Jersey Telecom Annual Review 2005

The Jersey Telecom Group

2005 Annual Review

Serving the Islands

Contents

3  Chairman's review

7  Managing Director's review 8  Jersey Telecom

11  Wave Telecom

13  Opportunities outside the

Channel Islands

14  Investment in our future

15  Value for money

16  In the community

17  Our people

18  Consolidated Profit & Loss Account 19  Consolidated Balance Sheet

20  Report of the Remuneration Committee 21  Board of Directors

23  Corporate Governance

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Our vision  

To be the Channel Islands'  leading provider of  communications solutions

Our commitment

to the Channel Islands is underlined by our company

Vision and Values, which underpin the way in which we work.

Our brand values

At the core of our business are our values which are to provide:

• Customer focus

• Value

• Innovation

Chairman's review

As the financial results demonstrate, 2005 was a successful year for the Group. We have maintained a strong performance

in Jersey through an increasingly competitive period and the performance of Wave Telecom in Guernsey was very satisfactory.

John P Henwood MBE  e Group produced a strong financial performance in the year with  e Board s strategy is straightforward: we aim to vigorously defend Chairman Profit before Taxation of £13m just marginally below last year s result:  our share of the existing Jersey market while growing our share of the

this is after charging an exceptional item of £1.4m relating to a voluntary  Guernsey market and seeking new, off-island opportunities. In this way redundancy exercise and after the adjustment required as a result of  we aim to maintain shareholder value. e objective is clear and simple adopting new financial reporting standards in relation to pensions. but achieving it is likely to be challenging and complex.

 e profitability of the Group has been maintained by revenue growth

in Broadband, Mobile services and Wave Telecom, which has helped offset the continued decline in the Fixed Line services income. Overall, revenues have increased by 3.5% to £84.5m.

We have been successful in containing costs to the extent that operating expenses of £57m were up just 1% on 2004.

We have maintained a strong balance sheet with improvements in liquidity through good management of working capital and an absence of debt.

 is puts us in a strong position to fund investment in the Next Generation Network (NGN) and to support our strategy in addressing competition in Jersey and Guernsey. e overall Capital and Reserves of

the Group now stands at £59.2m (after reclassification of preference dividends from equity to liabilities).

 e Group is owned by the States of Jersey and in 2005 it paid £1.95m in taxation and total dividends of £7.1m. is excludes the final ordinary dividend of £3.2m, which will be paid in 2006. In addition, £1.4m (excluding tax) was also paid out to the States Treasury as interest on preference dividends.

Part of that challenge lies in steering a path through what has once

again become a difficult regulatory environment in Jersey. I fear the optimism with which we greeted the new regime at the Jersey Competition Regulatory Authority (JCRA) last year may have been misplaced. e Regulator is developing policies apparently without regard to the size of the community and there is a lack of proportionality evident in key policy areas.

 e way in which regulatory practice is applied in much larger markets

is not necessarily scalable to a small market such as Jersey. e benefit

to consumers resulting from regulatory intervention should exceed,

by a reasonable margin, the costs and disruption resulting from the regulatory process itself. e JCRA s present approach to its responsibilities leads the Board seriously to doubt whether the cost of regulation will be matched in benefits to consumers.

We have no such concern about the regulatory framework in Guernsey.

In December 2005, we were awarded a licence to provide third generation (3G) Mobile services in Jersey along with three other operators. Whilst the launch of our new service is a high priority for 2006, we have reservations about the sustainability of this level of competition in a small market.

We are currently the only operator licensed to provide 3G services in Guernsey although we expect a second licence to be granted in 2006.

 e Board noted with interest the Treasury and Resources Minister s statements in relation to the future ownership of the Group. is is a matter reserved for a decision by the States of Jersey and it is likely that it will be considered in more depth during 2006. e Board will continue its dialogue with our shareholder on this important issue.

Clearly we face a challenging future, but we remain optimistic. In spite of some misleading public announcements by competitors, we continue to welcome competition, believing that our unique combination of local market knowledge allied to world class services will be more than a match for newcomers.

We intend to continue to provide the very best service to the Channel Islands, serving individuals and businesses with the latest technology, the most dependable service and the most economical prices. We are committed to introducing the technology of the future to the Channel Islands today, so that we can enable our customers to have the same level of service as other larger jurisdictions. It is also very important that we are able to support a resilient off-island network so that we and our customers can compete globally. Serving our local community is paramount and

forms the basis of our continued effort to create wealth for our shareholder and run our business successfully into the future.

Jersey Telecom Group is a strong and successful local business at the heart of which is an able and dedicated team of people. My thanks go to my colleagues around the Board table, whose contributions through another year have been so valuable, to our staff and management and not least to our customers for their loyalty.

£11.6m

invested in the group network during 2005

£9.1m

paid to the States of Jersey in tax and dividends

3G

licence awarded to Jersey Telecom in the year

£1.4m

Increase on  Wave Telecom  mobile income

7,500

Wave Telecom mobile subscribers in Guernsey

£5.4m net fixed assets

owned by

Wave Telecom

Managing Director's Review

Bob Managing LawrencDire ect or This year has been one of  

achievement during which  

we delivered successful results  against a backdrop of change  in our market.  

What is especially noteworthy is our continued ability to adapt to this  changing environment and maintain our strong position.  

Key to any successful organisation is its people and the way in which  they deliver customer service. We take great pride in the skills, ability and  positive attitude of our employees. ey are the heart of this organisation  and they consistently deliver the very high standards of customer service  that we strive to achieve.  

 is review illustrates how successful we have been during 2005  

and I would like to personally thank everyone who has contributed  to our achievements.

Jersey Telecom

High-speed access to the Internet, via our Broadband network,  85%

has become an increasingly important part of our business.

of Broadband on Jersey is  Jersey Telecom supplied by Jersey Telecom supports the

Broadband future of the Island

Customers are demanding cheaper and more powerful products and  

In 2005, Mobile revenues in Jersey exceeded  Jersey Telecom has responded with a price reduction across all of our  

Rapid Broadband products. At the end of 2005, 34% of Island homes  those from the Fixed business for the first  had a Broadband connection of which 85% were directly provided by  

time. This was driven by continued growth in  Jersey Telecom.  

subscriber levels, the total of which now  Revenues in Jersey from the traditional Fixed Line business continued to  exceeds the population of Jersey, and the  decline in 2005, as expected, due to the increase in the use of mobiles,  

increased use of data services. An important  price will continue reductions as competition and the effect grof ows competition. and the use Iof t is Vlikely oice othat ver IP this (Vdecline oIP)  part of our service is the ability of customers  technology matures.  

to use their mobiles abroad and for visitors to  Another key part of our business is the provision of off-island connectivity  have access to services when they are in  to the business community. We have opened up new capacity to cater for  Jersey. We now have roaming agreements  the demand for higher bandwidth circuits and we have cut the price of a  

with over 200 other operators and cover over  number of key products.

100 countries for mobile services and continue  We maintained a strong sales performance in both the Residential and  

to build our coverage for data services. Bdesigned usiness sectors. to serve Ithe n our integrated retail outlet communication we have a wide needs range of our of prcustomers. oducts  

To meet the requirements of our corporate customers, we have continued  to invest in our infrastructure and in keeping our people at the forefront  of relevant technology. We have more Cisco Certified Engineers in Jersey  than any other company and it is this strength in data applications that  

has helped us secure a number of key contracts for the supply of IP  telephony in 2005.

" The significant investment made by Jersey Telecom in this world-class facility demonstrates considerable confidence in Jersey's business continuity industry. It is without doubt one of the finest service offerings of its nature I have seen."

Paul Patterson MBE,

Chairman of the Business Continuity Institute (Channel Islands)

 e Lieutenant-Governor officially opened our new state-of-the-art

Data Centre in September and this facility will enable businesses to continue trading in the event of a disaster or crisis. We are able to provide everything under one roof telecoms, data management, Internet services, disaster recovery and business continuity.

 e quality and reliability of our network remains central to achieving

our objectives. We have focussed on making sure we can offer the latest services through our existing network and also by continued investment to ensure that we keep our systems up to date. is has resulted in the performance of our network being maintained to a very high standard.

During 2005, we took the opportunity to review the way we managed the external network and this resulted in the decision to outsource the cable provisioning works to local company. is was done as part of a wider voluntary redundancy programme, which resulted in 40 people from across the company leaving during the year.

Wave Telecom

Demonstrating our long term commitment to the Bailiwick of Guernsey

Wave Telecom represents choice for the Bailiwick

 e Bailiwick of Guernsey comprises a group of Islands and Wave Telecom prides itself on having built a mobile network that can provide 2G and 3G services to all of these customers.

Wave was successful in capturing 13% of the estimated Mobile market in the Bailiwick and this fuelled a substantial growth in revenues. We expect Wave to continue to gain market share through focusing on customer service, network quality and competitive pricing.

Wave offers integrated tariff packages that provide low cost calling between Wave mobiles through the Wave Family Option and reduced prices for calling Wave mobiles from fixed lines via the Wave YourCall service. In addition, our Premier Connect service offers low price fixed line calls for large businesses.

An example of our commitment to Guernsey was the opening of our new retail outlet at 24 High Street in September 2005. ese new premises

have contributed to a significant increase in sales, allowed us to offer a wider range of products and improved our level of customer service.

e provision of business Customer Premises Equipment (CPE) has

been the mainstay of Wave Telecom s revenues and continues to be important as customers migrate to IP telephony systems. Wave Telecom continues to enjoy success in being able to meet the complex needs of the finance industry.

Wave Telecom issued its own telephone directory e Book in January 2005, which was delivered to every home and business in the Bailiwick.

 e wide distribution of this publication raised Wave s profile, making customers aware of our range of services as well as being a one stop handy reference book for local information. It has recently been nominated for Directory of the Year by the Data Publishers Association.

 e Wave Telecom network performed extremely well during the year and its resilient design means that we are able to offer highly reliable services. We have continued to invest in the mobile network and this work

will continue in 2006 to improve indoor coverage.

Opportunities outside the Channel Islands

As competition begins to impact on our primary market, our strategy is to diversify into telecoms related markets outside the Channel Islands. We are already established as a provider of bulk messaging services for a number of UK companies and this has been a growing part of our revenues for a number of years.

Our new Hosting Centre in Jersey provides us with the opportunity

to develop new revenue streams from e-commerce. We are looking at the possibility of providing similar services over Wave Telecom s network in Guernsey.

In 2005, we developed a business for the provision of Mobile services, primarily for the cruise ship market, and we secured our first customer in the second half of the year.

Our extensive experience in providing Mobile services positions us

well to be innovative and take advantage of changes in the global roaming market. We are in the early stages of reviewing the feasibility of entering these markets, which might result in a significant opportunity for revenue growth.

We restructured during the year to create a separate Business Development team that can vigorously pursue off-island opportunities and this strongly aligns us with the policies of both Channel Island Governments as they plan to diversify their economies as well as achieving economic growth.

Investment

Capital investment in our network must support the future needs of our

customers both from an infrastructure build perspective and the delivery

of new services. In 2005 we made the decision to move to a totally IP in our future Our plans are to begin migrating customers on to the fixed NGN

based Next Generation Network for both fixed and mobile services.

during 2006 as well as the planned replacement of the mobile network.

 is will open up a whole new range of services based on VoIP and

high speed Broadband links in the wireline business, it will also provide enhanced capability to deliver high speed data services across the mobile network. Ultimately this will lead to the convergence of the fixed and mobile services, which can be accessed from a single device.

Our investment in the CIEG has enabled us to diversify our off-island connectivity allowing us to access new networks and service providers as well as securing our link with Guernsey. We have multiple off-island fibre optic cable routes terminating in Guernsey, the UK and France which are supplemented and backed-up by microwave systems.

Value for money

We are committed to delivering value for money services in Jersey and  Guernsey and we benchmark well against markets of a comparable size.  

 e price for local calls in Jersey remained unchanged and the cost  

of making National and International calls has never been so low.  Mobile call prices continue to fall and the cost of Broadband services was  cut by between 28% and 58% in December. e average consumer bill  

fell by 3.25% during the year as a result of these price reductions.

Our new mobile tariffs are good value for money. Text messaging at 7p  is 45% cheaper than the average UK price and our mobile subscriptions  compare favourably to those offered in the UK.

Per minute cost* of calls to international destinations

UK France 80p Australia

80

70

60

50

40 40p

30 25p

20

12p 10p

10 7.5p 7p 8p

3.5p

0

1995 2000 2005 1995 2000 2005 1995 2000 2005 * Day rate

In the community

" The concept of Guernsey friendly is epitomised by Wave Telecom whose generous sponsorship of events around the Island is tremendously appreciated and contributes to enhancing our way of life on our tiny Island."

Deputy Staples

As one of the largest Pan-Island Businesses, Jersey Telecom Group

is committed to achieving excellent standards of citizenship.

We demonstrate this through our efforts to minimise the impact

of our day-to-day operations on the environment, our support of local charities and our sponsorship of community events.

One of our key environmental initiatives has been the continuation

of our phone book recycling campaign in Jersey, which we run with the support of primary schools. is has been extended to Guernsey in 2006.

 ere has been a major drive in Jersey to take down telegraph poles where possible. Not only does this minimise the visual impact of poles, it also has the benefit of improving the quality of our services.

Beachwatch was launched in 1993 to raise awareness about the problem of marine and coastal litter and to monitor levels and sources of litter on Britain s beaches as well as encourage action to reduce pollution at source. e synergy with our Wave brand meant we were delighted to support this initiative in Guernsey.

Our chosen charity for 2005 was Childline and we raised over £14,000 through various fund raising events organised by the staff. In 2006, our nominated charity will be Headway in Jersey and Pink Ladies in Guernsey.

We continued our support of Great Ormand Street Hospital through sponsorship of the Crystal Ball event, which marked the end of the two-year fund raising campaign. A limited edition Mini Cooper, won by Jersey Telecom from a UK supplier, was donated to GOSH and raised £130,000 on the night.

e celebration of the 60th anniversary of the liberation of the Channel Islands in 2005 was a special event. As a local company in both Islands we were pleased to be able to offer some sponsorship of this important occasion.

In Jersey, we currently sponsor the Jersey Telecom Regatta, the Student Arts Exhibition, the Under 21 s Muratti and we also co-sponsored the Palais de Glace ice skating rink at the Waterfront in St Helier.

Wave sponsored a number of community events during the year including the Alderney Battle of Trafalgar Day, the Sea Sark Festival and the Sark Museum.

We held two events in the year, Summer Sizzler and Summer Wave, which were amongst the biggest pop concerts ever staged on the Islands. People turned out in their thousands to see a number of UK acts perform at these community events and in doing so raised money

for local charities.

Jersey Telecom and Wave Telecom signed a two-year agreement

with the organisers of the Tennerfest, Hamilton Brooke, to deliver significant technological developments to an already successful promotion. An innovative use of our technology allowed Tennerfest diners to see restaurant listings and menus on their mobile phones.

Our people

We are committed to ensuring that our people enjoy job satisfaction,  good working conditions and good terms and conditions of employment.  Our aim is to engender an environment where individuals can flourish  and be recognised and rewarded for their achievements.

We have consistently sought to recruit and retain the best employees in  our market, as this is key to delivering services to the highest standards.

 e Group has a policy of equal opportunities, which applies to the  recruitment of all new employees and to the management of existing  personnel. We offer all of our staff training relevant to their roles and we  believe that this has contributed to an increase in employee motivation  and satisfaction.

 e health and safety of our people is extremely important and we  maintain excellent standards. e number of days lost through accidents  is well below recognised industry averages.

Consolidated Profit & Loss Account for the year ended 31 December 2005

2005 £'000

Turnover 84,503 Costs

Operating expenses (56,972) Depreciation  (11,870) Amortisation  -

Cost of restructuring (1,396) Operating profit on ordinary activities before interest

14,265 payable and taxation

Interest receivable and similar income  543 Interest payable and similar charges (1,821) Profit on ordinary activities before taxation 12,987 Taxation  (2,340) Profit on ordinary activities after taxation  10,647 Dividends (7,129) Retained profit for the financial year  3,518

All the items dealt with in arriving at the operating profit for 2005 and 2004 relate to continuing operations.

 ere is no difference between the operating profit for the year stated above, and its historical cost equivalent.

* e profit and loss and balance sheet for 2004 has been restated for the adoption of FRS17 retirement benefits , FRS21 events after the balance sheet date and FRS25 financial instruments presentation.

2004*  £'000

81,649

(56,117)  (10,176)  (299)

-

15,057

289  (1,852) 13,494 (3,364) 10,130 (3,560)  6,570  

Consolidated Balance Sheet as at 31 December 2005

2005  2004*  £'000 £'000

Fixed assets

Tangible assets 67,783 68,168 Investments 10 10

67,793 68,178 Current Assets 33,130 28,255 Creditors: amounts falling due within one year (16,569) (23,116) Net current assets 16,561 5,139 Total assets less current liabilities 84,354 73,317 Creditors: amounts falling due after more than one year (22,980) (23,023) Provision for liabilities and charges

Deferred taxation (2,222) (2,494) Net assets 59,152 47,800

Total shareholders' funds 59,152 47,800

* e profit and loss and balance sheet for 2004 has been restated for the  adoption of FRS17 retirement benefits , FRS21 events after the balance  sheet date and FRS25 financial instruments presentation.

Report of the Remuneration Committee

Remuneration Committee

 e Remuneration Committee comprises the non-executive Directors  Changes to salaries and remuneration payments in Jersey Telecom

under the chairmanship of John P Henwood. e Committee s terms  Group are effective from 1st April each year. Increases to the basic salaries of reference comply with the Combined Code.  of Robert P Lawrence and F Philip Ainsworth between April 2004

and April 2005 were 3.7% and 3.8% respectively.

 e structure of remuneration is simple with no equity participation

by the Directors. Salaries are established by reference to those prevailing  Non-Executive Directors fees were set on appointment by the

in the market generally for Executive Directors of comparable status,  Finance & Economics Committee prior to 1st January 2003. responsibility and skills in comparable industries. e Committee uses

executive remuneration surveys prepared by independent consultancy

firms to assist in establishing market levels.

Basic  Benefits

Salary/Fees £ Bonuses* £ in Kind £ Total 2005 £ Total 2004 £

*Bonus for 2005 paid in March 2006.

 Company pension contributions were made in respect of Executive Directors as follows:

2005 £ 2004 £ Robert P Lawrence 21,248 20,669 F Philip Ainsworth 17,321 16,738

Board of Directors

Chairman John Henwood

John Henwood has a media background, having joined Channel Television in 1962 as a trainee and left the Group in 2000 as Chief Executive. He served for 13 years as a director of ITV Network and was appointed MBE in 1998. John was a member of the Review Panel on the Machinery of Government and is a past chairman and current President of the Jersey Branch of the Institute of Directors. He is the vice-Chairman of Jersey Finance Limited, a non-executive director of Kleinwort Benson CI Holdings Ltd and the current President of the Chartered Institute of Marketing in Jersey.

Non-executive Directors John Boothman

John Boothman retired in 2002 as Managing Director of Deutsche

Bank International Ltd, a post to which he was appointed in 1993.

John is non-executive chairman of Aztec Financial Services Limited

and holds several other non-executive directorships in the finance industry. He is also a trustee of the Gerard Le Claire Environmental Trust.

David Le Quesne  Executive Directors

Bob Lawrence

David Le Quesne is an Advocate of the Royal Court and Chairman

of the Jersey law firm of Vibert s. David was called to the Bar in the  Bob Lawrence joined Jersey Telecom as an apprentice in 1973

United Kingdom in 1976 and sworn in as an Advocate of the Royal  and qualified as a senior telecommunications engineer, working in

Court of Jersey in 1980. He specialises in litigation and private client  transmission and radio systems. In 1983 Bob was promoted to manager work. David was a member of the Review Panel on the Machinery of  of the Customer Installation department, then in 1987 he was appointed Government that produced the recommendations for reform set out  as Sales and Installation Director, before taking over as Managing

in the Clothier Report. He is a non-executive director of Securicor  Director in 1991.

Jersey Limited and is also Chairman of e Jersey Employment Tribunal.

In addition to having an extensive technical background, Bob has

David holds the IoD Diploma in Company Direction.

undertaken a wide range of management training at the Cranfield School Nigel Horne of Management and Templeton College, Oxford. He also holds the IoD

Diploma in Company Direction.

Dr Nigel Horne has spent many years in the telecommunications and

information technology manufacturing and service industries. His early  Philip Ainsworth

career was with GEC, which he joined as a student apprentice and left as

managing director of the information systems division, and STC and ICL  Pof hilip Scotland Ainsworand th joined is a member Jersey Tof elecom the Institute as Finance of CharDirector tered in Accountants 1979 after plc where he was a main board director.  holding senior positions in public accounting practice, the UK Health Following a period as a partner of KPMG, Nigel was chairman of Alcatel  Service and the States Treasury. He has been very active in the GSM

UK Limited for eight years, and over the past few years has been a founder  Association, the trade body for the global GSM mobile operator

and director of many high technology companies as well as an advisor to  community, initially as chairman of the Billing and Roaming Working major UK bodies including National Air Traffic Services Limited and the  Group and then as a member of the Executive Board from 1999 to 2002. Department of Social Security.  He has continued as a member of the GSM Association Finance

Committee and is a non-executive director of GSM Communication Among his professional qualifications Nigel is a Fellow of the Royal  Services Ltd. He is also a Non-Executive Director of software vendor,

Academy of Engineering and of the Institution of Electrical Engineers. Cerillion Technologies Limited.

Corporate Governance

Corporate Governance

 e Directors are committed to maintaining a high standard of Corporate Governance, in accordance with section 1 of the Principles of Good Governance of the Combined Code as incorporated within the Listing Rules issued by the Financial Services Authority. e Board is of the opinion that it has materially complied with the Combined Code, with one exception. As Chairman of the Board, John Henwood is not adjudged to be an independent Non-Executive Director and his membership of the Audit Committee is not in accordance with section C.3.1. of the Code.

 e Board has taken the view that at this stage in the Company s development it would be disadvantageous for the Chairman of the

Board to be excluded from Audit Committee deliberations.

The Board

 e Board currently comprises four Non-Executive and two Executive Directors. e Chairman is appointed by the Directors from amongst their number. John C Boothman is the Senior Independent Director.

 e Executive Directors are not subject to retirement by rotation but they are subject to the same periods of notice of termination of employment as are the other members of the Company s senior management.

 e Board s principal focus is the overall strategic direction, development and control of the Company. Key matters such as approval of the Company s objectives and commercial strategies, budgets and risk management strategy are reserved for the Board and these are set out in a formal statement of the Board s role.

Board Committees

 e Board has established and delegated specific responsibilities to the following committees.

Audit Committee

 e Audit Committee comprises the Non-Executive Directors under

the chairmanship of John P Henwood. Meetings are also attended by invitation, by the Managing Director, the Finance Director, the Company Secretary, the chairman of the Company s Risk Working Group and Deloitte and Touche, the external auditors during 2005.

 e Audit Committee supports the Board in the execution of its responsibilities to establish and monitor financial reporting and internal control procedures. e Committee s terms of reference comply with the Combined Code.

Remuneration Committee

 e Remuneration Committee comprises the Non-Executive Directors.

 e Remuneration Committee makes recommendations to the Board regarding the remuneration of executive directors and senior management and considers the ongoing appropriateness and relevance of the remuneration policy.

Nomination Committee Monitoring of controls

 e Nomination Committee comprises the Non-Executive Directors.  e Company has a Risk Working Group in place to ensure the

 e Nomination Committee makes recommendations to the Board  management of risks across the organisation. Its work involves assessing regarding the appointment of Executive and Non-Executive Directors.  through a structured work programme, the operating effectiveness and e Committee s terms of reference comply with the Combined Code.  efficiency of those business processes that are core to the organisation.

It is also through this forum that work on the management of risks Management Board existing in the business is carried out. A database of risks and a view

Responsibility for implementation of the strategies agreed by the Board  of their impact and likelihood of occurrence is assessed and managed. and the consideration of matters relevant to the day-to-day management  e Risk Working Group meets quarterly and its Chairman reports

of the business is delegated to the Management Board, which is a  directly to the Audit Committee.

committee chaired by the Managing Director and made up senior

executives. e Management Board normally meets throughout the  Audit Committee

year on a fortnightly basis.  e Audit Committee reviews the effectiveness of the internal control

process and discusses the reports of the external auditors with them. Internal control

 e Board has overall responsibility for the Company s system of internal

control and for reviewing its effectiveness whilst the role of management

is to implement Board policies on risk and control. e system of internal  ATTENDANCE AT MEETINGS

control is designed to manage rather than eliminate the risk of failure to

achieve business objectives.

 e key procedures which the Board has established to provide effective controls are:

Board reports

Key strategic decisions are taken at Board meetings following due debate and with the benefit of Board papers circulated beforehand. e risks associated with such decisions are a primary consideration in the information presented and discussed by the Board.

Financial information and control

 e Company prepares budgets on an annual basis and these budgets

are updated on a quarterly basis. e performance of the business against these budgets and forecasts is monitored by the Board. ere is an established investment evaluation process to ensure Board approval for all major capital expenditure commitments and includes the scrutiny of business plans by the Board.

*Executive Directors do not attend the Remuneration Committee

Relations with shareholder

Organisation While the Company is wholly owned by the States of Jersey, under the e Board concentrates mainly on strategic and directional matters and  terms of Article 32(6) of the Telecommunications (Jersey) Law 2002 the on financial performance. It aims to safeguard the Company s assets and  Ministry for Treasury and Resources is charged as its representative in ensure proper and reliable accounting records are maintained. ere is a  matters related to its share holding in the Company. Limitations on the clearly defined organisational structure with established reporting  powers of the Minister, which relate principally to share ownership responsibilities, authorities and reporting lines to the Board.  matters, are set out in that same article.

In order to ensure an appropriate accountability framework,

a Memorandum of Understanding exists between the Company

and the Minister and that Memorandum of Understanding recognises the obligation that the Directors have in regard to operating at all times in the best interests of the Company.

JT Group Ltd PO Box 53

No 1 The Forum Grenville Street St Helier JERSEY JE4 8PB