The past year was one of concentrated activity for the department as the momentum increased in FINSAC’s divestment activities.

ASSET DISPOSAL

The Department acted in the sale of several major holdings as detailed below:

• The sale of FINSAC-controlled shares in Island Broadcasting Services Limited, operators of KLAS FM was accomplished earlier this calendar year. Control of the shares was acquired through FINSAC’s intervention in several different entities, necessitating a lot of preliminary work to perfect various transfers in order to achieve the divestment to Wilmington Corporation Limited. The sale was completed in the first quarter of 2001.

• FINSAC’s shares in DB&G Merchant Bank Limited were also disposed of during the first quarter of 2001 to Dehring Bunting & Golding Limited, at a price of J$23Million.

• The transfer to Jamaica National Building Society of the Micro Finance Unit, formerly operated by Workers Savings & Loan Bank was smoothly concluded and documented.

• The Terra Nova and Boscobel Beach hotels were transferred during the course of the year to Guardian Life Limited, along with several other holdings pursuant to FINSAC’s Asset Transfer Agreement with Guardian. Work continues towards the completion of registration of these transactions.

• Efforts to divest Navy Island again resulted in major activity for the department. FINSAC interests already owned all but two of the lots on the island. To enhance the property’s market appeal, it was necessary to acquire the two remaining independently owned lots. The purchase and transfer to FIS of these were realised during the year. The department continued to assist in advising on the proposed sale transaction.

• The transfer of the Mutual Life-owned Pavilion Shopping Mall was accomplished. This property comprised several strata units all leased to commercial enterprises. The legal status of each unit had to be carefully reviewed in all aspects preparatory to the transfer.

• The transfer to FINSAC of the Island Life complex at 6 St. Lucia Avenue comprising 23 separate titles was accomplished. This acquisition has generated several lease agreements for review and/or preparation.

• Other real estate holdings, including prime holdings on Knutsford Boulevard in New Kingston and Norman Manley Boulevard in Negril were disposed of.

REGULATORY UNIT

A significant aspect of the department’s work is the co-ordination of the jointly funded FINSAC/IADB project to rehabilitate and strengthen the insurance supervisory and regulatory regime in Jamaica. One attorney within the legal department operates as the Project Manager and liaises between the appointed Task Force and the IADB.

The initial drafting of the proposed Insurance Act was co-ordinated to its final draft stage by this Unit. The Unit worked extensively with foreign insurance law consultants, local interest groups, the Ministry of Finance, and the Chief Parliamentary Counsel, in the drafting of the proposed legislation to Bill stage. The focus now is on the proposed Insurance Regulations to accompany the Act.

To facilitate this, the Unit is assisting in seeking a number of specialist personnel:

• Legal Adviser who will focus on receiving the comments and proposed amendments from the various stakeholders of the insurance industry and to draft and/or amend the Insurance Regulations;

• a Technical Assistant to prepare policy and procedure manuals based on the specific provisions of the incoming legislation; and

• a Training Adviser for the commissioners of the Financial Services Commission.

This office is required to draft and/or assist in the drafting of the Terms of Reference of these personnel vis a vis the objectives of the IADB and to participate in their selection. Our role will then extend to establish and formalise the terms and conditions of their contract of employment in conjunction with the IADB.

On an on-going basis the Unit plays a role on behalf of the IADB in evaluating the performance and progress of local and foreign consultants engaged in the project.

As Project Manager this office attends meetings with the Sector Manager of the IADB in respect of any matter pertinent to the project.

NON-PERFORMING LOANS

Disposition of Properties

In this area the Department has completed the sale of approximately 145 properties for the year, garnering net proceeds of sale of some J$311Million, while 167 properties were referred for public auction.

Litigation for Debt Recovery

On instructions received from the Loan Recovery Unit sanctioned by resolutions of the Credit Committee and/or Board of Directors, formal Demand Letters were issued in respect of 248 accounts and 135 Statutory Notices under the Registration of Titles Act were served.

In instances where formal demand has expired, no response has been received from the debtors and there is no security or inadequate security for the debt owed, suits have been filed. For the year, our in-house attorneys have filed 15 suits.

The Supreme Court granted a total of 81 judgements over the course of the year in suits managed by the department.

Instructing of External Counsel

We continue to monitor a number of suits filed by and against the entities by liaising with external counsel, reviewing and marshalling evidence.

A number of the issues before the Courts have involved in-depth research, analysis and review of lengthy pleadings.

Settlement, Discharges & Releases of accounts

As FINSAC forged ahead with the projected sale of its entire loan portfolio, the year ushered in the liquidation of several accounts. There were also a number of negotiated settlement arrangements. Settlement Agreements to capture payment terms were drafted and vetted as required. Consequent upon the settlement/liquidation of accounts the department has prepared hundreds of Discharges of Mortgages and Releases of Security.

Court Attendance

During this year under review FINSAC also inherited responsibility for the collection of the portfolio of non-performing loans under J$5Million in value. This portfolio had been previously collected by the Bank of origin. Recovery on these files has been pursued mainly by way of Judgment Debtor Summons, requiring regular Court attendance as Debtors are summoned before the Court to justify their means of repaying their debts. Our in-house attorneys have taken over the legal representation of these matters and have attended the hearings of these and other Summonses arising from the Court process.

LIQUIDATION OF COMPANIES

Owing to the defunct status of many of the acquired entities, and as the winding down phase of FINSAC accelerates, the department is required to assist liquidation teams. The ranges of issues involved are as diverse, as the issues themselves are complex and exacting.

TRANSFER OF SECURITIES

Mortgages

To date approximately 97% of mortgages inherited from intervened institutions, which are transferable, have been transferred. The remaining 3% comprises mainly Certificate of Titles awaited from other institutions.

Charges other than Individual Mortgages

The process continues in respect of updating the records of the Companies Office and the Island Records Office by filing the necessary applications to effect the transfer of charges from the intervened entities to Refin Trust Limited.

RECEIVERSHIPS

As part of the collection strategy, receiverships were instituted in some companies under powers of Debentures given by these companies. In the course of the year some of these receiverships were terminated as dictated by the circumstances impelling recovery of the debt, and the department played its role in drafting the documentation necessary in these instances.

PROPOSED SALE OF NON-PERFORMING LOAN PORTFOLIO

The department has been actively involved in the support of this undertaking, as the legal documentation demanded is copious. Contracts have had to be drafted to capture arrangements required with consultants, agents and aspiring purchasers, as well as to encompass and safe-guard all aspects of each phase of the project and the sub-projects required to attain the main objective of disposing of the loan portfolio. The sheer size of this portfolio and its non-performing (and more often than not imperfectly documented) nature rendered the management of each aspect exacting. Tremendous efforts have been expended in preparing the documentation to ensure the smooth legal transfer of these loans at the appropriate time.

As part of this effort, the department recruited a team of persons experienced in the loan documentation to assist with the task entrusted to us of verifying the accuracy of information captured on each

non-performing loan and related account. This task involved cross-checking the listing of security pledged for the loans to verify existing security, confirmation and deletion of sold assets and removal of obsolete documents from security packages.

JAMAICA MUTUAL LIFE ASSURANCE SOCIETY

The department also manages the legal services required by this entity.

The core of its activities has been the sale of the company’s assets. These include the sale of real estate, shares and mortgages. We have also participated in the sale of assets of a number of subsidiaries and associations as part of the winding down process.

The department carried out and participated in the sale of several of its major holdings:

• the sale of the company’s interest in the Hedonism II and Trelawny Beach Hotels for US$12.25Million

• the sale of the company’s interest in Grand Lido for US$9Million

• the sale of Boscobel Beach Hotel for US$14Million

• the sale of the The Terra Nova hotel for J$190Million. The department also gave legal advice regarding the termination of the relevant contracts, consequent upon the sale

• the sale of property owned by Mutual Life’s wholly owned subsidiary, Commercial and Residential Developments Limited, for J$ 39Million

• sale of the company’s shares in NEM Insurance (Ja.) Limited for J$86.6Million

• sale of the mortgage portfolio for J$83.25Million. The registration process of the various transfers of mortgages is ongoing

• the department completed 29 other sales, generating net proceeds of approximately J$130Million.

CORPORATE SECRETARIAL

In the past year FINSAC has acquired even more corporate responsibility, as several more entities were transferred to it. In addition to providing the organisation’s four main entities with corporate secretarial support, the Legal Department undertakes the company secretarial functions for all these organisations as well.

With a total of just over 50 companies for which the department provides this service, we are kept fully occupied in this area. Although the boards of these companies meet with variable regularity, the corporate secretarial services are ongoing in respect of ensuring that the entities comply with all statutory requirements, such as the convening of annual general meetings and filing of annual returns. The department also ensures that they maintain proper records of their activities by monitoring the records and documents.

Our corporate secretaries not only discharge the routine requirements of this office, such as preparing and organising the minutes of each meeting of these companies, but undertake the brunt of the legal work coming out of these companies. Given the nature of the companies FINSAC inherits, the legal support needed is often in connection with complicated issues requiring detailed research of the companies’ historical records (which are not always available) and studious application of the law. Many of these companies continue to have unresolved litigation matters, several of which have now been assigned trial dates and, therefore, demand our attention.

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