FINANCIAL REPORT AND ACCOUNTS 2011 - States Assembly

NOTES TO THE ACCOUNTSNOTE 11: AVAILABLE FOR SALE INVESTMENTS HELD AT FAIR VALUEThese valuations are intended to represent the accounting ‘fair value’ in respect of these companies and areprepared solely for inclusion in the accounts. Such valuations do not indicate the value that might be soughtor received from a full or partial sale of any holding. The States’ investments in these companies are held ona long term basis; there is no intention to sell any of the States holdings at the present time.Preference Shares are valued using the Dividend Valuation Model. Due to the method of valuation, increasesin the value of preference shares will reduce the value of the equity shares. Preference Shares havepreviously been held at par value, and comparatives have not been restated.Results of the 2011 ValuationOverall the value of Strategic Investments increased by £72 million. The value of Jersey Telecom GroupLimited increased by £84 million, primarily due to the growth expected as a result of the new investmentin Gigabit Jersey and investment in other new revenue streams. The Gigabit Jersey project will cost£41.5 million, and will be partly financed by the States (£19 million) as it is acknowledged to provide aninitial stimulus to the Jersey economy as well as longer term benefits to the Island of Jersey.In contrast the valuation of Jersey Post International Limited fell by £10 million, mostly due to a change inaccounting treatment for payments to one of their larger suppliers, impacting the forecast balance sheet.As expected and in line with their relatively stable market and operating environment, the value of holdingsin Jersey New Waterworks Company and Jersey Electricity plc remained broadly the same, with JECdecreasing slightly due to a small change in their share price, and JNWC increasing due to improvedgrowth expectations.Other Available for Sale investments held at Fair ValueThese investments are bonds that arise from the sale of properties to States tenants as part of the SocialHousing Property Plan 2007–2016 (SHPP), sales to first time buyers qualifying under the Homebuy schemeand other similar arrangements.The purchasers of properties under these two schemes are required to pay a proportion of the market valuein cash on purchase and also enter into an agreement (bond) relating to the remaining value of the property.During the year new bonds with a value of £451,250 (2010: £586,000) were issued.Upon the next sale and/or transfer of the property, the greater of the bond value and a proportion (as statedin the bond agreement) of the market value is paid to the States. During 2011, £23,500 of bonds wereredeemed (2010: £47,000), with a gain of £16,000 being recognised.Some variants of the bond scheme in the SHPP include an element where the percentage of the bond valuereduces. It is not expected that these bonds will be redeemed before the amount has reduced to a minimum,and therefore the value of these bonds is calculated based on this assumption.103