Jersey Post International: Annual Report 2011.

Danirde cAtdovrsis, Oorsfficers  ADPO Beuloditoittx 4eoLr L0s P3 Contents

St. Helier

Jurat Mike Liston OBE Jersey

Non-Executive Chairman  JE4 8WA 02 Board of Directors

Paul Jackson 04 Chairman s Statement

Non-Executive Pension Advisors

Aon Hewitt Limited 10 Business Review

Chris Evans Actuaries and Consultants

Non-Executive 40 Queen Square 16 Statement of Corporate Governance

Bristol

Donal Duff BAAF FCA AMCT BS1 4QP 26 Directors Report

Non-Executive

Tim Brown FIoD, FCILT, CPFA Bankers 28 Independent Auditors Report Non-Executive

(Appointed 1 September 2011) HPO BSBC Box 1a4nk plc 30 Consolidated Profit and Loss Account

St. Helier 30 Consolidated Statement of Total Recognised Kevin Keen MBA, FCCA, FCMA Jersey Gains and Losses

Chief Executive Officer JE4 8NJ

(Appointed 24 June 2011)

31 Consolidated Balance Sheet

Liz Vince BA (Hons), CPFA, CPD (cert.), MICA

Finance Director Registered Office 32 Consolidated Cash Flow Statement

Postal Headquarters

(Appointed 23 February 2012)

La Rue Grellier 33 Notes to the Financial Statements

La Rue des Pres Trading Estate

Gary Carroll St. Saviour

Business Development Director Jersey

(Appointed 23 February 2012) JE2 7QS

Company Secretary

Liz Vince BA (Hons), CPFA, CPD (cert.), MICA

Board of Directors 2 3 Jersey Post Annual Report & Accounts 2011

Board of Directors

Jurat Mike Liston OBE  Tim Brown FloD FCILT CPFA

Non-Executive Chairman, Mike Liston has wide experience of the public and private sectors.  Non-Executive, Tim Brown has over 20 years experience in the post, parcel and distribution Previously Chief Executive of Jersey Electricity PLC, he now holds a wide range of non- industry. He has worked in senior positions in Royal Mail and DHL Express, was CEO of executive Chairmanships with public and private operating companies, private equity and  Postcomm (the UK s postal regulator), provided advice to government and was Vice-Chair venture capital houses, in the energy and fiduciary services sectors. He is a lay Judge in the  of the European Regulators Group for Post. His current work includes providing board Royal Court of Jersey.  level advice, consultancy and interim management to post and parcel companies and

their suppliers.

Mike was founding Chairman of the Jersey Appointments Commission, which was

established by government to ensure probity in public appointments. He served for many

years on the governing Council and Audit Committees of Europe s largest professional

engineering body, the Institution of Engineering and Technology. He is a Fellow of the Royal  

Academy of Engineering. Kevin Keen MBA FCCA FCMA

Kevin Keen joined Jersey Post as Chief Executive in June 2011. He spent the majority of his previous career working for Le Riche Group where he was Group Finance Director for five years before being appointed as Managing Director of the group s core retail business in

Paul Jackson  2000. In 2003, Kevin joined Jersey Dairy as Managing Director where he led a successful Non-Executive, Paul Jackson is a well-known expert in the mail, express, air freight and  turnaround. He is a past President of The Jersey Chamber of Commerce.

logistics industry, with extensive knowledge and experience of all aspects of the industry

as a whole, and the postal world in particular. Kevin is also Non-Executive Chairman of Jersey Water, a Non-Executive Director of Voisins

Department Store Limited, Le Gallais Real Estates Limited and is Honorary Financial Adviser He is the Non-Executive Chairman of Triangle Management Services Limited, which provides  to the Jersey Heritage Trust.

strategic consultancy, market research, mergers and acquisitions services, conferences

and executive recruitment, mainly in the mail, express and logistics sectors. Under Paul s

direction, the company has developed a pre-eminent position in the mail, express, logistics

and global freight sectors.

Liz Vince BA (Hons), CPFA, CPD (cert.), MICA

Liz Vince joined Jersey Post in 2006. In January 2008, she took over the role of Company Secretary and in September 2011 she became the Finance Director when this was

combined with the post of Company Secretary. Prior to this, Liz was the Chief Internal Donal Duff BAAF FCA AMCT Auditor for the States of Jersey for 10 years. Liz qualified as a Chartered Accountant in 1992

Non-Executive, Donal Duff qualified as a Chartered Accountant with Coopers & Lybrand in  with the National Audit Office in London. Liz is Honorary Treasurer of Relate in Jersey.

Ireland in 1991 and subsequently transferred to its Jersey office in 1993 to work on a wide

range of audit and corporate finance assignments. In 1996, he joined Le Riche Group Limited,

a listed company, as Group Financial Controller, where he performed a variety of roles until

such time as it was acquired by C.I Traders Limited, an AIM-listed company, in 2002. Donal

was Director of Finance and Company Secretary of this company (the largest private sector  

employer in the Channel Islands) until its acquisition by a private equity consortium in 2007,  Gary Carroll

and he continued to work with the new owners until 2008. Donal is Chief Operating Officer &  Gary Carroll joined Jersey Post in October 2009 as the Service Delivery Director with Finance Director of The Stanley Gibbons Group plc, an AIM-listed Jersey registered company. responsibility for the logistics, postal and print business units of the Group. Prior to joining

Jersey Post, Gary worked for 28 years with Royal Mail Group, with the last 11 years as a regional director for Royal Mail International, where he successfully negotiated bilateral agreements and financial settlements with the world s major postal organisations.

Chris Evans  Gary spent 5 years working for Royal Mail s International consultancy business, leading Non-Executive, Chris Evans has worked in the information technology services sector for 26  on postal development programmes in the Middle East and Far East, the Americas and

years and has been involved in the formation and running of a number of IT businesses. He is  Caribbean. Prior to this, Gary worked for the parcels business in the Royal Mail Group, currently the Chief Executive of Foreshore, an Internet services business, promoting Jersey- as part of the national sales team where Gary s responsibilities included the training and based e-commerce to a global customer base. Chris has served as a Non-Executive Director  development of the sales and customer teams.

on a number of boards, most recently the Jersey Electricity Company, from which he retired

in 2010 after 12 years. He understands how the disruptive nature of technology can be used

to drive business change and diversification and has sat on a number of States of Jersey

committees over the past 10 years, with the objective of finding new economic opportunities

for the Island.

Forces for Change

My report last year described a number of profound risks facing Jersey Post and highlighted the radical measures your Board was taking to mitigate them.

It focused in particular on the threat to the economic  In mid-2011, the Economic Development Minister viability of the public postal service in Jersey arising  acknowledged our concerns about the unforeseen risks from drastic proposals by the Jersey Competition  of further liberalising such a fragile postal market, and Regulatory Authority (JCRA) to further open to global  issued a Direction to the JCRA to undertake a strategic operators, the bulk mail market on which the Island s  review of the sector, to include an assessment of the historically loss-making letters service has depended  sustainability of the public postal service in light of

for subsidy. existing and pending liberalisation; threats to the bulk mail market and the declining use of letter post. In the

In the event, the relevance of the JCRA s proposal was  comprehensive report of its review, the JCRA recognised eclipsed near the end of 2011 by the UK government s  the significant uncertainties surrounding Jersey Post s sudden decision to withdraw tax relief on low value  future business and proposed a moratorium on the imports (LVCR) from the Channel Islands from April  licensing of new operators, or further liberalisation of 2012. This will decimate the fulfilment industry, and  letter conveyance, until at least 2015. It did, however,

the associated bulk mail market, which represents  state its intention to open to competition, bulk mailings more than half of Jersey Post s revenues and most  to all overseas destinations other than the UK. This

of its profits.  appears a risky policy adventure given the imminent

demise of bulk mailings to the UK and the currently small demand for bulk mailings to other jurisdictions.

2011 Performance Overview £million

65 66 65

1.2

0.9 0.6

'11 '10 '09 '11 '10 '09

Turnover Operating Profit*

* Before exceptional costs

The relevance of the JCRA s proposal was eclipsed near

the end of 2011 by the UK government s sudden decision to withdraw tax relief on low value imports (LVCR) from the Channel Islands.

Mike Liston Chairman, Jersey Post Group

In Better Shape  New Beginnings

Ironically, the JCRA s liberalisation proposals, which made the  During the year, the Chief Executive and the Finance Director significant loss of our bulk mail business a possibility, has better- left the business and the HR Director s role became redundant. prepared us for the UK government s actions, which make that  Kevin Keen joined Jersey Post in August, as its third Chief loss a certainty. Executive in five years.

Anticipating the loss of some bulk mail business to new competitors, Jersey Post pressed ahead last year with a range of cost reduction measures which it had announced in 2010. Commensurate with the severity of the new competitive threats facing the business at that time, these measures included job redundancies and pay cuts affecting 41% of our staff and a reduction to five-days-per-week mail collections and deliveries. A pay freeze we had imposed on salaried staff was extended for a third year and this, together with job cuts among senior and middle management grades, has reduced our annual white-collar pay bill by £2M since 2008.

With the competitive threats now overtaken by the more extreme impacts of the confirmed withdrawal of LVCR, the measures already taken will absorb much of the shock to our business and our people, which otherwise might prove catastrophic. However, with the demise of the bulk mail market threatening to accelerate the loss of postal volumes to just one-third of their recent levels within the next two years, further measures will be needed to secure Jersey Post s future in very much harsher conditions than previously feared.

The business transformation programme set by your Board in 2010 aimed to eliminate over a four year period the intrinsic losses incurred in providing the public postal service (the Universal Service Obligation, or USO). In light of the new and immediate threats to the bulk mail market, the programme was accelerated in 2011 to achieve that objective in two years. Good progress has been made, as evidenced by an increase

in operating profit to £1.2M from £0.6M in the previous year despite a 5% fall in mail volumes. However,

the real challenge of change management lies in sustainability and the control of collateral effects across an organisation, and these considerations prompted further changes to the company s leadership during the year.

The public sector in Jersey, from which Jersey Post was transferred upon incorporation in 2006, is inexperienced in the management of rapid and radical change. The Island s strong economy and loose fiscal policy has, until recently, sheltered public sector managers from the task of coping with contraction, and their experience of implementing change has been confined mostly to the challenges of managing growth. Jersey Post s senior managers struggled to implement the Board s two-year accelerated cost reduction programme across the necessarily wide range of the company s activities. The complexities of business

The real challenge of

change management lies in sustainability and the control of collateral effects across an organisation

process re-engineering, information technology replacement, manpower productivity improvement, pay & conditions reform and organisational restructuring created substantial pressures and adversely impacted service quality, corporate reputation and staff morale.

The Board concluded that successful implementation of the changes on which the company s future depended, could not be sufficiently assured without further changes to its senior management team, more than half of which had already been replaced since incorporation. In particular, the Board recognised the special challenge in overcoming specific obstacles to the achievement of change, not least the existence of cultural conservatism among so many of Jersey Post s stakeholders its management, its staff, its customers and the States as its shareholder.

He has a strong reputation for business transformation and has made good progress in stabilising the organisation. Together with Liz Vince, who was later appointed Finance Director from her previous role as Business Risk Manager and Company Secretary, he first conducted a fundamental review of all our business units financial performance. That review identified some anomalies in the internal allocation of costs between the USO and the bulk mail businesses and it further concluded that the real cost reductions already achieved, together with those currently in progress, were such that Jersey Post could most probably survive the loss of most of the bulk mail market now threatened by the UK government s actions.

  The further changes needed to

secure Jersey Post s financial viability are substantial, but they are within the realms of those underway elsewhere in the postal world.

The further changes needed to secure Jersey Post s financial viability are substantial, but they are within the realms of those underway elsewhere in the postal world. They will involve the further re-structuring of manpower costs, such that they are less fixed and more aligned to mail volumes and workload profiles. They

will involve more flexibility in working practices and the reshaping of the network of mail collection boxes and sub-post offices to remove costly overlaps in access facilities for our customers. Such changes in our cost base, together with cost-reflective pricing to the extent permitted within the regulatory regime enforced by the JCRA, are the only means by which the public postal service can be made sustainable in the absence of the bulk mail market which has hitherto funded it.

Although cost reduction remains the most urgent

and important priority as we adapt to dramatically changing trading conditions, we remain determined to develop new business opportunities to replace those being lost with the collapse of fulfilment mailings to the UK. We are constrained though by the small scale of the markets available to us in developing services to exploit e-commerce for example, and we are dismayed by the high cost of telecoms connectivity in Jersey which impedes the growth of digital industries. These industries in other jurisdictions have provided new openings for postal operators whose traditional markets are being eroded by technology.

With the closing of an era in which our retained earnings were generated largely from the bulk mail market, your Board believes that a special dividend is appropriate. However, given the suddenness of the new risks impacting the business, and the urgency of finding new growth opportunities, the Directors intend to defer their recommendations on a special distribution until later in 2012. In the meantime, it proposes an ordinary dividend of £375k (2012, £0) representing one-third of net profit.

Challenges Ahead

Whilst not uncommon in the outside world, the pace and scale of vital change throughout Jersey Post has been traumatic for its staff and perplexing for its customers.

The risks involved in completing our journey to financial sustainability are compounded by external factors beyond our control. Within the Island, the risk of regulatory ideology in competition policy appears to be moderating, but from outside the Island the ideology which has driven the Communications Workers Union in the UK to resist changes aimed at securing Royal Mail s future, has sometimes threatened to work against the interests of its members in Jersey Post, who recognise the imperative for new ways of working and a local approach.

As recent events have shown, the Island risks being entangled in struggles elsewhere as the priorities of those accountable for adapting to economic crisis clash with those favouring the status quo. Our success is best assured when we look inwards for the reconciliation of differences, and my hopes for the difficult year ahead are that all with a stake in the future of Jersey Post work together to secure it.

I am grateful for the endeavours of all those who have helped Jersey Post to adapt to its new circumstances.

Our staff and their representatives, and my colleagues

on the Board, have shown courage and pragmatism through difficult times. Since the year end, the Board has appointed two new executive directors in Gary Carroll and Liz Vince, both of which have extensive experience and knowledge of our industry, and Tim Brown was appointed as a Non-Executive Director during the year. Tim brings experience as diverse as Chief Executive of the UK postal regulator PostCom and senior commercial roles within the privatised postal industry. His appointment provides good continuity of insight into the global postal sector, which insight has been provided most valuably and passionately in the past seven years by Paul Jackson , who will retire by rotation at the next AGM.

Our success is best assured when we look inwards for the reconciliation of differences, and my hopes for the difficult year ahead are that all with a stake in the future of Jersey Post work together to secure it.

Mike Liston OBE Chairman

24 May 2012

Another year of change

Volume of Mail Overview

2011 84m

2010 91m

          2009 94m

2008 97m 2007 86m

Customer Service  Our People

During December, the company launched its first  Given the pace and extent of change that has taken place at Island-wide survey. Jersey Post over the last few years, it was not surprising that

morale had been negatively impacted, but the extent of the After a period of change in some of the services we  generating almost 6,000 replies, which just goes to  decline was a source of great concern to management.

provide which had negatively impacted on customers,  show how passionate Islanders are about the service.

it was appropriate to seek feedback from Islanders.  The key findings of the survey were as follows:

We had a very large response for a survey of this type,

Responding to criticisms expressed by staff about aspects of the change programme, we spent considerable time in the final months of 2011 seeking

a solution that would provide the same level of savings whilst improving flexibility of manpower. A final proposal was made in March 2012 and overwhelmingly supported by members of the CWU.

As an organisation heavily dependent on the skills and

dedication of its people to provide our key services, we will be working hard with them all to maximise their

motivation and skills whilst being realistic about the challenges we face.

It is a testament to our people though, that in spite of all the disruption and uncertainty, they remained highly professional throughout 2011 putting the customers at the heart of what they do, which is as it should be. Without them, it is quite clear the much improved financial performance could not have been achieved and management are extremely grateful to all staff for their support during what has been a difficult year.

We were pleased with the results and plan to repeat the survey on an annual basis. We believe this gives Islanders an opportunity to have their say about the service and provides much valuable feedback both qualitative and quantitive to management. On the basis of information provided by the survey, we decided to end the two tier local service, which had proved to be difficult to administer and was deeply unpopular with

Islanders. There are a number of other actions arising from the survey which we hope will lead to an improved service and lower costs.

In late 2011, we reintroduced the quality of service

measurement operated by Research International,

which showed the following results: Regulatory Matters

In response to the reductions in mail volumes, and after a comprehensive consultation process, the JCRA approved a reduction in the USO to a five-day delivery service.

This change was implemented in May 2011 and  be no further liberalisation of the markets for post in although no service reduction is ever welcome with  the Island and UK in the near future.

customers, most understood the reasons why and

accepted the need for the change.

We welcome the new approach of the JCRA,

particularly their stated intention to move to a lighter In the face of concerns about the sustainability of  touch regime. The reality is that we already face fierce the USO, the Minister for Economic Development  competition from digital means of communication, instructed the JCRA to carry out a review of the Jersey  no better evidenced than by the very small amount postal service. The conclusions were largely supportive  consumers now spend on postal services, just £1 per of our present strategy and confirmed that there would  week, per household.

* Only November and December results were available

Notwithstanding the poor weather in December 2011  was extremely good and well ahead of target. The and the fact that the survey was only operated for two  results for the first quarter of 2012 are included for months, we were bitterly disappointed by the results  completeness and at least show some improvement, for non-local mail, although at least the local-to-local  but we will be working hard during the rest of 2012 service (where we are in total control of our quality)  to at least meet the targets set by our regulator.

Strategic Review

I joined the business full-time at the beginning of August and undertook a high level review which was submitted to the Board in September.

Whilst the need to diversify in response to falling mail volumes is undeniable, the Board accepted that the immediate priority was to stabilise the business after a period of dramatic change. In the second half of the year we made a number of changes including:

Reorganising the senior management team to further reduce costs and to provide for flatter organisation structure.

Bringing our IT back in house. Although we

will continue to outsource certain aspects, the management of this function is far too important to be outsourced.

Returning to accounting by profit centre for 2012 to improve control over the business.

As we reach the end of the stabilisation phase of our plan, increasing amounts of time are being dedicated

to making sure each profit centre is performing to

its maximum potential. In truth, this is a stage that is never finished, but we do hope to make significant progress in 2012. Following that, we will be in a

much better position to devote time and resources to diversification efforts. We will always do this within our competence and capacity whilst learning the lessons

of other postal authorities around the world who are trying to tackle the same problem.

Looking forward

Clearly the loss of LVCR for Channel Island companies is a major blow to them, Jersey Post and the whole community.

For us it means that we can no longer use the profits of this activity to subsidise our traditional services, which just reinforces the importance of action taken

in previous years. Cost reduction cannot be the sole answer to the loss of LVCR, so as well as developing new income streams, such as direct mail, we have had to increase prices in 2012 more than we would have liked. With these measures we believe that we will still be able to operate profitably in 2012, although clearly this will not be easy.

Looking further forward, the new management team

is optimistic that in spite of the problem of falling volumes there is still much we can do with our existing operations, all of which have capacity to improve. Creating new and profitable income streams, especially in the digital space, is clearly a bigger challenge, but with the talent we have in the business it is something we have a good chance of delivering.

Kevin Keen

Chief Executive Officer 24 May 2012

Statement of Corporate Governance

Jersey Post International Limited has a Memorandum of Understanding with the Treasury & Resources Minister.

The Memorandum requires the Group to produce Financial Statements which include disclosures in accordance with The UK Corporate Governance Code issued by the Financial Reporting Council ( the Code ). This requirement does not require the Group to apply other standards relevant to listed entities. The Directors are committed to maintaining a high standard of Corporate Governance in accordance with the principles laid down in the Code. The Board considers that it has complied with all appropriate provisions of the Code during the financial year ended 31 December 2011, except as explained below.

The Board

The Board is chaired by Mike Liston, who was appointed as Chairman on 12 June 2006 and reappointed for a further three- year term at the Company s AGM held on 25 June 2009.

The other Non-Executive Directors are: In accordance with the Company s Articles of

Association, two Non-Executive Directors are required Paul Jackson , who was originally appointed on 12 June  to retire by rotation. The Articles state that the directors 2006 and reappointed for a further three-year term at  to retire by rotation shall be they who have been

the company s AGM held on 12 May 2010.  the longest in office since their last appointment or

reappointment. Of the existing five Non-Executive Chris Evans was originally appointed on 25 June 2009  Directors, Mike Liston, Paul Jackson and Donal

and reappointed for a further three-year term at the  Duff have been the longest in office since their last company s AGM held on 24 June 2011. appointment and will retire by rotation at the AGM on

15 June 2012. The Board considered this matter at its Donal Duff was appointed at the Board meeting on 27  meeting on 24 May 2012 and agreed to recommend November 2009 with his appointment commencing on  the reappointment of Mr Liston and Mr Duff to the

1 January 2010. Mr Duff s appointment was confirmed  shareholder at the AGM.

at the AGM held on 12 May 2010.

The main role of the Board is to:

Tim Brown was appointed at the Board meeting on

8 July 2011 with his appointment commencing on    Set the overall strategy of the Group;

1 September 2011.

Approve the annual business plan, budget and

Non-Executive Directors are appointed to the Board on  annual report and financial statements;

the recommendation of the Nomination Committee.

The Board has delegated the day-to-day operation of  The Board held seven formal meetings during the the activities of the Group to the Executive Directors.  financial year ended 31 December 2011. Agendas There is a clear division of responsibility between the  and supporting papers are circulated to Board Chairman and the Chief Executive which is set out  members one week in advance of the meeting date. in writing as well as a Schedule of Matters Reserved  Records of meetings and the decisions of the Board for the Board. Both documents are reviewed by  are maintained by the Company Secretary and are the Company Secretary annually and updated and  approved by the Board at the following meeting. reapproved by the Board if necessary. There have been

no updates made to these documents in 2011. The Company also has a Nomination Committee

which meets when required to consider appointments The Chairman is responsible for leadership of the  to the Board. The Nomination Committee is chaired Board and monitoring its effectiveness. He ensures  by Mike Liston and has Donal Duff and Chris Evans effective communication with the shareholder and that  as members. The committee meets informally

the shareholder s views and interests are considered  without the Company Secretary or her assistant in when making key decisions. He also facilitates  attendance, therefore the meetings are not minuted. the contribution of the Non-Executive Directors  The Nomination Committee met during 2011 to agree and promotes a constructive relationship between  the appointments of Kevin Keen and Tim Brown. Executive and Non-Executive Directors. The Chief  Appointments are recommended to and approved by Executive is responsible for formulating strategy and  the Board and all decisions are formally minuted.

for its delivery once agreed by the Board. The Chief

Executive, together with the other Executive Directors,

creates the framework of strategy, values, organisation

and objectives which ensures the successful delivery

of key targets, and allocates decision making and

responsibilities to senior managers accordingly.

Number of Meetings Attended

Monitor performance against plans;

The Board has not elected one of the Non-Executive  Audit Remuneration

Ensure the maintenance of a sound system of  Main Board Committee Committee

Directors to be the Senior Independent Non-Executive

Director. The shareholder has immediate access to  internal control and risk management;

the Chairman, and in his absence, the Chief Executive  7 meetings 5 meetings 3 meetings Officer, and therefore the appointment of a Senior    Oversee the activities of the Executive Directors;

Independent Non-Executive Director is not considered  M Liston 7/7 (Chairman) 4/5 3/3

an immediate priority by the Board. This matter    Ensure obligations to the shareholder (the States

will be kept under review but we note that this is a  of Jersey) are understood and met; and P Jackson 7/7

requirement of Provision A4.1 of the Code.

Ensure compliance with the Postal Services (Jersey)

C Evans 6/7 3/3 (Chairman)

As at 31 December 2011, the Chief Executive Officer,  Law 2004.

Kevin Keen, was the only executive member of the

D Duff 6/7 5/5 (Chairman) 3/3 Board. Kevin Keen was appointed to the Board at

the AGM held on 24 June 2011. In accordance with

Principle B7.1 of the Code, Mr Keen and Mr Brown will  T B(approowintend wef 1 September 2011) 2/2 2/2

both be considered for election by the shareholder

at the AGM on 15 June 2012. The appointments of Liz  K K(appoeinetned wef 24 June 2011) 4/4

Vince and Gary Carroll to the Board will also be put

forward as resolutions at the 2012 AGM. I(r eCsaignrred wef 31 May 2011) 4/4

I Ridgway 5/5

(resigned wef 31 August 2011)

J Crabtree 6/6

(resigned wef 24 November 2011)

Director Independence, Performance Evaluation and Training

The Board considered that all the Non-Executive Directors were independent during the financial year ended 31 December 2011.

Performance Evaluation The Board did not consider  meet without the Chairman present to appraise his it either necessary or cost effective to undertake  performance as this was addressed via the Board self- an externally facilitated review of its performance.  assessment questionnaire.

Instead, in January 2012, on behalf of the Chairman,

the Company Secretary circulated a Board evaluation  Director Training All Directors are asked to review if questionnaire to all Board members for completion.  they have any specific training requirements as part The results of this questionnaire were summarised in a  of the Board s annual self-assessment questionnaire. written report which was reviewed by the Board at its  The Chairman would discuss any training and meeting held on 23 February 2012. development requirements with individual Directors.

Specific training for Audit and Remuneration

The Chairman and the Non-Executive Directors hold  Committee members is considered annually. Training informal meetings without the Executive Directors  and development requirements of the Executive being present. The performance of the Executive  Directors are addressed via their annual Performance Directors is reviewed by the Remuneration Committee. and Development Plans. New Directors receive an During 2011, the Non-Executive Directors did not  induction from the Company Secretary.

Audit Committee

The Audit Committee is appointed by the Board from the Non-Executive Directors.

The Audit Committee is chaired by Donal Duff, who is  company seminars and briefings by the external

a qualified Chartered Accountant. The other members  auditors.

of the Audit Committee are Mike Liston and, with effect

from 1 September 2011, Tim Brown.[1] The Audit Committee reviewed its performance via a

self-assessment questionnaire which was discussed The external auditors, the Finance Director and  at its meeting on 22 February 2012. In addition, the the Chief Executive Officer attend the meetings  Committee has an Action Plan which records the tasks by invitation. During the financial year ended 31  it needs to complete during the year, including those to December 2011, the Audit Committee met five times.  ensure compliance with the Code. Progress against the

Action Plan is reviewed at each Committee meeting.

The Audit Committee s agenda is linked to events in

the Company s financial calendar. The agenda for each  The Committee is charged by the Board with

Audit Committee meeting is agreed with the Chairman  responsibility for reviewing the strategic processes for at least four weeks prior to the meeting. risk, control and governance throughout the Group.

The Audit Committee has terms of reference which New Audit Committee members are provided with  include all matters indicated by the Code and which induction training and all Committee members receive  are subject to annual review. The terms of reference ongoing training on an annual basis as necessary.  were reviewed and updated by the Committee at its Training can comprise of attendance at formal  meeting on 24 November 2011 and approved by the conferences or courses but more likely internal  Board at its meeting on 25 November 2011.

Financial Reporting

The Committee monitors the integrity of the financial statements of the Company, including its annual and half-yearly reports and any other formal announcement relating to its financial performance, reviewing significant financial reporting issues and judgements which they contain.

The Committee reviews and challenges where necessary:

The consistency of, and any changes to, accounting policies both on a year-on-year basis and across the Group;

The methods used to account for significant or unusual transactions where different approaches are possible;

Whether the Company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor;

The clarity of disclosure in the company s financial reports and the context in which statements are made; and

All material information presented with the financial statements, such as the operating and financial review and the corporate governance statement (insofar as it relates to audit and risk management).

Internal Controls and Risk Management Systems The Committee:

Keeps under review the effectiveness of the Group s internal controls and risk management systems;

Reviews and approves the statements to be included in the annual report concerning internal controls and risk management; and

Undertakes an annual review of the Group s risk management policy and, in particular, the financial thresholds used to evaluate the impact of risks to ensure these remain appropriate.

Whistleblowing and Fraud The Committee:

Reviews the Group s arrangements for its employees to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters;

Ensures that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action; and

Reviews the Group s procedures for detecting fraud. Internal Audit

Until September 2011, the Group s internal audit was provided by the Business Risk Assurance Manager. With effect from 1 September 2011, the Company Secretary s role (who was also the Business Risk Assurance Manager) was combined with the role of Finance Director. As a result of this, the Group no longer has an internal audit function. However, the Audit Committee considers the need for internal audit at each of its meetings and will buy in external resources as and when the need arises to undertake individual internal audit/risk assurance reviews.

External Audit The Committee:

Considers and makes recommendations to the Board, to be put to the shareholder for approval at the AGM, in relation to the appointment, reappointment and removal of the Company s external auditors. The Committee oversees the selection process for new auditors, and if an auditor resigns the Committee shall investigate the issues leading to this and decide whether any action is required;

Makes recommendations annually to the Board on the external audit fee;

Oversees the relationship with the external auditors including (but not limited to):

> Ensuring that the level of fees is appropriate to enable an adequate audit to be conducted;

> Approving their terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit;

> Assessing annually their independence and objectivity taking into account relevant professional and regulatory requirements and the relationship with the auditor as a whole, including the provision of any non-audit services;

> Satisfying itself that there are no relationships (such as family, employment, investment, financial or business) between the auditor and the Company (other than in the ordinary course of business);

> Monitoring the auditor s compliance with relevant ethical and professional guidance on the rotation of audit partners, the level of fees paid by the Company compared to the overall fee income of the firm, office and partner and other related requirements;

> Assessing annually their qualifications, expertise and resources and the effectiveness of the audit process which shall include a report from the external auditor on their own internal quality procedures;

> Seeking to ensure co-ordination with the activities of any internal audit; and

> Considering the risk of the withdrawal of the Company s present auditor from the market.

Meets regularly with the external auditor, including once at the planning stage before the audit and once after the audit at the reporting stage. The Committee also meets the external auditor at least once a year, without management being present, to discuss their remit and issues arising from the audit;

Reviews and approves the annual audit plan and ensures that it is consistent with the scope of the audit engagement;

Reviews the findings of the audit with the external auditor. This includes but is not limited to the following:

> A discussion of any major issues which arose during the audit;

> Any accounting and audit judgements; and

> The levels of errors identified during the audit.

Reviews the effectiveness of the audit;

Reviews any representation letter requested by the

external auditor before it is signed by management;

Reviews the management letter and management s response to the auditor s findings and recommendations;

Develops and implements a policy on the supply of non-audit services by the external auditor, taking into account any relevant ethical guidance on the matter.

Nomination Committee

The nomination Committee is chaired by Mike Liston. The other members are Chris Evans and Donal Duff. The Nomination Committee met twice during 2011 to consider the appointments of a new Chief Executive and Non-Executive Director. The two UK-based Non- Executive Directors attend meetings if necessary.

The terms of reference of the Nomination Committee are approved by the Board and reviewed annually

by the Company Secretary. No changes to the Committee s terms of reference were made during 2011. Formal minutes of the Nomination Committee are not kept but recommendations on Board appointments are made to the Board and decisions recorded in

the Board minutes. The Nomination Committee

has not carried out a performance evaluation for

2011 as this was not considered necessary. The performance evaluation questionnaire for the Board addressed issues of Board skills, experience and future requirements.

Remuneration Committee

The Remuneration Committee is chaired by Chris  The Committee has an Action Plan which records the Evans with Mike Liston and Donal Duff as members.  tasks it needs to complete during the year, including During the financial year ended 31 December 2011,  those to ensure compliance with the Code. Progress

the Remuneration Committee met three times. The  against the Action Plan is reviewed at each Committee Remuneration Committee has responsibility for  meeting. The Committee s terms of reference are setting remuneration for the Executive Directors of  reviewed annually by the Company Secretary. No

the Company which is sufficient to attract, retain and  changes to the Terms of Reference were made in motivate people of the quality required. No Director  2011. The Remuneration Committee undertook a self- plays any role in the determination of his/her own  assessment exercise via the use of a questionnaire remuneration. The Memorandum of Understanding  which was reviewed at its meeting on 9 February 2012. with the Treasury and Resources Minister requires any

changes to the level of remuneration paid to Non- The remuneration of the Directors for the JPIL Group of Executive Directors to be agreed, in advance, by the  companies for the financial year ended 31 December Minister. The Committee also monitors the levels of  2011 is set out below:

remuneration for senior management.

Salaried Directors Remuneration 2011

Salary/Fees  Bonuses Other[1] Benefit in  2011 Total 2010 Total

£ 000 £ 000 £ 000 Kind[2] £ 000 £ 000 £ 000

Executive Directors[3]

Kevin Keen 66 66 0 (from 24 June 2011)

Ian Carr 64 198 11 273 179 (to 31 May 2011)

Ian Ridgway  87 139 15 241 150 (to 31 August 2011)

Julie Crabtree 126 165 20 311 143 (to 24 November 2011)

TOTAL 343 502 46 891 472

Non-Executives

Mike Liston 40 40 40 Paul Jackson 20 20 20 Chris Evans 15 15 15 Donal Duff 20 20 20 Tim Brown (from 1 September 2011) 4 4 0 TOTAL 99 99 95

Internal Controls

The Board is responsible for ensuring that there

are effective systems of internal control in place to reduce the risk of misstatement or loss and to ensure that business objectives are met. These systems are designed to manage, rather than to eliminate, the risk of failure to achieve business objectives and can only provide reasonable, and not absolute, assurance against material misstatement or loss.

The Board has conducted a review of the effectiveness of the Group s system of internal control in 2011 via the following key procedures:

Risk Management

The Group has a risk register which details and assesses all the significant risks facing the Group. Management is responsible for identifying the key risks to achieving their business objectives and ensuring that there are adequate controls in place to manage these, in line with the risk appetite set by the Board and contained in the Group s Risk Management Policy, which is reviewed annually by both the Audit Committee and the Board. There is also a Risk Management Group chaired by the Finance Director and comprising senior managers from each area of the business. This group meets quarterly and the minutes of the meetings are reviewed by the Audit Committee.

Board Reports

Key strategic decisions are taken at Board meetings following due debate and with the benefit of Board papers circulated in advance. The risks associated with decisions are a primary consideration in the information presented and discussed by the Board. The Board discusses and approves the Group s strategic direction, plans, objectives, annual budgets and financial forecasts and the associated risks to achieving these.

Management Structure

Responsibility for operating the systems of internal control is delegated to management and directed and overseen by the Executive Team chaired by the Chief Executive. This team meets weekly.

  Human Resources

The Group endeavours to ensure that its employees are able to carry out their duties in a competent and professional manner through its commitment to staff training and development.

24 May 2012

Directors Report 26 27 Jersey Post Annual Report & Accounts 2011

Directors Report

The Board of Directors of Jersey Post International Limited ( JPIL or the Company ) present their report on the affairs of JPIL and its subsidiaries ( the Group ), together with the audited consolidated financial statements for the year ended 31 December 2011.

Principal Activity  Dividends

The principal activity of the Group is that of providing  An ordinary dividend of £375,000 will be recommended postal services to the Island of Jersey.  at the AGM (2010: no dividend).

Going Concern  Directors Serving During the Year

The Directors have produced forecasts for the next  The following directors served on the Board during 2011: twelve months following the date of signing of these

financial statements which have satisfied them that the  Jurat Mike Liston OBE

Group will continue to be a going concern, and be able  Non-Executive Chairman

to meet its liabilities as they fall due. In making this

assessment, the Directors have considered the impact  Paul Jackson

of the UK government s decision to withdraw Low Value  Non-Executive

Consignment Relief from all Channel Island exports

with effect from 1 April 2012.  Chris Evans

Non-Executive

The Directors are also mindful of Article 8(2)(e) of the

Postal Services (Jersey) Law 2004 which states in so  Donal Duff BAAF FCA AMCT far as it is consistent with paragraph (1), the Economic  Non-Executive

Development Minister and the Authority [JCRA] shall

each have a duty in performing its functions under  Tim Brown FIoD, FCILT, CPFA the Law, to have regard to the need to ensure that  Non-Executive

persons engaged in commercial activities connected  (Appointed 1 September 2011)

with postal services in Jersey, have sufficient financial

and other resources to conduct those activities .  Kevin Keen MBA, FCCA, FCMA Accordingly, the Directors have adopted the going  Chief Executive Officer

concern basis in preparing the financial statements. (Appointed 24 June 2011)

Results  Ian Carr

Chief Executive Officer

Details of the results for the year are set out in the  (Resigned 31 May 2011)

Group consolidated profit and loss account on page

30. A review of the Group s business during the year  Ian Ridgway BSc MBA FCA MICA and an indication of the likely future development of the  Finance Director

business are provided in the Chairman s Statement and  (Resigned 31 August 2011)

the Business Review on pages 4-14.

Julie Crabtree BA MSc FCIPD Shareholdings  Human Resource Development Director

(Resigned 24 November 2011)

The 5 million £1 ordinary shares of JPIL are fully paid up and 100% owned by the States of Jersey.

Employee Involvement

During the year, the policy of providing employees with information about the Group was continued using

a variety of media through which employees were encouraged to present their suggestions and views

on the Group s performance. Jersey Post adopts a partnership working approach with the Communication Workers Union who are consulted and involved in all major policies, changes and initiatives.

Disabled Employees

The Group gives full consideration to applications

for employment from disabled persons where the requirements of the job can be adequately fulfilled by a handicapped or disabled person.

Where existing employees become disabled, it is

the Group s policy, wherever practicable, to provide continuing employment under normal terms and conditions and to provide training, career development and promotion to disabled employees wherever appropriate.

Board Remuneration

Details of Directors remuneration are set out in the Remuneration Committee Report on page 23.

Statement of Directors Responsibilities

The Directors are responsible for preparing the financial statements in accordance with applicable law and regulations.

Company Law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial statements are required by law to give a true and fair view of the state of affairs of the Company as at the end of the year and of the profit or loss of

the Company for the year. In preparing these financial statements, the Directors are required to:

Select suitable accounting policies and then apply them consistently;

Make judgements and estimates that are reasonable and prudent;

State whether applicable UK Accounting Standards have been followed; and

Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

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

the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Annual General Meeting

The AGM will be held at the States Treasury, Cyril le Marquand House, St Helier on 15 June 2012.

Auditors

Deloitte LLP were appointed and acted as auditors for the year ended 31 December 2011.

A resolution to appoint PWC as auditors for the year ending 31 December 2012, following a competitive tendering exercise, will be proposed at the AGM on 15 June 2012.

This statement was approved by the Board of Directors of Jersey Post International Limited on 24 May 2012 and was signed on their behalf by:

Liz Vince

BBA (Hons), CPFA, CPD(cert.), MICA

Company Secretary 24 May 2012

Independent Auditors Report 28 29 Jersey Post Annual Report & Accounts 2011

Independent Auditors Report

Independent Auditors Report to the Shareholder of Jersey Post International Limited

We have audited the group financial statements (the

 financial statements ) of Jersey Post International Limited for the year ended 31 December 2011 which comprise the Consolidated Profit and Loss Account, the Consolidated Statement of Total Recognised Gains and Losses, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement and the related notes 1 to 22. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the company s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the company s members 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 members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective Responsibilities of Directors and Auditors

As explained more fully in the Statement of Directors Responsibilities, the directors are responsible for

the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors.

Scope of the Audit of the Financial Statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that

the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the

overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies, we consider the implications for our report.

Opinion on Financial Statements

In our opinion, the financial statements:

Give a true and fair view of the state of the Group s affairs as at 31 December 2011 and of the Group s profit for the year then ended;

Have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

Have been properly prepared in accordance with the Companies (Jersey) Law 1991.

Matters on Which We Are Required to Report by Exception

We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:

Proper accounting records have not been kept by the parent company; or

The financial statements are not in agreement with the accounting records and returns; or

We have not received all the information and explanations we require for our audit.

Andrew Isham BA FCA For and on behalf of

Deloitte LLP Chartered Accountants St Helier, Jersey

24 May 2012

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company s website. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

Consolidated Profit and Loss Account Consolidated Balance Sheet

Year Ended 31 December 2011 Year Ended 31 December 2011

Note

2010  Note

2010

£ 000

£ 000

Turnover

65,648 Fixed assets (58,207) Tangible assets 7,441

Cost of sales

8

8,395

Gross profit

Administrative expenses

(6,846)

Current assets

Operating profit before exceptional costs Operating Exceptional Costs

2 4

595

Stock

9 10

182 9,131 2,674 8,996 20,983

Debtors due within one year

• Restructure costs

• Pension adjustment

(2,601) 1,906

Cash

Short-term investments - cash deposits

Operating profit/(loss) Interest receivable Net finance income Profit before taxation

(100) Creditors

5 6

119 Amounts falling due within one year

11

(9,599) 11,384 19,779

92 Net current assets

111 Total assets less current liabilities

Taxation 7 Profit after taxation

Pension Deficit 13 Net assets

(1,772) 18,007

111

The basis of preparation of these financial statements is set out on page 33, and the notes on pages 33-48 form part of  Represented by:

these financial statements.

Ordinary share capital

15 19

5,000 13,007

The above results are derived from continuing activities.

Profit and loss account reserve

Consolidated Statement of Total Recognised Gains and Losses Shareholder s funds

18,007

Year Ended 31 December 2011 The financial statements were approved by the Board of Directors of Jersey Post International Limited on 24 May 2012

and were signed on their behalf by:

Note

2010

£ 000

Profit for the year

111 401

Actuarial (loss)/gain in respect of the pension scheme

13(d)

Total recognised gains and losses for the year

512

Kevin Keen  Liz Vince

Chief Executive Officer  Finance Director

The basis of preparation of these financial statements is set out on page 33, and the notes on pages 33-48 form part of  The basis of preparation of these financial statements is set out on page 33, and the notes on pages 33-48 form part of these financial statements. these financial statements.

Consolidated Cash Flow Statement Notes to the Financial Statements

Year Ended 31 December 2011

1. Accounting Policies

Note

2010

The principal accounting policies are summarised below. They have all been applied consistently throughout the year and preceding year.

£ 000

Net cash inflow/(outflow) from operating activities 22 Returns on investments and servicing of finance

(11,077) 149 149

1. Basis ofPreparation

The financial statements are prepared in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practise). The financial statements are prepared under UK GAAP using the historical cost convention. Our Memorandum of Understanding with the Treasury and Resources Minister does not require us to adopt all UK Listing Rules. In particular, the Group implements and maintains a sound system of internal controls to safeguard the Shareholder s investment and assets.

Interest received

Net cash inflow from returns on investments and servicing of finance

Following a review of the allocation of centralised overheads in 2011, the comparative Cost of Sales figure for 2010 has decreased by £2,376k with a corresponding increase within Administrative expenses of the same amount.

Capital expenditure

2. GoingConcern

Net purchase of tangible fixed assets

(621) The Directors have produced forecasts for the next 12 months following the date of signing of these financial statements (624) which have satisfied them that the Group will continue to be a going concern and be able to meet its liabilities as they fall

Net cash outflow from capital expenditure

due. In making this assessment the Directors have considered the impact of the UK government s decision to withdraw LVCR from 1 April 2012. The Directors believe this will not have a material impact on the Group s ability to continue as a going concern over the coming year, however, it could have a significant impact in future years.

Net cash inflow/(outflow) before management of liquid resources and financing

(11,549) 10,567

Management of liquid resources 22

The Directors are also mindful of Article 8(2)(e) of the Postal Services (Jersey) Law 2004 which states in so far as it is consistent with paragraph (1), the Economic Development Minister and the Authority [JCRA] shall each have a duty in performing its functions under the Law, to have regard to the need to ensure that persons engaged in commercial activities connected with postal services in Jersey, have sufficient financial and other resources to conduct those activities . Accordingly the Directors have adopted the going concern basis in preparing the financial statements.

Financing

Dividends paid

(500) (1,482)

Decrease in cash in the year

22

3. Basis ofConsolidation

The consolidated financial statements include Jersey Post International Limited and its subsidiaries ( the Group ) drawn

up to 31 December each year. Intra-Group sales and profits are eliminated on consolidation and all sales and profit The basis of preparation of these Financial Statements is set out on page 33, and the notes on pages 33-48 form part of  figures relate to external transactions only.

these Financial Statements.

4. Tangible FixedAssets

On a continuing use basis within the business, tangible fixed assets are stated at cost less depreciation.

In accordance with the Postal Services (Transfer) (Jersey) Regulations 2006 which regulated the transfer of the assets, liabilities and rights of Jersey Post to Jersey Post International at 30 June 2006, the freehold land and buildings were re- valued on an existing use basis prior to their purchase by the Group.

The cost of all other tangible fixed assets is their purchase cost, together with any incidental costs on acquisition. Tangible fixed assets with a cost of less than £1,000 are not capitalised.

Depreciation is calculated so as to write off the cost of tangible fixed assets on a straight-line basis over the expected useful economic lives of the assets concerned. Tangible fixed assets are not depreciated until they are available for use.

The lives assigned to major categories of tangible fixed assets are:

Notes to the Financial Statements (continued) Notes to the Financial Statements (continued)

4. Tangible FixedAssets (continued) Defined Contribution

The carrying value of tangible fixed assets is reviewed for impairment when events or changes in circumstances indicate  Both the Group and employees pay contributions into an independently administered fund. The cost of providing these that the carrying value may not be recoverable. benefits, recognised in the profit and loss account, comprises the amount of contributions payable to the scheme in

respect of the year.

Website development costs are capitalised when they meet the criteria set out in UITF 29 Website Development Costs

and are capitalised along with the Computer hardware and software with which they are associated. 1.10  Operating Leases

Rentals receivable and payable under operating leases are charged in the profit and loss account on a straight line basis

5. Stocks over the lease term.

Stocks are stated at the lower of cost and net realisable value. Provisions are made where necessary for obsolete, slow-

moving and defective stocks. 1.11  Related Parties

The Group has taken advantage of the exemption in Financial Reporting Standard 8 Related Party Disclosures from

6. ForeignCurrencies disclosing transactions with related parties that are members of the Group on the basis that all subsidiaries are wholly Transactions in foreign currencies are translated into sterling at the exchange rate ruling when the transaction was  owned.

entered into. Monetary assets and liabilities expressed in foreign currencies are translated to sterling at the exchange

rates ruling at the balance sheet date. Foreign currency gains and losses are taken to the profit and loss account. All

foreign currency transactions were entered into in accordance with the Group s Foreign Exchange policy.

2. Operating Profit for the Year

7. Turnover

Turnover represents the invoiced value of goods and services supplied less post office boxes and business reply licences

invoiced in advance, unexpended credit on franking meters and prepayments on mobile telephones. The sale of stamps

2010

£ 000

is based on the cash received and no provision is made for services to be provided in respect of stamps in circulation as

the Directors consider this to be immaterial.

Operating profit for the year is stated after charging the following:

8. Taxation

Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted  Regulatory fees paid to the JCRA

310 223 42 1,156 63 26

or substantively enacted by the balance sheet date. Operating lease rentals land and buildings

others

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Group s taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.

Depreciation

Auditor s remuneration audit

non-audit

A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available

evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal  Operating lease rentals in relation to land and buildings are shown net. Existing leased property is sub-let on similar of the underlying timing differences can be deducted. Deferred tax is measured at the average tax rates that are expected  terms to the head lease resulting in the income offsetting the expense.

to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been

enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

3. Employees Costs

9. PensionCosts

The Group operates both defined benefit and defined contribution schemes.

2010

£ 000

Defined Benefit

Prior to incorporation the Group operated two defined benefit schemes, the Jersey Post Office Pension Fund (JPOPF), a closed occupational scheme, and the Public Employees Contributory Retirement Scheme (PECRS), an open multi-employer scheme, both of which required contributions to be made to separately administered funds. Upon incorporation the States of Jersey retained responsibility for the fully funded JPOPF. For the purpose of the Group JPOPF is treated as a defined contribution scheme.

Wages and salaries

13,816 812 1,501 16,179

Social security contributions Employer pension contributions

Operating profit is charged with the cost of providing pension benefits earned during the year. The expected return on pension scheme assets less the interest on pension scheme liabilities is shown as a finance cost within the profit and loss account.

Actuarial gains and losses arising in the year from the difference between the actual and expected returns on pension scheme assets, experienced gains and losses on pension scheme liabilities and the effects of changes in demographics and financial assumptions are included in the consolidated statement of total recognised gains and losses ( STRGL ).

Pension scheme liabilities are measured using the projected unit credit method, discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. Recoverable pension scheme surpluses and pension scheme deficits are recognised in the balance sheet.

Notes to the Financial Statements (continued) Notes to the Financial Statements (continued)

4. Operating Exceptional Costs 7. Taxation

Operating exceptional costs relate to non-recurring redundancy costs of £323k (2010:£2,000k), asset impairment of £150k (2010:£Nil) and IT transitional costs of £160k (2010: £600k).

2010

£ 000

5. Interest Receivable Jersey income tax

Current charge

£2 000101  £2 000100  (Credit)/Charge in respect of prior year

Total current tax (credit)/charge for the year

Bank interest receivable 217 119 Deferred taxation

Charge for the year taken to profit and loss

Charged/(credited) to the profit and loss in respect of prior periods

6. Net Finance Income

Total charge to profit and loss

Charge/(credit) for the year taken to the STRGL

2010

£ 000 Total tax charge/(credit) for the year

Expected return on pension scheme assets Interest on pension liabilities

2,058 (1,966)

The differences between the total current tax shown above and the amount calculated by applying the standard rate of Jersey corporation tax to the profit before tax is as follows:

92 Profit on ordinary activities before taxation

111

Net finance income

Tax on profit on ordinary activities at 20%

22

Factors affecting tax charge for the year

Rate differences

354 163 (156) (949)

Non-qualifying depreciation

Fixed asset timing differences

Timing differences on pensions

Expenses not deductible for tax purposes Adjustments in respect of prior years

Losses not utilised in the year

566

Total current income tax charge/(credit) for the year

Notes to the Financial Statements (continued) Notes to the Financial Statements (continued)

7. Taxation (continued)  8. Tangible Fixed Assets

Deferred Taxation Freehold Improvements Plant

land & to leasehold vehicles &

buildings property equipment Total 2010  £ 000 £ 000 £ 000 £ 000

£ 000

Cost

Total deferred tax balance at 1 January

At 1 January 2011 Additions

7,735 719 10,854 19,308 697 697

Charged to profit and loss

(Charge)/credit to the STRGL

Assets written-off Disposals

(8) (166) (174) (134) (134)

(Charge)/credit to the profit and loss in respect of prior periods Total deferred tax balance at 31 December

At 31 December 2011

7,735 711 11,251 19,697

Jersey Post Limited is subject to Jersey income tax at the rate of 20% (2010:20%). All other companies in the Group are

subject to Jersey income tax at the standard rate of 0% (2010:0%). Depreciation

At 1 January 2011 1,123 573 9,217 10,913 A net deferred tax asset has not been recognised in respect of timing differences relating to taxable losses carried

forward and fixed asset timing differences as there is uncertainty in relation to the availability of future taxable profits  Charge for the year 191 83 714 988 arising in the immediate future. The estimated value of the net deferred tax asset not recognised, measured at the  Assets written-off (11) (71) (82)

standard rate of 20% is £920,000 (2010: £1,524,000).

Disposals (133) (133) In addition, a deferred tax asset has not been recognised in respect of the defined benefit pension scheme deficit. The  At 31 December 2011 1,314 645 9,727 11,686 estimated value of the net deferred tax asset not recognised, measured at the standard rate of 20% is £1,878,400 (2010:

£354,000).

Net book value

At 31 December 2011 6,421 66 1,524 8,011 At 31 December 2010 6,612 146 1,637 8,395

9. Stock

2010

£ 000

Stamps and philatelic products Post Office shop

108 18 33 23 182

Promail paper

Mobile phones & accessories

Notes to the Financial Statements (continued) Notes to the Financial Statements (continued)

10. Debtors: Amounts Falling Due Within One Year  Included within trade creditors is the net amount due to Royal Mail of £9,324,320 (2010: £4,214,100) for the delivery of mail on and off the Island. The movement in this balance from prior year is due to changes in the timing of settlements with Royal Mail.

2010  2010

£ 000 £ 000

Deferred income relates to prepaid post office boxes, business reply licences, and unexpended credit on franking meters.

8,248 Included with accruals and other creditors is a provision in relation to leased properties following a review by property

Trade debtors

surveyors during 2012.

Provision for bad and doubtful debts Other debtors

(71)

8,177 86 10 314 544 9,131

2010

Taxation

£ 000

Agency debtors

Prepayments and accrued income

Opening balance Movement in the year Closing balance

500 500

A specific bad debt provision was created in 2010 as a result of the trade cessation of Corebits Services Limited.

A further specific provision was created in 2011 for £42k in respect of uncertainty over the collection of a number of  12. Operating Lease Commitments outstanding debts.

Land and Buildings

Provisions

2010

2010

£ 000

£ 000

Provision for bad and doubtful debts

The Group

As at 1 January

Non-cancellable annual commitments in respect of operating leases which expire: Less than one year

Provided for in year

71 71

116 82 409 607

Amounts recovered previously written off Provisions utilised

Between two and five years

After five years

As at 31 December

The Group has an existing annual lease commitment of £409k in relation to a leased property. It further sublets this

11. Creditors: Amounts Falling Due Within One Year property for a rental income which offsets this expense.

2010

£ 000

Trade creditors

4,386 4,527 326 360 9,599

Accruals and other creditors Agency creditors

Deferred income

Notes to the Financial Statements (continued) Notes to the Financial Statements (continued)

13. Pension Costs Defined Benefit  b) On the FRS17 basis, the assets and liabilities of the scheme attributable to the employees of the Group who are active members of PECRS were:

The Group had one defined benefit pension scheme at 31 December 2011, which is open to certain employees of Jersey

Post - Public Employees Contributory Retirement Scheme (PECRS)( the scheme ). Prior to incorporation, Jersey Post  At 31 December At 31 December At 31 December At 31 December At 31 December had a second defined pension scheme (JPOPF). The responsibility for JPOPF remains with the States of Jersey as from  2011 2010 2009 2008 2007

30 June 2006.

Long- Long- Long- Long- Long-

term  term  term  term  term

The Public Employees Contributory Retirement Scheme (PECRS) is a multi-employer defined benefit scheme operated by  expected  expected  expected  expected  expected

the States of Jersey, funded in accordance with the recommendations of an actuary, which provides benefits based on  rate of  rate of  rate of  rate of  rate of

final pensionable pay. The pension fund is open to new members. The assets of the fund are held separately from those  return* £ 000 return* £ 000 return £ 000 return £ 000 return £ 000 of the States of Jersey.

Fixed income bonds 2.8% 4.2% 4.5% 3.8% 4.7%

Salaries and emoluments include pension contributions of £1,161k for the year ended 31 December 2011 (2010: £1,501k)

for staff who are members of PECRS. There are unpaid contributions of £98k outstanding at the year end (31 December  Equities 8.0% 21,657 8.0% 23,814 8.3% 22,025 7.6% 17,673 7.6% 30,717 2010: £nil). The current employer contribution rate is 15.35% of members salaries. Index linked gilts 2.6% 4.0% 4.3% 3.6% 4.3%

The latest full actuarial valuation of PECRS was carried out by the PECRS s independent actuary as at 31 December 2007.  Property 7.5% 7.5% 8.8% 311 6.6% 483 6.6% 395 The valuation of PECRS has been updated by the actuary to 31 December 2010 in accordance with FRS17. Corporate bonds 3.9% 6,904 5.0% 6,668 5.5% 7,678 5.5% 7,822 4.7%

Other 1.8% 602 1.4% 417 0.7% 2,857 2.5% 856 5.9% 267

a) The major assumptions used by the actuary for this purpose were:

Total fair value of assets 29,163 30,899 32,871 26,834 31,379

Year  Year  Year  Year  Year  Present value of

Ended Ended Ended Ended Ended scheme liabilities (38,555) (32,671) (36,928) (31,050) (30,655)

2011 2010 2009 2008 2007

% p.a. % p.a. % p.a. % p.a. % p.a. (Deficit)/surplus (9,392) (1,772) (4,057) (4,216) 724

Deferred tax

Discount rate 4.8 5.2 5.6 6.0 5.8 asset/(liability) 843 (145) Rate of increase in salaries 4.4 3.9 3.9 4.4 4.7 Net (deficit)/surplus (9,392) (1,772) (4,057) (3,373) 579 Rate of increase of pensions in payment 3.1 3.5 3.9 3.1 3.4

Inflation assumption 3.4  3.8 3.9 3.1 3.4 * JPIL employs a building block approach in determining the long-term rate of return on pension plan assets. Historical

markets are studied and assets with higher volatility are assumed to generate higher returns consistent with widely

accepted capital market principles. The assumed long-term rate of return of assets is then derived by aggregating the

expected return for each asset class over the actual asset allocation for the scheme. c) Analysis of Amount Charged to Profit and Loss Account

Interest on liabilities 1,670 1,966 Net return (438) (92) Past service cost (1,266) Settlement cost (640) Net charge/(credit) to the profit and loss account 1,033 (383)

Notes to the Financial Statements (continued) Notes to the Financial Statements (continued)

13. Pension Costs Defined Benefit (continued) f) History of Experience Gains and Losses

4. Analysis of Amount Recognised in the STRGL

2010

£ 000

Difference between actual and expected return on pension scheme assets Experience gains arising on the scheme liabilities

(890) 3,639 (2,348) 401

percentage of scheme assets 8.3% 2.9% 9.8% 2.9% 2.2% Experience (losses)/gains on scheme liabilities:

Effect of changes in assumptions underlying the present value of scheme liabilities Total (losses)/gains recognised in the Statement of Total Recognised Gains and Losses

amount

(1,560) 3,638 1,829 562 (326) 4.0% 1.1% 4.9% 1.8% 1.1%

percentage of the present value of the

scheme liabilities

Total (losses)/gains recognised in statement

5. Movement in theScheme s Deficit Duringthe Year of total recognised gains and losses

amount (7,748) 401 421 (4,703) (12) 2010