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MHC ANNUAL REPORT 2007-2008

ANNUAL REPORT 2007-2008

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OUR CORE OUR CORE VALUESVALUES

VISIONVISION

MISSIONMISSIONTo help as many families as possible to become owners of a house and to be at the forefront of housing development in the country.

To be the Leading Provider of Housing Financial Services in the Region.

• Innovation & Creativity• Delighting the Customer• Teamwork• Commitment• Professionalism• Sense of Belonging

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CONTENTS

Corporate Profi le - Key Events of FY 2007/08 4

MHC’S Network 5

Financial Highlights & Evolution of KEY Financial Figures 6

Chairman’s Statement 7

Board of Directors 8

Board Committees 9

Management, Auditors & Legal Advisers 10

Management Report 12

Management Discussion & Analysis 23

Report from Directors 31

Report from Secretary 34

Report from Auditors 35

Audited Accounts 38

Notes to the Financial Statements for the year 2008 43

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CORPORATE PROFILE

• Renovation of 2nd Floor – Finance Department

• Launch of Complete ou Lacaze and Mixed Construction Loan Schemes

• 45th Anniversary of MHC

Key events of FY 07/08

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REGISTERED OFFICE MHC Building, Reverend Jean Lebrun Street, Port Louis

Our Network Head Offi ce

Reverend Jean Lebrun Street, Port Louis. Tel: 212 0244 Fax: 212 3325

Curepipe Charles Lees Street, Tel: 676 0245/46 Fax: 676 0248

Central Flacq

François Mitterand Street, Tel: 413 5139/40 Fax: 413 5138

Goodlands Corner Royal Road & Lall Bahadoor Shastri Street, Tel: 282 1460/ 42 Fax: 282 1461

Triolet Royal Road, 8ème Mille Tel/Fax: 261 7623 Bambous

Royal Road Tel/ Fax: 452 0372 Rodrigues

Camp du Roi, Tel: 831 1787 Fax: 831 1788

Email: [email protected] Website: www.mhc.mu

MHC’S NETWORK

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Financial Highlights

2007/08 2006/07 2005/06 (RsM) (RsM) (RsM) (Restated)

Interest Income 679.0 688.3 614.1Interest Expense 430.6 421.8 378.3Net Profi t 162.0 162.1 152.5Net Assets 5,273.8 5,623.9 5,677.1Retained Earnings 1,058.3 1,009.2 910.0Interest Cover (Times) 1.6 1.6 1.6Net Profi t Margin 22.0 21.4 22.2Housing Loans Assets 6,009.3 6,114.9 6,023.1Fixed Assets (Net of Depreciation) 363.4 245.8 242.5Total Assets 6,524.3 6,576.2 6,732.0Shareholders’ Funds 1,744.4 1,474.6 1,413.2Long Term Liabilities 3,198.7 3,845.0 3,979.7Capital Employed 5,273.8 5,623.9 5,677.1PEL (Capital Deposited) 755.4 715.7 716.9HDC (Capital Deposited) 595.5 639.9 983.8Gearing (Times) 2.3 3.0 3.3Current Ratio (Times) 1.4 1.8 1.3ROCE (%) 3.1 2.9 2.7RAROC (%) 1.0 1.8 2.5EPS (Rs) 8.10 16.21 15.25Total Income to Capital Employed Ratio 14.0 13.4 12.1

FINANCIAL HIGHLIGHTS & EVOLUTION OF KEY FINANCIAL FIGURES

Evolution Of Key Financial Figures 2007/08 2006/07 2005/06 2004/05 2003/04 Rs M Rs M Rs M Rs M Rs M (Restated) (Restated) (Restated)

Total Income 736.9 756.4 685.4 674.8 694.0Net Profi t 162.0 162.1 152.5 144.3 135.1Net Assets 5,273.8 5,623.9 5,677.1 5,594.6 5,938.6Net Housing Loans Assets 6,009.3 6,114.9 6,023.1 5,810.9 5,363.7Fixed Assets 363.4 245.8 242.5 242.6 225.3Reserves 1,875.1 1,678.9 1,597.4 1,448.6 1,452.7Long term liabilities 3,198.7 3,845.0 3,979.7 4,046.0 4,386.0EPS (Rs) 8.10 16.21 15.25 14.43 13.51Current Ratio (Times) 1.4 1.8 1.3 1.5 2.3

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The Directors are pleased to submit the Annual Report with the audited accounts for the year ended 30th June 2008 to the shareholders.

Review of the year’s performance

Despite the competitive environment, the Company performed satisfactorily over the year as a consequence of our product and market development strategies, provision of quality service, promoting of effi ciency and management of critical areas.

In face of the increasing number of residential and commercial projects going to its competitors, the Company managed to fend its way to secure a decent share in the housing fi nance market and repeated more or less the same performance of last year.

I am pleased to report that • Total Housing Loan Assets stood at Rs 6,009.3 Million as at 30.06.2008• PEL deposits increased by 5.5% to reach Rs 755.4 Million. The number of PEL a/c holders as at 30 June 2008 was 102,426.• Net profi t was maintained at the level of Rs 162 Million.

Dividend

The Directors have proposed a dividend payment for an amount of Rs 32,407,000 for the year ended 30th June 2008 representing 20% of net profi t as compared to the 17% paid for the previous fi nancial year.

Appreciation

This year’s performance once again translated the accomplishment of a dedicated Board, willpower of our Management Team, employees’ commitment and hard work as well as the proactive and innovative culture that is being developed throughout the organization.

On behalf of the Board, I wish to thank the management team as well as all staff members for their support and continuous cooperation. The Board recognizes and appreciates the hard work and dedication of the employees despite the challenging and competitive environment in which they are operating. Our employees remain our most valuable asset and their dedication will enable the Company to continue to be at the forefront of the housing fi nance sector.

I would also like to extend my appreciation to Board members for their valuable advices and continued support and whose contribution has equally been instrumental in the achievement of the results for the year under review.

Mr L. D. J. C. ArmanceChairman, Board of Directors

CHAIRMAN’S STATEMENT

Mr. L. D. J. C. Armance, Chairman

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BOARD OF DIRECTORS

Mr. L. D. J. C. ARMANCE - Chairman

Mr. M. SEETOHUL - Managing Director

Mr. G. CHAPERON - Director (Up to 27 December 2007)

Mr. M. DHOORUNDHUR - Director (Up to 27 December 2007)

Mr A. PONNUSAWMY - Director (with effect from 27 December 2007)

Mrs A. D. I. RAMPHUL-PUNCHOO - Director

Sir B. BACHA - Director (with effect from 27 December 2007)

Mr. D. MAYWAH - Director

Mr. S. M. S. MAUDARUN - Director (up to 09 April 2008)

Mr A. R. SEETAL - Director (with effect from 08 May 2008)

Mr R. C. GOPEE - Director (up to 16 April 2008)

Mr J. SOOBEN - Director (with effect from 08 May 2008)

Mr. K. NARROO

Company Secretary

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BOARD COMMITTEES

1. Audit Committee Chairperson : Mr M. Dhoorundhur (Up to 27 December 2007) Mr A. Ponnusawmy (with effect from 30 January 2008)

Vice-Chairperson : Mr G. Chaperon (Up to 27 December 2007) Other members : Mrs A.D. I. Ramphul-Punchoo Sir B. Bacha (with effect from 30 January 2008)

2. Corporate Governance & HR Committee

Chairperson : Mr R. C. Gopee (up to 16 April 2008) Sir B. Bacha (with effect from 23 May 2008)

Other members : Mr M. Seetohul Mr D. Maywah

3. Risk Committee

Chairperson : Mr J. M. C. G. Chaperon, (Up to 27 December 2007) Mr A. Ponnusawmy (with effect from 30 January 2008)

Other members : Mrs A. D. I. Ramphul-Punchoo Mr M. Seetohul

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MANAGEMENT, AUDITORS & LEGAL ADVISERS

SENIOR MANAGEMENT

Mr. M. SEETOHUL - Managing Director

Mr. R. K. MUDALIAR - Offi cer in Charge, Finance Division

Mr. A. NOBAUB - Manager - Information & Communications Technology Division

Mr. S. A. SOOKHEE - Manager - Commercial Division

Mrs. V. S. PAREEMAMUN - Manager - Corporate Services Division Dr R. BOOLAUCK - Manager - Corporate Planning & Development Division (with effect from 07th November 2007)

Mr. R. ABEELUCK - Ag. Manager, Technical Division

Mr. J. MAYWAH - Ag. Internal Auditor

AUDITORS

Kemp Chatteris Deloitte3rd Floor, Cerné HouseLa ChausséePort LouisMauritius

LEGAL ADVISER

Me Guy Ollivry, Q.C.105, Chancery HousePort Louis

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MANAGEMENT REPORT

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MANAGEMENT REPORT

Management Report

Management is pleased to present to you the Audited Financial Statements and Annual Report for the year ended June 30, 2008.

Economic Review

In general the economic upturn was sustained and reinforced. A growth of 5.7% in GDP was registered in 2007. Unemployment level was brought down to 8.5%. The main driver of this notable performance was the construction sector

- residential and commercial projects as well as integrated resort development schemes started up. In fact, the Construction Industry achieved an impressive growth of 15.7% in spite of elevated prices of raw materials.

The cut throat competition persisted in the housing loan business segment. Besides we have had to bear the associative consequences of fl uctuations in the Repo Rate. The Bank of Mauritius raised the Repo rate by 75 basis points to 9.25% in July 2007 as a result of persistent infl ationary pressures. During the course of the fi nancial year under review, the keynote rate was altered and slimmed down by a cumulative 125 basis points in the fi rst fi ve months of 2008 to 8% as at May last. MHC’s Performance

The innovative stance adopted by the Company proved to be fruitful. The introduction of new loan schemes and the review of our existing ones tailored to meet customers expectations allowed the Company to generate new business although not to the level expected. Apart from competitive pressures and morosity in the housing loans market, the lending market witnessed frequent movements in the base rate, Repo Rate.

Against this backdrop, the performance realised was satisfactory. However, MHC realised the same level of profi t as last year. This was an achievement in itself in as much as the budgeted profi t was exceeded by 44.6%.

Outlook for the year 2008-2009

We believe that competition in the already stringent housing loan business segment will be fi ercer as the number of competitors has kept on increasing. The differentiating factor will be the quality of service and the products offered. We will therefore pursue an innovative and creative stance so as not to lose our market share without losing focus on our customers’ expectations. In fact customer care will be at the centre of all strategies/schemes/any other development to be worked out.

Strategies that will be adopted for the generation of business will include - Maintain volume of business by offering a more personalised service to clients and prospects: (i) Increasing proximity with clients-opening of new feeder offi ces (ii) Going to the prospects at their workplace or residence- Developing new products- Revisiting our existing products- Carrying out a well planned sales and marketing campaign- Improving further on the quality of our services- Increase our non-interest income

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MANAGEMENT REPORT

- Accelerate recovery of arrears- Review cost- Review completely our I.C.T strategy and infrastructure- Resume property development

Review of the year’s performance

Overall the position of the Company remained almost stagnant. Total assets dwindled slightly from Rs 6,576.2 Million to Rs 6,524.3 Million mainly because of the decrease of housing loans assets by 1.7% from Rs 6,114.9 Million to Rs 6,009.3 Million. The negative growth in volume of business coupled with early repayments from clients led to reduction in our loans portfolio.

Bonus Issue

A bonus issue of Rs 100 Million was made to the shareholders to increase paid-up capital from Rs 100 Million to Rs 200 Million in compliance with the new requirement of the Banking Act 2004 regarding issued share capital. The increase in equity infl uenced favourably our Capital Adequacy as well as our Gearing. However, the incremental change in ROCE suffered slightly. EPS has also decreased substantially as the number of shares ranking for dividends has doubled.

Net profi t

Despite adverse factors, the Company has generated an appreciable level of profi t which is nearly the same as the previous year. Net profi t for the year stood at Rs 162.0 Million.

Net Profi t

* restated

Interest Income

Despite the decline in volume of business, interest on housing loans increased from Rs 629.5 Million to Rs 643.8 Million. The increase in interest on housing loans is due mainly to the 75 Basis Points increase in the Repo Rate on the eve of the start of the Financial Year and which stayed for the fi rst half of the year.

During the year under review, total interest income fell from Rs 688.3 Million in FY 2006/07 to Rs 679.0 Million in FY 2007/08.

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MANAGEMENT REPORT

Interest Income

Interest Expense

Interest Expense rose by 2.08% to attain Rs 430.6 Million during the FY 2007/08.

Interest Cover

Interest Cover remained at 1.6 times for the FY 2007/08.

Current Ratio

The current ratio changed from 1.8 times to 1.4. This was mainly due to many Housing Deposit Certifi cates becoming due over the next 12 months. Cash in hand and at bank stood at Rs 293.1 Million.

Earnings per Share

During the year under review EPS moved from Rs 16.21 to Rs 8.10. This dilution was due to bonus issue made during the year.

Earnings Per Share

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MANAGEMENT REPORT

Return on Capital Employed (ROCE)

The Company’s ROCE improved from 2.9% to reach 3.1% in FY 2007/08

Risk Adjusted Return on Capital

The Company’s RAROC was 1.0% for FY 2007/08 as compared to 1.8% for FY 2006/07

Gearing

The Gearing position improved from 3.0 to 2.3 times. Only Rs 100 Million long term loan were availed during the year.

Review of MHC Operations

Savings & Term Deposits

Plan Epargne Logement

During the fi nancial year 2007/08, the capital balance in PEL A/C increased by 5.5%. In fact, as at June 2008 the number of PEL A/C holders stood at 102,426.

Breakdown of cumulated PEL balance & operative accounts

As at No. of operative A/Cs Cumulated Balance – Rs Million 30.06.03 89, 298 564.730.06.04 93, 351 618.730.06.05 98, 349 682.130.06.06 100, 419 716.930.06.07 105,420 715.730.06.08 102,426 755.4

Cumulated PEL balance and Number of Operative Accounts

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MANAGEMENT REPORT

Housing Deposit Certifi cate

HDC continued to dwindle as it was not used to mobilise fresh funds. The interest rates attached to HDC were reviewed just to encourage clients to renew their deposit. The HDC portfolio declined from Rs 639.9 Million in 2006/07 to Rs 595.5 Million, i.e. a decrease of almost 6.9% against the 35% of last year.

HDC

Lending Operations

Loans Approved

Total Amount of loans approved during the fi nancial year 2007/2008 stood at Rs 451.70 Million involving 1238 cases.

Loans Approved – Housing Loans (Rs Million)

Financial GSL Private Other Year Schemes Promoters Loans Total 03/04 21.2 24.5 535.2 580.90 04/05 6.2 55.2 1,083.0 1,144.40 05/06 0.4 - 701.6 702.00 06/07 0.8 32.5 624.6 657.90 07/08 3.3 5.0 443.4 451.70

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MANAGEMENT REPORT

Loans Approved

Housing loan schemes

MHC’s Housing loan schemes proved to be very popular. The features of the schemes are continuously reviewed to meet customer’s expectation. The portfolio of products have been extended and MHC offers now the Home Loan Extra for clients availing above Rs 1,000,000 at an interest rate starting from 9.75% per annum.

Government sponsored loans at 6.5%

MHC Ltd operates the GSL scheme intended for lower income groups since 1986.

Over the year, MHC Ltd has approved under this scheme loans totaling Rs 3,345,000 inclusive of Rs 1,565,000 for victims of the landslide at Chitrakoot.

Loan against HDC and PEL

Under this scheme MHC Ltd provides loans to HDC depositors for housing purposes against assignment of their Housing Deposit Certifi cates in favour of MHC Ltd. The Company also provides loan against PEL deposits.

Loans amounting to Rs 5,872,000 - were approved during the fi nancial year.

Loan to housing development promoters

Loans amounting to Rs 5 Million were approved under this scheme during the fi nancial year.

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MANAGEMENT REPORT

Complete ou lacaze housing loan scheme

This scheme was launched in August 2007 mainly to help clients complete their housing units under construction at a preferential interest rate and with special conditions.

For its fi rst year, loans amounting to Rs 19,541,000 were approved.

SIT loan scheme

MHC offered a special package to benefi ciaries of plots of land in the Sugar Investment Trust (SIT) residential projects. MHC fi nanced clients to the tune of Rs 5,790,000 to purchase land in the Residences

Union Park project in December 2007.

Housing Loan Assets

Ancillary Services

Life and Building Insurance

MHC is also empowered “to carry on business in the nature of insurance in respect of its clients and/or its guarantor/s and client’s/s’ and/or guarantor’s/s’ properties”. As a caring Company, we offer a decreasing balance life assurance, at very appealing premia, to cover the life of our borrowers against death and/or total and permanent disability during the currency of the loan. Houses are insured against fi re, cyclones and allied perils under the House Insurance Scheme.

During the year Rs 42,448,836 as life assurance covers were issued and Rs 24,890,525 on building insurance covers.

Other value added services that MHC offers include the preparation of the legal document in house and architectural services at competitive rates. Therefore, clients fi nd all that they need under one roof, hence our commitment to the One Stop Shop concept.

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MANAGEMENT REPORT

Technical Divisions

Architectural/ Technical Services

Architectural Services

Architectural services are provided at very reasonable cost to enable people to secure such services which are normally prohibitive and which can be afforded by only a selected few. This service is being provided in line with our corporate social responsibility and to make Mauritius greener and scenic. These include the drawing of architectural/structural plans as per specifi cations and customers’ requirements. The in-house Architectural service offered to customers is gaining momentum every year, and many MHC customers are opting for this service.

During the Financial Year 2007/08, 50 free house plans were drawn as part of the package of our Home Loan Plus. 24 house plans were drawn as per customers’ requirements.

Inspectorate Unit

The involvement of the Inspectorate Unit in the loan sanctioning process is crucial. At the time of application, MHC’s Technical Offi cers undertake the valuation of the property which will be mortgaged. During the disbursement, the Technical Unit monitors the progress of the construction work to ensure that construction is made as per approved drawings/technical specifi cations and guides clients as and when advices are needed. Thus houses are built to a good standard and are also good security for loan advanced. Other activities involve site visits and reporting on the activities of clients.

During the Financial Year, the Inspectorate Unit carried out the following activities:

Progress Report 3,326 Valuation 2,257 Report on Activities 342 Sites & Services 52 Arrears/Foreclosed 757

These activities have been performed by MHC Technical Offi cers, thereby ensuring that MHC securities and clients’ interests are always safeguarded.

Refurbishment of the second fl oor level

A complete refurbishment of the second fl oor under the supervision of the Technical Unit was carried out to provide both customers and MHC staffs a more congenial, comfortable and user friendly environment conducive for better business. This renovation project took approximately 3 months to be realized at a total cost of Rs 10.0 Million. All project management services were done in-house.

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MANAGEMENT REPORT

Projects/Estates Development

Cybervillage

The joint MHC/BPML Cybervillage Housing Project at Ebene Cybercity proved to be a value for money investment for the Public. This secured residential complex comprises of 210 housing units, an open-air amphitheatre, an internal jogging track and underground cabling.

As at June 2008, the sale and rental status was as follows:-

Sold Reserved Rented Total

Individual House 43 11 - 543 Bedroom apartment 38 39 23 1002 Bedroom apartment 11 38 7 56

Total 92 88 30 210

Foreclosed Properties

Properties purchased by MHC at the Bar are normally sold to the highest bidder through open tender. During the year under review, MHC Ltd sold 5 of such properties and allocated 5 other properties, the sales of which are under process.

Vuillemin Housing Project

After the Cybervillage Project, MHC shall soon embark on with the construction of 24, three bedrooms apartments at Vuillemin Street, Beau Bassin. The site is situated along Vuillemin Street within the heart of a residential area and walking distance from commercial activities and other facilities. MHC intends to target the middle and upper middle income group for this project – each apartment shall be approximately 1180 sq ft.

MHC shall start the marketing of the project during the fi rst quarter of year 2009.

Corporate Services Division

MHC values its personnel. It continually pursues efforts to improve staff’s morale, build teamwork and team spirit, enhance skills and ultimately provide a better service to clients through increased quality productivity.

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MANAGEMENT REPORT

Staff matters

During the year, the following appointments were made:

• Manager (Corporate Planning and Development) 1

• Assistant Manager (Human Resources) 1

• Senior Executive Assistants 3

• Confi dential Secretary 2

• Executive Assistants 6

• Receptionist/Telephonists 2

• Messenger/Cleaner 1

The following offi cers retired from the services of the Company:

• Mrs K. Nowbutsingh-Hurynag Assistant Manager (Corporate Planning and Development)

• Messrs Rawat and Rughoonath Technical Offi cers

• Mr R. Manohur Messenger/Cleaner

Training and Development:

The fi nancial year 07/08 was marked with a focus on training and development (seminars and workshops) in line with the Company’s vision of a learning organization. The Company sponsored the participation of its personnel in various training programs and courses relevant to the business activities, for e.g

• Corporate Governance and Risk Management • Integrated Risk Management for Bankers • Golden Principles of Human Relations in Financial Services Organisations • Financial Markets for Beginners and Derivatives Markets • Productivity Measurement and Asset Utilisation for better Management Decision Making • Lean Six Sigma • Credit Risk Masterclass (I & II) • IFRS Update and Quality Control

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MANAGEMENT REPORT

Information & Communication Technology Division

MHC has an ambitious growth plan – existing strengths will be reinforced whilst new lines of business will be developed. To this end, MHC is revamping its existing ICT infrastructure. We are soliciting the services of IT consultants who will come up with a more aggressive IT strategy to cater for our business requirements for the next fi ve years.

The IT strategy will not only address all areas of concern for the IT business unit, namely latest business applications to run our business and delight our customers, hardware, networking, information security and business continuity plan to name but a few, but will also address the company’s strategy focussing on low hanging fruits but looking into untapped areas. The consultant will also advise on new standards, policies, strategies and business avenues.

The new set up will bring along necessary streamlining of our procedures leading to more fl uid and cost effective business processes. The whole exercise is being driven by putting the client at the centre.

Corporate Planning & Development Division

The Corporate Planning and Development Division is geared towards taking MHC a step further in marketing/business development, product development, risk management, quality and customer service.

MHC has repositioned itself in the market through intensive marketing campaigns and business development activities. Throughout the year, many road shows were organized.

On the other hand, innovative products were developed, such as “Complete ou Lacaze” and Mixed Construction Loan Schemes, and introduced in our endeavours to meet the ever increasing needs of our clients.

MHC has enhanced its management of risks. MHC is adopting an integrated risk management framework to build a risk-smart workforce and environment that allows innovation and responsible risk-taking whilst ensuring that legitimate precautions are taken to protect the company’s interest and assets.

The achievement of MHC’s quality objectives - the quality of its products and services, the effectiveness of its functioning, the appropriateness and consistency of its objectives, and the competitiveness of the organisation- has paved the way for the implementation of a Quality Management System and eventual ISO 9001:2000/2008 certifi cation.

MHC takes pride in delivering good customer service. Constant monitoring of the level of service and the address of customer complaints/grievances is made.

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MANAGEMENT DISCUSSION & ANALYSIS

Management Discussion and Analysis

1.0 Financial Review

1.1 Performance

The Company’s Total Revenue was Rs 737.0 Million for the period ended 30 June 2008 compared to Rs 756.4 Million for the same period last year. (Table 1 refers).

On the other hand, total expenses including fi nance costs for the period ended 30 June 2008, amounted to Rs 539.5 Million , as compared to Rs 515.5 Million last year representing an increase of 4.7% attributable to an increase in interest expenses and operating expenses.

The Company realized a Net Profi t of Rs 162.0 Million for the period ended 30 June 2008 which was more or less the same for the last year.

Shareholder’s Funds as at 30 June 2008 stood at Rs 1,744.4 Million compared to Rs 1,474.6 Million for last year.

Return on Equity as at 30 June 2008 was 9.3% compared to 11.0% for last year, whereas Return on Total Assets was 2.5% as at 30 June 2008 being the same as for last year.

Overall, the Company’s results were satisfactory for the period ended 30 June 2008 and in line with targeted results for the said period, although competitive pressure continued to affect our interest margin.

Table 1

Area Performance JUNE 08 JUNE 07 MUR 000’s MUR 000’s

Total Revenue 737.00 756.40 Total Expenses 539.50 515.50 Net Profi t After Tax 162.00 162.10 Tier One Capital 1,258.30 1,109.10 Loan Portfolio 6,009.30 6,114.90 1.1.1 Revenue Growth

The Company’s Interest Income for the period ended 30 June 2008 was Rs 679.0 Million compared to Rs 688.30 Million for the same period last year. The Net Interest Margin, (Net Interest Income to Average Interest Earning Assets) as at 30 June 2008 was 3.8%, compared to 3.3 % for the same period last year.

Our Net Interest Income was at Rs 627.2 Million for the period ended 30 June 2008 compared to Rs 656.0 Million for the same period last year. Please refer to Table II

The Company’s Core Revenue (Net Interest Income Plus Non-Interest Revenue) decreased to Rs 736.9 Million over the year, compared to Rs 756.4 Million for last year.

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Table II

JUNE 08 JUNE 07 Rs 000’s Rs 000’s

Interest Income 679.00 688.30Interest Expense 430.60 421.80Net Interest Income 196.70 234.20Core Non Interest Revenue 58.00 68.10Average Interest Earning Assets (AIEA) 6,009.30 6,114.9Interest Income to AIEA 11.30 11.26Interest Income to Total Assets 10.41 10.50Net Interest Margin/ Interest Earning Asset 4.10 4.40

1.1.2 Cost Controls

Total Non-Interest Expenses for the year ended 30 June 2008 were Rs 108.9 Million compared to Rs 93.7 Million for last year, while Total Non Interest Revenue fell from Rs 68.10 Million to 58.0 Million resulting in a cost to income ratio of 156.50 % as compared to 137.60 % for the same period last year.

Table III Actual Actual JUNE 08 JUNE 07 MUR 000’s MUR 000’s

Non Interest Expense 108.9 93.70Staff Expenses 64.36 64.51Depreciation 14.39 8.65Communication Expenses 2.50 1.74Legal & Professional Fees 0.59 0.59Other Non Interest Expenses 27.06 18.21Total Non Interest Expenses 108.9 93.70

1.1.3 Arrears recovery

During the year, 17,105 letters/reminders were sent to defaulting clients. 13,525 visits by defaulting clients, almost the double of last year, were recorded.

With the present system in place, as soon as a client defaults, a reminder is sent to him. 4,633 in-arrear clients made arrangements to settle amount overdue. During the year some Rs 32.6 Million, against 27.9 last year, were received as lump sum payments besides monthly arrangements – the cumulative lump sum recovered over the period to June 2008 amounted to Rs 331.8 Million.

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As far as possible, MHC is very fl exible in arrears recovery mostly because of its social responsibility. Foreclosure is only considered as a last resort when all attempts for making a reasonable arrangement have failed.

The NPA for the year ended 30/6/2008 stood at 22.3% when all accounts in arrear of more than 3 months and defaulting promoters are considered. It is planned to reduce the NPA to 18% over the next year.

2.0 Related Party Transaction

For the year ended 30 June 2008, the Company had transactions with related parties. The volume and balances of these transactions are as follows: Nature of Volume of transactions transactions 2008 2007 2006 Rs’000 Rs’000 Rs’000 SICOM Debentures 10,000 10,000 17,142 Interest 1,025 2,023 3,150National Pension Fund Loans 54,485 (46,692) 45,326 Interest 4,071 10,808 16,887Government of Mauritius Loans 9,658 (10,111) 9,562 Interest 3,156 4,330 5,087Directors and keymanagement personnel Emoluments 2,048 2,505 6,136 Deposits - 805 365 Loans 210 2,575 2,501

(Credit)/ (Credit)/ (Credit)/ debit debit debit balances balances balances Nature of at 30 June at 30 June at 30 June transactions 2008 2007 2006 Rs’000 Rs’000 Rs’000 SICOM Debentures (5,000) (15,000) (25,000) National Pension Fund Loans (1,645) (56,130) (105,821) Interest (77) (1,943) (3,644)Government of Mauritius Loans (54,205) (75,025) (85,136) Interest (225) (277) (550)Directors and key management personnel Deposits - (1,238) (2,043) Loans 5,341 5,153 5,460

Compensation paid to key management personnel 2008 2007 2006 Rs’000 Rs’000 Rs’000 Short term benefi ts 3,617 3,193 3,772

The transactions with the related parties were carried out at arm’s length and on commercial terms, except for loan granted to the directors and key management personnel on preferential rates and which rates are in accordance with their conditions of employment.

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3.0 Capital Adequacy

Capital structure

Weight 2007/08 2006/07 2005/06 % Rs M Rs M Rs M Amount Weighted Amount Weighted Amount Weighted Amount Amount Amount (i) Tier 1 – Core Capital Share Capital 100 200.0 200.0 100.0 100.0 100.0 100.0Revenue Reserve 100 1,034.0 1,034.0 1,009.2 1,009.2 910.0 910.0Total Core Capital 1,234.0 1,234.0 1,109.2 1,109.2 1,010.0 1,010.0(ii)Tier 2 – Supplementary Capital Revaluation/Other Reserve 75 510.4 382.8 365.5 274.1 403.1 302.3Total Supplementary Capital 510.4 382.8 365.5 274.1 403.1 302.3

Total Capital 1,744.4 1,641.1 1,474.7 1,383.3 1,413.1 1,312.3

Assets – Risk Profi ling

Weight 2007/08 2006/07 2005/06 % Rs M Rs M Rs M Amount Risk Amount Risk Amount Risk Weighted Weighted Weighted

Property Plant & Equipment/ software 100 331.6 331.6 214.8 214.8 209.2 209.2Investment Property 100 31.8 31.8 31.1 31.1 33.3 33.3Housing Loans 50 5,414.4 2,707.2 5,532.5 2,766.3 5,540.7 2,770.4Cash in Hand & at Bank 0 293.1 0 216.6 0 261.0 0Other Current Assets 100 453.4 453.4 581.2 581.2 687.8 687.8

Total 6,524.3 3,524.0 6,576.2 3,593.4 6,732.0 3,700.7 Capital Adequacy Ratio 46.6% 38.5% 35.5% Capital Adequacy Ratio for the year, therefore, worked out to 46.6% as against the minimum 10% imposed by Bank of Mauritius. This ratio aims at ensuring that an adequate amount of capital and reserves is maintained to safeguard solvency.

4.0 Risk Management

4.1 Integrated Risk Management Framework

Risk Management is a priority on MHC’s corporate agenda. The mission of the risk management function is to identify, assess and manage the risks to which the Organisation’s is exposed. The goal is to keep enhancing stakeholders’ confi dence with respect to the Organisation’s management of current and potential risks through adequate internal control mechanisms, up-to-date and comprehensive risk policies, adherence to legal and regulatory framework and reliable decision-making support.

A unit in the Corporate Planning & Development Division has been entrusted the responsibility to ensure that the Company meets statutory, regulatory and established internal requirements, as well as to develop and manage the corporate risk strategy.


27



4.2 MHC’s Risk Structure

Risk management has been on the forefront of MHC’s corporate agenda. This commitment has been translated by the Board via the setting up of a Risk Committee which is responsible for developing the corporate risk strategy.

4.3 Risk Identifi cation

As a fi rst step towards developing a strategy for management of risk, a Risk Management Framework has been established. The main risks which the Company may face have been identifi ed and are Credit Risk; Interest Rate Risk; Business Risk; Operational Risk; Legal Risk; Liquidity Risk; Compliance Risk; Reputation Risk; Market Risk; Concentration Risk; Price Risk and Risk of change in government policy.

4.3.1 Credit Risk

Credit Risk is the risk of fi nancial loss from a customer’s failure to meet fi nancial obligations when due. MHC’s aim is to keep a diversifi ed portfolio within the approved credit risk policy to limit credit risk, which is inherent in the lending activities undertaken by MHC.

As a prudential step, a portfolio management approach has been adopted to ensure that we develop the best possible portfolio that spreads business risk, while at the same time keep returns to their maximum. In so doing MHC will be able to manage the quality of its asset-base and avoid risk concentration.

As a step further towards improving the quality of the existing credit approval process, a Loans Approval Committee has been set up with well defi ned role. In the same spirit, a Credit Score Model has been designed and is in the way of being implemented. In addition, MHC will also join the Mauritius Credit Information Bureau. Both measures will provide leverage for credit appraisal.

28


4.3.2 Liquidity Risk

Liquidity risk refers to fi nancial risk due to uncertain liquidity. For a fi nancial institution like MHC liquidity risk could be characterised by the institution’s risk of being unable to meet its contractual payment obligations. This can arise from the need (i) to replace net outfl ows due to unanticipated withdrawal / non-renewal of deposits (institution and individual) and (ii) to compensate for non-receipt of expected infl ows of funds, i.e, performing assets turning into non-performing assets.

MHC’s objective is to maintain adequate cost-effective funds as well as funding capacity to honour all its fi nancial commitments, both contractual and those determined on the basis of behavioural patterns, when they become due. MHC has ensured that its commitments which are required to be funded can be met out of readily available and secured sources of funding.

The principal sources of funding for the Company are capital, deposits from business customers as well as institutional deposits and borrowings. We intend to achieve diversifi cation of sources of funding by introducing policies as well as setting of limits and controls to the deposit mix of the Company. The mix and maturities of deposits are reviewed to ensure funding cost effectiveness and limit raising funds at high prices.

A Liquidity Committee has been set up and meets regularly to monitor the cash fl ow position of the Company. In addition, MHC complies with the liquidity ratio as required by the Bank of Mauritius.

4.3.3 Compliance Risk

The Company policy is to adhere to both the letter and the spirit of all laws and regulations. With the appointment of a Risk and Compliance Offi cer, adherence to regulatory and mandatory requirements as well as to internal policies/procedures is now being closely monitored.

4.3.4 Market Risk

To adjust to unforeseeable risk of losses owing to changes in general level market prices and interest rates, new products have been developed taking into account the needs of customers and considering volatility of the market. In fact, two new housing loan products namely, Complete Ou Lakaz and Mixed Construction Loan have been introduced with an enhanced package to be more competitive.

The interest rates on the Housing Deposit Certifi cate have been reviewed upwards. This has enabled the Company to retain its existing depositors, thus avoiding the dwindling of the portfolio and attracts a few more. The interest on the PEL savings scheme has also been increased and is actually the best.

In order to enable timely adjustment of interest rates both on loans and deposits, the board has authorised the Loans Committee to bring such adjustments as and when necessary, subject to Board’s covering approval.

4.3.5 Interest Rate Risk

The Company exercises a close follow-up on the market interest rates and adapts its interest margins in response to changes in the rates. The Company sets limits on the level of mismatch of interest rate re-pricing that may be undertaken, which is monitored daily. The Company obtains credit facilities at favourable interest rates as these facilities are guaranteed by the Government of Mauritius.

4.3.6 Operational Risk

Operational Risk is defi ned as the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. While such risks cannot be eliminated they can


29



be mitigated by carefully managing them. The existing IT system has been enhanced with extra controls, and manual of procedures have been updated with clearly defi ned responsibilities at each level of staff.

To mitigate occurrence of operational risks commitment from staff is important. In this line, a Code of ethics has been introduced, with focus on corporate governance and integrity. A training program is being devised to make employees fully acquainted with all intricacies of their respective job requirements.

4.3.7 Addressing the Risk of Money Laundering

In its initiative to adherence to the “Guidance Notes on Anti-Money Laundering and Combating the Financing of Terrorism”, the Company has reviewed its existing system by implementing additional controls, thus enhancing its processes. Exception reports are now available for on-going monitoring of transactions. A Money Laundering Reporting Offi cer has been appointed. During the year under review:

1. Training sessions on the risks associated with money laundering were held.2. Guidelines on how to detect suspicious transactions were also issued to staff members.3. KYC principles have been translated to frontline staff as a measure to reduce the risk of exposure to money laundering and terrorist fi nancing and to protect against a range of other potentially damaging risks including reputation risk, legal risk and the risk of regulatory sanction.

4.4 Setting the target

MHC keeps improving and innovating in the fi eld of risk management. In this context, MHC is moving towards an integrated risk management framework with the foreseeable implementation of an information management architecture composed of a well structured data warehouse coupled with a business intelligence layer.

Integrated risk management is a continuous, proactive and systematic process to understand, manage and communicate risk from an organization-wide perspective. It is about making strategic decisions that contribute to the achievement of an organization’s overall corporate objectives.

MHC’s objective in adopting a more sophisticated and innovative approach in the future is to:

• Provide guidance in pursuing a more corporate and systematic approach to risk management and to advance the development and implementation of modern management practices• Practicing integrated risk management is expected to strengthen decision making and priority setting to better respond to the ever demanding risk environment.

30



5.0 Corporate Governance

The Board consists of a non-executive Chairman, a Managing Director and seven non-executive Directors from different business spheres. To refl ect more transparency in the company’s overall operations and especially to recognize the importance of employees as a stakeholder in the company, two staff members (representatives of the MHC Staff Association) are appointed as non-executive Directors of the Board.

The Board is fully committed to attaining the highest standard of Corporate Governance and complying with the recommendations of the Code of Corporate Governance effective since July 2004. MHC is committed to a transparent governance process which gives its stakeholders assurance that the Company is being managed responsibly and ethically in line with best practice policies whilst seeking to enhance business values for all of them.

Adherence to corporate governance is an opportunity for the Company to introduce better internal controls as well as improve performance through fi rm set of guidelines.

MHC will continue to maintain the spirit of corporate governance by adhering to the set of guidelines, meeting regulatory requirements and emphasizing on business integrity, transparency and professionalism.

The Board fulfi lls its proper governance responsibilities through three sub-Committees of the Board namely Audit Committee, Corporate Governance & HR Committee and Risk Committee. Each committee has its own terms of reference as approved by the Board. The committees review the technical and other issues in details and advise/make recommendations to the Board enabling the latter to take considered and informed decisions. The committees report to the Board after each meeting.

During the fi nancial year under review, the following meetings were held:Board (12); Audit Committees (4); Corporate Governance & HR Committee (nil); and Risk Committee (1).

31


REPORT FROM DIRECTORS

DIRECTORS’ REPORT

The directors have the pleasure in submitting their annual report together with the audited fi nancial statements of Mauritius Housing Company Ltd, “the Company”, for the year ended 30 June 2008.

INCORPORATION

The Company was incorporated in the Republic of Mauritius on 12 December 1989 as a public company with limited liability.

PRINCIPAL ACTIVITIES

The principal activities of the Company are the granting of loans for the construction of houses and to engage in deposits taking.

RESULTS AND DIVIDENDS

The results for the year are as shown in the income statements.

The directors have recommended the payment of a dividend of Rs Rs 32,407,000 (2007: Rs 27,557,000 and 2006: Rs 23,988,800) for the year under review as decided by the Board on 26 September 2008.

DIRECTORS

The present membership of the board is set out on page 8.

DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

Company law requires the directors to prepare fi nancial statements for each fi nancial year which present fairly the fi nancial position, fi nancial performance and the cash fl ows of the Company. The Directors are also responsible for keeping accounting records which:

• correctly record and explain the transaction of the Company;• disclose with reasonable accuracy at any time the fi nancial position of the Company; and• the fi nancial statements comply with the Mauritius Companies Act 2001.

The directors confi rm that they have complied with the above requirements in preparing the fi nancial statements.

DIRECTORS’ SHARE INTERESTS

The directors hold no share in the company whether directly or indirectly.

DIRECTORS’ REMUNERATION

Remuneration and other benefi ts received by the directors from the company are as follows:

2008 2007 2006 Rs Rs Rs

Executive Directors 1,304,859 1,348,424 1,297,031Non-Executive 742,820 978,685 661,000

32



SIGNIFICANT CONTRACTS

No contracts of signifi cance existed during the year under review between the Company and its directors and loans to the directors are done in the normal course of business.

DONATIONS

The company made a donation of Rs 112,500 (2007: Rs 10,000 and 2006: Nil) during the year.

AUDITORS

Fees (inclusive of VAT) payable to the auditors, Kemp Chatteris Deloitte for the year under review amounted to Rs 517,500 (2007: Rs 454,250 payable to Kemp Chatteris Deloitte and 2006: Rs 425,000 payable to Messrs Grant Thornton) and are entirely for audit services provided.

DIRECTOR

DIRECTOR

Date: 26 September 2008

33



STATEMENT OF MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING

The Company’s fi nancial statements have been prepared by Management, which is responsible for their

integrity, consistency, objectivity and reliability. International Financial Reporting Standards, as well as

the requirements of the Mauritius Companies Act 2001 and the Banking Act 2004 as applicable to the

Company and the guidelines issued thereunder, have been applied and Management has exercised its

judgment and made best estimates where deemed necessary.

The Company has designed and maintained its accounting systems, related internal controls and

supporting procedures, to provide reasonable assurance that fi nancial records are complete and accurate

and that assets are safeguarded against losses from unauthorized use or disposal. These supporting

procedures include careful selection and training of qualifi ed staff, the implementation of organisation

and governance structures providing a well-defi ned division of responsibilities, authorization levels and

accountability for performance, and the communication of the Company’s policies, procedures manuals

and guidelines of the Bank of Mauritius throughout the company.

The company’s Board of Directors oversees Management’s responsibility for fi nancial reporting,

internal controls, assessment and control of major risk areas, and assessment of signifi cant related party

transactions.

Pursuant to the provisions of Banking Act 2004, the Bank of Mauritius makes such examination and inquiry

into the operations and affairs of the Company, as it deems necessary.

The Company’s external auditors, Kemp Chatteris Deloitte, have full and free access to the proceeding of

the Board of Directors and its committee meetings to discuss the audit and matters arising there from,

such as their observations on the fairness of fi nancial reporting and the adequacy of internal controls.

DIRECTOR

DIRECTOR


34


REPORT FROM THE SECRETARY TO THE MEMBERS OF MAURITIUS HOUSING COMPANY LTD

I certify that, to the best of my knowledge and belief, the Company has fi led with the Registrar of

Companies all such returns as are required of the Company under the Mauritius Companies Act 2001, in

terms of section 166 (d) during the fi nancial year ended 30 June 2008.

Mr. Kreshan NarrooSecretary


REPORT FROM SECRETARY

35


REPORT FROM AUDITORS

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF MAURITIUS HOUSING COMPANY LTD

This report is made solely to the Company’s shareholders, as a body, in accordance with section 205 of the Mauritius Companies Act 2001. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders as a body, for our audit work, for this report, or for the opinions we have formed.

Report on the Financial Statements

We have audited the fi nancial statements of Mauritius Housing Company Ltd on pages 38 to 80 which comprise the balance sheet as at 30 June 2008 and the income statement, statement of changes in equity and cash fl ow statement for the year then ended and a summary of signifi cant accounting policies and other explanatory notes.

Directors’ responsibilities for the fi nancial statements

The directors are responsible for the preparation and fair presentation of these fi nancial statements in accordance with International Financial Reporting Standards and in compliance with the requirements of the Mauritius Companies Act 2001, the Banking Act 2004 and the Financial Reporting Act 2004. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.

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

36


REPORT FROM AUDITORS

Opinion

In our opinion, the fi nancial statements on pages 9 to 50 give a true and fair view of the fi nancial position of the Company as at 30 June 2008 and of its fi nancial performance and cash fl ows for the year then ended in accordance with International Financial Reporting Standards and comply with the requirements of the Mauritius Companies Act 2001 applicable to non-bank deposit taking fi nancial institutions and the Financial Reporting Act 2004.

Report on other legal and regulatory requirements

In accordance with the requirements of the Mauritius Companies Act 2001, we report as follows:

• we have no relationship with, or interests in, the Company other than in our capacities as auditors; • we have obtained all information and explanations that we have required; and• in our opinion, proper accounting records have been kept by the Company as far as appears from our examination of those records.

In accordance with the requirements of the Banking Act 2004, we report as follows:

• in our opinion, the fi nancial statements have been prepared on a basis consistent with that of the preceding year and are complete, fair and properly drawn up and comply with the provisions of the Banking Act 2004 and the regulations and guidelines of the Bank of Mauritius; and• the explanations or information called for or given to us by the offi cers or agents of the Company were satisfactory.

Chartered AccountantsDate: 26 September 2008 A member of Audit • Tax • Consulting • Financial Advisory Deloitte Touche Tohmatsu

37


FINANCIAL STATEMENTS 30 JUNE 2008

38


Notes 2008 2007 2006 (Restated) Rs’000 Rs’000 Rs’000 Interest income 5 678,975 688,264 614,066

Interest suspended (51,730) (32,250) (27,755)

627,245 656,014 586,311

Interest expense 6 (430,597) (421,846) (378,293)

Net interest income 196,648 234,168 208,018

Other income 7 57,951 68,106 71,353

254,599 302,274 279,371

Operating expenses 8 (108,916) (93,671) (89,857)

Operating profi t on ordinary activities 145,683 208,603 189,514

Fair value adjustment on property

development 16 30,022 - (4,022)

Realised loss on foreclosed properties (2,895) (21,268) (13,950)

Operating profi t before provision 172,810 187,335 171,542

Provision for credit losses 13(c) (10,771) (25,236) (19,064)

Profi t for the year 9 162,039 162,099 152,478

The notes on pages 43 to 80 form an integral part of these fi nancial statements.

INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

39


Note 2008 2007 2006 (Restated) Rs’000 Rs’000 Rs’000

ASSETS

Non-current assets Property, plant and equipment 10 331,521 214,627 209,006Investment property 11 31,798 31,082 33,274Intangible asset 12 53 136 203Non-current receivables 13 4,441,766 4,646,179 5,116,678 4,805,138 4,892,024 5,359,161Current assets Assets held for trading 15 42,079 41,287 33,010Property development 16 134,214 194,801 237,657Trade and other receivables 17 1,142,455 1,051,747 664,294Loans and advance to BPML 18 107,289 179,784 176,870Cash in hand and at bank 293,097 216,560 261,034 1,719,134 1,684,179 1,372,865 Total assets 6,524,272 6,576,203 6,732,026

EQUITY AND LIABILITIES

Capital and reserves Share capital 19 200,000 100,000 100,000Revaluation and other reserves 20(a) 510,448 365,452 403,142Building insurance reserve 20(b) 116,810 116,810 116,816Revenue reserves 22 1,033,997 1,009,162 910,026 1,861,255 1,591,424 1,529,984

Insurance fund 21 213,840 187,490 167,434

Non-current liabilities Borrowings 24 1,869,127 2,207,739 2,158,656Retirement benefi t obligations 25 21,306 24,309 24,540PEL savings accounts 26(a) 947,615 951,844 915,812Housing depositscertifi cates – HDC 26(b) 288,990 553,476 737,015Loan NHDC 27 56,986 78,321 99,656Other payables 38 14,660 29,319 43,978 3,198,684 3,845,008 3,979,657

Current liabilities Borrowings 24 496,978 455,803 410,312PEL savings accounts 26(a) 290,762 201,400 201,400Housing deposits certifi cates – HDC 26(b) 357,437 139,417 307,884Loan NHDC 27 21,335 21,335 21,335Trade and other payables 28 83,981 134,326 114,020 1,250,493 952,281 1,054,951

Total equity and liabilities 6,524,272 6,576,203 6,732,026

BALANCE SHEET AS AT 30 JUNE 2008

Approved and authorized for issue by the Board of Directors on 26 September 2008 and signed on its behalf by:

DIRECTOR DIRECTOR


40


Revaluation Building Share and other insurance Revenue capital reserves reserve reserves Total Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 At 1 July 2005 - as previously reported 100,000 668,125 - 904,696 1,672,821- transfer - (116,816) 116,816 - -- transfer to insurance fund - (131,424) - - (131,424)Insurance premium - (36,342) - 18,858 (17,484)- penalty fee - - - (73,296) (73,296)- specifi c provision for credit losses - - - (50,960) (50,960) - as restated 100,000 383,543 116,816 799,298 1,399,657 Profi t for the year - - - 152,478 152,478Dividend: - - - (22,151) (22,151)Transfer to general reserve: - 15% of profi t for the year - 17,992 - (17,992) -- 1% of net secured loans - 1,607 - (1,607) - At 30 June 2006 100,000 403,142 116,816 910,026 1,529,984 At 1 July 2006 - as previously reported 100,000 726,718 - 982,890 1,809,608- transfer - (116,816) 116,816 - -- transfer to insurance fund - (167,434) - - (167,434)- penalty fee - - - (75,889) (75,889)- insurance premium - (39,326) - 39,326 -- specifi c provision for credit losses - - - (50,960) (50,960) - as restated 100,000 403,142 116,816 895,367 1,515,325Profi t for the year - - - 162,099 162,099Dividend (Note 23) - - - (23,989) (23,989)Transfer to general reserve: - 15% of profi t for the year - 24,315 - (24,315) -Transfer to portfolio provision - (62,032) - - (62,032)Movement on reserves - 27 (6) - 21 At 30 June 2007 100,000 365,452 116,810 1,009,162 1,591,424 At 1 July 2007 - as previously reported 100,000 365,452 116,810 1,009,162 1,591,424- penalty fee - - - 14,659 14,659 - as restated 100,000 365,452 116,810 1,023,821 1,606,083Profi t for the year - - - 162,039 162,039Dividend (Note 23) - - - (27,557) (27,557)Transfer to general reserve - 15% of profi t for the year - 24,306 - (24,306) -Movement on reserves - 120,690 - - 120,690Bonus issue 100,000 - - (100,000) - At 30 June 2008 200,000 510,448 116,810 1,033,997 1,861,255

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2008


41


CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

2008 2007 2006 (Restated) Rs’ 000 Rs’ 000 Rs’ 000 Cash generated from/(used in) operations (Note 29(a)) 75,019 (122,526) 24,036 Interest received 678,975 688,264 546,191 Interest paid (430,597) (421,646) (365,869) Net cash from operating activities 323,397 144,092 204,358 Investing activities

Purchase of property, plant and equipment (10,712) (13,395) (8,365)Purchase on investment property (1,100) (545) (889)Purchase of foreclosed property (1,975) (6,249) (6,684)Proceeds from disposal of property, plant and equipment 75 - 1,025 Secured loans granted – net (Note 29(c)) 33,907 (95,730) (237,833)Property development 60,587 42,856 1,086 Net generated from/(cash used in) investing activities 80,782 (73,063) (251,660) Financing activities Grant and subsidies received - 154,426 96,573 Housing deposits certifi cates (HDC) (44,393) (343,850) (26,378)Plan Epargne Logement Savings (PEL) 39,735 (1,158) 34,805 Repayment of debentures (78,500) (78,500) (85,642)Proceeds from long term borrowings 100,000 450,000 604,334 Payments on long term borrowings (306,185) (268,680) (237,930)Dividends paid (27,557) (23,989) (32,963) Net cash (used in)/generated rom fi nancing activities (316,900) (111,751) 352,799 Increase/(decrease) in cash and cash equivalents 87,279 (40,722) 305,497 Movement in cash and cash equivalents Cash and cash equivalents at 1 July (Note 29(b)) 157,923 198,645 (106,852)Increase/(decrease) in cash and cash equivalents 87,279 (40,722) 305,497 Cash and cash equivalents at 30 June (Note 29(b)) 245,202 157,923 198,645


42


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

43


1. GENERAL INFORMATION

Mauritius Housing Company Ltd, the ‘Company’, was incorporated on 12 December 1989 as a public company with limited liability. The principal activities of the Company are the granting of loans for the construction of houses and to engage in deposits taking. The registered offi ce of the Company is MHC Building, Reverend Jean Lebrun Street, Port Louis, Mauritius.

2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

In the current year, the Company has adopted all of the new and revised standard and interpretations issued by the International Accounting Standards Board (the “IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB that are relevant to its operations and effective for accounting periods beginning on 1 July 2007. The adoption of these new and revised standards and interpretations has not resulted in any changes to the Company’s accounting policies that would affect the amounts reported for the current or prior years.

The Company has adopted IFRS 7: Financial Instruments: Disclosures which is effective for annual reporting periods beginning on or after 1 January 2007 and the consequential amendments to IAS 1: Presentation of Financial Statements. The impact of the adoption of IFRS 7 and the changes to IAS 1 has been to expand the disclosures provided in these fi nancial statements regarding fi nancial instruments.

At the date of authorisation of these fi nancial statements, the following Standards and Interpretations were in issue but not yet effective:

IAS 1 Presentation of Financial Statements - Comprehensive revision including requiring a statement of comprehensive incomeIAS 1 Presentation of Financial Statements - Amendments relating to disclosure of puttable instruments and obligations arising on liquidationIAS 1 Presentation of Financial Statements - Amendments resulting from May 2008 Annual Improvements to IFRSsIAS 16 Property, Plant and Equipment - Amendments resulting from May 2008 Annual Improvements to IFRSsIAS 19 Employee Benefi ts - Amendments resulting from May 2008 Annual improvement to IFRSsIAS 20 Government Grants and Disclosure of Government Assistance - Amendments resulting from May 2008 Annual Improvements to IFRSsIAS 23 Borrowing Costs - Comprehensive revision to prohibit immediate expensingIAS 23 Borrowings Costs - Amendments resulting from May 2008 Annual Improvements to IFRSsIAS 27 Consolidated and Separate Financial Statements - Consequential amendments arising from amendments to IFRS 3IAS 27 Consolidated and Separate Financial Statements - Amendment relating to cost of an investment on fi rst time adoptionIAS 27 Consolidated and Separate Financial Statements - Amendments resulting from May 2008 Annual Improvements to IFRSsIAS 28 Investments in Associates - Consequential amendments arising from amendments to IFRS 3IAS 28 Investments in Associates - Amendments resulting from May 2008 Annual improvements to IFRSsIAS 29 Financial Reporting in Hyperinfl ationary Economies - Amendments resulting from May 2008 Annual Improvements to IFRSsIAS 31 Interests in Joint Ventures - Consequential amendments arising from amendments to IFRS 3


44


2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (CONT’D)

IAS 31 Interests in Joint Ventures Amendments resulting from May 2008 Annual Improvements to IFRSsIAS 32 Financial Instruments: Presentation Amendments relating to puttable instruments and obligations arising on liquidationIAS 36 Impairment of Assets Amendments resulting from May 2008 Annual Improvements to IFRSsIAS 38 Intangible Assets Amendments resulting from May 2008 Annual Improvements to IFRSsIAS 39 Financial Instruments: Recognition and Measurement Amendments resulting from May 2008 Annual Improvements to IFRSs IAS 40 Investment Property Amendments resulting from May 2008 Annual Improvements to IFRSsIAS 41 Agriculture Amendments resulting from May 2008 Annual Improvements to IFRSsIFRS 1 First-time Adoption of International Financial Reporting Standards Amendment relating to cost of an investment on fi rst-time adoptionIFRS 2 Share-based Payment Amendment relating to vesting conditions and cancellationsIFRS 3 Business Combinations Comprehensive revision on applying the acquisition methodIFRS 5 Non-current Assets Held for Sale and Discontinued Operations Amendments resulting from May 2008 Annual Improvements to IFRSsIFRS 8 Operating SegmentsIFRIC 11 Group and Share Treasury TransactionsIFRIC 12 Service Concession ArrangementsFRIC 13 Customer Loyalty ProgrammeFRIC 14 IAS 19 The limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and their InteractionIFRIC 15 Agreements for the construction of real estateIFRIC 16 Hedges of a net investment in a foreign operation

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the fi nancial statements of the company.

IAS 39 and IFRS 4 (Amendment), Financial Guarantee Contracts (effective from 01 January 2006)

This amendment requires issued fi nancial guarantees, other than those previously asserted by the entity to be insurance contracts, to be initially recognized at fair value and subsequently measured at the higher of:

(a) the unamortized balance of the related fees received and deferred, and

(b) the expenditure required to settle the commitment at the balance sheet date.

Management has considered this amendment to IAS 39 and concluded that it is not relevant to the company.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2008

45


3. ACCOUNTING POLICIES

The principal accounting policies adopted by the Company are as follows:

(a) Basis of preparation

The fi nancial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) and the guidelines of Bank of Mauritius and under the historical cost convention as modifi ed by the revaluation of land and buildings, foreclosed property, property development and certain fi nancial instruments.

(b) Property, plant and equipment

Property, plant and equipment include own-used properties, IT and communication and other machines and equipment, motor vehicles and housing estates.

All property, plant and equipment are initially recorded at cost, except freehold land and buildings which are shown at market value, based on triennial valuations done by external independent valuers. All property, plant and equipment, are stated at historical cost/valuation less depreciation, except freehold land and housing estates which are not depreciated.

Owned-used property is defi ned as property held for use in the supply of services or for administrative purposes whereas investment property is defi ned as property held to earn rental income and/or for capital appreciation.

Increases in the carrying amount arising on revaluation are credited to revaluation and other reserves in shareholders’ equity. Decreases that offset previous increases of the same assets are charged against the revaluation reserve; all other decreases are charged to the income statement.

Depreciation is calculated to write off the cost of each asset or its revalued amount to its residual value over its estimated useful life, with the exception of freehold land and housing estates.

The annual rates used are as follows:

Freehold buildings 2% Straight line method Furniture and equipment 10% and 33 1/3% Straight line methodMotors vehicles 20% Straight line method

Where the carrying amount of an asset is greater than estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposal of property, plant and equipment are determined by the difference between their carrying values and their net disposal proceeds and are accounted for in the income statement.

(c) Intangible asset

Intangible asset consists of computer software. The software cost is amortised on a straight line basis over its estimated useful lives of 3 years.


46


3. ACCOUNTING POLICIES (CONT’D)

(d) Foreclosed property

Foreclosed property is classifi ed as assets held-for-trading and it represents houses acquired through auction at the Master’s Bar further to the default of clients. Foreclosed property is held for trading and is stated at the price paid at bar together with all related expenses incurred on the acquisition. If the acquisition value together with related costs is different from the loan balance outstanding, the difference is reported as an unrealized loan loss/gain in the Mortgage Insurance Reserve Account, if the property has a mortgage insurance.

Realised loss/gain on disposal of foreclosed property is taken to the income statement.

No depreciation is charged on foreclosed property.

(e) Software development costs

Software development costs are recognized when they meet certain criteria relating to identifi ability, it is probable that future economic benefi ts will fl ow to the enterprise, and the cost can be measured reliably. These costs are amortised on the basis of the expected useful lives.

Costs associated with the maintenance of existing computer software are expensed as incurred.

(f) Investment property

Investment property which is property held to earn rental income and/or for capital appreciation is stated at cost at the balance sheet date.

Depreciation is calculated at the rate of 2% per annum on the straight line method to write off the cost of the buildings to their residual values over their estimated useful lives.

On disposal of an investment property, the difference between the net disposal proceeds and the carrying amount is charged or credited to the income statement.

(g) Deferred taxation

No provision for deferred taxation made in these fi nancial statements as the Company is exempt from any income tax liability.

(h) Inventories

All consumables and accessories are expensed in the year in which they have been purchased.

(i) Financial assets

The Company classifi es its fi nancial assets in the following categories:

• Financial assets held for trading: these concerns principally foreclosed property and are intended for sale in the short term. Financial assets held for trading are recognized on trade-date, that is, the date on which the Company commits to purchase the assets;

• Secured loans: these concern loans originated by the Company and where the money is provided directly to the borrowers and they are recognized when cash is advanced to the borrowers. They are initially recorded at cost, which is the fair value of the cash given to originate the loans, including any transaction costs, and are subsequently valued to account for any impairment.


47



(i) Financial assets (Cont’d)

Financial assets are recognised when the rights to receive cash fl ows from the fi nancial assets have expired or where the Company has transferred substantially all risks and rewards of ownership.

Provision for credit losses

An allowance for credit losses is established if there is objective evidence that the Company will be unable to collect all amounts due according to the original contractual terms.

An allowance for credit losses is reported as a reduction of the carrying value of a loan on the balance sheet.

All impaired loans are reviewed and analysed at each balance sheet date. Any subsequent changes to the amounts and timing of the expected future cash fl ows compared to the prior estimates will result in a change in the allowance for credit losses and be charged or credited to the income statement.

An allowance for an impairment is reversed only when the credit quality has improved such that there is reasonable assurance of timely collection of principal and interest in accordance with the original contractual terms of the loan agreement.

A write-off is made when all or part of a claim is deemed uncollectible. Write-offs are charged against previously established allowances for credit losses or directly to the income statement. Recoveries in part or full of amounts previously written-off are credited to the income statement.

The company has established the below-mentioned criteria for provisions for credit losses and for adjustment in respect of interest income suspended and these criteria are in line with the spirit of ‘social mission’ which guides the Company:

(i) A loan is classifi ed as non-performing when the contractual payments of principal and interest are in arrears and where legal action has not yet been initiated; the provision for such type of loan is the excess of balance of capital outstanding and interest over the recoverable amount of the collateral security. This is calculated on a case-to-case basis.

(ii) For a non-performing loan for which legal action has been initiated, the provision for credit loss is the difference between outstanding balance and valuation of the security reduced by 50%.The full outstanding interest is suspended.

(iii) For a non performing loan where sale by levy has already been initiated, the provision for credit loss is the difference between the outstanding balance and valuation of the security reduced by 64%.

Portfolio provision

A portfolio provision for credit impairment is maintained on the aggregate amount of all loans and advances to allow for potential losses not specifi cally identifi ed but which experience indicates are present in the portfolio loans. The Bank of Mauritius Guideline on Credit Impairment Measurement and Income Recognition prescribes that the portfolio provision should be no less than 1 per cent of the aggregate amount of loan and advances excluding impaired advances, excluding loans granted to or guaranteed by the Government of Mauritius and excluding loans to the extent that they are supported by collateral of liquid assets held by the Company. The charge for portfolio provision is recognised in the Income Statement.

Over and above provision for credit losses and portfolio provision, a general provision of 1% of total secured loans (net of provisions) is made.


48



(j) Employee benefi ts

• Retirement benefi t obligations

The Company contributes to a defi ned benefi t plan for its employees and the assets of this plan are held in a separate fund administered by the State Insurance Company of Mauritius Limited. The cost of providing benefi ts is determined using the projected unit credit method so as to spread the regular cost over the service lives of employees in accordance with the advice of qualifi ed actuaries who carry out a full valuation of the plans every year. Actuarial gains and losses which exceed 10 per cent of the greater of the present value of the Company’s pension obligations and fair value of plan assets are amortised over the expected average remaining working lives of the participating employees.

The amount recognized in the balance sheet represents the present value of the defi ned benefi t obligation as adjusted for recognized actuarial gains and losses and recognized past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to recognized actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

The present value of unfunded obligations is recognised in the balance sheet as a non-current liability after adjusting for any recognised actuarial gains and losses and any recognised past service cost. The value of unfunded obligation would be computed on the basis of estimates made by the directors.

• Pension contributions

Contributions to the Family Protection Scheme (FPS) are expensed to the income statement in the period in which they fall due.

(k) General reserve

The Company has set up a General Reserve which will act as a buffer for any contingencies that may arise and hence 15% of the net profi t is transferred annually to this reserve. Such reserve is not distributable.

(l) Cash and cash equivalents

For the purpose of the cash fl ow statement, cash and cash equivalents comprise cash in hand, deposits held at call with banks, net of bank overdrafts. In the balance sheet, bank overdrafts are included in borrowings under current liabilities.

(m) Equity

Share capital is determined using the nominal value of share that has been issued.

Revenue reserves include all current and prior years’ results as disclosed in the statement of changes in equity.

Capital reserves are made up of revaluation reserves and statutory and non-statutory general expenses.

Insurance Reserves are made up of Building Insurance Reserve.


49



(n) Revenue recognition

Interest, other than bank interest, is recognised as income in the income statement of the accounting period in which it is receivable.

Interest income is suspended when loans become non-performing.

Bank interest income is accounted on an accrual basis, unless collectibility is in doubt.

Rental income is accounted on an accrual basis.

Fees and commissions are generally recognised on an accrual basis when the service has been provided.

Refund of interest differential, interest generated from grants and administration cover from Government of Mauritius are recognised on an accrual basis.

Penalty on late payments There is a surcharge equivalent to 10% of the monthly repayment that is not made within fi fteen days from the last day of the month when the payment falls due. This surcharge is accounted for in the income statement as and when received.

(o) Life assurance and building insurance

The Company operates the following insurance schemes:

Secured loans holders are required to make contribution to the Company which provides life assurance cover for a sum equal to the balance outstanding of their account. 90% of the contribution is credited to a Life Assurance Reserve Account and the remaining 10%, representing the Company’s charge for the administration of the scheme, is credited to the income statement.

Building insurance premium is charged to those who have taken loans for construction purposes. The premium is based on the expected valuation of the building. The total contribution is credited to the income statement.

A mortgage insurance premium of 0.06% is charged, on the excess of loan amount over 75% of the value of collaterals, to client as a Mortgage Insurance.

(p) Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events and, it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are reviewed at each balance sheet date and adjusted to refl ect the current best estimate.

(q) Impairment of assets

At each balance sheet date, the Company reviews the carrying amounts of its assets to determine whether there is objective evidence of impairment. If any such indication exists, the asset’s recoverable amount is estimated, being higher of the asset’s net selling price and its value in use, to determine the extent of the impairment loss, if any, and the carrying amount of the asset is reduced to its recoverable amount. The impairment loss is recognised as an expense immediately, unless the asset is carried at the revalued amount, in which case, the impairment loss is treated as a revaluation decrease.


50



(r) Financial instruments

Financial assets and liabilities are recognized on the balance sheet when the Company has become a party to the contractual provisions of the instrument.

Financial instruments are initially measured at cost, which includes transaction costs. Subsequent to initial recognition, these instruments are measured as set out below:

• BorrowingsBorrowings are measured at amortised cost.

• Trade receivablesTrade receivables are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

• Assets held for tradingAssets held for trading are stated at their fair values.

• LoansLoans are measured at amortised cost less allowance for credit losses.

• Trade payablesTrade payables are stated at their nominal values.

• Cash and cash equivalentsCash and cash equivalents are measured at fair values.

• DepositsDeposits are stated at amortised cost.

Offsetting

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or recognised the asset and settle the liability simultaneously.

(s) Leases

Leases in which a signifi cant portion of the risks and rewards of ownership are retained by the lessor are classifi ed as operating leases. Payments made under operating leases are recognized in the income statement on a straight line basis over the term of the lease.

Assets leased out under operating leases are included in the balance sheet as investment property and are depreciated over their expected useful lives on a basis consistent with similar assets.

(t) Dividend distribution

Dividend distribution to the Company’s shareholders is recognized as a liability in the fi nancial statements in the year in which the dividends are approved by the Company’s shareholders.


51



(u) Related parties

For the purposes of these fi nancial statements, parties are considered to be related to the Company if they have the ability, directly or indirectly, to control the Company, or exercise signifi cant infl uence over the Company in making fi nancial and operating decisions, or vice versa or if they and the company are subject to common control. Related parties may be individuals or other entities.

(v) Debt issued

Debt issued is initially measured at cost, which is the fair value of the consideration received, net of transactions costs incurred.

(w) Comparatives

Where necessary comparative fi gures have been restated or reclassifi ed to conform to the current year’s presentation.

4. ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of fi nancial statements in accordance with IFRS requires the directors and management to exercise judgment in the process of applying the accounting policies. It also requires the use of accounting estimates and assumptions that may affect the reported amounts and disclosures in the fi nancial statements. Judgments and estimates are continuously evaluated and are based on historical experience and other factors, including expectations and assumptions concerning future events that are believed to be reasonable under the circumstances. The actual results could, by defi nition therefore, often differ from the related accounting estimates.

Where applicable, the notes to the fi nancial statements set out areas where management has applied a higher degree of judgment that have a signifi cant effect on the amounts recognized in the fi nancial statements, or estimations and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year.


52


5. INTEREST INCOME 2008 2007 2006 (Restated) Rs’000 Rs’000 Rs’000

Interest on secured housing loans 643,819 629,463 562,071Refund of interest differential fromGovernment 983 13,551 10,492Interest generated fromGovernment grants - 8,847 11,124Housing deposits bonus from Government 11,804 17,602 17,407Interest on bank deposits 20,637 15,687 9,802Other interests 1,732 3,114 3,170 678,975 688,264 614,066 6. INTEREST EXPENSE 2008 2007 2006 (Restated) Rs’000 Rs’000 Rs’000

Interest expense on:

Bank overdrafts 425 3,285 3,975Bank and other loans repayableby instalments 241,119 219,681 171,497Debentures 22,832 30,400 37,583Exceptional Savings Scheme 61 94 32Plan Epargne Logement (PEL) 91,383 81,363 48,983NHDC loans 7,049 8,853 10,667Housing Deposit Certifi cates (HDC) 64,192 77,815 100,952Other interest 3,536 355 4,604 430,597 421,846 378,293 7. OTHER INCOME 2008 2007 2006 (Restated) Rs’000 Rs’000 Rs’000 Administration cover 1,000 11,720 13,774Insurance premium 25,154 27,511 26,468Other commissions 21,004 19,252 21,645Rental income 8,049 6,455 6,035Policy fees and charges on loans 1,796 2,306 2,753Others 948 862 678 57,951 68,106 71,353


53


8. OPERATING EXPENSES 2008 2007 2006 Rs’000 Rs’000 Rs’000 Salaries 47,784 45,513 46,103 Depreciation 14,393 8,653 7,524 Staff pension contributions 3,173 5,673 5,711 Maintenance and repairs 4,884 3,537 3,272 Travelling and transport 5,979 5,665 5,325 Staff welfare, training and study schemes 5,070 4,546 4,070 General expenses 1,324 835 1,075 Electricity 2,886 2,409 2,298 Passages benefi ts 1,704 1,551 1,634 Printing and stationery 1,830 1,064 860 Telephone 2,530 1,851 1,847 Motor vehicles running expenses 830 615 595 Directors’ emoluments 2,048 2,327 1,958 Audit fees 633 454 425 Professional fees 430 525 468 Family protection schemes’ contribution 508 484 458 Entertainment expenses 40 656 353 Software maintenance costs 2,574 609 - Rent of properties 903 1,775 1,544 Advertising 2,500 1,737 1,395 Overseas mission expenses 732 34 87 Postages 1,240 451 488 Legal fees and expenses 164 58 96 Bank charges 970 726 214 Loss on disposal of property for cybervillage 1,181 64 783 Share of expenses on MHC/BPML Joint Venture Project 2,452 1,698 - Retirement benefi ts (Voluntary Early Retirement) 154 161 1,274 108,916 93,671 89,857

9. PROFIT FOR THE YEAR 2008 2007 2006 Rs’000 Rs’000 Rs’000Profi t for the year is arrived at after charging/(crediting): Charging: Depreciation on property, plant and equipment 10,049 7,635 7,029Depreciation on investment property 737 848 495Depreciation on intangible asset 3,607 170 -Directors’ emoluments (Note (a) below) 2,048 2,327 1,958Staff costs (Note (b) below) 51,111 51,831 53,546Loss on foreclosed properties 2,895 21,268 13,950 Crediting: Rental income from investment property 4,603 4,220 3,556


54


9. PROFIT FOR THE YEAR (CONT’D)

(a) Directors’ emoluments

2008 2007 2006 Rs’000 Rs’000 Rs’000 - Full time directors (both actual and former) 1,305 1,348 1,297- Part time directors 743 979 661

2,048 2,327 1,958

(b) Analysis of staff costs

2008 2007 2006 Rs’000 Rs’000 Rs’000 Wages and salaries 47,784 45,513 46,103Pension costs and other contributions 3,173 6,157 6,169Retirement benefi ts (Voluntary Early Retirement) 154 161 1,274

51,111 51,831 53,546

(c) General reserve

2008 2007 2006 (Restated) Rs’000 Rs’000 Rs’000

At 1 July 166,039 203,756 184,157Transfer to portfolio provision - (62,032) -Transfer from revenue reserves 24,306 24,315 19,599 At 30 June 190,345 166,039 203,756


55


10. PROPERTY, PLANT AND EQUIPMENT Improvement Furniture Freehold Housing to Leasehold and Motor land estates property Buildings equipment vehicles Total Rs’000 Rs’000 Rs’000 Rs’00 Rs’000 Rs’000 Rs’000

COST OR VALUATION At 1 July 2005 120,290 4,854 185 68,949 75,915 9,509 279,702 Additions - 1,958 - - 2,484 3,720 8,162 Disposals - - - - (103) (2,985) (3,088)

At 30 June 2006 120,290 6,812 185 68,949 78,296 10,244 284,776Additions 6,500 - - 2,706 4,189 - 13,395Transfer from investment property - - - 1,889 - - 1,889Disposals - (2,028) - - - - (2,028)

At 30 June 2007 126,790 4,784 185 73,544 82,485 10,244 298,032Additions - - - 1,936 4,830 - 6,766Revaluation 36,975 - 1,000 82,202 - - 120,177Written off - - - - (76) - (76)Transfer - - (185) 185 - - -

At 30 June 2008 163,765 4,784 1,000 157,867 87,239 10,244 424,899 DEPRECIATION

At 1 July 2005 - - 185 3,941 61,663 4,232 70,021Charge for the year - - - 1,037 3,944 2,048 7,029Disposals - - - - (103) (1,177) (1,280)

At 30 June 2006 - - 185 4,978 65,504 5,103 75,770Charge for the year - - - 1,141 4,543 1,951 7,635

At 30 June 2007 - - 185 6,119 70,047 7,054 83,405Charge for the year - - - 3,224 5,249 1,576 10,049Written off - - - - (76) - (76)Transfer - - (185) 185 - - -

At 30 June 2008 - - - 9,258 75,220 8,630 93,378 NET BOOK VALUE At 30 June 2008 163,765 4,784 1,000 148,339 12,019 1,614 331,521 At 30 June 2007 126,790 4,784 - 67,425 12,438 3,190 214,627 At 30 June 2006 120,290 6,812 - 63,971 12,792 5,141 209,006


56


10. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

Revaluation of land and buildingThe Company’s land and buildings were previously revalued in 1998/1999 and 2001/2002 respectively, on an open market existing use basis, by Mr. P. Ramrekha, an independent Chartered Valuation Surveyor. On 30 June 2008, the land and buildings were revalued by Mr Yodhun Bissessur, MSc., F.R.I.C.S., M.M.I.S., an independent Chartered Valuation Surveyor.

The book values of the properties were adjusted to the revalued amounts and the resultant surplus was credited to revaluation reserve in the shareholders’ equity. Subsequent additions to property, plant and equipment are shown at cost. If the land and building were stated on the historical cost basis, the net book value would be as follows:

2008 2007 2006 Rs’ 000 Rs’ 000 Rs’ 000 Cost 25,163 25,163 25,163 Accumulated depreciation (5,758) (5,504) (5,250)

Net book value 19,405 19,659 19,913

11. INVESTMENT PROPERTY Freehold BPML Land Building Furniture TotalCOST OR VALUATION Rs’000 Rs’000 Rs’000 Rs’000

At 1 July 2005 4,115 29,294 - 33,409Addition - 889 - 889At 30 June 2006 4,115 30,183 - 34,298Additions - - 545 545Transfer to property, plant and equipment - (1,889) - (1,889)At 30 June 2007 4,115 28,294 545 32,954Additions - - 1,099 1,099Revaluation - 354 - 354At 30 June 2008 4,115 28,648 1,644 34,407 DEPRECIATION At 1 July 2005 - 529 - 529Charge for the year - 495 - 495At 30 June 2006 - 1,024 - 1,024Charge for the year - 840 8 848At 30 June 2007 - 1,864 8 1,872Charge for the year - 573 164 737At 30 June 2008 - 2,437 172 2,609

NET BOOK VALUE At 30 June 2008 4,115 26,211 1,472 31,798At 30 June 2007 4,115 26,430 537 31,082At 30 June 2006 4,115 29,159 - 33,274


57


12. INTANGIBLE ASSET

SOFTWARE Rs’000COST At 1 July 2005 211Additions 203At 30 June 2006 414Additions 103At 30 June 2007 517Additions 3,524At 30 June 2008 4,041

DEPRECIATION At 1 July 2005 211Charge for the year -At 30 June 2006 211Charge for the year 170At 30 June 2007 381Charge for the year 3,607At 30 June 2008 3,988 NET BOOK VALUE At 30 June 2008 53 At 30 June 2007 136 At 30 June 2006 203


58


13. NON-CURRENT RECEIVABLES

2008 2007 2006 (Restated) Rs’000 Rs’000 Rs’000(a) Secured loans

Fast loans 69,875 24,321 50,937 Secured loans 5,939,400 6,090,625 5,972,180 Total loan advanced 6,009,275 6,114,946 6,023,117 Provision for credit losses (Note (c) below) (277,155) (266,384) (179,116) Interest suspended (210,433) (136,324) (126,452) BPML loan (Note 18) (107,289) (179,784) (176,870) 5,414,398 5,532,454 5,540,679 Portion of loan receivable within one year shown under current assets (Note 17) (975,950) (889,825) (508,143) 4,438,448 4,642,629 5,032,536

(b) Grants

Total grants receivable (Note 17(b)) 3,318 3,550 109,637 Portion of grants receivable within one year shown under current assets (Note 17) - - (25,495) 3,318 3,550 84,142

Total non-current receivables 4,441,766 4,646,179 5,116,678

Specifi c General Portfolio Provision Provision Provision Total Rs’000 Rs’000 Rs’000 Rs’000

(c) Provision for credit losses At 1 July 2005 - as previous reported 103,034 57,018 - 160,052 - prior year adjustment 2,656 - - 2,656

- as restated - - - - Movement during the year 21,077 (2,013) - 19,064 At 30 June 2006 126,767 55,005 - 181,772 Provision pertaining to secured loans 124,111 55,005 - 179,116 Provision pertaining to other debtors 2,656 - - 2,656 126,767 55,005 - 181,772


59


13. NON-CURRENT RECEIVABLES (CONT’D)

(c) Provision for credit losses (cont’d)

Specifi c General Portfolio Provision Provision Provision Total Rs’000 Rs’000 Rs’000 Rs’000

At 1 July 2006 - as previously reported 75,807 55,005 - 130,812- prior year adjustment 50,960 - - 50,960

- as restated 126,767 55,005 - 181,772Transfer from general reserve - - 62,032 62,032Movement during the year 23,403 6,384 (4,551) 25,236

At 30 June 2007 150,170 61,389 57,481 269,040

Provision pertaining to secured loans 147,514 61,389 57,481 266,384Provision pertaining to other debtors 2,656 - - 2,656 150,170 61,389 57,481 269,040

At 1 July 2007 150,170 61,389 57,481 269,040Movement during the year 19,991 1,252 (10,472) 10,771

At 30 June 2008 170,161 62,641 47,009 279,811

Provision pertaining to secured loans 167,505 62,641 47,009 277,155Provision pertaining to other debtors 2,656 - - 2,656 170,161 62,641 47,009 279,811

14. LIABILITY ARISING FROM LOANS REFINANCING

On 28 June 2004, the Company has refi nanced certain of its long-term loans from the ‘NPF and NSF’ of the Ministry of Social Security, National Solidarity & Senior Citizen Welfare and Reform Institutions, and which loans have become expensive given the fl uctuations in the Lombard Rate and the prime lending rate offered by the local commercial banks.

Pursuant to the terms of loan agreement with NPF/NSF, the Company has an obligation to pay a penalty fee at the rate of 1% of the amount repaid in anticipation and this penalty has been established at Rs 87,955,295. It was agreed between both parties that the penalty fee of Rs 87,955,295 is repayable in equal annual instalments over a period of 6 years as from 28 June 2004 with an interest payable at the savings rate +2%.


60


15. ASSETS HELD FOR TRADING

2008 2007 2006 Rs’000 Rs’000 Rs’000 Foreclosed properties 40,051 39,259 -Land and apartments repossessed 2,028 2,028 33,010

At 30 June 42,079 41,287 33,010

The foreclosed properties represent houses acquired at bar on default of clients and these are stated at their acquisition costs, being their fair values.

16. PROPERTY DEVELOPMENT

This represents the share of costs incurred by the Company in relation to the BPML/MHC Cybercity Project.

Pursuant to a Memorandum of Understanding of February 2004 between Business Park of Mauritius Ltd (BPML), a locally incorporated company, and the Company, it was agreed that both companies will undertake a joint project for the development of an integrated residential and recreational complex at Ebène Cybercity site.

The terms of this Memorandum of Understanding include, inter alia:

I. The complex will be developed on a plot of land of 8.44 hectares belonging to BPML and with an estimated value of Rs 20M; II. The fi nancing and return shall be shared equally between the parties; and III. After completion of the project, the Company will act as Estate Manager.

The project is already completed and selling of the housing units is well underway. At 30 June 2008, included in trade and other payables is an amount of Rs24M (2007: Rs69M and 2006: Rs54M) received as deposits from potential buyers. The deeds of sale of 25 housing units were fi nalized after the year end.

2008 2007 2006 Rs’000 Rs’000 Rs’000 At 1 July 194,801 237,657 238,743 Movement during the year (90,609) (42,856) 2,936 Fair value adjustment 30,022 - (4,022)

At 30 June 134,214 194,801 237,657

The recoverable amount has been determined by adjusting the valuation carried out last year. The directors consider the amount of Rs 134,214,000 to be a refl ection of the fair value.


61


17. TRADE AND OTHER RECEIVABLES

2008 2007 2006 (Restated) Rs’000 Rs’000 Rs’000 Trade receivables 90,168 89,706 79,104 Other debtors and prepayments (Note (a) below) 76,337 72,216 51,552 Secured loan-short term receivables (Note 13(a)) 975,950 889,825 508,143 Grants (Note 14(b)) - - 25,495 1,142,455 1,051,747 664,294

(a) Other debtors and prepayments 78,993 74,872 54,208 Provision for doubtful debts (Note 13(c)) (2,656) (2,656) (2,656) 76,337 72,216 51,552

(b) Grants – Government of Mauritius (see Note 13) At 1 July 3,550 109,637 134,892 Subsidies granted during the year 228 66 240 Grants received during the year (460) (106,153) (25,495)

At 30 June 3,318 3,550 109,637

18. LOANS AND ADVANCE TO BPML

The Company has provided loans and advance to Business Park of Mauritius Ltd (BPML) of Rs 107,289,000 (2007: Rs 179,784,000 and 2006: Rs 176,870,000) in order to enable the latter to meet its fi nancial obligations under the joint venture agreement, as fully described in Note 16. The loans and advance bear interest at rates varying from 6% to 11% per annum and repayment will be made out of proceeds arising from housing units disposed.

The Government of Mauritius has covenanted to provide BPML all assistance to meet its obligations towards Mauritius Housing Company Ltd and in that respect a letter of comfort was issued by the Government through the Ministry of Finance and Economic Development.

On 7 July 2008 the Government of Mauritius has paid Rs 150 M to Mauritius Housing Company Ltd to take over the cybervillage.


62


19. SHARE CAPITAL

2008 2007 2006

Rs’000 Rs’000 Rs’000Authorised 25,000,000 ordinary shares of Rs 10 each 250,000 250,000 250,000

Issued and fully paid 20,000,000 ordinary shares (2007 and 2006: 10,000,000) of Rs 10 each 200,000 100,000 100,000

Following the annual meeting held on 27 December 2007, the share capital was increased to Rs 200 M, through a one to one bonus issue of shares, to satisfy the minimum capital requirement of Rs 200 M, as required by the Banking Act 2004. The directors are of opinion that the Company has met this minimum requirement.

20(a). REVALUATION AND OTHER RESERVES Movement At 1 July during the year At 30 June 2005 DR CR 2006 Rs’000 Rs’000 Rs’000 Rs’000 Foreclosed property reserve 260 - - 260EDF revolving fund 12,067 - - 12,067Revaluation reserve (Note (a)) 187,059 - - 187,059General reserve (Note (b) and (c)) 184,157 - 19,599 203,756 383,543 - 19,599 403,142

Movement At 1 July during the year At 30 June 2006 DR CR 2007 Rs’000 Rs’000 Rs’000 Rs’000

Foreclosed property reserve 260 - 26 286EDF revolving fund 12,067 - 1 12,068Revaluation reserve (Note (a)) 187,059 - - 187,059General reserve (Note (b) and (c)) 203,756 (62,032) 24,315 166,039 403,142 (62,032) 24,342 365,452


63


20(a). REVALUATION AND OTHER RESERVES (CONT’D)

Movement At 1 July during the year At 30 June 2007 DR CR 2008 Rs’000 Rs’000 Rs’000 Rs’000 Foreclosed property reserve 286 - 159 445EDF revolving fund 12,068 - - 12,068Revaluation reserve (Note (a)) 187,059 (17,639) 138,170 307,590General reserve (Note (b) and (c)) 166,039 - 24,306 190,345 365,452 (17,639) 162,635 510,448

(a) Revaluation reserves arising on revaluation of land and buildings.(b) 15% of net profi t for the year and 1% of net secured loan transferred to general reserve during the year. At 30 June 2008, the general reserve includes Rs58,625 in respect of 1% statutory provision on net secured loans.(c) Estate equalization reserve and Gervaise reserve have been reclassifi ed as general reserve.

20(b). BUILDING INSURANCE RESERVE Movement At 1 July during the year At 30 June 2005 DR CR 2006 (Restated) Rs’000 Rs’000 Rs’000 Rs’000 Building insurance reserve 135,674 (173) 20,641 156,142Transfer to income statement - 173 (20,641) (20,468)Transfer to revenue reserve (18,858) - - (18,858) 116,816 - - 116,816 Movement At 1 July during the year At 30 June 2006 DR CR 2007 (Restated) Rs’000 Rs’000 Rs’000 Rs’000 Building insurance reserve 156,142 (6) - 156,136Transfer to revenue reserves (39,326) - - (39,326) 116,816 (6) - 116,810

Movement At 1 July during the year At 30 June 2007 DR CR 2008 Rs’000 Rs’000 Rs’000 Rs’000

Building insurance reserve 116,810 - - 116,810


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21. INSURANCE FUND Movement At 1 July during the year At 30 June 2005 DR CR 2006 Rs’000 Rs’000 Rs’000 Rs’000 Life assurance reserve (Note (a) and (b) ) 148,637 (13,235) 31,204 166,606Mortgage insurance reserve (Note (c) ) 271 - 557 828 148,908 (13,235) 31,761 167,434

Movement At 1 July during the year At 30 June 2006 DR CR 2007 Rs’000 Rs’000 Rs’000 Rs’000 Life assurance reserve (Note (a) and (b) ) 166,606 (13,712) 33,395 186,289Mortgage insurance reserve (Note (c) ) 828 - 373 1,201 167,434 (13,712) 33,768 187,490

Movement At 1 July during the year At 30 June 2007 DR CR 2008 Rs’000 Rs’000 Rs’000 Rs’000 Life assurance reserve (Note (a) and (b) ) 186,289 (14,924) 41,043 212,408Mortgage insurance reserve (Note (c) ) 1,201 - 231 1,432 187,490 (14,924) 41,274 213,840

(a) Secured loans to deceased customers are written off during the year.(b) 90% of life assurance contributions received during the year is transferred to a reserve account.(c) 90% of mortgage insurance premiums received during the year is transferred to a reserve account.


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22. REVENUE RESERVES

2008 2007 2006 (Restated) (Restated) Rs’000 Rs’000 Rs’000

At 1 July

- as previously reported 1,009,162 982,890 904,696 - penalty fee 14,659 (75,889) (73,296)- provision for credit losses - (50,960) (50,960)- insurance premium - 39,326 18,858- as restated 1,023,821 895,367 799,298Profi t for the year 162,039 162,099 152,478

Transfer to general reserve:

(i) 15% profi t for the year (24,306) (24,315) (17,992)(ii) 1% statutory provision on net secured loans - - (1,607)Dividends (Note 23) (27,557) (23,989) (22,151)Share capital - bonus issue (100,000) - -At 30 June 1,033,997 1,009,162 910,026

23. DIVIDENDS PAID 2008 2007 2006 Rs’000 Rs’000 Rs’000 Dividends paid 32,407 27,557 23,989 Rs Rs RsDividend per share 1.62 2.76 2.40

In respect of the year ended 30 June 2008, the directors proposed that a dividend of Rs1.62 per share to be paid to the shareholders. The dividend was approved by the board of directors on 26 September 2008.

In respect of the year ended 30 June 2007, the directors proposed that a dividend of Rs2.76 per share to be paid to the shareholders. The dividend was approved by the board of directors on 27 September 2007 and paid in February 2008.

In respect of the year ended 30 June 2006, the directors proposed that a dividend of Rs2.40 per share to be paid to the shareholders. The dividend was approved by the board of directors on 27 October 2006 and paid in June 2007.


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24. BORROWINGS 2008 2007 2006 Rs’000 Rs’000 Rs’000

Current Bank overdrafts (Secured) 47,895 58,637 62,389Debentures (Note (a) below) 192,500 92,784 78,500Loan capital (Note (b) below) 36,583 84,382 79,423Bank loans (Note (c) below) 220,000 220,000 190,000 496,978 455,803 410,312Non Current Debentures (Note (a) below) - 178,216 271,000Loan capital (Note (b) below) 301,300 241,695 329,828Bank loans (Note (c) below) 1,556,665 1,776,666 1,546,666Loan - Government of Mauritius (Note (d) below) 11,162 11,162 11,162 1,869,127 2,207,739 2,158,656 Total borrowings 2,366,105 2,663,542 2,568,968

(a) Debentures

2008 2007 2006 Rs’000 Rs’000 Rs’000 9.5% MHC, 29 November 2008 – BOM 150,000 150,000 150,000 9.98% MHC, 06 April 2008 – SBM - 22,500 45,000 10% MHC, 12 May 2008 – SICOM - 10,000 10,000 8.5% MHC, 04 June 2008 – IOIB - 8,500 17,000 10% MHC, 6 September 2008 – SICOM 5,000 5,000 15,000 9.65% MHC 4 October 2008 – SBM 12,500 25,000 37,500 9.65% MHC 11 October 2008 – SBM 25,000 50,000 75,000 192,500 271,000 349,500 Less repayable within one year shown as short term loans (192,500) (92,784) (78,500) - 178,216 271,000

The above debentures are guaranteed by the Government of Mauritius.


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24. BORROWINGS (CONT’D)

(b) Loan capital Rate of Terms of 2008 2007 2006interest Lenders repayment Repayment period Rs’000 Rs’000 Rs’000

7.50% Government of Mauritius Half Yearly 19.03.1992 – 19.09.2011 410 527 6442.50% European Development Fund Half Yearly 30.12.1991 – 30.06.2021 21,955 23,367 24,7468.50% Cargo Handling Corporation Yearly 30.06.1998 – 30.06.2017 3,237 3,470 3,6868.50% Cargo Handling Corporation Yearly 01.04.2006 – 31.03.2026 1,354 1,445 2,0006.80% National Pension Fund Yearly 04.05.1989 - 04.05.2008 - 955 1,8488.80% National Pension Fund Yearly 19.12.1991 - 19.12.2010 1,096 1,404 1,68810.80% National Pension Fund Yearly 18.12.1991 - 18.12.2010 304 386 4606.80% National Pension Fund Yearly 09.07.2003 - 09.07.2023 245 316 3839.50% National Pension Fund Yearly 28.07.1993 - 28.01.2008 - 41,282 78,9069.50% National Pension Fund Half Yearly 29.10.1993 - 29.04.2008 - 11,786 22,5369.50% Government of Mauritius/USAID Yearly 30.11.1991 - 30.11.2010 8,262 11,016 13,7707.50% Government of Mauritius/USAID Half Yearly 29.05.1991 - 29.11.2010 1,938 2,713 3,48812% Sugar Insurance Fund Board Yearly 04.12.1997 - 04.12.2013 48,000 56,000 64,0006% Mauritius Marine Authority Yearly 29.12.1990 - 29.12.2009 1,964 2,676 3,3486% Mauritius Marine Authority Yearly 30.04.1995 - 28.02.2014 4,287 4,867 5,4146% Mauritius Marine Authority Yearly 29.12.1996 - 29.12.2015 1,083 1,186 1,2846% Mauritius Marine Authority Yearly 11.09.1998 - 11.07.2017 3,174 3,438 3,6545% Mauritius Marine Authority Yearly 28.07.1999 - 28.07.2018 1,000 1,067 1,1315% Mauritius Marine Authority Yearly 23.02.2001 - 23.02.2020 3,556 3,769 3,9715% Mauritius Marine Authority Yearly 03.05.2002 - 03.05.2021 4,146 4,369 4,5815% Mauritius Marine Authority Yearly 09.07.2003 - 09.07.2023 2,087 2,171 2,2505% Mauritius Marine Authority Yearly 20.05.2002 - 20.05.2022 2,145 2,249 2,3485% Mauritius Marine Authority Yearly Part of loan disbursed 4,264 4,264 4,2655% Mauritius Marine Authority Yearly Part of loan disbursed 938 970 1,0008% The National Saving Fund Half Yearly 31.03.2000 - 30.09.2014 34,667 40,000 45,3339% The National Saving Fund Half Yearly 30.06.2001 - 31.12.2015 52,745 57,498 61,8507.50% Government Sponsored Loan Half Yearly 21.06.1991 - 31.01.2012 9,500 12,500 15,5007.50% Government Sponsored Loan Half Yearly 31.07.1992 - 31.01.2012 3,500 4,500 6,0002.50% Government Sponsored Loan Yearly 17.10.1978 - 18.06.2024 8,641 9,240 9,82512% Anglo Mauritius Quarterly 29.02.2008 – 01.02.2028 98,750 - -3% Bank of Mauritius Yearly No fi xed repayment terms 14,635 16,646 19,342 337,883 326,077 409,251Less repayable within one year shown as short term loans (36,583) (84,382) (79,423) 301,300 241,695 329,828Repayable by instalments: - after one year and before fi ve years 136,125 123,285 181,194- after fi ve years 146,276 101,765 127,293Repayable terms not yet fi nalised 4,264 - 2,000Repayable other than by instalments 14,635 16,645 19,341 301,300 241,695 329,828


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24. BORROWINGS (CONT’D)

(c) Bank loans

2008 2007 2006 Rs’000 Rs’000 Rs’000

7.5% - 9.50% per annum bank loans repayable by monthly instalments andguaranteed by the Government of Mauritius 1,776,665 1,996,666 1,736,666

Current Portion repayable within one year 220,000 220,000 190,000 Non-currentPortion repayable after one year and beforefi ve years 705,002 983,336 701,666Portion repayable after fi ve years 851,663 793,330 845,000 1,556,665 1,776,666 1,546,666 Total 1,776,665 1,996,666 1,736,666

(d) Loan – Government of MauritiusInterest free loan from Government of Mauritius and with no fi xed repayment terms.

25. RETIREMENT BENEFIT OBLIGATIONS

Retirement benefi t obligation comprise of the Company’s staff pension fund and of other post retirement benefi ts.

The pension scheme is a defi ned plan and the assets of the plan are held separately from those of the Company and are administered by the State Insurance Company of Mauritius Limited.

The amount recognised in the balance sheet are as follows:

2008 2007 2006 Rs’ 000 Rs’ 000 Rs’ 000

Net liability on funded obligations (Note (a)) 10,447 13,577 14,031 Adjustment for staff costs 299 172 (51)Funds kept within the Company 10,560 10,560 10,560

21,306 24,309 24,540


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25. RETIREMENT BENEFIT OBLIGATIONS (CONT’D)

2008 2007 2006 Rs’000 Rs’000 Rs’000(a) Funded obligations Present value of funded obligations 149,923 157,252 148,676 Present value of unfunded obligations 1,754 1,200 1,256 Fair value of plan assets (188,541) (164,190) (140,672) (36,864) (5,738) 9,260 Unrecognised actuarial gain 47,311 19,315 4,771 Net liability 10,447 13,577 14,031 The amount recognised in the income statement are as follows:

2008 2007 2006 Rs’000 Rs’000 Rs’000 Current service cost 4,605 5,223 4,977 Fund expenses 123 - -Interest costs 17,430 16,493 14,385 Actuarial gain 131 - -Expected return on plan assets (18,854) (16,236) (13,651)Total included in staff costs 3,173 5,480 5,711 Actual return on plan assets 24,834 22,502 16,470 Movement in the liability recognised in the balance sheet:

2008 2007 2006 Rs’000 Rs’000 Rs’000

At 1 July 13,577 14,031 14,311 Total expenses as above 3,173 5,480 5,711 Contribution paid (6,303) (5,934) (5,991)At 30 June 10,447 13,577 14,031 2008 2007 2006

Main assumptions: Discount rate 11% 11% 10.50%Expected return 11.50% 11.50% 11%Pension increase 9% 9% 8.50%Salary increase 7% 7% 6.50%


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26. PEL SAVINGS ACCOUNTS AND HOUSING DEPOSITS CERTIFICATES

2008 2007 2006 (Restated) (Restated) Rs’000 Rs’000 Rs’000

(a) PEL savings accounts Capital 755,438 715,703 716,861 Interest payable 481,213 435,877 398,763 Other savings accounts 1,726 1,664 1,588 1,238,377 1,153,244 1,117,212Portion repayable within one year (290,762) (201,400) (201,400) Portion repayable after one year 947,615 951,844 915,812

(b) Housing Deposits Certifi cates - HDC

Capital 595,512 639,905 983,755 Interest payable 50,915 52,988 61,144 646,427 692,893 1,044,899 Portion repayable within one year (357,437) (139,417) (307,884) Portion repayable after one year 288,990 553,476 737,015

2008 2007 2006 Capital Interest Capital Interest Capital Interest Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Within 3 months 26,708 2,283 2,590 29 5,448 9,970Over 3 months and6 months 187,738 26,868 32,444 3,801 12,858 8,917Over 6 months and upto 1 year 112,458 1,382 88,322 12,231 258,450 12,241Over 1 year andup to 2 years 26,637 2,277 451,250 34,930 254,763 13,951Over 2 years andup to 5 years 241,971 18,105 65,299 1,997 452,236 16,065 595,512 50,915 639,905 52,988 983,755 61,144


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27. LOAN – NHDC

2008 2007 2006 Rs’000 Rs’000 Rs’000

At 1 July 99,656 120,991 142,326 Repayment of capital (21,335) (21,335) (21,335)At 30 June 78,321 99,656 120,991 Portion repayable within one year (21,335) (21,335) (21,335) Portion repayable after one year 56,986 78,321 99,656 The NHDC loan is unsecured, carries interest at the rate of 8.5% per annum and repayable by 2011.

28. TRADE AND OTHER PAYABLES

2008 2007 2006 (Restated) Rs’000 Rs’000 Rs’000

Trade payables 55,633 107,083 84,662 Other creditors and accruals 13,689 12,584 14,699Current portion of penalty fee (Note 38) 14,659 14,659 14,659 83,981 134,326 114,020

29. NOTES TO THE CASH FLOW STATEMENTS

(a) Cash generated from operations 2008 2007 2006 (Restated) Rs’000 Rs’000 Rs’000 Profi t for the year 162,039 162,099 152,478 Adjustments for: Depreciation 14,393 8,653 7,524 Fair value adjustment (30,022) - - Prior year adjustment – insurance premium - - (20,468)Provision for bad debts 10,771 25,236 19,064 Interest suspended 51,730 32,250 27,755 Loss on sale of Cybervillage 1,181 64 783Retirement benefi t obligations (2,306) (231) (280)Loss on sale of foreclosed properties 2,895 21,268 13,950 Interest expense 430,597 421,646 378,293 Interest income (666,188) (648,264) (575,043)Grants and subsidies (13,787) (51,720) (52,797)

Changes in working capital: Trade and other receivables 2,652 (31,266) (11,596)Trade and other payables (50,635) (20,306) 45,379 Other reserves 135,349 (62,011) 38,994 Insurance fund 26,350 20,056 - Cash generated from/(used in) operations 75,019 (122,526) 24,036 (b) Cash and cash equivalents Cash at bank and in hand 293,097 216,560 261,034 Bank overdrafts (47,895) (58,637) (62,389) 245,202 157,923 198,645


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29. NOTES TO THE CASH FLOW STATEMENTS (CONT’D)

(i) There is a restriction on the use of cash at bank and in hand up to Rs 10,560,000 (2007: Rs10,560,000 and 2006: Rs 10,560,000) relating to funds kept by the Company in respect of retirement benefi t obligations (Note 25). (c) Secured loans granted – net 2008 2007 2006 Rs’000 Rs’000 Rs’000 Loans disbursed during the year 481,685 515,583 692,501 Repayment of loans by customers (515,592) (419,853) (454,668) (33,907) 95,730 237,833

30. COMMITMENTS 2008 2007 2006 Rs’000 Rs’000 Rs’000

(a) Loans Loans approved but not yet disbursed to individuals 10,635 70,616 103,818 Loans to NHDC but not yet disbursed - - 450,000 10,635 70,616 553,818

(b) Capital commitments The Company does not have any commitments recognized and contracted at the balance sheet date.

(c) Operating lease arrangement The Company as a lessor 2008 2007 2006 Rs’000 Rs’000 Rs’000

Rent received under operating lease recognized in income statement 4,603 4,220 3,556 There were no direct operating expenses incurred in respect of the investment property.

At the balance sheet date, the Company has outstanding commitments under non-cancelable operating leases which fall due as follows: 2008 2007 2006 Rs’000 Rs’000 Rs’000 Within one year 8,897 5,085 4,331 Between 2 and 5 years 14,804 1,620 14,527 After more than 5 years 19,590 - 3,454 43,291 6,705 22,312

Operating lease represents rental income from premises rented to outside parties. The leases are negotiated for an average term of ten years and rentals are fi xed for an average term of fi ve years. All operating contracts contain market review clauses in the event the lessee exercises its option to renew. The lessees do not have an option to purchase the property at the expiry of the lease.


73


30. COMMITMENTS (CONT’D)

(d) Operating lease arrangement The Company as a lessee 2008 2007 2006 Rs’000 Rs’000 Rs’000 Minimum lease payment under operating lease recognized in income statement 850 23 1,274

At the balance sheet date, the Company had outstanding commitments under non-cancelable operating leases which fall due as follows: 2008 2007 2006 Rs’000 Rs’000 Rs’000 Within one year 852 225 1,274 Between 2 and 5 years 3,408 90 605 4,260 315 1,879

Operating lease payments represent rental for offi ce buildings. The leases are negotiated for an average term of 3-5 years and rentals are fi xed for an average of 3-5 years. The Company does not have an option to purchase the property at the expiry of the lease period.

31. TAXATION

Further to the Mauritius Housing Company Corporation (Transfer of Undertaking) Act 1989, all rights and privileges of the Mauritius Housing Corporation have been transferred to Mauritius Housing Company Ltd. The provisions of this Act have also dispensed the Company from any income tax liability.

No deferred tax asset or liability has been provided in the fi nancial statements due to the exempt income tax status of the Company.

32. CLAIM FOR INTEREST DIFFERENTIAL TO GOVERNMENT

The fi nal claim for the subsidy scheme on Government Sponsored Loans and grants at 30 June is:

2008 2007 2006 Rs’000 Rs’000 Rs’000 Net amount due by the Government at 1 July 2,951 (582) 17,004 Amounts claimed during the year: Interest differential 983 13,551 10,492 Grants 228 114,904 36,978 Administration cover 1,000 11,720 13,774 Housing Deposit bonus 11,803 17,602 17,407 PEL bonus 172 182 336 17,137 157,377 95,991 Amount received from the Government during the year (15,503) (154,426) (96,573) Net amount due by/(due to) the Government at 30 June 1,634 2,951 (582)

The net amount due by/(due to) the Government is included in other debtors and prepayments in Note 17.


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33. RELATED PARTIES TRANSACTIONS

The Company is making the following disclosures in accordance with IAS 24 (Related Party Disclosures): Nature of Volume of transactions transactions 2008 2007 2006 Rs’000 Rs’000 Rs’000 SICOM Debentures 10,000 10,000 17,142 Interest 1,025 2,023 3,150National Pension Fund Loans 54,485 (46,692) 45,326 Interest 4,071 10,808 16,887Government of Mauritius Loans 9,658 (10,111) 9,562 Interest 3,156 4,330 5,087Directors and key managementpersonnel Emoluments 2,048 2,505 6,136 Deposits - 805 365 Loans 210 2,575 2,501

(Credit)/ Credit)/ (Credit)/ debit debit debit balances balances balances Nature of at 30 June at 30 June at 30 June transactions 2008 2007 2006 Rs’000 Rs’000 Rs’000

SICOM Debentures (5,000) (15,000) (25,000) National Pension Fund Loans (1,645) (56,130) (105,821) Interest (77) (1,943) (3,644)Government of Mauritius Loans (54,205) (75,025) (85,136) Interest (225) (277) (550)Directors and key managementpersonnel Deposits - (1,238) (2,043) Loans 5,341 5,153 5,460

Compensation paid to key management personnel

2008 2007 2006 Rs’000 Rs’000 Rs’000

Short term benefi ts 3,617 3,193 3,772


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34. FINANCIAL SUMMARY

2008 2007 2006 2005 2004 (Restated) (Restated) Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Share capital 200,000 100,000 100,000 100,000 100,000Profi t for the year 162,039 162,099 152,478 144,270 135,147Revaluation and other reserves 510,448 365,452 403,142 383,543 558,069Building insurance reserves 116,810 116,810 116,816 116,816 -Revenue reserves 1,033,997 1,009,162 910,026 799,278 867,574Dividends - 27,557 23,989 22,151 27,029

35. CONTINGENCIES

At 30 June 2008, the Company has no material litigation or claims outstanding, pending or threatened against it, which would have a material adverse effect on its fi nancial position or fi nancial results.

36. REPORTING CURRENCY

The fi nancial statements are presented in thousands of Mauritian Rupees since this is the currency in which the majority of the Company’s transactions are denominated.

37. FINANCIAL INSTRUMENTS

In its ordinary operations, the company is exposed to various risks such as capital risks, interest rate risks, credit risks and liquidity risks. The Company has devised on a central basis a set of specifi c policies for managing these exposures. Strategy in using fi nancial instruments

The use of fi nancial instruments is a major feature of the company’s operations. The Company accepts deposits from customers and secures borrowings from fi nancial and non-fi nancial institutions at variable rates and seeks to earn above-average interest margins by investing these funds in a wide range of assets.

In pursuance of its objectives of maximizing returns on investments, the Company takes into account the maintenance of suffi cient liquidity to meet all claims that might fall due and to provide loans facilities for housing purposes.

The Company also seeks to raise its interest margins, net of provisions, through lending at competitive rate and then claim back any interest differential from Government of Mauritius in the form of Government sponsored Loans.


76


37. FINANCIAL INSTRUMENTS (CONT’D)

Capital risk management

The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Company’s overall strategy remains unchanged from 2007.

The capital structure of the Company consists of debt, which includes the borrowings disclosed in notes 24 and 27, cash and cash equivalents and equity comprising of issued capital, reserves and revenue reserve as disclosed in the statement of changes in equity.

Gearing ratio

The Risk Management Committee has the responsibility to review the capital structure periodically. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital.

The gearing ratio at the year end was as follows:

2008 2007 2006 Rs’000 Rs’000 Rs’000

Debt (i) 4,329,230 4,609,335 4,852,070Cash and cash equivalents (293,097) (216,560) (261,034) Net debt 4,036,133 4,392,775 4,591,036 Equity (ii) 1,861,255 1,591,424 1,529,984 Net debt to equity ratio 2.17 2.76 3.00

(i) Debt is defi ned as long and short term borrowings, bank overdrafts, PEL savings accounts and housing deposits certifi cates.

(ii) Equity includes all capital and reserves of the Company.

Signifi cant accounting policies

Details of the signifi cant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of fi nancial asset, fi nancial liability and equity instrument are disclosed in note 3 to the fi nancial statements.

Fair values

Except where stated elsewhere, the carrying amounts of the Company’s fi nancial assets and fi nancial liabilities approximate their fair value to the short term nature of the balances involved.


77



Interest rate riskThe interest rate profi le of the fi nancial assets and fi nancial liabilities of the Company as at 30 June 2008 was:

Currency : MUR Interest rate % per annum 2008 2007 2006Financial assets Lowest Highest Lowest Highest Lowest Highest % % % % % %

Deposits with banks 8.00 11.00 8.25 10.25 7.85 10.25Loans and advances to customers 6.50 15.50 6.50 14.00 6.50 14.00 Financial liabilities Savings and fi xed deposits 8.00 11.00 6.05 8.25 5.50 8.25Borrowings from Government of Mauritius 2.50 7.50 2.50 9.50 2.50 9.50Borrowings fromBank of Mauritius - 3.00 - 3.00 - 3.00Borrowings – Commercial banks 8.50 11.25 10.17 11.25 7.50 9.00Borrowings – Financial institutions 8.50 10.00 6.80 10.80 5.80 10.80

Categories of fi nancial instruments

2008 2007 2006 Rs’000 Rs’000 Rs’000Financial assets Cash resources 293,097 216,560 261,034Loans and advances 5,525,005 5,715,788 5,801,691Other assets 266,461 325,794 375,266 6,084,563 6,258,142 6,437,991Financial Liabilities Housing deposit certifi cates 646,427 692,893 1,044,899PEL savings accounts 1,238,377 1,153,244 1,117,212Borrowings 2,366,105 2,663,542 2,568,968Other liabilities 198,268 287,610 303,529 4,449,177 4,797,289 5,034,608

Credit risk

Credit risk represents the loss the Company would suffer if a borrower failed to meet its contractual obligations. Such risk is inherent in traditional fi nancial products such as loans, commitments to lend and other contingent liabilities. The credit quality of counterparties may be affected by various factors such as an economic downturn, lack of liquidity, an unexpected political event or death. Any of these events could lead the company to incur losses.


78



Credit risk (cont’d)

All loans are secured loans and the Company has formulated policies for determining the stage where a loan becomes impaired.

Additionally, customers are required to procure a life assurance and building and mortgage insurance in order to cater for any unforeseen event. Management believes that impairments in the portfolio at the balance sheet are adequately covered by allowances and provisions.

The Company does not have any concentration of risk.

Market risk

Market risk is the risk of loss arising from movement in observable market variables such as interest rates, exchange rates and equity markets. The market risk management policies at the Company are set by and controlled by the Risk Committee.

Cash fl ow and interest rate risks

Cash fl ow risk is the risk that future cash fl ows of a fi nancial instrument will fl uctuate because of changes in market interest rates. Interest rate risk is the risk that the value of a fi nancial instrument will fl uctuate because of changes in market interest rates. The Company exercises a close follow-up on the market interest rates and adapts its interest margins in response to changes in the rates. The Company sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored daily. The Company obtains credit facilities at favourable interest rates as these facilities are guaranteed by the Government of Mauritius.

The company manages the interest rate risks by maintaining an appropriate mix between fi xed and fl oating rate borrowings.

Interest Rate Sensitivity Analysis

A low basic point increase or decrease representing management’s assessment of the reasonably possible change in interest rate is used for the sensitivity analysis below.

If interest rate had been 100 basis points higher/lower and all other variables were held constant, the Company’s profi t for the year ended 30 June 2008 would decrease/increase by Rs 26,790,599. This is mainly attributable to the company’s exposure to interest rate on its variable rate borrowings.

Currency risk

The Company is not exposed to currency risk as all its fi nancial assets and liabilities are denominated in Mauritian Rupees, the Company’s reporting currency.


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Liquidity riskBeing a fi nancial institution, the Company’s liquidity risk is subject to statutory obligation whereby it has to meet the Bank of Mauritius requirements in respect of liquidity ratio to be maintained at all times. The Company manages its liquidity risk by ensuring timely collection of receivables and also by availing credit facilities from banks and which facilities are guaranteed by Government of Mauritius.

The tables below analyse the Company’s fi nancial assets and liabilities to the relevant maturity groupings based on the remaining years of repayment.

Maturities of fi nancial assets and liabilities at 30 June 2008:

Between 3 Less than 3 months and Over one months 1 year year Total Rs’000 Rs’000 Rs’000 Rs’000Assets - Cash resources - 293,097 - 293,097 - Loans and advances - 1,083,239 4,441,766 5,525,005- Other assets - 266,461 - 266,461 - 1,642,797 4,441,766 6,084,563Liabilities - HDC 28,991 328,446 288,990 646,427- PEL - 290,762 947,615 1,238,377- Borrowings - 496,978 1,869,127 2,366,105- Other liabilities - 105,316 92,952 198,268

28,991 1,221,502 3,198,684 4,449,177


Between 3 Less than 3 months and 1 Over one months year year Total Rs’000 Rs’000 Rs’000 Rs’000Assets

- Cash resources - 216,560 - 216,560- Loans and advances - 1,069,609 4,646,179 5,715,788- Other assets - 325,794 - 325,794 - 1,611,963 4,646,179 6,258,142Liabilities

- HDC 2,619 136,798 553,476 692,893- PEL - 201,400 951,844 1,153,244- Borrowings - 455,803 2,207,739 2,663,542- Other liabilities - 155,661 131,949 287,610 2,619 949,662 3,845,008 4,797,289


80




Between 3 Less than months Over one 3 months and 1 year year Total Rs’000 Rs’000 Rs’000 Rs’000Assets - Cash resources - 261,034 - 261,034- Loans and advances - 685,013 5,116,678 5,801,691- Other assets - 375,266 - 375,266 - 1,321,313 5,116,678 6,437,991Liabilities - HDC 13,302 294,582 737,015 1,044,899- PEL - 201,400 915,812 1,117,212- Borrowings - 410,312 2,158,656 2,568,968- Other liabilities - 135,355 168,174 303,529

13,302 1,041,649 3,979,657 5,034,608

Legal claimDue to the nature of the business, the Company is exposed to claims, disputes and legal proceedings arising in the ordinary course of business. Such legal proceedings may result in monetary damages, legal defence costs and penalties. It is the policy of the Company to seek legal advice on each case.

38. LIABILITIES ARISING FROM LOAN REFINANCING

2008 2007 2006 (Restated) Rs’000 Rs’000 Rs’000 Penalty Fee 43,978 58,637 73,296Repaid during the year (14,659) (14,659) (14,659) 29,319 43,978 58,637Current portion (14,659) (14,659) (14,659) Non – current portion 14,660 29,319 43,978


ffaites un pasaites un pas on fait le on fait le rresteeste · 2019-06-20 · mhc annual report...

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