Daejan Holdings PLC Report & Financial Statements 2007 Daejan Holdings PLC Report & Financial Statements 2007 Summary of Results Year ended 31 March 2006 £000 162,659 113,112 690.1p 65.0p £45.74 2007 £000 198,316 141,829 868.6p 70.0p £52.88 Profit before Taxation Profit after Taxation Earnings per Share Dividends per Share Equity Shareholders’ Funds per Share Final Dividend of 45p per share payable on 2 November 2007 to shareholders on the register on 5 October 2007. Summary of Results Chairman’s Statement Directors’ Report Directors’ Remuneration Report Corporate Governance Directors’ Responsibilities Independent Auditors’ Report Consolidated Income Statement Consolidated Statement of Recognised Income and Expense Consolidated Balance Sheet Consolidated Statement of Cash Flows Note to the Consolidated Financial Statements Company Balance Sheet Notes to the Company Financial Statements Five Year Record Directors & Advisers Notice of Meeting Contents Page 1 2 9 13 15 18 19 21 22 23 24 25 42 43 46 47 48 Page 1 Daejan Holdings PLC Report & Financial Statements 2007 Chairman’s Statement It gives me great pleasure to present the Report and Accounts for the year ended 31 March 2007, a year which has seen a very satisfactory continuation in the growth of our Group with Profit before Tax increasing to £198.3 million (2006 – £162.7 million). These accounts are prepared on the IFRS basis following our adoption of this system in 2006. As I mentioned in my report last year, by including valuation gains in our Income Statement the IFRS approach has the potential to inject volatility into our reported profits, with every percentage point change in annual revaluation producing a swing of some £12 million in Profit before Tax. It is important to remember that our Consolidated Income Statement includes Net Valuation Gains of £156.5 million (2006 – £132.3 million) which arise mainly from fluctuations in market values rather than as a direct result of our operating activities. This year has also seen healthy growth in our profits before net valuation gains to £41.8 million (2006 – £30.4 million). As can be seen from the Consolidated Statement of Cash Flows, the Net Cash from Operating Activities has reduced to £14.6 million (2006 – £17.1 million) although this increases to £34.2 million (2006 – £29.3 million) when the proceeds from sales of property are included. We must never lose sight of the fact that it is net rental income and realised gains which generate the cash with which we run the business and pay dividends to shareholders. In our day to day efforts we continue to focus on the core business of generating value from our portfolio of investment properties. This requires a steady, long term approach and it is pleasing to be able to report on another year of good progress in both profit and the Group’s net worth. The revaluation of our Investment Properties at 31 March 2007 produced an overall uplift of £153.9 million (2006 – £131.0 million); this is equivalent to 14% (2006 – 14%). The table below shows an analysis of the revalued portfolio, by type of property. Commercial Property UK USA Residential Property UK USA Total Valuation March 2007 Percentage Change £653.5m £32.7m £405.5m £142.2m £1,233.9m +15.8% -4.4% +15.9% -6.7% +14% Above: An architectural detail at Kensington Church Street London W8 Right: Langlands House Harlow Essex Page 2 Daejan Holdings PLC Report & Financial Statements 2007 The apparent fall in value of the Group’s US properties is entirely due to the current weakness of the US dollar against sterling. In dollar terms the US commercial and residential properties increased by 7.9% and 5.6% respectively. Notwithstanding short term currency movements, we remain committed to the gradual long term expansion of our US portfolio. Dealing now with the results for the year, our Gross Rental Income at £73.9 million is somewhat down on last year’s figure of £77.5 million. However, as mentioned in my statement last year, the 2006 rental income received a non-recurring boost from the settlement of a long outstanding rent review; the comparison has been further distorted by the current weakness of the US dollar. These factors mask underlying year on year rental growth in both the UK and US of 3% and 5% respectively. This year has seen expenditure on repairs at £19.5 million which is some £3.0 million down on last year’s total.Whilst there has been a modest reduction in the UK of £1.1 million, the greater part of the reduction is attributable to the US which has reverted to a more normal level of spend following completion of the abnormal hurricane damage repairs in 2006. Left: Sainsbury’s Watford Hertfordshire Left: Oslo Court Regents Park London NW8 Page 3 Daejan Holdings PLC Report & Financial Statements 2007 Chairman’s Statement (continued) Analysis by Property Type Property UK Property USA Commercial £653.5m Residentital £405.5m Commercial £32.7m Residential £142.2m Commercial Property UK Commercial Property USA Offices £211.2m Leisure £27.0m Industrial £48.5m Retail £321.3m Land & Development £45.5m Offices £30.8m Retail £1.9m Analysis by Location UK Valuations USA Valuations London & the South £740.4m Midlands & East Anglia £172.9m Wales & West £71.0m North & Scotland £74.7m New York £79.6m Boston £23.1m Baltimore £12.6m Florida £35.3m New Jersey £22.4m Pennsylvania £1.9m In the UK letting activity ran at our usual level of just over 1,000 new lettings and renewals during the year and vacancy rates remained broadly constant. The Group continues to benefit from a strong balance sheet, with shareholders funds increasing to £861.7 million (2006 – £745.3 million).This is equivalent to £52.88 (2006 – £45.74) per share, an increase of 15.6% in the year (2006 – 17.5%). It has long been the Board’s policy prudently to increase dividend payments in line with the continued progress of the Group.The Board therefore has pleasure in recommending an increase in the total dividend for the year from 65p to 70p; equivalent to 7.7% (2006 – 6.6%). This year has seen unprecedented movement in the Group’s share price. Following a review by FTSE International Limited in December 2006, our shares have, for the first time, been included in a number of their indices including the FTSE 250 and the All Share Index. This produced Page 4 Daejan Holdings PLC Report & Financial Statements 2007 Far left: Grove Hall Court St John’s Wood London NW8 Left: Cadogan Square Glasgow Below: Marsh Wall Isle of Dogs London E14 Far left: Park West Marble Arch, London W2 Left: Witley Court London WC1 Page 5 Daejan Holdings PLC Report & Financial Statements 2007 Chairman’s Statement (continued) The pictures on these pages illustrate the refurbishment of 164 Shaftesbury Avenue London WC2 Right: an artist’s impression of the new reception area and below: the reception area floorplan Page 6 Daejan Holdings PLC Report & Financial Statements 2007 an immediate and significant upward movement in our share price as various tracker funds which follow these indices sought to acquire shares to achieve the correct weighting. By 31 March 2007 this initial surge of activity seemed to have passed with the share price back to previously prevailing levels. Since the 31 Μarch the shares have suffered from the downward pressure which has afflicted the property sector as a whole. Both the upward and the downward movements have been quite detached from the underlying reality of your company’s steady long term growth. As I anticipated last year, our further consideration of the Real Estate Investment Trust (REITS) structure has confirmed that the Group is unable to take advantage of the legislation as presently drafted. Left: the new entrance to 164 Shaftesbury Avenue and below left: the original design So far as general market conditions are concerned, it is possible that we may see a change in market sentiment with an upward movement in yields and a corresponding downward pressure on capital values. The recent increases in interest rates and their possible impact on economic activity over the the coming year reinforce positive forward better this may bring side priced purchase opportunities than we have seen in recent years. With gearing at 8.8% (2006 – 12.7%) and £152 million (2006 – £144 million) we are well placed to take advantage of any such opportunities. this concern. On undrawn facilities of to concentrate on We continue identifying opportunities to enhance rental and capital values within our existing portfolio. In practice development projects tend to take a considerable time to bring to fruition and as always we temper enterprise with Page 7 Daejan Holdings PLC Report & Financial Statements 2007 Chairman’s Statement (continued) prudence in pursuing such projects. During the year, the projects we have been actively progressing included the following: ● 164, Shaftesbury Avenue, London WC2: this major refurbishment will create 29,000 sq feet of prime office space and is due to complete by the end of the year. ● 25–29, Worship Street: this development close to Broadgate in the City of London will create 22,000 sq feet of modern office space; work commenced on site in June 2007. ● Africa House: a planning application is being submitted for a major refurbishment of this office block in central London which will create 115,000 sq feet of high quality space.This project is likely to span a number of years. I remain constant in my belief that our well tried business approach means that we are well placed to continue to deliver the long term steady progress that has come to characterise the Group. As ever my thanks must go to our dedicated and hard working staff for helping to deliver another successful year. B S E FRESHWATER Chairman Right: The Strand Palace Hotel Strand London WC2 Far right: Dudley Court and Clarendon Court Finchley Road London NW11 Page 8 Daejan Holdings PLC Report & Financial Statements 2007 Directors’ Report The Directors have pleasure in presenting their Report together with the Financial Statements for the year to 31 March 2007. Principal Activities of the Group Daejan Holdings PLC is a holding company whose principal activity, carried on through its subsidiary undertakings, is property investment, with some development also being undertaken. The major part of the Group’s property portfolio comprises commercial, industrial and residential premises throughout the United Kingdom. Some subsidiary undertakings are incorporated in the United States of America and carry out property investment in that country. Properties A professional valuation of all the Group’s properties was carried out at 31 March 2007. The resultant ¢gures are included in the Financial Statements now presented and the increase of »153.9 million over previous book values has been included in the Income Statement. The Group’s UK properties were valued by Colliers CRE, Chartered Surveyors and produced a revaluation surplus of »144 million. The Group’s USA properties were valued by KTR Newmark, Meredith & Green, Joseph J. Blake and Associates Inc. and Metropolitan Valuation Services Inc. All the USA ¢rms are General Certi¢ed appraisers. The revaluation surplus arising on the USA properties was $19.4 million. Business Review The Group’s Business Review and future developments are included in the Chairman’s Statement set out on pages 2 to 8 which are included in this report by reference. Results & Dividend The pro¢t for the ¢nancial year amounted to »141.8 million (2006 ^ »113.1 million). An Interim Dividend of 25p per share was paid on 9 March 2007 and the Directors now recommend the payment of a Final Dividend of 45p per share, making a total for the year of 70p per share, an increase of 5p over the previous year. An analysis of the Group’s property income and pro¢t before taxation for the year is as follows:^ Gross Rental and Service Charges Sales of Investment Properties Net Valuation Gains Financing Charges (net) Administrative and Other Expenses Pro¢t before Taxation Property Income USA UK »000 »000 72,998 19,160 144,829 17,178 1,141 9,043 Profit UK »000 34,882 17,156 144,829 USA »000 5,486 13 9,043 236,987 27,362 196,867 14,542 (569) (6,192) (4,894) (1,438) 190,106 8,210 8,210 198,316 Page 9 Daejan Holdings PLC Report & Financial Statements 2007 Directors’ Report (continued) Financial Objectives and Policies and Exposure to Financial Risk The Group operates a cautious ¢nancial policy within clear authorities on a non-speculative and long term basis in order to enable the Group to carry on its business in con¢dence and with strength. The Group aims to ensure that the cost of capital is kept to a minimum through the maintenance of its many long standing relationships with leading banks and other ¢nancial institutions. The Group seeks to minimise the risk of sudden and unexpected rises in ¢nance costs by way of ¢nancial derivative instruments whilst retaining some ability to take advantage of falling interest rates. There is no obligation or present intention to repay the borrowings other than at maturity. Payment Policy It has long been the Group’s policy to settle the terms of payment with suppliers when agreeing the terms of each transaction, to ensure that those suppliers are aware of those terms and to abide by the agreed terms of payment. The Group does not, however, follow any formal code or statement on payment practice. The Group and the Company do not have material trade creditor balances. Directors The Directors who served throughout the year, and who are still in of¢ce, are:^ Mr B S E Freshwater Mr D Davis Mr S I Freshwater Brief biographies of the Directors are as follows:^ Mr B S E Freshwater. Aged 59 ^ Joined the Board in December 1971 with primary responsibility for the Group’s ¢nances. In July 1976 he was appointed Managing Director and, additionally, became Chairman in July 1980. Mr D Davis. Aged 72 ^ A Chartered Accountant and member of the Institute of Taxation, was previously a partner in Cohen Arnold, the Group’s consulting accountants. He relinquished his partnership in 1971 in order to devote more time to his numerous business and other interests. He has been a non-executive Director of the Company since December 1971. Mr S I Freshwater. Aged 56 ^ Directs the Group’s operations in the USA and also has responsibility for the Group’s UK sales division. He has been a Director of the Company since January 1986. Directors’ Interests Day-to-day management of the Group’s properties in the United Kingdom is mainly carried out by Highdorn Co. Limited and by Freshwater Property Management Limited. Mr B S E Freshwater and Mr S I Freshwater are Directors of both companies and are also interested in the share capital of Highdorn Co. Limited. Mr B S E Freshwater, Mr S I Freshwater and Mr D Davis are also Directors of the parent company of Freshwater Property Management Limited but have no bene¢cial interest in either company. Details of the amounts paid for the provision of these services are set out in note 20 to the ¢nancial statements. Page 10 Daejan Holdings PLC Report & Financial Statements 2007 Substantial Interests & Interests of Directors Daejan Holdings PLC Ordinary Shares D Davis B S E Freshwater S I Freshwater (notes 2 & 3) (notes 1, 2, 3 & 4) (notes 2, 3 & 4) Notes: 31 March 2007 31 March 2006 763 590,033 89,270 763 590,033 89,270 1. 2. 3. All the above holdings were bene¢cially owned. Mr B S E Freshwater’s shareholding represents 3.6% of the Issued Share Capital of the Company. A further 4,363,116 shares (2006 ^ 4,363,116) representing 26.8% of the Issued Share Capital of the Company were held by in which Mr B S E Freshwater, Mr S I Freshwater and Mr D Davis have no bene¢cial interest. Freshwater companies charitable and by family trusts In addition to the holding shown in the table and in note 2 above, companies owned and controlled by Mr B S E Freshwater, Mr S I Freshwater and by their families, and family trusts, held at 31 March 2007 a total of 7,876,431 shares (2006 ^ 7,876,431) representing 48.3% of the Issued Share Capital of the Company. Mr D Davis has a non-bene¢cial interest in some of these shares as a Director of the companies concerned, or as a trustee. 4. Of these shares 89,270 are held by a company owned jointly by Mr B S E Freshwater and Mr S I Freshwater. 5. There have been no changes in any of the above interests since 31 March 2007 up to the date of signing this report. Included in notes 2 and 3 are the following holdings, each amounting to 3% or more of the Company’s Issued Share Capital:^ Henry Davies (Holborn) Limited Trustees of the B S E Freshwater Settlement Trustees of the S I Freshwater Settlement Distinctive Investments Limited Quoted Securities Limited Centremanor Limited Mayfair Charities Limited Shares 1,934,090 1,705,000 1,560,000 1,464,550 1,305,631 1,000,000 565,000 % 11.9 10.5 9.6 9.0 8.0 6.1 3.5 Capital Gains Tax For the purpose of computing Capital Gains Tax the market value of the Company’s Shares was 185p on 31 March 1982. Charitable Donations Charitable Donations made by the Group amounted to »120,000 (2006 ^ »120,000). There were no political contributions (2006 ^ »Nil). Auditors The Company’s auditors, KPMG Audit Plc, have expressed their willingness to continue in of¢ce. In accordance with Section 384 of the Companies Act 1985, resolutions for the reappointment of KPMG Audit Plc as auditors of the Company, and to authorise the Directors to determine their remuneration, are to be proposed at the forthcoming Annual General Meeting. Page 11 Daejan Holdings PLC Report & Financial Statements 2007 Directors’ Report (continued) Statement of Disclosure of Information to Auditors The Directors who held of¢ce at the date of approval of this Directors’ Report con¢rm that, so far as they each are aware there is no relevant audit information of which the Company’s auditors are unaware, and each Director has taken all the steps he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. By Order of the Board, M R M Jenner Secretary 3 August 2007 Page 12 Daejan Holdings PLC Report & Financial Statements 2007 Directors’ Remuneration Report Audited Information Remuneration Details of individual Director’s remuneration are set out below on an accruals basis. 2007 Mr B S E Freshwater Mr D Davis Mr S I Freshwater 2006 Mr B S E Freshwater Mr D Davis Mr S I Freshwater Salary » 620,000 ^ 552,000 Fees » 20,000 20,000 20,000 Total » 640,000 20,000 572,000 1,172,000 60,000 1,232,000 Salary » 575,000 ^ 504,000 Fees » 20,000 20,000 20,000 Total » 595,000 20,000 524,000 1,079,000 60,000 1,139,000 Pensions Mr B S E Freshwater participates in a Small Self-administered Pension Scheme which provides at any time after age 60 a sum of money to purchase a pension subject to Inland Revenue limits and other statutory rules. The pension scheme also provides on death in service, for all contributions made to be applied in providing bene¢ts for Mr Freshwater’s dependants. This is a de¢ned contribution scheme to which no further contributions will be made. Unaudited Information Compliance The Board considers that the Company has complied throughout the year with the requirements of the Combined Code in relation to Directors’ remuneration with the exception of the provision relating to the formation and constitution of a remuneration committee (see page 15). In determining remuneration policy, the Board has given full consideration to the Principles of Good Governance and Code of Best Practice as set out in Section 1 of the Combined Code annexed to the Listing Rules of the Financial Services Authority. Policy The remuneration policy adopted by the Board is designed to ensure that the Directors’ interests are allied to the long-term growth of the Group and therefore to the interests of the shareholders as a whole. The Group does not operate any form of bonus scheme or share option scheme since the Executive Directors’ salaries for the year are determined by the Board once the results for the year are known with any salary increase calculated and paid with effect from the beginning of the ¢nancial year. Page 13 Daejan Holdings PLC Report & Financial Statements 2007 Directors’ Remuneration Report (continued) Remuneration of Non Executive Directors The fee of the non-executive Director is reviewed periodically by the Executive Directors who make recommendations to the Board. The current level of »20,000 has been ¢xed for a number of years. Service Contracts No Director has a service contract. Total Shareholder Return The following graph shows the total shareholder returns for the Company for each of the last ¢ve ¢nancial years compared to the FTSE All-Share Real Estate Index. The Company is a constituent of the FTSE All-Share Real Estate Index and the FTSE 350 index, and the Board considers these to be the most appropriate broad market equity indices for illustrating the Company’s performance. Daejan Holdings Total Shareholder Return Index versus FTSE Real Estate Sector Total Return Index and the FTSE 350 Total Return Index for the ¢ve ¢nancial years ended 31 March 2007 (rebased as at 1 April 2002) TSR Performance Graph 450 400 350 300 250 200 150 100 50 Daejan FTSE All Share Real Estate FTSE 350 2002 2003 2004 2005 2006 2007 Daejan Holdings FTSE All Share Real Estate Index FTSE 350 Source: Thomson Datastream Approved by the Board on 3 August 2007 and signed on its behalf by M R M Jenner Company Secretary Page 14 Daejan Holdings PLC Report & Financial Statements 2007 Corporate Governance Corporate Governance The Board is required by the Financial Services Authority to report on the extent of its application of the principles and of its compliance with the provisions contained in the revised Combined Code issued by the Financial Reporting Council in July 2003. Your Board fully supports the goal of better Corporate Governance and we comply with the majority of the provisions of the revised Code. We do not comply with the provisions of the revised Code in connection with non-executive representation on the Board, as we are doubtful that further extending non-executive participation at present would bene¢t our shareholders. We consider it vital that the principles of a unitary Board of Directors sharing responsibility for all the Company’s business should not be facets of undermined by reserving areas of decision making solely for non-executive Directors. For this reason the matters which the Code recommends should be reserved for audit, nomination and remuneration committees are dealt with by the entire Board and it is intended to continue this practice. In view of the fact that the Board comprises only three Directors it is also not considered necessary to split the roles of Chairman and Chief Executive. Executive remuneration is not directly related to performance, but a link is established by the fact that remuneration is not agreed upon until after the results for the year are known. Changes should be made when they are appropriate and in the best interests of the Company, rather than for the sake of change itself. This Company has a successful track record and whilst the Board will continue to keep under review any proposals which may improve the ef¢ciency of its operations, the current structure has stood the Company in good stead over many years and should continue to do so in the future. The Board The Group is controlled through its Board of Directors. The Board’s main roles are to create value to shareholders, to provide entrepreneurial leadership of the Group, to approve the Group’s strategic objectives and to ensure that the necessary ¢nancial and other resources are made available to enable them to meet those objectives. The Board meets regularly throughout the year on both a formal and informal basis. Comprehensive management information covering all aspects of the Company’s business is supplied to the Board in a timely manner and in a form and quality to enable it to discharge its duties. The Board’s principal focus, in accordance with the formal schedule of matters referred to it for decision, is on the formation of strategy and the monitoring and control of operations and ¢nancial performance. All Directors have access to the Company Secretary who is responsible for ensuring that the Board procedures are complied with. The Board has agreed a procedure for Directors in the furtherance of their duties to take independent professional advice if necessary, at the Company’s expense. The Board consult on a regular basis with the Group’s external auditors and are charged with ensuring that their objectivity and independence is safeguarded. The entire Board is responsible for the selection and approval of candidates for appointment to the Board. All Directors retire by rotation and submit themselves to shareholders at Annual General Meetings at regular intervals and at least every three years. The Board acknowledge that in view of his length of service the non-executive Director is not technically independent. The non-executive Director will stand for re-election on an annual basis in order to comply with the revised Combined Code. Page 15 Daejan Holdings PLC Report & Financial Statements 2007 Corporate Governance (continued) During the year there were four formal Board Meetings and attendance was: B S E Freshwater (4), S I Freshwater (4), D Davis (4). Directors and Directors’ Independence The Board currently comprises the Chairman, one non-executive Director and one executive Director. The names of the Directors together with their biographical details are set out on page 10. All the Directors served throughout the period under review. Directors’ Remuneration Details of the Directors’ remuneration are contained in the Remuneration Report on page 13. Internal Controls The Board is ultimately responsible for the group’s system of internal control and for reviewing its effectiveness. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss. The revised Combined Code introduced a requirement that the Directors review the effectiveness of the Group’s system of internal controls. This extends the existing requirement in respect of internal ¢nancial controls to cover all controls including: ¢nancial, operational, compliance, and risk management. The Board con¢rms that there is an ongoing process for identifying, evaluating and managing the signi¢cant business risks faced by the Group, that this process has been in place for the year under review and up to the date of approval of the Annual Report and Accounts. This process is reviewed by the Board at regular intervals and accords with the Turnbull guidance. The Board has considered the bene¢ts likely to arise from the appointment of an internal audit function and have concluded that this is not currently necessary having regard for other controls which operate within the Group. Key elements of the Group’s system of internal controls are as follows : Controls environment: The Group is committed to the highest standards of business conduct and seeks to maintain these standards across all its operations across the world. The Group has a clear organisational structure for planning, executing and monitoring business operations in order to achieve the Group’s objectives. Lines of responsibility and delegation of authority are well de¢ned. is responsible for the identi¢cation and Risk identi¢cation and evaluation: Management evaluation of key risks applicable to the areas of their the property market which impact objectives. These risks are assessed on a continual basis and may be associated with a variety of internal and external sources. The Board considers the risk implications of business decisions including those affecting all major transactions. Information and communication: Periodic strategic reviews are carried out which include the consideration of long term ¢nancial projections. Annual budgets are prepared and performance the Board level. Through these mechanisms group against plan is actively monitored at performance is monitored, risks identi¢ed in a timely manner, their implications assessed, control procedures re-evaluated and corrective actions agreed and implemented. Page 16 Daejan Holdings PLC Report & Financial Statements 2007 Control procedures: The Group has implemented control procedures designed to ensure complete and accurate accounting for ¢nancial transactions and to limit the potential exposure to loss of assets or fraud. Measures include physical controls, segregation of duties, reviews by management and external audit to the extent necessary to arrive at their audit opinion. Monitoring and corrective action: The Board meets regularly formally and informally throughout the year to review the internal controls. This includes an annual review of the signi¢cant business risks, formally considering the scope and effectiveness of the Group’s system of internal control. In addition, the Directors and senior management staff have a close involvement in the day to day operations of the Group and as such the controls are subject to ongoing monitoring. Investor Relations The Board values communication with private and institutional shareholders and with analysts. The Annual General Meeting is used as an opportunity to meet private shareholders. Other opportunities are taken during the year to discuss the strategic and other issues with institutional shareholders and analysts. The Board continues to support the concept of individual resolutions on separate issues at Annual General Meetings. Details of proxy voting on each resolution are disclosed to the Meeting after it has been dealt with by a show of hands. In accordance with the revised Code, notice of the Annual General Meeting and the Report and Financial Statements will be sent to shareholders at least twenty working days before the meeting. Financial Reporting The Board are responsible for the preparation of the Report and Financial Statements within which they seek to present a balanced and understandable assessment of the Company’s business. Further details are given in the Chairman’s Statement. Compliance Statement The Board consider the Company has complied throughout the year ended 31 March 2007 with the provisions of the revised Code with the exception of the following paragraphs : Subject split of Chairman and CEO roles strong independent non-executive element appointment of nomination committee and their proceedings performance evaluation of the Board length of service of non-executive directors performance related remuneration for executive directors appointment of remuneration committee and their proceedings appointment of audit committee and their proceedings Paragraph A.2.1^2 A.3.1^3 A.4.1^3, A.4.6 A.6 A.7.2 B.1.1 B.2.1^2 C.3.1^6 Going Concern After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the ¢nancial statements. Page 17 Daejan Holdings PLC Report & Financial Statements 2007 Directors’ Responsibilities Statement of Directors’ Responsibilities in respect of the Annual Report and the Financial Statements The directors are responsible for preparing the Annual Report and the group and parent company ¢nancial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and parent company ¢nancial statements for each ¢nancial year. Under that law they are required to prepare the group ¢nancial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company ¢nancial statements in accordance with UK Accounting Standards, and applicable law (UK generally accepted accounting practice). The group ¢nancial statements are required by law and IFRSs as adopted by the EU to present fairly the ¢nancial position and the performance of the group. The Companies Act 1985 provides in relation to such ¢nancial statements, that references in the relevant part of that Act to ¢nancial statements giving a true and fair view, are references to their achieving a fair presentation. The parent company ¢nancial statements are required by law to give a true and fair view of the state of affairs of the parent company and of the pro¢t or loss of the parent company for that period. In preparing each of the group and parent company ¢nancial statements, the directors are required to:^ . . . . . select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; for the group ¢nancial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU; for the parent company ¢nancial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the parent company ¢nancial statements; and prepare the ¢nancial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the ¢nancial position of the parent company and enable them to ensure that its ¢nancial statements comply with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the directors are also responsible for preparing a Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that comply with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and ¢nancial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of ¢nancial statements may differ from legislation in other jurisdictions. Page 18 Daejan Holdings PLC Report & Financial Statements 2007 Independent Auditors’ Report Independent auditors’ report to the members of Daejan Holdings PLC We have audited the group and parent company ¢nancial statements (the ‘‘¢nancial statements’’) of Daejan Holdings Plc for the year ended 31 March 2007 which comprise the primary statements such as the Group Income Statement, the Group and Parent Company Balance Sheets, the Group Cash Flow Statement, the Group Statement of Recognised Income and Expense and the related notes. These ¢nancial 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. 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 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 group ¢nancial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU, and for preparing the parent company ¢nancial statements and the Directors’ Remuneration Report in accordance with applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice) are set out in the Statement of Directors’ Responsibilities on page 18. Our responsibility is to audit the ¢nancial statements and the part of the Directors’ Remuneration legal and regulatory requirements and Report International Standards on Auditing (UK and Ireland). to be audited in accordance with relevant We report to you our opinion as to whether the ¢nancial statements give a true and fair view and whether the ¢nancial statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985 and, as regards the group ¢nancial statements, Article 4 of the IAS Regulation. We also report to you whether, in our opinion, the information given in the Directors’ Report is consistent with the ¢nancial statements. The information given in the Directors’ Report includes that speci¢c information presented in the Chairman’s Statement that is cross referenced 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 information speci¢ed by law regarding directors’ remuneration and other transactions is not disclosed. We review whether the Corporate Governance Statement re£ects the company’s compliance with the nine provisions of the 2003 FRC Combined Code speci¢ed 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. Page 19 Daejan Holdings PLC Report & Financial Statements 2007 Independent Auditors’ Report (continued) We read the other information contained in the Annual Report and consider whether it is consistent with the audited ¢nancial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the ¢nancial 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 examination, on a test basis, of evidence relevant to the amounts and disclosures in the ¢nancial statements and the part of the Directors’ Remuneration Report to be audited. It also includes an assessment of the signi¢cant estimates and judgments made by the directors in the preparation of the ¢nancial 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 suf¢cient evidence to give reasonable assurance that the ¢nancial 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 ¢nancial statements and the part of the Directors’ Remuneration Report to be audited. Opinion In our opinion: . . . . . the group ¢nancial statements give a true and fair view, in accordance with IFRSs as adopted by the EU, of the state of the group’s affairs as at 31 March 2007 and of its pro¢t for the year then ended; the group ¢nancial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation; the parent company ¢nancial statements give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of the parent company’s affairs as at 31 March 2007; the ¢nancial statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985; and the information given in the Directors’ Report is consistent with the ¢nancial statements. KPMG Audit Plc Chartered Accountants Registered Auditor London 3 August 2007 Page 20 Daejan Holdings PLC Report & Financial Statements 2007 Consolidated Income Statement for the year ended 31 March 2007 Gross Rental Income Service Charge Income Year ended 31 March 2007 »000 Year ended 31 March 2006 »000 Notes 73,884 16,292 77,526 18,163 Total Rental and Related Income from Investment Properties Property Operating Expenses 90,176 (49,808) 95,689 (52,980) 3 Net Rental and Related Income from Investment Properties Pro¢t on Disposal of Investment Properties Valuation Gains on Investment Properties Valuation Losses on Investment Properties 40,368 17,169 155,304 (1,432) 42,709 6,173 149,728 (18,752) Net Valuation Gains on Investment Properties 153,872 130,976 Administrative Expenses 4 (7,630) (9,091) Net Operating Pro¢t before Net Financing Costs 203,779 170,767 Fair Value Gains on Financial Instruments Fair Value Gains/(Losses) on Current Investments Other Financial Income Financial Expenses Net Financing Costs Share of Post Tax Pro¢t of Equity Accounted Associates Pro¢t Before Taxation Income Tax Expense Pro¢t for the Year Attributable to:^ Equity Holders of the Parent Minority Interest Pro¢t for the Year 5 9 6 2,553 25 1,669 (9,710) 1,298 (10) 2,119 (11,515) (5,463) (8,108) ^ ^ 198,316 162,659 (56,487) (49,547) 141,829 113,112 141,536 293 112,460 652 141,829 113,112 Basic and Diluted Earnings per Share 7 868.6p 690.1p The notes on pages 25 to 41 form part of these Financial Statements. Page 21 Daejan Holdings PLC Report & Financial Statements 2007 Consolidated Statement of Recognised Income and Expense for the year ended 31 March 2007 Foreign Exchange translation differences Income & Expense Recognised Directly in Equity Pro¢t for the Year Year ended 31 March 2007 »000 Year ended 31 March 2006 »000 (14,505) 8,307 (14,505) 141,829 8,307 113,112 Total Recognised Income & Expense for the Year 127,324 121,419 Attributable to:^ Equity Holders of the Parent Minority Interest 127,031 293 120,767 652 Total Recognised Income & Expense for the Year 127,324 121,419 The notes on pages 25 to 41 form part of these Financial Statements. Page 22 Daejan Holdings PLC Report & Financial Statements 2007 Consolidated Balance Sheet as at 31 March 2007 Assets Investment Properties Investment in Associate Deferred Tax Assets Other Investments Total Non-Current Assets Trade and Other Receivables Investments Cash at Bank Total Current Assets Total Assets Equity Issued Capital Share Premium Retained Earnings Total Equity Attributable to Equity Holders of the Parent Minority Interest Total Equity Liabilities Interest Bearing Loans and Borrowings Deferred Tax Liabilities Total Non-Current Liabilities Bank Overdrafts Interest Bearing Loans and Borrowings Trade and Other Payables Taxation Total Current Liabilities Total Liabilities Total Equity and Liabilities Notes 8 9 10 11 12 13 14 14 14 16 10 13 16 15 31 March 2007 »000 1,233,885 ^ 1,842 617 31 March 2006 »000 1,101,048 ^ 2,608 617 1,236,344 1,104,273 33,924 226 31,926 32,043 160 37,300 66,076 69,503 1,302,420 1,173,776 4,074 555 857,098 4,074 555 740,659 861,727 135 745,288 330 861,862 745,618 111,940 264,686 140,212 219,045 376,626 359,257 30 3,188 37,729 22,985 15 8,448 42,209 18,229 63,932 68,901 440,558 428,158 1,302,420 1,173,776 The Financial Statements on pages 21 to 41 were approved by the Board of Directors on 3 August 2007 and were signed on its behalf by:^ B.S.E Freshwater D. Davis Director Director The notes on pages 25 to 41 form part of these Financial Statements. Page 23 Daejan Holdings PLC Report & Financial Statements 2007 Consolidated Statement of Cash Flows for the year ended 31 March 2007 Cash Flows From Operating Activities Cash Receipts ^ Rent and Charges Cash Paid to Suppliers and Employees Cash Generated from Operations Interest Received Interest Paid Drawings by Minority Interest in US partnership UK Corporation Tax Paid Overseas Tax Paid Net Cash from Operating Activities (Note 18) Cash Flows from Investing Activities Acquisition of Investment Properties Proceeds from Sale of Investment Properties Year ended 31 March 2007 »000 »000 88,308 (59,592) 28,716 1,673 (9,858) (488) (4,765) (655) (3,488) 19,558 Year ended 31 March 2006 »000 »000 90,284 (59,785) 30,499 2,119 (11,543) (528) (3,352) (83) 14,623 17,112 (6,806) 12,165 Net cash from Investing Activities 16,070 5,359 Cash Flows from Financing Activities Repayment of Secured Loans New Secured Loans Repayment of Mortgage Advances New Mortgage Advances Dividends Paid (48,377) 20,000 (1,186) 5,906 (10,592) (24,782) ^ (1,321) 4,728 (9,940) Net Cash from Financing Activities (34,249) (31,315) Net Decrease in Cash and Cash Equivalents Cash and Cash Equivalents Brought Forward Effect of Exchange Rate Fluctuations on Cash Held Cash and Cash Equivalents (Note 13) (3,556) 37,285 (1,833) 31,896 (8,844) 44,825 1,304 37,285 The notes on pages 25 to 41 form part of these Financial Statements. Page 24 Daejan Holdings PLC Report & Financial Statements 2007 Notes to the Consolidated Financial Statements 1. Significant accounting policies Daejan Holdings PLC is a company domiciled in the United Kingdom. The consolidated ¢nancial statements of the Company for the year ended 31 March 2007 comprise the Company and its subsidiaries (together referred to as the ‘‘Group’’) and the Group’s interest in associates. The consolidated ¢nancial statements were authorised for issuance on 3 August 2007. (a) Statement of compliance The consolidated ¢nancial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (IFRSs). The Company has elected to prepare its parent Company Financial Statements in accordance with UK GAAP and these are presented on pages 42 to 45. (b) Basis of preparation The ¢nancial statements are presented in sterling, rounded to the nearest thousand. They are prepared on the historical cost basis except that the following assets and liabilities are stated at investment properties, other non-current their investments and current asset investments. fair value: derivative ¢nancial instruments, The preparation of ¢nancial statements in conformity with IFRS requires management to make the application of policies and reported judgements, estimates and assumptions that affect amounts of assets and liabilities, income and expenses. Standards which have been issued and adopted in the year, have had no material impact on the ¢nancial statements. Additional standards have been issued but were not effective during the year and are not expected to have any material effect on the results of the Group These consolidated ¢nancial statements have been prepared on the basis of IFRSs in issue that are effective at the Group’s annual reporting date, 31 March 2007. The accounting policies have been applied consistently throughout the Group for purposes of these consolidated ¢nancial statements. (c) Subsidiaries Subsidiaries are those entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the ¢nancial and operating policies of an entity so as to obtain bene¢ts from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. (d) Associates Associates are those entities in which the Group has signi¢cant in£uence, but not control, over the ¢nancial and operating policies. The consolidated ¢nancial statements includes the Group’s share of the total recognised gains and losses of associates on an equity accounted basis, from the date that signi¢cant in£uence commences until the date that signi¢cant in£uence ceases. Page 25 Daejan Holdings PLC Report & Financial Statements 2007 Notes to the Consolidated Financial Statements (continued) (e) Transactions eliminated on consolidation Intra-group balances and any unrealised gains and losses arising from intra-group transactions are eliminated in preparing the consolidated ¢nancial statements. (f) Income available for distribution Under the Articles of Association of certain Group investment undertakings, realised capital surpluses are not available for distribution as dividends. (g) Foreign currency translation The assets and liabilities of foreign operations are translated to sterling at the foreign exchange rate ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to sterling at rates approximating to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange difference arising on retranslation are recognised directly in a separate component of equity. (h) Derivative ¢nancial instruments The Group uses derivative ¢nancial instruments to hedge its exposure to interest rate risk arising from operational and ¢nancing activities. As the derivatives do not qualify for hedge accounting, they are accounted for as trading instruments. Derivative ¢nancial instruments are recognised initially at fair value. Subsequent to initial recognition, derivative ¢nancial instruments are stated at fair value. The fair value of interest rate swaps is the estimated amount that the Group would recover or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the credit worthiness of the swap counterparties. The gain or loss on re- measurement to fair value is recognised immediately in the Income Statement. (i) Investment property IFRS de¢nes Investment properties as those which are held either to earn rental income or for capital appreciation or both. Investment properties are stated at fair value. External, independent valuation ¢rms having appropriate recognised professional quali¢cations and recent experience in the location and category of property being valued, value the portfolio annually at the Company’s year end. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The Group’s investment properties were valued as set out in note 8 on page 33. The valuations are prepared either by considering the aggregate of the net annual rent receivable from the properties using a yield which re£ects the risks inherent in the net cash £ow which is then applied to the net annual rents to arrive at the property valuation, or on a sales comparison basis. Any gains or losses arising from a change in fair value are recognised in the Income Statement. When the Group begins to redevelop an existing investment property for continued future use as an investment property, the property remains an investment property, which is measured based on the fair value model. A property interest under an operating lease is classi¢ed and accounted for as an investment property on a property-by-property basis when the Group holds it to earn rentals or for capital Page 26 Daejan Holdings PLC Report & Financial Statements 2007 appreciation or both. Any such property interest under an operating lease classi¢ed as an investment property is carried at fair value. When the Group uses only part of a property it owns and retains the remainder to generate rental income or capital appreciation the extent of the Group’s utilisation is considered to determine the classi¢cation of the property. If the Group’s utilisation is less than ¢ve per cent., this is regarded as immaterial such that the whole property is classi¢ed as an investment property and stated at fair value. Acquisition and disposals are accounted for at the date of completion. It is Group policy to sell, as individual units, £ats in residential blocks which have been held as investment but which are now considered uneconomic to retain. Occasionally there are sales of residential and commercial investment blocks. The resulting surplus based on the excess sale proceeds over valuation is included in the Income Statement and taxation applicable thereto is shown as part of the taxation charge. (j) Other non-current investments Other non-current investments are classi¢ed as available for sale investments and are stated at fair value with any resultant gain or loss recognised through reserves. (k) Investment in equity securities Investments held for trading are classi¢ed as current assets and are stated at fair value, with any resultant gain or loss recognised in the Income Statement. (l) Other receivables Trade and other receivables are stated at their cost less impairment losses. (m) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insigni¢cant risk of changes in value. Bank overdrafts are repayable on demand and form an integral part of the Group’s cash management. Bank overdrafts have therefore been included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows. (n) Dividends Dividends are recognised as a liability in the period in which they are declared. (o) Trade and other payables Trade and other payables are stated at their cost. (p) Net rental income Net rental income comprises rent and service charges receivable less applicable provisions and costs associated with the properties. Rental income from investment property leased out under operating leases is recognised in the Income Statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income. Service charge income is recognised as the services are provided. Net rental income is stated net of VAT. Page 27 Daejan Holdings PLC Report & Financial Statements 2007 Notes to the Consolidated Financial Statements (continued) The cost of repairs is written off to the Income Statement in the year in which the expenditure occurred. Lease payments under operating leases are recognised in the Income Statement on a straight-line basis over the term of the lease. (q) Dividend income Dividend income is recognised in the Income Statement on the date the entity’s right to receive payments is established which in the case of quoted securities is the ex-dividend date. (r) Taxation Corporation tax on the pro¢t or loss for the year comprises current and deferred tax. Corporation tax is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for ¢nancial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. The deferred tax liability relates to potential capital gains on the sale of investment properties. The Group has no intention of making material disposals of its property assets in the foreseeable future and as such no allowance has been made for the effect of indexation. A deferred tax asset is recognised only to the extent that it is probable that future taxable pro¢ts will be available against which the asset can be utilised. (s) Segment reporting A segment is a distinguishable component of the Group that is engaged in providing products or services within a particular business segment or geographic location, which is subject to risks and rewards that are different from those of other segments. (t) Impairment The carrying amounts of the Group’s assets, other than investment property (see accounting policy (i)) and deferred tax assets (see accounting policy (r)), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the Income Statement. Impairment losses recognised in respect of cash generating units are allocated to ¢rst reduce the carrying amount of any goodwill allocated to cash generating units (group of units) and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. When a decline in the fair value of an available-for-sale ¢nancial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had Page 28 Daejan Holdings PLC Report & Financial Statements 2007 been recognised directly in equity is recognised in pro¢t or loss even though the ¢nancial asset has not been derecognised. The amount of the cumulative loss that is recognised in pro¢t or loss is the difference between the acquisition cost and the current fair value, less any impairment loss on that ¢nancial asset previously recognised in pro¢t or loss. (i) Calculation of recoverable amount The recoverable amount of the Group’s investments in held-to-maturity securities and receivables is calculated as the present value of expected future cash £ows, discounted at the original effective interest rate (i.e., the effective interest rate computed at initial recognition of these ¢nancial assets). Receivables with a short duration are not discounted. The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash £ows are discounted to their present value using a pre-tax discount rate that re£ects current market assessments of the time value of money and the risks speci¢c to the asset. For an asset that does not generate largely independent cash in£ows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. (ii) Reversal of impairment An impairment loss in respect of a receivable is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (u) Provisions A provision is recognised in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an out£ow of economic bene¢ts will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash £ows at a pre-tax rate that re£ects current market assessments of the time value of money and, where appropriate, the risks speci¢c to the liability. (v) Interest bearing loans and borrowings Interest bearing loans and borrowings are initially recognised at fair value, being loan proceeds less issue costs. After initial recognition interest bearing loans and borrowings are amortised over their life using the effective rate method. (w) Principal accounting estimates and judgements The Group’s critical accounting policies and estimates are disclosed above. This note highlights the policy critical to the business based on the level of management judgement required in its application, complexity and potential impact on the results and ¢nancial position reported for the Group. The principal area of judgement is the valuation of properties, see note (i). Page 29 Daejan Holdings PLC Report & Financial Statements 2007 Notes to the Consolidated Financial Statements (continued) 2. Segmental Analysis The group operates in one business segment, Investment Property, across two geographical segments, UK & USA. The geographical analysis of property income, pro¢t and total assets and liabilities is as follows:^ UK »000 USA »000 2007 Total »000 UK »000 USA »000 2006 Total »000 72,998 17,178 90,176 77,114 18,575 95,689 Total rental and related income Pro¢t on disposal of investment properties 17,156 13 17,169 4,884 1,289 6,173 Property Income 90,154 17,191 107,345 81,998 19,864 101,862 Pro¢t before ¢nancing charges Financing Charges 190,675 (569) 13,104 (4,894) 203,779 (5,463) 154,248 (5,908) 16,519 (2,200) 170,767 (8,108) Pro¢t before taxation 190,106 8,210 198,316 148,340 14,319 162,659 Total Assets 1,101,795 200,625 1,302,420 962,194 211,582 1,173,776 Total Liabilities Capital Expenditure 318,798 1,856 121,760 1,632 440,558 3,488 304,755 1,597 123,403 5,209 428,158 6,806 3. Property Operating Expenses Porterage, Cleaning and Repairs Insurance Building Services Other Management Costs 2007 »000 25,928 3,552 10,879 9,449 2006 »000 28,944 3,745 11,057 9,234 49,808 52,980 Page 30 Daejan Holdings PLC Report & Financial Statements 2007 4. Administrative Expenses Salaries Directors’ Remuneration Audit and Accountancy Legal and Other Administrative Expenses 2007 »000 4,542 1,260 648 1,180 2006 »000 4,387 1,079 551 3,074 7,630 9,091 Auditors’ Remuneration During the year the Group paid KPMG Audit plc »20,000 (2006 ^ »20,000) for the audit of the Company and »244,000 (2006 ^ »232,000) for the audit of the Group’s subsidiaries. A further »48,000 (2006 ^ »162,000) was paid to KPMG LLP for Taxation Services and nil for all other services (2006 ^ »141,000). The Group jointly employed an average of 140 persons during the year (2006 ^ 145). The aggregate payroll costs were:^ Wages NI Contributions Pensions 2007 »000 3,804 323 415 2006 »000 3,662 305 420 4,542 4,387 Details of Directors’ Remuneration is as set out in the Directors’ Remuneration Report. 5. Net Financing Costs Fair Value Gains on Derivative Financial Instruments Fair Value Gains/(Losses) on Current Investments Interest Receivable Financial Income Interest Payable on Loans Repayable within 5 years Interest Payable on Loans Repayable after 5 years Financial Expenses 2007 »000 2,553 25 1,669 2006 »000 1,298 (10) 2,119 4,247 3,407 (1,358) (8,352) (1,738) (9,777) (9,710) (11,515) (5,463) (8,108) Page 31 Daejan Holdings PLC Report & Financial Statements 2007 Notes to the Consolidated Financial Statements (continued) 6. Taxation Taxation based on the pro¢t for the year of the Company and its subsidiaries:^ UK Corporation Tax at 30% (2006 ^ 30%) Overseas Taxation Prior Years Adjustments Deferred Tax Reconciliation of Tax Expense Pro¢t before Taxation Corporation Tax at the Standard Rate of 30% (2006 ^ 30%) Expenses Disallowed Adjustments in Respect of Previous Period ^ UK Reduced Tax on Overseas Pro¢ts Not Subject to UK Corporation Tax Other movements 2007 »000 13,490 496 13,986 (2,522) 45,023 2006 »000 10,484 462 10,946 79 38,522 56,487 49,547 198,316 162,659 59,495 290 (2,522) ^ (776) 48,798 825 79 (343) 188 56,487 49,547 The Group has a wholly owned subsidiary undertaking J2C PLC, an associate Arch Holdings Limited and an investment in Triteam Limited. They have realised tax losses of »52 million (2006 ^ »52 million). On 27 June 2007 Parliament substantially enacted the 2007 Finance Act containing a change in the rate of UK Corporation Tax from 30% to 28% effective 1 April 2008. In future periods the new rate will be applied to the Group’s deferred tax liabilities and assets, including those held at the balance sheet date. The net impact on the Group’s deferred tax position at 31 March 2007 will be to decrease the net deferred tax liability by »17,523,000. The directors are not aware on any other factors which will affect future tax charges. 7. Earnings per Share Earnings per share is calculated on the earnings, after taxation and minority interests, of »141,536,000 (2006 ^ »112,460,000) and the weighted average shares in issue during the year of 16,295,357 (2006 ^ 16,295,357). Page 32 Daejan Holdings PLC Report & Financial Statements 2007 8. Investment Properties Professional Valuation at 1 April 2006 Disposals New Acquisitions Additions to existing properties Revaluation Foreign Exchange Movements Freehold »000 876,485 (1,812) 834 2,140 110,328 (18,142) Long Leasehold »000 Short Leasehold »000 Total 2007 »000 209,348 (803) 407 84 43,463 (3,766) 15,215 1,101,048 (2,615) 1,264 2,224 153,872 (21,908) ^ 23 ^ 81 ^ Total 2006 »000 955,157 (5,994) 1,597 5,209 130,976 14,103 Professional Valuation at 31 March 2007 969,833 248,733 15,319 1,233,885 1,101,048 Professional valuations of all the Group’s United Kingdom investment properties were carried out at 31 March 2007 by Colliers CRE, Chartered Surveyors. The revalued ¢gures of »1,061,144,000 are based on open market values in accordance with the Practice Statements in the RICS Appraisal and Valuation Manual. The Group’s USA investment properties were also professionally valued at 31 March 2007 by KTR Newmark, Meredith & Grew, Joseph J Blake and Associates, Inc. and Metropolitan Valuation Services Inc., USA General Certi¢ed Appraisers. The revalued ¢gures of »172,741,000 are based on open market values. 9. Investment in Associate Daejan Holdings PLC owns 74.9% (2006 ^ 74.9%) of the ordinary share capital of Arch Holdings Limited, incorporated in the UK, a holding company which owns 100% of the ordinary share capital of Arch (2004) Limited. The Company’s shareholding provides 50% of the voting rights in Arch Holdings Limited and hence in Arch (2004) Limited. Arch (2004) Limited’s principal activity was underwriting, which it ceased on 31 December 2001. The company is fully indemni¢ed by its former parent for all liabilities in excess of the company’s assets and the former parent is also liable for all ongoing operating expenses of the company. Due to this arrangement Daejan Holdings PLC has no obligation to fund any losses of Arch (2004) Limited or any excess of its liabilities over assets. Daejan Holding PLC’s interest in the net assets revenues and pro¢ts of Arch (Holdings) Limited amounted to »nil (2006 ^ »nil). Page 33 Daejan Holdings PLC Report & Financial Statements 2007 Notes to the Consolidated Financial Statements (continued) 10. Deferred Tax Assets and Liabilities Assets »000 Liabilities »000 2007 Net »000 Assets »000 Liabilities »000 2006 Net »000 Investment Property Accelerated Capital Allowances Financial Instruments ^ (257,676) (257,676) (7,010) ^ 1,842 1,842 (7,010) ^ ^ ^ 2,608 (212,167) (212,167) (6,878) 2,608 (6,878) ^ 1,842 (264,686) (262,844) 2,608 (219,045) (216,437) Movement in Deferred Tax:^ Accelerated Investment Capital Financial Property »000 Allowances »000 Instruments »000 Total 2007 »000 Total 2006 »000 Balance 1 April 2006 Recognised in Income (212,167) (45,509) (6,878) (132) 2,608 (216,437) (766) (46,407) (177,915) (38,522) Balance 31 March 2007 (257,676) (7,010) 1,842 (262,844) (216,437) 11. Trade and Other Receivables Rent and Service Charges Other Debtors and Prepayments Mortgages granted repayable within one year Escrow Account 12. Investments held as Current Assets Listed Securities 2007 »000 15,264 12,692 1,047 4,921 2006 »000 14,046 12,083 2,105 3,809 33,924 32,043 2007 »000 226 2006 »000 160 Page 34 Daejan Holdings PLC Report & Financial Statements 2007 13. Cash and Cash Equivalents Bank Balances Call Deposits Cash at Bank Bank Overdrafts 2007 »000 2006 »000 12,804 19,122 27,793 9,507 31,926 (30) 37,300 (15) 31,896 37,285 Included within Bank Balances are tenants’ deposits of »1,067,000 (2006 ^ »933,000) which cannot be used in the ordinary course of business. 14. Capital and Reserves Share Capital Authorised : Ordinary Shares of 25 pence per share Allotted, Called Up and Fully Paid: Ordinary Shares of 25 pence per share Number 2007 »000 2006 »000 18,722,596 4,681 4,681 16,295,357 4,074 4,074 Share Share Retained Capital Premium Earnings »000 »000 »000 Minority Interest »000 Total »000 Total Equity »000 Balance at 1 April 2005 Total Recognised Income and Expense Dividends to Shareholders Balance at 31 March 2006 Balance at 1 April 2006 Total Recognised Income and Expense Dividends to Shareholders Balance at 31 March 2007 4,074 ^ ^ 4,074 4,074 ^ ^ 4,074 555 ^ ^ 629,832 120,767 (9,940) 634,461 120,767 (9,940) 206 652 (528) 634,667 121,419 (10,468) 555 740,659 745,288 330 745,618 555 ^ ^ 740,659 127,031 (10,592) 745,288 127,031 (10,592) 330 293 (488) 745,618 127,324 (11,080) 555 857,098 861,727 135 861,862 Included within retained earnings is a translation reserve of (»16,384,000) (2006 ^ (»1,879,000)). Page 35 Daejan Holdings PLC Report & Financial Statements 2007 Notes to the Consolidated Financial Statements (continued) 15. Trade and Other Payables Rent and Service Charges charged in advance Other Creditors and Accruals Financial Instruments 16. Interest Bearing Loans and Borrowings Non-current Liabilities Mortgage Advances Secured Bank Loans Analysis of creditors falling due after more than one year:^ 2007 »000 13,477 18,113 6,139 37,729 2007 »000 79,690 32,250 2006 »000 14,127 19,422 8,660 42,209 2006 »000 86,907 53,305 111,940 140,212 Amounts Repayable between April 2012 and August 2037 Instalment Mortgages Secured Bank Loans Amounts Repayable Between 1 April 2009 and 31 March 2012 Instalment Mortgages Secured Bank Loans Amounts Repayable Between 1 April 2008 and 31 March 2009 Instalment Mortgages Secured Bank Loans Interest Rate % 2007 »000 2006 »000 4.50^7.64 5.23^8.55 66,713 32,250 78,688 49,306 98,963 127,994 4.375^9.25 5.23^8.55 4.50^5.89 5.23^8.55 11,071 ^ 11,071 1,906 ^ 1,906 4,586 3,000 7,586 3,632 1,000 4,632 Total Amount of Long Term Loans 111,940 140,212 Amount of Long Term Loans secured on certain of the Group’s properties 111,940 140,212 Page 36 Daejan Holdings PLC Report & Financial Statements 2007 Current Liabilities Bank Loans Mortgage Advances 2007 »000 ^ 3,188 3,188 Instalment Mortgages are secured and at ¢xed rates, Bank Loans are at £oating rates. 17. Financial Instruments Financial Assets Cash ^ Sterling denominated Cash ^ USA dollar denominated 2007 »000 20,656 11,270 31,926 2006 »000 7,148 1,300 8,448 2006 »000 21,450 15,850 37,300 All cash balances receive interest at a variable rate with reference to LIBOR for sterling denominated balances and USA Prime rate for USA dollar denominated balances. All cash balances are repayable on demand. The Group has trade and other receivables of »13,400,000 (2006 ^ »8,386,000) and trade and other payables of »7,012,000 (2006 ^ »7,873,000) denominated in USA dollars. Current asset investments are denominated in Sterling. Current and non-current asset investments, trade and other receivables and payables are included in these accounts at amortised cost which is considered to equate to their fair value. Financial Liabilities Liquidity risk ^ pro¢le The maturity pro¢le of the Group’s ¢nancial liabilities is set out below:^ Within one year or less or on demand Between one and two years Between two and ¢ve years After ¢ve years 2007 »000 3,218 1,906 11,071 98,963 2006 »000 8,463 4,632 7,586 127,994 115,158 148,675 The Group has undrawn borrowing facilities of »85 million (2006 ^ »115 million) expiring within one year and »67 million (2006 ^ »29 million) expiring after ¢ve years. Page 37 Daejan Holdings PLC Report & Financial Statements 2007 Notes to the Consolidated Financial Statements (continued) Interest rate risk ^ pro¢le The interest rate pro¢le of the Group’s ¢nancial liabilities at 31 March, after taking account of interest rate instruments taken out by the Group was:^ Floating rate liabilities ^ Sterling denominated Floating rate liabilities ^ USA dollar denominated Fixed rate liabilities ^ Sterling denominated Fixed rate liabilities ^ USA dollar denominated 2007 »000 7,280 ^ 33,650 74,228 2006 »000 18,265 7,149 45,005 78,256 115,158 148,675 The £oating rate ¢nancial liabilities comprise Sterling denominated bank borrowings bearing rates based on LIBOR and USA dollar denominated bank borrowings bearing rates based on USA Prime rate. The Group seeks to minimise the risk or sudden and unexpected rises in ¢nance costs by way of ¢nancial derivative instruments while retaining the ability to take advantage of falling interest rates. Foreign exchange risk The Group holds property and related borrowings in US Dollars. Consequently the Group has a degree of exposure to foreign currency risk. As the Group’s investments in the US are held for the long term and funds are not usually returned to the UK the Group’s policy is not to hedge foreign currency transactions. Instead management monitor exchange rates on a regular basis and elect to transfer funds between the UK and the US only when the rate is favourable to do so. Credit risk Management monitors credit risk on an ongoing basis. Credit evaluations are performed and security deposits taken from new residential and commercial tenants. At the reporting date there were no signi¢cant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each ¢nancial asset, including ¢nancial instruments in the balance sheet. Hedge pro¢le ^ type and maturity of protection The Group has a number of ¢xed rate mortgages. The weighted average interest rate on these mortgages was 6.64% (2006 ^ 6.71%) and the weighted average period for which the borrowing is ¢xed at 31 March 2007 was 10 years (2006 ^ 9 years). The Group has »57.3 million (2006 ^ »59 million) of ¢xed rate swaps which mature between 2010 and 2018 and have a weighted average interest rate of 6.85%. Details of Financial Risk Management are set out in the Directors Report. Fair value of ¢nancial liabilities The table below sets out by category the book values and fair value of the Group’s ¢nancial liabilities. The disclosures exclude short term trade and other receivables and payables as the carrying value is a reasonable approximation of fair value. Page 38 Daejan Holdings PLC Report & Financial Statements 2007 Financial instruments held or issued to ¢nance the Group’s operations Liabilities: Floating rate debt Fixed rate debt Fair value adjustment Notional Principle »000 2006 Fair Value adjustment »000 Fair Value »000 Book Value »000 (25,414) (123,261) ^ ^ (25,414) (131,953) ^ (8,692) (8,692) 2007 Notional Fair Value Book Value »000 Principle »000 adjustment »000 Fair Value »000 Financial instruments held or issued to ¢nance the Group’s operations Liabilities: Floating rate debt Fixed rate debt Fair value adjustment (7,280) (107,878) ^ ^ (7,280) (114,017) ^ (6,139) (6,139) 18. Net Cash from Operating Activities Pro¢t for the Year Adjustments for:^ Valuation Gains on Investment Properties Fair Value Gains Gain on Sale of Investment Properties Interest Income Interest Expense Income Tax Expense Operating Pro¢t Before Changes in Working Capital and Provisions Increase in Debtors (Decrease)/Increase in Creditors (Increase)/Decrease in Investments held as Current Assets Cash Generated from Operations Interest Received Interest Paid Drawings by Minority Interest in USA partnership UK Corporation Tax Paid Overseas Tax Paid 2007 »000 2006 »000 141,829 113,112 (153,872) (2,578) (17,169) (1,669) 9,710 56,487 32,738 (3,347) (657) (18) 28,716 1,673 (9,858) (488) (4,765) (655) (130,976) (1,288) (6,173) (2,119) 11,515 49,547 33,618 (4,772) 1,652 1 30,499 2,119 (11,543) (528) (3,352) (83) Net Cash from Operating Activities 14,623 17,112 Page 39 Daejan Holdings PLC Report & Financial Statements 2007 Notes to the Consolidated Financial Statements (continued) 19. Dividends Final dividend for the year to 31 March 2005 Paid 1 November 2005 @ 36p per share Interim dividend for the year to 31 March 2006 Paid 10 March 2006 @ 25p per share Final dividend for the year to 31 March 2006 Paid 1 November 2006 @ 40p per share Interim dividend for the year to 31 March 2007 Paid 9 March 2007 @ 25p per share Final proposed dividend for the year to 31 March 2007 @ 45p per share »000 5,866 4,074 6,518 4,074 7,333 20. Related party transactions Day-to-day management of the Group’s properties in the United Kingdom is mainly carried out by Highdorn Co. Limited and by Freshwater Property Management Limited. Mr B S E Freshwater and Mr S I Freshwater are Directors of both companies and are also interested in the share capital of Highdorn Co. Limited. Mr B S E Freshwater, Mr S I Freshwater and Mr D Davis are also Directors of the parent company of Freshwater Property Management Limited but have no bene¢cial interest in either company. The net amounts paid for the provision of various management services charged by the Group’s managing agents Highdorn Co. Limited and Freshwater Property Management Limited were »2.9 million (2006 ^ »3.9 million). At 31 March 2007 »4.4 million was due to Highdorn Co. Limited and Freshwater Property Management Ltd. (2006 ^ »3.8 million). The Directors interests in the Company and the principal shareholders are described on pages 10 and 11. The Board considers that the directors are the key management personnel of the Group and their remuneration is disclosed on page 13. 21. Contingent liabilities The Group is from time to time party to legal actions arising in the ordinary course of business. The Directors are advised that there are no current actions which could have a material adverse effect on the ¢nancial position of the Group. Page 40 Daejan Holdings PLC Report & Financial Statements 2007 22. Principal Subsidiary Undertakings Except where indicated the following are direct subsidiaries of the Company. All are wholly owned property investment companies and are included in the Consolidated Financial Statements. Incorporated in the UK and registered in England Astral Estates (London) Limited* Daejan (Norwich) Limited* Bampton Holdings Limited* Bampton (B&B) Limited* Bampton (Redbridge) Limited* Brick¢eld Properties Limited Daejan (NUV) Limited* Daejan Properties Limited Daejan (Reading) Limited* Daejan Retail Properties Limited City and Country Properties Limited* Daejan (Taunton) Limited* City and Country Properties (Birmingham) Limited* Daejan (Warwick) Limited* City and Country Properties (Camberley) Limited* Daejan (Worcester) Limited* City and Country Properties (Midlands) Limited* Hampstead Way Investments Limited Coinpeak Limited Coinsun Limited Daejan (Brighton) Limited* Daejan (Cambridge) Limited Daejan (Cardiff) Limited* Inputstock Limited Inputstripe Limited Lawnstamp Limited Limebridge Co. Limited Pegasus Investment Company Limited* Daejan Commercial Properties Limited Rosebel Holdings Limited Daejan (Dartford) Limited* Seaglen Investments Limited* Daejan Developments Limited St. Leonards Properties Limited Daejan (Durham) Limited* Daejan Enterprises Limited Daejan Estates Limited Daejan (FH 1998) Limited Daejan (FHNV 1998) Limited Daejan (High Wycombe) Limited* Daejan Investments Limited The Bampton Property Group Limited* The Cromlech Property Co. Limited* The Halliard Property Co. Limited* Daejan Investments (Grove Hall) Limited Incorporated in the USA (see note 1) Daejan Investments (Harrow) Limited* Daejan Holdings (US) Inc.* Daejan Investments (Park) Limited Daejan (Kingston) Limited* Daejan (Lauderdale) Limited* Daejan (NY) Limited* Daejan Enterprises Inc.* * Indirectly owned. Note 1 Minority interests arise on investments in a U.S. subsidiary. Page 41 Daejan Holdings PLC Report & Financial Statements 2007 Company Balance Sheet as at 31 March 2007 Notes »000 2007 »000 »000 2006 »000 Fixed Assets Investment in subsidiary undertakings Current Assets Debtors: Due within one year Cash at Bank Creditors: Amounts falling due within one year Net Current Liabilities Total Assets Less Current Liabilities Creditors: Amounts falling due after more than one year Net Assets Capital and Reserves Called up Share Capital Share Premium Account Revaluation Reserve Other Reserves Pro¢t and Loss Account 3 4 5 6 7 8 8 8 8 899,660 698,621 4,924 3,791 8,715 (14,398) 3,812 7,775 11,587 (15,729) (5,683) 893,977 (32,250) 861,727 4,074 555 607,526 893 248,679 861,727 (4,142) 694,479 (37,250) 657,229 4,074 555 418,479 893 233,228 657,229 The Financial Statements on pages 42 to 45 were approved by the Board of Directors on 3 August 2007 and were signed on its behalf by:^ B S E Freshwater D Davis Director Director The notes on pages 43 to 45 form part of these Financial Statements. Page 42 Daejan Holdings PLC Report & Financial Statements 2007 Notes to the Company Financial Statements 1. Accounting Policies The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company’s ¢nancial statements. Basis of Preparation The ¢nancial statements have been prepared under the historical cost convention, modi¢ed to include the revaluation of investments in subsidiaries, and in accordance with applicable UK accounting standards. As permitted by section 230(4) of the Companies Act 1985, a separate pro¢t and loss account dealing with the results of the Company has not been presented. The Company’s pro¢t for the year after taxation is »14,653,000 (2006 ^ »20,242,000). Cash Flow Statement Under FRS 1 Cash Flow Statements the Company is exempt from the requirement to prepare a cash £ow statement on the grounds that it is consolidated within the consolidated ¢nancial statements of the Group. Investments in Subsidiary undertakings The historical cost of shares in subsidiary undertakings is »17,876,000 (2006 ^ »17,876,000). Shares in subsidiary undertakings have been valued by the Directors at 31 March 2007 based on the net asset values of the subsidiary undertakings. Foreign Currencies Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction and gains and losses on translation are included in the pro¢t and loss account. 2. Profit on ordinary activities before taxation The company has no staff other than its Directors and their remuneration is set out on page 13. 3. Investments in subsidiary undertakings At 1 April 2006 Loans Revaluation Effect of Foreign Exchange Differences At 31 March 2007 Shares at Valuation »000 Loans »000 Total »000 436,261 ^ 193,973 (4,926) 262,360 11,992 ^ ^ 698,621 11,992 193,973 (4,926) 625,308 274,352 899,660 Page 43 Daejan Holdings PLC Report & Financial Statements 2007 Notes to the Company Financial Statements (continued) 4. Debtors: Due within one year Escrow account Other debtors and prepayments 5. Creditors: Amounts falling due within one year Bank loans and overdrafts Other creditors and accruals Taxation 6. Creditors: Amounts falling due after more than one year 2007 »000 4,921 3 2006 »000 3,809 3 4,924 3,812 2007 »000 ^ 7,222 7,176 2006 »000 8,149 832 6,748 14,398 15,729 2007 »000 2006 »000 32,250 37,250 Number 2007 »000 2006 »000 18,722,596 4,681 4,681 16,295,357 4,074 4,074 Secured bank loans 7. Share Capital Authorised : Ordinary Shares of 25 pence per share Allotted, called up and fully paid: Ordinary Shares of 25 pence per share Page 44 Daejan Holdings PLC Report & Financial Statements 2007 8. Reserves Share Premium Account: At 1 April 2006 and 31 March 2007 Revaluation Reserve: At 1 April 2006 Foreign exchange movements Fixed asset revaluation At 31 March 2007 Other Non-Distributable Reserves: At 1 April 2006 and 31 March 2007 Pro¢t and Loss Account: At 1 April 2006 Foreign Exchange Movements Retained pro¢t for the Year At 31 March 2007 »000 555 418,479 (4,926) 193,973 607,526 893 233,228 798 14,653 248,679 Page 45 Daejan Holdings PLC Report & Financial Statements 2007 Five-Year Record PREPARED UNDER UK GAAP Turnover Net Rental Income Surplus on Sale of Trading Properties Other Income Gross pro¢t Group Pro¢t before Taxation Taxation Minority Interests Available Surplus Earnings: p. per Share Dividends: p. per Share Gross Assets Equity Shareholders’ Funds Equity Shareholders’ Funds: » per Share (based on balance sheet ¢gures) Represented by: Share Capital Reserves and Retained Pro¢t Equity Shareholders’ Funds PREPARED UNDER IFRS Total Rental and Related Income Property Operating Expenses Net Rental and Related Income Pro¢t on Disposal of Properties Net Valuation Gains Administrative Expenses 2003 »000 2004 »000 84,132 90,007 37,723 6,587 159 37,138 7,002 196 44,469 44,336 30,692 10,057 51 30,442 7,522 1 20,584 22,919 126.3 55.0 140.6 58.0 704,425 469,506 713,782 504,505 28.81 30.96 4,074 465,432 4,074 500,431 469,506 504,505 2005 »000 2006 »000 2007 »000 83,427 (46,760) 95,689 (52,980) 90,176 (49,808) 36,667 7,959 64,379 (7,669) 42,709 6,173 130,976 (9,091) 40,368 17,169 153,872 (7,630) Net Operating Pro¢t Before Financing Costs 101,336 170,767 203,779 Pro¢t before Taxation Income Tax Expense Pro¢t for the Year Earnings per Share Total Assets Equity Shareholders Funds Equity Shareholders Funds » per Share Issued Share Capital Reserves and Retained Earnings Equity Shareholders’ Funds 96,420 (28,911) 162,659 (49,547) 198,316 (56,487) 67,509 113,112 141,829 413.7p 690.1p 868.6p 1,030,119 1,173,776 1,302,420 745,288 861,727 45.74 52.88 634,461 38.94 4,074 630,387 4,074 741,214 4,074 857,653 634,461 745,288 861,727 Page 46 Daejan Holdings PLC Report & Financial Statements 2007 Directors & Advisers Directors B S E Freshwater (Chairman and Managing Director) D Davis (non executive) S I Freshwater Secretary M R M Jenner F.C.I.S. Registered & Head Of¢ce Freshwater House, 158-162 Shaftesbury Avenue, London WC2H 8HR Registered in England No. 305105 Registrars Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA Auditors KPMG Audit Plc, 8 Salisbury Square, London EC4Y 8BB Consulting Accountants Cohen Arnold New Burlington House, 1075 Finchley Road, London NW11 0PJ Principal Bankers Lloyds TSB Bank Plc Barclays Bank PLC The Royal Bank of Scotland Group Stockbrokers Brewin Dolphin Securities Limited, 7 Drumsheugh Gardens, Edinburgh EH3 7QH Page 47 Daejan Holdings PLC Report & Financial Statements 2007 Notice of Meeting Notice is hereby given that the Seventy Second Annual General Meeting of Daejan Holdings PLC will be held at The Methven Room, CBI, 1st Floor, Centre Point, New Oxford Street, London WC1, on Friday 26 October 2007 at 12 noon, for the following purposes:^ Ordinary Business To consider and if thought ¢t, pass the following Ordinary Resolutions : 1. 2. 3. 4. 5. 6. To receive the Financial Statements for the year ended 31 March 2007 together with the Reports of the Directors and the Auditors. (Resolution 1.) To approve the Remuneration Report. (Resolution 2.) To declare a ¢nal dividend. (Resolution 3.) To re-elect Mr D Davis who retires in accordance with the requirements of the Combined Code. (Resolution 4.) To re-elect Mr S I Freshwater who retires by rotation. (Resolution 5.) To re-appoint KPMG Audit Plc as Auditors, and to authorise the Directors to agree their remuneration. (Resolution 6.) By Order of the Board, M R M Jenner Secretary 3 August 2007 A Member entitled to attend and vote may appoint one or more proxies to attend, and on a poll, to vote instead of him. A proxy need not be a Member of the Company. Only those Members registered in the Register of Members of the Company as at 6.00 pm on 24 October 2007 shall be entitled to attend or vote at the aforesaid Annual General Meeting in respect of the number of shares registered in their name at that time. To be valid, forms of proxy must be received by the Company’s Registrars at least 48 hours before the time ¢xed for the Meeting. The recommended ¢nal dividend will, if approved, be paid on 2 November 2007 to Shareholders registered at the close of business on 5 October 2007. No Director has a service contract. Page 48 Printed by greenaways. Design, art direction and photography by Roger Watt