Anglo-Eastern Plantations
Annual Report 2006

Plain-text annual report

Contents Financial summary Chairman’s statement Estate areas Location of estates Financial record Additional information Directors’ report Directors’ responsibilities Directors Statement on corporate governance Directors' remuneration report Auditors’ report Consolidated income statement Consolidated statement of recognised income and expenses Consolidated balance sheet Consolidated cash flow statement Notes to the consolidated financial statements Company balance sheet Notes to the company financial statements Notice of annual general meeting 1 2 6 7 8 9 11 14 15 16 18 20 21 22 23 24 26 42 43 45 Company addresses, advisers and website inside back cover Photographs Thirteen year old palms - Sungei Musam New mill nearing completion - Bina Pitri; reservoir in foreground Return of stripped fruit bunches to the field, as mulch - Blankahan (cover) (pages 2 - 3) (page 4) Anglo-Eastern Plantations Plc, fully listed on the London Stock Exchange, operates and is developing plantations in Indonesia and Malaysia, amounting to a total land area of 45,000 hectares producing mainly palm oil and some rubber. Financial highlights Revenue Profit before tax - before biological asset (BA) adjustment - after BA adjustment EPS before BA adjustment Dividend TRADING PROFIT 30 25 20 15 10 5 0 0 0 0 $ ’ 2006 $ m 79.1 26.7 29.0 2005 $ m 64.3 21.5 21.4 cts/share 38.3 10.8 cts/share 31.0 8.8 Increase 23% 25% 36% 24% 23% EARNINGS AND DIVIDENDS PER SHARE EPS Dividend 45 35 25 15 5 0 s t n e c S U 2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006 ANGLO-EASTERN PLANTATIONS PLC 1 Chairman’s statement Results It is pleasing to report a record profit for 2006, which is 18% higher than 2005 and 6% higher than the previous record in 2004. The good results are attributable to record crops and favourable com- modity prices. Operating profit before biological asset (BA) adjustment was $26.3 million in 2006 compared to $22.2 million in 2005. If not for the exceptionally dry weather in Sumatra in the second half of the year, the 12% increase in fresh fruit bunch (FFB) crops for the year over 2005 would have been higher. Average dollar crude palm oil (CPO) prices were 14% higher but, because of the weakness of the dollar, were only 8% higher in Indonesian rupiah. Also, there were sharp increases in local costs at the end of 2005 following the withdrawal of fuel price subsidies by the Indonesian govern- ment. For example, wages in North Sumatra rose by some 25% and diesel by some 160%. Profit before tax, and after a BA credit adjustment of $2.3 million, was also a record $29.0 million. However, as I have said in earlier statements on the subject, this adjustment has no bearing on the operating performance or cash generation for the group. Earnings per share before BA adjustment were 38.3 cts in 2006, an increase of 24% over the 31.0 cts in 2005. Financing During 2006, we repaid $1.6 million of long term loans and drew down a new five year loan of $3.2 million to fund part of the cost of the mill being built at Bina Pitri. As a result, group long term loans increased from $5.5 million at the beginning of the year to $7.1 million at year end. Total capital expenditure amounted to $15.4 million (2005 - $7.6 million) comprising mainly $4.4 million on the Bina Pitri mill, $3.7 million on the new development at Labuhan Bilik and $5.8 million for new plant- ings at Bengkulu. Notwithstanding these, group cash balances increased from $10.8 million at the beginning of the year to $16.8 million at year end. 2 ANGLO-EASTERN PLANTATIONS PLC Chairman’s statement Valuations Given the price trends in recent years, the outlook for the entire palm oil industry and the operating environment in Indonesia, it is thought that the parameters used to ascertain the value of the group’s Indonesian estates need to be revised. This is also a reflection of the general uptrend in agricultural property prices in Indonesia in recent years. We have revised our CPO price assumption to be $440/mt (previously $400/mt), cif Rotterdam, and the discount rate to 12% (previously 15%). The result is that our Indonesian estates are valued at an average of $4,450/ha compared to $3,790/ha in our 2005 balance sheet. This valuation is a ‘value in use’ to the company and we feel it is a prudent figure in relation to current market values. The positive BA adjustment in the income state- ment reflects this increase in value. Prices After 18 months’ trading in a relatively narrow range of $410/mt to $450/mt, the CPO price began to rise strongly from July 2006 and ended the year at $570/mt. The average for 2006 was $479/mt, compared to $422/mt in 2005. By contrast, palm kernel prices, which were relatively strong in 2004 and 2005, fell 15% during 2006. Palm kernels accounted for about 9% of group oil palm revenue in 2006. Rubber prices reached an all-time high of $2,750/mt in June 2006, largely on what is regarded as speculative demand, and ended 2006 at $1,950/mt. Prices averaged $2,080/mt in 2006 compared to $1,490/mt in 2005. Indonesia Starting in July, we experienced a severe and prolonged drought both at Tasik and at Bengkulu. While crops at these estates were 10% and 19%, respectively, ahead of expectations in the first half of the year, they were only 4% ahead and 3% below expectations, respectively, for the full year. ANGLO-EASTERN PLANTATIONS PLC 3 Chairman’s statement FFB production from Tasik and Anak Tasik was 167,290 mt, about 1.7% lower than in 2005. Tasik continues to perform well for the age of its plantings. With its satisfactory yield, we might defer the start of replanting beyond 2008. Bought-in crop rose to 130,000 mt in 2006 as compared to 111,330 mt in 2005. However, margins reduced as a result of increasing competition from surrounding mills. FFB production from the three smaller estates around Medan was a record at 66,010 mt, up 4% on the record of 63,450 mt harvested in the previous year. Sungei Musam (a picture of which appears on the front cover) performed exceptionally well, with yield rising to 28 mt/ha. The mill at Blankahan, which processes crop from all three estates, completed its second full year of operations. Bought-in crop rose to 44,950 mt from 26,420 mt in 2005. In spite of this large increase, extraction rates remained satisfactory at 22.6%. All the remaining 258 ha of cocoa at Rambung has now been replaced by rubber. The mature rubber area of 434 ha made a contribution of $1.7 million to group profits. Production at Bengkulu, at 189,940 mt, was 19% higher than the previous year but below our budget, due mainly to a severe prolonged drought. We spent considerable sums improving road surfaces to address the difficulties of FFB transport during the monsoon season. With some 4,000 ha of immature palms to be brought into production in the next few years, Bengkulu will be the group’s main profit generator. With keen competition from surrounding mills, bought-in crop at Beng- kulu fell 19% to 119,690 mt. However, the extraction rate improved from 21.0% in 2005 to 21.9% in 2006, reflecting in part the increasing proportion of better planting material used in later years. Bina Pitri performed well and to our expectation, with crop up 70% on 2005 at 46,760 mt. The new 40 mt/hr mill (a picture of which appears on the previous page) expects to commence production shortly. 4 ANGLO-EASTERN PLANTATIONS PLC Chairman’s statement Malaysia Production was up 14% over 2005 at 43,900 mt, a significant improvement on earlier performance. With better FFB prices, our Malaysian properties recorded a much reduced loss of $100,000 from $607,000 in 2005. At current prices, I expect the Malaysian operation to repay all its borrowings during the current year, after which, at reasonable CPO prices, it will be in a position to deliver a cash return to the group. Development New planting at Bengkulu accelerated to 1,360 ha in 2006 from 980 ha in 2005, leaving about 1,100 ha to be completed in 2007. This will bring the Bengkulu estates to a planted area of 15,850 ha. At Labuhan Bilik, 1,400 ha were cleared and drained in early 2006 ready for planting. However, work was held up while we waited for necessary permits resulting in only 349 ha being planted by year end. The planted area has increased to 1,250 ha at the end of March 2007. We have acquired a further 880 ha of land nearby, bringing the plantable area of this estate to 4,000 ha. We are optimis- tic on yield from this fertile property. Our management continues to search for new land or estates to acquire. With current high CPO prices, suitable opportunities are difficult to come by. Directors The Combined Code on Corporate Governance requires non-executive directors who have served for more than nine years to submit themselves for re-election every year. From the notice of the forthcoming annual general meeting, you will see that three of our independent non-executive direc- tors are affected by this provision, which assumes that, after nine years, such directors are not inde- pendent. I commend these directors to you as thoroughly independent and recommend that share- holders vote in favour of all three. Outlook With the exception of North Sumatra, crops so far in 2007 appear to suffer from the effects of the earlier drought and have been a little disappointing. Against this, the CPO price is now around $640/mt and most vegetable oil analysts are positive about the outlook for all vegetable oils, driven by strong consumption in traditional markets as well as prospective demand from the biodiesel industry. If current prices are maintained and unless there is a significant decline in crops, we can expect a material improvement in profits and operating cash flows for 2007. Dividend On the strength of the improved outlook for palm oil and mindful of the effect of the weaker dollar on our sterling based shareholders, the board is proposing to increase the annual dividend by 23% to 10.8 cts per share from 8.8 cts in the previous year. Shareholders’ attention, particularly those who intend to receive a sterling dividend, is drawn to the reference to dividends in the directors’ report on page 13. In future, any sterling equivalent will be paid at the rate of exchange ruling at the date the register closes. If the current exchange rate of $1.96: £ remained unchanged our sterling shareholders would receive a dividend of 5.51p per share or an increase of 9.8% over the previous year. CHAN TEIK HUAT Chairman 3 April 2007 ANGLO-EASTERN PLANTATIONS PLC 5 Estate areas - - - - - - - - - - - - 0 4 9 , 4 9 1 1 , 1 1 3 3 6 , 3 8 0 8 , 1 - - 6 4 6 4 8 8 6 8 2 4 6 9 0 , 1 2 1 2 , 2 4 9 3 9 0 2 6 1 1 9 1 7 - - 6 1 1 6 1 1 4 3 4 0 0 1 4 3 5 0 7 6 0 2 7 2 4 2 1 7 6 8 9 , 4 1 3 3 , 3 1 2 5 3 , 4 4 2 9 , 1 1 4 7 0 6 9 6 2 0 , 4 1 - 3 3 , 3 1 2 - 5 3 , 4 4 - 2 9 , 1 1 - 4 7 - - - 0 8 8 , 3 0 3 1 , 7 3 3 6 , 3 6 0 5 , 1 6 1 1 7 1 9 7 8 3 7 9 7 1 7 , 1 2 7 2 , 2 - - 2 - 0 3 0 - 2 - - 0 4 9 , 4 9 1 1 , 1 1 3 3 6 , 3 8 0 8 , 1 6 3 1 7 1 9 7 1 9 9 4 3 6 6 7 2 1 0 , 6 4 1 2 , 0 3 5 1 7 , 3 9 2 9 , 3 3 a e r a d e t n a p l l a t o T s e v r e s e R - 3 7 3 0 4 7 5 9 7 - 5 9 1 - 5 6 , 3 0 3 2 , 1 1 8 8 , 4 0 3 2 , 5 - 0 3 2 , 5 - - 1 3 1 3 7 9 7 7 - 9 7 - 7 1 7 6 4 8 4 4 9 1 6 1 , 5 5 9 0 , 2 0 0 2 , 8 6 9 0 , 6 4 1 4 , 8 3 6 - 9 0 , 6 4 2 2 , 2 3 0 9 1 , 6 4 0 5 6 2 3 0 1 , 2 3 3 6 , 2 8 4 3 , 6 8 - 4 3 , 6 4 6 2 , 7 8 0 5 , 1 1 2 1 , 2 3 9 8 , 0 1 2 2 8 , 4 4 2 3 6 , 8 3 0 9 1 , 6 c t e i , g n s u o h – r e h t O s e l t i t d n a L : h c h w i f o s t h g i r d n a L a e r a l a t o T l e b a t n a p n U l l e b a t n a P l - - 9 4 3 9 4 3 - - - 6 6 7 2 1 0 , 6 0 6 9 , 3 2 0 3 4 , 3 0 9 3 , 7 2 - - - - 6 2 1 , 2 4 9 5 , 3 - 5 8 2 6 6 7 2 1 0 , 6 0 8 6 , 9 2 5 1 7 , 3 - - - - - - 4 3 4 0 0 1 4 3 5 - - - 6 2 1 , 2 9 7 8 , 3 5 9 3 , 3 3 4 3 4 0 0 1 4 3 5 7 0 0 2 d n e e r u t a m o t e u d e r u t a m m I e r u t a M m l a P l i O r e h t o l a t o T e r u t a m m I e r u t a M l a t o T r e b b u R U A R I A N B I I R T P I % 0 8 U L U K G N E B % 0 9 O N L A S A M % 0 9 I G N D U P % 5 7 I E G N U S M A S U M s e r a t c e H s e r a t c e H s e r a t c e H s e r a t c e H % 0 0 1 s e r a t c e H % 5 7 s e r a t c e H G N U B M A R N A H A K N A L B A R T A M U S H T R O N % 0 8 K I L I B N A H U B A L K A N A I K S A T % 0 0 1 % 0 8 I K S A T s e r a t c e H s e r a t c e H s e r a t c e H s e r a t c e H L A T O T G N U R E D N E C L A T O T I A S E N O D N I I A S Y A L A M P U O R G 6 0 0 2 r e b m e c e D 1 3 t A % 5 5 s e r a t c e H s e r a t c e H l w o e b s a e r a l a t o t n i t s e r e t n i p u o r G 6 ANGLO-EASTERN PLANTATIONS PLC Location of Estates 1 2 3 4 6 5 7 8 9 1 Cenderung 2 Sungei Musam 3 Blankahan 4 Rambung 5 Labuhan Bilik 6 Anak Tasik 7 Tasik 8 Bina Pitri 9 Bengkulu project ©1996 George Philip & Son Ltd Cartography by Philip's ANGLO-EASTERN PLANTATIONS PLC 7 Kota BaharuGeorge TownIpohKuala TerengganuKuala LumpurSerembanKuantanPalembangTanjungkarangTelukbetungJambi(Telanaipura)PadangPekanbaruMedanBengkuluSawahluntoSolokPadangpanjangBukittinggiPayakumbuhSibolgaShah AlamAlor SetarKangarMelakaPematangsiantarTebingtinggiBirTanjungbalaiPanaitanTg. GedeRanauEquatorUjung Rajanda AcehangPERLISNEGERIMELAKASEMBILANPINANGKEDAHPERAKSELANGORTERENGGANUPAHANGJOHORSINGAPORESELATANRIAUJAMBIUTARAACEHLAMPUNGBARATPENINSULARMALAYSIAKELANTANKepulauanBatuDanauTobaSiberutNiasSimeulueKepulauanBanyakKepulauan LinggaKepulauanRiauKepulauanAnamba Selat Sunda Pulau Rakata ILAND J a v a T r e n c Peurangan Simpangkiri Rokan Siak Kampar Batangkari Tembesi Musi Ogan Tulangbawang Selat Bangka Selat Berhala Str. of Singapore Rompin MS O UINDIANOCEANStrait of Malacca Kepulauan Mentawai B u k i t B a r i s a n S U M A T E R A I B E N G K U L U ▲ 2855▲ 2985▲2130▲1276▲2182▲2190▲ 2108▲17483805▲▲23836073▼6650▼2170▲▲3159▲▲ 2833▲ 3381Pahang PTLeuserGeureudongAbongabongKerinciLangkawiP. TiomanKundurSinkepG. ChamahG. BesarLahatEngganoPulau PagaiSelatanPulau PagaiUtaraKuala LipisG. KorbuG. Batu PutehG. LedangG. TahanMetroKotabumiBaturajaCurupLubuklinggauSekayuKualatungkalBengkalisChoa ChukangTuasNee SoonJohor BaharuTeberauBatu PahatKeluangLabisPandang EndauMuarTampinAlur GajahPort DicksonRembauTelok DatokKelangKajangKuala SelangorBentongTanjong MalimKuala Kubu BaharuRaubTapahKamparBatu GajahCameron HighlandsPort WeldTaipingParit BuntarBukit MertajamKulimSungai PetaniKuala NerangGerikNarathiwatKuala KeraiMarangKuala DungunCukaiPasir MasSelamaTeluk AnsonTemerlohSegamatKuala PilahChangiTanjungpinangBangkoSungaipenuhPariamanBatusangkarLubuksikapingPadangsidempuanGunungsitoliTarutungKabanjaheLangsaLhokseumaweSigliRantauprapatBangkinangSijunjungMuarabungoMuaraenimRengatGadis Lalang Bernam SebangkaLinggaJemajaKualaPandegelangBintanBatamTanahmasaTanahbalaSeblatDempoBengkalisRupatSamosirPadangRangsangTebingtinggiLabuhanAnyerKaliandoKotaagungMannaPerabumulihKayuagungMuntokBelinSarolangunMuarateboSungaipakningDumaiBagansiapiapiMersingSinabangLahewaMeureuduBireuenPeureulakPangkalansusuMartapuraSukadonoPiniUjungKualasimpangTelukdalemNatalPrapatBatangButterworthJerantutGemasBenomDanungTanah MerahKuala KangsarLumutSabakPekanKuala RompinKota TinggiDaboTanjungbatuLabuhanbilikBaharokKutacanePangkalanbrandanGeumpangokkruetSidikajangSeribudolokBakunganKandangBlangpidreBelawanIdiBaligeKisaranRantaukamparSiaksrinderapuraKotatengahKotapinangSipiongotSingkriSingkuangSirambuSibigoLasiaSibuhuanRaoPantiAirmolekCirentiKotabaruMuarasabakKenaliasamJebusSungsangSungaigerongTgPendopoMenggalaBukitkemuningKruiKotajawaMuararupuArgamakmurTaisBintuhanMuaraamanIpuhPatnanPasarkuokSabulubekIndrapuraMukomukaTalukMuaraLipatkamMinasMasuraiSipuraKirakatauTg. CinaMusalaTuangkuTakenganMeulabohTapaktuanTembilahanMuaratembesiFinancial record Profit and Loss Account Revenue Trading profit Biological asset (BA) adjustment Exchange profits/(losses) Net interest - income/(charged) Profit before tax Tax Minority interests 2006 IFRS $000 79,094 26,270 2,312 368 90 2005 IFRS $000 64,321 22,201 (35 ) (550 ) (196 ) 2004 IFRS $000 2003 UK GAAP $000 2002 UK GAAP $000 65,676 24,793 1,950 147 (287) 48,519 19,994 31,139 12,767 - - - - (537) (895) 29,040 21,420 26,744 19,587 12,092 (9,289 ) (3,277 ) (7,097 ) (2,140 ) (8,450 ) (2,901 ) (6,141 ) (2,201 ) (4,367 ) (1,250 ) Profit attributable to shareholders 16,474 12,183 14,809 11,245 6,475 Dividend proposed for year (4,265) (3,514) (3,147) (2,375) (1,571) Balance Sheet Fixed assets Cash net of short term borrowings Long term loans Other working capital Deferred tax $000 $000 $000 $000 $000 160,823 129,518 127,302 105,096 103,558 15,079 (5,454 ) (1,919 ) 9,091 (3,940 ) 255 9,357 (5,558 ) (4,341 ) (21,152 ) (16,941 ) (16,698 ) 13,067 (6,108 ) (4,677 ) 1,013 6,376 (8,085 ) (4,554 ) 1,215 Minority interests 147,377 117,983 110,062 108,391 98,510 (25,421) (20,519) (19,276) (19,229) (17,377) Net worth 121,956 97,464 90,786 89,162 81,133 Share capital Treasury shares 15,495 (1,387 ) (1,387 ) (1,387 ) 15,481 15,424 15,319 15,171 Share premium and capital redemption account 24,991 24,955 24,912 Revaluation and exchange reserve Profit and loss account 2,407 80,450 (9,121 ) (6,674 ) 67,536 58,511 - 24,766 5,375 43,702 - 24,657 6,586 34,719 Equity attributable to shareholders’ funds 121,956 97,464 90,786 89,162 81,133 Ordinary shares in issue (‘000s) Earnings per share before BA adj (US cents) Dividend per share for year (US cents) Asset value per share (US cents) 39,958 38.3cts 10.8cts 309cts Earnings per share before BA adj (pence equivalent) 20.6p Asset value per share (pence equivalent) Borrowings net of cash: shareholders’ funds (%) 158p - 39,928 31.0cts 8.8cts 244cts 17.1p 142p - 39,804 34.5cts 8.0cts 228cts 18.7p 135p - 39,581 28.6cts 6.0cts 225cts 17.4p 126p - 39,227 16.5cts 4.0cts 207cts 10.9p 128p 2% Relevant exchange rates shown on page 9. 8 ANGLO-EASTERN PLANTATIONS PLC Additional information Planted area Oil palm - mature - immature - total Rubber Cocoa Total Crops FFB - all estates - bought-in or processed for third parties - mill throughput Saleable crude palm oil (CPO) Saleable palm kernels Rubber Cocoa Average yields FFB Rubber Cocoa Extraction rates CPO Kernel Sales CPO Palm kernel FFB Rubber Cocoa Average ex-factory sales prices – Indonesia CPO Palm kernels Rubber Cocoa FFB (ex-estate) Average ex-estate sales prices – Malaysia FFB Exchange rates – year end Rp : $ $ : £ RM: $ Exchange rates – average Rp : $ $ : £ RM: $ ANGLO-EASTERN PLANTATIONS PLC 2006 Ha 27,390 6,005 33,395 534 - 33,929 mt 513,902 294,647 717,888 156,285 36,596 1,088 46 mt/ha 18.8 2.0 - % 21.8 5.1 mt 157,326 36,556 90,659 1,074 67 Rp/kg 3,586 1,879 17,932 9,303 754 RM/mt 299 9,020 1.96 3.53 9,141 1.86 3.66 2005 Ha 26,393 5,481 31,874 434 258 32,566 mt 459,080 284,705 677,845 145,820 35,049 946 157 mt/ha 17.7 2.2 0.6 % 21.5 5.1 mt 145,943 35,220 65,864 947 125 Rp/kg 3,332 2,218 13,716 10,923 702 RM/mt 277 9,830 1.72 3.78 9,751 1.81 3.79 2004 Ha 25,533 4,500 30,033 434 258 30,725 mt 428,657 241,359 562,134 118,197 28,526 1,370 208 mt/ha 18.9 2.3 0.8 % 21.5 5.2 mt 119,250 28,315 107,844 1,376 221 Rp/kg 3,600 2,233 10,618 10,894 764 RM/mt 319 9,290 1.92 3.80 9,001 1.84 3.80 2003 Ha 19,910 4,507 24,417 757 258 25,432 mt 372,290 170,948 453,717 94,523 22,325 1,800 154 mt/ha 19.0 2.3 0.6 % 20.8 4.9 mt 91,238 22,302 90,119 1,800 141 Rp/kg 3,320 1,500 8,451 14,544 719 RM/mt 284 8,447 1.79 3.80 8,563 1.65 3.80 2002 Ha 19,335 3,389 22,724 843 258 23,825 mt 294,062 101,906 302,592 63,240 15,033 1,491 178 mt/ha 16.3 1.6 0.7 % 21.1 5.0 mt 63,042 15,018 93,929 1,508 170 Rp/kg 3,113 1,468 6,698 15,214 617 RM/mt 242 8,940 1.61 3.80 9,253 1.51 3.80 9 Additional information FFB PRODUCTION RUBBER AND COCOA PRODUCTION 550 500 450 400 350 300 250 200 150 100 50 650 600 550 500 450 400 350 300 250 200 ) 0 0 0 ’ ( s e n n o T e n n o t / $ s e n n o T 2000 1800 1600 1400 1200 000 800 600 400 200 0 2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006 PALM OIL - PRICE (Rotterdam) RUBBER AND COCOA PRICES e n n o t / $ 2750 2500 2250 2000 1750 1500 1250 1000 750 500 250 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007 ANGLO-EASTERN SHARE PRICE (Month opening) PLANTED AREAS - HECTARES Rubber (534 ha - 1.6%) Oil palm - immature (6,005 ha - 17.7%) Oil palm - mature (27,390 ha - 80.7%) e c n e P 340 320 300 280 260 240 220 200 180 160 140 120 100 80 60 40 20 2001 2002 2003 2004 2005 2006 2007 10 ANGLO-EASTERN PLANTATIONS PLC Directors’ report The directors present their annual report on the affairs of the group, together with the financial statements and auditors' report, for the year ended 31 December 2006. Principal activity The company is incorporated in the United Kingdom under the Companies Act 1985. The address of the registered office and company number are on the inside back cover. The company acts as a holding company and co-ordinates the businesses of its subsidiaries. At 31 December 2006 these comprised principally the cultivation of oil palm and rubber in Indonesia and Malaysia. The subsidiary undertakings which principally affected the profits or net assets of the group in the year are listed in note 27 to the consolidated financial statements. Results and dividends The audited financial statements for the year ended 31 December 2006 are set out on pages 21 to 44. The group profit for the year on ordinary activities before taxation was $29,040,000 (2005 - $21,420,000) and the profit attributable to ordinary shareholders was $16,474,000 (2005 - $12,183,000). As usual no interim dividend was paid. The directors recommend a final dividend per share of 10.8cts (2005 – 8.8cts) to be paid on 9 July 2007 to shareholders on the register on 8 June 2007. Shareholders may elect to receive their dividend in sterling as described on page 13. Enhanced business review Refer to the chairman's statement on pages 2 to 5. In addition the principal risks and uncertainties of the group’s business are: • Unexpected variations in crop, principally caused by unusual weather • Variations in commodity prices • Variations in the rates of exchange of the Indonesian rupiah and the Malaysian ringgit against the US dollar, which affect directly the local selling prices of the group’s products and the cost of imported inputs, as well as the value of financial assets and liabilities as set out in note 26 of the financial statements • Input cost inflation and • Changes in the policy of the Indonesian or Malaysian governments towards the plantation industry and towards foreign investment. Financial risk Information on financial instruments and other risks is set out in note 26 to the financial statements. Biological assets, property, plant and equipment Information relating to changes in these fixed assets is given in note 11 to the financial statements. Directors A full list of directors appears on page 15. All the directors served throughout the year. Datuk Chin, who will have served for nine years, together with Madam Lim, Mr O'Connor and Mr Ho, who will have each served for 13 years, will be submitting themselves for re-election at the forthcoming annual general meeting, as provided in the Combined Code of Corporate Governance. Directors' interests The interests of the directors, together with those of their immediate families, in the securities of the company were as shown below: Directors' beneficial interests at 31 December R O B Barnes T H Chan Datuk Chin S K Foo (resigned 16 Sept 2005) S C Ho L Y Kee S K Lim P E O'Connor 2006 Ordinary shares 186,000 - - - 300,000 - 20,521,314 200,000 2005 Ordinary shares 186,000 - - - 300,000 - 20,521,314 250,000 ANGLO-EASTERN PLANTATIONS PLC 11 Directors’ report The interests disclosed for Madam Lim are held by Genton International Limited and certain other companies of which Madam Lim is the controlling shareholder. There have been no changes in the interests of the directors in the securities of the company between 31 December 2006 and the date of this report. Other than as set out in note 22 to the financial statements, no director had a material interest in any contract of the company subsisting during, or at the end of, the financial year. Substantial share interests As at 3 April 2007 the following interests had been notified to the company, being interests in excess of 3% of the issued ordinary share capital of the company: Name of holder Genton International Limited Alcatel Bell Pension Fund S N Roditi Number 20,247,814 5,940,000 2,116,900 Percentage held 50.7% 14.9% 5.3% Auditors All of the current directors have taken the steps that they ought to have taken to make themselves aware of any information needed by the company's auditors for the purposes of their audit and to establish that the auditors are aware of the information. The directors are not aware of any relevant audit information of which the auditors are unaware. BDO Stoy Hayward LLP have expressed their willingness to continue in office and a resolution to re-appoint them will be proposed as Resolution 5 at the forthcoming annual general meeting. Authority to allot shares At the annual general meeting held on 26 May 2006 shareholders authorised the board under the provisions of section 80 of the Companies Act 1985 to allot relevant securities within specified limits for a period of five years. Renewal of this authority on similar terms is being sought under Resolution 6 at the forthcoming annual general meeting. Such authority will be limited to shares up to a maximum nominal amount of £5,127,432 which represents the company's authorised but unissued share capital. The authority will last for up to five years from the date of the resolution. The directors do not have any present intention of issuing any shares under this authority. A fresh authority is also being sought under the provisions of section 95 of the Companies Act 1985 to enable the board to make an issue to existing shareholders without being obliged to comply with certain technical requirements of the Companies Act, which create problems with regard to fractional entitlements and overseas shareholders. In addition, the authority will give the board power to make issues of shares for cash to persons other than existing shareholders up to a maximum aggregate nominal amount of £499,478 representing 5% of the current issued share capital. The section 95 authority will last for up to 15 months from the date of the annual general meeting. Scrip dividends Resolution 7 to be proposed at the annual general meeting seeks renewal for a further five years of the authority under which the directors are able to offer shareholders a scrip dividend alternative. No scrip alternative is being offered in respect of the 2006 final dividend. Acquisition of the company's own shares and authority to purchase own shares At 3 April 2007 the directors had remaining authority, under the shareholders' resolution of 26 May 2006, to make purchases of 3,992,837 of the company's ordinary shares. This authority expires on 31 May 2007. 12 ANGLO-EASTERN PLANTATIONS PLC Directors’ report The board will only make purchases if they believe the earnings or net assets per share of the company would be improved by such purchases. All such purchases will be market purchases made through the London Stock Exchange. Companies can hold their own shares which have been purchased in this way in treasury rather than having to cancel them. The directors would, therefore, consider holding the company's own shares which have been purchased by the company as treasury shares as this would give the company the flexibility of being able to sell such shares quickly and effectively where it considers it in the interests of shareholders to do so. Whilst any such shares are held in treasury, no dividends will be payable on them and they will not carry any voting rights. Resolution 8 to be proposed at the forthcoming annual general meeting seeks renewed authority to purchase up to a maximum of 3,995,827 ordinary shares of 25p each on the London Stock Exchange, representing 10% of the company's issued ordinary share capital. The maximum price which may be paid for ordinary shares on any exercise of the authority will be restricted to 5% above the average middle market quotations for such shares as derived from the London Stock Exchange Daily Official List for the 5 business days before the purchase is made. The maximum number of shares and the price range are stated for the purpose of compliance with statutory requirements in seeking this authority and should not be taken as an indication of the level of purchases, or the prices thereof, that the company would intend to make. Payment of dividends The group reporting currency is US dollars. However shareholders can choose to receive dividends in US dollars or in sterling. In the absence of any specific instruction up to the date of closing the register, shareholders with addresses in the UK are deemed to have elected to receive their dividends in sterling and those with addresses outside the UK in US dollars. The sterling equivalent dividend will be paid at the exchange rate ruling at the date of closure of the register. This is a change from previous years when the exchange rate was that ruling at the date of the preliminary announcement of the company’s results. Supplier payment policy It is the group’s policy to pay suppliers promptly in accordance with agreed terms of payment. Year end trade creditor days were about 30 (2005 – 30). Liability insurance for company officers As permitted by the Companies Act 1985 the company has maintained insurance cover for the directors against liabilities in relation to the company. Political and charitable donations None (2005 - $62,000). By order of the board R O B Barnes Secretary ANGLO-EASTERN PLANTATIONS PLC 3 April 2007 13 Directors’ responsibilities The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the group, for safeguarding the assets of the company, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a directors' report and directors' remuneration report which comply with the requirements of the Companies Act 1985. The directors are responsible for preparing the annual report and the financial statements in accordance with the Companies Act 1985. The directors are also required to prepare financial statements for the group in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS) and Article 4 of the IAS Regulation. The directors have chosen to prepare financial statements for the company in accordance with UK Generally Accepted Accounting Practice (GAAP). After making enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue operations for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Group financial statements International Accounting Standard 1 requires that financial statements present fairly for each financial year the group's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's 'Framework for the preparation and presentation of financial statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRS. A fair presentation also requires the directors to: • • • consistently select and apply appropriate accounting policies present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information and provide additional disclosures when compliance with the specific requirements of IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance. Parent company financial statements Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to: • • • • select suitable accounting policies and then apply them consistently prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business make judgements and estimates that are reasonable and prudent and state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements. Financial statements are published on the group's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the group's website is the responsibility of the directors. The directors' responsibility also extends to the ongoing integrity of the financial statements contained therein. 14 ANGLO-EASTERN PLANTATIONS PLC Directors Chan Teik Huat (Chairman and CEO, aged 67) – appointed 29 November 1993 Chartered Accountant; until January 2006 managing director of Metroplex Berhad, an investment holding company, listed on the Kuala Lumpur Stock Exchange, primarily engaged in property development, investment property, hotel ownership, building materials, leisure and gaming; founder and managing partner of a leading accounting firm in Malaysia for some 17 years. Kee Lian Yong (Executive director, aged 50) – appointed 1 August 2005 Chartered Accountant; from January 2006 managing director of Metroplex Berhad; previously chief executive for ten years of Ecofirst Consolidated Berhad (formerly Kumpulan Mas Berhad), a company quoted on the Kuala Lumpur Stock Exchange with interests in plantations, water engineering, property development and education. R O B Barnes (Chief financial officer, aged 62) – appointed 10 July 1989 Chartered Accountant; director of The Chillington Corporation Plc from 1986 to 1989. Madam Lim Siew Kim (Non-executive, aged 58) – appointed 29 November 1993 Executive chairman of Metroplex Berhad. Datuk H Chin Poy-Wu (Independent non-executive, chairman of remuneration committee, aged 69) – appointed 1 May 1998 Deputy chairman of Hap Seng Consolidated Berhad, director of Glenealy Plantations Berhad, both listed on the Kuala Lumpur Stock Exchange. Board member of University Malaysia, Sabah. Commissioner of Police - Kuala Lumpur, retired 1993. P E O'Connor (Senior independent non-executive, chairman of nomination committee, aged 66) – appointed 3 June 1994 Chairman of Advance Developing Markets Plc; lead director of NEO Material Technologies Inc and deputy chairman of IMS Investment Manager Selection Limited; director of GT Management Plc 1975 to 1990 (in London and Hong Kong). Ho Soo Ching (Independent non-executive, chairman of audit committee, aged 57) – appointed 29 November 1993 From September 2006 chief executive officer of Manhattan Resources Limited, a Singapore listed company involved in the Indonesian coal mining sector. Prior to that involved mainly in the financial services sector including some time within Singapore Technologies Group. Director of Morgan Grenfell, Singapore from 1981 to 1987. ANGLO-EASTERN PLANTATIONS PLC 15 Statement on corporate governance During 2006 the company has complied with the great majority of the requirements of the Combined Code of Corporate Governance. Where provisions of the Combined Code were not met during 2006, particular comment is made in the statements below and in the Directors' remuneration report on page 18. This statement does not attempt to rehearse all the provisions of the Combined Code. The board The board comprises three executive and four non-executive directors, three of whom are independent. All of these three have served for over nine years, which is the limit reckoned by the Combined Code to indicate prima facie independence. All three have a wide range of business interests beyond their position with the company and the rest of the board agrees unanimously that they have shown themselves to be fully independent. Mr Chan has been both chairman and chief executive since 1998. Madam Lim, who is a non-executive director, is the controlling shareholder of the company. In the opinion of the board, given the size of his family's commitment to the company, his common interest as a family member and manager in the company make it reasonable that the post of chairman and chief executive are combined. The other members of the board are satisfied that through the specific powers reserved for the board, and given the presence of three wholly independent non-executives, there is a reasonable balance of influence. A schedule of duties and decisions reserved for the board and management respectively has been adopted. The audit, remuneration and nomination committees have written terms of reference. Unless warranted by unusual matters, the board normally meets three times each year. Other meetings to deal with formalities take place by telephone or written resolution. During 2006 there were three full meetings, attended by all the directors except Madam Lim who did not attend any, and Mr O’Connor who was absent from one. All the independent non-executive directors met on their own in early 2006 and 2007. The chairman met all the non-executive directors, in the absence of the other executive directors, twice in 2006. Mr O’Connor has been senior non-executive director since January 1999. Non-executives are appointed for three year terms. There have been changes in non-executive directors at intervals in the past (as recently as 2005) for a variety of reasons. While accepting the need to maintain the vitality of the board the directors do not intend to specify fixed terms of office for non-executives. However, the board will review the position of each director at the time set for his normal three yearly reappointment under the Articles. New directors have not received formal training on the occasion of their appointment to the board as all have previous experience of public company directorships and some of them have worked in financial or accounting service industries. In January 2007 the board conducted a review of its performance. No major issues arose from this review. The nomination committee comprises Mr O’Connor (chairman), Mr Ho and Datuk Chin. The committee did not need to meet during 2006. Relations with shareholders Company executives attempt to contact principal shareholders at least twice a year and at all times are pleased to speak to and meet any shareholder. Given the dispersion of directors and shareholders it is not possible for every non-executive director to meet shareholders in the presence of management. A member of the audit and remuneration committees will be available at the 2007 annual general meeting. Accountability and audit The responsibilities of the directors as regards the financial statements are set out on page 14. A statement of going concern is also on page 14. 16 ANGLO-EASTERN PLANTATIONS PLC Statement on corporate governance Accountability and audit - continued The audit committee comprises Mr Ho (chairman), Mr O'Connor and Datuk Chin. Mr Ho and Mr O'Connor have current financial experience from their present or previous principal occupations in corporate finance and investment. The committee met prior to the completion of the 2006 accounts and three times during 2006. These meetings were attended by all members, except Mr O’Connor, who was absent from one. Internal control The company has followed the Combined Code provisions and Turnbull Committee guidance on internal control since 1999. The board has overall responsibility for the group’s internal control and risk management; the audit committee reviews and monitors specific risks and internal control procedures and reports to the board where appropriate. Executive staff and directors are responsible for implementation of control procedures and for identifying and managing business risks. The audit committee review is a continuous but sequential process and in any one year does not necessarily cover all risks which are significant to the group. The process aims to provide reasonable assurance against material misstatement or loss. In 2006 for example the audit committee reviewed, among other things, industrial relations policy, exchange exposure, environmental risks and risks in acquisitions in Indonesia. The board receives monthly reports from executive management in Indonesia and Malaysia and focuses at each meeting on the principal continuing risks to which the group is exposed including, but not limited to, commodity price movements, exchange rate movements, political and social change and government legislation. The group has an internal audit department which visits each operating site in Indonesia and Malaysia twice a year and provides a wide ranging report to the managing director of those operations. Environmental and corporate social responsibility In 2004 a group of growers, processors, retailers and wildlife and conservation groups founded the “Round Table for Sustainable Palm Oil”, known as RSPO, to codify and promote best practices in the industry. The group’s management and directors take a serious view of their environmental and social responsibilities and are fully committed to the principles being developed by RSPO. These principles cover eight headings as follows: • Transparency • Compliance with local laws and regulations • Commitment to long term economic and financial viability • Use of appropriate best practices by growers and millers • Environmental responsibility and conservation of natural resources and biodiversity • Responsible consideration of individuals and communities affected by growers and mills • Responsible development of new plantings and • Commitment to continuous improvement in key areas of activity Within these headings are 40 detailed principles. Among the most important are • Not to remove primary forest • Not to use fire for clearing new or replantings • To follow accepted soil and water conservation practices • To use agrochemicals in ways that do not endanger health or the environment and to promote non- chemical methods of pest management • To leave wild areas for wildlife corridors, water catchment and riparian protection • Provide full treatment of mill effluent water • Ensure the wishes of local communities and individuals are taken account of and • Only freely agreed compensation is paid to individuals with residual rights over land, in addition to following government land regulations ANGLO-EASTERN PLANTATIONS PLC 17 Directors’ remuneration report This report by the remuneration committee has been approved by the board of directors for submission to shareholders for their approval at the forthcoming annual general meeting. Membership The remuneration committee comprised throughout the year Mr Ho and Mr O'Connor and was chaired by Datuk Chin. The committee met three times in 2006 attended by all members, except Mr O’Connor who was absent from one. Policy The remuneration committee makes recommendations on senior management pay and conditions, after consultation with the chief executive, and recommends to the board the terms of executive directors. The committee recommends remuneration terms by reference to individual performance, market conditions, the company's performance and the need to maintain an economic operation. Non-executive directors' remuneration is considered by the board as a whole. Components Base salary Base salaries are reviewed on an annual basis by the remuneration committee or when an individual changes responsibilities. Non-executive directors receive no benefits other than a fee. Bonus The group operates a bonus scheme for senior executives and managers which is generally determined by operating performance criteria. Annual bonuses for senior executives and managers are capped at 66% of base salary. Executive directors receive a bonus which has ranged from 0% to 41% in past years, at the discretion of the board. Share options The UK and overseas executive share option schemes of the company are administered and supervised by a committee consisting, in the majority, of non-executive directors. These schemes are limited over their 10 year life to issuing no more than 5% of the issued ordinary share capital of the company from time to time. They provide for options to be granted over treasury shares as well as over new shares. To avoid dilution, the board intends generally to follow the treasury share route. Individual grants are phased over three years. The total grant to each holder is determined by seniority and total market value at date of grant is limited to four times base salary. Exercise of options is only permitted three years after grant. There are no performance criteria for exercise. Pensions There is no company pension scheme for executive directors or senior executives and management. In the case of one executive director, Mr Barnes, the company makes contributions based on base salary only to a personal money purchase scheme. Senior executives who leave voluntarily after more than five years' service are entitled to a gratuity of one month's base salary for each year of service. Service contracts All directors, executive and non-executive, have service contracts. Those of the non-executives are all dated 24 February 2006 for three year terms with notice periods of one month. Mr Barnes has a contract dated 29 March 2005 which expires on 31 May 2007. In the event of an early termination by the company this contract provides for a termination payment equivalent to the lower of one year or the outstanding term of the contract. Mr Chan and Mr Kee have rolling contracts dated 22 February 2007 and 22 June 2005, respectively, each having a notice period of six months. Notice periods for all other senior management are generally between three and six months. 18 ANGLO-EASTERN PLANTATIONS PLC Directors’ remuneration report Performance graph The following graph shows the company's performance, measured by share price, compared to the Kuala Lumpur Stock Exchange (KLSE) Plantation Index for the period 1 January 2002 to 19 March 2007. This is the only relevant index available in terms of sector but any comparison should be qualified; many Malaysian plantation companies are diversified, as well as not holding as great a proportion of their assets in Indonesia as the company. In determining senior management compensation, the remuneration committee is influenced by the operating performance of the company and not directly by the share price. Audited information Directors' share options Anglo-Eastern Plant (EQ) --------- Kuala Lumpur SE/Plantation CR (IN) 900 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0 -50 h t w o r g e g a t n e c r e P 2002 2003 2004 2005 2006 2007 5 years from 01/01/02 to 19/03/07 Share options granted to the directors of the company under the company's 1994 Executive Share Option Scheme and Overseas Share Option Scheme and outstanding at 31 December 2006 were: Name of director Date of grant Exercise price Period of option No of ordinary shares under option T H Chan 16.04.02 44.7p 30.04.05-29.04.12 1 Jan 06 30,600 (Exercised) - 31 Dec 06 30,600 The market price of the shares at 31 December 2006 was 312.5p and the range during 2006 was 218.25p to 330p. Directors' remuneration The remuneration of all directors who served during the year was: Name of director Executive: T H Chan (Chairman and CEO) R O B Barnes L Y Kee (appointed 1 August 2005) Non-executive: S K Lim Datuk H Chin S K Foo (resigned 16 Sep 2005) S C Ho P E O'Connor 2006 2005 Fees $000 Executive salary $000 Bonus (re 2005) $000 Benefits in kind $000 Total 2006 $000 Total 2005 $000 Pension contribution 2005 $000 2006 $000 - - 15 22 - 22 22 81 92 86 196 82 - - - - - 364 293 14 31 4 - - - - - 49 107 6 31 14 - - - - - 51 35 106 258 100 15 22 - 22 22 545 118 276 41 15 22 11 22 22 527 - 34 - - - - - - 34 - 31 - - - - - - 31 Apart from the salaries of Mr Chan and Mr Kee, which are denominated in Malaysian ringgit, all the other above salaries are denominated in sterling. On behalf of the board Datuk H Chin Poy-Wu Chairman, remuneration committee ANGLO-EASTERN PLANTATIONS PLC 3 April 2007 19 Auditors’ report Independent auditors' report to the shareholders of Anglo-Eastern Plantations Plc We have audited the group and parent company financial statements (the ''financial statements'') of Anglo-Eastern Plantations Plc for the year ended 31 December 2006 which comprise the consolidated income statement, the consolidated and parent company balance sheets, the consolidated cash flow statement, the consolidated statement of recognised income and expenses and the related notes. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the directors' remuneration report that is described as having been audited. Respective responsibilities of directors and auditors The directors' responsibilities for preparing the Annual Report and the group financial statements in accordance with applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union, and for preparing the parent company financial statements and the directors' remuneration report in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the statement of directors' responsibilities. Our responsibility is to audit the financial statements and the part of the directors' remuneration report to be audited in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the directors' remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985 and whether the information in the directors' report is consistent with those financial statements. The financial statements have been properly prepared in accordance with Article 4 of the IAS Regulation. We also report to you if, in our opinion the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed. We review whether the corporate governance statement reflects the company's compliance with the nine provisions of the 2003 FRC Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the group's corporate governance procedures or its risk and control procedures. We read other information contained in the annual report and consider whether it is consistent with the audited financial statements. The other information comprises only the financial summary, the chairman's statement, financial record, additional information, location of estates, estate areas, the directors' report, statement on corporate governance and the unaudited parts of the directors' remuneration report. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Our report has been prepared pursuant to the requirements of the Companies Act 1985 and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of the Companies Act 1985 or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the directors' remuneration report to be audited. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group's and company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the directors' remuneration report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the directors' remuneration report to be audited. Opinion In our opinion: • the group financial statements give a true and fair view, in accordance with IFRS as adopted by the European Union, of the state of the group's affairs as at 31 December 2006 and of its profit for the year then ended; the group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation. the parent company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the parent company's affairs as at 31 December 2006; and the parent company financial statements and the part of the directors' remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985. the information given in the directors' report is consistent with the financial statements. • • • • BDO STOY HAYWARD LLP Chartered Accountants and Registered Auditors 8 Baker Street London W1U 3LL 3 April 2007 20 ANGLO-EASTERN PLANTATIONS PLC Consolidated income statement for the year ended 31 December 2006 Continuing operations Notes 2006 2005 Result before BA adjustment $000 BA adjustment $000 Total $000 Result before BA adjustment $000 BA adjustment $000 Total $000 Revenue Cost of sales Gross profit Biological asset revaluation movement (BA adjustment) Other income Administration expenses Operating profit Exchange profits/(losses) Finance income Finance costs Profit before tax Tax Profit for the year Attributable to: - Equity holders of the parent - Minority interests Earnings per share - basic - diluted 3 4 5 8 9 9 2 79,094 (50,089 ) 29,005 - 13 (2,748 ) - - - 79,094 64,321 (50,089 ) (39,514 ) 29,005 24,807 2,312 2,312 13 - - (2,748 ) (2,721 ) - 115 - - - 64,321 (39,514 ) 24,807 (35 ) (35 ) - - 115 (2,721 ) 26,270 2,312 28,582 22,201 (35 ) 22,166 368 538 (448 ) - - - 368 538 (448 ) (550 ) 302 (498 ) - - - (550 ) 302 (498 ) 26,728 2,312 29,040 21,455 (35 ) 21,420 (8,595 ) (694 ) (9,289 ) (7,107 ) 10 (7,097 ) 18,133 1,618 19,751 14,348 (25 ) 14,323 15,153 2,980 18,133 1,321 16,474 12,235 (52 ) 12,183 297 3,277 2,113 27 2,140 1,618 19,751 14,348 (25 ) 14,323 41.7 cts 41.7 cts 30.9 cts 30.9 cts Earnings before BA adjustment are shown in note 9 The accompanying notes are an integral part of this consolidated income statement. ANGLO-EASTERN PLANTATIONS PLC 21 Consolidated statement of recognised income and expenses for the year ended 31 December 2006 Profit for the year Unrealised surplus on revaluation of the estates Profit/(loss) on exchange translation Deferred tax on revaluation Total recognised income and expense for the year Attributable to: - Equity holders of the parent - Minority interests Notes 23 23 23 23 23 2006 $000 19,751 6,016 11,718 (3,327) 2005 $000 14,323 3,112 ) (5,703 ) (176 34,158 11,556 28,002 6,156 9,736 1,820 34,158 11,556 The accompanying notes are an integral part of this consolidated statement of recognised income and expenses. 22 ANGLO-EASTERN PLANTATIONS PLC Consolidated balance sheet as at 31 December 2006 Non-current assets Biological assets Property, plant and equipment Receivables Current assets Inventories Investments Tax receivables Trade and other receivables Cash and cash equivalents Current liabilities Bank loans and other financial liabilities Trade and other payables Tax liabilities Net current assets Non-current liabilities Bank loans and other financial liabilities Deferred tax liabilities Retirement benefit net liabilities Net assets Equity Share capital Treasury shares Share premium reserve Share capital redemption reserve Revaluation and exchange reserves Retained earnings Equity attributable to equity holders of the parent Minority interests Total equity Notes 2006 $000 2005 $000 11 11 12 13 14 15 16 17 16 18 19 20 20 23 23 23 23 23 33,255 127,568 1,071 161,894 1,785 - 2,684 1,918 17,246 23,633 (2,167 ) (5,308 ) (3,235 ) (10,710 ) 12,923 (5,454 ) (21,152 ) (834 ) 147,377 15,495 (1,387 ) 23,904 1,087 2,407 80,450 121,956 25,421 147,377 26,975 102,543 1,071 130,589 2,499 259 1,106 2,003 11,194 17,061 ) (2,103 ) (3,487 ) (2,594 ) (8,184 8,877 (3,940 ) (16,941 ) (602 ) 117,983 15,481 ) (1,387 23,868 1,087 ) (9,121 67,536 97,464 20,519 117,983 The financial statements were approved by the board of directors and authorised for issue on 3 April 2007 and were signed on its behalf by R O B Barnes The accompanying notes are an integral part of this consolidated balance sheet. ANGLO-EASTERN PLANTATIONS PLC 23 Consolidated cash flow statement for the year ended 31 December 2006 Operating profit Adjustments for: BA adjustment Net loss/(profit) on disposal of current and fixed asset investments Depreciation Share-based remuneration expense Retirement benefit provisions Foreign exchange Operating cash flow before changes in working capital Decrease/(increase) in inventories Decrease/(increase) in trade and other receivables Increase in trade and other payables Cash inflow from operations Interest paid Overseas tax paid Net cash flow from operations Investing activities Property, plant and equipment - purchase - sale Interest received Net cash used in investing activities 2006 $000 28,582 (2,312 ) 158 3,551 20 232 715 30,946 714 85 1,007 32,752 (541 ) (9,321 ) 22,890 2005 $000 22,166 35 ) (77 3,243 14 ) (491 ) (994 23,896 ) (964 ) (258 542 23,216 (600 ) (9,809 ) 12,807 (15,370 ) (7,596 ) 119 538 116 302 (14,713 ) (7,178 ) 24 ANGLO-EASTERN PLANTATIONS PLC Consolidated cash flow statement (continued) for the year ended 31 December 2006 Financing activities Dividends paid by parent company Share options exercised Repayment of existing long term loans Drawdown of new long term loan Finance lease (repayment)/drawdown Dividends paid to minority shareholders Repayment by minority shareholders Subscriptions to subsidiary share capital by minority shareholders Receipt from sale of portfolio investment Net cash used in financing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents less overdrafts At beginning of year At end of year Comprising: Cash at end of year Overdraft at end of year 2006 $000 (3,560 ) 50 (1,645 ) 3,200 (11 ) (460 ) - - 267 (2,159 ) 6,018 2005 $000 ) (3,158 100 ) (5,531 - 74 ) (2,587 693 448 227 ) (9,734 ) (4,105 10,805 16,823 14,910 10,805 17,246 (423 ) 16,823 11,194 ) (389 10,805 ANGLO-EASTERN PLANTATIONS PLC 25 Notes to the financial statements 1 Accounting policies Basis of accounting The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS and IRFIC interpretations) issued by the International Accounting Standards Board (IASB) as adopted by the EU and with those parts of the Companies Act 1985 applicable to companies preparing their accounts under IFRS. The principal accounting policies are set out below. The policies have been applied consistently to all the years presented. The group has elected not to adopt IFRS 7 Financial Instruments early. IFRS 7 will apply to the group for accounting periods beginning on or after 1 January 2007 and contains provisions relating to the disclosure of the significance of financial instruments, the risk exposures arising therefrom and the approach taken in managing those risks, replacing the existing provisions of IAS 32. IFRS 8 Operating Segments will apply to the group for accounting periods beginning on or after 1 January 2009 and will replace the existing provisions of IAS 14. The board will monitor the effect of the standard on the future disclosure of segment information by the group. IAS 23 Borrowing Costs will apply to the group for accounting periods beginning on or after 1 January 2009 and will require interest to be capitalised for assets that take a substantial period of time to get ready for use or sale. The board will monitor the effect of the standard on future disclosures. Basis of consolidation The consolidated financial statements incorporate the financial statements of the company and entities controlled by the company (its subsidiaries) made up to 31 December each year. Control is achieved where the company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated balance sheet, the acquiree’s identifiable assets and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group. All intergroup transactions, balances, income and expenses are eliminated on consolidation. Foreign currency The individual financial statements of each subsidiary are presented in the currency of the country in which it operates (its functional currency) with the exception of the company and its UK subsidiaries which are presented in US dollars. The presentation currency for the consolidated financial statements is also US dollars, chosen because the price of the bulk of the group’s products are ultimately denominated in dollars. On consolidation, the results of overseas operations are translated into US dollars at average exchange rates for the year unless exchange rates fluctuate significantly. All assets and liabilities of overseas operations are translated at the rate ruling at the balance sheet date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at average rate are recognised directly in equity (the “foreign exchange reserve”). Exchange differences recognised in the income statement of group entities’ separate financial statements on the translation of long-term monetary items forming part of the group’s net investment in the overseas operation concerned are reclassified to the foreign exchange reserve if the item is denominated in the presentational currency of the group or of the overseas operation concerned. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the income statement as part of the profit or loss on disposal. All other exchange profits or losses are credited or charged to the income statement. Revenue recognition Revenue includes - amounts receivable for produce provided in the normal course of business, net of sales related taxes, including export taxes; - amounts received for sales of palm kernel shell, rubber wood and other income of an operating nature. Sales of CPO, palm kernel and cocoa are recognised when contracts have been signed and when payment in full has been received which is shortly after signature of contract. Sales of rubber are recognised on signature of sales contract. Share based payments In accordance with the transitional provisions, IFRS 2 has been applied to all share options granted after 7 November 2002 unvested at 1 January 2005. The resulting outstanding share options are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. This fair value is expensed on a straight-line basis over the vesting period, based on the group’s estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. 26 ANGLO-EASTERN PLANTATIONS PLC Notes to the financial statements 1 Accounting policies - continued Share based payments - continued Fair value is measured by use of a binominal model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. Provided that all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition. Interest capitalisation Interest on third party loans directly related to field development is capitalised in the proportion that the opening immature area bears to the total planted area of the relevant estate. Interest on loans related to construction in progress (such as an oil mill) is capitalised up to the commissioning of that asset. Tax UK and foreign corporation tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Dividends Equity dividends are recognised when they become legally payable. The company pays only one dividend each year as a final dividend which becomes legally payable when approved by the shareholders at the next following annual general meeting. Biological assets, property, plant and equipment Estates, which comprise biological assets, property, plant and equipment, are shown at fair values in use, which are calculated internally every year and reviewed by an external valuer every five years. Value in use is calculated as the present value of the local currency cash flows of each estate over the next twenty years, including replanting where required. Any surplus or deficit on revaluation of property, plant and equipment is transferred to the revaluation and exchange reserve, except that a deficit which is in excess of any previously recognised surplus relating to the same property is charged to the income statement. On the disposal or recognition of a provision for impairment of a revalued estate, any related balance remaining in the revaluation and exchange reserve is transferred to retained earnings as a movement on reserves. Oil mills, which are part of property, plant and equipment are shown at cost less depreciation. The depreciation charge on Indonesian estates is based on mature values at the beginning of the year and is provided at a rate of 2% per annum. Oil mills are depreciated at 5% per annum. The Malaysian leasehold land is depreciated over the remaining term of the lease. Mature plantations in Malaysia are depreciated at 5% per annum. Within the estate valuations described above the value of biological assets is estimated separately and, as required by IAS 41, the movement in valuation surplus of biological assets is charged or credited to the income statment for the relevant period (BA adjustment). Leased assets Assets financed by leasing agreements which give rights approximating to ownership (finance leases) are capitalised at amounts equal to the original cost of the asset to the lessors and depreciation is provided on the asset over the shorter of the lease term or its useful economic life on the basis of group depreciation policy. The capital elements of future obligations under finance leases are included as liabilities in the balance sheet and the current year’s interest element is charged to the income statement to produce a constant rate of charge on the balance of capital repayments outstanding. There are no operating leases. Impairment Impairment tests on tangible assets are undertaken annually on 31 December. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use or fair value, less costs to sell), the asset is written down accordingly. Impairment charges are included in the administrative expenses line item in the income statement, except to the extent they reverse gains previously recognised in the statement of recognised income and expenses. Inventories Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Weighted average cost is used to determine the cost of ordinarily interchangeable items. All produce inventories are already processed and therefore the requirement under IAS 41 to value agricultural produce at market value, does not apply. Trade receivables Trade receivables are carried at cost less any provision for impairment. Current asset investment In the case of the group, the only investments are in shares listed on a recognised stock exchange and available for sale. These shares are carried at market value and changes in market value are recognised in the income statement. Bank borrowings Interest bearing bank loans and overdrafts are recorded at the proceeds received. Finance charges are accounted for on an accruals basis and charged in the income statement, unless capitalised according to the policy as set out under Interest capitalisation above. ANGLO-EASTERN PLANTATIONS PLC 27 Notes to the financial statements 1 Accounting policies - continued Trade and other payables Trade and other payables are shown at fair value at recognition. Deferred tax Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base. Recognition of deferred tax assets is restricted to those instances where it is possible that taxable profit will be available against which the difference can be utilised. Within these parameters, deferred tax is recognised on temporary differences arising on revalued properties. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, such as revaluations, in which case the deferred tax is also dealt with in equity. Retirement benefits Contributions to defined contribution pension schemes are charged to the income statement in the year to which they relate. The group operates a number of defined benefit pension schemes in respect of its Indonesian operations. The pension costs of these schemes charged to the income statement comprise the annual payments to the schemes together with any provision required for any shortfall in funding as disclosed by annual valuations of the schemes as advised by the schemes’ actuaries. Treasury shares Consideration paid or received for the purchase or sale of the company’s own shares for holding in treasury is recognised directly in equity, where the cost is presented as the treasury share reserve. Any excess of the consideration received on the sale of treasury shares over the weighted average cost of shares sold, is taken to the share premium account. Any shares held in treasury are treated as cancelled for the purpose of calculating earnings per share. Significant accounting estimates and judgements The preparation of the group financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported assets and liabilities and reported revenue and expenses. Actual results could differ from those estimates and accordingly they are reviewed on an ongoing basis. The main areas in which estimates are used are: fair value of biological assets, property, plant and equipment; deferred tax; retirement benefits. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Assumptions regarding the valuation of biological assets, property, plant and equipment are set out in note 11. The group’s policy with regard to impairment of such assets is set out above. 2 Revenue Sales of produce Other operating income 3 Other income Income from current asset investments Profit on disposal of current asset investments 4 Finance costs Interest payable on: Development loans - (note 16) Overdraft - (note 16) Finance leases Interest capitalised on loans related to field development and construction in progress 2006 $000 78,863 231 79,094 2005 $000 64,186 135 64,321 2006 $000 5 8 13 2006 $000 478 57 6 ) (93 448 2005 $000 79 36 115 2005 $000 576 20 4 ) (102 498 28 ANGLO-EASTERN PLANTATIONS PLC Notes to the financial statements 5 Profit before tax Profit before tax is stated after charging Depreciation (including $41,000 (2005 – $25,000) in respect of leased assets) Staff costs (note 7) Auditors’ remuneration - audit (company $25,000 (2005 – $25,000) - other advisory services 6 Segment information 2006 Revenue Profit/(loss) before tax and BA movement BA movement Profit/(loss) before tax Assets (Liabilities ex tax) Net assets ex tax Tax (liabilities)/assets Deferred tax (liability)/asset Net assets Capital expenditure Depreciation North Sumatra $000 42,768 17,919 1,161 19,080 75,900 (2,628 73,272 589 (13,711 60,150 ) ) Bengkulu $000 28,829 8,955 175 9,130 60,224 (1,591 58,633 (1,228 (5,679 51,726 ) ) ) Riau $000 3,857 1,071 1,013 2,084 23,472 (7,712 15,760 570 (3,154 13,176 ) ) Total Indonesia $000 76,454 27,945 2,349 30,294 159,596 (11,931 ) 147,665 (69 ) (22,544 ) 125,052 5,374 (1,304 ) 4,714 (1,190 ) 5,147 (209 ) 15,235 (2,703 ) 2005 $000 $000 $000 $000 Revenue Profit/(loss) before tax and BA movement BA movement Profit/(loss) before tax Assets (Liabilities ex tax) Net assets ex tax Tax (liabilities)/assets Deferred tax (liability)/asset Net assets Capital expenditure Depreciation 34,889 16,720 ) (17 16,703 53,016 ) (1,822 51,194 ) (264 ) (11,640 39,290 2,536 ) (1,152 24,632 7,263 (519 6,774 ) 53,049 (1,261 51,788 (820 (5,248 45,720 ) ) ) 3,937 (1,096 ) 1,975 ) (937 506 ) (431 12,306 ) (4,944 7,362 4 ) (1,202 6,164 61,496 23,046 ) (30 23,016 118,371 (8,027 110,344 (1,080 (18,090 91,174 ) ) ) 2006 $000 3,551 10,772 110 - UK $000 2 (1,386 ) - (1,386 ) 2,832 (613 ) 2,219 (7 ) - 2,212 2005 $000 3,243 7,559 120 - Total $000 79,094 26,728 2,312 29,040 182,843 (13,763 ) 169,080 (551 ) (21,152 ) 147,377 - - 15,463 3,551 $000 - ) (988 - ) (988 8,755 ) (534 8,221 6 - 8,226 $000 64,321 21,455 ) (35 21,420 146,545 ) (10,133 136,412 ) (1,488 ) (16,940 117,983 Malaysia $000 3,638 169 (37 132 ) ) ) 20,415 (1,219 19,196 (475 1,392 20,113 228 (848 ) $000 2,825 (603 ) (5 ) ) (608 19,419 ) (1,572 17,847 ) (414 1,150 18,583 861 ) (176 7,334 (2,424 ) 363 ) (819 - - 7,697 ) (3,243 Turnover Profit/(loss) before tax Secondary reporting format by crop: By activity: Oil palm Rubber Cocoa Gross profit BA movement Administration expenses Unallocated assets/income/(expenses) Interest ANGLO-EASTERN PLANTATIONS PLC Net assets 2006 $000 2005 $000 129,962 2,357 - 106,434 2,254 72 - - - - 2006 $000 76,862 2,186 46 - - 2005 $000 62,798 1,331 192 - - 15,058 - 147,377 9,223 - 117,983 - - 79,094 - - 64,321 2006 $000 27,557 1,725 (277 ) 29,005 2,312 (2,748 ) 381 90 29,040 2005 $000 23,796 999 12 24,807 ) (35 ) (2,721 ) (435 ) (196 21,420 29 Notes to the financial statements 7 Employees' and directors' remuneration Average numbers employed (primarily overseas) during the year - full time - casual Staff costs (primarily overseas): Wages and salaries Social security costs Retirement benefit costs/(write back of provisions) (note 19) Share based remuneration expense (equity settled) 2006 number 3,463 4,406 2006 $000 9,923 234 595 20 10,772 2005 number 3,466 4,008 2005 $000 7,583 189 (227 14 7,559 ) The information required by the Companies Act and the listing rules of the Financial Services Authority is contained in the directors' report on remuneration on pages 18 to 19 of which the information on page 19 has been audited. Directors emoluments Pension contributions 2006 $000 545 34 579 Executive directors are considered to be the key management personnel; their remuneration is shown on page 19. 8 Tax Foreign corporation tax - current year Foreign withholding tax on remittances Deferred tax adjustment - current year 2006 $000 7,794 590 905 9,289 2005 $000 527 31 558 2005 $000 6,509 539 49 7,097 The corporation tax rates in Indonesia and Malaysia, the group's countries of operation, are close to the 30% standard rate of corporation tax in the UK but the charge for the year differs from the standard UK rate of corporation tax for the reasons below. Profit on ordinary activities before tax Profit on ordinary activities multiplied by standard rate of UK corporation tax of 30% (2005 – 30%) Effects of: Rate adjustment relating to overseas profits Group accounting adjustments not subject to tax Expenses not allowable for tax Temporary differences Losses not offsetable against fellow subsidiary profits Utilisation of tax losses brought forward Foreign corporation tax charge for year Deferred tax adjustments (note 18) Foreign withholding tax Total tax charge for year 2006 $000 29,040 2005 $000 21,420 8,712 6,426 ) (13 ) (785 150 ) (46 99 ) (323 7,794 905 590 9,289 ) ) ) ) (13 (176 102 (219 702 (313 6,509 49 539 7,097 30 ANGLO-EASTERN PLANTATIONS PLC Notes to the financial statements 9 Earnings per ordinary share (EPS) Profit for the year attributable to equity holders of the parent company before BA adjustment Net BA adjustment Earnings used in basic and diluted EPS Weighted average number of shares in issue in year - used in basic EPS - dilutive effect of outstanding share options - used in diluted EPS Basic EPS before BA adjustment Basic EPS There is no significant difference between basic and diluted EPS. 2006 $000 15,153 1,321 16,474 Number ‘000 39,478 55 39,533 2005 $000 12,235 (52) 12,183 Number ‘000 39,411 50 39,461 38.3cts 31.0cts 41.7cts 30.9cts 10 Dividends Paid during the year Final dividend of 8.80 cts for the year ended 31 December 2005 (2004 – 8.00 cts) 2006 $000 3,560 2005 $000 3,158 Proposed final dividend of 10.8 cts for the year ended 31 December 2006 (2005 – 8.80 cts) 4,265 3,473 The proposed dividend for 2006 is subject to shareholder approval at the forthcoming annual general meeting and has not been included as a liability in these financial statements. 11 Biological assets, property, plant and equipment Cost or valuation At 1 January 2005 Exchange translations Revaluations Additions Disposals At 31 December 2005 Exchange translations Revaluations Additions Disposals At 31 December 2006 Non-biological plantation assets $000 Total property plant and equipment $000 Mills $'000 Biological assets $000 Total $000 90,037 ) (4,063 451 5,148 ) (28 91,545 12,852 ) (704 - 1,566 ) (106 13,608 7,959 3,930 7,844 (272 111,006 ) 1,218 - 5,453 (92 20,187 ) 102,889 (4,767 451 6,714 (134 105,153 ) ) 9,177 3,930 13,297 (364 131,193 ) ) 26,558 (1,193 627 983 - 26,975 129,447 (5,960 1,078 7,697 (134 132,128 ) ) 2,341 1,773 2,166 - 33,255 11,518 5,703 15,463 (364 164,448 ) ANGLO-EASTERN PLANTATIONS PLC 31 Notes to the financial statements 11 Biological assets, property, plant and equipment - continued Accumulated depreciation and impairment At 1 January 2005 Exchange translations Revaluations Charge for the year Disposals At 31 December 2005 Exchange translations Revaluations Charge for the year Disposals At 31 December 2006 Carrying amount At 31 December 2005 At 31 December 2006 Non-biological plantation assets $000 - - 2,065 (2,065 - - ) - 2,163 (2,163 - - ) Total property plant and equipment $000 Biological assets $000 (2,145 123 2,065 (2,712 59 (2,610 (246 2,163 (3,011 79 (3,625 ) ) ) ) ) ) - - 531 ) (531 - - - 540 ) (540 - - Mills $'000 (2,145 123 - (647 59 (2,610 (246 - (848 79 (3,625 ) ) ) ) ) ) Total $000 (2,145 123 2,596 (3,243 59 (2,610 (246 2,703 (3,551 79 (3,625 ) ) ) ) ) ) 91,545 10,998 102,543 26,975 129,518 111,006 16,562 127,568 33,255 160,823 The directors valued the estates (comprising biological assets, non-biological plantation assets, plantation infrastructure and oil mills) at 31 December 2006 and 2005 at the higher of net realisable value and value in use. These values were reviewed at December 2006 by PT Nagadi Ekasakti, Jakarta based consultants, who are familiar with the properties and the necessary assumptions underlying the calculations; principal among these were: an assumed CPO selling price of $440/mt (cif Rotterdam) (2005 - $400/mt) and a discount rate of 12% (2005 - 15%). Biological assets are estimated as a proportion of these calculations. The Indonesian estates have been included at values in use. The change in assumptions reflects the rising price of and improved outlook for CPO, as well as increasing agricultural property values and replacement costs and falling interest rates in Indonesia. If the Indonesian estates had been valued at December 2006 using an assumed CPO price of $400/mt and a discount rate of 15% the total carrying value of biological assets, property, plant and equipment would have been $111,770,000. The Malaysian estates were professionally valued by PPC International, Kuala Lumpur based valuers, in December 2006 on an open market existing use basis and are included at this valuation less potential sale costs. The estates include $93,000 (2005 - $102,000) of interest and $1,491,000 (2005 - $1,403,000) of overheads capitalised during the year in respect of expenditure on estates under development during 2006. Original cost and depreciation at historical rates of exchange of the estates at 31 December 2006 : Original cost Cumulative depreciation based on original cost Estates $000 152,144 (30,826 121,318 ) Mills $000 27,306 ) (8,452 18,854 Total $000 179,450 (39,278 140,172 ) The Indonesian authorities have granted certain land exploitation rights and operating permits for the estates. In the case of estates in North Sumatra these rights and permits expire between 2023 and 2026 with rights of renewal thereafter for periods from 35 to 60 years. In the case of estates in Bengkulu land titles were issued between 1993 and 2002 and the titles expire between 2028 and 2032 with rights of renewal thereafter for two consecutive periods of 25 and 35 years respectively. In the case of estates in Riau, land titles were issued in 2003 and expire in 2033 with subsequent rights of renewal similar to those in Bengkulu. Renewal is subject to compliance with the laws and regulations of Indonesia. As described in note 1 the values in use of the Indonesian estates are depreciated over a period of fifty years since the directors expect the renewals will take place. The land title of the estate in Malaysia is a long lease expiring in 2084. 12 Receivables: non-current Due from minority shareholders 2006 $000 1,071 2005 $000 1,071 The minority shareholders in PT Mitra Puding Mas and PT Alno Agro Utama have acquired their interests on deferred terms. The resulting debts will be settled from dividends arising from these projects over the next five years. The book value of the amount due from minority shareholders approximates its fair value. 32 ANGLO-EASTERN PLANTATIONS PLC Notes to the financial statements 13 Inventories Estate and mill consumables Processed produce for sale 14 Current asset investments 2006 $000 1,309 476 1,785 2005 $000 1,847 652 2,499 This represents a short term investment listed on the Kuala Lumpur Stock Exchange, shown at market value but sold during 2006. Cost (2005 - $309,194). 15 Trade and other receivables Trade debtors Other debtors Prepayments and accrued income The carrying amount of trade and other receivables approximates to their fair value. 16 Bank loans and other financial liabilities Bank overdraft (a) Long term development loan (b) Long term development loan (c) Long term development loan (d) Total bank loans Finance lease obligations (e) Total bank loans and lease obligations Amounts repayable after more than one year, as follows: in more than one year but not more than two years in more than two years but not more than five years In more than five years but not more than six years under one year $000 423 1,250 - 444 2,117 50 2,167 2006 more than one year $000 - 2,188 3,200 - 5,388 66 5,454 1,677 3,377 400 5,454 2006 $000 644 1,038 236 1,918 2005 $000 368 1,413 222 2,003 2005 under one year $000 389 1,250 - 425 2,064 39 2,103 more than one year $000 - 3,437 - 415 3,852 88 3,940 1,704 2,236 - 3,940 (a) (b) (c) (d) (e) The bank overdraft is secured by a fixed and floating charge over the land titles and assets of the parent company’s Malay- sian operating subsidiary, Anglo-Eastern Plantations (M) Sdn Bhd (“AEP Malaysia”) as well as over the parent company’s shareholding in AEP Malaysia. The parent company has guaranteed the overdraft. Interest is at 2% above Malaysian Bank Lending Rate or about 8.7% (2005 - 8.0%). The long term development loan, which is part of an original facility of $5,000,000, was made in July 2004 to, and secured by a fixed and floating charge on the land titles and other assets of, PT Bina Pitri Jaya. The parent company has guaranteed the loan. Interest was at 3% under the US dollar Indonesian prime rate or about 8.0% through 2006 (2005 - 7.25%). The loan is repayable in sixteen quarterly instalments of $312,500 from October 2005 to July 2009. The long term development loan of $3,200,000, to part finance construction of a mill, was made in September 2006 to, and secured by a fixed and floating charge on the land titles and other assets of, PT Bina Pitri Jaya. Interest and security is on the same terms as for the loan under (b) above. The loan is repayable in sixteen quarterly instalments of $200,000 from July 2008 to April 2012. The long term development loan is made to AEP Malaysia on the same interest and security terms described for the overdraft in note (a) above. The loan is part of an original facility of $2,266,000 and is to be fully repaid in 2007. Finance lease obligations relate to vehicles and machinery, on which the obligations are secured, in the Malaysian subsid- iaries (2005 – Malaysia). Interest is effectively at 3.0%. Payments complete by the end of 2010. ANGLO-EASTERN PLANTATIONS PLC 33 Notes to the financial statements 17 Trade and other payables Trade creditors Other creditors Accruals 18 Deferred tax liabilities Year end (liability) relates to Revaluation surplus Unutilised tax losses Other temporary differences Movement: At beginning of year (liability) (Charge) to - income statement - equity: revaluation and exchange reserve Exchange adjustment At end of year (liability) Details of movement in 2006 Revaluation surplus Accelerated capital allowances Employee pension liabilities Other temporary and deductible differences Available losses Details of movement in 2005 Revaluation surplus Accelerated capital allowances Employee pension liabilities Other temporary and deductible differences Available losses A deferred tax asset has not been recognised for the following items Unutilised tax losses 19 Retirement benefits 2006 $000 1,737 2,200 1,371 5,308 2005 $000 1,451 939 1,097 3,487 2006 $000 2005 $000 (21,244 330 (238 (21,152 ) ) ) (17,223 ) 605 (323 ) (16,941 ) (16,941 ) ) (16,698 (905 (3,327 21 (21,152 ) ) ) ) (49 ) (176 ) (18 ) (16,941 (Charged)/ credited to income 2006 $000 (694 (7 82 38 (324 (905 (Charged)/ credited to income 2005 $000 10 (4 (18 (35 (2 (49 ) ) ) ) ) ) ) ) ) (Charged)/ credited to reserves 2006 $000 (3,327 - - - - (3,327 ) ) (Charged)/ credited to reserves 2005 $000 (176 ) - - - - (176 ) 2006 $000 2005 $000 15,186 14,691 (Liability) 2006 $000 (21,244 ) (39 ) 158 (357 ) 330 (21,152 ) (Liability) 2005 $000 ) (17,223 ) (29 69 ) (363 605 ) (16,941 The group maintains a defined funded pension scheme for some labour in Indonesia. The scheme is valued by an actuary at the end of each financial year. The major assumptions used by the actuary were: Inflation Rate of increase in wages Discount rate 2006 10% 10% 12% 2005 10% 10% 12% 2004 10% 10% 12% Any excess of the actuarial liability over the fund assets is provided and charged to the income statement. The group also operates a non-contributory non-funded retirement plan for staff in Indonesia. Retirement benefits are paid to employees in a single lump sum at the time of retirement. Retirement benefit is accrued by the group and charged in the income statement based on individual employees’ service up to the end of the financial year. 34 ANGLO-EASTERN PLANTATIONS PLC Notes to the financial statements 19 Retirement benefits - continued Reconciliation to balance sheet Scheme assets (all cash) Scheme (liabilities) Net assets/(liabilities) Reconciliation of scheme assets At beginning of year Exchange gain/(loss) Contributions by group Income Benefits paid Expenses At end of year Reconciliation of scheme (liabilities) At beginning of year Exchange (loss)/gain Current service (cost)/write back Benefits paid At end of year Defined benefit funded scheme Defined benefit unfunded scheme Defined contribution schemes 20 Share capital Ordinary shares of 25p each Beginning of year Share options exercised End of year Treasury shares Beginning of year Purchased in year End of year Market value of treasury shares Beginning of year (245p/share) End of year (312.5p/share) Defined benefit - funded schemes 2006 $000 Defined benefit – unfunded schemes 2006 $000 Total 2006 $000 Defined benefit - funded schemes 2005 $000 Defined benefit - unfunded schemes 2005 $000 Total 2005 $000 1,032 (906 126 ) 789 73 151 65 (42 (4 1,032 ) ) (748 (67 (134 43 (906 ) ) ) ) - (960 (960 ) ) 1,032 (1,866 (834 ) ) - - - - - - - (643 (31 (477 191 (960 ) ) ) ) 789 73 151 65 (42 (4 1,032 ) ) (1,391 (98 (611 234 (1,866 ) ) ) ) 789 (748 41 ) 669 (38 178 50 (42 (28 789 (865 46 29 42 (748 ) ) ) ) ) - (643 ) ) (643 789 (1,391 ) (602 ) - - - - - - - 669 ) (38 178 50 ) (42 ) (28 789 ) (907 24 200 40 ) (643 ) (1,772 70 229 82 ) (1,391 2006 $000 72 475 48 595 2005 $000 (50 (225 48 (227 ) ) ) Authorised Number 60,000,000 - 60,000,000 Issued and fully paid Number 39,928,372 29,900 39,958,272 Authorised £000 Issued and fully paid £000 Authorised $000 Issued and fully paid $000 15,000 - 15,000 9,982 7 9,989 23,865 - 23,865 15,481 14 15,495 Number 468,000 - 468,000 $000 (1,387 - (1,387 ) ) 1,972 2,867 The charge (credit) for the year for retirement benefit comprises: The above treasury shares were purchased in December 2004 at 153p/share. ANGLO-EASTERN PLANTATIONS PLC 35 Notes to the financial statements 21 Share based payment Options have been granted under the company's 1994 Executive Share Option Scheme and Overseas Share Option Scheme and the 2005 Unapproved Executive Share Option Scheme (all of which schemes are equity settled) to subscribe for ordinary shares of 25p each of the company as follows: Date of grant 16.10.00 16.04.02 21.05.03 13.05.04 19.05.06 09.10.06 Price per share 38.0p 44.7p 108.5p 181.2p 234.0p 323.25p Period of option 16.10.03 - 15.10.10 30.04.05 - 29.04.12 21.05.06 - 29.05.13 13.05.07 - 12.05.14 19.05.09 - 18.05.16 09.10.09 - 08.10.16 Exercisable 1 Jan 05 5,400 159,700 42,800 30,000 - - 237,900 5,400 ) (Lapsed - ) (2,400 - - - - ) (2,400 Exercised (5,400 ) ) (119,200 - - - - ) (124,600 1 Jan 06 - 38,100 42,800 30,000 - - 110,900 38,100 Granted - - - - 51,200 15,500 66,700 Exercised - (7,500 ) ) (22,400 - - - ) (29,900 31 Dec 06 - 30,600 20,400 30,000 51.200 15,500 147,700 51,000 Options granted to directors, included above, are shown on page 19. The weighted average contracted life of options outstanding at the end of the year was 8 years (2005 – 7 years) and the weighted average exercise price was 176p (2005 – 106p). The weighted average share price of options exercised during the year was 92p (2005 – 44p). 66,700 share options were granted in 2006 (2005 – nil). The aggregate of the estimated fair value of options granted in 2006 was $48,000 The assumptions applied in the binomial model used to calculate this fair value were: Weighted average share price at grant date Weighted average exercise price Weighted average contracted life Weighted average expected period to exercise Expected volatility Risk free rate Expected dividend yield 256p 255p 10 years 3.5 years 25% 5% 2% There are no vesting conditions other than that option holders may exercise their options at any time within three and ten years after grant, provided they remain employees of the group throughout that period. 22 Ultimate controlling shareholder and related party transaction At 31 December 2006 Genton International Limited, a company registered in Hong Kong, held 20,247,814 (2005 – 20,247,814) shares of the company representing 50.7% (2005 – 50.7%) of the issued share capital of the company. Madam Lim, a director of the company has advised the company that she is the controlling shareholder of Genton International Limited. During the year a subsidiary of the company managed, for a fee of $9,000 (2005 - $8,000), small plantations owned by compa- nies controlled by Madam Lim. This contract is on an arm's length basis. At 31 December 2006 the amount due under this contract was $2,200 (2005 - $700). 36 ANGLO-EASTERN PLANTATIONS PLC Notes to the financial statements 6 5 5 , 1 1 0 2 8 , 1 6 3 7 , 9 3 8 1 , 2 1 8 4 5 8 4 4 0 0 1 ) 3 8 1 , 4 ( ) 5 2 0 , 1 ( ) 8 5 1 , 3 ( ) 8 - 5 1 , 3 ( ) 8 - - 8 6 , 4 ( 4 0 5 , 3 1 6 7 3 4 7 , 2 ) ) ) 7 5 6 6 9 7 7 0 1 ( , , 6 ( 2 ( ) ) ) 6 5 0 6 1 2 ( 0 3 ( , 1 ( ) ) ) 0 7 0 1 4 8 1 4 0 ( , , 5 ( 2 ( - - - - 3 2 3 , 4 1 0 4 1 , 2 3 8 1 , 2 1 3 8 1 , 2 1 ) ) ) 0 8 8 6 0 1 ( 8 - 8 6 , , 5 ( 4 ( 0 6 5 3 8 1 , 2 8 - 5 1 - 4 2 , 2 1 - - 4 2 , 2 l a t o T y t i u q e 0 0 0 $ 0 0 0 $ y t i r o n M i s t s e r e t n i l a t o T 0 0 0 $ 0 0 0 $ i d e n a t e R i s g n n r a e 0 0 0 $ e v r e s e r i n g e r o F e g n a h c x e 0 0 0 $ e v r e s e r 2 6 0 , 0 1 1 6 7 2 , 9 1 6 8 7 , 0 9 1 1 5 , 8 5 ) 3 9 5 , 5 7 ( 9 1 9 , 8 6 e r a h S l a t i p a c n o i t a u a v e R l n o i t p m e d e r e r a h S 0 0 0 $ i m u m e r p - - - - - - - - 0 0 0 $ e v r e s e r 7 8 0 , 1 5 2 8 , 3 2 ) 7 8 3 , 1 ( 4 2 4 , 5 1 4 0 0 2 r e b m e c e D 1 3 t a e c n a l a B - - - - - - - 3 4 - - - - - - - - - - - - - - - 7 5 s e t a t s e f o n o i t a u a v e r l n o l s u p r u s d e s i l a e r n U 5 0 0 2 r o f y t i u q e n i s e g n a h c t c e r i D y t i u q e n i y l t c e r i d i d e s n g o c e r e m o c n i t e N e s n e p x e d n a e m o c n i i d e s n g o c e r l a t o T r a e y r o f t i f o r P l n o i t a s n a r t e g n a h c x e n o ) s s o L ( n o i t a u a v e r l n o x a t d e r r e f e D r a e y e h t r o f n o i t p i r c s b u s l a t i p a c e r a h S i d a p s d n e d v D i i 0 0 0 $ s e r a h s y r u s a e r T e r a h S l a t i p a c 0 0 0 $ s t s e r e t n i i y t i r o n m d n a s e v r e s e R 3 2 ANGLO-EASTERN PLANTATIONS PLC 3 8 9 , 7 1 1 9 1 5 , 0 2 4 6 4 , 7 9 6 3 5 , 7 6 ) 1 8 2 , 0 8 ( 0 6 1 , 1 7 7 8 0 , 1 8 6 8 , 3 2 ) 7 8 3 , 1 ( 1 8 4 , 5 1 5 0 0 2 r e b m e c e D 1 3 t a e c n a l a B 6 1 0 , 6 7 6 3 , 1 9 4 6 , 4 ) 7 2 3 , 3 ( ) 9 6 5 ( ) 8 5 7 , 2 ( 8 1 7 , 1 1 1 8 0 , 2 7 0 4 , 4 1 9 7 8 , 2 7 3 6 , 9 8 2 5 , 1 1 - - - - 1 5 7 , 9 1 7 7 2 , 3 4 7 4 , 6 1 4 7 4 , 6 1 0 5 ) 4 1 8 , 4 ( ) 4 - 5 2 , 1 ( 0 5 ) 0 6 5 , 3 ( ) 0 - 6 5 , 3 ( 8 5 1 , 4 3 6 5 1 , 6 2 0 0 , 8 2 4 7 4 , 6 1 ) 3 5 8 ( 6 5 2 7 3 6 , 9 0 - 4 0 , 9 0 - - 4 0 , 9 2 0 5 , 5 ) 4 - 1 0 , 3 ( 8 - 8 4 , 2 8 - - 8 4 , 2 - - - - - - - - - - - - - - - 6 3 - - - - - - - - - - - - - - - 4 1 s e t a t s e f o n o i t a u a v e r l n o l s u p r u s d e s i l a e r n U 6 0 0 2 r o f y t i u q e n i s e g n a h c t c e r i D y t i u q e n i y l t c e r i d i d e s n g o c e r e m o c n i t e N e s n e p x e d n a e m o c n i i d e s n g o c e r l a t o T r a e y r o f t i f o r P l n o i t a s n a r t e g n a h c x e n o t i f o r P n o i t a u a v e r l n o x a t d e r r e f e D r a e y e h t r o f n o i t p i r c s b u s l a t i p a c e r a h S i d a p s d n e d v D i i 7 7 3 , 7 4 1 1 2 4 , 5 2 6 5 9 , 1 2 1 0 5 4 , 0 8 ) 1 4 2 , 1 7 ( 8 4 6 , 3 7 7 8 0 , 1 4 0 9 , 3 2 ) 7 8 3 , 1 ( 5 9 4 , 5 1 6 0 0 2 r e b m e c e D 1 3 t a e c n a l a B 37 Notes to the financial statements 23 Reserves and minority interests - continued Nature and purpose of each reserve: Share premium Amount susbscribed for share capital in excess of nominal value. Capital redemption Amounts transferred from share capital on redemption of issued shares. Treasury shares Weighted average cost of own shares held in treasury. Revaluation Gains/loses arising on the revaluation of the group's estates. Foreign exchange Gains/losses arising on translating the net assets of overseas operations into dollars. Retained earnings Cumulative net gains and losses recognised in the consolidated income statement. 24 Guarantees and other financial commitments Capital commitments at 31 December Contracted but not provided - normal estate operations - new/extended oil mills Authorised but not contracted - normal estate operations - new/extended oil mills - land acquisition 2006 $000 306 710 7,336 1,520 476 2005 $000 78 4,005 3,746 2,343 950 25 Finance leases The group leases a few tractors and cars, included under non-biological plantation assets at a net carrying value $137,000 (2005 - $145,000). Such assets are classified as finance leases as the rental period amounts to the estimated useful economic life of the assets concerned and the group has the right to purchase the assets outright at the end of the minimum lease term by paying a nominal amount. Future lease payments are due as follows: Not later than one year Later than one year and not later than five years Not later than one year Later than one year and not later than five years The present value of future lease payments are analysed as: Current liabilities Non-current liabilities Minimum lease payments 2006 $000 50 66 116 Minimum lease payments 2005 $000 39 88 127 Interest 2006 $000 8 14 22 Interest 2005 $000 3 18 21 2006 $000 42 52 94 Present value 2006 $000 42 52 94 Present value 2005 $000 36 70 106 2005 $000 36 70 106 38 ANGLO-EASTERN PLANTATIONS PLC Notes to the financial statements 26 Disclosure of financial instruments and other risks General The group’s financial instruments at present comprise cash and liquid resources, some short term creditors, together with normal trade debtors and creditors, and long term loans in Indonesia and Malaysia. The main risks which arise from these financial instruments relate to liquidity, interest rates and exchange rates. Liquidity risk At 31 December 2006 the group had the following loans and facilities. Malaysia: ringgit denominated - overdraft - long term loan Indonesia: US dollar denominated - long term loan The total long term loan facilities of $7,082,000 are repayable as follows: Borrowings $000 Facilities $000 Repayable 423 444 850 444 On demand 2007 (note 16) 6,638 6,638 2007 - 2012 (note 16) 2007 $000 1,694 2008 $000 1,650 2009 $000 1,738 2010 $000 800 2011 $000 800 2012 $000 400 The loans listed above are all at variable rates of interest as described in note 16. The group’s financial liabilities comprise long term loans as set out above, as well as short term creditors, and a potential short term overdraft facility. The group’s financial assets comprise short term debtors, short term portfolio investments, cash at bank and long term debtors. All surplus cash is in bank deposits at variable short term rates of interest. Long term debtors comprise dollar denominated amounts due from minority shareholders, as described in note 12, on which amounts interest is due at 6% (2005 - 6%) (fixed) but not accrued in the group accounts; these debtors are expected to be settled in about five years. The interest rate profiles of the group’s financial liabilities at 31 December 2006 and 2005 were: 2006 Sterling US dollar Rupiah Ringgit Total 2005 Sterling US dollar Rupiah Ringgit Total Total $000 (156 (7,196 (7,921 (1,725 (16,998 ) ) ) ) ) $000 (162 (5,985 (4,988 (1,591 (12,726 ) ) ) ) ) Fixed rate $000 - - - (116 (116 ) ) Variable rate $000 - ) (6,638 - (867 ) ) (7,505 Interest free $000 (156 (558 (7,921 (742 (9,377 ) ) ) ) ) $000 - - - (126 (126 ) ) $000 - (5,528 ) - (389 ) (5,917 ) $000 (162 (457 (4,988 (1,076 (6,683 ) ) ) ) ) All currencies – 2006 Fixed rate financial liabilities Weighted average interest rate % 3 Weighted average period on which rate is fixed Years 3 Interest free Weighted average period until maturity Years Less than 1 Foreign currency risk All the group’s operations are overseas. The group is therefore exposed to currency movements on its net investment overseas. The effects of devaluation in local currencies on the group's operations are as follows: Since selling prices of the group's produce are linked directly to the US dollar, a depreciation of local currencies against the US dollar would increase the profit of the Malaysian and Indonesian subsidiaries in terms of local currencies and by a lesser amount in US dollars. However, this benefit is partly offset over time by consequent inflation in local costs. Cost of development in dollar terms also reduces. ANGLO-EASTERN PLANTATIONS PLC 39 Notes to the financial statements 26 Disclosure of financial instruments and other risks - continued Value of estates in Indonesia are included in the group's financial statements based on estimated future cash flows in rupiah. The net effect of depreciation of the rupiah is to increase values in rupiah terms and to a lesser extent in US dollars. Estates in Malaysia have been included in the group's financial statements at ringgit market valuation determined by a professional valuer. In the cases of both Indonesia and Malaysia, exchange losses on translation of estate values into US dollars are offset against revaluation surpluses. The exchange profits or losses arising in overseas subsidiaries holding foreign currency balances are credited or charged in the group income statement. The group’s subsidiaries which are borrowing US dollars, as shown under “Liquidity risk” above, could face significant exchange losses, which would be charged in the group income statement. This risk is mitigated in part by the dollar denomination of the group’s income, and by any dollar liquid assets. Exchange losses on long term dollar intercompany debt are charged against the revaluation surpluses referred to above and do not affect the group’s profit. Gains and losses arising from structural currency exposures are taken to the revaluation and exchange reserve and are therefore recognised in the movement in reserves. The table below shows the net monetary assets and liabilities of the group at 31 December 2006 and 2005 that were not denomi- nated in the operating (or “functional”) currency of the operating unit involved. Functional currency of group operation 2006 Indonesian rupiah US dollar Total 2005 Indonesian rupiah US dollar Total Net foreign currency assets/(liabilities) US dollar $000 Ringgit $000 Sterling $000 (6,626 - (6,626 ) ) $000 (3,139 - (3,139 ) ) - ) (31 ) (31 $000 - 532 532 Total $000 ) (6,626 ) (113 ) (6,739 - (82 (82 ) ) $000 $000 - (82 (82 ) ) ) (3,139 450 ) (2,689 Credit risks CPO and kernel, amounting to 97% of group revenue are not despatched unless payment has been received in advance. Remaining sales are on credit for about 30 days. Fair values of financial assets and financial liabilities There is no material difference between the book values and fair values of the group’s financial assets and liabilities as at 31 December 2006 and 2005. Gains and losses on hedges The group enters into no hedging transactions and normally does not contract to sell produce more than one month ahead. Other risks Changes in the Indonesian government or in policy towards foreign investment and the plantation industry could affect the group’s future profits and cash flow. The net assets of the group in Indonesia subject to this risk are set out in note 6. 40 ANGLO-EASTERN PLANTATIONS PLC Notes to the financial statements 27 Subsidiary companies The principal subsidiaries of the company all of which have been included in these consolidated financial statements are as follows: Principal United Kingdom sub-holding company Anglo-Indonesian Oil Palms Limited UK management company Indopalm Services Limited Malaysian operating companies Anglo-Eastern Plantations (M) Sdn Bhd Anglo-Eastern Plantations Management Sdn Bhd Indonesian operating companies PT Alno Agro Utama PT Anak Tasik PT Bina Pitra Jaya PT Hijau Pryan Perdana PT Mitra Puding Mas PT Musam Utjing PT Simpang Ampat PT Tasik Raja PT United Kingdom Indonesia Plantations Percentage holding of ordinary shares 100 100 55 100 90 100 80 80 90 75 100 80 75 The principal United Kingdom sub-holding company and UK management company are registered in England and Wales and are direct subsidiaries of the company. Details of United Kingdom subsidiaries which are not significant have been omitted. The Malaysian operating companies are incorporated in Malaysia and are direct subsidiaries of the company. The Indonesian operating companies are incorporated in Indonesia and are direct subsidiaries of the principal sub-holding company. The principal activity of the operating companies is plantation agriculture. The company’s entire interest in Anglo-Eastern Plantations (M) Sdn Bhd has been secured against the loans to that subsidiary as set out in note 16. ANGLO-EASTERN PLANTATIONS PLC 41 Company balance sheet (UK GAAP) as at 31 December 2006 Fixed assets Investment in subsidiaries Current assets Debtors Investments Cash and cash equivalents Current liabilities Other creditors Net current assets Net assets Equity Share capital Treasury Share premium reserve Share capital redemption reserve Exchange reserve Retained earnings Shareholders' funds Notes 2006 $000 2005 $000 2 3 4 6 7 7 8 8 8 8 50,949 50,949 49,810 49,810 45 - 1,720 1,765 31 259 1,360 1,650 (187 ) (192 ) 1,578 52,527 15,495 (1,387 ) 23,904 1,087 3,872 9,556 1,458 51,268 15,481 (1,387 ) 23,868 1,087 3,872 8,347 52,527 51,268 The financial statements were approved by the board of directors and authorised for issue on 3 April 2007 and were signed on its behalf by R O B Barnes The accompanying notes are an integral part of this balance sheet. 42 ANGLO-EASTERN PLANTATIONS PLC Notes to the company financial statements 1 Accounting policies Basis of accounting The separate financial statements of the company are presented as required by the Companies Act 1985. They have been prepared under the historical costs convention and in accordance with applicable United Kingdom Accounting Standards and law. The principal accounting policies are summarised below. Foreign currency The functional currency of the company is US dollars, chosen because the price of the bulk of the group’s products are ultimately denominated in dollars. Transactions in sterling are translated to US dollars at the actual exchange rate and exchange losses recognised in profit and loss. Sterling denominated assets and liabilities are converted to US dollars at the rate ruling at the balance sheet date. Dividends In accordance with FRS21 equity dividends are recognised when they become legally payable. Share based payments As set out under group accounting policies on page 26. Current asset investment The company's investments are in shares listed on a recognised stock exchange and available for sale. These shares are carried at the lower of cost or market value and, where relevant, changes in market value are recognised in the income statement. Deferred tax A deferred tax asset has not been set up in relation to brought forward tax losses because it is not certain those losses can be utilised. Treasury shares Consideration paid or received for the purchase or sale of the company’s own shares for holding in treasury is recognised directly in equity, where the cost is presented as the treasury share reserve. Any excess of the consideration received on the sale of treasury shares over the weighted average cost of shares sold, is taken to the share premium account. Any shares held in treasury are treated as cancelled for the purpose of calculating earnings per share. Financial guarantee contracts The company has not adopted amendments to FRS26 in relation to financial guarantee contracts which applies for periods commencing on or after 1 January 2006. Where the company enters into financial guarantee contracts and guarantees the indebted- ness of other companies within the group, the company considers these to be insurance arrangements and accounts for them as such. In this respect, the company treats the guarantee contract as a contingent liability until such time that it becomes probable that the company will be required to make a payment under the guarantee. It has no impact on the financial statements for the period commenc- ing 1 January 2006. 2 Investments in subsidiaries At beginning of year Movements in year At end of year Investments in subsidiary undertakings $000 7,745 - 7,745 Loans to subsidiary undertakings $000 42,065 1,139 43,204 Total $000 49,810 1,139 50,949 Loans to and from subsidiary companies do not have fixed repayment terms and are repayable on demand. In practice they are effectively long term in nature and therefore classified with investments in subsidiaries. The principal subsidiaries of the company are listed in note 27 to the consolidated financial statements on page 41. 3 Debtors Prepayments and accrued income Other debtors 4 Current asset investments 2006 $000 41 4 45 2005 $000 26 5 31 This represents a short term investment listed on the Kuala Lumpur Stock Exchange, shown at market value but sold during 2006. Cost (2005 - $309,000). 5 Dividends Paid during the year Final dividend of 8.80cts for the year ended 31 December 2005 (2004 – 8.00cts) Proposed final dividend of 10.8cts for the year ended 31 December 2006 (2005 – 8.80cts) 2006 $000 3,560 4,265 2005 $000 3,158 3,473 The proposed dividend for 2006 is subject to shareholder approval at the forthcoming annual general meeting and has not been included as a liability in these financial statements. ANGLO-EASTERN PLANTATIONS PLC 43 Notes to the company financial statements 6 Other creditors Accruals Other creditors 7 Share capital Ordinary shares of 25p each Beginning of year Share options exercised End of year Treasury shares Beginning of year Purchased in year End of year Market value of treasury shares Beginning of year (245p/share) End of year (312.5p/share) 2006 $000 172 15 187 2005 $000 192 - 192 Authorised Number Issued and fully paid Number 60,000,000 - 60,000,000 39,928,372 29,900 39,958,272 Authorised £000 15,000 - 15,000 Issued and fully paid £000 9,982 7 9,989 Authorised $000 23,865 - 23,865 Number 468,000 - 468,000 Issued and fully paid $000 15,481 14 15,495 $000 ) (1,387 - ) (1,387 1,972 2,867 The above treasury shares were purchased in December 2004 at 153p/share. Details of share based payments are set out in note 21 to the consolidated financial statements on page 36. 8 Reserves Company balance sheet Beginning of year Share options exercised Profit for the year Dividend paid End of year Share premium account $000 23,868 36 - - 23,904 Share capital redemption $000 1,087 - - - 1,087 Exchange reserve $000 3,872 - - - 3,872 Profit and loss account (distributable) $000 8,347 - 4,769 ) (3,560 9,556 As permitted by section 230 of the Companies Act 1985, a separate profit and loss account dealing with the results of the company has not been presented. The profit before tax of the company for the year was $4,801,000 (2005 - $4,356,000) and profit for the year was $4,769,000 (2005 – $4,319,000). Of the exchange reserve, $3,449,000 is available to meet any reduction in dollar terms of investments in and loans to subsidiaries caused by adverse exchange rate movements on the underlying assets. 9 Employees' and directors' remuneration Average numbers employed during the year - directors - staff Staff costs Wages and salaries Social security costs Retirement benefit costs Share based remuneration expense (equity settled) 2006 number 7 2 2006 $000 627 57 48 20 752 2005 number 7 2 2005 $000 637 57 45 14 753 The information required by the Companies Act and the listing rules of the Financial Services Authority is contained in the directors' report on remuneration on pages 18 to 19 of which the information on page 19 has been audited. Directors' emoluments Pension contributions 2006 $000 545 34 579 2005 $000 527 31 558 10 Guarantees and other financial commitments The company has provided guarantees for loans and overdrafts to subsidiaries totalling $7,505,000 (2005 - $5,916,000) as set out in note 16 to the consolidated financial statements. 44 ANGLO-EASTERN PLANTATIONS PLC Notice of annual general meeting Notice is hereby given that the twenty-second Annual General Meeting of Anglo-Eastern Plantations Plc will be held at the offices of Lovells, Atlantic House, Holborn Viaduct, London EC1A 2FG on 1 June 2007 at 11.30am for the following purposes: As Ordinary Business 1 To receive and consider the company’s annual report for the year ended 31 December 2006. 2 To declare a dividend. 3 To approve the directors' remuneration report for the year ended 31 December 2006. 4 To re-elect the following non-executive directors each of whom has served for more than nine years: a) Madam S K Lim b) Mr P E O'Connor c) Mr Ho Soo Ching d) Datuk Chin Poy-Wu 5 To re-appoint BDO Stoy Hayward LLP as auditors and to authorise the directors to fix their remuneration. As Special Business 6 To consider and, if thought fit, to pass the following resolutions as special resolutions: That (a) the directors be generally and unconditionally authorised pursuant to and in accordance with section 80 of the Companies Act 1985 (“the Act”) to exercise for the period ending on 31 May 2012 all the powers of the company to allot relevant securities up to an aggregate nominal amount equal to the company's authorised but unissued share capital at the date of this resolution; (b) during the period expiring on the date of the next Annual General Meeting or on 31 August 2008 (whichever shall be earlier) the directors be empowered to allot equity securities for cash pursuant to the authority conferred under paragraph (a) above or by way of sale of treasury shares (within the meaning of section 162A of the Act): (c) (d) (i) (ii) in connection with a rights issue; and up to an aggregate nominal amount of £499,478 otherwise than in connection with a rights issue; as if section 89 (1) of the Act did not apply to any such allotment; by such authority and power the directors may during such periods make offers or agreements which would or might require the making of allotments after the expiry of such periods; and for the purposes of this resolution: (i) "rights issue" means an offer of equity securities open for acceptance for a period fixed by the directors to holders of equity securities (other than the company) on the register on a fixed record date in proportion to their respective holdings of such securities or in accordance with the rights attached thereto (but subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to fractional entitlements or legal or practical problems under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory); the nominal amount of any securities shall be taken to be, in the case of rights to subscribe for or convert any securities into shares of the company, the nominal amount of such shares which may be allotted pursuant to such rights; and words and expressions defined in or for the purposes of part IV of the Act shall bear the same meanings herein. (ii) (iii) ANGLO-EASTERN PLANTATIONS PLC 45 Notice of annual general meeting 7 To consider and if thought fit to pass the following resolution as a special resolution: That the directors be and they are hereby authorised (i) to exercise the powers contained in the Articles of Association of the company so that, to the extent determined by the directors, the holders of ordinary shares be permitted to elect to receive new ordinary shares in the capital of the company, credited as fully paid, instead of all or part of any interim or final dividend or dividends which may be declared or paid at any time or times prior to 31 May 2012; and (ii) to capitalise the appropriate nominal amount of additional ordinary shares, falling to be allotted pursuant to elections made as aforesaid, out of the amount standing to the credit of any reserves of the company, to apply such sum in paying up such ordinary shares and pursuant to section 80 of the Act to allot such ordinary shares up to a maximum nominal value of an aggregate nominal amount equal to the company's authorised but unissued share capital at the date of this resolution to members of the company validly making such elections at any time or times prior to 31 May 2012 as if sub-section (1) of section 89 of the said Act did not apply thereto and so that this authority shall be without prejudice and additional to the authority conferred by resolution no 8. 8 To consider and if thought fit to pass the following as a special resolution: That the company is hereby generally and unconditionally authorised to make market purchases (within the meaning of section 163 of the Act) of ordinary shares of 25p each in the capital of the company provided that: (a) the maximum number of ordinary shares hereby authorised to be purchased is 3,992,837 (representing 10% of the issued ordinary share capital); (b) the minimum price which may be paid for each ordinary share is 25p; (c) (d) the maximum price which may be paid for each ordinary share is an amount equal to 105% of the average of the middle market quotations for such share as derived from the Daily Official List of the London Stock Exchange plc for the five business days immediately preceding the date of purchase; and the authority hereby conferred shall expire on 31 August 2008 or, if earlier, at the conclusion of the next Annual General Meeting of the company save that the company may before the expiry of this authority make a contract of purchase which will or may be executed wholly or partly after such expiry and may make a purchase of shares pursuant to any such contract. By order of the board R O B BARNES Secretary 3 April 2007 A member of the company entitled to attend and vote at the meeting may appoint one or more proxies to attend and. on a poll, vote instead of him. A proxy need not be a member of the company. The instrument appointing a proxy must be deposited at the office of the registrars not less than forty-eight hours before the time appointed for holding the meeting (or any adjournment thereof). Pursuant to regulation 34 of the Uncertified Securities Regulations 1995, the company has specified that only those shareholders on the register of members of the company at 11.30am on 30 May 2007 shall be entitled to attend and vote at the meeting in respect of the number of shares registered in their name at that time. Changes to the register of members after 11.30am on 30 May 2007 shall be disregarded in determining the rights of any person to attend and vote at the meeting. The register of directors' interests, showing any transactions of directors and of their families in the securities of the company, will be available for inspection at the registered office of the company during usual business hours from the date of this notice until the date of the Annual General Meeting and on that day until the conclusion of the meeting. No directors have service agreements exceeding one year's duration. 46 ANGLO-EASTERN PLANTATIONS PLC Company addresses Company advisers Malaysian Office 8th Floor Wisma Equity 150 Jalan Ampang 50450 Kuala Lumpur Tel : 60 (3) 2162 9808 Fax : 60 (3) 2164 8922 Indonesian Office PT United Kingdom Indonesia Plantations Wisma HSBC Jalan Diponegoro, Kav 11 Medan 20152 North Sumatra Tel : 62 (0) 61 452 8683 Fax : 62 (0) 61 452 0029 Auditors BDO Stoy Hayward LLP 8 Baker Street London W1U 3LL Principal Bankers National Westminster Bank Plc 15 Bishopsgate London EC2P 2AP The Hong Kong and Shanghai Banking Corporation Limited Wisma HSBC Jalan Diponegoro, Kav 11 Medan 20152 North Sumatra Secretary and Registered Office (Number Malayan Banking Corporation Bhd 1884630) R O B Barnes 6/7 Queen Street London EC4N 1SP Tel : 44 (0) 20 7236 2838 Fax : 44 (0) 20 7236 8283 Company website www.angloeastern.co.uk Menara Promenade 100 Jalan Tun Razak 50050 Kuala Lumpur Registrars Capita Registrars Northern House Woodsome Park Fenay Bridge Huddersfield West Yorkshire HD8 0LA Solicitors Lovells Atlantic House Holborn Viaduct London EC1A 2FG 

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