Jersey Development Company: Annual Report and Consolidated Financial Statements 2017

Jersey Development Company Annual Report & Consolidated Financial Statements 2017

JDC Key Achievements 2017

KEY ACHIEVEMENTS

2017

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JDC Key Achievements 2017

The unitised façade won Best use of Innovation' Award at the Jersey Construction Council Awards 2017.

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JDC Contents

Contents

Directors, Officers and Professional Advisers  3

JDC Directors, Officers and Professional Advisers

Directors, Officers and Professional Advisers

Non-Executive Directors

Nicola Palios (Chairman)

Paul Masterton (Senior Independent Director) Ann Santry CBE

Richard Barnes

Tom Quigley

Executive Directors

Lee Henry (Managing Director) Simon Neal (Finance Director)

Company Secretary Simon Neal

Registered Office

Durell House 28 New Street St. Helier Jersey

JE2 3RA

Place of Incorporation Jersey

Auditors

Price waterhouseCoopers CI LLP 37 Esplanade

St. Helier

JE1 4XA

JDC Chairman's Statement

Chairman's Statement

The States of Jersey Development Company Limited's ("the Company" or "JDC") remit is to create value for the public of Jersey. This value will be realised in a number of different but complementary ways - financially, economically, socially and environmentally.

JDC maximises returns from its development  That first building will shortly be almost 90% full, activities and its property investments.  with blue chip' tenants, both long established Revenue generated by JDC from the direct  and new to the Island. As we are approaching full development of property will be invested  occupancy, we will shortly be marketing that building in working capital for future developments,  for sale and expect to have a sale completed, with invested in public infrastructure, invested in  a healthy profit for the Company and Islanders, regeneration projects or paid to the States  by the end of this summer.

Treasury via a dividend. Ultimately, the

Construction of the second building commenced receipts from the Company's development

during 2017 and is on schedule for completion in activities are reinvested for the benefit of

2018. We are again attracting a lot of interest from the public.

tenants who want to avail themselves of column free The Company's development activities  space, energy efficient buildings and magnificent stimulate the local economy and support  views over St Aubin's Bay. With these 2 blocks, employment. In recent years the Company  we have set a new standard for commercial office

has placed construction contracts totalling  buildings in Jersey and established an International more than £80 million with two locally based  Finance Centre which will play an important role in contractors. Furthermore, the office buildings  ensuring that Jersey remains at the forefront of the that are being created at the International  international finance industry.

Finance Centre provide modern and efficient

But JDC is not solely about office development; space both for existing businesses to expand

we have also been continuing work during 2017

or for new businesses to locate to the Island.

on the housing development at the former Jersey Profit maximisation is not JDC's sole objective.  College for Girls site. This scheme provides

Many of the Company's projects include  much needed housing for the Island, including

social and environmental benefits, whether  80 affordable units, and the restoration and

it be discounted homes for eligible first-time  preservation of one of the most iconic historical buyers, as at College Gardens, or extensive  building façade that the Island has to offer. I am

new civic open space in the heart of St. Helier  delighted to report that all units in this development as at the International Finance Centre ("IFC"). have sold in advance of its completion. In addition

to providing more housing stock and restoring the 2017 has seen a real step change' for

historic building, the Company is predicted to secure the Company.

a profit in excess of £5m on this development which The IFC has finally come to life after years of  will be paid out as a dividend to the States of Jersey. planning, with the first building having been

We are therefore now turning attention to our next completed and occupied and providing our

residential development, Horizon, which will deliver new tenants with the only super-prime

280 apartments on the marina front in St. Helier . grade A office space in Jersey.

Again, pre-sales are already strong, ahead of the formal launch of this scheme.

JDC Chairman's Statement

Chairman's Statement (continued)

JDC was established to ensure

that redundant States assets are developed for the benefit of the Island. I believe that we are delivering that,

by providing top quality buildings for commercial lettings at the same time as ensuring that we are providing social and residential housing and generous public realm areas, which are not

the natural concern of commercial developers.

I would like to thank the Board and the staff of the Company for their excellent contributions this year and we look forward to continuing to contribute to the development of the Island during the years to come.

Nicola Palios Chairman

19 March 2018

Strategic Review

2017 has seen a strong year of performance for this property development company that is 100% owned by the States of Jersey. Highlights include the successful completion and further lettings in Building 1 of the International Finance Centre (IFC), construction advancing on IFC Building 5, 100% pre-sales on College Gardens and the commencement of marketing and pre-sales on our new residential project, Horizon.

The Island's economy is in a good position  College Gardens

and continues to improve with positive Gross

Value Added (GVA) figures, growing 1% in  The former Jersey College for Girls building, which

2016 following a 2% rise in 2015 and a 5%  was a decaying asset, is being transformed into a

increase in 2014. It is expected that 2017 will  modern and highly desirable residential community. continue to show economic growth, following  The College Gardens development is creating 187

record employment figures and high levels of  new apartments, including both open market and

activity in the construction industry.  affordable properties. The development will not only

return a financial profit to the island but also makes

The residential property market is very  a significant contribution to affordable housing,

buoyant, with activity at an all-time high  while redeveloping a landmark building that will help and values across most unit types having  regenerate that part of St. Helier .

recovered from the global recession.

Demand for one- and two-bedroom  The development comprises:

apartments is particularly strong as evidenced  Social rented units for the over 55's 40 by the Company's successful pre-sales for

College Gardens and now Horizon. JDC is  Shared equity units for eligible first-time buyers 40 keen to assist first time buyers by structuring  Open market units  107

a phased payment plan for the 10% deposit  187 required for off-plan purchases.

This arrangement has been welcomed by  The 40 Social Rented Units are being delivered by

54 first-time buyers to date and supports  JDC on behalf of the Jersey Homes Trust. These

the Islands wider housing strategy.  units are on programme and will be completed and

handed over to the Jersey Homes Trust in April 2018.

JDC is also delivering 40 Shared Equity units for first time buyers that were pre-qualified through the Housing Gateway. The Company worked with the Housing Minister and the Strategic Housing Unit to agree the eligibility criteria. These units were sold

at a discount to the open market with prices ranging from £155,000 to £199,000 and enabled 40 local individuals/couples, who were otherwise priced out of the housing market, the opportunity to buy their own home. The retained equity element of 10%

(that has a value of £700,000) will ultimately be held by the States Treasury.

By the year end, JDC had secured pre-sales on 100% of the units in the College Gardens residential development with a cumulative value of over £53m. It is a remarkable achievement on such a sizeable residential development.

Strategic Review (continued)

The first units will be ready for occupation in April 2018. Phased completions will take place thereafter until final completion in May 2019. 100% of the profit generated from the development will be paid to the States Treasury as a dividend in 2019.

International Financial Centre (IFC)

Financial Services is the Island's primary industry employing more than 13,000 people and directly contributing 44% of the Island's GVA. It is vitally important that the Island has the right infrastructure to support and grow the industry and this extends to the provision of modern and efficient office space.

JDC is delivering a flagship office district that

provides the highest quality office buildings in

Jersey with column free floorplates offering

occupiers complete flexibility on their fit-outs

and having excellent levels of natural light.

This has been scientifically proven to improve

staff well-being and productivity.  JDC remains confident that based on the lease

profiles of potential tenants and the number of During the year, construction was completed  enquiries that it has received, that there will be

on the first IFC building (IFC 1) and the building  sufficient demand to fill the first four office buildings is now home to UBS AG, BNP Paribas SA,  in the IFC within a 5 year timeframe.

Laing O'Rourke Corporation, ED Capital and

Foundation Services Limited. By the year  Horizon

end, IFC 1 was 74% let with a further 14%

During 2017, JDC appointed a design team and

in legal hands.

advanced the detailed design for Horizon, a 280 unit IFC 1 is the highest quality office building in  residential scheme between the Radisson Hotel and Jersey and is a testament to the design team  Castle Quay. The development includes 20,000 sq. ft. (principally MJP Architects and Waterman  of commercial space on the ground floor and Group), the Main Contractor (Camerons),  194 underground parking spaces.

and their various sub-contractors, as well as

Horizon already had planning consent and JDC JDC's in-house project management team.

appointed the original architects, Skidmore,

Progress on the second building (IFC 5)  Owings and Merrill (SOM) to progress the detailed continued during the year with the building  design. SOM is an internationally renowned firm envelope almost complete by the year end.  of architects having designed the world's tallest

IFC 5 is on programme and will be complete  building, the Burj Khalifa in Dubai, as well as

by the end of July 2018 which will include a  One World Trade Center in New York.

new public square.

JDC commenced the pre-sales on the development During the year, SANNE Group plc exercised  at the end of November and by the end of the year an option on the third floor resulting in  had secured reservations on 31 units in the first SANNE now taking 56% of the building.  building (Horizon East) representing 31% of that JDC has received a number of enquiries for  block. Construction is planned to commence in

the remaining space in IFC 5 and further  August 2018 and it is estimated that the entire lettings are anticipated during 2018.  development will be delivered by early 2022.

Strategic Review (continued)

Investment Properties

The Company owns investment properties which it actively manages to ensure revenues are maximised. Overall, investment and other income was £3.05m for the year (2016: £2.46m) which included litigation costs recovered of £370k, a 24% increase year on year.

During the year, following agreement with the States as Shareholder, the Company disposed of a number of non-strategic investment properties totalling £3.38m.

The Company retains its key strategic investment properties namely - the Waterfront Car Park, the Transportation Centre and Weighbridge Square.

As part of the development of IFC 1, during the year the Company completed new civic space around the building that will be tied into the public square that will be delivered as part of IFC 5.

Financial Performance

Summary

Community Projects

The Company continues to take responsibility for and directly funds the maintenance and upkeep of extensive areas of community space on the St. Helier Waterfront. These areas include Les Jardins de la Mer, Marina Gardens (on top of the Waterfront Car Park), Weighbridge Square and the Waterfront promenades, as well as the landscaping and street lighting on Route de Port Elizabeth, Rue de L'Etau and Rue de Carteret.

In accordance with international accounting standards, profits are only realised on the completion of a property provided the asset is either sold or held as an investment. During the year the first building

in the IFC was completed but the asset was not disposed of and as such it continues to be reflected

The Company ensures that these areas

in the Company's accounts as inventory, at the lower of cost or net realisable value, so no profit has been booked during the year. As College Gardens and

are well maintained, as cost effectively as possible, for the benefit of the public.

JDC promotes and supports the use of these

IFC 5 were still under construction these properties areas for public events and was delighted to

are also held in the accounts as inventory at the lower assist the Super League Triathlon in the set-

of cost or net realisable value, and no profit has been up of the arena at the Waterfront. The event

booked during the year.

was a huge success and was a great showcase

for the St. Helier Waterfront. It is hoped that  Notwithstanding this, the Company generated an

the event will return in 2018. Other major  operating profit of £7.3m (2016: £2.2m) for the events in 2017 included Liberation Day  financial year ended 31 December 2017, this included celebrations, the Boat Show, the Marathon,  an upward revaluation of its investment properties of the Triathlon, Pride, Madeiran Festival and  £6.1m (2016: £1.6m).

French Week all taking place on land that is

owned or administered by JDC. Annually,

the Company organises and assists in funding

the Christmas lights on Weighbridge Square

and Route du Port Elizabeth.

Strategic Review (continued)

Cash and cash equivalents decreased to  Esplanade Quarter Masterplan Review £2.0m (2016: £2.9m). The Company's finance

facilities totalling £82.5m (2016: £76.5m)  JDC welcomes the review of the Masterplan and provide construction finance for IFC 1,  has participated, along with other stakeholders and IFC 5 and College Gardens and the pre- members of the public, in the workshops that have development costs of Horizon. At the year  been organised by the Environment Department and end £55.2m (2016: £25.8m) of these loans  their independent advisors the Design Council CABE. had been drawn. The loans will be repaid in full  JDC believes that everyone that attended is aligned on the disposal of the completed assets. The  in a vision to create a Waterfront that Islanders can profits will either be paid out as a dividend,  be proud of, that provides a good mix of uses and retained by the Company for the delivery  improves the built environment. Waterfronts around of public infrastructure, or used  the world are forward looking and provide

as working capital for future  new areas for living, commerce and development projects. leisure and St. Helier 's Waterfront

has the ingredients to create a The Group, being the  compelling Waterfront.

Company and its  JDC is committed to subsidiaries, manages  delivering well designed, total assets of  high-quality buildings £126.0m  and public realm that will (2016: £85.4m). improve the quality of the

The Group's  built environment. inventory is carried  Future

at the lower of cost

and net realisable  Over the next 5 years the value with cost being the  Company is targeting the land value at the date of  delivery of a further two office the original acquisition plus  buildings at the IFC, in addition to subsequent expenditure incurred.  completing College Gardens

As at 31 December 2017 the inventory  and Horizon.

totalled £102.4m (2016: £66.4m).

The Company will also be preparing for the next Given the level of pre-development  phases of the St. Helier Waterfront following the expenditure on large real estate projects,  conclusion of the review of the Esplanade Quarter the funding requirements for the delivery of  Masterplan. It is envisaged that these areas

public infrastructure at the Esplanade Quarter  (extending from the north of the Radisson Hotel to and the long lead-in times to realising receipts  Les Jardins de la Mer) will deliver further residential from real estate development, JDC agreed  accommodation as well as hospitality uses (hotel, with its Shareholder that there would be no  self-catering and ground floor food and beverage dividend paid from 2016 until the completion  and retail).

of the College Gardens development in 2019.

JDC is also in dialogue with the Shareholder over the All net receipts from the sale of IFC 1 and

future regeneration of surplus States owned assets IFC 5 will be retained by the Company to

such as South Hill and St. Saviour 's Hospital.

fund the delivery of the new 520 space

underground public car park that JDC is  required to deliver as part of the current  Esplanade Quarter masterplan.

Lee Henry Managing Director 19 March 2018

Commercial Activities

IFC Jersey

IFC Jersey has set a new standard in office development in Jersey, supporting the island's leading Financial Services industry, which directly contributes 44% of the island's economy and employs over 13,000 people.

All buildings in the IFC will provide tenants with  During the year, new trees were planted along Castle highly efficient and flexible working spaces  Street. Works to the new public square to be known as well as an exceptional approach to energy  as Trenton Square commenced in March and will be efficiency, excellent levels of natural light and  complete in July 2018.

extensive high quality civic space.

A new website specifically created for IFC Jersey was The IFC forms a new extension to the existing  launched in April. Ifcjersey.je provides information central business district and will establish a  regarding each of the buildings, floor plans, news clear identity for the island's premier industry  updates and a photographic gallery.

and strengthen the connection between the  

historic town centre and the Waterfront.

The development will deliver high quality  community areas and will include a new public square and public park, as well as delivering

a re-landscaped Esplanade with wider pavements.

The inclusion of wide open public space  surrounding IFC 1 includes the re-instatement of the former sea wall and the recycling of the old sea wall granite to form pavement curb edges.

Commercial Activities (continued) IFC 1

Honoured guests including The Bailiff , Senator Alan Maclean and Constable Simon Crowcroft assisted the company to officially open the first building on the IFC development in April.

On completion, the first tenant UBS AG relocated to IFC 1, taking space on the fifth floor and part of the fourth floor. BNP Paribas followed in September taking space on the third and second floor.

At the year end, the building was 74% occupied.

During the year an additional 9,510 sq ft was let to:

Lease

Lessee  sq.ft Floor

commencement Laing

3,297 sq.ft. 4th floor May 2017 O'Rourke

E.D Capital  3,676 sq.ft. 4th floor August 2017 Foundation

2,537 sq.ft. 1st floor January 2018 Services Ltd

The unitised façade won Best use of Innovation' Award at the Jersey Construction Council Awards in October 2017.

Commercial Activities (continued) IFC 5

Bulk excavation commenced in early 2017 and  Food & Beverage and retail space of 2,600 sq.ft will the building is due to be practically complete  be occupied on the ground floor and we are currently at the end of July 2018. in negotiations with local food & beverage and retail

outlets to secure this space.

SANNE PLC secured 50% of the building in

November 2016 and agreed terms for an

additional 6% of space during the year,

bringing the total to 56%.

Commercial Activities (continued) IFC 6

Detailed plans were approved by the Planning  There will also be private underground parking for Applications Committee in March and will  51 cars and 72 bicycles.

provide 68,000 sq.ft. of modern Grade A office

The technical design was advanced during 2017 accommodation over five floors, as well as a

and construction will commence once a pre-let restaurant within the ground floor section.

agreement has been confirmed.

Residential Activities

The delivery of much needed residential accommodation is a key objective to the Island Plan. The property market is buoyant, with activity at an all-time high and values across all unit types have now recovered from the global recession. It's imperative that we assist in providing more residential homes to islanders. Our aim is to offer choice and affordability

as well as contributing to high quality public spaces within these new residential areas.

Profit maximisation is not the company's sole objective and many of our projects include social and/or environmental benefits, whether it's discounted homes for eligible first-time buyers (as at College Gardens), or creating

a new neighbourhood of homes, shops, restaurants and public spaces (as per Horizon at the waterfront).

The Company is also committed to improving the built environment and creating well designed and quality buildings.

The former Jersey College for Girls building was a decaying States asset and is currently being transformed into a modern and highly desirable residential community.

The Castle Quay phase 2 development named Horizon' will provide a new level of living and leisure opportunities, connecting St. Helier 's business district and creating a dynamic new destination at the waterfront.

College Gardens

During the year, construction continued to progress at the former Jersey College for Girls site at La Pouquelaye, which will consist of 187 residential units. This includes 80 units being delivered as affordable homes; 40 of which have been sold to the Jersey Homes Trust for over 55's social rental and 40 units have been sold to eligible first-time buyers at a discount to the open market.

The first two blocks will be practically complete in April 2018, this includes Garret-Anderson House for the Jersey Homes Trust and Inglis House which contains ten open market units.

The remaining units will be completed as follows:

Nightingale House  

provides 28 units and is due for completion - Summer of 2018.

Curie Fry House  

provides 35 units and is due for completion - Autumn 2018.

Cavell House  

provides 26 units and is due for completion - Winter 2018.

Austen-Bartlett House

provides 48 units and is due for completion - Spring 2019.

JDC Residential Activities

Residential Activities (continued)

The concept came to us at an exciting time in our lives. We are looking to retire and were apprehensive, but now look at it as

a new beginning. When we looked at the high specification and the layout of the apartments, the idea became a reality. The whole experience was very pleasant and we now look forward to the future with great excitement.

Purchaser in Nightingale House

All of the apartments were pre-sold off-plan which included 40 Shared Equity units sold through the Assisted Purchase scheme for first-time buyers. To qualify for these units, the Housing Minister set the eligibility criteria that included:

1. Being a first-time buyer
2. Locally qualified and

All residents at College Gardens will have the opportunity to enjoy extensive private landscaped gardens surrounding the new development.

The historical main building, originally built in 1888 is being converted into 28 apartments with its magnificent façade and generous floor to ceiling heights.

We instantly loved the look of the development and its location - the concept appealed to us, and the timescale of the development fitted in with our plans.

The whole experience from introduction and follow up was first class and totally professional, and the ease of purchase made the whole process hassle free.

A sheer delight to have been successful in the purchase of our apartment.

Purchaser in Austen-Bartlett House

3. Maximum earnings (individual or couple)  of £41,000 per annum.

Residential Activities (continued) Horizon

Horizon will be an exclusive collection of 280 one, two and three-bedroom waterside apartments and penthouses and will include a restaurant and retail quarter at the water's edge. The development will bring together a new neighbourhood of homes, shops, restaurants and civic spaces, connecting

St. Helier 's business district and creating a dynamic destination.

Designed by Skidmore, Owings and Merrill LLP (SOM International), one of the largest and most influential architecture firms in the world, Horizon will be a landmark development for

St. Helier .

SOM International are renowned for their iconic buildings and commitment to design excellence, innovation and sustainability and we are extremely excited to be working with this talented team.

The company commenced marketing the residential apartments in Q4 2017 and pre-sales was taken from November 2017. At 31 December 2017, 31 apartments had been pre-sold.

Construction is due to commence on site in Q3 2018. Horizon will be completed in three phases, the first of which will be Q3 2021 through to 2022.

JDC Future Developments

Future Developments

Over the next five years the Company is  JDC is also in dialogue with its shareholder to undertake targeting the delivery of four office buildings at  the regeneration of any surplus States owned assets

IFC, completing College Gardens and Horizon. such as St. Saviour 's Hospital and South Hill.

The Company will be preparing the next

phase of the St. Helier Waterfront following the conclusion of the review of the Esplanade Quarter Masterplan. It is envisaged that

these areas (extending from the north of the Radisson Hotel to Les Jardins de la Mer) will deliver further residential accommodation as well as hospitality uses (hotel, self-catering and ground floor food and beverage and retail).

JDC Community Engagement

Community Engagement

Super League Triathlon

The company was delighted to assist the Super League Triathlon team and 3D Events with facilitating the Super League Triathlon Jersey' on 23, 24 September at the Waterfront. The Super League Triathlon transformed the waterfront area to an exciting fast-paced sporting competition,

which was enjoyed by thousands of spectators and  televised globally throughout the world in 147 countries,

to an audience of approximately 375 million people.

As part of our commitment to improving the public

areas of the Waterfront area we ensured a number

of improvements were made to the estate in

advance to assist with the success of the Super

League Triathlon.

The company is keen and supportive to see the  waterfront areas used for a variety of public and  charitable events. A number of events have  

taken place and include, the Jersey Marathon,  Liberation Day Celebrations, The Jersey Triathlon,  Autism Jersey Table Football, Race for Life and  The Norman Market.

JDC Community Engagement

Community Engagement (continued)

Public Art Commission for College Gardens

As part of the redevelopment of the former Jersey College for Girls site, we invited art & design students from JCG to take part in

the company's public art commission - a large sculpture will be installed at College Gardens to celebrate the school's heritage.

The company commissioned Derek Tristram, a professional local artisanal stonemason. Derek has previous experience as an educator and practical knowledge of working with schools and community groups regarding the delivery of public art schemes. During a 10-week period from March, students reviewed the school's history and most notable alumni set against the cultural backdrop of women's changing roles in society over the last century.

The project journey included learning

about the scale, technical processes

and materials, drawing sessions

to develop ideas, practical

workshops to learn clay and stone

carving techniques and design

detailing sessions, which concluded in

July with the final approach for the chosen sculpture.

During the winter Derek commenced work on sculpturing

the final design in granite, which will be installed adjacent to the old Greek theatre at College Gardens in Summer

of 2018, creating a lasting cultural legacy for future generations for both College Gardens residents and students from JCG to enjoy.

Pride of Jersey Awards

For the past two years, the company has had the privilege to be involved with the annual Pride of Jersey Awards organised by the Jersey Evening Post. The awards recognise remarkable groups or individuals who

have gone beyond all expectations and have helped

to enhance the lives of others around them.

The company was delighted to once again support the Child of the Year' award. We felt this aligned  

with the company's purpose: to invest in future

generations, supporting economic growth and stability for the benefit

of all islanders, and in particular, our children's future opportunities.

Civic Space

The company has transformed extensive areas of land into attractive community spaces, with promenades, landscaped gardens and squares. This includes Les Jardins de la Mer, Marina Gardens, Weighbridge Square, the Waterfront promenades and more recently landscaping and tree lined streets which have been widened adjacent to IFC 1 and IFC 5.

As part of the development of IFC, a new public square  named Trenton Square (similar size to Liberation Square) will be completed along with IFC 5 in August 2018.

JDC Corporate Governance Report

Corporate Governance Report

Jersey Development Company is committed to maintaining a high standard of Corporate Governance and follows the Corporate Governance Handbook which is based on the best practice principles of the UK Corporate Governance Code issued by the Financial Reporting Council ("the

Code") where it is appropriate and practical to do so.

The Company has entered into a Memorandum of Understanding with its Shareholder which emphasises a no surprises' culture and specifies those strategic and other issues for which the agreement of the Shareholder's representative should be sought.

The shareholder function is exercised by the Treasury and Resources Minister, whose duty is to act on behalf of the States of Jersey.

The Board

The Board is collectively responsible for the governance of the Company. This is achieved by setting the overall strategy, approving detailed business plans and overseeing

delivery of objectives by continually monitoring performance against those plans. Critically,

the Board establishes the culture, ethics and values of the Company.

The Board of Directors is responsible for the governance of the Company. The Board is responsible for:

• setting the Company's strategic aims;

• providing the leadership necessary to deliver  these aims and associated objectives;

• establishing the culture, values and ethics  of the Company;

• supervising the management of the  business;

• ensuring the Company complies with  relevant laws and regulations; and

• reporting to the shareholder on stewardship,  in accordance with the requirements of

  the MoU.

The Board remains cognisant that while responsibility for the operation of a commercial development company, the Company operates in a multi-stakeholder environment with the public of Jersey as the ultimate shareholder.

The Chairman is responsible for leadership of

the Board and ensuring its effectiveness on all aspects of its role. The non-executive directors constructively challenge and help develop proposals on strategy and bring strong, independent judgement, knowledge and experience to the Board's deliberations. In accordance with good corporate governance, the Board has an Audit & Risk Committee and a Remuneration & Nomination Committee in place.

Whilst maintaining oversight at regular meetings of the Board, the day to day operation of the Company is the responsibility of the Managing Director and his executive team.

Mix of Independent Non-Executive and Executive Directors

The Board comprises the Chairman, the Managing Director, the Finance Director, the Ministerial Appointee, and 3 States Appointees (in addition to the Chairman). At the year end, the Board comprised of seven Directors, two of whom form the Executive and five the Non-Executive Directors. Of the

five Non-Executive Directors, one Director was appointed as the Senior Independent Director during the year.

Independence

One Non-Executive Director is appointed by the Minister for Treasury and Resources with the remaining Non-Executive Directors being appointed by the States Assembly. All Non-Executive Directors are nominated via an open recruitment process overseen by the Jersey Appointments Commission. The primary function of the Jersey Appointments Commission in overseeing appointments to States related bodies, is to ensure that the selection is

fair, efficient and conducted in accordance with

best practice and procedures. The recruitment

code sets the principles and processes to be

applied in recruitment and selection activities for all appointments which include conflicts of interest and the members of the commission.

JDC Corporate Governance Report

Corporate Governance Report (continued)

In addition, the Board carries out an annual review for assessing the independence of Non-Executive Directors and was satisfied that throughout the year, all Non-Executive Directors were independent as to both character and judgement.

Membership of both the Board Committees is comprised solely of Non-Executive Directors. These Committee members are authorised

to obtain, at the Company's expense, professional advice on any matter within their terms of reference and to have access to sufficient resources in order to carry out their duties. A report of the Audit & Risk Committee is provided on page 23 and the report of the Remuneration & Nomination Committee is provided on pages 24-25.

Meetings

The Board meets regularly and are responsible for setting and monitoring strategy, reviewing trading performance and risk management, examining business plans and capital and revenue budgets, formulating policy on key issues and reporting to the shareholder. Board papers are circulated prior to each meeting in order to facilitate informed discussion of the matters at hand.

The Board met eight times during 2017.

Number of

Board attendee meetings   AGM

attended

Nicola Palios (Chair) 7 - Ann Santry 7 1 Paul Masterton 8 1 Richard Barnes 8 1 Tom Quigley 7 1 Lee Henry 8 1 Simon Neal 8 1

Board Assessment

In accordance with the Board's Terms of Reference, an annual performance assessment of the Board and of the Chair is made together with recommendations for areas of improvement. The main recommendation from the 2017 review was to increase focus on risk management and mitigation.

Internal Control

The Board has overall responsibility for the Company's system of internal control and for reviewing its appropriateness following any change to business operation(s) while the role of management is to implement Board policies on risk and control. The system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives.

The key procedures which the Board has established to provide effective controls cover:

• Strategy & Management

• Financial Reporting and Control

• Communication

• Staff resources

Relations with Shareholder

The Company is wholly owned by the States of Jersey with the Minister for Treasury and Resources representing the Company's shareholder.

The Company seeks to comply in full with its governing statutes as the basis for the conduct

of its relationship with its shareholder.

By order of the Board

Paul Masterton

Senior Independent Director 19 March 2018

JDC Audit & Risk Committee Report

Audit & Risk Committee Report

The Audit & Risk Committee operates under a charter agreed by the Board. The Audit & Risk Committee is responsible for:

1. providing effective governance over the appropriateness of the Company's financial reporting including the adequacy of related disclosures;
2. the performance of the audit function;
3. the management of the Company's systems of internal control and financial risks;
4. overseeing the management of risk by approving the risk management policy and governing its implementation;
5. reviewing the Company's risk register that includes the highest assessed risks in the Company's development projects;
6. to monitor the organisation's current risk profile and provide assurance that there are robust structures, processes and accountabilities for risk management within the organisation.

The Audit & Risk Committee members are Non-Executive Directors - Tom Quigley (Chairman), Ann Santry and Paul Masterton. The meetings provide a forum for discussions with the external auditor. Meetings are also attended, by invitation, by the other Non- Executive Directors, the Managing Director, the Finance Director and the external auditors.

The Audit & Risk Committee is responsible for reviewing the annual financial statements and accompanying reports before their submission to the Board for approval. It is also responsible for monitoring the controls which are in force, (including financial, operational and compliance controls and risk management procedures) to ensure the integrity of the financial information reported to the shareholder. It also considers reports from the internal and external auditor and from management. It reports and makes recommendations to the Board.

The Company has a Risk Register for each project and the Company as a whole which details and assesses all the significant risks facing the Company.

Management is responsible for identifying the key risks to achieving their business objectives and ensuring that there are adequate controls in place to manage these in line with the risk appetite set by the Board. The Managing Director and Finance Director are invited to attend the Audit & Risk Committee meetings to provide presentations on the key risks and how these are managed.

The terms of reference of the Audit & Risk Committee require it to meet at least three times

in a year. Additional meetings may be called where deemed necessary.

The Audit & Risk Committee also advises the Board on the appointment of the external auditor and on their remuneration, including monitoring any issues that could impact auditor independence. In addition, the Audit & Risk Committee regularly reviews

the scope and results of the work undertaken by both internal and external auditors. As the fifth anniversary has passed since the last tender

process, the Audit & Risk Committee has decided

to tender the external audit for 2018 which will be concluded in time for the Annual General Meeting in May.

The Audit and Risk Committee met four times during 2017.

Committee member   Number of attendee meetings attended

Tom Quigley (Chairman) 4 Ann Santry 4 Paul Masterton 4

In Attendance

Lee Henry 4 Simon Neal 4 Price waterhouseCoopers 3

By order of the Audit & Risk Committee

Tom Quigley

Chairman of the Audit & Risk Committee 19 March 2018

JDC Remuneration & Nomination Committee Report

Remuneration & Nomination Committee Report

The Remuneration & Nomination Committee operates under a charter agreed by the Board. The Remuneration & Nomination Committee is responsible for:

1. Reviewing the structure, size and composition of the Board;
2. Consider and make recommendations to the Board on all new appointments of Directors having regard to the overall balance and composition of the Board;
3. Make recommendations to the Board concerning the reappointment of any Non-Executive Director following conclusion of his or her specified term of office;
4. Overseeing succession planning in respect of the Directors; and
5. Setting the remuneration of the Directors.

The Committee recognises the benefits and will continue to appoint Executive and Non- Executive Directors to ensure diversity of background and on the basis of their skills and experience.

The Remuneration Committee members

are currently Non-Executive Directors,

Ann Santry (Chairman), Paul Masterton and Richard Barnes.

The Remuneration & Nomination Committee makes recommendations to the Board regarding the remuneration of both Executive, Non-Executive Directors and all staff and considers the ongoing appropriateness and relevance of the remuneration policy.

The Committee is also primarily responsible for overseeing the selection and appointment of the Company's Executive and Non- Executive Directors, as and when required and make recommendations to the Board.

As per the Memorandum of Understanding (MoU) with the Treasury and Resource Minister, all the Non-Executive Directors will be appointed by the States Assembly with the exception of the Minister's Appointee. Any changes to the level of remuneration paid to Non-Executive Directors is to be agreed

in advance by the Minister. It also states that the Board will undertake a review and benchmarking of directors' remuneration and terms of employment at least every two years.

During the year the first external review of non executive pay was undertaken since 2011. Following approval by the Shareholder, the annual fee was increased, on a phased basis, to £20k p.a in 2017 with a further increase to £22k scheduled from

1 January 2018. The Chair of the Audit Committee is paid an additional £3k p.a to reflect the additional responsibilities.

The terms of reference of the Remuneration & Nomination Committee require it to meet at least once a year.

Remuneration structures are simple with no equity participation (share ownership) by the Directors. Salaries are established by reference to those prevailing in the open market generally for directors of comparable status, responsibility and skills in comparable industries. The Committee uses executive remuneration surveys prepared by independent consultants to assist in establishing market levels. The determination of the Executive Directors remuneration is a decision taken by the Non-Executive Directors, but in the case of the Managing Director requires the approval of the Shareholder.

JDC Remuneration & Nomination Committee Report

Remuneration & Nomination Committee Report (continued)

Changes to salaries and remuneration payments are effective from 1 January each year.

Directors' Remuneration

In addition to the above, the Executive Directors' received the following pension contributions:

Directors' pension contributions

The Remuneration Committee met six times during 2017.

Committee member  Number of attendee meetings attended

Ann Santry (Chair) 6 Paul Masterton 6 Richard Barnes 6

In Attendance

Lee Henry 6

By order of the Remuneration & Nomination Committee

Ann Santry

Chairman of the Remuneration & Nomination Committee 19 March 2018

JDC Directors' Report

Directors' Report

The Directors present their report and the audited consolidated financial statements for the year ended 31 December 2017.

Incorporation

The States of Jersey Development Company Limited (the "Company") was incorporated in Jersey, Channel Islands on 21 February 1996. The Company trades as Jersey Development Company which is it the registered

business name.

Principal Activities

The principal activity of the Company and its subsidiaries (the "Group") is to engage in property investment, property development, car park operations and estate management.

Every initiative undertaken by the Company is Government-led and the building and property investments are raised on land that has been entrusted to the Company by the States

of Jersey.

The Company's mission is to create dynamic innovative and sustainable new environments for people to live, work and invest, ensuring all developments are in the local interest and contributing to Jersey's bright economic future.' The Company creates new homes for residents and new Grade A office space for

the Island's premier financial services industry. By investing in direct development, rather than selling land to developers, the Company ensures that returns to taxpayers are improved as well as retaining control over design

and quality.

Results and Dividends

The results for the year are set out in the consolidated statement of comprehensive income on page 33. There was no dividend paid during the year (2016: £Nil).

Directors

The Directors who held office during the year and subsequently were:

Executive Directors

Lee Henry (Managing Director) Simon Neal (Finance Director)

Non-Executive Directors

Nicola Palios (Chairman)

Paul Masterton (Senior Independent Director) Ann Santry CBE

Tom Quigley

Richard Barnes

Directors' and officers' insurance

During the year the Company maintained liability insurance for its directors and officers.

Independent Auditor

A tender process is currently underway to appoint an auditor which will be concluded in time for an appointment to occur at the Annual General Meeting.

The Company's projects are also community focussed and include high quality open green spaces and landscaped areas for the public

to enjoy.

The principal place of business is Jersey, Channel Islands.

JDC Directors' Report

Directors' Report (continued)

Statement of Directors' Responsibilities

The Directors are responsible for preparing the financial statements in accordance with applicable law and International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

The Directors are required by the Companies (Jersey) Law 1991 to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group as at the end of the financial year and of the profit or loss of the Group for that year. In preparing these financial statements the Directors are required to:

• Select suitable accounting policies and then  apply them consistently;

• Make judgements that are reasonable and  prudent;

• State whether applicable accounting

  standards have been followed, subject to any  material departures disclosed and explained  in the financial statements; and

• Prepare the financial statements on the

  going concern basis unless it is inappropriate  to presume that the Group will continue in

  business.

So far as the Directors are aware there is no relevant audit information of which the Company's auditors are unaware, and each director has taken all steps that he or she ought to have taken as a director

in order to make himself or herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

The financial statements are published on www.jerseydevelopment.je which is a website maintained by the Company. The work undertaken by the Independent Auditors does not involve consideration of the maintenance and integrity

of the website and, accordingly, the Independent Auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Visitors to the website need to be aware that legislation in Jersey governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.

By order of the Board

For and on behalf of

The States of Jersey Development Company Limited 19 March 2018

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991.

They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

Independent Auditor's Report to the members of the States of Jersey Development Company Limited

Report on the audit of the consolidated financial statements Our opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of The States of Jersey Development Company Limited (the "Company") and its subsidiaries (together the "Group") as at 31 December 2017, and of their consolidated financial performance and their consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the requirements of the Companies (Jersey) Law 1991.

What we have audited

The Group's consolidated financial statements comprise:

• the consolidated statement of financial position as at 31 December 2017;

• the consolidated statement of comprehensive income for the year then ended;

• the consolidated statement of changes in equity for the year then ended;

• the consolidated statement of cash flows for the year then ended; and

• the notes to the consolidated financial statements, which include a summary of significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants ("IESBA Code"). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.

Other information

The directors are responsible for the other information. The other information comprises the Key Achievements 2017, the Directors, Officers and Professional Advisers, the Chairman's Statement, the Strategic Review, the Commercial Activities, the Residential Activities, the Future Developments, the Community Engagement, the Corporate Governance Report, the Audit & Risk Committee Report, the Remuneration & Nomination Committee Report and the Directors' Report.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Independent Auditor's Report to the members of the

States of Jersey Development Company Limited (continued)

Responsibilities of directors for the consolidated financial statements

The directors are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards, the requirements of Jersey law, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud

  or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and

  appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is

  higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,  or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are

  appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the  Group's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and  related disclosures made by the directors.

• Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on

  the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast

  significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty

  exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial

  statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence  obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to

  continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the

  disclosures, and whether the consolidated financial statements represent the underlying transactions and events  in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities

  within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction,  supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Independent Auditor's Report to the members of the

States of Jersey Development Company Limited (continued)

Report on other legal and regulatory requirements

Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit;

• proper accounting records have not been kept; or

• the consolidated financial statements are not in agreement with the accounting records. We have no exceptions  to report arising from this responsibility.

This report, including the opinion, has been prepared for and only for the members as a body in accordance with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Karl Hairon

For and on behalf of Price waterhouseCoopers CI LLP Chartered Accountants

Jersey, Channel Islands

29 March 2018

Consolidated statement of comprehensive income

For the year ended 31 December 2017

2017  2016 Notes

£'000 £'000

There is no other comprehensive income as defined by IAS 1 ("Presentation of Financial Statements"). The notes on pages 37 to 60 form an integral part of these consolidated financial statements.

Consolidated statement of financial position

For the year ended 31 December 2017

2017  2016 Notes

£'000 £'000

Assets

Non-current assets

Investment property 4 17,250 11,000 Property, plant and equipment 5 27 33 Trade and other receivables 7 1,297 - Retention money receivable 86 13 18,660 11,046

Current Assets

Inventories 6 102,408 66,354 Trade and other receivables 7 1,582 764 Retention money receivable 86 - Cash and cash equivalents 1,951 2,900

106,027 70,018 Non-current assets held for sale 8 1,330 4,370 Total assets 126,017 85,434 Equity

Equity attributable to equity holders of the Company

Share capital 9 20,000 20,000 Capital contribution 2.11 20,196 20,196 Retained earnings 2.11 17,320 10,573 Total Equity 57,516 50,769 Liabilities

Non-current liabilities

Borrowings 10 55,199 23,328 Deferred consideration 11 - 1,500 Contract liability 12 - 200 Sale deposits 2.15 1,340 2,925 Retention money payable 13 582 442 Trade and other payables 14 821 - Total non-current liabilities 57,942 28,395 Current liabilities

Borrowings 10 - 2,500 Deferred consideration 11 1,500 - Contract liability 12 182 1,197 Sale deposits 2.15 3,078 - Retention money payable 13 928 345 Trade and other payables 14 4,871 2,228

The consolidated financial statements were approved by the Board of Directors on 19 March 2018 and signed on their behalf

By  ___________________________ Director

The notes on pages 37 to 60 form an integral part of these consolidated financial statements.

Consolidated statement of changes in equity

For the year ended 31 December 2017

Share Capital  Capital Contribution  Retained Earnings  Total Equity £'000 £'000 £'000 £'000

Balance at 1 January 2017 20,000 20,196 10,573 50,769 Comprehensive Income:

Profit for the year - - 6,747 6,747 Balance at 31 December 2017 20,000 20,196 17,320 57,516

Comprehensive Income:

Profit for the year - - 2,033 2,033 Balance at 31 December 2016 20,000 20,196 10,573 50,769

The notes on pages 37 to 60 form an integral part of these consolidated financial statements.

Consolidated statement of cash flows

For the year ended 31 December 2017

The notes on pages 37 to 60 form an integral part of these consolidated financial statements.

Notes to the consolidated financial statements

1. General information

The principal activities of the Company and its subsidiaries (together, the Group') are property holding, property development, car park operation and estate management in Jersey. The Company is a limited liability company incorporated and domiciled in Jersey, Channel Islands. The Company trades as Jersey Development Company which is the registered business name of The States of Jersey Development Company Limited.

Equity

In 1996 The States of Jersey subscribed £20m of share capital in the Company to finance the infrastructure of the Waterfront. The Company was originally formed to manage the development of the St. Helier Waterfront area on behalf of the States of Jersey. In 2004, The States of Jersey transferred land holdings to the Company at market value as a capital contribution totalling £20.2m. In 2010 the States adopted P73/2010 which set a new remit for the Company, changed the name of the Company and the Memorandum and Articles of Association. The changes to the Company were enacted on 24 June 2011 following the appointment of a new board of Non-Executive Directors by the States of Jersey. The Company carries out developments which are financed from third parties and capital receipts from the proceeds on the sale of inventory.

2. Summary of significant accounting policies

2.1  Basis of preparation

The principal accounting policies that have been applied in the preparation of these consolidated financial statements are summarised below. These policies have been consistently applied to all years presented, unless otherwise stated.

Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the IFRS Interpretations Committee ("IFRIC").

Standards, amendments and interpretations to existing standards that are effective and have been adopted by the Group The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2017:

Disclosure Initiative: Amendments to IAS 7. This amendment requires disclosure of changes in liabilities arising from financing activities.

The adoption of these amendments did not have any significant impact on financial statements.

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group

The Directors have considered all accounting standards that are in issue which are not yet effective for accounting period beginning on or after 1 January 2018 and believe that early adopting these standards would not have a material impact on the financial statements of the Group:

In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments, which replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The Group has reviewed its financial assets and liabilities and is expecting the following impact from the adoption of the new standard on 1 January 2018:

Notes to the consolidated financial statements (continued)

2.1  Basis of preparation (continued)

The financial assets of the Group consist solely of loans and receivables and are held currently held at amortised costs. Under IFRS 9, the financial assets meet definition of a debt instrument. Management has considered the following assessments in determining their classification:

• The business model for managing the financial asset.

• The contractual cash flows characteristics of the financial asset.

As the objective of the Group is to hold these assets to maturity and the contractual payments represent solely payment of principal and interest, the financial assets will continue to be held at amortised costs. Accordingly, the Group does not expect the new guidance to affect the classification and measurement of these financial assets.

The new impairment model requires the recognition of impairment provisions based on expected credit losses ("ECL") rather than only incurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortised cost, debt instruments measured at FVOCI, contract assets under IFRS 15 Revenue from Contracts with Customers, lease receivables, loan commitments and certain financial guarantee contracts. As the Group's financial assets consist of trade and other receivables, contract assets and lease receivables which don't contain significant financing component, the Group has elected the simplified approach to impairment assessment. This approach allows to recognise the loss allowance at initial recognition and throughout its life at an amount equal to lifetime ECL. ECL are a probability-weighted estimate of credit losses. A credit loss is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive discounted at the original effective interest rate. ECL consider the amount and timing of payments, thus a credit loss arises even if the Group expects to be paid in full but later than when contractually due. As the Group's financial assets have been originated with parties that have low risk of default and have strong capacity to meet its obligations, the Group doesn't expect the ECL impairment model to have material impact on the consolidated financial statements.

The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group's disclosures about its financial instruments particularly in the year of the adoption of the new standard.

There will be no impact on the Group's accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The derecognition rules have been transferred from IAS 39 Financial Instruments: Recognition and Measurement and have not been changed.

IFRS 16, Leases' will allow more faithful representation of a lessee's assets and liabilities and, together with enhanced disclosures, greater transparency of a lessee's financial leverage and capital employed. The standard replaces IAS 17 Leases' and is effective for annual periods beginning on or after 1 January 2019 with earlier application permitted. The Group is assessing the impact of application of IFRS 16.

Amendment to IAS 40, Investment Property' clarifies that transfers to, or from, investment property can only be made if there has been a change in use that is supported by evidence. A change in use occurs when the property meets, or ceases to meet, the definition of investment property. A change in intention alone is not sufficient to support a transfer. The amendment is effective for annual periods beginning on or after 1 January 2018 with earlier application permitted. The Group does not expect material impact of this standard.

Standards, amendments and interpretations to existing standards that are not yet effective and have been early adopted by the Group

IFRS 15, Revenue from contracts with customers' was issued in May 2014 and is effective for annual periods commencing on or after 1 January 2018 either based on a full retrospective or modified application, with early adoption permitted. IFRS 15 outlines a single comprehensive model of accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, which is found currently across several Standards and Interpretations within IFRS. It establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

Notes to the consolidated financial statements (continued)

1. Basis of preparation (continued)

The Group had elected to adopt IFRS 15 with effect from 1 January 2016.

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

Income and cash flow statement

The Group has elected to present a single statement of comprehensive income.

The Group reports cash flows from operating activities using the indirect method. Finance income received and paid is presented within operating cash flows. The Director's believe that presentation of finance income within operating activities best represents the circumstances of the Group. The acquisition of investment properties are disclosed as cash flows from investing activities because this most appropriately reflects the Group's business.

2. Basis of Consolidation

The consolidated financial statements have been prepared on a going concern basis, applying the historical cost convention, except for the measurement of investment property at fair value.

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that effect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Although these estimates are based on the management's best knowledge of the events, and amounts involved, the actual results may differ from these estimates. Management believes that the underlying assumptions are appropriate. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in notes 2.24, 4 and 6.

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2017. Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of one half of the voting rights (refer to note 16).

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full. Subsidiaries are fully consolidated from the date from which control is transferred to the Group. They are deconsolidated from the date control ceases.

3. Foreign currency translation

Functional and presentation currency

Items presented in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment of which the entity operates ("the functional currency"). The consolidated financial statements are presented in pounds sterling (£') which is the Company's functional currency and the Group's presentation currency.

No transactions or balances have been translated as the Group conducts all transactions in pounds sterling.

4. Investment property

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property. Investment property also includes property that is being constructed or developed for future use as an investment property.

Land held under operating leases is classified and accounted for by the Group as investment property when the definition of investment property would otherwise be met. The operating lease is accounted for as if it were a finance lease.

Investment property is measured initially at its cost, including related transaction costs and (where applicable) borrowing costs. Subsequent expenditure is capitalised to the asset's carrying value only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other maintenance and repair costs are expensed as incurred.

After initial recognition, investment property is carried at fair value in accordance with IAS 40 Investment Property' with movements in value recognised as gains or losses in the consolidated statement of comprehensive income.

Notes to the consolidated financial statements (continued)

4. Investment property (continued)

In determining the fair value of the investment property, the Group uses market valuations, suitably adjusted for unamortised lease incentives. Fair value is determined each year, using recognised valuation techniques, by an employee of the Company who is a member of the Royal Institute of Chartered Surveyors (RICS'). Fair value reflects, among other things, rental income from current leases, car park receipts and assumptions about rental income from future leases in light of current market conditions. Fair value is also determined independently by professional individuals, holding recognised and relevant professional qualifications, at the discretion of the Board but at least once every five years.

The valuations form the basis of the carrying amounts of investment property in the consolidated financial statements.

Where an investment property undergoes a change in use, evidenced by commencement of development with a view to sale, the property is transferred to inventories. A property's deemed cost for subsequent accounting as inventories is its fair value at the date of change in use.

When the Group disposes of a property at fair value in an arms-length transaction the carrying value immediately prior to the sale is adjusted to the transaction price, and the adjustment is recorded in the income statement as net gain on sale of investment property.

5. Property, plant and equipment

All property, plant and equipment ("PPE") is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Cost of an item of PPE includes its purchase price and any direct attributable costs. Cost includes the cost of replacing part of an existing item of PPE at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an item of PPE.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced is derecognised. All other repairs and maintenance are charged to the consolidated statement of comprehensive income during the financial period in which they are incurred.

Depreciation is calculated using the straight-line method to allocate the cost over the assets' estimated useful lives, as follows:

Leasehold land Not depreciated Leasehold buildings 50 years Fixtures, fittings & equipment 10 years Events installations and equipment 5 - 10 years Estate Capital improvements 5 - 10 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at least at each financial year end.

An asset's carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the consolidated statement of comprehensive income.

6. Leases

Properties leased out under operating leases are included in investment properties within the consolidated statement of financial position. See note 2.17 for revenue recognition.

Notes to the consolidated financial statements (continued)

7. Inventories

The Group's inventories comprise of land and other property that is to be sold to developers or developed with a view to sale. Inventories are valued at the lower of cost and net realisable value. Cost represents the purchase price plus any directly attributable cost including professional fees and expenses incurred directly associated with the land's development since acquisition. Directly attributable costs also include salaries and related expenses. Net realisable value is the estimated selling price in the ordinary course of business less costs to complete redevelopment and selling expenses (refer to note 2.24). Inventories also include building materials which are held at the lower of cost and net realisable value.

In determining the net realisable value of inventory property the Group uses market valuations to determine the fair value. Fair value is determined each year, using recognised valuation techniques and using the latest valuation assumptions included in the reports produced for third party funders on similar investments. Fair value reflects assumptions about rental income from future leases in light of current market conditions as comparable evidence from other land or property that is sold in the market place. Fair value is also determined independently by professional individuals, holding recognised and relevant professional qualifications, at the discretion of the Board.

8. Non-current assets held for sale

Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for such assets and its sale must be highly probable. They are stated at the lower of carrying amount and fair value less costs to sell. Investment properties reclassified as non- current assets held for sale continue to be measured at fair value.

9. Financial instruments

1. Financial assets

Financial assets are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity financial assets and available-for-sale financial assets, as appropriate. The Group determines the classification of its financial assets at initial recognition. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

Financial assets are derecognised only when the contractual rights to the cash flows from the financial asset expire or the Group transfers substantially all risks and rewards of ownership.

Financial assets recognised in the consolidated statement of financial position as trade and other receivables are classified as loans and receivables. They are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment.

In relation to trade and other receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amounts due under the original terms of the invoice. Impaired debts are derecognised when they are assessed as uncollectible.

Cash and cash equivalents are also classified as loans and receivables and include cash in hand and short-term investments with maturity dates of less than 180 days from the year-end. All such investments are highly liquid.

2. Financial liabilities

Liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss or other liabilities, as appropriate.

All loans and borrowings are classified as other liabilities. Initial recognition is at fair value less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost. The fair value of a non-interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted.

Notes to the consolidated financial statements (continued)

10. Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held at call with banks.

11. Equity

• Share Capital

  Shares are classified as equity when there is no obligation to transfer cash or other assets.

• Capital Contribution

  The capital contribution represents land transferred to the Group by its ultimate shareholder at market value.

• Reserves

  Reserves represent distributable profits.

12. Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Other payables include contractual obligations related to lease incentives provided to tenants.

Other payables are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the date of the statement of financial position.

13. Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan.

14. Borrowing costs

Specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use of sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Borrowing costs that are not directly attributable to a qualifying asset are accounted for in the consolidated statement of comprehensive income in the period in which they are incurred (on an accruals basis).

15. Sale deposits

Sale deposits refers to the amount received from the customers to reserve apartments at College Gardens. The amounts held will be recognised as revenue when the performance obligation is satisfied as explained in note 2.17.

16. Provisions

Provisions are recognised when:

• the Group has a present legal or constructive obligation as a result of past events;

• it is probable that an outflow of resources will be required to settle the obligation; and

• the amount can be reliably estimated.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as finance costs.

Notes to the consolidated financial statements (continued)

17. Revenue recognition

Revenue represents the value of the consideration received on the disposal of inventory, rental income, car park receipts and other income.

Revenue from contracts with customers

The Group recognises revenue from contracts with customers based on a five step model as set out in IFRS 15:

Step 1.  Identify the contract(s) with a customer: A contract is defined as an agreement between two or more parties that

creates enforceable rights and obligations and sets out the criteria for every contract that must be met.

Step 2.  Identify the performance obligations in the contract: A performance obligation is a promise in a contract with a

customer to transfer a good or service to the customer.

Step 3.  Determine the transaction price: The transaction price is the amount of consideration to which the Group expects to

be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

Step 4.  Allocate the transaction price to the performance obligations in the contract: For a contract that has more than one

performance obligation, the Group will allocate the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the Group expects to be entitled in exchange for satisfying each performance obligation.

Step 5.  Recognise revenue when (or as) the entity satisfies a performance obligation.

The Group satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met:

1. The customer simultaneously receives and consumes the benefits provided by the Group's performance as the Group  performs; or
2. The Group's performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
3. The Group's performance does not create an asset with an alternative use to the Group and the entity has an enforceable  right to payment for performance completed to date.

For performance obligations where one of the above conditions is not met, revenue is recognised at the point in time at which the performance obligation is satisfied.

When the Group satisfies a performance obligation by delivering the promised goods or services, it creates a contract asset based on the amount of consideration earned by the performance. Where the amount of consideration received from a customer exceeds the amount of revenue recognised this gives rise to a contract liability.

Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes and duty. The Group assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. Revenue and costs are recognised by the reference to the stage of completion of the contract activity.

Revenue is recognised in the consolidated income statement to the extent that it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably.

Investment Income

• Rental income

  Rental income comprises income from operating leases net of GST and is recognised on a straight line basis over the

  lease term. Benefits to lessees in the form of rent free periods are treated as a reduction in the overall return on the lease  in accordance with SIC 15 "Operating Leases - Incentives" and are recognised on a straight line basis over the lease term.

• Car park receipts

  Revenue from car park receipts is recognised on an accruals basis and, in respect of weekly cash collections at the  Waterfront Car Park, a cash basis.

Other income

Other income is recognised on an accruals basis.

Notes to the consolidated financial statements (continued)

18. Finance Income and costs

Finance income and costs are accounted for on an accruals basis. The Group has chosen to capitalise borrowing costs on all qualifying assets irrespective of whether they are measured at fair value or not.

19. Expenses

All expenses are accounted for in the consolidated statement of comprehensive income in the period in which they are incurred (on an accruals basis).

20. Taxation

• Income Tax

  The Group is exempt from paying Income Tax in Jersey. On 19 October 2007, the Minister for Treasury and Resources

  exempted the Company and its fully owned subsidiaries from income tax under Article 115 of the Income Tax (Jersey) Law  1961 as the profits of the Company are to be expended wholly and exclusively to improve and extend public infrastructure  and works for the good of the public of the Island.

• Goods & Services Tax

  The Company is registered for Goods & Services Tax ("GST") and pays GST on all services purchased in Jersey.

21. Employee benefits

• Pensions

 The Group operates defined contribution pension plans wherein the Group pays fixed contributions to publicly or privately  administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment

  obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when

  they are due.

• Short-term employee benefits and compensation absences

 Wages, salaries, paid annual leave and sick leave and non-monetary benefits (such as health services and childcare services)  are recognised as an employee benefit expense and accrued when the associated services are rendered by the employees

  of the Group.

22. Dividend distribution

Dividend distributions to the Company's shareholders are recognised as a liability in the Group's consolidated financial statements in the period in which the dividends are approved.

23. Financial Risk Management

The risk management function within the Group is carried out in respect of financial risks. Financial risks are risks arising from financial instruments to which the Group is exposed during or at the end of the reporting period. Financial risk comprises liquidity risk, capital risk, credit risk and market risk (including currency risk, interest rate risk and other price risk). The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits.

Risk management is carried out by the Executive Directors under policies approved by the Board of Directors. The Executive Directors identify and evaluate financial risk by taking into account the Group's expected activities and future commitments.

The Board considers both financial and other risks within the Group bi-annually.

1. Liquidity risk

 Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate  amount of committed credit facilities.

  The Group's liquidity position is monitored on a daily basis by the management and is reviewed at least quarterly by the  Board of Directors. A summary table with maturity of assets and liabilities presented below is used by key management  personnel to manage liquidity risk and derived from managerial reports at Company level. The amounts disclosed in the  tables below are the contractual undiscounted cash flows. Undiscounted cash flows in respect of balances due within

  12 months generally equal their carrying amounts in the statement of financial position, as the impact of discounting

  is not significant.

Notes to the consolidated financial statements (continued)

2.23  Financial Risk Management (continued)

The maturity analysis of financial liabilities at 31 December 2017 is as follows:

The obligations in respect of liabilities maturing in years 2 to 5 will be met from proceeds on disposal of the development assets.

The maturity analysis of financial liabilities at 31 December 2016 was as follows:

2. Capital risk

  When managing capital, the Group's objectives are to safeguard the Group's ability to continue as a going concern in order  to provide returns to the Shareholder. The Group aims to deliver these objectives by ensuring that:

• prior to commencing a commercial development, the Group has a sufficient level of legally binding pre-lets to create a  value that exceeds the construction cost, and the debt being incurred to fund those costs of development projects are  funded by specific loans and the value of the development project exceed the construction costs, and

• prior to commencing a residential development, the Group has legally binding pre-sale agreements in place whose total  sales value exceeds the construction cost and debt funding.

  The general costs of the Group are met through operating revenue and a revolving credit facility provided by HSBC Bank plc.

Notes to the consolidated financial statements (continued)

2.23  Financial Risk Management (continued)

3. Credit risk

 Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to

  discharge an obligation. The Group has no significant concentrations of credit risk. Credit risk arises from cash and cash

  equivalents held at banks, trade receivables, including rental receivables from lessees and rental guarantees. Credit risk is  managed on a group basis. The Group structures the levels of credit risk it accepts by placing limits on its exposure to a

  single counterparty or groups of counterparties. Such risks are subject to a quarterly or more frequent review. The Group  has policies in place to ensure that rental and sale contracts are entered into only with lessees and buyers with an

  appropriate credit history but the Group does not monitor the credit quality of receivables on an ongoing basis.

  Cash balances are held only with financial institutions with a Moody's credit rating of A or better. The utilisation of credit  limits is regularly monitored.

 The fair value of cash and cash equivalents at 31 December 2017 and 31 December 2016 equals to the carrying value.

4. Market risk

  Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in  market prices. The Group's market risks arise from open positions in interest bearing assets and liabilities, to the extent

  that these are exposed to general and specific market movements. Management sets limits on the exposure to interest rate  risk that may be accepted which are monitored on a quarterly basis. However, the use of this approach does not prevent

  losses outside of these limits in the event of more significant market movements.

1. Cash flow and fair value interest rate risk

   The Group's interest rate risk principally arises from long-term borrowings (Note 10). Borrowings issued as variable

   rates expose the Group to cash flow interest rate risk. The Group does not have borrowings at fixed rates and therefore   has no significant exposure to fair value interest rate risk.

The Group's interest rates risk is monitored by the Group's management on a monthly basis. The interest rate risk policy is approved by the Board of Directors at the time each facility is put in place. Management analyse the Group's interest rate exposure together with adverse rate sensitivity analysis on a monthly basis based on the latest market information. These calculations are only run for liabilities that represent major interest-bearing positions and are included in the development appraisals that are reported to the Board at each Board meeting.

Trade receivables and payables under one year are interest-free and have settlement dates within one year.

2. Price risk

   The Group has no significant exposure to price risk as it does not hold any equity securities or commodities.

The Group is exposed to property price risk other than from financial instruments including property rentals risk (see notes 2.24, 4 and 6).

5. Fair value estimation

 The table below analyses financial instruments carried at fair value, by valuation method. The different levels are  defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly  (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

Notes to the consolidated financial statements (continued)

23. Financial Risk Management (continued)

Financial Assets and liabilities not carried at fair value but for which fair value is disclosed

The following table analyses within the fair value hierarchy the Group's assets and liabilities (by class) not measured at fair value at 31 December 2017 but for which fair value is disclosed.

There were no transfers between levels 1, 2 or 3 during the year.

The following table analyses within the fair value hierarchy the Group's assets and liabilities (by class) not measured at fair value at 31 December 2016 but for which fair value is disclosed.

The assets and liabilities included in the above table are carried at a reasonable approximation of fair value.

Notes to the consolidated financial statements (continued)

24. Significant accounting judgements, estimates and assumptions Revenue recognition and cost of revenue on development sales

Satisfaction of performance obligations

The Group is required to assess each of its contracts with customers to determine whether performance obligations are satisfied over time or at a point in time in order to determine the appropriate method of recognising revenue. The Group has assessed that based on the sale and purchase agreements entered into with customers and the provisions of relevant laws and regulations, where contracts are entered into to provide real estate assets to customer, the Group does not create an asset with an alternative use to the Group and usually has an enforceable right to payment for performance completed to date. In these circumstance, the Group recognises revenue over time. Where this is not the case revenue is recognised at a point in time.

Determination of transaction prices

The Group is required to determine the transaction price in respect of each of its contracts with customers. In making such judgment the Group assess the impact of any variable consideration in the contract, due to discounts or penalties, the existence of any significant financing component in the contract and any non-cash consideration in the contract.

Transfer of control in contracts with customers

In cases where the Group determines that performance obligations are satisfied at a point in time, revenue is recognised when control over the assets that is the subject of the contract is transferred to the customer. In the case of contracts to sell real estate assets this is generally when the unit has been handed over to the customer.

Allocation of transaction price to performance obligation in contracts with customers

The Group has elected to apply the input method in allocating the transaction price to performance obligations where revenue is recognised over time. The Group considers that the use of the input method which requires revenue recognition on the basis of the Group's efforts to the satisfaction of the performance obligation provides the best reference of revenue actually earned. In applying the input method, the Group estimates the cost to complete the projects in order to determine the amount of revenue to be recognised. These estimates include the cost of providing infrastructure, potential claims by contractors as evaluated by the project consultant and the cost of meeting other contractual obligations to the customers.

Classification of property

The Group determines whether a property is classified as investment property or inventory as follows:

• Investment property comprises leasehold land and buildings which are not occupied substantially for use by, or in the  operations of, the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income

  and capital appreciation.

• Inventory comprises freehold and leasehold land and buildings that is held for sale or development and subsequent sale  in the ordinary course of business.

Estimation of net realisable value for inventory

Inventory is stated at the lower of cost and net realisable value ("NRV"). NRV for completed inventory property is assessed with reference to market conditions and prices existing at the reporting date and is determined by the Group having taken suitable external advice and in the light of recent market transactions.

NRV in respect of commercial inventory property under construction is assessed by the Executive Directors with reference to the pre-let agreements in place, the yields being applied on similar completed property, any current sale transactions in the market and any further letting agreements that are in negotiation having regard to the latest independent valuation report on similar properties prepared for the third-party funder. From the resultant value, the costs that are to be incurred to complete construction are deducted.

Sensitivity analysis is performed to assess headroom in the estimation.

NRV in respect of residential inventory property is assessed with reference to pre-sale agreements and other current sales of similar properties. From the resultant value, the costs that are to be incurred to complete construction are deducted.

Notes to the consolidated financial statements (continued)

2.24  Significant accounting judgements, estimates and assumptions (continued)

For both residential and commercial property, prior to entering into a construction contract, the internal valuer will assess the value of the site by comparison to independent valuations and other similar recent land sales that have occurred.

 For commercial property, the NRV is sensitive to estimated rental values, sales yield and construction costs. For residential property, the NRV is sensitive to both sales revenue and the cost of construction.

Valuation of property

Fair value is determined each year, using recognised valuation techniques, by an employee of the Company who is a member of the Royal Institute of Chartered Surveyors (RICS'). Fair value is also determined independently by professional individuals, holding recognised and relevant professional qualifications, at the discretion of the Board but at least once every five years. Fair values are determined based on recent real estate transactions with similar characteristics and location to those of the Group assets.

Fair value reflects, among others, rental income from current leases, car park receipts and assumptions about rental income from future leases in light of current market conditions.

The valuation of investment property is inherently difficult due to the individual nature and circumstances of each investment property. As a result, valuations may not reflect the actual sales price even if the sale was to occur shortly after the valuation date.

Techniques used for valuing investment property

The income capitalisation method converts anticipated future cash flow benefits in the form of rental income into present value. This approach requires careful estimation of future benefits and the application of investor yield or return requirements. One approach to value the property on this basis is to capitalise net rental income on the basis of an initial yield, generally referred to as the All Risks Yield' approach or Net Initial Yield' approach, adjusting for any factors not included in net rental income, such as vacancy, lease incentives, refurbishment, etc.

The Residual Method (or Hypothetical Development Approach) to estimating fair value is a combination of the Capitalisation (income) and a cost approach (Summation). The Residual Method is defined according to "Approved European Property Valuation Standards" of TEGoVA (The European Group of Valuers' Associations), as: "A method of determining the value of a property which has potential for development, redevelopment or refurbishment. The estimated total cost of the work, including fees and other associated expenditures, plus allowance for interest, developer's risk and profit, is deducted from

the gross value of the completed project. The resultant figure is then adjusted back to the date of valuation to give the residual value."

3. Revenue and expenses

3.1  Revenue

Notes to the consolidated financial statements (continued)

1. Revenue (continued)

The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:

2. Development Revenue and Cost

During 2016, the Jersey Homes Trust purchased the plot for Block 4 at College Gardens and entered into a construction contract with the Company for £8m to develop 40 units that is due for completion in April 2018. £5.27m (2016: £1.95m) was received during 2017 and the balance is due over the construction period based on the percentage of work completed. See 2.17 and 2.24 for details on revenue, cost recognition, performance obligations and judgements related to them.

3. Other expenses

4. Employee benefit expense

The average number of employees in 2017 was 12 (2016: 9).

Notes to the consolidated financial statements (continued)

5. Estate management

4. Investment property

The Group's investment property is measured at fair value. The Group holds 3 classes of investment property all located in Jersey being a car park, a bus station and a public square.

Notes to the consolidated financial statements (continued)

4.  Investment property (continued)

Valuation processes

The Company has an RICS qualified employee who performs valuations on the investment properties based on the latest independent valuations and taking into account recent market evidence, rental agreements, quality of covenant, yield comparisons and location of the asset. If available, information included in valuation reports prepared by independent valuation experts is taken into consideration. The RICS qualified employee reports directly to the Managing Director and Finance Director who report to the Audit & Risk Committee. Discussions of valuation processes and results are held between the Audit & Risk Committee, the Managing Director and Finance Director on an annual basis and with independent valuers, at least once every five years.

Independent professionally qualified valuers D2 Real Estate Ltd (formerly known as BNP Paribas Real Estate Ltd) who hold a recognised relevant professional qualification and have relevant experience in the locations and segments of the investment properties valued the Waterfront Car Park and the Bus Station at the end of 2017 and Public Square on 31 December 2013.

The increase in the valuation associated with the WaterfrontCar Park is noted in the valuation report being attributable to the following consideration:

• Gross income is excess of £1.2 million;

• Comparable leasing transactions with annual rent in excess of £3,000 p.a. / parking space where as the valuation the  gross income equates to £2,069 p.a. / parking space;

• Increased demand for parking in St. Helier ;

• Establishment of the Esplanade Quarter as a central office location, warranting further growth of the demand for  parking; and

• Prime yields in Q4 2017 were 6.6 to 6.7%.

The increase in the valuation associated with the Transport Centre is as a direct result of the valuers establishing the fair value of the rent that would be payable by an unrelated party. The valuers considered the rental value of other uses and considered the value of the rent as a bus station should be a minimum of £150,000 p.a. The valuers considered that given the covenant strength, a yield of 5.7% on the fair value rental was appropriate.

For all investment properties, it is considered that their current use equates to the highest and best use. At each financial year end, the Finance Director:

- Verifies all major inputs to the valuation report;

- Assesses property valuation movements when compared to the prior year valuation report;

- Holds discussion with the internal valuer / independent valuer if an independent valuer has been appointed.

Information about fair value using significant unobservable inputs (Level 3):

Notes to the consolidated financial statements (continued)

4. Investment property (continued)

Yield sensitivity analysis

Gross Revenue1

There have been no movements between levels 1, 2 and 3 and all investment properties are considered to be level 3. Information about fair value as at 31 December 2016 using significant unobservable inputs (Level 3):

Yield sensitivity analysis

Gross Revenue1

There have been no movements between levels 1, 2 and 3 and all investment properties are considered to be level 3.

1 Inputs relating to gross rental income are based on existing leases on each of the sites noted. Investment income can fluctuate year on year but is generally considered to be stable across each of the main investment properties.

Notes to the consolidated financial statements (continued)

5. Property, plant and equipment

6. Inventories

Freehold land' refers to the land owned by the Company in perpetuity and Leasehold land' held on 150 years lease with the Public of Jersey.

Freehold and Leasehold land includes the professional fees and other expenses incurred to obtain planning and building consents on various commercial and residential buildings.

Leasehold building' refers to IFC 1 that was completed during the year.

Property under construction' represents the construction costs, professional fees and expenses on IFC 5 and College Gardens. The comparable amounts show the costs incurred on these developments prior to 2017.

The Company has entered into a fixed price contract with construction firm Camerons Limited to construct IFC 5 for completion in July 2018.

The Company has also entered into a fixed price contract with construction firm ROK Regal to construct College Gardens with a phased completion of the six blocks from April 2018 to April 2019.

Borrowing costs capitalised during the year amount to £650,207 (2016: £322,639). The weighted average interest rate for the Group's borrowings during the year was 3.72% (2016: 3.56%).

Notes to the consolidated financial statements (continued)

6. Inventories (continued)

Assessment of Net Realisable Value ("NRV")

Inventories are carried at the lower of cost and NRV. The NRV is the estimated selling price in the ordinary course of business less costs to complete the development and selling expenses. The valuation techniques used to determine the NRV are set out in notes 2.7 and 2.24.

Cost information is provided by the Company's professional cost consultants and this information, together with other costs and the sales evidence, is appraised by the Managing Director and Finance Directors who report to the Audit & Risk Committee. Discussions of valuation processes and results are held between the Audit & Risk Committee, the Managing Director and Finance Director on a bi-annual basis.

Following the calculation of the NRV, the Finance Director undertakes a sensitivity analysis to determine the associated risks to changes in market conditions. This process analyses changes to sales value for unsold residential units / unlet office space and changes to estimated costs on projects that have yet to commence and are therefore subject to final tender.

Based on the analysis undertaken, the inventory is carried at lower of cost and NRV.

7. Trade and other receivables

8. Non-current assets held for sale

As agreed with its Shareholder, the Board agreed to dispose of all the Group's non-strategic assets. The Group sold Land for a sub-station and Hotel Interest during the year for £230,000 and £3,150,000 respectively before deducting disposals costs amounting to £58,345, resulting in a realised profit of £1,655. Part of a Public Square and some car parking located as Castle Quay are in the process of being sold / have been sold since the year end and are shown at fair value.

Notes to the consolidated financial statements (continued)

8. Non-current assets held for sale (continued)

The gain or loss recognised on the revaluation for the above assets are included in "Net gain from fair value adjustment on non-current assets held for sale" in the statement of comprehensive income.

9. Share capital

10. Borrowings

All the Group's borrowings are at floating rates of interest. Interest costs may increase or decrease as a result of changes in the interest rates.

The bank borrowings are secured on inventory to the value of £89.33m (2016: £55.14m) and investment property to the value of £14.5m (2016: £9.5m) and bears average interest of 2.56% (2016: 2.89%) annually. The maturity analysis of the borrowings is included in note 2.23.

The fair value of borrowings approximated their carrying value at the date of the statement of financial position. The Group has the following undrawn floating rate borrowing facilities:

As of 31 December 2017, if interest rates had increased by 25 basis points (2016: 25 basis points) with all other variables held constant, profit for the year would reduce by £67,720 (2016: £15,394). If interest rates had been reduced by 25 basis points (2016: 25 basis points) with all other variables held constant, profit for the year would increase by £67,720 (2016: £15,394).

Notes to the consolidated financial statements (continued)

11. Deferred consideration

The deferred consideration represents the consideration payable for the former Jersey College for Girls' site (now known as College Gardens) which is payable to the States of Jersey on completion and sale of the development.

12. Contract liability

Contract liability represents consideration received from the Jersey Homes Trusts towards the construction of Block 4 of College Gardens and is transferred to revenue based on the percentage of work completed.

13. Retention money payable

The retention money payable refers to a percentage of the contract price due to contractors retained by the Company.

14. Trade and other payables

Within accruals and deferred income is included accrued interest amounting to £163,774 (2016: £50,390) included in the consolidated statement of comprehensive income.

Notes to the consolidated financial statements (continued)

14. Trade and other payables (continued)

15. Contingent liabilities and commitments

In 2012, Harcourt Developments Limited and associated entities ("Harcourt") filed an action against the Company. Harcourt claimed that the Company should not have terminated what it alleges to be an agreement relating to prospective development projects and is claiming damages for breach of contract and / or unjust enrichment.

During 2016, the Company was successful in having the majority of Harcourt's claim, including the entirety of the contractual claim, struck out and the Court ordered Harcourt to properly plead those parts of the unjust enrichment that were not struck out within a certain time period. Harcourt failed to meet the Court's deadline and the remaining parts of the claim have also been struck out.

During 2017, Harcourt lost its appeal to overturn the Court's decision and the case is now concluded in the Company's favour. The Company has recovered costs amounting to £369,528 which are reflected in other income of which £133,600 was outstanding as at 31 December 2017 and has subsequently been received.

The Group has no significant contingent liabilities.

The Group has capital commitments of £33,397,859 (2016: £65,941,057) in respect of developments under construction.

16. Subsidiaries

The principal activities of the Company are land and property holding, development and estate management.

It is also the owner of all the equity share capital of the following subsidiary companies all of which are incorporated in Jersey:

Notes to the consolidated financial statements (continued)

16. Subsidiaries (continued)

17. Related party transactions

The Company

Directors received £533,260 in 2017 comprising salary, emoluments, pension, bonus and benefits (2016: £472,508). The States of Jersey

The Company submitted planning and building control applications for its various developments and was required to pay planning and building control fees to the States of Jersey for each application. During the year £695,868 (2016: £116,650) was expended.

The Company paid £30,080 (2016: £85,080) in stamp duty to register the security on the Company's borrowings.

The States of Jersey receive £45,000 per annum (2016: £45,000) in rental in respect of La Fregate at Les Jardin de la Mer and passes this amount onto the Company as a contribution to the upkeep of Les Jardins de la Mer public park.

The States of Jersey receive £14,269 per annum (2016: £14,772) in relation to various insurance policies obtained by States of Jersey on behalf of the Company.

In September 2007, a lease was entered into for Liberation Station whereby rental income receivable from the States of Jersey was at a level the Directors considered equivalent to market rates. The total recognised in the consolidated statement of comprehensive income for the year ended 31 December 2017 in respect of this contract is £100,000 (2016: £84,166). An insurance premium in respect of Liberation station in the sum of £3,861 (2016: £1,462) has been recharged to the States of Jersey of which £nil (2016: £644) was outstanding at the year end.

The Company receives £759,000 (2016: £759,000) from the States of Jersey in respect of a licence to operate Les Jardins Car Park.

Notes to the consolidated financial statements (continued)

17. Related party transactions (continued)

The Company intermittently purchases services from various departments at the States of Jersey on a commercial basis as follows: