Annreport08 09 by Urban Development Corporation

ANNUAL REPORT 2008 - 2009

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009

TABLE OF CONTENTS 2

Directors

Urban Development Corporation

BOARD OF DIRECTORS

Ackendown New Town Development Company Limited

CHAIRMAN’S REPORT

Bloody Bay Hotel Development Limited

GENERAL MANAGER’S REPORT

Caymanas Development Company Limited

Central Wastewater Treatment Company Limited

The Jamaica Conference Centre

Hellshire Marble Limited (Dormant)

Lift Up Jamaica 2

Kingston Waterfront Re-Development Company Limited (Dormant)

The Tax Incentive Programme for Urban Renewal

Kingston Waterfront Hotel Company Limited (Dormant)

Lilliput Development Corporation Limited

Hellshire Lot C Phase II

Montego Freeport Limited

SOUTHWEST COAST / MONTEGO BAY REGION

National Hotels and Properties Limited

Montego Bay Sport Complex

Ocho Rios Commercial Centre Limited

Pegasus Hotels of Jamaica Limited

NORTH EAST COAST REGION

Portmore New Town Development Company Limited (Dormant)

Port Maria Civic Centre

Portmore Commercial Development Company Limited

Reach Falls

Port Royal Development Company Limited (Dormant)

Runaway Bay Water Company Limited

St. William Grant Park

Rutland Point Beach Resorts Limited

Urban Transport Centre

Seacastles Limited

SUBSIDIARIES AND ASSOCIATE COMPANIES

Seaside at Rose Hall Developments Limited

St. Ann Development Company Limited

Montego Freeport Ltd.

Urban Maintenance (1977) Limited

National Hotels and Properties Limited

UDC Board Committees

•Pegasus Hotels of Jamaica Limited

Audit

Contracts Awards

Runaway Bay Water Company Limited

Finance & Investments

St Ann Development Company Ltd. (SADCo)

Human Resource Management

•Dunn’s River Falls & Park

Planning & Development

Public Relations & Marketing

•Ocho Rios Bay Beach

Information Technology

•Turtle River Park

Montego Bay Advisory Committee

•Craft Market

Negril Advisory Committee

SENIOR EXECUTIVE COMPENSATION

Urban Maintenance (1977) Limited

DIRECTORS COMPENSATION

UDC GROUP SUBSIDIARIES & ASSOCIATE COMPANIES

DIRECTORS COMPENSATION

FINANCIAL STATEMENTS

CORPORATE PROFILE OUR HISTORY

PROJECTS REPORTS

ST. CATHERINE REGION

Montego Bay Convention Centre

DOWNTOWN KINGSTON

Caymanas Development Company Ltd.

Ocho Rios Commercial Centre Ltd.

•Green Grotto Caves and Attractions

•Roaring River Estate

Cover Photo: Aerial of Kingston Waterfront

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009

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 nationâ&#x20AC;&#x2122;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 2008-2009 OUR HISTORY The Urban Development Corporation (UDC) was established by an Act of Parliament in March 1968, to “ensure that planned and orderly development takes place where and when it is needed in Jamaica, within the framework of national priorities”. Its role is to plan and design urban environments in designated and other areas and to undertake large-scale projects, as a catalyst for development, or to facilitate urban renewal and revitalisation.

Board of Directors

Wayne Chen Chairman

Audrey Marks Deputy Chairman

Joy Douglas General Manager

Its mandate is to make development happen, while ensuring that projects are economically feasible and financially viable. The Corporation The UDC is one of the major public sector developers involved in urban and regional planning, property development, construction of large resort, residential, educational and health facilities. It offers project management services, technical services and investment opportunities for development of land and buildings in its designated areas.

Tom Tavares-Finson

Dahlia Kelly

Sally Porteous

Michael Subratie

The UDC also incorporates a group of subsidiaries and associated companies, involved in maintenance services, water supply, hotel operations and the management and operation of attractions including the world renowned Dunn’s River Falls & Park.

Daniella Gentles

Zachary Harding

Lennox Elvy

Robert Russell

Ownership The UDC is a statutory body, wholly owned by the Government of Jamaica.

Ann-Marie Rhoden

Sancia Templer

Desmond Young

Leadership A Board of Directors provides policy direction for the Corporation with members drawn from the public and private sectors. Michael Ammar Jr.

Cleo Taylor

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 Management and Staff The Corporation is managed by a General Manager who heads an Executive Management Team, comprising Deputy General Managers/Divisional Heads with responsibilities for such areas as Company Secretariat, Finance, Administration and Treasury, Legal and Estate Management Services, Technical Services, Project Management and Corporate Services. The staff comprises a cadre of professionals trained in such areas as architecture, engineering, quantity surveying, urban and regional planning, accounting, economics, law, estate management, human resource management, research, construction management, communication and administrative support. Financial Performance The UDC is not supported from the Central Government’s Budget. It is self-financing and earns its income from three main sources: management fees – for project management services offered to Government entities, rental of land or buildings and sale of land for development as well as from investment projects carried out on its own behalf. With assets mainly in land and buildings, the UDC has, for the past 18 years, generated capital expenditure in excess of $2.5B per annum. Products and Services The main products and services produced by the Corporation are the provision of residential solutions, hotels, attractions, schools, hospitals and other public buildings, project management, estate management and technical services.

Achievements Since its establishment, the Corporation has developed a proven track record for performance and probity in its undertakings. Major projects over the years have included those in the designated areas: • Kingston Waterfront • Hellshire • Caymanas • Ocho Rios • Montego Bay • Negril

As such, its achievements include the redevelopment of the waterfront areas in Kingston, Ocho Rios, Montego Bay and Negril, construction of several housing projects, redevelopment/ reconstruction of six major hospitals islandwide, and the redevelopment of sporting and cultural facilities including Independence Park/National Stadium Complex, Montego Bay Sports Complex, Montego Bay and Port Maria Civic centres.

The Corporation has also completed numerous agency projects including those under: The Comprehensive Rural Township Development Programme (CRTDP) San Jose Accord for Sports and Culture Health Services Rationalisation Programme (HSRP) Schools Building Programme Police Station Upgrading Programme The Lift Up Jamaica Programme The Inner City Renewal Programme and continues to manage Government’s Tax Incentive Programme (TIP) for Urban Renewal.

Community Involvement Community development is an integral component of the Corporation’s work, covering a wide spectrum of activities. The focus is on the development of the human resource potential in the areas where it carries out work - to help communities develop positive values and attitudes and empowering them to help themselves and hence contribute to overall national development. The UDC therefore undertakes programmes such as leadership and skills training with a bias towards young people, parenting seminars, environmental education and providing support for

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 community and national initiatives, particularly in health and education. Return to Core Function The government has directed the UDC to return to its core function in full recognition of the fact that while the Corporation has been undertaking commendable work over the years, it has not accomplished its primary function which is to prepare and implement development plans within designated areas. To accomplish this, the Corporation has the responsibility to develop primary and secondary infrastructure in the designated areas. This is what distinguishes the Corporation from any other government agency. Among the large scale development projects identified so far in this context are: • The redevelopment of downtown Kingston • The development of Caymanas Estate, St. Catherine • New developments in the resort town of Ocho Rios, St. Ann, and • New developments in Jamaica’s second city of Montego Bay, St. James.

Herfa Brown participating teacher in the UDC’s Remedial Reading Workshop, works with students at Port Antonio Primary Scholl.

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009

CHAIRMAN’S REPORT people, its business process and its product.

Wayne Chen Chairman, Board of Directors

Even as the UDC marked its 40th year of service to the Jamaican people during 2008-2009, the Corporation sought simultaneously to re-structure its operations to meet the challenges and demands of its national mandate. In its renewed effort to truly address the requirements of urban planning and re-development as a critical factor in national development, the Corporation faced issues affecting its

On October 27, 2008, Prime Minister Orette Bruce Golding, who has portfolio responsibility for the UDC, appointed a 16 member Board which I am honoured to chair. Our appointment succeeded the tenure of the Board, chaired by Louis Williams, which served November 2007- August 2008 and which initiated plans for the return to core business as directed by Government. Our acceptance of the appointment to serve the UDC and the nation is a clear indication of this Board to vigorously pursue that mandate and to re-energize the Corporation’s efforts to plan and design urban environments, serve as a catalyst for sustainable development and foster the involvement of both the private and public sectors in national development initiatives. While crafting the plans that will guide the future orderly development of urban centres islandwide, the UDC also sought to initiate, continue and complete projects in its portfolio during the year. A review of Financial Year April 2008 to March 2009 will therefore show that the Corporation:

• Completed work on the Kingston Metropolitan Wastewater Treatment project at Soapberry in St. Catherine • Continued work on Phase 2 of the Port Maria Civic Centre • Continued work on Phase 3 of the Montego Bay Sports Complex and • Commenced work on the Montego Bay Convention Centre Honourable Prime Minister, on behalf of the Board, management and staff of the UDC, I present to you the Annual Report and Financial Statements of the Urban Development Corporation, its Subsidiaries and Associated Companies for the period April 1, 2008 to March 31, 2009.

Wayne Chen Chairman, Board of Directors

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009

GENERAL MANAGER’S REPORT

Joy Douglas General Manager

The Urban Development Corporation entered Financial Year 2008-2009, reminiscing on its 40 years of accomplishment as the nation’s main development agency yet very conscious of its imperative to return to its core business of developing and implementing development plans in designated areas. In response to its current mandate, the Corporation signaled its return to the formulation of comprehensive development plans during the 20082009 Financial Year. Of special note in this regard, was the designation of the Caymanas Estate in March 2009 and articulation of the plan for that designated area to transform the property of approximately 4,332 hectares (10.704 acres) into a complete community to include: • Housing with a mix of 4,350 residential solutions targeting high to low middle income groups. • An Enterprise Zone conceptualized

along the lines of the Chinese Development Zone model, to house numerous business entities including Information Communication Technologies, Manufacturing, Agro-processing and the Creative Industries. It is expected that when completed, the Caymanas Enterprise Zone will also be the Caribbean region’s first Science and Industrial Park, a hub for industrial research and development.

• A Hub for Sports Tourism thus taking advantage of the lucrative market with its renowned country club and golf course; equestrian and polo facilities and proposed mega sports facility. The Mega Sports facility is intended to tie together all recreational sporting elements within the Caymanas Development and the UDC is already working with the University of Technology (UTECH) to pursue this planned project.

Phase 3: Creation of Justice Square at the Supreme Court on King Street and development of the Ward Theatre Cultural Square Phase 4: Establishment of a trade centre in line with plans to establish downtown Kingston as a viable financial district. Work on aspects of this plan is already in progress and the UDC continues to engage critical stakeholders from the public and private sectors, international and local financiers as well as the community in this development process. Understandably, the year was one in which the management team sought to define and operationalise the mandate by way of identifying the corporate strategies necessary to support the transformative process on which the Corporation had embarked. Cognizant of the need to improve the financial sustainability of the Corporation while responding to

Another event of note was the Corporation’s presentation of its proposal for the redevelopment of downtown Kingston. As outlined at our stakeholders meeting held June 25, 2008 at the Jamaica Conference Centre, the fourphased plan to be implemented over a 10-year period will include: Phase 1: Construction of a multi-modal transport centre, upgrading of the St William Grant Park and improvement of the market district Phase 2: Provision of a Festival Marketplace, upgrading of the Kingston Waterfront, renovation of the Oceana Building and the Jamaica Conference Centre

Francis Kennedy, Chairman of Kingston City Centre Improvement Company, Hon. Mourice Facey, Chairman of Pan Jam Group participate in the launch of the downtown Kingston plan

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 its new mandate, the management team also recognized the importance of strengthening the organisational structure to ensure its alignment with the mandate of the Corporation. Specifically, the Corporation commissioned a Management Audit and embarked on an accompanying restructuring programme aimed at re-designing both structure and staffing to meet the new requirements. Consequently, a new executive management structure was introduced during the year resulting in the following divisions: • Company Secretariat • Corporate Security and Facilities Management • Development Planning and Management

• General Manager’s Office • Human Resource Management and Administration • Finance Treasury and Investment • Legal Services and Estate Management

programmes and activities in our subsidiary and affiliated companies.

The on-going restructuring programme also resulted in the establishment of a Sales and Tax Incentive Department and a merged Corporate Relations and Marketing Department.

Joy Douglas General Manager

Concurrent with its initiatives to chart the way forward, the UDC during the year under review, continued to manage its business as usual activities, an account of which is detailed in the rest of this Report. Highlighted therein are our financial performance, progress reports on projects and corporate

Participants at the downtown Kingston launch event.

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 PROJECTS REPORTS 2008-2009 During Financial Year 2008-2009, the UDC continued to execute projects related to residential solutions, tourism enhancement, sports and culture, infrastructure development, urban renewal and community development.

The Jamaica Conference Centre With the approval of Cabinet in February 2008 of $420,850,000 to carry out refurbishing works at the Jamaica Conference Centre(JCC) in downtown Kingston, the project got underway to improve the communication, surveillance, air conditioning and fire detection systems as well as critical buildersâ&#x20AC;&#x2122; works. During the financial year therefore, the JCC was closed for an extended period to facilitate the ongoing refurbishing. The Centre was closed in April 2008 to allow for the first phase of the refurbishing exercise to accommodate the 12th Session of the International

Seabed Authority (ISA). Phase 2 of the exercise was scheduled for the period June to December 2008. In the interim, some of the JCC staff was re-assigned to the UDCâ&#x20AC;&#x2122;s Head Office.

previously committed for the post December 2008 period. Refurbishing works which continued after December were therefore scheduled around the existing bookings.

The following was accomplished during Phase I of the refurbishing: 1. Complete roof repairs 2. Installation of new chillers for the air conditioning system 3. Installation of a new security surveillance system 4. Furniture repairs in major areas such as the Harbour Lounge and Entry Hall 5. Landscaping 6. Other minor works

Caterers, From Thought to Finish, has been retained in the interim to provide food and beverage services for clients of the Centre. They provided these services for the International Seabed Authority and their contract was extended to the scheduled completion of the kitchen in December 2009.

Government took the decision to utilize the Caucus Rooms as Civil Courts commencing October 2008 and since then the Caucus Rooms have not been available for regular use. In spite of the closure of the facility to the general public, the Centre hosted both sittings of the Court and bookings that were

At March 31, 2009, Phase 2 of the refurbishing works was still underway and subject to funding from the Ministry of Finance. This limited the number of events that could be held simultaneously at the Centre. Total revenue of $17,456,151.47, as detailed in the graph below, was generated during the financial year.

The level of receivables was reduced and an average of approximately 80% collection maintained throughout the year.

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 Lift Up Jamaica 2 Extended to July 2008, phase 2 of Government’s Lift Up Jamaica programme, co-ordinated by the UDC, completed a number of projects in its portfolio during the reporting period. These included: • 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

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 were women. The programme was financed by the Government through the Caracas Energy Development Fund.

Lift Up Jamaica, which was reintroduced in July 2005, is a short

The Tax Incentive Programme (TIP) for Urban Renewal

Acting as agents on behalf of The Ministry of Finance and the Public Service, the UDC continued the implementation of TIP in downtown Kingston, Port Royal, downtown Montego Bay and Spanish Town during the review period.

These individuals represent a variety of public and private sector organisations with a vested interest in the administration of the Tax Incentive Programme for Urban Renewal.

During the year, a new Incentive Recommendation Committee (IRC) was appointed. The role of the Committee is to do an overall assessment of each application to ensure that it meets the requirements and intent of the Urban Renewal and (Tax Relief ) Act and make recommendation to the Minister of Finance and the Public Service.

- Dr. Fabian Lewis - Ms. Louise Mcleod - Mr. Michael Robison - Mrs. Maria Ho Sue

During the financial year, three applications for approved developer received previously were submitted to the Ministry of Finance and the Public Service for approval. All three applications were approved and gazetted. A fourth application for approved developer worth J$52 million is currently being processed

L-r GM Joy Douglas, Sonia Hyman, LUJ co-ordinator join with Prime Minister, Bruce Golding as he interacts with students at Barnabas Basic School, West Kingston November 30, 2008.

for submission to the Incentive Recommendation Committee. There was also one application for approved organization worth US$24 million. The TIP was enacted by Government in 1995 in an attempt to reverse the decay and accompanying decline in economic and social conditions that characterize many parish capitals. It provides incentives for capital expenditures and purchase of Urban Renewal Bonds. The incentives seek 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. The GraceKennedy distribution hub on lands at Bernard Lodge on the outskirts of Spanish Town. GraceKennedy first accessed the TIP in 1995 to renovate its corporate headquarters in downtown Kingston and again in 2009 for the warehouse project.

Appointed to the committee were: - Mr. Peter Goldson (Chairman) - Mr. Michael Ammar Jnr. - Mrs. Paula Cobourne - Mr. Jumaane Robinson - Ms. Carol Straw - Mrs. Karis Flowers - Mr. Winston Deer - Mr. Vayden McMorris

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009

REGIONAL REPORTS St. Catherine Caymanas Estate Preparation of a Strategic Environmental Assessment (SEA) was among the preliminary work undertaken in pursuit of the Caymanas Development Plan. The plan makes provision for residential solutions, village development, preservation of forest, woodland and wetlands, recreational facilities, agricultural lands, landscaped buffer, a mega sports complex, light industry and manufacturing, mining and extraction, sewage treatment facility, Jamaica Defence Force barracks and related infrastructure. The Caymanas Estate property straddles the parishes of St. Andrew and St. Catherine, with at least 90% of its lands in St. Catherine. This land is approximately 4,332 hectares or 10,703 acres. Hellshire Lot C Phase II Following the completion of 165 housing units and related infrastructure works during the 2007-2008 financial year, an additional 45 units and eight residential lots at Hellshire Glades in St Catherine were completed and handed over to the UDC by West Indies Home Contractors Limited (WHICON).

SOUTHWEST COAST/MONTEGO BAY Montego Bay Sports Complex With new loan financing from Bandes of Venezuela and the Government, work proceeded on the Sports Complex located at Catherine Hall in St James. Valued at US$11,497,937, the project was approximately 71% complete during the period. Additional financing in the amount of US$4,514,141.77 was requested by way of a submission to Cabinet in October 2008. Montego Bay Convention Centre Ground was officially broken on February 14, 2009, to mark the commencement of work on the Convention Centre sited on 9.3 hectares (23 acres) of land at Rose Hall in St James. On completion the Centre will provide 4,860 sq m of exhibition space, a banquet hall of 1,944 sq. m. and 1,053 sq. m. of meeting rooms. The project is funded by the Government of Jamaica and the EXIM Bank of China. The Ministry of Labour and Social Security has been asked by the UDC to manage the selection of local labour.

Work in progress on the Hellshire Glades Housing development in St. Catherine.

(l-r): His Excellency Xi Jingping, Vice President of the Peopleâ&#x20AC;&#x2122;s Republic of China and the Hon. Bruce Golding, Prime Minister of Jamaica, shake hands after breaking ground for the Montego Bay Convention Centre, at Rose Hall in St. James on February 14, 2009. The Convention Centre is being constructed by UDC through COMPLANT (China National Complete Plant Import and Export Corporation) on approximately 9.3 hectares of land between the Half Moon Golf Course and Rose Hall Great House. The project is being funded by the Government of Jamaica (GOJ) and the EXIM Bank of China, which will be providing a loan of YUAN RMB 350 M. The Centre is being designed as a modern state of the art facility, capable of hosting large and small meetings, conferences, exhibitions, banquets, weddings and other events.

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009

NORTH EAST COAST Port Maria Civic Centre Phase II Continuing its programme for the development of sporting and cultural facilities initiated under the San Jose Accord, the UDC working on behalf of the Government is undertaking Phase 2 of a restoration and rehabilitation project at the Port Maria Civic Centre in St Mary. Following the signing of the contract with the Venezuelan firm Racar Ingenieros C.A. in 2008, the project was approximately 65% complete at the end of the period under review. Valued at an overall cost of US$2,663,360, the project involves the construction of a mayor’s office, council chambers, retail shops, restaurants, craft museum and commercial shops. Additional financing in the amount of US$494,725.22 was required to complete the project and hence a

Reach Falls Phase 1 of upgrading works at Reach Falls in Portland commenced following the signing in June 2008 with Portland General Contractors of a contract valued at $25M.

Frontview of Port Maria Civic Centre submission was made for this amount. The Civic Centre project is funded jointly by the Bank of Economic and

friendly design approach, thus enhancing the tourism product in the north-eastern parish. Having leased Reach Falls from the National Land Agency in June 2006, the UDC re-opened the attraction

Social Development (Bandes) of Venezuela and the Government. Phase 1 was completed in 2003.

to the public in February 2007 after completing interim upgrading works, inclusive of improved sanitary amenities, electricity supply, water supply and road repairs.

The re-development programme at the 4.6-hectare attraction includes the provision of: • A two storey administrative building • Ticket/Security Office • Craft Hut • Food and Beverage Hut • Nurses Station/Souvenir Shop • Sanitary Conveniences/Treatment and Disposal System A car park will also be constructed under an auxiliary contract. The upgrading project is intended to optimize the attraction’s natural features by way of an environment-

Workmen from Portland General Contractors undertake upgrading works at Reach Falls, Portland.

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009

DOWNTOWN KINGSTON St. William Grant Park Working on behalf of the Kingston City Centre Improvement Company (KCCIC), the UDC proceeded with the refurbishing of the historic St William Grant Park in downtown Kingston. At March 31, 2009 the project was approximately 75%. The project involves the extensive refurbishing of the Park located between North and South Parade. It includes the rehabilitation of all sanitary conveniences, upgrading 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.

Urban Transport Centre Following Cabinet approval of variations and related works, construction of the new transport centre at Water Lane in downtown Kingston was about 87% complete at March 31, 2009. Work on the installation of bus sheds and paving of the platforms was in progress. Implemented by the UDC on behalf of the KCCIC, the project to provide the Downtown Kingston Transport Centre commenced following the signing of a contract with Alcar Construction & Haulage Company Limited in January 2008 for the construction of the bus park component of the Urban Transport Centre. The KCCIC has 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

Estimated construction cost is approximately $80M and following the signing of a Memorandum of Understanding between the KCCIC and owners of the property, the Kingston and St Andrew Corporation (KSAC), the project was first sent to public tender in March 2006 but was however subsequently re-tendered. Work commenced on the project following the signing of the contract with Jatlin Construction & Associates in January 2008.

Workmen carry out upgrading works at the St. William Grant Park, downtown Kingston. At the end of the project, the St William Grant Park will benefit from an enhanced landscape, openness and improved aesthetic appeal. Security of the Park will be a priority issue while retaining a distinct ambiance, with upgraded administrative and sanitary facilities, and a redesigned centrepiece fountain.

the St. William Grant Park, thus merging the existing 10 bus terminals into one multi-modal Centre and easing congestion around the Parade area. It is being constructed on lands owned by the UDC and 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 costs.

Motorists driving along Port Royal Street downtown Kingston observe work being carried out at the site for the Kingston Transport Centre.

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009

REPORTS FROM SUBSIDIARIES AND ASSOCIATE COMPANIES Caymanas Development Company Limited A fully owned Subsidary of the UDC, Caymanas Development Company Limited continued during the financial year to manage and operate The Caymanas Golf and Country Club at the Estate in St Catherine. The golf club experienced another difficult year financially with golfrelated revenues from membership subscriptions, green fees, cart fees remaining constant at best and declining in some areas. Fees were generally increased by approximately 12% in November 2008, but that resulted in a decline in renewals and in utilization generally. Of note also was the historic level of rainfall that was experienced for nearly two months that wreaked havoc on the country generally and negatively affected activities at the club and resulted in declining revenues. Despite best efforts, expenses on the other hand, increased over the period in light of the fact that much

MONTEGO FREEPORT LIMITED Montego Freeport Limited an Associated Company of the Urban Development Corporation, is publicly listed. During the Financial Year April 2008-March 2009 the Company reported the following: Financial Results Operating and other income for the period under review was $125.623M. Fair value gains on sale of investment property were $298.235M. Operating profit was $391.409M and after accounting for taxation resulted in a net profit of $361.798M.

Caymanas Country Club and Golf Course of a golf clubâ&#x20AC;&#x2122;s expenses such as parts, chemicals and fertilizers are directly related to exchange rates. Cutting back on maintenance and the related costs was also not a viable option.

The real solution to the financially successful operation of the golf club lies in the plans for the development of the Caymanas Estate which is greatly anticipated.

Encouragingly, there was some growth on the food, beverage and function side of the business and this area continues to show the greatest potential in the short-term.

Earnings per stock unit for the period were $0.64. Sale of Property There was no completion of sale of lands during this period. However, sale of the following lots was in progress: Lots A40, A59, M80 and M81. Capital Distribution Capital distribution of $1.06 cents per stock unit was paid to shareholders on November 10, 2008. Directors During the period under review Homer Davis, Angus Gordon, Shalman

Scott and Jewell Spencer resigned as directors of the Company and Robert Russell, Michael Subratie, Zachary Harding and Richard Clarke were subsequently appointed directors. The Audit Committee comprises: Richard Clarke (Chairman), Barrington Baugh and Melissa Chang.

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 NATIONAL HOTELS AND PROPERTIES LTD. National Hotels and Properties Limited (NHP) is the subsidiary company of the UDC charged to oversee the interests of the Corporation in the following: • Ackendown New Town Development Company Limited (Sandals Whitehouse) • Bloody Bay Hotel Development Limited (Grand Lido Negril) • Kingston Waterfront Hotel Company Limited (Oceana Hotel) • Montego Beach(1975) Limited (Club Jamaica) • Pegasus Hotels of Jamaica Limited (Jamaica Pegasus Hotel). For Financial Year 2008-2009 the NHP report the following: Pegasus Hotels of Jamaica Limited Financial Results For the year under review, the Jamaica Pegasus recorded gross profit of $657.116M earned from total sales of $1.003B. After accounting for administrative, other operating expenses, interest income and taxation, a net profit of $55.243M was recorded. The balance in the Capital Reserve Account as at March 31, 2009 is $3.705B and in the Retained Earnings Account is $31.987M. Expansion/Refurbishing Project As part of an on-going improvement programme, the rooms on a further four (4) floors were expanded into junior suites during the year. The windows of these junior suites were double glazed to make them soundproof and more energy efficient. They were also fitted with flat screen television sets and many other amenities. Free wireless internet service is now provided to all guests. As a result of this ongoing project the hotel was granted incentives for 10 years under the Hotel (Incentives) Act (1990).

A total of $117M was invested in fixed assets and a further $43M was invested in replacements during the period. The hotel incentives, from which the Company will benefit during the next 10 years, will more than justify these and earlier investments. For the coming year, it is planned that the remaining five floors will be refurbished with double glazing of doors, 42” flat screen televisions, large desks as well as refrigerators and other fittings and amenities similar to those in the junior suites. There are also plans for major improvements to the luxury suites. Financing Despite the substantial capital and other expenditure mentioned above, and payments of dividends of $48M, the long term debt has only increased from $45M to $49M. The Company was also holding $108M of cash in short term and other marketable investments at the year end. It is anticipated that the Company will be able to obtain long term loans at favourable terms to finance the majority of this year’s projects. Net current assets decreased from $107M to $24M in part because of the holding of $62M of Government of Jamaica’s indexed bonds due in May 2010 which is classified as a non-current asset. At the end of the year, shareholders’ equity stood at $3.859M compared to $3.351M at the end of the previous year. Taxation Tax charges for the year increased by $11.925 million (97%) to $24M due to deferred taxation and an overpayment credit booked in the previous year. This resulted in after tax profits of $39.015M, $2 million below the previous year’s $41M. Dividends Interim dividends of $0.20 cents per

stock unit were paid on July 24, 2008 based on the results of the Audited Financial Statements as at March 31, 2008. A further $0.20 cents per stock unit was paid on December 15, 2008 and a further $0.10 cents per stock unit was declared on March 30, 2009 to be paid on April 22, 2009. Hotel Incentives Under Section 4 of the Hotel (Incentives) Act (1990), the Approved Hotel Extension (Jamaica Pegasus Hotel) Order, 2009 was granted. The benefits include waiver of GCT and Customs Duty for 10 years on an approved list of items and corporate tax relief for 10 years arising from the hotel’s operations. Directors During the period under review the following nominated Directors resigned: Messrs. Louis Williams, L. L. (Laurie) Ventour, Basil Anthony Lindo and Mrs. Marcia Ward. Under Article 80(1) (a) of the Articles of Incorporation of the Company, National Hotels and Properties Limited, a wholly owned subsidiary of the Urban Development Corporation, nominated Daniella Gentles, Dahlia Kelly, Robert Russell, Michael Subratie and Desmond Young to serve as Directors of the Company. Under Article 80(1) (c) of the Articles of Incorporation of the Company, Rev. Denzil Barnes and Mr. Alston Douglas were co-opted to serve as Directors for a period of one year. Audit Committee During the period under review Messrs. L. L. (Laurie) Ventour and Basil Anthony Lindo resigned as members of the Audit Committee. Messrs. Michael Subratie and Desmond Young were appointed to serve on the Committee. The Committee now comprises Rev. Denzil Barnes – Chairman, Michael Subratie and Desmond Young. During the period under review the

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 Committee met four (4) times where the audit plan for the year, quarterly reports for the Jamaica Stock Exchange, insurance coverage, risk assessment, revision of the credit policy and reports from the Internal Auditor were discussed. OCHO RIOS COMMERCIAL CENTRE LIMITED Ocho Rios Commercial Centre Limited (ORCC), is the owner and operators of the Ocean Village Shopping Centre located at 29 Main Street, Ocho Rios, St. Ann. The Shopping Centre built in 1972 by the UDC is situated on Lot 4 which is approximately 4 acres of land to complement the resort and residential properties that were being built in the town to facilitate easy access to retail and commercial activities. The facility became operational in 1974. The building consists of four blocks with a lettable space of 70,631 square feet and encompasses ten (10) offices and Seventy- Five (75) shops. Additionally ORCC collects rent on behalf of the UDC for one (1) shop and four (4) offices at SandCastles Resorts. During the Financial Year 2008-2009 ORCC continued to: • Ensure the rental of all lettable spaces • Manage the accounts receivable • Provide maintenance services to the building, grounds and gardens • Rent car park facilities and green spaces The first month of the financial year was an abnormal one for ORCC. Unusually heavy rainfall on April 17, 2008 resulted in the entire complex being inundated with water, mud and debris. The entire staff complement worked assiduously and normalcy was returned to the property on Tuesday, April 22. The cleaning operation incurred expenditure of $1,867,526.24 and led to a subsequent redesign of the flower beds in the eastern section

which were completely destroyed. The Company’s insurers, Allied Insurance Brokers Limited, was notified of the damage and all documents submitted to facilitate claims. The entity also experienced the following changes during financial year: • Reporting directly to parent company, UDC as of December 1,2008 • Two separate changes to the directorate. • Closure of the SandCastles operation with the sale of the last shop completed on November 11, 2008. • Increase in the hourly rate for the car park facility from $80.00 to $100.00 per hour or any part thereof effective October 13, 2008. The following programmes continued during the fiscal year: • Team Jamaica training seminar for 25% of the staff members • Cross training of two janitors through participation in the HEART/NTA Landscaping 6 weeks course • Documentation of operational procedures in areas such as Bank Reconciliation, in an effort to develop a Quality Management Manual for the entity • Usage of the food court to host promotional activities by several corporate companies. Financial During the financial year all 83 lettable spaces were occupied up to October 30, 2008. At March 31, 2009, two lettable spaces were vacant namely Shop 67B and Office # 4. Unaudited profit for the 2008-2009 financial year is $4,407,374.33. Profit before taxation and after taxation: Operating profit - $43,909,000 Profit after tax – $22,051,000

RUNAWAY BAY WATER COMPANY LIMITED. Runaway Bay Water Company Ltd. is a wholly owned subsidiary of the Urban Development Corporation. During the financial year April 2008 to March 2009, the Company employed a manager assisted by four administative staff to carry out the commercial office functions, a system supervisor and thirteen full time system operators who manned the two well plants around the clock to monitor quality and to extract, treat and distribute 2.079M m3 of potable water. 1.541M m3 or 74% of this production was sold wholesale to the National Water Commission (NWC) for re-distribution to their customers in communities around the Runaway Bay area and the remainder was distributed directly by the company to its 313 domestic and 62 commercial customers in the Cardiff Hall subdivision of Runaway Bay. Throughout the year all the standards stipulated for portable water by the Government and monitored by the various statutory regulatory agencies were met. The company was granted a rate increase by Office of Utilities Regulation that became effective November 1, 2008. Over the same period the Company generated sales revenue of $79.5M, an increase of $6.02M or 8.2% over the previous year. Its audited financial showed an after taxation loss of $11.8M after a charge of $24M management fees to its parent the UDC and a write off of $11M pension loss.

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 ST. ANN DEVELOPMENT COMPANY LIMITED The St. Ann Development Company Limited (SADCO) is an associate company established in 1967 under the name St. Ann Redevelopment Company Limited which was amended in 1997 to reflect the present company name. The original mandate of the Company has changed somewhat over the years and the main focus of operation is to manage and oversee the day to day operations of all attractions and properties owned by the UDC in St. Ann. The following is a list of the main entities managed by SADCO for the UDC: • Dunn’s River Falls & Park • Green Grotto Caves • Ocho Rios Bay Beach • Turtle River Park • Roaring River Estate • Ocho Rios Craft Market • Pineapple Place Craft Market • Laughing Water • Undeveloped Lands Based on the performance of these entities during the reporting period, SADCO has identified the restructuring of the organization and its human resource complement as its main corporate objective for the 20092010 Financial Year. This is geared to include a comprehensive Marketing Department, Landscaping Department, Maintenance Department and Training Unit within the Human Resources Department. This restructuring is vital to effect the efficient day to day operations of all entities and to maximize the potential of revenue centres. For Financial Year 2008-2009, SADCO reports the following: Dunn’s River Falls & Park Dunn’s River is possibly the most visited attraction in the Caribbean region. This unique attraction offers

a magnificent setting with lush flora and a spectacular cascading waterfall which has created one of the most challenging adventure attractions by way of a climb up the Falls. With the continued appeal of this attraction, it is necessary to offer first class service facilities while securing the integrity of the natural environment. To this end, all development being undertaken at Dunn’s River should blend seamlessly into the landscape. The existing chart for development at the Falls has several projects pending that need to be implemented before any further structures are built. This includes: • Expansion & Upgrading of Sewage Treatment System • Beach Replenishment • Electronic Ticketing and Access Control System The management of SADCO has taken steps to refurbish existing structures on the property to fit the needs of the operation which include: • Refurbishing the old Ticket Office and creating a Customer Service Centre • Establishing a landscaped shopping courtyard in the central parking area • Establishing additional locker solutions and photo/video services in area. • Refurbishing existing building on the beach to offer snacks and beverages • Refurbishing existing building at tunnel level to offer sundry items • Installation of uniformed signage throughout the property • Refurbishing existing bathroom facilities throughout the property The establishment of a full landscape department has allowed for major landscaping projects to be undertaken. Dunn’s River Falls & Park will be the major focus of this department in the first quarter of the year. Green Grotto Caves The Green Grotto Caves and Attractions, the first cave worldwide to

received Green Globe Certification in February 2003 has unlimited potential in generating new revenue. The realization of this potential in the short term however, may include divestment to an established interest, capable of marketing this unique attraction. Significant capital projects were undertaken at the Green Grotto between 2004-2007. However, there were still areas critical to offering a more complete product, to be addressed which could really start to generate additional revenue. Ocho Rios Bay Beach Beaches worldwide are capable of drawing high volumes of people. However, in order to realize significant revenue along beachfronts there must be a high energy level created, with numerous revenue centres in keeping with this environment. Consequently, SADCO proposes to increase the revenue centres significantly in 2009-2010 with the addition of the following: o Food and Beverage Facilities o Logo Shop o Surf Shop o Beach Equipment Rental o Beach and Water Sports Tours and Activities The marina is also an underutilized source of revenue for this area and hence, SADCO has already taken steps to offer more comprehensive facilities in the marina in order to attract vessels that are able to afford current market rates, in order to make the marina a more viable entity. Turtle River Park The Turtle River Park is truly the centrepiece of Ocho Rios. The area is always beautifully landscaped and offers a peaceful and relaxing environment for the town of Ocho Rios. In seeking to enhance the offering at Turtle River, SADCO is proposing the addition of a jogging and exercise trail on the outer perimeter of the

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 park to attract fitness enthusiasts. The acquisition of the lot on the northwestern side of the Park for the addition of a small amusement park for children is also being proposed. This could include a miniature golf circuit. The Park is growing in popularity as a venue for special events and this additional revenue along with other existing and planned revenue centres is needed to offset the cost of maintaining this green space. Craft Markets In keeping with the Ministry of Tourism’s plan to implement an Artisan Village concept in all the major tourism centres, the UDC is presently preparing plans for an artisan village to be located on the property at Shaw Park South. It is expected that this facility would consolidate and incorporate all the existing markets being managed by SADCO. Roaring River Estate The Roaring River property is over 1,100 acres and much of this is watershed area. The cost of maintaining a property of this size is significant. SADCO has proposed the refurbishing of the great house on the property to create a tour which will be marketed primarily to the cruise ship market. The tour will be marketed as a “Taste of Old Jamaica” with a traditional plantation tea house offering a taste of Jamaica’s indigenous fruits and spices. URBAN MAINTENANCE (1977) LIMITED The Urban Maintenance (1977) Ltd., continued to have 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 and which include three multi- storey parking garages and five open parking lots. For the year under review UML made an operating loss of $32.3M (unaudited) as there were increases in expenditure and higher than expected inflation. Details of the Company’s operations at the various Cost Centres for the period 2008-2009 are as follows: Block 4 – Office Centre Building, 12 Ocean Boulevard, Kingston • Installation of two 400-ton Semi-hermetic Direct Drive Rotary Compressor Water cooled chillers, to improve the cooling of the entire building. The works were valued at $30.0M and started in March 2009. • Upgrading of the lighting in all washrooms • Installation of additional lighting to external corridors • Replacement of exhaust fan Oceana Complex, 2 – 4, King Street • Installation of a semi-hermetic Direct Drive Rotary Compressor Water cooled chiller, valued at $14.0M. The works were done in November 2008, to improve the cooling on the entire building. • Remedial works on the roofs of the Crystal Palace and the Old Ball Room. • Replacement of the windows on the mezzanine floor. Block 3 • Installation of new roofing at the National Gallery Building. Block 2/6 • Relocation of the chiller,

which initially serviced the offices of the Organized Crime Investigative Division (OCID) to an area where it could also serve the offices of the Major Investigation Taskforce (MIT). • Repair of the chiller and Installation of a number of mini-air- conditioning units to the shops and offices. Jamaica Conference Centre • Major refurbishing works were carried out at the Jamaica Conference Centre with the installation of a new chiller, repair of the roof, installation of a surveillance system, repairs to the washrooms, lighting upgrade and some painting. UML worked in conjunction with the Technical Services Division of the UDC. Car Parks Temple Lane Car park • Some refurbishing work was done at the Temple Lane Car Park with the installation of additional lighting, repainting of the spaces and directional signs. Orange Street Multi-storey Car parks • Lighting was upgraded. The car parks made a profit of $12.8 M (unaudited) to February 2009, an increase over last year which had a number of lost days due to hurricane threats and inclement weather. The total number of spaces available in the eight car parks was approximately 2,600; however only 2,200 were available for contract parking of which almost 90% was contracted out. The usage for daily parking averaged 4,000 vehicles per month.

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 Other Projects UML continued to offer maintenance services to its sister subsidiary company, Runaway Bay Water Company and to the Hellshire projects including Two Sisters Caves and Fort Clarence Beach Park. Administration The Companyâ&#x20AC;&#x2122;s staff complement increased to 50 permanent employees. During the year the Company lost two members of staff and gained one new employee in the Accounts Department. Staff members were able to pursue a variety of courses to upgrade their skills Promotion of Downtown Kingston The company was again involved in activities, sponsored by the UDC, to promote downtown Kingston, chief among these being the return of Fireworks on the Waterfront, the event was held on December 31, 2008 to herald in the New Year.

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009

LISTING OF SUBSIDIARIES & ASSOCIATE COMPANIES AS AT MARCH 31, 2009

• ACKENDOWN NEWTOWN DEVELOPMENT COMPANY LIMITED • BLOODY BAY HOTEL DEVELOPMENT LIMITED • 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

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009

DIRECTORS OF THE URBAN DEVELOPMENT CORPORATION, ITS SUBSIDIARIES AND ASSOCIATE COMPANIES Urban Development Corporation Directors - April, 2008 - October 15, 2008

Ackendown Newtown Development Company Limited Ann Marie Rhoden Milverton Reynolds Joseph M. Matalon Wayne Chen Wentworth Charles Wilfred Bagaloo

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

Bloody Bay Hotel Development Ltd Thomas Tavares-Finson Yvette Sibble Ann-Marie Rhoden Marlene McLean

John Joseph Issa Muna Issa John Stuart Fisher Company Secretary

Caymanas Development Company Limited

Urban Development Corporation Directors - October 27, 2008 â&#x20AC;&#x201C; March 2009

Cleo Taylor Joy Douglas Patrick Stanigar Dahlia Kelly Anthony Hyde David Mais Paul Lalor William Mahfood Robert Woodstock

Wayne Chen Chairman Audrey Marks Deputy Chairman Robert Russell Michael Subratie Sancia Templer Michael Ammar Jr Tom Tavares- Finson Zachary Harding Sally Porteous Daniella Gentles Lennox Elvy Dahlia Kelly Desmond Young Cleo Taylor Ann-Marie Rhoden Joy Douglas (Appt. General Manager on January 12, 2009)

Chairman

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

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 DIRECTORS OF THE URBAN DEVELOPMENT CORPORATION, ITS SUBSIDIARIES AND ASSOCIATE COMPANIES Kingston Waterfront Re-Development Company Limited (Dormant)

Pegasus Hotels of Jamaica Limited

Lilliput Development Corporation Limited

Hon John J. Issa Rev Denzil Barnes Christopher Bovell Alston Douglas Joy Douglas Desmond Young Michael Subratie Robert Russell Daniella Gentles Dahlia Kelly Marlene McLean

Winston Dear Marsha Francis

Portmore New Town Development Company Limited (Dormant)

Montego Freeport Limited

Desmond Young Sancia Templer Lennox Elvy Richard Clarke

Michael Ammar Jr Francis Kennedy Kingston Waterfront Hotel Company Limited (Dormant) Vivalyn Downer-Edwards Gloria Royale-Davis

John Gourzong Chairman Barrington Baugh Dale Sinclair Methelina Scarlett-Jones Zachary Harding Robert Russell Michael Subratie Richard Clarke Melissa Chang Marlene McLean Company Secretary

Company Secretary

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

National Hotels and Properties Limited Tim Scarlett Lennox Elvy Michael Subratie Joy Douglas Yvette Sibble

Port Royal Development Company Limited (Dormant) Thomas Tavares-Finson Daniella Gentles Robert Russell Joy Douglas Martin Lyn Carole Guntley-Brady Edebu Galbraith Robert Gregory Robert Stpehens Michael Campbell Lols Sherwood Donovan Perkins

Ocho Rios Commercial Centre Limited Junior Haughton Martin Lyn Richard Clarke Marlene McLean

Chairman

Company Secretary

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 DIRECTORS OF THE URBAN DEVELOPMENT CORPORATION, ITS SUBSIDIARIES AND ASSOCIATED COMPANIES Runaway Bay Water Company Limited

St. Ann Development Company Limited

Dwight Clacken Peter Morais Marsha Francis Maurice Bryan Everett Heron Joy Douglas Ann Marie Rhoden

Junior Haughton Laura Heron Nathan Morrison Patrick Drake Delroy Giscombe Derrick Chang Carlton Cole Desmond Morgan Alfred Lee Zachary Harding Marcia Scott-Golding Richard Clarke

Chairman

Rutland Point Beach Resorts Limited Shalman Scott Robert Russell Michael Subratie Sally Porteous Yvette Sibble

Chairman

Urban Maintenance (1977) Limited William Masterton Francis Kennedy Desmond Young Richard Clarke

Seacastles Limited Shalman Scott Robert Russell Marsha Francis Seaside at Rose Hall Developments Limited Don C. Stansberry Jr Michele Rollins Peter Williams Vivalyn Downer-Edwards Joy Douglas

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 URBAN DEVELOPMENT CORPORATION BOARD COMMITTEES Audit Wayne Chen Ann-Marie Rhoden Francis Kennedy Lennox Elvy

Chairman

Human Resource Management Thomas Tavares-Finson Chairman Dahlia Kelly Planning & Development Wayne Chen Desmond Young Zachary Harding Robert Russell Audrey Marks Sancia Templer Sally Porteous Michael Ammar Jr Francis Kennedy Michael Subratie Joy Douglas

Contracts Award Thomas Tavares-Finson Chairman Desmond Young Daniella Gentles Wentworth Charles Elona Grant-Hewitt

Finance & Investment

Chairman

Public Relations & Marketing

Audrey Marks Chairman Michael Subratie Lennox Elvy Veronica Bennett-Warmington Sancia Templer

Zachary Harding Robert Russell Michael Ammar Jr Dahlia Kelly

Chairman

Information Technology Lennox Elvy Zachary Harding

Chairman

URBAN DEVELOPMENT CORPORATION ADVISORY COMMITTEES Montego Bay Advisory Committee

Negril Advisory Committee

Robert Russell George Thomas Godfrey Dyer Noel Donaldson Peter Williams Cecil Davis Merrick Fray Patrick Fletcher John Gourzong

Shalman Scott Eric Clarke Linus Aruliah Cosmo Brown Roy Hutchinson Carey Wallace Patricia Sinclair-Stair Opal Beharie Joan Smalling Russell Hammond

Chairman

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 The compensation package for Executive Management and Senior Managers for the period 2008-2009 is as shown below: SENIOR EXECUTIVE COMPENSATION 2008-2009

Position of Senior Executive

General Manager

Salary $

8,558,707.32

Gratuity or Performance Incentive $

Travelling Allowance or Value of Assigned Motor Vehicle $

Pension or Other Retirement Benefits

Other Allowances ($)

Notice pay & Redundancy Payments s

681,182.13

Assistant General Manager

9,585,972.88

8,487,356.55

342,535.06

756,081.27

5,578,655.93

334,719.36

6,579,953.15

DGM- Investments

5,578,655.93

334,719.36

5,728,200.32

DGM- Project Management

4,517,007.24

745,732.33

7,814,865.03

355,943.78

1,598,114.91

32,720,382.97 2,794,832.02

9,239,889.45 1,643,654.93

DGM-Finance & Administration

Total

Total ($)

1,643,654.93

DGM- Legal Division

DGM-Technical Services

Non-Cash Benefits ($)

12,493,328.44 11,641,575.61

5,262,739.57 1,954,058.69

51,821,219.57

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 DIRECTORS COMPENSATION APRIL 2008- OCTOBER 15, 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 ($)

Total ($)

Chairman

48,000

N/A

48,000

Deputy Chairman

39,500

N/A

39,500

Director

25,500

N/A

25,500

Director

64,000

N/A

64,000

Director

46,500

N/A

46,500

Director

60,500

N/A

60,500

Director

81,500

N/A

81,500

Director

50,000

N/A

50,000

Director

59,000

N/A

59,000

Director

106,000

N/A

106,000

Director

59,050

N/A

59,050

Director

25,500

N/A

25,500

Director

39,500

N/A

39,500

Director

32,500

N/A

32,500

Director

106,000

N/A

106,000

Total

843,050

*Compensation not included for Executive members

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009 DIRECTORS COMPENSATION OCTOBER 27, 2008- MARCH 2009

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

Honoraria ($)

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

112,000

N/A

112,000

Deputy Chairman

51,000

N/A

51,000

Director

51,000

N/A

51,000

Director

51,000

N/A

51,000

Director

51,000

N/A

51,000

Director

59,500

N/A

59,500

Director

59,500

N/A

59,500

Director

59,500

N/A

59,500

Director

51,000

N/A

51,000

Director

59,500

N/A

59,500

Director

51,000

N/A

51,000

Director

51,000

N/A

51,000

Director

51,000

N/A

51,000

Director

51,000

N/A

51,000

Director

59,500

N/A

59,500

Position of Director

Fees ($)

Chairman

Total

868,500

Total ($)

868,500

Total Directors fees - $1,711,550 - captured in Administrative Expenses of the Financial Statement (Page 3) *Compensation not included for Executive members

FINANCIAL STATEMENTS

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2008-2009

URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES YEAR ENDED MARCH 31, 2009

CONTENTS Page

Independent Auditors’ Report – to the members

FINANCIAL STATEMENTS

Consolidated Balance Sheet

Consolidated Income Statement

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Corporation’s Balance Sheet

Corporation’s Income Statement

Corporation’s Statement of Changes in Equity

Corporation’s Statement of Cash Flows

Notes to the Consolidated Financial Statements

10 - 65

Page 3

URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES CONSOLIDATED INCOME STATEMENT YEAR ENDED MARCH 31, 2009

2009 $’000

2008 $’000

2,542,992

2,846,289

(1,810,060)

(2,025,501)

Notes

Revenue

27 (a)

Cost of sales Gross profit

27 (b)

Other operating income

732,932

820,788

40,736

251,606

Administrative expenses

( 953,136)

( 777,401)

Other operating expenses

( 297,750)

( 354,341)

(

Finance costs

Share of (loss)/profit from associates Increase in fair value of investment properties

( 430,981) 6

Profit on disposal of investment properties

1,538,163 105,902 -

PROFIT BEFORE TAXATION Income tax credit (charge)

838,134

33,616

Income from investment in joint venture

PROFIT FOR THE YEAR AFTER TAXATION

12,855) 495,757

Negative goodwill

Income from investments

50,688)

4,118

338,987

82,208

251,850

2,153,945

69,272

(

318,803)

321,122

1,835,142

236,624 84,498

1,764,677 70,465

321,122

1,835,142

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

The Notes on Pages 10 to 65 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, 2009

Note Balance at April 1, 2007

Capital Contribution $’000 222,788

Capital Reserve $’000 9,210,788

General Reserve $’000

Fair value Reserve $’000

323,026

Revenue Reserve $’000

Advances to the Government of Jamaica $’000

19,405,585

(292,924)

Attributable to Equity Holders of Parent Company $’000

Minority Interest $’000

Total $’000

28,869,263

1,508,815

30,378,078

937,119

259,070

1,196,189

Revaluation increase on land and buildings

937,119

Deferred tax

( 173,217)

Net income recognized directly in equity

763,902

197,874

961,776

Net profit for the year

1,764,677

70,465

1,835,142

Total recognized income and expenses

763,902

1,764,677

2,528,579

268,339

2,796,918

Transfer to/(from) capital reserve

266,494

( 266,494)

Transfer to general reserve

(

Distribution

222,788

10,241,184

325,718

20,901,076

(292,924)

31,397,842

1,711,362

33,109,204

1,186

798

1,984

1,582,322

201,548

1,783,870

Balance at March 31, 2008 Fair value gains on investment

2,692

1,186

2,692)

(

173,217)

(

61,196)

65,792)

(

234,413)

65,792)

Revaluation increase on land and buildings

1,582,322

Deferred tax

( 170,529)

(

170,529)

Loss on disposal

(

14,000)

Net income recognized directly in equity

1,397,793

1,398,979

138,338

1,537,317

Net profit for the year

236,624

84,498

321,122

Total recognized income and expenses

1,397,793

236,624

1,635,603

222,836

1,858,439

Transfer to/(from) capital reserve

279,025

279,025)

Distribution

( 126,752)

222,788

11,918,002

325,718

20,858,675

(292,924)

33,033,445

1,807,446

Balance at March 31, 2009

The Notes on Pages 10 to 65 form an integral part of the Financial Statements.

14,000)

1,186 1,186

1,186

(

64,008) -

(

234,537)

(

14,000)

(

126,752) 34,840,891

Page 5.1

URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED MARCH 31, 2009

2009 $â&#x20AC;&#x2122;000

2008 $â&#x20AC;&#x2122;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 (Decrease) Increase in provision for future infrastructure costs on land sold Impairment loss recognised on trade and other receivable Share of loss/(profit) from associates Income from investment in joint venture Tax expense Interest expense Adjustment to property, plant and equipment Interest income Negative goodwill

321,122

1,835,142

178,702 ( 838,134) 312,237 ( 81,706) ( 574) ( 16,250) ( 13,372) 430,981 ( 69,272) 50,688 ( 267,698) ( 33,616)

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) -

Operating cash flows before movements in working capital

(

26,892)

( 228,226)

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

(

7,401) 281,874 ( 22,315) ( 364,544) 65

2,917 ( 745,416) 17,477 392,391 ( 78,145)

Cash used in operations

( 139,213)

( 639,002)

Interest paid Income taxes paid

( 15,101) ( 110,710)

( (

Net cash used in operating activities

( 265,024)

( 726,285)

10,394) 76,889)

Page 5.2

URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED MARCH 31, 2009 2009 $’000

2008 $’000

INVESTING ACTIVITIES Interest received Investment in associates Investment in joint venture Purchase of available-for-sale investments 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 Distribution from associates

261,310 ( 23,170) ( 132,308) ( 60,369) ( 367,716) ( 14,447) 36,239 ( 8,277) 16,750 59,564 ( 15,457) 75,373

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

Net cash (used in) provided by investing activities

( 172,508)

1,106,712

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

( 126,753) ( 34,836) 656,070

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

Note

Net cash provided by (used in) financing activities 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 65 form an integral part of the Financial Statements.

494,481

( 261,960)

56,949

118,467

1,859,495

1,690,086

81,706

50,942

1,998,150

1,859,495

Page 7

URBAN DEVELOPMENT CORPORATION INCOME STATEMENT YEAR ENDED MARCH 31, 2009

2009 $’000

Notes

Revenue

27(a)

Cost of sales Gross (loss) profit

27(b)

2008 $’000

1,359,484

1,948,433

(1,410,386)

(1,697,230)

(

50,902)

251,203

Administrative expenses

( 154,679)

( 134,632)

Other operating expenses

( 165,458)

( 252,943)

(

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

2,312)

777,766

695,926

695,075

296,275

1,063,392

853,517

PROFIT BEFORE TAXATION Taxation

38,410)

PROFIT FOR THE YEAR

The Notes on Pages 10 to 64 form an integral part of the Financial Statements.

14,678 1,078,070

( 86,000 ) 767,517

Page 8 URBAN DEVELOPMENT CORPORATION STATEMENT OF CHANGES IN EQUITY YEAR ENDED MARCH 31, 2009

Notes

Balance at April 1, 2007

Capital Reserve $’000

222,788

Revaluation increase on land and buildings Deferred tax

Capital Contribution $’000

7,359,852

535,952

(

75,589)

460,363

Total recognized income and expenses

Transfer from capital reserve

Transfer to general reserve

Balance at March 31, 2008

222,788

7,801,005

325,718

1,125,564

(

19,210)

Total $’000

(292,924)

Net profit for the year

460,363

Advances to the Government of Jamaica $’000

14,658,635

Revenue Reserve $’000

323,026

Net income recognised directly in equity

Revaluation increase on land and buildings

460,363

General Reserve $’000

22,271,377 535,952 (

75,589)

767,517

1,227,880

19,210

(292,924)

23,499,257

1,125,564

2,692

(

2,692)

15,442,670

Deferred tax

(

75,249)

(

75,249)

Loss on disposal

(

14,000)

(

14,000)

1,036,315

Net income (expense) recognised directly in equity

1,036,315

Net profit for the year

1,078,070

Total recognized income and expenses

1,036,315

1,078,070

2,114,385

Transfer from capital reserve

19,210)

19,210

Transfer to general reserve

Balance at March 31, 2009

222,788

8,818,110

325,718

16,539,950

(292,924)

25,613,642

The Notes on Pages 10 to 64 form an integral part of the Financial Statements.

(

Page 9 URBAN DEVELOPMENT CORPORATION STATEMENT OF CASH FLOWS YEAR ENDED MARCH 31, 2009 Note

2009 $’000

OPERATING ACTIVITIES Net profit

2008 $’000

1,078,070

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

767,517

80,205 14,678) 777,766) 268,876 45,832)

71,613 86,000 ( 695,926) ( 35,150) ( 28,763)

( ( (

16,250) 114,075) 38,410 535,168) 7,525) 624)

15,482 41,283) 2,312 ( 226,229) 44,451 ( 2,551)

Operating cash flows before movements in working capital

(

46,357)

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

( 414,666) ( 89,080) ( 22,315)

( 191,341) ( 59,652) 17,477

Cash utilized in operations Tax paid Interest paid

( 572,418) ( 44,556) ( 2,823)

( 276,043) ( 37,102) ( 2,312)

Net cash used in operating activities

( 619,797)

( 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

( 226,822) 107,190 535,168 ( 13,119) ( 8,277) 162,327 ( 364,544) ( 132,308) 16,750 58,515

(

( ( ( ( (

(

42,527)

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

Net cash from investing activities

134,880

FINANCING ACTIVITIES Repayment of borrowings Loan proceeds

606,070

( 235,134) -

Net cash from (used in) financing activities

606,070

( 235,134)

NET INCREASE IN CASH AND CASH EQUIVALENTS

121,153

126,209

1,189,153

1,034,181

45,832

28,763

1,356,138

1,189,153

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

The Notes on Pages 10 to 64 form an integral part of the Financial Statements.

676,800

Page 10 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

IDENTIFICATION The group comprises: !

The Corporation is established 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, 2009 are as follows:

Name of subsidiary

Place of Incorporation (or registration) and operation

Proportion of ownership interest %

Proportion of voting power held %

Principal activity

Negril Jamaica Estates Limited

Jamaica

100

Non-trading

Urban Maintenance (1977) Limited

Jamaica

100

Management and maintenance services

Runaway Bay Water Company Limited

Jamaica

100

Supply of water

National Hotels and Properties Limited

Jamaica

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

Operation of golf course and management of agricultural and horticultural projects

Ocho Rios Commercial Centre Limited

Jamaica

100

Leasing of commercial properties

Montego Freeport Limited

Jamaica

Property owners and managers

Lilliput Development Corporation Limited

Jamaica

100

Project management in housing development and infrastructure

Seacastles Limited

Jamaica

100

Construction and rental

Rutland Point Beach Resorts Limited

Jamaica

100

Construction and rental

Page 11 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

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, 2009. 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.

ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS Standards and Interpretations effective in the current year In the current year IASB issued amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures on reclassification of financial assets effective July 1, 2008. These amendments permit an entity to reclassify non-derivative financial assets (other than those designated at fair value through profit or loss by the entity upon initial recognition) out of the fair value through profit or loss category in particular circumstances. The amendment also permits an entity to transfer from the available-for-sale category to the loans and receivable category a financial asset that would have met the definition of loans and receivables and the entity has the intention and ability to hold that financial asset for the foreseeable future or to maturity. The Corporation elected not to reclassify any of its investments. Two interpretations issued by the International Financial Reporting Interpretations Committee are also effective for the current period. These are: IFRIC 12 IFRIC 14: IAS 19

Service Concession Arrangements The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

The adoption of these Interpretations has not resulted in changes to the Corporation’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 authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective for the financial period being reported upon: . Effective for annual periods beginning on or after New Standards IFRS 8 IFRS 9 IFRS for SMEs

Operating Segments Financial Instruments - Classification and Measurement International Financial Reporting Standard for Small and Medium-sized Entities

January 1, 2009 January 1, 2013 (i)

Page 12 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (Cont’d) . Amendments to Standards 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) IAS 27, 28, and 31 (Revised) IAS 1 (Revised)

IAS 23 (Revised)

IAS 24 (Revised) IAS 27 (Revised)

IAS 32 (Revised) IAS 38 (Revised) IAS 39 (Revised) IAS 39 and IFRS 7 IAS 39 and IFRIC 9 (Revised) IFRS 1 (Revised)

IFRS 2 (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 Consequential amendments arising from amendments to IFRS 3 Presentation of Financial Statements – Comprehensive revision including requiring a statement of comprehensive income Borrowing costs – Comprehensive revision to prohibit immediate expensing of borrowing costs in respect of qualifying assets Related party disclosures – Revised definition of related parties Consolidated and Separate Financial Statements - Amendment relating to cost of an investment on firsttime adoption Financial Instruments Presentation: - Amendment relating to classification of rights issue Intangible assets – Amendments arising from April 2009 Annual Improvements to IFRS Eligible Hedged Items Reclassification of Financial Assets Embedded Derivatives First-time Adoption of International Financial Reporting Standards - Amendment relating to cost of an investment on first-time adoption - Revised and restructured - Amendments relating to oil and gas assets and determining whether an arrangement contains a lease - Limited exemption from comparative IFRS 7 Disclosure for First-time Adopters Share-based Payment: - Amendment relating to vesting conditions and cancellations - Amendments arising from April 2009 Annual Improvements to IFRS - Amendments relating to group cash-settled sharebased payment transactions

Effective for annual periods beginning on or after

January 1, 2009

January 1, 2010 January 1, 2009 July 1, 2009

January 1, 2009

January 1, 2009 January 1, 2011

January 1, 2009 February 1, 2010 July 1, 2009 July 1, 2009 July 1, 2009 (ii)

January 1, 2009 July 1, 2009

January 1, 2010 July 1, 2010

January 1, 2009 July 1, 2009 January 1, 2010

Page 13 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (Cont’d) . Amendments to Standards (Cont’d) 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)

IFRIC 13 IFRIC 15 IFRIC 16 IFRIC 16 (Revised)

IFRIC 17 IFRIC 18 IFRIC 19 (i) (ii) (iii) -

Reassessment of Embedded Derivatives – Amendments arising from April 2009 Annual Improvements to IFRS Customer Loyalty Programmes Agreements for the Construction of Real Estate Hedges of a Net Investment in a Foreign Operation Hedges of a Net Investment in a Foreign Operation – Amendments arising from April 2009 Annual Improvements to IFRS Distributions of Non-cash Assets to Owners Transfer of Assets from Customers Extinguishing financial liabilities with equity instruments

Effective for annual periods beginning on or after

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 (iii) July 1, 2010

issued July 9, 2009. effective for annual periods ending on or after June 30, 2009. effective for transfers received on or after July 1, 2009.

The Board of Directors and management believe that the adoption of the following Standards and Interpretations in the future periods at their effective dates will be relevant to the financial statements of the Group. New and Revised Standards and Interpretations considered relevant ! Amendments specifically to IAS 1, 8, 10, 16, 18, 19, 27, 28, 36, 38, 39 and IFRS 7, 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 their respective effective dates. !

Amendments specifically to IAS 1, 7, 17, 36 and 39, resulting from the April 2009 Annual Improvements to IFRS are not expected to have a significant impact on the Group’s financial statements on adoption at their respective effective dates.

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

IAS 23 (Revised) - Borrowing Costs - The revision removes the option of either capitalising borrowing costs Relating to qualifying assets or expensing these borrowing costs. The revised standard requires management to capitalise borrowing costs attributable to qualifying assets. Qualifying assets are assets that take a substantial time to get ready for their intended use or sale. The adoption of this revised standard at its effective date is not expected to have a 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, 2009

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

IFRS 3 (Revised) Business Combinations - The revision to IFRS 3 and the consequential amendments to IAS 27 Consolidated and Separate Financial Statements, IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures, 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. These revised standards are not expected to have any significant impact on the Group’s financial statements.

The amendment to IFRS 7, Financial Instruments: Disclosure, requires enhanced disclosures about fair value measurements and liquidity risk. On adoption at its effective date, the amendment will result in expanded disclosures in respect of fair value measurements recognised on the balance sheet and will restrict liquidity risk disclosures to financial liabilities that are settled by delivering cash or another financial asset.

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.

IFRS for SMEs – Directors and management have not yet assessed the likely impact of the standard on the Group. This assessment will be carried out when the Institute of Chartered Accountants of Jamaica determines the effective date of the standard and the entities that should apply it.

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.

Page 15 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Basis of consolidation (Cont’d) 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. 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.

Page 16 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Property, plant and equipment (Cont’d) Depreciation is charged so as to write off the cost or valuation of assets other than land and properties under construction, over their estimated useful lives using the straight-line method. The 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. 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.

Page 17 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Goodwill (Cont’d) For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period. On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 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 associates in excess of the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s post investment in the associate) are recognized only to the extent that the Group has incurred legal or constructive obligations or has made payments on behalf of the associate. Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate. 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, 2009

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 proportionate consolidation. The Group’s share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line by line basis. Any goodwill arising on the acquisition of the Group’s interest in a jointly controlled entity is accounted for in accordance with the Group’s accounting policy for goodwill arising on the acquisition of a subsidiary. Where the Group transacts with its jointly controlled entities, unrealized profits and losses are eliminated to the extent of the Group’s interest in the joint venture. 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, 2009

SIGNIFICANT ACCOUNTING POLICIES (Contâ&#x20AC;&#x2122;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. Deferred tax assets arising from deductible temporary differences associated with such investments and interest are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary difference and they are expected to 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 assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. 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 acquirerâ&#x20AC;&#x2122;s interest in the net fair value of the acquireeâ&#x20AC;&#x2122;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)

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

Page 20 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Financial instruments (Cont’d) (d)

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

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

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

a contractual obligation: (i) (ii)

(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) (ii)

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

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The Group recognizes financial assets or financial liabilities on its balance sheet only when the Group becomes a party to the contractual provisions of the instruments. Financial assets Financial assets are recognized and de-recognized using trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the asset within the timeframe established by the 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 categories of: ! !

Available-for-sale investments, and Loans and receivables

The classification depends on the nature and purpose of the financial assets and is determined at the time of acquisition.

Page 21 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Financial instruments (Cont’d) Financial assets (Cont’d) Investments The Group classifies its investments, which comprise Government of Jamaica securities, as available-for-sale. Investments classified as available-for-sale are traded in an active market and are intended to be held for an indefinite period of time, and may be sold in response to need for liquidity or changes in interest rates. These investments are initially recognised at fair value, plus transaction costs, and subsequently re-measured at fair value based on quoted bid prices or amounts derived from cash flow models. Where fair values cannot be reliably determined, available-for-sale securities are carried at cost less provision for impairment. Gains and losses arising from changes in fair values are recognised in fair value reserves in equity with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in income. Where the investment is disposed of or determined to be impaired, the cumulative gain or loss previously recognised in fair value and other reserves is included in profit or loss. 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. 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 financial assets classified as AFS, objective evidence of impairment could include: ! ! !

significant financial difficulty of the issuer or counterparty; or default or delinquency in interest or principal payments; or it becoming probable that the borrower will enter bankruptcy or financial re-organization.

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 number of delayed payments in the portfolio past the average credit period of 30 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. 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.

Page 22 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Financial instruments (Cont’d) Financial assets (Cont’d) Impairment of financial assets (Cont’d) The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against profit or loss. Changes in the carrying amount of the allowance account are recognized in profit or loss. 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. 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 and interest charges 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.

Page 23 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Inventory of land and development projects (Cont’d) 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 realizable 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

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.

Page 24 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 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. The Group as lessor 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. Rental income collected in advance is treated as deferred income and is amortized to profit or loss for the related period on a straight-line basis. The Group as lessee Operating lease payments are recognized as an expense on a straight-line basis over the lease term. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred. Interest and dividend revenue Interest income is accrued on a time 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 amount. Dividend revenue from investments is recognized when the Group’s right to receive payment has been established. 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.

Page 25 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Interest expense 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. 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 11, the Group operates a defined benefit pension plan. The amounts shown in the balance sheet of an asset of approximately $8.047 million (2008: $304.827 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.

Page 26 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont’d) Key sources of estimation uncertainty (Cont’d) (b) Fair value of property, plant and equipment and investment properties Included in the balance sheet are amounts of $13.05 billion (2008: $11.8 billion) and $15.04 billion (2008: $14.0 billion) 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. (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 $79.639 million (2007: $71.362 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 $212.1 billion (2008: $228.35 billion) 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 27 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009 5

PROPERTY, PLANT AND EQUIPMENT Furniture, Fixtures & Fittings $’000

Sewerage Treatment Plant $’000

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)

54,192

46,508

23,480 ( 7,833)

805,282 11,402 166,816 7,841 ( 4,647)

36,533 -

31,692 4,135 ( 7,841) -

12,446,139 11,827 367,716 ( 200,379) 1,684,901 ( 81,480)

4,454,513

54,192

62,155

986,694

36,533

27,986

14,228,724

8,606,651

9,161 4,445,352

54,192 -

62,155 -

986,694 -

36,533 -

27,986 -

1,176,721 13,052,003

8,606,651

4,454,513

54,192

62,155

986,694

36,533

27,986

14,228,724

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 -

3,515 99,865 98,969) -

26,510 5,437 -

35,671 5,999 ( 5,016)

524,263 11,379 64,700 ( 3,474)

23,342 2,701 -

4,411

31,947

36,654

596,868

26,043

The Group Freehold Land $’000

Freehold Buildings $’000

Leasehold Properties $’000

7,103,013 493,146 -

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

54,192 -

7,596,159 425 172,979 ( 174,379) 1,080,467 ( 69,000)

3,875,773

March 31, 2009

8,606,651

Classified as follows: At cost At valuation

At cost or valuation April 1, 2007 Additions Transfers Adjustments Revaluation Disposals Impairment March 31, 2008 Acquisition of subsidiaries Additions Transfers Revaluation Disposals

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

March 31, 2008 Acquisition of subsidiaries Charge for year Revaluation adjustments On disposals

March 31, 2009

(

306 26,000) 604,434 -

Motor Vehicles $’000

Capital Work-in Progress $’000

Total $’000

( ( ( (

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

( (

613,301 11,378 178,702 98,969) 8,490) 695,923

Net Book Value March 31, 2009

8,606,651

4,450,102

22,245

25,501

389,826

10,490

27,986

13,532,801

March 31, 2008

7,596,159

3,872,258

27,682

10,837

281,019

13,191

31,692

11,832,838

Page 28 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

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

Furniture, Fixtures & Equipment $’000

664,836 ( 1,835)

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

175,119 16,479 -

165,490

828,491 -

The Corporation Freehold Land $’000 At cost or valuation April 1, 2007 Additions Disposals Transfers Revaluation adjustments March 31, 2008 Additions Disposals Transfers Revaluation adjustments

6,198,942 309,182

Freehold Buildings $’000

Sewerage Treatment Plant $’000

Leasehold Property $’000

Capital Work-in Progress $’000

36,533 -

54,192 -

18,760 5,091 -

191,542 32,321 ( 74) -

36,533 -

54,192 -

23,851 4,135 -

7,680,992 226,822 ( 76,907) ( 200,379) 1,069,701

Total $’000 7,186,992 23,164 ( 1,945) ( 1,835) 474,672

6,508,124 172,979 ( 69,000) ( 174,379) 899,822

( 26,000) 169,879

38,259 17,387 ( 7,833) -

March 31, 2009

7,337,546

972,370

47,813

223,789

36,533

54,192

27,986

8,700,229

Classified as follows: At cost At valuation

7,337,546

972,370

47,813 -

223,789 -

36,533 -

54,192 -

27,986 -

390,313 8,309,916

7,337,546

972,370

47,813

223,789

36,533

54,192

27,986

8,700,229

Depreciation 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 Charge for year Eliminated on revaluation On disposals

55,863 ( 55,863) -

28,075 5,118 ( 5,016)

138,597 11,085 -

23,342 2,701 -

26,509 5,438 -

216,523 80,205 ( 55,863) ( 5,016)

March 31, 2009

28,177

149,682

26,043

31,947

Net Book Value March 31, 2009

7,337,546

972,370

19,636

74,107

10,490

22,245

27,986

8,464,380

March 31, 2008

6,508,124

828,491

10,184

52,945

13,191

27,683

23,851

7,464,469

235,849

Page 29 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

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 qualified in house valuators. The effective date of all valuations was as at March 31, 2009. The valuations were arrived at by reference to market evidence of transaction prices for similar properties. 6

INVESTMENT PROPERTIES (a)

Fair value of investment properties This represents open market value determined by qualified internal valuators. The Group 2009 2008 $’000 $’000 At beginning of the year Additions Transfers Disposal Acquisition of subsidiaries Increase in fair value during the year At year-end

The Corporation 2009 2008 $’000 $’000

14,019,798 14,447 200,379 ( 16,750) 124,501 838,134

13,493,668 ( 69,185) ( 942,848) 1,538,163

10,962,388 200,379 ( 16,750) 777,766

10,379,647 ( 69,185) ( 44,000) 695,926

15,180,509

14,019,798

11,923,783

10,962,388

The fair value of the Group’s Investment property at March 31, 2009 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.

(c)

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

Page 30 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

INVESTMENT PROPERTIES (Cont’d) (d)

The property rental income earned by the Group from its investment properties all of which are leased under operating leases amounts to $266.169 million (2008: $216.327 million). Direct operating expenses arising in the investment properties during the period amount to $924.146 million (2008: $766.567 million).

INTANGIBLE ASSETS The Group and the Corporation 2009 2008 $’000 $’000 At beginning of the year Additions during the year Amounts capitalized during the year

71,362 8,277 -

73,727 6,497 ( 8,862)

79,639

71,362

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

Proportion of ownership interest %

Proportion of voting power held %

Principal activity

Hellshire Marble Limited

Jamaica

Non-trading

Portmore Commercial Development Company Limited

Jamaica

Operation of shopping and commercial centre

Bloody Bay Hotel Development Limited

Jamaica

Hotel operation

Page 31 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

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

2008 $’000

12,000 65,923 194,794 -

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

272,717 25 109,890

272,719 25 109,890

382,632

382,634

67,240 ( 383) 153,685 -

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

220,542 ( 102,329)

284,707 ( 124,498)

118,213

160,209

Share of post acquisition profits

1,127,853

1,650,735

Loans to associated companies

112,298

108,799

1,740,996

2,302,377

Shares at cost in associates and 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

Total investments in associated companies *

Investment of less than $1,000.

35 35 40 49 50

2009 $’000

Page 32 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

INVESTMENTS IN ASSOCIATES (Cont’d) The Corporation Details of the Corporation’s investments in subsidiaries and associates at March 31, 2009 are as follows:

(a)

(b)

2009 $’000

2008 $’000

323,250 154,805 109,915

425,887 214,495 109,915

587,970

750,297

2009 $’000

2008 $’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 Seacastles Limited Rutland Point Beach Resorts Limited

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

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

Total shares at cost

119,255

119,264

Advances Long-term loans

212,814 13,554

303,756 3,071

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

Shareholding and other transactions in subsidiaries Name of subsidiary

Less: Provision for losses

Total investments in subsidiary companies

226,368 ( 22,373)

(

306,827 204)

203,995

306,623

323,250

425,887

Page 33 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

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

Shareholdings and other transactions in associates 2009 $’000 Seacastles Limited Rutland Point Beach Resorts Limited Hellshire Marble Limited Portmore Commercial Development Company Limited Bloody Bay Hotel Development Limited Cost of investment Loans

2008 $’000

* * 12,000

1 1 12,000

65,923 *

77,923

77,925

112,298

108,799

67,240 ( 383) ____56

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

66,913 (102,329)

152,269 (124,498)

( 35,416)

27,771

154,805

214,495

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

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

Investment in other companies 2009 $’000

2008 $’000

Shares at cost:- Kingston Restoration Company Limited - Rose Hall Resort Limited

25 109,890

109,915

Page 34 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

INVESTMENTS IN ASSOCIATES (Cont’d) Summarized audited financial information in respect of the Group’s associates are as follows: 2009 $’000 Total assets Total liabilities

334,665 (231,254)

Net assets

454,560 ( 330,970)

103,411

123,590

Group’s share of associate’s net assets

69,410

75,270

Revenue

11,437

25,322

4,163

16,760

Profit for the period Group’s share of associate’s (loss)/profit for the period 9

2008 $’000

(430,981)

464,024

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 among 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 Developments Limited is based on the Heads of Agreement between the Group and Rose Hall Developments 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 2009 $’000 Ackendown Newtown Development Company Limited Stated capital Impairment loss

2008 $’000

The Corporation 2009 2008 $’000 $’000

497,828 ( 412,077)

85,751 732,043

85,751 599,745

85,751 732,043

85,751 599,745

817,794

685,496

817,794

685,496

18,137

Seaside at Rosehall Developments Limited Initial Investment Accumulated share of profits

287,226 711,765

287,226 -

Loans receivable

998,991 33,035

998,991 33,025

287,226 33,035

287,226 33,025

1,032,026

1,032,016

320,261

320,251

1,867,957

1,735,649

1,156,192

1,023,884

Loans

Port Royal Development Company

Total Investment

497,828 ( 412,077)

Page 35 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

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, 2009.

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, 2008 was carried out at March 21, 2009 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, 2008 and March 31, 2009. 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 $1,349.7 million (2008: $1,243.7 million) and for the Corporation $1,187.554 million (2008: $1,071.6 million) and that the actuarial valuation of these assets represented 148.8% (2008:113%) for the Group and 146% (2008: 109%) 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 2009 2008 % % Gross discount rate Expected return on assets Expected rate of salary increases Future pension increases Inflation

16.00 9.50 11.00 5.00 10.00

13.00 9.50 10.00 3.50 8.75

Page 36 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

RETIREMENT BENEFIT ASSET (Cont’d) (b)

Amounts included in the balance sheet in respect of the plan are as follows: The Group 2009 $’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

( 583,688) 1,243,660

( 483,076) 1,187,554

( 511,780) 1,071,628

807,188 ( 312,970)

659,972 ( 225,032)

704,478 ( 284,075)

559,848 ( 179,504)

( 486,171)

( 130,113)

( 420,423)

( 124,587)

304,827

255,757

8,047

Amounts recognized in income in respect of the plan are as follows: The Group 2009 $’000 Current service cost - employer Interest costs Expected return on plan assets Recognized actuarial losses

18,910 81,318 (120,354) ( 11,835)

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

The Corporation 2009 2008 $’000 $’000 17,628 72,118 (103,534) ( 4,147)

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

286,811

( 11,531)

344,198

Total included in Employee benefit expense

312,237

( 23,076)

268,876

( 35,150)

78,211

125,197

82,298

110,457

Movements in the net assets in the year were as follows: The Group 2009 $’000 Balance, April 1 Amounts charged to income Contributions (Reduction) Increase in income due to limit

304,827 (312,237) 15,457 -

Balance, March 31 (e)

2008 $’000

Increase (Reduction) in income due to limit

The actual return on plan assets was (d)

The Corporation 2009 2008 $’000 $’000

( 542,534) 1,349,722

Net asset in balance sheet (c)

2008 $’000

8,047

2008 $’000

The Corporation 2009 2008 $’000 $’000

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

255,757 (268,876) 13,119 -

210,152 35,150 10,455 -

304,827

255,757

Changes in the present value of the defined benefit obligation are as follows: The Group 2009 $’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

2008 $’000

The Corporation 2009 2008 $’000 $’000

583,689

490,420

511,780

438,497

1) 36,574 18,910 81,318 (156,091) ( 11,353) ( 10,512)

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

30,189 17,628 72,118 (138,959) ( 6,910) ( 2,770)

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

542,534

583,689

483,076

511,780

(

Page 37 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

RETIREMENT BENEFIT ASSET (Cont’d) (f)

Changes in the fair value of plan assets are as follows: The Group 2009 $’000 Opening fair value of plan assets Contributions Employees Employer Expected return on plan assets Benefits paid Actuarial gain/(loss) Settlements Closing fair value of plan assets

The Corporation 2009 2008 $’000 $’000

2008 $’000

1,243,660 34,248 15,457 120,354 ( 11,353) ( 42,132) ( 10,512)

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

1,071,628 30,189 13,119 103,534 ( 6,910) ( 21,236) 2,770

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

1,349,722

1,243,660

1,187,554

1,071,628

2006 $’000

2005 $’000

(g) Retirement benefit experience adjustments The Group 2009 $’000

2008 $’000

Present value of defined benefit obligation Fair value of plan assets

542,534 (1,349,722)

583,688 (1,243,660)

490,420 (1,127,554)

341,396 (919,737)

284,780 (764,327)

Surplus in the plan

( 807,188)

( 659,972)

(

637,134)

(578,341)

(479,547)

Experience adjustment to plan liability

156,091

Experience adjustment to plan assets

(

42,132)

2007 $’000

(

777)

19,985

47,691

8,516

(

700)

61,223

90,034

108,252

The Group expects to make a contribution of $14.741M to the defined benefits plan during the next financial year. The Corporation 2009 $’000

2008 $’000

2007 $’000

2006 $’000

2005 $’000

Present value of defined benefit obligation Fair value of plan assets

483,076 (1,187,554)

511,780 (1,071,627)

438,497 (969,488)

300,902 (810,422)

254,643 (682,379)

Surplus in the plan

( 704,478)

( 559,847)

(530,991)

(509,520)

(427,736)

3,609)

41,483

12,892

16,615

6,036

62,612

69,972

118,163

Experience adjustment to plan liability Experience adjustment to plan assets

138,959 (

21,236)

(

The Corporation expects to make a contribution of $13.261M 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 2009 2008 $’000 $’000 Equity fund Fixed income fund Mortgage and real estate Other assets

The Corporation 2009 2008 $’000 $’000

60,650 989,485 299,587 -

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

47,132 876,164 264,258 -

57,888 782,793 230,947 -

1,349,722

1,243,660

1,187,554

1,071,628

Page 38 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

INVESTMENTS (a)

Non-current 2009 $’000

Available for sale at fair value: Government of Jamaica Securities

62,353

(b)

Current

2008 $’000

2009 $’000

2008 $’000 36,239

(a)

A subsidiary holds an 11.5% fixed rate Government of Jamaica U.S. Dollar indexed bond. The security matures in 2010.

(b)

The weighted average effective interest rate on the Government of Jamaica securities is 9.22% (2008: 6.85%). Included in investment is interest receivable of $Nil (2008: $1,239,000)

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 2009 2008 $’000 $’000

(b)

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

166,845

31,051

135,794

Balance at March 31,

166,845

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

2009 $’000 Inventory at cost - Land and development projects Less: Deferred management fees (Note 12(a))

2008 $’000

2,903,569 ( 166,845)

2,539,025 ( 166,845)

2,736,724

2,372,180

Management’s estimate of net realisable value which was based on independent valuations during 2009, was $2.228 billion (2008: $1.989 billion) in excess of cost. Management has not revalued land classified as development projects. The cost of inventory of land and development projects recognised as an expense during the year was $11.4M (2008: $546.7M).

Page 39 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

INVENTORIES The Group

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

2009 $’000

2008 $’000

19,079 2,072 12,651 15,174

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

48,976

41,575

TRADE AND OTHER RECEIVABLES These comprise: The Group 2009 2008 $’000 $’000 Trade receivables Real Estate sales receivables

Less: Provision for doubtful debt

Other receivables and prepayment: Amount advanced on specific projects Prepayments Other

Less : Provision for doubtful debt

The Corporation 2009 2008 $’000 $’000

549,779 429,984

433,679 458,236

381,534 429,984

304,094 458,236

979,763

819,915

811,518

762,330

(278,663)

(231,432)

(192,019)

(202,536)

701,100

660,483

619,499

559,794

85,877 937,423

72,108 1,254,897

13,289 45,951 614,825

41,882 266,705

1,023,300 ( 138,233)

1,327,005 ( 135,241)

674,065 ( 138,233)

308,587 (135,241)

885,067

1,191,764

535,832

173,346

1,586,167

1,852,247

1,155,331

733,140

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 $49.809 million (2008:$104.160 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 (2008: 61 days).

Page 40 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

TRADE AND OTHER RECEIVABLES (Cont’d) Ageing of past due but not impaired: The Group 2009 2008 $’000 $’000 31 – 60 days 61 – 90 days

The Corporation 2009 2008 $’000 $’000

21,585 30,546

93,858 10,302

16,222 16,036

84,727 3,391

52,131

104,160

32,258

88,118

Movements in allowance for doubtful debts: The Group Trade $’000

2009 Other receivables $’000

Trade $’000

2008 Other receivables $’000

Balance at beginning of year Increase in allowance recognized in profit and loss Acquisition of subsidiary

231,432

135,241

193,296

114,297

10,380 36,851

2,992 -

38,136 -

20,944 -

Balance at end of the year

278,663

138,233

231,432

135,241

The Corporation Trade $’000 Balance at beginning of year (Decrease)/Increase in allowance recognized in profit and loss Balance at end of the year

202,536 ( 10,517) 192,019

2009 Other receivables $’000

Trade $’000

2008 Other receivables $’000

135,241

179,029

114,297

2,992

23,507

20,944

138,233

202,536

135,241

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 2009 2008 $’000 $’000

2009 $’000

2008 $’000

101,976 124,638

10,248 607,546

98,066 87,787

10,248 607,546

226,614

617,794

185,853

617,794

Page 41 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

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 2009 $’000

2008 $’000

Cash at bank and short-term deposits Bank overdraft

(

2,029,817 9,834)

(

1,876,099 1,159)

Less: interest receivable - deposits

(

2,019,983 21,833)

(

1,874,940 15,445)

1,998,150

1,859,495

The Corporation 2009 $’000 Cash and bank balances Short-term deposit

Less: Interest receivable - deposits

2008 $’000

10,955 1,367,016

(

1,377,971 21,833) 1,356,138

144,933 1,059,169

(

1,204,102 14,949) 1,189,153

Interest rates on bank deposits range from 3.0% to 5.0% (2008: 3.0% to 5.0%) for investments in United States dollars and 3.0% to 11% (2008: 3% to 11%) for investments in Jamaican dollars.

Page 42 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009 16

CAPITAL RESERVE (a)

This comprises: The Group 2009 2008 $’000 $’000 Surplus on valuation of fixed assets In prior years In current year Land and building Deferred tax liability Loss on disposal

1,582,322 ( 170,529) ( 14,000)

9,863,739

(

937,119 173,217) -

8,541,884

( (

8,081,521

1,125,564 75,249) 14,000)

535,952 (

9,578,199

8,541,884

75,589)

12,025,434

10,627,641

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)

(

17,869)

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

(

501,610)

(

501,610)

( 201,237)

(

258,460) 279,025

(

524,954) 266,494

( 521,773) ( 19,210)

( 502,563) ( 19,210)

20,565

(

258,460)

( 540,983)

( 521,773)

386,515 4,967

11,918,002

10,241,184

8,818,110

7,801,005

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)

10,627,641

The Corporation 2009 2008 $’000 $’000

(

17,869)

(

17,869)

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

The Group 2009 $’000

2008 $’000

The Corporation 2009 2008 $’000 $’000

The Parent

279,025

266,494

19,210

Total

279,025

266,494

19,210

Page 43 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

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 of the sale of a hotel property was transferred to the general reserve.

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

2009 $’000

2008 $’000

6,483,413 385,515 9,671,022

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

16,539,950

15,441,409

1,959,921 318,332 1,944,776

3,220,313 292,866 1,884,408

4,223,029

5,397,587

20,762,979

20,838,996

95,696

62,080

20,858,675

20,901,076

ADVANCES TO THE GOVERNMENT OF JAMAICA This comprises: The Group and the Corporation 2009 2008 $’000 $’000 Advances to the Government of Jamaica (Note 19 (a)) Real estate receivable (Note 19 (b))

93,674

199,250

292,924

Page 44 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

ADVANCES TO THE GOVERNMENT OF JAMAICA (Contâ&#x20AC;&#x2122;d) 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.

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 Share of fair value reserve

Less: Capital distribution/minority interest

2009 $'000

2008 $'000

48,307

334 1 50,676

99,318

1,426,513

1,288,973

1,525,831

1,388,291

461,285 798

376,787 -

1,987,914

1,765,078

( 180,468) 1,807,446

(

53,716) 1,711,362

Page 45 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

LONG-TERM BORROWINGS

(a) Loan (b) Redeemable convertible cumulative preference shares (c) Redeemable preference shares

Less: Current Portion

2009 $’000

2008 $’000

92,139 333 200

76,977 333 198

92,672 42,857

77,508 31,921

49,815

45,587

(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, 2009 there were arrears of cumulative preference dividends amounting to $1.2 million (2007: $1.1 million). No provision has been made for this amount. (c) Redeemable preference shares

10% Redeemable cumulative preference shares

2009 $’000

2008 $’000

200

198

The preference shares could have been redeemed on March 31, 1993; however, no redemption has taken place up to March 31, 2009. They may be redeemed at a premium at anytime. At March 31, 2009, 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.

Page 46 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

PROVISION FOR FUTURE INFRASTRUCTURE COST ON LAND SOLD The Group and the Corporation 2009 2008 $’000 $’000 At April 1 Reduction in provision for the year Additional provision for the year At March 31

228,350 ( 16,250) -

212,868 15,482

212,100

228,350

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 2009 $’000

2008 $’000

The Corporation 2009 2008 $’000 $’000

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

2,162,458 ( 444,069)

2,033,795 ( 427,581)

502,181 (265,061)

443,554 (264,849)

1,718,389

1,606,214

237,120

178,705

The movement during the year in the Group’s deferred tax position was as follows: The Group 2009 $’000 At April 1, 2008 (Credited) Charged to income for the year Charged to equity for the year Acquisition of subsidiaries At March 31, 2009

2008 $’000

The Corporation 2009 2008 $’000 $’000

1,606,214 ( 136,314) 234,537 13,952

1,120,622 251,179 234,413 -

178,705 ( 16,834) 75,249 -

44,211 58,905 75,589 -

1,718,389

1,606,214

237,120

178,705

Page 47 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009 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 Revaluation Surplus $’000

Retirement Benefit Asset $’000

Interest Receivable $’000 6,955

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

1,104,938

80,810

11,000

20,652

At March 31, 2008 Acquisition of subsidiaries Charged (credited) to income for the year Charged to equity for the year

1,343,755 -

At March 31, 2009

227,817

(

29,334) 234,470 1,548,891

(

Fair value Adjustments $’000

Accelerated Tax Depreciation $’000

Unrealized Foreign Exchange Gains $’000

357,097

2,730

1,542

564)

216,508

(

946)

6,529

245,310

234,413

6,391 -

573,672 -

8,313 35,536

202 -

( 98,925)

2,858

( 30,151)

3,447

10,695

67 543,588

1,554,072

(1,340)

101,462 -

Total $’000

47,296

10,897

2,537

9,249

Depreciation charges in excess of Capital Allowances $’000

Retirement benefit obligations $’000

Tax losses carried forward $’000

Unrealised exchange gains $’000

194,647

146

88,598

12,700

( 21,893)

(146)

15,307

863

172,754 -

103,905 21,584

13,563 -

137,359 -

2,033,795 35,536 ( 141,410) 234,537 2,162,458

Deferred Tax Assets

At April 1, 2007 (Charged) credited to income for the year At March 31, 2008 Acquisition of subsidiaries (Charged) credited to income for the year At March 31, 2009

(

4,948) 167,806

(

3,103) 122,386

Accrued vacation pay $’000

Impairment loss on joint venture $’000

Total $’000

137,359 -

(

253)

3,208

(

253)

16,771

137,359

433,450 (

5,869) 427,581 21,584

(

5,096) 444,069

Page 48 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

DEFERRED TAX LIABILITIES (Cont’d) The Corporation Deferred tax liabilities Revaluation Surplus Buildings $’000 At April 1, 2007 Charged to income for the year Charged to equity

Revaluation of Investment Properties $’000

Retirement Benefit Assets $’000

Interest Receivable $’000

Total $’000

99,728 75,589

152,768 25,233 -

70,051 15,202 -

4,506 477 -

327,053 40,912 75,589

At March 31, 2008 Charged (Credited) to income for the year Charged to equity

175,317

178,001

85,253

4,983

443,554

75,249

66,336 -

(85,253) -

2,295 -

( 16,622) 75,249

At March 31, 2009

250,566

244,337

7,278

502,181

Impairment loss on Joint Venture $’000

Total $’000

Deferred tax assets

Accrued Vacation Leave $’000

Depreciation Charges in Excess of Capital allowances $’000

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

11,980

133,503

137,359

282,842

( 18,746)

( 17,993)

At March 31, 2008 (Charged) Credited to income for the year

12,733

114,757

137,359

264,849

At March 31, 2009

15,620

753

2,887

(

2,675) 112,082

137,359

212 265,061

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, 2009 the shares in the regional companies had not been transferred to the Group. The net deficit in the income statement at March 31, 2009 aggregated $14.013 million (2008:$3.513 million) which amounts have not been incorporated in these financial statements.

Page 49 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

TRADE AND OTHER PAYABLES These comprise: The Group 2009 $’000 Amounts to be disbursed on specific projects Trade payables Contract payables and retentions Deposits on sale of real estate Accruals Others

2008 $’000

The Corporation 2009 2008 $’000 $’000

460,716 143,326 32,790 259,543 74,253 412,584

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

460,716 32,790 120,267 8,882 195,118

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

1,383,212

1,381,541

817,773

906,854

2009 $’000

2008 $’000

SHORT-TERM BORROWINGS

Development Bank of Jamaica (Principal) Accrued interest

606,070 35,587

Total

641,657

During the period the Corporation obtained from the Development Bank of Jamaica, a line of credit in the amount of $1,000,000,000 of which $606,070,000 has been drawn down. The loan carries a variable rate of interest of 7.75% per annum. The repayment date of both principal and interest is October 31, 2009. The loan is secured by duly executed Promissory Notes together with specific securities as follows: (1)

Hypothecation of shares in companies to be divested (Bloody Bay Development Limited and Pegasus Hotels of Jamaica Limited in the first instance) value J$ 2.5 billion (subject to a current valuation being provided).

(2)

Assignment of additional security (including first mortgage on land assets) to maintain a security coverage loan ratio of 1.6:1.

(3)

First mortgage on property known as “Room on the Beach” located in St. Ann and registered at Volume 1104 Folio 890 and Volume 1220 Folio 833 of the Register Book of Titles. (This security is to be held on an interim basis until the primary security is in place).

Page 50 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

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 2009 $’000 Hotel operations Real estate sales Lease income Ticket sales Car park income Agricultural operations Project management fees Management fees Water and sewage Other operations Other income

1,002,775 156,612 264,873 607,799 41,696 4,766 209,629 241,989 79,494 ( 142,807) 76,166 2,542,992

(b)

2008 $’000 676,291 620,178 222,404 626,183 40,397 881 54,059 190,135 75,286 125,170 215,305 2,846,289

The Corporation 2009 2008 $’000 $’000 156,612 206,052 607,799 41,696 4,766 209,629 191,112 ( 134,348) 76,166 1,359,484

620,178 145,077 626,183 40,397 881 54,059 144,140 1,814 144,942 170,762 1,948,433

Gross operating profit+ The Group 2009 $’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 income

2008 $’000

715,692 155,999 207,782 183,564 ( 21,701) ( 24,586) (599,657) 221,565 40,197 (222,089) 76,166

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

732,932

820,788

The Corporation 2009 2008 $’000 $’000 155,999 195,745 183,564 ( 21,701) ( 24,586) (599,657) 191,112 (207,544) 76,166 ( 98-)

77,682 130,599 254,583 14,862 ( 23,269) (605,345) 144,140 ( 52) 1,814 85,427 170,762 251,203

Page 51 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

PROFIT FOR YEAR The Group 2009 $’000

2008 $’000

The Corporation 2009 2008 $’000 $’000

The profit for the year has been arrived at after charging: Net foreign exchange gains Depreciation of property, plant and equipment Employee benefit expense 29

(

45,832) 178,766 1,035,194

( 40,898) 142,150 821,399

Interest on bank overdrafts and loans Foreign exchange losses Interest on loan – DBJ

The Corporation 2009 2008 $’000 $’000

15,101 35,587

10,394 2,461 -

2,823 35,587

2,312 -

50,688

12,855

38,410

2,312

INCOME FROM INVESTMENTS The Group 2009 2008 $’000 $’000 Dividend income Interest on bank deposits Foreign exchange gains on deposits Other interest income

( 28,763) 71,613 617,507

FINANCE COSTS The Group 2009 2008 $’000 $’000

( 45,832) 80,205 882,478

The Corporation 2009 2008 $’000 $’000

223,856 71,289 43,842

41,310 40,898 -

535,168 91,424 45,832 22,651

226,229 41,283 28,763 -

338,987

82,208

695,075

296,275

INCOME TAX EXPENSE (a)

Total charge for the year comprises: The Group 2009 2008 $’000 $’000 Income tax at 33!% of taxable income Deferred tax adjustment (Note 23)

The Corporation 2009 2008 $’000 $’000

67,042 (136,314)

67,624 251,179

2,156 (16,834)

27,095 58,905

( 69,272)

318,803

(14,678)

86,000

Subject to agreement with the Commissioner, Taxpayer Audit and Assessment, tax losses of the Corporation and its subsidiary companies amounting to $301.43 million (2008: $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 (2008: $54.6 million) of these losses due to the unpredictability of future profit streams.

Page 52 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

31 INCOME TAX EXPENSE (Cont’d) (b)

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

Profit before taxation

The Corporation 2009 2008 $’000 $’000

2009 $’000

2008 $’000

253,054

2,153,945

1,064,596

853,517

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 Tax effect of other revenue exempt from tax Tax effect of income recorded for tax purposes only Tax effect of tax losses utilised

84,351

717,982

354,865

284,506

4,149 143,660 (253,704) 52,244 (137,351) 31,848 5,531

12,214 ( 165,252) ( 1,373) ( 280,746) 35,978 -

3,592 (193,288) ( 1,458) (178,389) -

7,127 (202,001) ( 3,632) -

Total tax charge for the year

( 69,272)

318,803

( 14,678)

86,000

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: 2009 $’000 The Parent The subsidiary companies Associated companies

1,079,274 ( 410,465) ( 430,981) 237,828

2008 $’000 767,517 501,403 495,757 1,764,677

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 2009 2008 $’000 $’000 Advances receivable: Associated companies Loans: Associated companies (Note 8(b))

119,406 (112,298) 7,108

160,209 ( 108,799) 51,410

Page 53 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

RELATED PARTIES’ TRANSACTIONS (Cont’d) Compensation of key management personnel The remuneration of directors and other members of key management during the year was as follows: The Group

Short term benefits 34

2009 $’000

2008 $’000

51,821

63,556

The Corporation 2009 2008 $’000 $’000 51,821

58,880

NON-CASH TRANSACTIONS The following are the major non-cash transactions are not reflected in the statement of cash flows: Capital reserve increased by $1,676.8M (2008: $1,030.40M) and of this amount $1,411.79M (2008: $763.90M) (net of deferred tax) was eliminated against property, plant and equipment. This resulted from the revaluation of property, plant and equipment in the Group.

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

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

(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.

Page 54 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

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 2009 2008 $’000 $’000 Financial Assets Investments: available-for-sale Loans and receivables (including cash and bank balances)

Financial Liabilities Other liabilities

62,353

36,239

The Corporation 2009 2008 $’000 $’000

3,530,107

3,656,238

1,997,470

1,763,896

3,592,460

3,692,477

1,997,470

1,763,896

2,068,809

1,289,541

1,466,243

791,037

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, cash flow interest rate risk and other price risk), credit risk and liquidity 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.

Page 55 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) Financial risk management policies and objectives (Cont’d) (a)

Credit risk (Cont’d) 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

2009 $’000

2008 $’000

1,500,290 2,029,817

1,780,139 1,876,099

3,530,107

3,656,238

The Corporation’s maximum exposure to credit risk at year end was as follows: 2009 $’000 Trade receivables - non-related parties Cash and bank balances

(b)

2008 $’000

619,499 1,377,971

559,794 1,204,102

1,997,470

1,763,896

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.

Page 56 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) Financial risk management policies and objectives (Cont’d) (b)

Market risk (Cont’d) 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 2009

2008

US$ $’000

J$ $’000

US$ $’000

J$ $’000

Total asset Total liabilities

7,250 1,550

637,331 136,238

21,047 1,449

1,489,095 102,548

Net assets

5,700

501,093

19,598

1,386,547

Page 57 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) Financial risk management policies and objectives (Cont’d) (b)

Market risk (Cont’d) (i)

Foreign currency risk (Cont’d) Management of Foreign Currency Risk (Cont’d) The Corporation 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 Corporation 2009

2008

US$ $’000

J$ $’000

US$ $’000

J$ $’000

Total asset

2,867

252,021

3,381

239,208

Net assets

2,867

252,021

3,381

239,208

Foreign currency sensitivity The following table details the Group’s sensitivity to a 2% revaluation or a 10% devaluation (2008: 5%) change in the Jamaican dollar against the relevant foreign currencies. The change in the sensitivity rates below represents management’s assessment of the reasonably possible change in foreign exchange rates. The table indicates the United States dollar to which the Group had exposure on its monetary assets and its forecast cash flows. The sensitivity analysis represents outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for the change in foreign currency rates below. The sensitivity analysis includes accounts receivables and cash resources net of accounts payable for the group and cash resources for the Corporation. 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. If the Jamaican dollar strengthens by 2% or weakens by 10% against the US dollar (2008: 5%), income will decrease or increase by: The Group Revaluation 2009 2009 Change in Currency Rate % J$’000 (Surplus) deficit

10,022

Devaluation 2009 2009 Change in Currency Rate % J$’000 -10

(50,109)

Revaluation and Devaluation 2008 2008 Change in Currency Rate % J$’000 ±5

69,327

Page 58 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) Financial risk management policies and objectives (Cont’d) (b)

Market risk (Cont’d) Foreign currency sensitivity The Corporation Revaluation 2009 2009 Change in Currency Rate % J$’000 (Surplus) deficit

5,037

Devaluation 2009 2009 Change in Currency Rate % J$’000 -10

(25,187)

Revaluation and Devaluation 2008 2008 Change in Currency Rate % J$’000 ±5

11,960

The sensitivity for the Group has declined due to reduction of US dollar denominated receivable and deposits for subsidiary companies. The sensitivity of the Corporation remains the same due to reduction in deposits but increase in the exchange rate. (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 59 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009 36

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) Financial risk management policies and objectives (Cont’d) (b)

Market risk (Cont’d) (ii) Interest rate risk (Cont’d) Management of interest rate risk (Cont’d) The Group

2009 3 to 12 Months $’000

Within 1 Month $’000

1 to 3 Months $’000

Assets Investment: available-for-sale security Receivables Cash and bank

465,236

1,452,632

Total financial assets

465,236

1,452,632

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

42,857 641,657 -

Total financial liabilities

684,514

Interest sensitivity gap

465,236

1,452,632

( 684,514)

Cumulative interest sensitivity gap

465,236

1,917,868

1,233,354

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

1,500,290 111,949

62,353 1,500,290 2,029,817

62,353

1,612,239

3,592,460

49,815 -

1,318,782 15,698

92,672 641,657 1,318,782 15,698

49,815

1,334,480

2,068,809

12,538

277,759

1,523,651

1,245,892

1,523,651

1 to 5 Years $’000

Non-interest Bearing $’000

Total $’000

62,353 -

2008

Assets Investment: 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

Liabilities Long-term borrowings Owed to regional companies Payables

33,080 -

45,587 -

38,013 1,172,861

78,667 38,013 1,172,861

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

Cumulative interest sensitivity gap

45,306

586,405

589,564

543,977

2,402,936

Page 60 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) Financial risk management policies and objectives (Cont’d) (b)

Market risk (Cont’d) (ii) Interest rate risk (Cont’d) Management of interest rate risk (Cont’d) The Corporation 2009 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

1,367,016

619,499 10,955

619,499 1,377,971

Total financial assets

1,367,016

630,454

1,997,470

Liabilities Trade and other payables Owed to regional companies Short-term debt

641,657

808,888 15,698 -

808,888 15,698 641,657

Total financial liabilities

641,657

824,586

1,466,243

Interest sensitivity gap

1,367,016

(641,657)

(194,132)

Cumulative interest sensitivity gap

1,367,016

725,359

531,227

531,227 -

2008 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

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

Total financial liabilities

791,037

Interest sensitivity gap

238,886

733,973

972,859

238,886

238,856

Cumulative interest sensitivity gap

238,856

972,859

Page 61 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) Financial risk management policies and objectives (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 %

The Group 2009 Within 3 to 12 3 Months Months % %

1 to 5 Years %

Average % 8.3

Cash and bank balance

7.2

9.94

Long-term loan

Short-term debt

7.5

Immediately Rate Sensitive %

Within 3 Months %

1 to 5 Years %

Average %

Investment available-forsale security

Cash and bank balance

8.1

Long-term loan

2008 3 to 12 Months %

6.85

10.89

10.67

13.0

1 to 5 Years %

Average %

The Corporation 2009 3 to 12 Months %

Immediately Rate Sensitive %

Within 3 Months %

Cash and cash equivalent

9.94

Short-term debt

7.75

Immediately Rate Sensitive %

Within 3 Months %

1 to 5 Years %

Average %

10.98

Cash and bank balance

2008 3 to 12 Months % -

Interest rate sensitivity The sensitivity analyses below have been determined based on the exposure to interest rates for nonderivative instruments at the end of the reporting period. A 5% increase or 8% decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates. If interest rates had been 5% higher and 8% lower (2008: 2% higher/lower) and all other variables were held constant, the Group’s profit for the year ended March 31, 2009 would increase/decrease by approximately $62.294 million and $99.671 million respectively (2008: increase/decrease by $10.903 million). This is mainly attributable to the Group’s exposure to interest rate risk on its bank deposits.

Page 62 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) Financial risk management policies and objectives (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 2009 Less than 1 Month $’000 Interest bearing Non-interest bearing

1 to 3 Months $’000 -

3 to 12 Months

1 to 5 Years

Total

$’000

716,308

66,005

782,313 1,334,480 2,116,793

171,393

1,004,663

156,426

1,998

171,393

1,004,663

872,734

68,003

2008 Less than 1 Month $’000 Interest bearing Non-interest bearing

1 to 3 Months $’000

3 to 12 Months $’000

1 to 5 Years $’000

Total $’000

35,230

60,403

95,633

170,941

881,927

156,016

1,990

1,210,874

170,941

881,927

191,246

62,393

1,306,507

Page 63 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) Financial risk management policies and objectives (Cont’d) (c)

Liquidity risk (Cont’d) Management of liquidity risk (Cont’d) The Corporation 2009 Less than 1 Month $’000

1 to 3 Months $’000

Interest bearing

Non-interest bearing

824,586

3 to 12 Months $’000 670,665 670,665

1 to 5 Years $’000

Total $’000

670,665

824,586

1,495,251

2008 Less than 1 Month $’000 Non-interest bearing

1 to 3 Months $’000

3 to 12 Months $’000

1 to 5 Years $’000

Total $’000

791,037

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.

Page 64 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

OTHER DISCLOSURES - EMPLOYEES The Group 2009 2008 $’000 $’000

The Corporation 2009 2008 $’000 $’000

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

51,821 585,411 289,219 76,148 32,595

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

51,821 490,867 268,876 70,914 -

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

1,035,194

821,399

882,478

617,507

COMMITMENTS AND CONTINGENCIES (a)

Commitments The Group and the Corporation have estimated cost of $645.092 million (2008: $900.845 million) to complete operational projects.

(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. Under the terms of Reference Agreement dated June 2008, it was agreed that the matter goes to arbitration. Mr. Justice Hugh Small, Q.C. was appointed Arbitrator. A proposed date for the arbitration was set for March or April 2009.

OPERATING LEASE ARRANGEMENTS Property rental income earned during the year for the Group was $246.628 million (2008: $222.404 million) and the Corporation, $206.052 million (2008: $145.573 million). At balance sheet date the Group had contracted with tenants for the following future minimum lease payments:

The Group and the Corporation 2009 2008 $’000 $’000 Within one year In the second and third years

273,646 362,514

120,817 304,235

636,160

425,052

Page 65 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2009

ACQUISITION OF SUBSIDIARIES Effective April 1, 2008 the Corporation having obtained control of all the shares in two of its 35% associated companies, included the assets and the results of their operations in its consolidated financial statements for the year ended March 31, 2009. The following are the details of the fair value of the net assets acquired:

Assets Property and equipment Investment properties Accounts receivable

Liabilities Due to parent Deferred tax liability Accounts payable

Net assets Share of net asset previously recorded Provision recorded now reversed Net assets acquired Consideration given Negative goodwill

Seacastles Limited $’000

Rutland Point Beach Resorts Limited $’000

267 15,161 2,422

181 109,340 -

448 124,501 2,422

17,850

109,521

127,371

35,800 1,298

48,038 13,952 308

83,838 13,952 1,606

37,098

62,298

99,396

(19,248)

47,223

27,975

(16,528)

22,169 2,921 2,921

30,695 30,695

Total $’000

22,169 33,616 33,616

Included in the operating results of the Corporation for the year ended March 31, 2009 is $1.0 M in relation to Seacastles Limited and $5.2 M in relation to Rutland Point Beach Resorts Limited.

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 Falmouth: 4 Rodney Street. Telephone: (876) 617-0712/954-5605, Telefax: (876) 954-4960