Ministry of Works and Engineering

Office of the Minister of Works and Engineering

27th August, 2010

The financial year 2009/10 has been a period of significant change and accomplishment for the West End Development Corporation [“WEDCo”]. As the Minister with assigned responsibility for WEDCo, I am extremely pleased to note that the partnership between Government and WEDCo remains as strong and as healthy as ever, one that is rapidly transforming the Royal Naval Dockyard into a dynamic destination and community of which all Bermuda can be proud.

During the past year, I have had the honour of attending three major openings, each of which underscored the remarkable progress unfolding in Dockyard as we realize WEDCo’s vision of the west end of the Island as Bermuda’s premier destination for residents and visitors alike.

In April 2009, I joined our Premier, Dr. the Hon. Ewart F. Brown, JP, MP in opening the second cruise ship terminal at Heritage Wharf. With two megaships now able to dock simultaneously, the increased business that additional passengers and crew bring provides a considerable economic boost for the Dockyard specifically and the Island generally. In June 2009, WEDCo Chairman, the Hon. Walter M. Lister, JP, MP, and I officially opened the second traffic lane across Cockburn Bridge and the widened historic Main Gates – much-needed improvements that will greatly improve efficient access to and from Dockyard. Then, in January 2010, I was privileged to preside over the official opening of the West End Waste Water Reclamation Treatment Plant at Sally Port. This state-of-the-art facility is essential in meeting the increased water demands of a thriving Dockyard and the west end.

There can be no doubt that careful planning, unwavering commitment and hard work on the part of WEDCo and Government provided the underpinning for these three critically important projects. Indeed, the WEDCo team, headed by Chairman Lister and General Manager, Mr. Andrew Dias, is richly deserving of gratitude and praise for continuing to work diligently and enthusiastically as it advances the Dockyard dream.

As the Royal Navy Dockyard celebrated its 200th anniversary this year, we were honoured by a visit from Her Majesty Queen Elizabeth II and His Royal Highness, Prince Philip, Duke of Edinburgh. The royal presence, perfect weather and perfect organization led to a day that WEDCo and the people of the west end of the Island will never forget: an exciting new chapter in Dockyard’s colourful history had well and truly begun.

The Hon. Derrick V. Burgess, JP, MP Minister of Works and Engineering

General Post Office Building, 56 Church Street, Hamilton HM 12, BERMUDA PO Box HM 525, Hamilton HM CX, BERMUDA Phone (441) 297-7815 Fax: (441) 295-0170 Email:[email protected] Website: www.gov.bm

The Wes t End Development Corpora tion | Annu al Repor t 2010 Letter From The Chairman

The face of the Dockyard has changed interest in the yachting community although this project is in re-enactment by Sandys Secondary students of the Dockyard December saw WEDCo start its special Christmas more in the last year than it has changed its early stages and there is much groundwork yet to be done. Apprentices journey to the UK in 1950 to complete their Shopping campaign. Each Sunday of the month there in the previous fifty years. As the summer drew to an end we were happy with the training. The “real” apprentices were then introduced to Her was entertainment provided by various artists; free gift- increased number of cruise ship visitors and the tourists that Majesty. Dr. David Saul had a display of woodcarvings which wrapping and a special Kiddie Corner with face painting and In April the Premier, Dr. the Hon. Ewart came to Dockyard. We have truly become the destination on the Queen admired as she made her way into the Chartroom a fun castle, where the little ones could be left while their Brown, JP, MP, accompanied with the the Island most visited by tourists. where Sandys Middle School demonstrated an “old fashioned parents or guardians shopped. Minister of Works and Engineering, the Bermuda wedding”. Hon. Derrick Burgess, JP, MP, came to The highlight of the year was in November with the Royal With all the accomplishments of this fiscal year we were not Dockyard to open the newly completed Heritage Wharf. Visit of Her Royal Highness Queen Elizabeth II and His Royal Outside, Her Majesty unveiled a plaque commemorating the done yet; in January 2010 Minister the Hon. Derrick Burgess This event was attended by many representatives from the Highness the Duke of Edinburgh. It was a beautiful day; many visit before she left to enjoy lunch at the Commissioner’s JP, MP returned to officially open the new Waste Water Government, the West End community and the shipping seniors from the various senior homes in Somerset were in House on the grounds of the Bermuda Maritime Museum. Reclamation Treatment Plant, located in Sally Port, Dockyard. community. This is the only port in Bermuda that can attendance along with tourist and residents from all over This facility will assist in servicing our water requirements accommodate the mega cruise ships and the event marked a the Island. Her Majesty was greeted at our ferry dock by throughout the year; especially with the mega cruise ships wonderful start to the 2009 cruise ship season. elementary school students; the Drum Corps of the Sandys during the summer months. Secondary School serenaded her Majesty as she drove past on In June the Minister of Works and Engineering returned to her way to the Clocktower Mall. At the mall she was greeted The year 2009 marked the 200th anniversary of The Royal the West End where he and I together opened the new second by WEDCo’s Chairman, the Hon. Mr. Walter Lister, JP, MP and Naval Dockyard. We are proud of our accomplishments and lane to Cockburn Cut Bridge and the widening of the historic Mrs. Brenda Lister, who then introduced her to other members look forward to continued growth in our fiscal year 2010-2011. Main Gates of the Royal Naval Dockyard. Traffic now flows of the WEDCo Board and local area Members of Parliament. easily in and out of Dockyard. Upstairs in the Clocktower Mall, Mrs. Bentley, who is 100 During the summer of 2009 we announced plans for a years-old and a resident of the Packwood Home rendered proposed marina for the South Basin. This sparked much “God Save the Queen” on the piano. This was followed by a

The Hon. Mr. Walter Lister, JP, MP Chairman

2 The Wes t End Development Corpora tion | Annu al Repor t 2010 General Manager’s Report

I am both proud and delighted to report that the West End heritage and ambience of Dockyard that is at the core of its Development Corporation has made significant progress appeal. Everything we do should enhance, not detract from during the financial year 2009-2010. those unique qualities.

The completion and opening of the second cruise ship We are committed to ensuring that Dockyard is sustainable terminal at Heritage Wharf and the increased volume of and as “green” as possible. Increased public transportation visitors it brings has changed the face of Dockyard and will and pedestrianisation will help reduce pollution levels; positively impact the West End and the rest of Bermuda for our strategic planning places great value on retaining and years to come. enhancing open space; and we hope to take advantage of Dockyard’s location to develop alternative sources of energy However in addition to presenting obvious short-term such as wind and solar power. business opportunities, it also presents new challenges. The new terminal provides an economic springboard but it is In closing I wish to thank WEDCo’s dedicated management critical that WEDCo and our various stakeholders nurture and and staff for their efforts during the past year as well as the develop this opportunity and not take it for granted. We need Ministry of Works and Engineering and the Ministry of Tourism to manage expectations, especially among our retail partners, with whom we continue to enjoy a productive and successful that today’s cruise ship passengers are likely to have different working partnership. tastes and spending habits to tourists of the past and that goods and services need to be targeted accordingly.

We need to ensure that Dockyard continues to provide a pleasant and memorable experience for locals and visitors alike, by encouraging a diversity of attractions and activities. One of the most attractive things about the West End for locals and visitors is that there is something for everyone. Andrew Dias There is nowhere in Bermuda that provides so much that General Manager is so accessible in one place – shopping, restaurants, water sports, arts and crafts, history and museums, swimming with dolphins, superb natural beauty and open space, as well as a growing live entertainment scene at night.

Although we pride ourselves on developing a premier port and tourist destination, we have seen a significant and gratifying increase in local trade over the past two years, especially at weekends, as Bermuda residents discover that Dockyard is not only a desirable place to visit but one in which to live and work.

We need to manage our future growth so that while we upgrade amenities and facilities to those of a world-class destination and port, we remain respectful of the remarkable

4 THE YEAR IN REVIEW HIGHLIGHTS & ACCOMPLISHMENTS

During a year in which the Royal Naval Dockyard proudly Cruise Ship Visits celebrated its 200th anniversary and welcomed Her Majesty Queen Elizabeth II, it was fitting that the financial year 2009- Work on the second cruise ship terminal at Heritage Wharf 2010 saw the West End Development Corporation (WEDCo, or was completed by the Department of Tourism in April 2009. “the Corporation”) complete a number of key projects and The new terminal enables Bermuda to dock two post-Panamax initiatives that will help secure the economic and viability of mega cruise ships at the same time. The Norwegian Spirit was the area well into its third century. the first ship to dock at the new pier on April 29, 2009 and the facility was officially opened by the Premier Dr. Ewart Brown, The first full season of operation for the second cruise ship JP, MP on May 6, 2009. terminal at Heritage Wharf was a great success and will become the catalyst for Dockyard’s future growth and From April to December 2009 King’s Wharf and Heritage development. The completion of the Water Reclamation Wharf welcomed a total of approximately 278,385 passengers, Facility represented not only a significant development up from 200,991 in 2008. Regular visits by contract ships in the area’s sustainability but one of the single most Caribbean Princess (Princess Cruises), Explorer of the Seas important environmental developments in Bermuda to date. and Grandeur of the Seas (Royal Caribbean International) The widening of Cockburn Cut Bridge and the main gates and Norwegian Dawn and Spirit (Norwegian Cruise Lines) to Dockyard and the transfer of the west end bus depot accounted for 251,446 visitors with a further 26,939 arriving to Dockyard helped to significantly improve access and on singles visits by 10 other ships. transportation to the area. The increase in both the number of visitors and the amount The fact that these achievements were accomplished against of time spent in port had a significant and positive impact the backdrop of a difficult global economic climate was on local stores, restaurants and services in Dockyard. The particularly noteworthy and says much about the Department of Tourism has invited RFPs for a duty free growth of Dockyard as a viable and vital destination shop at Heritage Wharf and this is expected to be and port. During this past year, perhaps more available for the 2010 cruise ship season. than any other, the true economic potential of Dockyard as the Island’s premier destination Improved transportation facilities at the cruise and port and the positive implications for ship terminal made it easy for visitors to access the Bermuda tourism industry as a whole, buses, ferries or taxis to transport them to became self-evident. other areas of Bermuda. WEDCo continues to work closely with the Departments of Visit of Her Majesty Queen Eliz abeth II Marine and Ports, Transport and Tourism to ensure that the flow of increased numbers The Royal visit to Dockyard on November 25, 2009, by Her of visitors in and out of Dockyard is handled Royal Highness Queen Elizabeth II and Prince Phillip, the Duke as efficiently as possible. An additional of Edinburgh was undoubtedly one of the highlights of the road train service was added during 2009 year. The visit, 35 years after Her Majesty officially opened offering cruise ship passengers direct return the Bermuda Maritime Museum at Dockyard, marked both the trips to Horseshoe Bay. 200th anniversary of Dockyard and the 400th anniversary of settlement of Bermuda.

6 The Wes t End Development Corpora tion | Annu al Repor t 2010 The Wes t End Development Corpora tion | Annu al Repor t 2010 HIGHLIGHTS & ACCOMPLISHMENTS

During the hugely popular visit, their Royal Highnesses were the accomplishments of the former Dockyard apprentices Bermuda Tattoo Staff changes given a tour of the Clocktower Mall by Chairman Walter Lister, were marked in a special ceremony during which Governor met Naval Dockyard apprentices from 1950 and were treated Sir Richard Gozney unveiled a plaque commemorating the For three nights in October 2009, the Keep Yard at the WEDCo’s management team remained stable during the to a series of cultural and historical enactments by local Bermudians who served their apprenticeships at Dockyard Dockyard provided a suitably impressive historic setting for financial year. A custodian technician and two maintenance students. Her Majesty also officially opened the 1,000 square and, following the closure of Dockyard in 1950, completed their the spectacular Bermuda Tattoo featuring 400 musicians, technicians were added to meet increased operational needs. foot mural in the Commissioner’s House by Bermudian artist education in the UK. Dr. Edward Harris, Executive Director of dancers and other performers from Bermuda and overseas. Graham Foster depicting Bermuda’s history. the Bermuda Maritime Museum, led a tour highlighting the WEDCo Westgate Inmate Programme significant contributions of the apprentices to Bermuda. Christmas in Dock yard Since 2007, WEDCo has worked with the Department of Destination Dockyard Local residents flocked to the West End during December Corrections in providing paid work release opportunities for the popular Christmas in Dockyard events. Every for low-risk Westgate inmates. The programme provides a The weekly Destination Dockyard street festival continued to Sunday during the festive season, shoppers were treated positive and valuable step in the rehabilitation of offenders be popular with residents and visitors alike. During the 2009 to entertainment and free gift-wrapping while their children and on any given week, up to five inmates work under strictly season, 20 weekly events were held every Monday evening were looked after at a special “kiddie corner” where supervised conditions alongside WEDCo staff performing from mid-May to mid-October, featuring late-night shopping, attractions included face-painting and a fun castle. landscaping, plumbing, electrical and other general local crafts, food and live entertainment. maintenance duties. WEDCo expects to sign a memorandum Bermuda Music Festival of understanding with the Department of Corrections Festival of the Sea extending the programme through 2010-2012. October saw the return of the Bermuda Music Festival to On June 7, WEDCo hosted the annual Festival of the Sea, Dockyard. The Keep Yard of the Maritime Museum played to celebrate the Tall Ships Atlantic Challenge 2009, and to host to the legendary Quincy Jones and Friends, including commemorate the 200th Anniversary of the Royal Naval Kenny Rogers, Wyclef Jean, Michael McDonald, John Legend Dockyard. The event attracted a large number of visitors and Patti Austin. and was an opportunity to showcase Dockyard’s versatility 200th Anniversary and advantages as both a destination and a venue for major events. Visitors were able to visit the four class A vessels A number of events were held during 2009 to commemorate berthed at Dockyard during the Challenge - Captain Miranda, the 200th anniversary of the establishment of The Royal Cisne Branco, Kaliakra, and Kruzenshtern – along with Spirit Naval Dockyard. of Bermuda, which is permanently based in Dockyard. Other attractions included live music, gombeys, salsa dancing, roving Dockyard Apprentice Appreciation ‘pirates’, a market on the Clocktower lawn, a beer garden in the Victualling Yard and a free dolphin show at DolphinQuest For more than two centuries, the apprentice system at HM in the Maritime Museum. Dockyard Bermuda produced generations of highly skilled Bermudian craftsmen, mechanics and tradesmen. While the Endless Summer system primarily served the Royal Navy’s ships and shore stations, the skills and talents nurtured at Dockyard benefited Hundreds of residents celebrated Dockyard’s 200th Bermuda immensely. It provided Bermuda’s first truly racially anniversary on August 30 at the Endless Summer event that integrated school and workshop experience while producing featured family attractions, food, live entertainment and a 200 master tradesmen and scholars, many of whom went on free movie presentation. to run their own successful businesses. On March 21, 2010,

8 The Wes t End Development Corpora tion | Annu al Repor t 2010 INFRASTRUCTURE

West End W ater Reclamation Facility Commercial Dock Reverse Osmosis Plants

The completion of the West End Water Reclamation Facility Work on the public dock and excursion boat berths was Management of Dockyard’s two reverse osmosis plants was was a major step forward in upgrading the area’s water and completed in time for the 2009 season. This will enable taken over by Rocon Services Ltd. from the fourth quarter of wastewater treatment infrastructure to address its existing more convenient access to commercial services such as 2009. In addition to ensuring a consistent supply of treated and future needs. The new facility uses state-of-the-art jet skis and charter boats for cruise ship passengers and water to visiting cruise ships and Works and Engineering, technology to produce high-quality reclaimed water suitable visitors arriving by ferry. Rocon is also assisting WEDCo in monitoring both water for use as non-potable reuse as toilet flushing water and supply and water quality testing throughout the West End. landscape irrigation. Security Casemates It replaces a 20-year old facility that was in extremely poor WEDCo continues to work closely with Police and the physical condition, produced a poor effluent quality and was Community Action team in monitoring and improving In December 2009, Government transferred Casemate infamous for foul odours in Dockyard. The new facility is security in and around Dockyard. The establishment of a Barracks and its adjacent buildings and fortifications to designed to treat an average of 150,000 gallons per day (gpd), permanent Police sub-station in Building NB15 did not take Bermuda Maritime Museum, creating the National Museum and peak flow of 250,000 gpd. This capacity can be doubled place as expected during the 2009-2010 financial year due of Bermuda. Archaeological and restoration work on the when needed by adding new membrane equipment within to Police budgetary restraints but WEDCo remains hopeful former Casemates site continued under the leadership of bottlenecks at Cut Bridge and the Dockyard Gates and allows the existing structure. The compact design has a smaller that it will take place during 2010-2011. Dr. Edward Harris, the Museum’s director. for more efficient transportation of cruise ship passengers in footprint than the old wastewater treatment plant but has the and out of the Dockyard. capability to treat more than six times the flow and produce a Technical issues prevented the planned installation of far superior effluent quality. Pender Road Bus Depot additional closed circuit cameras during 2009 but WEDCo is confident that these can be resolved for installation Significantly, the project was managed internally by WEDCo, during 2010. The Department of Public Transportation’s new Bus Depot which decided to act as general contractor after negotiations was completed in August 2009 on the site of the former with contractors failed to reduce the estimated $20 million Following the completion of the Water Reclamation Facility, derelict housing on Pender Road. With all West End routes project budget. WEDCo negotiated contracts with various a new security gate was installed at the Sallyport. The now terminating to Dockyard instead of Somerset Village, subcontractors and managed the construction and startup of gate, which is operated by swipe card access, also provides it has led to a significant improvement in public transport the new facility. This initiative meant the cost of the project additional land-side security for Snorkel Park. facilities for local and visitors alike. Together with the Sea was reduced to $15.2 million. Express ferry service and Dockyard Train, it has helped make getting around the West End much easier and more efficient. This facility represents a significant step forward for WEDCo and Bermuda, and will allow future development of the West North Basin Marina End to proceed in the future.

Phase Three of the North Basin Marina development continued Pender Road with the relocation of Marine & Ports’ vessels to the North Arm. One remaining dock is due to be completed in mid-2010 The much-needed widening of Pender Road was completed enabling the Marina to accommodate 140 berths. in May 2009, allowing for easier traffic access to and from During 2009, WEDCo also announced plans for development Dockyard. The improvements included a new bridge which of the South Basin, which will include a marina with a further has been built at Cockburn Cut, the site of Bermuda’s first 100-120 berths. Work is expected to begin on this project concrete bridge in 1892, and widening of the Dockyard during 2011. Gates. The completion of the project has eliminated traffic

10 The Wes t End Development Corpora tion | Annu al Repor t 2010 BUSINESS DEVELOPMENT

Retail RESIDENTIAL DEVELOPMENT

As expected, the increased volume of cruise ship visitors As previously announced, WEDCo relinquished its and crew following the opening of Heritage Wharf created management of the Boaz Island Condominium Corporation demand and opportunity for local businesses with Dockyard after divesting most of its assets at the Village but as the stores reporting average increases in retail sales of 4-5%. owner of 34 remaining units, the Corporation retains a place on the Board. The growing business confidence in Dockyard reflected by the establishment of major stores Makin’ Waves and Phoenix WEDCo expects to see work begin in the 2010-11 fiscal year on Dockyard Pharmacy in 2008, continued in 2009 with the the long-awaited redevelopment of Victoria Row Houses. The addition of popular children’s lifestyle boutique Daisy final name for the site has not yet been finalized however for & Mac in the Clocktower Mall, which took over the space project purposes it has been given a name of Victoria Place. vacated by the Bermuda Bookstore. The Duchess Boutique The site will be rebuilt as a mix of 100 one-, two- and three- was another new addition, while in March 2010, Eve’s Cycles bedroom rental units. WEDCo is committed to ensuring that opened Dockyard’s second cycle rental facility, in Dockyard every opportunity is provided to the sitting tenant to avoid Terrace No. 10. Popular Bermudian artist Carole Holding displacing any tenant during the projects development. expanded her successful Front Street business to include The Bermuda Shop in the Clocktower Mall and a concession at Hertiage Wharf.

Snorkel Park was taken over by the new management team of Belcario Thomas and Tom Steinhoff who set about enhancing the facility as both a major tourist attraction and the west end’s premier entertainment venue with a series of well- received summer events and parties. Redevelopment work included a larger patio for dancing or live entertainment, improved dining facilities and a separate children’s beach.

The former Beethoven’s restaurant in the Clocktower Mall was successfully renovated and rebranded as Café Amici by Livio Ferigo, owner of popular Dockyard restaurant Bonefish. The new Italian-themed restaurant provides visitors and local diners with more choice and variety in Dockyard for lunch and dinner.

12 The Wes t End Development Corpora tion | Annu al Repor t 2010 LOOKING FORWARD

The development of the South Basin will be the next major WEDCo is fortunate in that it owns the buildings in Dockyard project undertaken by WEDCo. Work on the project, which will and is in a position to ensure consistent and appropriate involve significant land reclamation and a new third break arm, development – something that has arguably been lost in is expected to start in 2011. When complete this development Hamilton. Pending developments, for example, will further will provide a new 100 - 125 berth marina and space for the utilize second floor space in the Clocktower Mall and other relocation of Marine and Ports and West End Yachts and other buildings as offices while retaining lower floors for easy visitor light industries presently located behind the Clocktower Mall access to retail businesses, restaurants and other services. as well as other new businesses. This relocation will in turn open up another excellent development opportunity in the Dockyard continues to provide opportunities for growth in North Basin. Bermuda, especially in the current economic environment where Government increasingly seeks private-public WEDCo’s efforts in the coming year are driven by the ongoing partnerships. The Corporation also continues to attract need to increase critical mass. Our continued upgrading of serious interest from overseas investors who view Bermuda buildings and facilities is geared to attracting both more as a safe investment and we remain confident that in due permanent residents and a regular flow of local visitors and course this will result in substantial developments that will tourists to the West End in order to maintain revenue sources benefit not only Dockyard but also the whole of Bermuda. and ensure long-term sustainability. More than 200 years after it was founded as a naval base, We remain committed to the vision of developing the West End Dockyard is successfully charting a new course that re- and Dockyard as a unique place in which to live, work and play. establishes its strategic importance to Bermuda. Today, No other destination in Bermuda offers the total experience though, it is cruise ships, not warships that are providing the that Dockyard offers in terms of dining, entertainment, catalyst for economic growth and opportunity. The Board shopping, activities, culture, and heritage. and management of WEDCo remain committed to managing that growth to ensure that Dockyard becomes a vibrant and WEDCo remains ever mindful that future development, while sustainable destination, port and town that will prosper for essential for the long-term viability of Dockyard, must be another 200 years. sensitive to the architectural heritage and history that is such a major component of the area’s appeal. To this end, WEDCo endeavours to retain the exterior and character of existing buildings where possible and strives to ensure that new structures complement the historical environment. To date this has been achieved successfully throughout Dockyard with buildings such as the Clocktower Mall, Dockyard Terrace and Heritage Wharf.

14 FINANCIAL REVIEW 2009-2010

While fiscal 2009-2010 was a year in which the Corporation During fiscal 2009-2010, the Corporation completed the sale succeeded in furthering many of its initiatives to promote of nine additional units at Boaz Island Village bringing the growth in the West End, these have not yet begun to generate total sold at year-end to 18. The cash position at year-end the revenue streams that are expected over the longer term. reflects the proceeds from these sales and these funds are However, the operating costs begin immediately and therefore targeted for investment in projects that will produce greater have had a significant impact on the income statement. revenue streams than those lost through rents.

This resulted in an operating loss for the period, primarily Looking forward to the future, the Heritage Wharf complex due to increased operating costs of 16% associated with the continues to be a major catalyst in increasing the critical operation of the new West End Water Reclamation Facility. mass of both tourists and local residents to the area. While This was offset somewhat by an increase in revenues of 8.2% the Government has commenced proceedings to divest the generated by increases in both rental and dock revenues. Corporation of this asset in financial year 2010-2011, the The sales of Boaz Island units produced additional revenues, Corporation will continue to be responsible for the operation generating a net growth in Retained Earnings of 10.4% to of the facility. $24.4 million. The development of the new housing at Victoria Place is While the Corporation remains in growth mode, this pattern is moving forward and while this will not, in and of itself, enhance likely to continue for the short-term until new developments the Corporation’s revenues, it will provide an opportunity to begin to generate the expected revenues to offset the redevelop some of the existing properties with the intent of increase in the cost of providing the appropriate services in better utilising the assets and augmenting existing revenue the interim. streams. Other initiatives, which are currently in the early stages, are expected to stimulate additional critical mass and will be pursued aggressively during the coming year.

The future remains clearly in focus and the Corporation is secure in the knowledge that they are continuing on the right course to achieving its long-term goals and objectives. 18 The Wes t End Development Corpora tion | Annu al Repor t 2010 NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 20010 expressed in Bermuda dollars

1. AUTHORITY The West End Development Corporation (“the Corporation”) was established by the West End Development Corporation Act 1982. The general function of the Corporation is to manage and develop all designated land in the western end of the Island with a view to the progressive improvement of the social and economic conditions.

2. SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared in accordance with accounting principles generally accepted in Bermuda and Canada applicable to a ‘going concern’, which assume that the Corporation will continue its operations in the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.

Management regularly reviews and considers the current and forecast activities of the Corporation in order to satisfy itself as to the viability of operations. These ongoing reviews include current and future business opportunities, customer and supplier exposure and forecast of cash requirements and balances. Based on these evaluations management considers that the Corporation is able to continue as a going concern.

For financial reporting purposes, the Corporation is classified as a government business-type organization and has adopted accounting policies appropriate for this classification. The policies considered particularly significant are set out below:

(a) Government of Bermuda grants and contributions

Operating grants are recorded as revenues. Contributions for capital projects are deferred and amortized to income on the same basis as the related capital assets are amortized.

Contributed capital assets are recorded at their fair value at the date of contribution. When fair value cannot be reasonably determined, the capital asset is recorded at nominal value.

(b) Revenue recognition

Rental income received under operating leases is recognized on an accrual basis. Leased properties are outlined in note 8 as rental revenue producing assets.

Berthing fees, received from all vessels arriving in Dockyard, are recognized on an accrual basis.

(c) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and current account balances with banks.

(d) Capital assets

Capital assets are recorded at cost. Amortization is calculated on a straight-line basis over the estimated useful lives of the assets as follows:

Years

Furniture, equipment and tools 3 - 10 Building improvements and renovations 10 - 25 mechanical rehabilitation 10 - 25 landscaping 5 - 40 Buildings 40 infrastructure rehabilitation 40

Assets under development represent the cost of direct materials and labour of capital projects not completed at year-end.

A half-year’s amortization is charged in the year the asset is brought into use.

(e) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognized in the statement of operations in the period in which they are incurred.

(f) Use of estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues earned and expenses incurred during the year. Actual results could differ from these estimates.

20 The Wes t End Development Corpora tion | Annu al Repor t 2010 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 20010 MARCH 31, 20010 expressed in Bermuda dollars expressed in Bermuda dollars

(g) Adoption of Accounting Standards 5. TENANT IMPROVEMENTS RECOVERY During the year, the Corporation provided funding, in the amount of $471,663, to the Department of Public Transportation to develop a bus depot in Dockyard Effective April 1, 2009 the Corporation adopted the following new accounting standards issued by the Canadian Institute of Chartered Accountants (which to replace the existing one in Somerset. This loan is to be repaid over 5 years at 7%. An amount of $33,327 was repaid during the year. At March 31, 2010 are promoted by the Institute of Chartered Accountants of Bermuda by signed agreement and therefore generally accepted in Bermuda). the balance outstanding was $438,336.

Financial Statement Concepts, Section 1000

Financial Statement Concepts, Section 1000, clarifies the criteria for recognition of an asset and the timing of expense recognition. The adoption of this standard had no material impact on the Corporation’s financial statements.

Credit risk and fair value of financial assets and liabilities, EIC 173

The guidance clarified that an entity’s own credit risk and the credit risk of counterparty should be taken into account in determining the fair value of financial assets and liabilities including derivative instruments. The Corporation has evaluated the new EIC and determined that the adoption of the new requirement did not have a material impact on the Corporation’s financial statements.

(h) Financial Instruments, Recognition and Measurement 6. INVESTMENT IN SUBSIDIARY During the fiscal year ended March 31, 2010, the formation of a limited liability company known as South Basin Development Ltd. (SBD) was finalized. SBD will The Corporation’s financial instruments consist of cash, accounts receivable, mortgages receivable, tenant improvements recoverable, housing units sale have the specific role of developing affordable housing, marina and land reclamation. The subsidiary is 100% WEDCO owned. It is planned that the ownership proceeds receivable, accounts payable and accrued liabilities, due to the Government of Canada and long-term debt. of SBD will change to 60% WEDCO and 40% Clark International, LLC in a Public Private Partnership before SBD commences operations.

The following is a summary of the accounting model the Corporation has elected to apply to each of its significant categories of financial instruments As at year end, $13,974 (2009 - $3,075) in legal costs had been incurred on the formation of SBD. outstanding at March 31, 2010: 7. HOUSING UNITS HELD FOR SALE • Cash, accounts receivable, housing units sale proceeds receivable and accounts payable and accrued liabilities are classified as Held for trading In April 2005, the Board approved the sale of the 52 units owned by the Corporation at Boaz Island Village. Management is actively pursuing potential buyers and are measured at fair value and changes in fair value are recognized in the statement of operations. of the individual units. As a result, the units, previously classified as revenue rental producing assets, have been reclassified in the balance sheet as Housing • Mortgages receivable and tenant improvements recoverable are classified as Loans and receivables and are measured at amortized cost using the Units Held for Sale at cost as this is lower than the net realizable value. As at March 31, 2010, two sales had been completed for which the proceeds, totalling effective interest rate method. $900,000, had not yet been received. • Long-term debt and Due to the Government of Canada are classified as other financial liabilities and are measured at amortized cost. 8. CAPITAL ASSETS Unless otherwise noted, it is management’s opinion that the Corporation is not exposed to significant interest, currency or credit risk arising from these financial instruments.

The fair value of the Corporation’s held-for-trading financial assets and financial liabilities approximate their carrying values due to their short-term maturity.

Certain items such as prepaid expenses, capital assets, deferred revenue, deferred insurance proceeds and deferred capital contributions are excluded from fair value disclosure requirements as they are not financial instruments.

3. ACCOUNTS RECEIVABLE

4. MORTGAGES RECEIVABLE In April 1985, the Corporation received permission to sell, subject to the approval of the Minister of Works & Engineering and Housing, the freehold interest of its residential properties in the West End Development Corporation area under the provisions of Section 20 of the West End Development Corporation Act 1982. The mortgages are for periods varying from five to 30 years at an interest rate of 9% per annum.

22 The Wes t End Development Corpora tion | Annu al Repor t 2010 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 20010 MARCH 31, 20010 expressed in Bermuda dollars expressed in Bermuda dollars

8. CAPITAL ASSETS (continued) 11. OBLIGATIONS UNDER CAPITAL LEASE (continued) Loan interest incurred during the construction of the Waste Water Treatment Facility totalled $243,914 and is included in the cost of the capital assets. Future repayments scheduled over the remaining term of the lease are as follows:

Under the West End Development Corporation Act 1982, approximately 214 acres of land comprising Watford Island, Boaz Island and Ireland Islands North and South, including buildings thereon, were vested in the Corporation by the Government of Bermuda. According to Section 20 of the Act, the Corporation shall not make a sale or other disposition of any vested property or any interest in vested property unless the Senate and the House of Assembly have first approved the sale or disposition by resolution. The Corporation has received approval for residential properties, subject to the approval of the Minister of Works & Engineering and Housing, as disclosed in note 4.

On May 7, 2009, the Government conveyed ownership of the new cruise ship pier known as the Heritage Wharf and the associated reclaimed land to the Corporation with an estimated value of $58 million for a nominal fee of $1. Under the terms of the conveyance agreements, the Government has an irrevocable right to purchase the transferred assets for the same consideration.

Included in the above capital assets are rental revenue producing assets at a cost of $21,635,589 (2009 - $21,145,047) and related accumulated amortization of $9,047,586 (2009 - $8,291,203).

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

12. DUE TO THE GOVERNMENT OF CANADA Effective December 31, 1993, the Department of National Defence, Canada, withdrew its personnel from Bermuda. A Deed of Surrender was signed on December 6, 1995, whereby the Government of Canada surrendered 54 Boaz Island Village units to the Corporation. The deed requires the Corporation to repay the sum of $5,000,000, interest free, within a term of ten years of the date of the deed.

It is Management’s intention that for any units sold, the proceeds will be paid against this debt obligation by the end of the calendar year in which the unit is sold. This debt obligation will first be paid to the Government of Bermuda up to a total amount of $353,483, to discharge redundancy payments payable on behalf of the Government of Canada. Thereafter, the proceeds per unit sold will be remitted to the Canadian Government to satisfy the remainder of the debt obligation.

10. DEFERRED INSURANCE PROCEEDS During fiscal 2003/2004, the Corporation sustained damage to its properties as a result of Hurricane Fabian for which the insurance company compensated the Corporation an amount of $1,650,000. As of March 31, 2010, $1,257,732 (2009 - $1,242,732) had been spent on repairs. Work is ongoing and the unused portion of the claim has been deferred and separately identified on the balance sheet.

11. OBLIGATIONS UNDER CAPITAL LEASE Effective February 1, 2010 the Corporation entered into a capital lease with Air Care to provide upgrades to existing equipment and to replace any and all equipment as necessary for a period of 10 years at a total lease cost of $175,084. Under the terms of the lease, the Corporation made a 25% down payment of $43,771. The remaining balance of $131,313 is payable over a period of 10 years at monthly installment amounts of principal and interest of $1,700. The lease bears interest of approximately 9.5%.

13. LONG-TERM DEBT In April 2009, the Corporation secured a loan for $10,000,000 through Capital G Bank to fund the completion of the new Waste Water Treatment Facility in Dockyard. The interest rate on the loan is the bank’s Bermuda dollar base rate plus margin of 0.75%. This loan is for a term of seven years and repayment of principal and interest has been guaranteed by the Government by way of annual grants to the Corporation. The total amount of drawn down plus capitalized interest at March 31, 2010 is $8,537,868 of which $243,914 is capitalized interest.

24 The Wes t End Development Corpora tion | Annu al Repor t 2010 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 20010 MARCH 31, 20010 expressed in Bermuda dollars expressed in Bermuda dollars

13. LONG-TERM DEBT (continued) 16. EMPLOYEE BENEFITS Scheduled principal and interest repayments are as follows: (a) PENSION PLANS

(i) Pension plan for Bermuda Industrial Union employees

Employees of the Corporation who are included in the Bermuda Government collective bargaining agreement with the Bermuda Industrial Union are covered by the Public Service Superannuation Fund (“the Fund”), which is a defined benefit plan administered by the Government of Bermuda. Employee contributions to the Fund are 8% of gross salary and they are matched by the Corporation.

The Corporation is not required, under present legislation, to make contributions to the Fund with respect to quantified actuarial deficiencies. As a result, the current year contributions to the Fund represent the total liability of the Corporation. The Corporation’s contributions to the Fund during the year totalled $55,119 (2009 - $51,718).

(ii) Pension plan for administrative employees

Administrative employees of the Corporation are covered under a private defined contribution plan through BF&M Life Insurance Co. Ltd. Employee contributions to the Plan are 5% of gross salary and they are matched by the Corporation. These contributions represent the total liability of the Corporation and are recognized in the accounts on a current basis. The Corporation’s contributions to the Plan during the year amounted to $74,932 (2009 - $54,358). 14. DEFERRED CAPITAL CONTRIBUTIONS Deferred capital contributions represent the unamortized amount of capital assets received and grants received for the purchase of capital assets. The (b) OTHER BENEFITS amortization of deferred capital contributions is recorded as revenue in the statement of operations. Other employee benefits include maternity leave, sick leave, and vacation days. All of these benefits are unfunded.

Maternity leave does not accumulate or vest and therefore an expense and liability is only recognized when applied for and approved. There were no maternity benefits applied for or approved during the current year and therefore, no liability has been accrued in the accounts.

Sick leave accumulates but does not vest, and like maternity leave, a liability is recorded only when extended leave is applied for and approved. There was no extended sick leave applied for or approved during the current year and therefore, no liability has been accrued in the accounts.

Vacation days accumulate and vest and therefore a liability is accrued each year. An actuarial study has not been performed for the vacation days benefit obligation as there were no factors used in the calculation that are materially different from the figures that would be estimated by an actuary. The accrued vacation liability as of March 31, 2010 is $111,587 (2009 - $103,759) and is included in accounts payable and accrued liabilities.

17. COMMITMENTS At March 31, 2010, the Corporation had contractual obligations relating to various capital projects of $128,100 (2009 - $8,922,608). Additional approved projects not yet contracted amount to $34,000,000 (2009 - $560,000).

18. FINANCIAL RISK MANAGEMENT Capital asset received during the year represents the value of the new cruise ship pier, the Heritage Wharf, conveyed to the Corporation by Government at a The Corporation has exposure to counterparty credit risk, liquidity risk and market risk associated with its financial assets and liabilities. The Board of nominal fee of $1. Directors has overall responsibility for the establishment and oversight of the Corporation’s risk management framework. The Board of Directors has established the Finance and Audit Committee which is responsible for developing and monitoring the Corporation’s compliance with risk management 15. RELATED PARTY TRANSACTIONS policies and procedures. The Finance and Audit Committee regularly reports to the Board of Directors on its activities. The Corporation’s risk management The Corporation is related in terms of common control to all Government of Bermuda created departments, boards and quasi-autonomous non-governmental program seeks to minimize potential adverse effects on the Corporation’s financial performance. The Corporation manages its risks and risk exposures organizations. The Corporation enters into transactions with these entities in the normal course of business which are measured at the exchange amount, through a combination of insurance and sound business practices. which is established and agreed to by the related parties. Related party transactions entered into by the Corporation are as follows: Credit Risk

Credit risk arises from cash held with banks and credit exposure to customers, including outstanding accounts receivable. The maximum exposure to credit risk is equal to the carrying value (net of allowances) of the financial assets. The objective of managing counterparty credit risk is to prevent losses on financial assets. The Corporation assesses the credit quality of counterparties, taking into account their financial position, past experience and other factors.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and current account balances with banks. Credit risk associated with cash and cash equivalents is minimized substantially by ensuring that these financial assets are invested with highly rated financial institutions.

Accounts Receivable

Accounts receivable consist primarily of trade accounts receivable from billings of services provided. The Corporation’s credit risk arises from the possibility that a counterparty which owes the Corporation money is unable or unwilling to meet its obligations in accordance with the terms and conditions in the contracts with the Corporation, which would result in a financial loss for the Corporation. This risk is mitigated through established credit management techniques, including monitoring counterparty’s creditworthiness, obtaining references and taking security deposits. In the year ended March 31, 2010, the maximum credit risk to which the Corporation is exposed represents the fair value of its accounts receivable.

26 The Wes t End Development Corpora tion | Annu al Repor t 2010 NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 20010 expressed in Bermuda dollars

18. FINANCIAL RISK MANAGEMENT (continued)

Liquidity Risk

Liquidity risk is the risk the Corporation will not be able to meet its financial obligations as they fall due. The Corporation’s objective in managing liquidity is to ensure that it will always have sufficient liquidity to meet its commitments when due, without incurring unacceptable losses or risking damage to the Corporation’s reputation. The Corporation manages exposure to liquidity risk by closely monitoring supplier and other liabilities, focusing on debtor collection, generating positive cash flows from operations and establishing and maintaining good relationships with various financial institutions.

Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the fair value of recognized assets and liabilities or future cash flows of the Corporation’s results of operations. The Corporation has minimal exposure to market risk.

Foreign Exchange

The Corporation’s business transactions are mainly conducted in Bermuda dollars and, as such, it has minimal exposure to foreign exchange rates risk.

Interest Rate

The Corporation is exposed to changes in interest rates, which may impact interest expense on long-term debt.

19. CAPITAL MANAGEMENT The Corporation’s objective when managing capital is to hold sufficient equity to enable it to withstand negative unexpected financial events. The Corporation seeks to achieve this objective through generating an excess of revenues over expenses. The Corporation maintains sufficient liquidity to meeting its short- term obligations as they come due. The Corporation is not subject to any externally imposed capital requirements.

20. SUBSEQUENT EVENT On May 7, 2009, the Government conveyed ownership of the new cruise ship berth and the associated reclaimed land to the Corporation, with an estimated value of $58 million, for a nominal fee of $1. The Corporation has assumed responsibility for the operation and maintenance of the facility with effect from that date. However, subsequent to March 31, 2010, the Government has expressed the intention to divest the Corporation of this asset and enter into a lease and repair agreement with the Corporation.

21. RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Developments

In February 2008, the Accounting Standards Board of the Canadian Institute of Chartered Accountants confirmed its strategic plan which will abandon Canadian generally accepted accounting principles and effect a complete convergence to International Financial Reporting Standards (IFRS). In September 2009, the Public Sector Accounting Board approved an amendment to the scope of public sector accounting standards. The existing category of government business-type organizations (GBTO) will cease to exist and such organizations like The West End Development Corporation previously falling into that category must decide if they are a “Government Not-For-Profit Organization (GNFPO)” or an “Other Government Organization (OGO)”. Other Government Organizations will be permitted to choose to prepare their financial statements in accordance with public sector standards or IFRS. This choice will depend on an evaluation of which basis will better satisfy the needs of users of their financial statements. These new developments will be effective for the Corporation’s financial year commencing April 1, 2011.

22. COMPARATIVE FIGURES Certain comparative figures have been restated and reclassified to conform to the current year’s presentation.

28 BOARD OF DIRECTORS

Chairperson: The Hon. Walter Lister, JP MP

Deputy Chairperson: Mr. Stanley Lee

Directors: Dr. Edward Harris MBE, JP, FSA Mr. Cecil O. Durham, JP Mr. Marc Daniels Dr. Melvyn Bassett Mr. Albert Ratteray Mr. Michael Wellman

EX-OFFICIO

Permanent Secretary, Works & Engineering Director of Planning Financial Secretary

FINANCE AND AUDIT COMMITTEE

Mr. Stanley Lee – Chairperson Ms. Sandra Ferguson Mr. Andrew Dias

WEDCo EXECUTIVE

General Manager: Andrew Dias Financial Controller: Sandra J. Ferguson Facilities Manager: Carmen Harvey Business Development Manager: Raymond Tannock

BANKERS

Bank of N. T. Butterfield & Son, Ltd. Capital G Bank

Annual Report Design the foundation

Writer Chris Gibbons

Photography Craig Ferguson Work. Play. Live.

West End Development Corporation

P.O. Box MA 415 Mangrove Bay, MA BX Bermuda

[T] 441.234.1709 [F] 441.234.3411

[E] [email protected] www.thewestend.bm