Annual Report for the year ended 31 December 2007 1Athelney Trust plc CONTENTS Chairman's Statement and Business Review 2 - 6 Investment and Portfolio Analysis 7 - 9 Report of the Directors 10 - 11 Report of the Auditors 12 - 13 Income Statement 14 Balance Sheet 15 Cash Flow Statement 16 Notes to the Financial Statements 17 - 24 Officers and Financial Advisers 25 Notice of Annual General Meeting 26 2Athelney Trust plc Waterside Court, Falmouth Road, Penryn, Cornwall, TR10 8AW Telephone: 01326 378 288 Email: hugo@athelneytrust.co.uk CHAIRMAN’S STATEMENT AND BUSINESS REVIEW I enclose the audited results for the year ended 31 December 2007. The salient points are as follows: • Audited Net Asset Value (“NAV”) is 173.1p per share (31 December 2006: 189.7p), a fall of 8.8 per cent. • Gross Revenue increased by 26 per cent to £120,488 (31 December 2006: £95,615). • On a like-for-like basis revenue increased by 18.3 per cent and dividend income rose by 17.6 per cent. • Revenue return per ordinary share was 3.9p, an increase of 18.2 per cent (31 December 2006: 3.3p). • Recommended dividend of 3.5p per share (2007: 3.25p), an increase of 7.7 per cent Review of 2007 The year 2007 turned out to be a particularly disappointing and frustrating period in that Athelney’s unaudited NAV as at 30 June was up by 6.1 per cent but we finished the year down by 8.8 per cent. The second half of the year will principally be remembered for those Three Amigos, sub-prime lending, the credit crunch and Northern Rock which caused a disorderly retreat from small caps into blue chips and the latter into gilts and cash. More of the Three later. A good place to start a review of the year is with the international situation but, rather than list a long liturgy of trouble-spots, allow me to mention two places which exemplify just what a dangerous world we live in today. On 6 September, Israeli jets bombed a mysterious site near Deir-ez-Zor on the Euphrates River, eastern Syria: could it have been missiles on their way to Hezbollah, the Shia movement that Syria backs in Lebanon? Or was it perhaps a nuclear reactor in the early stages of construction and were North Korean technicians involved? Was the raid an indirect way for Israel and its American ally to warn the Iranians of what might happen if they continue to enrich uranium? Or simply an Israeli exercise to test Syria’s air defence system, said to have been upgraded by the Russians? George W. Bush, who obviously knows what is happening, is saying nothing: ‘This is not my first rodeo’ he stalled at a press conference in October. Meanwhile, in the Swat Valley in Pakistan, an area famous in that part of the world for its beautiful mountains and lakes and superb skiing has reputedly been over-run by a combustible cocktail of local malcontents, al Qaeda and the Taliban even though the area is being patrolled by 20,000 less-than-enthusiastic Pakistani soldiers. All this is happening less than two hours’ drive from the capital Islamabad – the chilling thought is accompanied by another, namely that Pakistan is a nuclear power. ‘It seems that’ mused a member of the Musharraf Government a few short weeks before the assassination of Benazir Bhutto ‘we have a University of Terrorism in the Tribal Areas as good as Harvard, in its field.’ Everything that could go wrong with 2007 did. What started with unsound sub-prime mortgages, spread to collateralized debt obligations (CDOs) in which those mortgages were wrapped, endangered municipal bond insurance and threatened to unravel the credit default swap (CDSs) market. Furthermore, investment banks’ commitments to leveraged buyouts (LBOs) became liabilities and hedge funds designed to be market-neutral turned out not to be and had to be unwound. The asset-backed commercial paper market came to a standstill and the special investment vehicles (SIVs) set up by the banks to move mortgages off balance sheet could no longer obtain outside financing. Worst of all, inter-bank lending, which is central to the financial system, was badly disrupted because banks had to conserve resources and no longer knew which of the other banks to trust. As a consequence, the central banks had to inject an unprecedented amount of liquidity into the system and extend credit on a much wider range of securities than ever before. Thus the credit crunch trundled onwards. Away from the world of high finance, we in the UK had three rises in interest rates – most or all of them ill-advised in my opinion – with which to cope, plus floods, foot and mouth, blue tongue, avian ‘flu (twice) and an unsuccessful terrorist attack. 3Athelney Trust plc CHAIRMAN’S STATEMENT AND BUSINESS REVIEW (CONTINUED) The result of all this was a very poor equity market in the second half of the year which undid all the good work of the first so that the FT Small Cap Index fell by 12.4 per cent over the twelve-month period and, as far as the whole market was concerned, the median share fell by 10.1 per cent. Some popular sectors did far worse, for example: retailers 26 per cent; house-builders (my estimate) 45 per cent; commercial property 38 per cent; banks 21 per cent and so on. Compare and contrast with the Shanghai and Indian indices, which jumped by 95.6 per cent and 46.5 per cent respectively as investors strove to buy into those nations’ sparkling economic growth. So here we are right in the middle of a credit crisis which originated, not in Lombard Street, but in the trailer parks of the United States, and how did we get into this mess? How is it that we have not had a run on a bank for 141 years, yet pictures of solid British subjects queuing up outside branches of Northern Rock have flashed round the world to the apparent amusement of everyone who wanted to take business away from the City of London? Mr. G. Brown, ex-Chancellor of the Exchequer, is to my mind the culprit. In 1866, the firm of Overend, Gurney & Co. had, next to the Bank of England itself, the biggest balance sheet in London and took deposits from all over the country. However, it was not sound and had taken speculative and disastrous interests in shipbuilding, steel, land and so on through a complex web of over 200 companies. When the run started, the Bank appointed a committee of three wise men to have a look at Overend, Gurney’s books who reported back that the latter was ‘rotten to the core’ and that nothing could be saved. That was the end of Overend, Gurney but the Bank next day lent secretly the then-amazing sum of £4m to banks, discount houses and merchants to see them over any difficulty. This was entirely successful. Coming up to date, the sums involved are very much larger, of course, but surely the principle is the same isn’t it? No, the man some call Mr Tinkerman from his constant habit of messing and tinkering with things and yet not improving them, became Chancellor of the Exchequer in 1997 and everyone remembers how he gave independence to the Bank of England – except that he didn’t. Or rather, he gave responsibility to the Bank for monetary policy (i.e. setting interest rates) but took away the Bank’s historic role as guardian of the City and spread responsibility between the Bank, the Financial Services Authority and the Treasury. This did not seem very clever at the time and has subsequently proved to be so. The highly public support operation for Northern Rock had the same effect as a lion ambling up to a herd of wildebeest: a mass depositor stampede which has destroyed so much value for Ordinary shareholders and holders of the 12.625% Subordinated Loan Notes. Was Northern Rock as unsound as Overend, Gurney was 141 years ago? No, Northern Rock was solvent, profitable but illiquid, had a low number of slow payers and was the most efficient lender in the market-place. What it couldn’t do was borrow money quietly from the Bank when the credit crisis skipped continents. The consequences of all this are profound: a financial institution that had underpinned the economy and self-image of one of England’s poorest regions, the North East, has been destroyed, the reputation of a good central bank governor has been tarnished and an internationally admired regulatory system has fallen into disrepute. The trouble with taking out a mortgage these days is that you don’t know where it is going to end up – before you can say knife, your bank has thrown it in with a few thousand others, sliced, diced and wrapped them into a package and sold them on to other parties or perhaps to its own trading desk. This process is known as securitization which, for a brief moment, turned investment banks into mega-growth stocks but now threatens to bring them back down to mortal status. CDOs repackaged mortgages, CLOs did the same for leveraged (geared) corporate loans and there are also specialist products involving both student and auto loans. Structured investment vehicles (SIVs) are also full of danger: they borrow short-term to invest in long-dated assets but investors will no longer tolerate such a mismatch and so banks have had to bring back over $136 billion onto their books. That comes on top of $160 billion so far, and possibly $400 billion in total sub-prime write-downs. This practice of securitization has exposed four deep flaws: severing the link between those who scrutinise borrowers and those who lose when the borrower defaults has resulted in a lack of accountability; second, the new products are opaque and incredibly complex; third, some securities were badly structured and their risks not fully understood and, fourth, investors relied too much on the rating agencies who were themselves compromised from the start by being paid for their research by the seller not the buyer. 4Athelney Trust plc CHAIRMAN’S STATEMENT AND BUSINESS REVIEW (CONTINUED) Essentially, there are only three Nationally Recognised Rating Organizations (ratings agencies): Standard & Poor’s (S&P); Moody’s and Fitch. All three rate securities using a nine-point scale which they label differently. S&P and Fitch use: AAA, AA, A, BBB, BB, etc. whereas Moody’s prefers: Aaa, Aa, A, Baa, Ba, and so on. Many think that AAA/Aaa means armour-plated, BBB/Baa is riskier and CCC/Caa suggests that you run for the hills. Oh, were it so simple: first, there are many ways to measure credit risk; second, S&P and Moody’s employ different approaches so that the former rates are based on default probability with a BBB rating, for instance, reflecting a 7.1% default probability. Moody’s, on the other hand, goes by expected loss, which is calculated as default probability multiplied by the severity of the loss. So much for the methodology but the fact of the matter is that that the ratings agencies have earned huge fees by offering opinions on the creditworthiness of an alphabet soup of mortgage-related securities created by over-eager banks. As the market expanded, so did the agencies’ profits - Moody’s net income rose from $289 million in 2002 to $754 million in 2006. Did these huge fees lead to a drop in standards? I am sure that the agencies would say not but if a security is trading at 70 cents on the dollar, it is no use saying that S&P rates it AAA – the extra 30 cents will not magically appear just because the agency says so. The solution, in my opinion, is to force brokers and investors to pay for the ratings – that way there can be no doubt as to whether there is a conflict of interest. Another obscure corner of the world of high finance is surely needing a bold rescue plan. So-called monoline insurers guarantee the capital and interest on municipal bonds, in effect renting out their AAA ratings in return for a fee. For a long time, this business was dull, boring but nicely profitable. As competition grew, however, the monolines were attracted by the higher returns of insuring CDOs and the rest of the alphabet soup. But as mortgage defaults rose so did monoline losses – two such insurers wrote off $8.5 billion in the last quarter of the year. The monolines’ thin capital cover, perfectly adequate when they were doing only safe municipal business, now looks to be worryingly threadbare. Unless they raise more capital, it is likely that the ratings agencies will downgrade them with the inevitable consequence that all the paper that they have insured will have to be downgraded as well. Holders of downgraded bonds will have to mark them down in value under ‘fair value’ accounting rules and some investors, who are only allowed to hold highest-grade bonds, may become forced sellers. Investment banks that were active in the CDO market may think that it would be cheaper for them to ride to the rescue of the monolines rather than let the worst happen – perhaps a plan will have been hatched by the time that you read this. In May, 2006 Alan Greenspan, the former Federal Reserve chairman, noted, ‘The credit default swap is probably the most important instrument in finance……What CDS did is lay off all the risk of highly leveraged institutions – and that’s what banks are, highly leveraged – on stable American and international institutions.’ Reality may prove different: in recent months whole swathes of investors have suddenly realized just how opaque many of the new complex instruments are. However, at its simplest, the CDS is similar to credit insurance. The buyer of protection (typically a bank) transfers the risk of default by one of its borrower clients to a protection seller (perhaps a monoline insurer or hedge fund) who for a fee indemnifies the protection buyer against a credit loss. It seems to me that there are two problems at the moment: first, these contracts were taken out when credit was easy to obtain and default rates were therefore very low. Expect default rates to shoot up now that credit conditions are tight; second, there is a danger that the selling party may not be able to keep its part of the bargain. Monoline insurers, as we have already discovered, are in dire straits. What is the damage? Anything between $30 billion and $150 billion, it has been estimated. With the more complex stuff, frankly it is anybody’s guess. There are three more worrying factors to mention before I close, the first being the increasing number of profit warnings. The 107 profit warnings from companies in the last quarter of 2007 was the highest number since 2001 and represents a 22 per cent increase on 2006. The pound suffered its weakest annual performance for 15 years in 2007, falling 6.1 per cent in the past year which is the biggest annual decline since 1992 – the year in which Britain was ejected from the European Exchange Rate Mechanism. The Sterling Exchange Rate Index, which compares the pound with a comprehensive basket of currencies, finished the year at 97.9 having weakened by 6.7 per cent in the second half of the year. 5Athelney Trust plc CHAIRMAN’S STATEMENT AND BUSINESS REVIEW (CONTINUED) No review of 2007 would be complete without a paragraph on commodities, the prices of many of which have now been in an upswing for several years – crude oil, for instance has surged by 450 per cent in the current cycle with the rally now more than six years old, the most powerful and durable ever. Copper had a trough-to-peak rise of 570 per cent between November 2001 and May 2006 – while the rise in gold and silver has not yet surpassed the events of the 1970s in percentage terms, it has been the most durable on record as the cycle approaches its seventh year. In 2007, wheat prices more than doubled and almost every crop under the sun – maize, milk, oilseeds and so on – is at or near a peak in nominal terms having risen on average by 26 per cent last year: even in real terms, food prices have risen by 75 per cent since 2005. Dearer food is likely to persist for many years: that is because ‘agflation’ is underpinned by changes in diet that accompany the growing wealth of emerging economies such as China and India – the Chinese consumer who ate 20kg of meat in 1985 now gets through over 50kg. This in turn pushes up demand for grain since, for instance, it takes 8kg of grain to produce one of beef. But the rise in prices is also the result of American over-generous ethanol subsidies. This year biofuels will take a third of America’s huge maize crop – fill up an SUV’s fuel tank and you have used up enough maize to feed a person for a year. At the moment, there are something like nine cars to every 1,000 people in China compared with more than 900 in America – there is quite a lot of catching up to do. As far as uranium is concerned, there are 442 nuclear reactors in the world needing 180 million lbs each year but only 110 million lbs was mined in 2005. There is a similar story for gold: in India, gold is often used for wedding gifts and, with increasing prosperity, there has been a huge rise in demand. And even with 23 new gold mines coming on stream world-wide, supply may not be enough. So, the era of cheap food has gone for good and increasing demand for metals and minerals is likely, in many cases, to underpin high prices. Results Gross Revenue increased by 26 per cent compared to 2006. A breakdown of the companies paying dividends is given below: Number Companies paying dividends 95 Companies sold (therefore no true comparison) 13 Companies purchased (therefore no true comparison) 24 Increased total dividends in the year 50 Reduced total dividends in the year 6 No change in dividend 2 Corporate Activity Six of our companies were taken over for cash: Enterprise; European Motor Holdings; City Lofts; Hitachi Capital, Ben Bailey and Domestic & General producing a profit of 698 per cent, 242 per cent, 30.3 per cent, 9.5 per cent, 83.8 per cent and 88.1 per cent respectively. Portfolio Review Holdings of Aero Inventory, Umeco, Character Group, Prime People, Renew Holdings, Smallbone, H&T Group, Ambrian Capital, FDM Group, Finsbury Food, M&C Saatchi, Quarto Group, Trifast, Creston, LSL Property Services, Avesco Group, Financial Objects and OPD Group were all purchased for the first time. Blacks Leisure, Johnson Service, AT Communications, Erinaceous Group, City of London and Speymill were all sold. In addition, a total of twenty-seven holdings were top-sliced to provide capital for the new purchases. 6Athelney Trust plc CHAIRMAN’S STATEMENT AND BUSINESS REVIEW (CONTINUED) Dividend The Board is pleased to recommend an increased annual dividend of 3.5p per ordinary share (2007: 3.25p). This represents an increase of 7.7 per cent over the previous year. Subject to shareholder approval at the Annual General Meeting on 14 May 2008, the dividend will be paid on 16 May 2008 to shareholders on the register on 18 April 2008. Update The unaudited NAV at 29 February 2008 was 160.3p whereas the share price on the same day stood at 169.5p. Further updates can be found on www.athelneytrust.co.uk Outlook When I look at the world-wide equity market, I am reminded of Winston Churchill’s famous phrase ‘It is a riddle, wrapped in a mystery, inside an enigma ……..’ No matter that he was talking about something completely different (Russia’s attitude to the war in October 1939) it remains a telling description of where we are now. But it is to a well-known American that we must turn rather than a famous Englishman, so please step forward Mr. Ben Bernanke. So far, the Chairman of the U.S. Federal Reserve Board has announced seven initiatives since last August including steep interest rate cuts, extra borrowing facilities and is now offering Treasury securities in exchange for AAA-rated mortgage-backed investments (poor old American tax-payer!). His aim is to improve substantially both liquidity and solvency – the former so that banks will start to lend to each other again and the latter so that such as Bear Sterns are not overwhelmed by their losses in CDOs and CDSs (over 100 CDOs and SIVs are in default already) although hedge funds will be allowed to go to the wall and are starting so to do. Of course there is a danger that we can just become too gloomy about everything; it is worth bearing in mind that in the midst of the Great Depression up to 50 per cent of mortgages in America were in default – today’s equivalent figure is 6 per cent. On the other hand, one can only blush at the British Chancellor’s assertion that the U.K. is better placed than other leading economies to cope with a slow-down. With 30 per cent of output coming from the City of London, finance and business services how can this be anything other than dangerous complacency? Yes, I do believe that Mr. Bernanke will succeed in his laudable ambitions and, yes, I do believe that recovery prospects in equity markets are excellent – but patience will be required! H.B. Deschampsneufs Chairman 7Athelney Trust plc INVESTMENT AND PORTFOLIO ANALYSIS AT 31 DECEMBER 2007 SECTOR Stock Holding Cost (£) Current Price (p) Value (£) £ % Aerospace and defence Aero Inventory 7,000 27,291 652 45,640 Umeco 7,250 35,021 627 45,458 91,098 2.88% Basic resource (ex mining) Acertec 28,000 14,993 40 11,200 11,200 0.35% Chemicals Treatt 10,500 24,605 270 28,350 28,350 0.89% Construction and materials Clarke (T) 18,000 19,938 170 30,600 Galliford Try 30,000 8,484 98 29,475 Renew Holdings 35,000 31,180 95 33,250 93,325 2.95% Electronic and electrical equipment XP Power Ltd 8,000 19,999 282 22,560 22,560 0.71% Food and beverages Finsbury Food Group 29,500 25,872 84 24,780 Nichols 13,050 24,415 198 25,839 Shepherd Neame "A" 5,400 15,886 1,426 77,001 Wynnstay Group 30,000 26,818 240 72,000 199,620 6.30% General financial Albemarle & Bond 15,000 14,999 234 35,100 Ambrian Capital Plc 42,000 19,496 44 18,480 Arbuthnot Banking Group 10,000 34,134 440 44,000 Arden Partners 18,000 29,453 156 28,080 Blue Oar 130,000 29,402 18 23,400 Camellia 1,200 28,749 8,800 105,600 Charles Taylor Consulting 8,000 19,021 332 26,560 Davenham Group 10,000 24,199 210 21,000 Dowgate Capital 166,666 23,509 14 23,333 Jarvis Securities 17,500 10,092 160 28,000 Park Group 130,000 20,985 17 22,100 S & U 8,000 23,901 415 33,200 Tenon Group 50,000 12,957 55 27,250 Vantis 36,667 45,289 121 44,367 480,470 15.17% Healthcare equipment and services Tristel 60,000 30,301 51 30,600 30,600 0.97% House, leisure and personal goods Havelock Europe 24,000 20,120 93 22,320 Smallbone 36,500 36,366 107 39,055 61,375 1.94% Industrial engineering Gooch & Housego 13,000 14,050 400 52,000 Goodwin 11,000 6,758 1,000 110,000 Severfield-Rowen 13,000 11,012 452 58,695 Slingsby (H.C) 4,000 9,958 985 39,400 Somero Enterprises 27,550 25,974 90 24,795 Trifast 40,000 26,611 65 25,800 310,690 9.81% Industrial transportation Braemar Shipping Services 18,000 22,317 462 83,160 Clarkson 6,300 8,432 1,010 63,630 Fisher (James) 11,000 9,332 651 71,610 218,400 6.89% Insurance Personal Group Holdings 17,500 15,908 295 51,625 51,625 1.63% 8Athelney Trust plc INVESTMENT AND PORTFOLIO ANALYSIS AT 31 DECEMBER 2007 (CONTINUED) SECTOR Stock Holding Cost (£) Current Price (p) Value (£) £ % Media Avesco 30,000 34,846 107 32,100 Character Group 22,000 17,274 89 19,580 Chime Communications 85,000 24,797 36 30,600 Creston 19,000 16,309 75 14,250 Huntsworth 35,000 26,459 90 31,325 International Greetings 18,000 11,514 129 23,220 M&C Saatchi Plc 20,500 27,481 124 25,420 Media Square 213,179 14,318 9 19,719 Quarto Group Inc Com 18,000 34,546 170 30,600 226,814 7.16% Pharmaceuticals and biotechnology Genus 12,000 10,696 819 98,280 98,280 3.10% Real estate Colliers CRE 17,400 12,668 59 10,266 LSL Property Services 13,500 19,752 140 18,900 Mountview Estates 1,750 22,012 5,400 94,500 Smart (J) & Co. 4,000 21,009 750 30,000 153,666 4.85% Retailers Flying Brands 15,000 23,816 145 21,750 H & T Group 17,000 35,028 202 34,340 Lookers 30,000 16,666 113 33,825 Mallett 12,000 6,701 182 21,840 SCS Upholstery 10,000 9,826 93 9,300 Stanley Gibbons 55,000 6,692 209 114,950 236,005 7.45% Support services Broker Network Holdings 10,000 21,211 593 59,300 Dawson Holdings 34,000 16,508 114 38,760 Gibbs & Dandy 10,000 6,558 300 30,000 Latham (James) 13,000 6,368 240 31,200 Litho Supplies 50,500 24,007 49 24,745 Macfarlane Group 100,000 31,311 29 29,000 N.W.F Group 40,000 11,707 225 90,000 OPD Group 9,000 21,605 188 16,920 Prime People 26,000 29,608 98 25,480 RWS Holdings 12,000 21,150 323 38,760 VP 17,000 21,164 330 56,015 Waterman Group 36,000 19,180 148 53,280 WSP Group 13,000 8,077 585 76,050 569,510 17.98% Technology hardware Belgravium Technologies 350,000 35,256 10 34,125 34,125 1.08% Technology software and services FDM Group 27,500 30,480 120 33,000 Financial Objects 70,000 34,291 45 31,500 Group NBT 15,000 17,434 200 30,000 Pennant International 116,000 11,052 18 20,880 Phoenix IT 8,500 24,571 310 26,350 141,730 4.47% Travel and leisure Air Partner 6,000 11,878 1,000 60,000 Enterprise Inns 10,000 7,016 484 48,375 108,375 3.42% 9Athelney Trust plc INVESTMENT AND PORTFOLIO ANALYSIS AT 31 DECEMBER 2007 (CONTINUED) Portfolio Value £ 3,167,818 100% Net Current Assets £ 209,187 Deferred Tax £ (256,283) TOTAL VALUE £ 3,120,722 Shares in issue 1,802,802 Audited NAV 173.1p AIM45%FULL53%PLUS2%FULLAIMPLUS1.94%9.81%6.89%1.63%7.16%4.85%7.45%17.98%4.47%0.71%15.17%6.30%3.10%2.95%2.88%0.35%0.89%0.97%1.08%3.42%Aerospace and defenceBasic resource (ex mining)ChemicalsConstruction and materialsElectronic and electrical equipmentFood and beveragesGeneral financialHealthcare equipment and servicesHouse, leisure and personal goodsIndustrial engineeringIndustrial transportationInsuranceMediaPharmaceuticals and biotechnologyReal estateRetailersSupport servicesTechnology hardwareTechnology software and servicesTravel and leisurePortfolio by Sector Portfolio by Listing 10REPORT OF THE DIRECTORS OF Athelney Trust plc The directors present their report and audited financial statements of the Company for the year ended 31 December 2007. Principal Activity and Business Review The principal activity of the Company is that of an investment company. The investment objectives of the Company are to achieve long term capital growth while at the same time producing a progressive income return. Investments made by the Company are primarily in the equity securities of both unquoted and quoted UK companies, including smaller companies with a market capitalisation of below £50 million. During the period, the Company followed the normal activities of an investment company. Details of these are given in the Chairman’s Statement and Business Review on pages 2 to 6. Directors and Their Interests The directors who held office during the year and their interest in the ordinary shares of the Company are stated below: 31 December 2007 1 January 2007 H. Deschampsneufs 78,038 78,038 R.G. Boyle 443,970 443,970 D.A. Horner 20,000 20,000 H.B. Deschampsneufs’ interest includes 19,163 (2006: 19,163) shares held in his Self-Invested Personal Pension. R.G. Boyle’s interest includes 16,970 (2006: 16,970) shares held in his Self-Invested Personal Pension. D.A. Horner’s interest includes 20,000 (2006: 20,000) shares owned by a pension fund in which D.A. Horner has an interest. Statement of Directors’ Responsibilities The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial statements are required by law to give a true and fair view of the state of affairs of the company and of the result for the company for that period. In preparing those financial statements, the directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and estimates that are reasonable and prudent; - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 11REPORT OF THE DIRECTORS OF Athelney Trust plc (CONTINUED) So far as each of the directors is aware at the time the report is approved: there is no relevant audit information of which the auditors are unaware, and the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. Corporate Governance The Board continues to give careful consideration to the principles of corporate governance as set out in the Combined Code appended to the Listing Rules issued by the Financial Services Authority. However the Company is small and it is the opinion of the directors that not all the provisions of the Code are relevant or desirable for a company of Athelney’s size. The Board meets regularly and has ultimate responsibility for the management of the Company, although the Remuneration Committee makes recommendations to the Board relating to the remuneration of the managing director and the non-executive directors. The Audit Committee assists the Board in relation to matters concerning corporate governance and financial reporting. Both Committees, currently comprising H.B. Deschampsneufs and D.A. Horner, meet during the year as required, with the Audit Committee to include external auditors if appropriate. Results and Dividends The return on ordinary revenue activities before dividends for the year is £70,528 (2006: £60,322) as detailed on page 14. It is recommended that an annual dividend of 3.5p (2007: 3.25p) per ordinary share be paid. Payment of Suppliers It is the Company’s policy to obtain the best possible terms for all business and, therefore, there is no consistent policy as to the terms used. The Company contracts the terms on which business will take place throughout the year with its suppliers. There were no invoiced trade creditors outstanding at the end of the year, the amounts shown as creditors in the balance sheet comprise expenses and proposed dividends. Auditors In accordance with Section 385 of the Companies Act 1985, a resolution proposing that Clement Keys be re-appointed as auditors of the Company will be put to the annual general meeting. BY ORDER OF THE BOARD J. Girdlestone Secretary Waterside Court Falmouth Road Penryn Cornwall TR10 8AW 01 April 2008 12INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF Athelney Trust plc We have audited the financial statements of Athelney Trust plc for the year ended 31 December 2007, which comprise the Income statement, the Balance Sheet, the Cashflow Statement and the related notes. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by the law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors’ responsibilities for preparing the Annual report and the financial statements 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 in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you in our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors’ Report is consistent with the financial statements. This information includes specific information presented in the Chairman’s Statement that is cross referred from the Business Review section of the Directors’ Report. In addition we 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 the information specified by law regarding directors’ remuneration and other transaction is not disclosed. We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. This other information comprises only the Directors’ Report, the Chairman’s Statement and the Investment and Portfolio Analysis. We consider the implications for our report if we become aware of any apparent misstatement or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. 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 an examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the 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 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. 13INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF Athelney Trust plc (CONTINUED) Opinion In our opinion: • the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of affairs of the Company as at 31 December 2007 and of the revenue, total return and cash flows for the year then ended; • have been properly prepared in accordance with the provisions of the Companies Act 1985; and • the information given in the Directors’ Report is consistent with the financial statements. Clement Keys Chartered Accountants Registered Auditors 39/40 Calthorpe Road Edgbaston Birmingham B15 1TS 01 April 2008 14Athelney Trust plc INCOME STATEMENT (INCORPORATING THE REVENUE ACCOUNT) 31 December 2007 31 December 2006 Note Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ (Losses) profits on investments 8 - (362,778) (362,778) - 708,480 708,480 Income 2 120,488 - 120,488 95,615 - 95,615 Investment Management expenses 3 (9,893) (28,979) (38,872) (8,216) (24,164) (32,380) Other expenses 3 (52,362) - (52,362) (35,355) - (35,355) Return on ordinary activities before taxation 58,233 (391,757) (333,524) 52,044 684,316 736,360 Taxation 5 12,295 81,248 93,543 8,278 (122,442) (114,164) Return on ordinary activities after taxation 13 70,528 (310,509) (239,981) 60,322 561,874 622,196 Return per ordinary share 6 3.9p (17.2)p (13.3)p 3.3p 31.2p 34.5p Dividend per ordinary share paid during the year 3.25p 2.5p The revenue column of this statement is the profit and loss account for the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the above financial years. A statement of movements of reserves is given in note 13. There have been no recognised gains or losss, other than the results for the financial years shown above. The notes on pages 17 to 24 form part of these financial statements 15Athelney Trust plc BALANCE SHEET AS AT 31 DECEMBER 2007 Note 2007 2006 £ £ Fixed assets Investments 8 3,167,818 3,706,392 Current assets Debtors 9 205,773 105,603 Cash at bank and in hand 45,335 32,486 251,108 138,089 Creditors: amounts falling due within one year 10 (41,921) (50,797) Net current assets 209,187 87,292 Total assets less current liabilities 3,377,005 3,793,684 Provisions for liabilities and charges 11 (256,283) (374,390) Net assets 3,120,722 3,419,294 Capital and reserves Called up share capital 12 450,700 450,700 Share premium account 13 405,605 405,605 Other reserves (non distributable) Capital reserve - realised 13 892,893 719,086 Capital reserve - unrealised 13 1,239,083 1,723,399 Revenue reserve 13 132,441 120,504 Shareholders' funds - all equity 14 3,120,722 3,419,294 Net Asset Value per share 173.1p 189.7p Approved by the board of directors on 01 April 2008 ………………………………. R.G. Boyle The notes on pages 17 to 24 form part of these financial statements 16Athelney Trust plc CASHFLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 £ £ £ £ Net cash (outflow)/inflow from operating activities (69,440) 68,111 Servicing of finance Dividends paid (58,591) (45,070) Net cash (outflow)/inflow from servicing of finance (58,591) (45,070) Taxation Corporation tax paid (34,916) (18,613) Investing activities Purchases of investments (1,247,174) (1,103,978) Sales of investments 1,422,970 1,091,988 Net cash inflow/(outflow) from investing activities 175,796 (11,990) Increase (decrease) in cash in the year 12,849 (7,562) Reconciliation of operating net revenue to net cash inflow from operating activities £ £ Revenue on ordinary activities before taxation 58,233 52,044 (Increase) / decrease in debtors (100,170) 39,506 Increase in creditors 1,476 725 Management expenses charged to capital (28,979) (24,164) (69,440) 68,111 Analysis of net debt 2006 Cashflow 2007 £ £ £ Cash at bank and in hand 32,486 12,849 45,335 The notes on pages 17 to 24 form part of these financial statements 17Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 1. Accounting Policies 1.1 Basis of Preparation of Financial Statements The financial statements are prepared under the historical cost convention modified to include fixed asset investments at valuation. The financial statements are prepared in accordance with applicable accounting standards and, unless otherwise stated, the provisions of the Statement of Recommended Practice in “Financial Statements of Investment Trust Companies” (SORP) in effect for this period. 1.2 Income Income from investments including taxes deducted at source is recognised as income on the date the dividend is due for payment. UK dividend income is reported net of tax credits in accordance with FRS 16 “Current Tax”. Interest is dealt with on an accruals basis. 1.3 Expenses Expenses (including VAT) and interest payable are dealt with on an accruals basis and charged through the Revenue Account. 1.4 Investment Management Expenses Investment management expenses have been allocated 25% to revenue and 75% to capital, in line with the Board’s expected long term split of returns, in the form of income and capital gains respectively, from the investments portfolio. 1.5 Investments Listed investments comprise those listed on the Official List of the London Stock Exchange. Profits and losses on sales of investments are taken to realised capital reserve. Any unrealised appreciation or depreciation is taken to unrealised capital reserve. Investments have been classified as “fair value through profit and loss” upon initial recognition. Subsequent to initial recognition, investments are measured at fair value with changes in fair value recognised in the Income Statement. Securities of companies quoted on a recognised stock exchange are valued by reference to their quoted bid prices at the close of the year. 1.6 Taxation The tax effect of different items of income and expenses is allocated between capital and revenue on the same basis as the particular item to which it relates, using the Company’s effective rate of tax for the year. 18Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 1. Accounting Policies (continued) 1.7 Deferred Taxation Deferred taxation is provided in respect of all future obligations to pay additional tax arising as a result of past events. Tax is provided at rates expected to apply in the period in which timing differences reverse based on tax rates and laws substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted. 1.8 Capital Reserves Capital Reserve – Realised Gains and losses on realisation of fixed asset investments are dealt with in this reserve. Capital Reserve – Unrealised Increases and decreases in the valuations of fixed asset investments are dealt with in this reserve. 2. Income Income from investments 2007 2006 £ £ UK dividend income 114,513 91,470 Bank interest 5,574 4,145 Other income 401 - Total income 120,488 95,615 UK dividend income 2007 2006 £ £ UK listed investments 43,164 57,800 AIM investments 70,188 32,566 Other investments 1,161 1,104 114,513 91,470 19Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 3. Return on Ordinary Activities Before Taxation 2007 2006 £ £ The following amounts (inclusive of VAT) are included Within investment management and other expenses: Directors’ remuneration: - Services as a director 10,000 9,000 - Otherwise in connection with management 30,000 25,000 Auditors’ remuneration Audit Services - Statutory audit 7,200 6,921 - Audit related regulatory reporting 910 881 Further assurance services - Advice on accounting matters 862 1,350 4. Employees 2007 2006 £ £ Costs in respect of directors: Wages and salaries 40,000 34,000 Social security costs 3,171 2,399 43,171 36,399 Costs in respect of administrator: Wages and salaries 10,000 7,000 Social security costs 620 253 10,620 7,253 Total: Wages and salaries 50,000 41,000 Social security costs 3,791 2,652 53,791 43,652 Average number of employees: Chairman 1 1 Investment 2 2 Administration 1 1 4 4 20Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 5. Taxation 2007 2006 Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ (i) The tax charge for the year is based on the return for the year Corporation tax for current year - 24,564 24,564 - 34,916 34,916 Tax relief on management expenses charge to income (12,295) 12,295 - (8,278) 8,278 - Adjustment in respect of previous years - - - - - - Deferred taxation - (118,107) (118,107) - 79,248 79,248 (12,295) (81,248) (93,543) (8,278) 122,442 114,164 (ii) Factors affecting the tax charge for the year The tax charge for the period is lower than the average small company rate of corporation tax in the UK (20 per cent). The differences are explained below: 2007 2006 £ £ Total return on ordinary activities before tax (333,524) 736,360 Total return on ordinary activities multiplied by the average small company rate of corporation tax 20% (2006: 19%) (66,705) 108,472 Effects of: UK dividend income not taxable (22,902) (17,379) Revaluation of shares not taxable 120,485 (52,556) Indexation relief for capital gains (5,775) (3,621) Other (80) - Change in tax rate (459) - Current tax charge for the year 24,564 34,916 21Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 6. Return per Ordinary Share The calculation of earnings per share has been performed in accordance with FRS 22 “Earnings Per Share”. 2007 2006 £ £ £ £ £ £ Revenue Capital Total Revenue Capital Total Attributable return on ordinary activities after taxation 70,528 (310,509) (239,981) 60,322 561,874 622,196 Number of shares 1,802,802 1,802,802 Return per ordinary share 3.9p (17.2)p (13.3)p 3.3p 31.2p 34.5p 7. Dividend An annual dividend of 3.5p (2007 – 3.25p) per share amounting to a total of £63,098 (2007 - £58,591) is proposed by the Board. The dividend proposed will not be accounted for until it has been approved at the Annual General Meeting. 8. Investments 2007 2006 £ £ Movements in year Valuation at beginning of year 3,706,392 2,985,922 Purchases at cost 1,247,174 1,103,978 Sales - proceeds (1,422,970) (1,091,988) - realised gains on sales 239,645 266,437 Increase (decrease) in unrealised appreciation (602,423) 442,043 Valuation at end of year 3,167,818 3,706,392 Book cost at end of year 1,650,667 1,587,384 Unrealised appreciation at the end of the year 1,517,151 2,119,008 3,167,818 3,706,392 UK Listed 1,553,403 2,121,748 AIM 1,537,414 1,493,168 PLUS 77,001 91,476 3,167,818 3,706,392 2007 2006 £ £ Dividend in respect of 2007 of 3.25p (2006 – 2.5p) per share 58,591 45,070 22Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 8. Investments (continued) Gains on investment 2007 2006 £ £ Realised gains on sales 239,645 266,437 Increase (decrease) in unrealised appreciation (602,423) 442,043 (362,778) 708,480 The purchase and sales proceeds above include transaction costs of £4,678 (2006: £4,147 ) and £5,817 (2006: £4,544 ) respectively. 9. Debtors 2007 2006 £ £ Amounts falling due within one year: Investment transaction debtors 202,940 103,452 Other debtors 2,833 2,151 205,773 105,603 10. Creditors 2007 2006 £ £ Corporation tax 24,564 34,916 Social security and other taxes 6,938 5,649 Other creditors 159 148 Accruals and deferred income 10,260 10,084 41,921 50,797 11. Deferred Tax 2007 2006 Not Not Provided Provided Provided Provided £ £ £ £ Tax on unrealised gains net of losses 256,283 - 374,390 - 256,283 - 374,390 - 2007 2006 £ £ Balance at beginning of year 374,390 295,142 Charge to the capital element of the Statement of Total Return (118,107) 79,248 Balance at end of year 256,283 374,390 Tax is provided at the latest known rates on all taxable gains net of losses which would arise if investments were sold at the market value included in the balance sheet at the end of the financial year. 23Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 12. Called Up Share Capital 2007 2006 £ £ Authorised 10,000,000 Ordinary Shares of 25p 2,500,000 2,500,000 Allotted, called up and fully paid 1,802,802 Ordinary Shares of 25p 450,700 450,700 13. Reserves 2007 Share Capital Capital premium reserve reserve Revenue account realised unrealised reserve £ £ £ £ Balance at 1 January 2007 405,605 719,086 1,723,399 120,504 Net gain on realisation of investments - 239,645 - - Decrease in unrealised appreciation - - (602,423) - Management expenses allocated to capital - (28,979) - - Taxation - (36,859) 118,107 - Profit for the year - - - 70,528 Dividend paid in year - - - (58,591) Balance at end of year 405,605 892,893 1,239,083 132,441 14. Reconciliation of Movement on Shareholders’ Funds 2007 2006 £ £ Retained net revenue for the year after taxation 70,528 60,322 Dividend (58,591) (45,070) 11,937 15,252 Total recognised gains for the year (310,509) 561,874 (298,572) 577,126 Shareholders' funds at beginning of year 3,419,294 2,842,168 Shareholders' funds at end of year 3,120,722 3,419,294 24Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 15. Risk Management, Financial Assets and Liabilities The following information is given in accordance with Financial Reporting Standard 13. Risk Management The major risks associated with the Company are market and liquidity risk. The Company has established a framework for managing these risks. The directors have guidelines for the management of investments and financial instruments. Market risk arises from changes in interest rates, valuations awarded to equities, movements in prices and the liquidity of financial instruments. The Company’s portfolio is invested in UK securities. Financial Assets and Liabilities The Company’s financial instruments comprise equity investments, cash balances and debtors and creditors that arise directly from its operations, for example, in respect of sales and purchase awaiting settlement. Short term debtors and creditors are excluded form disclosure as allowed by FRS 13. Fixed asset investments (see note 8) are valued at market bid price where available which equates to their fair values. The fair values of all other assets and liabilities are represented by their carrying values in the balance sheet. 16. Net Asset Value Per Share The net asset value per share is based on net assets of £3,120,722 (2006: £3,419,294) divided by 1,802,802 (2006: 1,802,802) ordinary shares in issues. 2007 2006 Net asset value 173.1p 189.7p 25Athelney Trust plc OFFICERS AND FINANCIAL ADVISERS Directors: H.B. Deschampsneufs (Chairman) Email: hugo@athelneytrust.co.uk R.G. Boyle (Managing Director) Email: robin171@btinternet.com D.A. Horner Email: cam@chelvertonam.com Secretary: J. Girdlestone Email: john@athelneytrust.co.uk Waterside Court Tel: 01326 378 288 Falmouth Road Penryn Cornwall, TR10 8AW Registered Office: Waterside Court Website: www.athelneytrust.co.uk Falmouth Road Email: info@athelneytrust.co.uk Penryn Tel: 01326 378 288 Cornwall, TR10 8AW Company Number: 2933559 (Registered in England) Nominated Adviser: Noble & Company Limited Email: noble@noblegp.com 120 Old Broad Street Tel: 020 7763 2200 London, EC2N 1AR Stockbroker: Speirs & Jeffrey Limited Email: wgd@speirsjeffrey.co.uk 36 Renfield Street Tel: 0141 248 4311 Glasgow, G2 1NA Auditor: Clement Keys Email: mike.meakin@clementkeys.co.uk 39/40 Calthorpe Road Tel: 0121 456 4456 Edgbaston Birmingham, B15 1TS Banker: The Royal Bank of Scotland plc London City Office 62/63 Threadneedle Street London City Office, EC2R 8LA Registrar: Share Registrars Limited Email: enquiries@shareregistrars.uk.com Craven House Tel: 01252 821 390 West Street Farnham Surrey, GU9 7EN Public Relations Consultants: City Road Communications Email: cityroad@cityroad.uk.com 42-44 Carter Lane Tel: 0207 248 8010 London, EC4V 5EA 26Athelney Trust plc NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the fourteenth Annual General Meeting of the Company will be held at the offices of Noble & Company Limited, 5th Floor, 120 Old Broad Street, London, EC2N 1AR on Wednesday 14 May 2008 at 4.30p.m. for the following purposes: As Ordinary Business 1. To receive and adopt the Company’s Accounts and the Report of the Directors and Auditors for the year ended 31 December 2007. 2. To declare an annual dividend of 3.5p per ordinary share. It is intended that dividend cheques in respect of the dividend will be posted on Friday 16 May 2008 to all shareholders on the register of members at close of business on Friday 18 April 2008. 3. To approve the remuneration of the Directors. 4. To re-elect Mr D.A. Horner as a Director of the Company. 5. To re-appoint Clement Keys as Auditors and to authorise the Directors to fix their remuneration. By Order of the Board John Girdlestone Secretary 02 April 2008 Registered Office: Waterside Court, Falmouth Road, Penryn, Cornwall, TR10 8AW NOTES (i) A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a member of the Company. A form of proxy is enclosed with this Notice for use at the Meeting. To be valid, completed forms of proxy (together with any Power of Attorney or other authority under which it is executed or duly certified copy of any such Power or authority) must be deposited at the Company’s Registered Office not less than 48 hours before the time fixed for this meeting. Completion and return of a form of proxy will not prevent the member from attending and voting at the Meeting in person. (ii) The register of Directors’ interests kept in accordance with Section 325 of the Companies Act 1985 and copies of Directors’ service contracts will be available for inspection during normal business hours on any weekday (Saturdays and public holidays excepted) at the Company’s Registered Office from the date of this Notice until the date of the Meeting. Athelney Trust plc FORM OF PROXY (See Note (i)) To be used at the Annual General Meeting to be held on 14 May 2008 I/We (Block letters please) of and (Names of any joint holders) Being (a) member(s) of the above-named Company hereby appoint the Chairman of the Meeting or (see Note (ii)) as my/our proxy for me/us and on my/our behalf at the Annual General Meeting of the Company to be held on 14 May 2008 at 4.30 p.m. and at every adjournments thereof. I/We wish this proxy to be used on the vote on the following: Please indicate with an X in the appropriate spaces how you wish the proxy to vote. Unless otherwise instructed, the proxy will use his/her discretion to vote as he/she thinks fit or to abstain from voting on any of the resolutions set out below and on any other business considered at the Meeting. RESOLUTIONS For Against 1 To receive and adopt the accounts for the year ended 31 December 2007 2 To declare a dividend of 3.5p per Ordinary Share 3 To approve the remuneration of the Directors 4 To re-elect Mr D.A. Horner as a Director 5 To re-appoint Clement Keys as Auditors To authorise the Directors to fix the Auditors’ Remuneration Signed_______________________________________________________Dated_________________________________ NOTES (i) This form is for the use of shareholders only and will be used only in the event of a poll being directed or demanded. (ii) If you wish to appoint someone other than the Chairman of the Meeting as your proxy please delete the words “the Chairman of the Meeting” and insert the name of the person you wish to appoint. A proxy need not be a member of the Company. (iii) To be effective, this form of proxy together with any Power of Attorney or other authority under which it is executed or a duly certified copy of any such Power or authority must be deposited at the Company’s Registered Office (Waterside Court, Falmouth Road, Penryn, Cornwall, TR10 8AW) not less than 48 hours before the time fixed for the Meeting. (iv) Where the member is a corporation, this form must be executed under its common seal or signed by an officer or attorney or other person duly authorised in writing. (v) In the case of joint holders, only one need sign this form but the names of all the joint holders should be shown. The vote of the senior holder who tenders a vote, whether in person or proxy, will be accepted to the exclusion of the votes of the other joint holders. Seniority will be determined by the order in which the names of the holders appear in the register of members in respect of joint holdings. (cid:6)