The main financial activities for the year were the disposal of FINSAC’s majority shareholdings in two institutions - National Commercial Bank Jamaica Limited and Life of Jamaica Limited - and the sale of the major portion of the Non-Performing Loan portfolio previously managed by FINSAC’s subsidiary, Refin Trust Limited.

The results of the above activities are included in the Profit and Loss Account and the Balance Sheet.

PROFIT AND LOSS ACCOUNT

The audited financial statements for the year ended March 31, 2002 showed a profit of $4.5Billion (before exceptional item) compared with a loss of $30.3Billion for the year ended March 31, 2001. The Ministry of Finance assumed the liabilities represented by FINSAC Notes on March 31, 2001. There were, therefore, no interest liabilities for the year ended March 31, 2002 compared with $18.2Billion for the previous year.

For the year 2001 FINSAC made provisions against loans, deposits and investments in subsidiaries and associated companies in the amount of $11.5Billion. For year 2002 there was no need for further provisions, and a total of $4.3Billion of the previous years’ provisions were written back. This write-back of provisions accounted for the net profit realised for 2002, as the operating income just about covered the operating expenses.

Exceptional items resulted from the disposal of an investment property at a price below the acquisition cost.

GENERAL AND ADMINISTRATIVE EXPENSES

General and Administrative Expenses fell from $437Million in 2001 to $303Million in 2002. Major contributing factors were:

a) reduction in salaries of $8Million as a result of the reduction in staff.

b) The cost of stationery and office supplies was $9Million less during 2002. The previous year's amount had included the substantial printing and related costs incurred as a result of the Scheme of Arrangement involving the former NCB group of companies.

c) Professional fees were $122Million less in 2002. Most of the professional fees incurred in relation to the disposition of the loan portfolio were incurred during year 2001, and were a major factor in this expense category for that year.

d) FINSAC incurred $22Million more in maintenance charges in 2002. These charges related to properties being held for disposal, some of which have been vacant for extended periods. Maintenance charges for all untenanted properties are borne by FINSAC.

e) Provisions for bad debts fell from $32Million for 2001 to nil in 2002.

f) Stamp duty, transfer taxes and other related fees amounting to $14Million were incurred in 2002, while these were nil in 2001.

BALANCE SHEET

Assets

During the year FINSAC disposed of its holding in Life of Jamaica to Barbados Mutual Life Assurance Society et al via the Accountant General. This resulted in a reduction in investments by $1.3Billion.

FINSAC’s investment in National Commercial Bank was held via two subsidiaries. When the shares were sold, the initial payment of $2.6Billion was used to reduce the holdings in these subsidiaries.

Total investments were further reduced by the set-off of amounts due to Jamaica Mutual Life Assurance Society ($1.7Billion) and Crown Eagle Life ($1.0Billion) and cash remittances from Refin Trust ($1.4 Billion).

The provisions against loss of investments and loans and advances were reduced by $3.3Billion as a result of the above transactions. The net effect of all these transactions is a reduction in total assets from $19.2 Billion as at March 31, 2001 to $14.0Billion as at March 31, 2002.

Long Term Liabilities

During the previous year a significant portion of FINSAC Bonds was transferred to the Government of Jamaica, which agreed to redeem same by the issuance of Local Registered Stock to the bondholders. The balance remaining at March 2001 was $11.0Billion, of which $7.0Billion was redeemed by way of cash payments. The balance of $4.0Billion was due to FINSAC-controlled entities. Of this amount, $1.7 Billion due to Jamaica Mutual Life Assurance Society and $1.0Billion due to Crown Eagle Life were set off against loans due from these entities (as mentioned above). The balance of $1.3Billion was re-classified as accounts payable and accruals.

Executive Emoluments

Executives also received the following additional benefits:

- a fully maintained motor vehicle or payment of an allowance in lieu thereof;

- medical insurance coverage, which is non-contributory and applies to all employees;

- group life insurance coverage, which is non-contributory and also applies to all employees; and

- a gratuity of 25% of emoluments is paid on completion of contract. This also applies to all employees.

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