Mountview Estates PLC
Annual Report 2009

Plain-text annual report

MOUNTVIEW ESTATES P.L.C. REPORT AND ACCOUNTS 2009 This document is important and requires your immediate attention. If you are in any doubt as to any aspect of the proposals referred to in this document or the action you should take, you should consult a stockbroker, solicitor, accountant or other appropriate independent professional adviser authorised under the Financial Services and Markets Act 2000. If you have sold or transferred all of your shares in Mountview Estates P.L.C., you should at once forward this document and the accompanying Form of Proxy to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. Notice of the Annual General Meeting of the Company to be held at the offices of Norton Rose LLP, 3 More London Riverside, London SE1 2AQ is set out on pages 54 to 56 of this document. To be valid for use at the Meeting, the enclosed Form of Proxy should be completed and returned, in accordance with the instructions thereon, to Capita Registrars (Proxies), The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible and, in any event, so as to arrive no later than 48 hours before the time of the Meeting. 1 M O U N T V I E W E S T A T E S P. L. C. CONTENTS Page Financial Highlights Chairman’s Statement Review of Operations Directors and Advisers Report of the Directors Statement of Directors’ Responsibilities Corporate Governance Remuneration Report Consolidated Income Statement Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Consolidated Statement of Recognised Income and Expense Notes to the Consolidated Financial Statements Independent Auditors’ Report to the Members of Mountview Estates P.L.C. Mountview Estates P.L.C. – parent company balance sheet prepared under UK GAAP Notes to the parent company balance sheet prepared under UK GAAP Independent Auditors’ Report to the Members of Mountview Estates P.L.C. (Parent company prepared under UK GAAP) Table of Comparative Figures Notice of Meeting Shareholders’ Information 2 3 5 8 9 13 14 17 19 20 21 22 23 24 42 44 45 52 53 54 57 2 M O U N T V I E W E S T A T E S P. L. C. FINANCIAL HIGHLIGHTS Turnover (millions) Gross Profit (millions) Profit Before Tax (millions) Profit Before Tax excluding investment properties revaluation (millions) Equity Holders’ Funds (millions) Earnings per share (pence) Net assets per share Dividend per share (pence) 2009 £ 53.6 25.9 13.1 16.3 187.5 241.0 48.1 155 2008 £ 54.3 36.0 29.5 27.7 187.7 530.1 48.2 155 (Decrease) % (1.2) (28.0) (55.6) (41.2) (0.1) (54.5) (0.2) – 3 M O U N T V I E W E S T A T E S P. L. C. CHAIRMAN’S STATEMENT First the good news, this company is still making profits. Next more good news, this company is proposing to maintain its dividends at the record levels reached last year. At the Annual General Meeting on 12 August 2009, shareholder approval will be sought for a final dividend of 105 pence per share. In the worst financial climate in living memory, I consider the achievements highlighted in the first paragraph to be true success and I congratulate all my staff and colleagues on their hard work which has happily produced this level of success. Because of their continuing diligence I am confident that I will again be able to report profits in twelve months’ time although we may yet see an even more difficult economic climate. The financial highlights opposite show that despite the various difficulties in the marketplace we have very nearly maintained the same level of turnover as in the previous year. This has been achieved by selling about twenty five per cent more properties which explains why the cost of sales has risen but nevertheless, in such difficult circumstances, maintaining turnover is a considerable achievement. In the fifteen months up to the end of June 2008 we had made very substantial purchases and our borrowings had reached their highest level ever. In normal circumstances it would be necessary to place an emphasis on the repayment of those borrowings but in present circumstances it is even more vital. Although interest rates are presently extraordinarily low, in twelve months’ time I believe they will be significantly higher and the reduction of our borrowings in the meantime will be prudent. During the twelve months under review our long term borrowings have decreased by £7 million and have continued to decrease since 31 March 2009 and must continue to decrease in the coming months. During recent months we have been introducing a new computer system from which we are already gaining some benefits and this has helped to reduce the administrative costs of the company. As we continue to integrate the new systems and take advantage of their full capabilities it should be possible to contain costs further. Unfortunately a company such as this is ever further burdened by the increasing bureaucracy which is inflicted upon us and this may sometimes obscure the greater efficiency with which the core activities are being administered. At the Annual General Meeting on 12 August 2009 John Hall will be retiring from the position of Non-Executive Director which he has occupied with distinction since December 2000. He was Chief Executive of Brewin Dolphin Holdings PLC from 1987 to September 2007 and we have been fortunate to have the skill and advice of such an experienced man. He has seen the company grow quite significantly and we are grateful for all his contributions during this time. As at 1 January 2009 we welcomed James Laing to the Board as a Non-Executive Director and he will stand for election at the Annual General Meeting on 12 August 2009. He has been a Senior Partner at Strutt & Parker for many years and as a Chartered Surveyor I am confident that he will bring a wealth of relevant experience to the Board. CHAIRMAN’S STATEMENT The company continues on a sound financial basis with tight internal controls and although we may yet experience greater economic perils I am confident that in the fullness of time we will reap the benefits of the purchases made in recent years. My staff and colleagues are ready for the challenges ahead and I look forward to the day when their efforts will again produce greater profits and when they can enjoy the financial benefits of those profits and dividends can once again be increased. The final dividend of 105 pence per share in respect of the year ended 31 March 2009 recommended by your Board is payable on 17 August 2009 to shareholders on the Register of Members as at 17 July 2009. This will make a total dividend for the year ended 31 March 2009 of 155 pence per share which is more than one and a half times covered by the earnings per share. 4 M O U N T V I E W E S T A T E S P. L. C. D.M. SINCLAIR Chairman 16 July 2009 REVIEW OF OPERATIONS 1. RESIDENTIAL PROPERTIES The Group’s business model is simple. We are a property trading company buying tenanted properties at a discount to notional vacant possession value and selling them when they become vacant. Categories of Property held as trading stock The Group trades in the following categories: Regulated tenanted (residential) units Ground rent units Life tenancy units A unit is a property, however large or small, whether freehold or leasehold, which is held subject to one tenancy. Analysis of the Group Trading portfolio by type as at 31 March 2009 Regulated Tenancies Ground Rents Life Tenancies No of units 2,411 1,076 377 Cost £m 242.8 1.3 24.7 Analysis of the Group Trading portfolio at the lower of cost and estimated net realisable value by geographical location as at 31 March 2009 5 M O U N T V I E W E S T A T E S P. L. C. Regulated Ground Rents Life Tenancies £m £m £m London (North) London (South) Kent, Surrey, Sussex, Dorset Hampshire, I.O.W Herts, Essex, Beds, Bucks, Oxon, Camb, Norfolk, Suffolk, Berks, Middx, Northants Remainder of England and Wales 62.4 88.4 24.2 42.1 25.8 0.6 0.6 0.04 0.1 0.03 0.2 0.7 6.0 7.1 10.7 Portfolio % 23.5 33.3 11.3 18.3 13.6 The Company’s modus operandi is to buy tenanted residential property and sell it when it becomes vacant. Regulated investments that are characterised by early possession with rental returns below market value and high margin on sale are becoming increasingly short in supply. Life tenancy stock has nominal rental income, is bought at a greater discount to vacant possession value and has a higher margin on sale. In addition, the maintenance of the property is usually the responsibility of the life tenant. 6 M O U N T V I E W E S T A T E S P. L. C. REVIEW OF OPERATIONS 1. RESIDENTIAL PROPERTIES (continued) During the financial year the Group has sold the following number of units: Sales Price (£) 2 million+ 500,000-1 million below 500,000 Analysis of acquisitions Regulated tenancies Life tenancies Ground rents (or created) No of units Year ended 31.03.2009 1 6 237 244 No of units 61 2 59 122 Location London London London and other Year ended 31.03.2009 Costs £’000 15,147 277 272 15,696 The above analysis does not include legal and commission expenses directly related to the acquisition of properties nor any repairs of a capital nature. “Magdalen Park Estate” – Portfolio The Group residential trading properties are carried in the balance sheet at the lower of cost and net realisable value. In assessing the net realisable value the Group compares the net sales proceeds which the Group expects on sale of property with the vacant possession value. A net realisable value provision of £3 million has been made at 30 September 2008 against this Portfolio to write down properties expected to be sold ultimately at vacant possession value. The Directors are of the opinion that the property market as at 31 March 2009 has improved to an extent that in their opinion it is not necessary to make further write downs in respect of this estate. We have significantly reduced acquisitions in the latter part of the year. Based on sales made during the financial year, the Directors do not consider that any stock write down is necessary in respect of the other properties. Rental Income The Company’s rental income is derived from five different sources: • Regulated tenancies • Assured tenancies • Assured shorthold tenancies • Life tenancies • Ground rents We continue to target those properties where the rent is capped such that expenditure on improvements and the provision of missing amenities leads to substantial increases in rental income. REVIEW OF OPERATIONS 2. INVESTMENT PROPERTIES The analysis of the investment portfolio as at 31 March 2009 is as follows: Louise Goodwin Limited A.L.G. Properties Limited 53 units 11 units All the properties are located in Belsize Park, London NW3. Mountview Estates P.L.C. purchased the investment companies in 1999. They are the only significant departures from the Company’s normal activities. During the financial year, we disposed of one unit for £1.05 million. Outlook Where units become vacant we are prepared to refurbish the properties and sell them by private treaty to discerning purchasers who actively seek new homes in this prestigious area. Valuation The properties comprised within the investment portfolio have been revalued externally for the purpose of these accounts. The value attributed to each individual property reflects the change in its condition where appropriate and the adjustment resulting from changes in market circumstances. Details of the valuation of the investment portfolio are disclosed on page 35. 7 M O U N T V I E W E S T A T E S P. L. C. 8 M O U N T V I E W E S T A T E S P. L. C. DIRECTORS AND ADVISERS Executive Directors D.M. Sinclair FCA (Chairman) Joined the Company as Company Secretary in 1977, became a Director on 1 January 1982 and succeeded his late father as Chairman on 5 June 1990. Member of the Institute of Chartered Accountants in England and Wales. K. Langrish-Smith Joined the Company in 1974 and became a Director on 1 January 1982. Miss J.L. Murphy Joined the Company in 1990 as an assistant to the late Frank Sinclair and became a Director on 1 September 1995. Mrs. M.M. Bray FCCA Joined the Company in 1996 and became Company Secretary. Became a Director on 1 April 2004. Member of the Association of Chartered Certified Accountants. Non-Executive Directors J.P. Hall Joined the Company as a Non-Executive Director on 1 December 2000. He is Chairman of APCIMS and a member of the Takeover Panel. He was the Chief Executive of Brewin Dolphin Holdings PLC from 1987 to September 2007. Mr. J.P. Hall is to retire from the Board at the Annual General Meeting 2009. J.B. Fulton FCA Joined the Company as a Non-Executive Director on 1 January 2007. Member of the Institute of Chartered Accountants in England and Wales. He has held senior financial roles in multinational companies. J.A.N. Laing FRICS Joined the Company as a Non-Executive Director on 1 January 2009. Member of the Royal Institution of Chartered Surveyors. Retired as a partner from Strutt and Parker Property Consultants and Estate Agents in April 2009 but remains as a consultant. Secretary and Registered Office Mrs. M.M. Bray FCCA Mountview House, 151 High Street, Southgate, London N14 6EW Bankers HSBC Bank Plc, 60 Queen Victoria Street, London EC4N 4TR Barclays Bank Plc, One Churchill Place, London E14 5HP Auditors BSG Valentine Lynton House, 7-12 Tavistock Square, London WC1 H9B Solicitors Norton Rose LLP 3 More London Riverside, London SE1 2AQ Registrars and Transfer Office Capita Registrars The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU Brokers Brewin Dolphin Securities Ltd 12 Smithfield Street, London EC1A 9BD 9 M O U N T V I E W E S T A T E S P. L. C. REPORT OF THE DIRECTORS The Directors have pleasure in presenting their Seventy-Second Annual Report to the Members together with the Financial Statements for the year ended 31 March 2009. 1. RESULTS AND DIVIDENDS The Results for the year are set out in the Income Statement on page 19. The Directors recommend the payment of a final dividend of 105 pence per share. The dividend will be paid on 17 August 2009 subject to approval at the A.G.M. on 12 August 2009 to Shareholders on the register at the close of business on 17 July 2009. 2. ACTIVITIES The principal activities of the Company and its Subsidiary undertakings are as follows: Parent Company Mountview Estates P.L.C. Property Dealing Subsidiary undertakings (wholly owned) Hurstway Investment Company Limited Louise Goodwin Limited A.L.G. Properties Limited Property Dealing Property Investment Property Investment 3. REVIEW OF BUSINESS AND PROSPECTS Details of the Group’s performance during the year and expected future developments are contained in the Chairman’s Statement and the Review of Operations on pages 5 to 7. In addition the Group has established the following Financial and Internal Performance Indicators: Turnover Profit before tax excluding investment properties revaluations Earning per share Net assets per share Financial Key Performance Indicators 2009 growth % (1.2) (41.2) (54.5) (0.2) 2008 growth % (20.3) (23.0) (41.1) 8.8 The Directors consider that there are no significant non-financial indicators in existence. Administrative expenses as percentage of revenue Administrative expenses per member of staff Profit before tax per member of staff Internal Performance Measures 2009 £’000 7.0% 140 484 2008 £’000 7.8% 150 1,054 In the current economic climate, the impact of the credit crunch has caused a slowdown in the rate of house price growth and a strong decline in levels of mortgage approvals. 10 REPORT OF THE DIRECTORS M O U N T V I E W E S T A T E S P. L. C. 3. REVIEW OF BUSINESS AND PROSPECTS (continued) Risk review The key risks to the Group’s business are: (cid:1) long-term downturn in the UK housing market Our residential portfolio consists mainly of low value units spread over high demand areas of London and the South East. The majority of our properties are of relatively low value, which are still affordable even during a market slowdown. Our investment portfolio is located in the highly desirable area of Belsize Park. (cid:1) significant fluctuations in interest rates The Company has entered into an Interest Rate Swap Agreement, for a period of 5 years in 2008 on its £40 million loan in order to reduce its exposure to interest rate fluctuations. (cid:1) a lack of availability of finance We are reducing our still modest level of gearing and improving liquidity by cutting back on purchases and repaying loans. (cid:1) long term worldwide recession The shrinking of UK economy combined with worsening economic outlook and higher unemployment will affect the prices obtained from the sale of properties. 4. ROTATION OF DIRECTORS In accordance with the Company’s Articles of Association, Mrs. M.M. Bray and Mr. J.B. Fulton retire from the Board by rotation and being eligible, offer themselves for re-appointment. Resolutions for their re-appointment will be proposed at the Annual General Meeting. 5. SHARE CAPITAL The authorised share capital of the Company as at 31 March 2009 was £250,000 divided into 5,000,000 Ordinary Shares of 5 pence of which 3,899,014 were in issue. The rights and obligations attaching to the Company’s shares, as well as the powers of the Company’s directors, are set out in the Company’s Articles of Association, a copy of which can be viewed on the Company’s website at www.mountviewplc.co.uk The Company’s Articles of Association can only be amended by special resolution of the shareholders. 6. DIRECTORS’ INTERESTS IN SHARE CAPITAL The number of Ordinary Shares in the Company in which the Directors and their families were interested is as follows: Mr. D.M. Sinclair including the following holding of Sinclair Estates Limited – 54,165 beneficial Mr. D.M. Sinclair is a Director of the above company Mr. K. Langrish-Smith Miss J.L. Murphy Mrs. M.M. Bray Mr. J.P. Hall All the above interests are beneficial except where otherwise stated. 31 March 2009 1 April 2008 Ordinary Shares of 5p each 535,883 534,883 304,225 227,250 1,500 11,477 2,000 1,500 10,187 2,000 REPORT OF THE DIRECTORS 11 M O U N T V I E W E S T A T E S P. L. C. There have been the following changes in the interests of Directors in the share capital of the Company between 31 March 2009 and 12 July 2009: Mr. K. Langrish-Smith has increased his beneficial holdings by 400 Ordinary Shares on 6 April 2009. Mrs. E. Langrish-Smith (wife of the director) has increased her beneficial shareholdings by 375 Ordinary Shares on 6 April 2009. 7. NOTIFIABLE INTERESTS IN SHARE CAPITAL As at 12 July 2009, the following disclosures of major holdings of voting rights have been made (and have not been amended or withdrawn) to the Company pursuant to the requirements of Disclosure and Transparency Rule 5: Ordinary Shares of 5p each % of Issued Share Capital Mr. Phillip Trevor Wheater FDSGS Acct and Mrs. Daphne Sinclair and Mr. Alistair James Sinclair Mr. Richard Michael Moyse and Mr. Stephen Robin Oldfield Trustees of W.D.I. Sinclair Grandchildren Settlement Estate of Mrs. Doris Sinclair Mrs. M.A. Murphy Mrs. A. Williams Mrs. S. Simpkins 633,780 179,400 118,100 596,745 145,450 138,750 16.25 4.60 3.03 15.31 3.73 3.56 8. ENVIRONMENTAL MATTERS AND SOCIAL/COMMUNITY ISSUES Given the size of the Company and the nature of its business as a property trading company, the Company does not currently have any policies in place in relation to environmental, social or community issues. 9. EMPLOYEES The Company provides regular training for its employees relating to the software used in the day to day running of the business, in order to ensure the ongoing development of each employee’s skills and knowledge. 10. SIGNIFICANT AGREEMENTS Certain banking agreements to which the Company is a party (described in Note 19 to the Consolidated Financial Statements) alter or terminate upon a change of control of the Company following a takeover bid. There are no other significant agreements to which the Company is a party that take effect, alter or terminate upon a change of control of the Company following a takeover bid. There are no contractual or other agreements or arrangements in place between the Company and third parties which, in the opinion of the Directors, are essential to the business of the Company. 11. DIRECTORS’ INTERESTS IN CONTRACTS There was no Contract in existence during or at the end of the financial year in which a Director of the Company is, or was, materially interested, and which is or was significant in relation to the Company’s business. 12 REPORT OF THE DIRECTORS M O U N T V I E W E S T A T E S P. L. C. 12. DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE The Company purchases liability insurance covering the Directors and Officers of the Company and its Subsidiary undertakings. 13. POLICY ON THE PAYMENT OF CREDITORS The Company’s policy in respect of all its suppliers is to settle the terms of payment when agreeing the terms of each transaction. The Company also ensures that the suppliers are made aware of the terms of payment and abide by them. Trade creditors existing at 31 March 2009 relating to purchases of property stock generally complete 28 days after exchange of contracts. Other trade creditors were settled, on average, 21 days after incurring the liability (2008: 14 days). 14. REMUNERATION POLICY The Company’s Shareholders will be asked to approve the Remuneration Report contained in the Annual Report and Accounts at the Annual General Meeting to be held on 12 August 2009 and a resolution is drafted accordingly. 15. CORPORATE GOVERNANCE The Directors’ statement on corporate governance is set out on pages 14 to 16. 16. HEALTH AND SAFETY The Group is committed to achieving a high standard of health and safety. The Group regularly reviews its health and safety policies and practices to ensure that appropriate standards are maintained. 17. DONATIONS During the year the Group made charitable donations of £19,065 (2008: £27,343). There were no political donations (2008: £nil). 18. GOING CONCERN BASIS The Directors continue to adopt the going concern basis in preparing the accounts. They are of the opinion that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. 19. AUDITORS Messrs. BSG Valentine have indicated their willingness to continue in office and a resolution for the reappointment of BSG Valentine as auditors for the ensuing year will be proposed at the Annual General Meeting. By Order of the Board M.M. BRAY Secretary Mountview House 151 High Street Southgate London N14 6EW 16 July 2009 STATEMENT OF DIRECTORS’ RESPONSIBILITIES 13 M O U N T V I E W E S T A T E S P. L. C. The Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with the applicable law and International Financial Reporting Standards as adopted by the European Union. In addition the Directors are responsible for preparing the Parent Company accounts in accordance with UK GAAP. Company law requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss for that period. In preparing these financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; (cid:1) (cid:1) make judgements and estimates that are reasonable and prudent; (cid:1) (cid:1) state whether Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group 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 the Group and to 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 the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. In so far as the Directors are aware: (cid:1) (cid:1) there is no relevant audit information of which the Company’s 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. The Directors confirm to the best of their knowledge: (cid:1) (cid:1) the consolidated financial statements, which have been prepared in accordance with United Kingdom law and the International Financial Reporting Standards (IFRSs) and in accordance with rule 4.1.12(3)(a) of the Disclosure and Transparency Rules, have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities and financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole; and the Management Report represented by the Directors’ Report has been prepared in accordance with rule 4.1.12(3)(b) of the Disclosure and Transparency Rules, and includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties the Group faces. By Order of the Board M.M. BRAY Secretary Mountview House 151 High Street Southgate London N14 6EW 16 July 2009 14 CORPORATE GOVERNANCE M O U N T V I E W E S T A T E S P. L. C. The Financial Reporting Council (FRC) published a new version of the Combined Code in June 2006 following publication of the Higgs report earlier that year. This is applicable to the Company for the reporting year commencing 1 April 2008. The Board is satisfied that as a “small company” outside the FTSE 350 it would currently meet most of the requirements. Mountview Estates P.L.C. is a family controlled Company. There is a concert party in existence, of which members of the Sinclair family, Sinclair Estates Limited, Viewthorpe (Holdings) Limited, directors of the Company and various long standing supporters of the Company are currently members. As a result of a reorganisation of certain of the Sinclair family’s interests which took place in April 2005, shares in the Company which had previously been held by certain former members of the concert party are no longer being treated as held by the concert party. Due to this reorganisation and the addition also of certain other shareholdings, the net aggregate shareholdings of the concert party now amount to approximately 53 percent of the issued share capital of the company. Throughout the year ended 31 March 2009 the Company has been in compliance with the Code provisions set out in Section 1 of the June 2006 FRC Combined Code on Corporate Governance with certain exceptions noted below: (cid:1) (cid:1) A2.1 requires justification for combining the posts of Chairman and Chief Executive Officer. There is no formal division of responsibilities but neither the Chairman nor any other member of the Board has unfettered powers of decision. Given the size of the Company, there is no formal nomination of a senior independent director. A3.2 The majority of non-executive Directors should be independent of management and free from any business or other relationship, which could materially interfere with the exercise of their independent judgement. Mr. J.P. Hall, a non-executive Director and a former Chief Executive of Brewin Dolphin Holdings PLC is to retire from the Board at this year’s AGM. In view of this we continue to believe that all our non-executive Directors are independent. The Board As at the year ended 31 March 2009 the Board comprised the Chairman, Mr. D.M. Sinclair, three executive Directors and three non-executive Directors. All Directors have access to independent professional advice at the expense of the Company and to the services of the Company Secretary who is responsible to the Board for ensuring the correct procedures are followed. In addition to ad-hoc meetings arranged to discuss particular transactions and events, the full Board meets at least four times a year and retains full and effective control over the Group’s activities. Meetings Full Board Audit Committee Remuneration Committee Nomination Committee Mr. D.M. Mr. K. Miss J.L. Mrs. M.M. Mr. J.P. Mr. J.B. Mr. J.A.N. Bray Sinclair Langrish- Murphy Smith Fulton Laing Hall 4 2 1 1 4 – – 1 4 – – 1 4 2 – 1 4 3 2 1 4 3 2 1 2 3 2 – Day to day management is delegated to the Executive Board which focuses on major transactions, business growth, strategy, cash management and control. There is regular communication with the Non-Executive Directors in order to keep them informed on the Company’s operations. CORPORATE GOVERNANCE 15 M O U N T V I E W E S T A T E S P. L. C. All members of the Board are subject to the re-election provisions of the Articles which require them to offer themselves for re-election at least once every three years and, on appointment, at the first Annual General Meeting (AGM) after appointment. Details of those directors offering themselves for re-appointment are set out in the Directors’ Report on page 10. Going concern The Board is confident that the Company have adequate resources to continue in existence for the foreseeable future. For this reason the Group continue to adopt the going concern basis in preparing the accounts. Directors – performance evaluation The Board is of the opinion that the Directors’ performance is continuously evaluated throughout the year. Any areas of concern are addressed during our regular management or Board meetings. Each of the Directors is responsible for his/her self-appraisal process in respect of their individual performance during the year. This is in turn discussed with the members of the Remuneration Committee who also review the performance of the Board as a whole. Remuneration Committee The Remuneration Committee comprises Mr. J. Hall (non-executive Director), Mr. J.B. Fulton (non- executive Director) and Mr. J.A.N. Laing (non-executive Director). The Committee, which is chaired by Mr. J. Hall, monitors, reviews and makes recommendations to the Board on all elements of the remuneration of the executive Directors. The Committee meets twice a year. Mr D.M. Sinclair, the Chairman of the Company, is invited by the Remuneration Committee members to attend one meeting or part of any meeting as and when appropriate. No Director is involved in deciding his/her own remuneration and the remuneration of the non- executive Directors is determined by the full Board. The report of Directors’ Remuneration is set out on pages 17 to 18. Nomination Committee The Nomination Committee is responsible for the selection and approval of appointments to the Board. Given the small size of the Company the Chairman of the Nomination Committee is Mr. D.M. Sinclair and all the Directors of the Company are members. There was one meeting during the year. Audit Committee The Audit Committee comprises Mr. J. Hall (non-executive Director), Mr. J.B. Fulton (non-executive Director) and Mr. J.A.N. Laing (non-executive Director). The Committee, which is chaired by Mr. J.B. Fulton, has clear terms of reference agreed by the Board and is responsible for ensuring that the Group’s system of financial control is adequate. It also keeps under review the cost effectiveness of the audit and the independence and objectivity of the auditors. This includes the approval of any non-audit service fees above a relatively normal level. The Committee is satisfied that the taxation services provided by BSG Valentine is overseen by partners and staff who are excluded from the audit procedure. Mr D.M. Sinclair and Mrs M.M. Bray attended two of the meetings held by the Audit Committee. The Committee meets three times a year and one of these meetings is with the external auditors without an executive director in attendance. The Chairman of the Audit Committee reports to the Board on matters discussed with external auditors. The Audit Committee monitors the integrity of the financial statements and reviews the interim and annual financial statements before submission to the Board. Further the Committee seeks to ensure that the external auditors are independent. 16 CORPORATE GOVERNANCE M O U N T V I E W E S T A T E S P. L. C. Mr. J.B. Fulton is a member of Institute of Chartered Accountants in England and Wales. The Audit Committee has satisfied itself that the Company complies with the principles set out in the Smith Report. Communications with Shareholders The Company communicates with its shareholders by way of the Annual Reports and Accounts and half yearly interim reports. Investors may use the Company’s Annual General Meeting to communicate with the Board. The Board including the non-executive Directors is available throughout the year to listen to the views of Shareholders. Risk Management Details of this are included in Note 3 in the Report of the Directors on page 10. Internal Financial Control An ongoing process for identifying, evaluating and managing the significant risks faced by the Group was in place throughout the period from 1 April 2008 to the date of approval of the Annual Report and Accounts. This process is regularly reviewed by the Board and accords with the Internal Control Guidance for Directors in the Combined Code. The Directors are responsible for establishing and maintaining the Group’s system of internal financial control. Internal control systems in any group are designed to meet the particular needs of that group and the risks to which it is exposed, and by their nature can provide reasonable but not absolute protection against material misstatement or loss. Due to its size, the Group does not have an internal audit function. The key procedures which the Directors have established with a view to providing effective internal financial control are as follows: Identification of Business Risks – The Board is responsible for identifying the major business risks faced by the Group, such as fluctuations in interest rates, inflation rates, fluctuations in consumer spending, employment levels and for determining the appropriate course of action to manage those risks. Management Structure – The Board has overall responsibility for the Group and there is a formal schedule of matters specifically reserved for decision by the Board. Corporate Accounting – Responsibility levels are communicated throughout the Group as part of the corporate accounting procedures. These procedures set out authorisation levels, segregation of duties and other control procedures. Quality and Integrity of Personnel – The integrity and competence of personnel is ensured through high recruitment standards and close Board supervision. Monitoring – Internal financial control procedures are reviewed by the Board as a whole. These reviews embrace the provision of regular information to management, and monitoring of performance and key performance indicators. REMUNERATION REPORT 17 M O U N T V I E W E S T A T E S P. L. C. UNAUDITED INFORMATION Remuneration Committee The Remuneration Committee, as constituted by the Board is responsible for the determination of the remuneration of the executive Directors of Mountview Estates P.L.C. The Board as a whole considers the remuneration of the non-executive Directors. External advisors were not used in the year under review. Mr J.A.N. Laing (non-Executive Director) joined the Remuneration Committee as from 1 January 2009. Remuneration Policy The Group operates in a competitive environment. In forming its policy on remuneration the Group aims to set reward packages which enable the Group to attract, retain and motivate executives with the appropriate skills and experience. The Remuneration Committee has developed the following specific remuneration package consisting of two elements. (cid:1) (cid:1) Basic salary and benefits – the fixed part of the package Annual discretionary bonuses Basic salaries and benefits in kind for each executive Director are reviewed on an annual basis by the Remuneration Committee, which takes into account individual responsibilities, experience and performance as well as competitive market practice. Benefits include the provision of a car and private medical health insurance. Directors have the choice of the use of a company car or a cash alternative. The Group does not operate any share option scheme. Bonuses are recommended by the Committee and approved by the Board having regard to the performance of the Group and the executive Directors during the year. In assessing corporate performance the Remuneration Committee takes into account the Group’s corporate performance within the property sector. Non-Executive Directors Each non-executive Director receives fees of £24,000 per annum. The non-executive Directors are not entitled to bonuses, benefits or pension contributions. Pensions The Company contributes from 1 July 2008 5% of the total of the executive Directors’ gross annual salaries and bonuses to a Stakeholder Pension Scheme. This scheme is available to all employees of the Company. Performance Graph The graph below is prepared in accordance with The Directors’ Remuneration Report Regulations 2002 and illustrates the Company’s performance compared to a broad equity market index over the past five years. As the Company is a constituent of the FTSE All-Share Real Estate Index, that index is considered the most appropriate form of broad equity market index against which the Company’s performance should be plotted. Performance is measured by Total Shareholder Return as represented by share price performance and dividend. Total Shareholder Return £ 240 220 200 180 160 140 120 100 80 60 40 FTSE W UK Real Estate £ – Total Return Index Mountview Estates – Total Return Index 2004 2005 2006 2007 2008 2009 31 March Source: Datastream The graph looks at the value of £100 invested in Mountview Estates P.L.C. on 31 March each year compared to the value of £100 invested in the FTSE All-Share Real Estate Index. 18 REMUNERATION REPORT M O U N T V I E W E S T A T E S P. L. C. AUDITED INFORMATION 2009 Executive D.M. Sinclair K. Langrish-Smith Miss J.L. Murphy Mrs M.M. Bray Non-Executive J.P. Hall J.B. Fulton J.A.N. Laing 2008 Executive D.M. Sinclair K. Langrish-Smith Miss J.L. Murphy Mrs M.M. Bray Non-Executive J.P. Hall J.B. Fulton Salary £000 Bonus £000 Benefits in kind £000 Pensions Contri- butions £000 250 150 180 200 24 24 6 834 200 65 120 135 – – – 520 39 24 13 – – – – 76 21 10 14 15 – – – 60 Salary £000 Bonus £000 Benefits in kind £000 Pensions Contri- butions £000 243 148 176 191 24 24 806 240 80 150 165 – – 635 33 15 15 – – – 63 14 7 10 11 – – 42 Total £000 510 249 327 350 24 24 6 1,490 Total £000 530 250 351 367 24 24 1,546 Service Contracts Each of the executive Directors who served during the year has a service agreement, which can be terminated on one year’s notice by either party. Approval An Ordinary Resolution to approve this report will be proposed at the Annual General Meeting of the Company. This report was approved by the Board on 16 July 2009. John Hall Chairman of the Remuneration Committee CONSOLIDATED INCOME STATEMENT 19 M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 Year ended 31.03.2009 £000 Notes Year ended 31.03.2008 £000 REVENUE Cost of sales GROSS PROFIT Administrative Expenses Operating profit before changes in fair value of investment properties (Decrease)/Increase in fair value of investments PROFIT FROM OPERATIONS Finance costs Income from investments PROFIT BEFORE TAXATION Taxation – current Taxation – deferred Taxation PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS 4 4 8 9 10 Basic and diluted earnings per share (pence) 12 53,599 (27,657) 25,942 (3,767) 22,175 (3,210) 18,965 (5,906) 3 13,062 (4,864) 1,191 (3,673) 9,389 241.0 54,338 (18,347) 35,991 (4,207) 31,784 1,784 33,568 (4,043) 4 29,529 (8,358) (503) (8,861) 20,668 530.1 The notes on pages 24-41 are an integral part of these consolidated financial statements. 20 CONSOLIDATED BALANCE SHEET M O U N T V I E W E S T A T E S P. L. C. as at 31 March 2009 ASSETS NON-CURRENT ASSETS Property, plant and equipment Investment properties CURRENT ASSETS Inventories of trading properties Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Capital and reserves attributable to equity holders of the company Share capital Capital redemption reserve Capital reserve Other reserves Cash flow hedge reserve Retained earnings NON-CURRENT LIABILITIES Long-term borrowings Deferred tax CURRENT LIABILITIES Bank overdrafts and loans Trade and other payables Current tax payable Derivative financial instruments TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES Approved by the Board on 16 July 2009. As at 31.03.2009 £000 Notes As at 31.03.2008 £000 13 14 16 17 22 23 23 23 21 24 19 20 19 18 21 2,567 32,195 34,762 268,806 660 840 270,306 305,068 195 55 25 56 (3,614) 190,773 187,490 88,000 8,506 96,506 13,026 2,055 2,377 3,614 21,072 117,578 305,068 2,719 36,203 38,922 271,361 1,118 802 273,281 312,203 195 55 25 56 – 187,426 187,757 95,000 9,697 104,697 12,685 3,081 3,983 – 19,749 124,446 312,203 D. M. SINCLAIR Chairman K. LANGRISH-SMITH Director The notes on pages 24-41 are an integral part of these consolidated financial statements. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 21 for the year ended 31 March 2009 Share capital £000 Capital reserve £000 Notes Capital redemp- tion reserve £000 Cash flow hedge reserve £000 Other Retained earnings £000 reserves £000 Total £000 Changes in equity for year ended 31 March 2008 Balance as at 1 April 2007 Profit for the year Dividends 11 195 25 55 – 56 172,606 172,937 20,668 20,668 (5,848) (5,848) M O U N T V I E W E S T A T E S P. L. C. 24 195 25 55 – 56 187,426 187,757 Balance at 31 March 2008 Changes in equity for year ended 31 March 2009 Balance as at 1 April 2008 195 25 55 – 56 187,426 187,757 Profit for the year Cash flow hedge Dividends Balance at 31 March 2009 21 11 9,389 9,389 (3,614) (3,614) (6,042) (6,042) 24 195 25 55 (3,614) 56 190,773 187,490 The fair value movements on those derivative financial investments qualifying for hedge accounting under IAS39 are taken to this reserve. The notes on pages 24-41 are an integral part of these consolidated financial statements. 22 CONSOLIDATED CASH FLOW STATEMENT M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 Year ended 31.03.2009 £000 Notes Year ended 31.03.2008 £000 CASH FLOWS FROM OPERATING ACTIVITIES Profit from operations 18,965 33,568 Adjustments for: Depreciation Loss on disposal of property, plant and equipment Decrease/(Increase) in fair value of investment properties Operating cash flows before movement in working capital Decrease/(Increase) in inventories Decrease/(Increase) in receivables (Decrease)/Increase in payables Cash generated from operations Interest paid Income taxes paid Net cash inflow/(outflow) from operating activities Investing activities Interest received Proceeds from disposal of investment properties Proceeds from disposal of property, plant and equipment Purchase of property, plant and equipment Capital expenditure on investment properties 13 14 Net cash inflow/(outflow) from investing activities Cash flows from financing activities Increase in borrowings Repayment of borrowings Equity dividend paid Net cash (outflow)/inflow from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of year 19 192 145 3,210 22,512 2,555 459 (1,053) 24,473 (5,906) (6,443) 12,124 3 1,005 15 (58) (350) 615 – (9,110) (6,042) (15,152) (2,413) (8,798) (11,211) 190 21 (1,784) 31,995 (87,472) (57) 128 (55,406) (4,043) (10,901) (70,350) 4 – 60 (382) (339) (657) 67,411 – (5,848) 61,563 (9,444) 646 (8,798) The notes on pages 24-41 are an integral part of these consolidated financial statements. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 23 Profit for the year Net (expense) recognised directly in equity 21 Notes Total recognised income The total recognised income in the year is attributable to: Equity shareholders of the parent for the year ended 31 March 2009 Year ended 31.03.2009 £000 9,389 (3,614) 5,775 Year ended 31.03.2008 £000 20,668 – 20,668 5,775 20,668 M O U N T V I E W E S T A T E S P. L. C. The notes on pages 24-41 are an integral part of these consolidated financial statements. 24 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 1. GENERAL INFORMATION Mountview Estates P.L.C. (the Company) and its Subsidiaries (the Group) is a property trading company with a portfolio in England and Wales. The Company is a public limited liability company incorporated, domiciled and registered in England. The address of its registered office is: 151 High Street, Southgate, London N14 6EW. The Companys’ website is: www.mountviewplc.co.uk The Company has its primary listing on the London Stock Exchange. These consolidated financial statements have been approved for issue by the Board of Directors on 16 July 2009. 2. ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) (b) (c) (d) Basis of Preparation The Accounts have been prepared under the historical cost convention, as modified by the revaluation of investment properties, and in accordance with applicable International Financial Reporting Standards as adopted by the EU. Basis of Consolidation The Group’s financial statements incorporate the results of Mountview Estates P.L.C. and all of its Subsidiary undertakings made up to 31 March each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. The Group exercises control through voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. On acquisition, the identifiable assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. The purchase method has been used in consolidating the subsidiary financial statements. All significant inter company transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation within the consolidated accounts. Consistent accounting policies have been used across the Group. Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. Investment Properties Properties that are held for long term rentals or for the capital appreciation are classified as investment properties. Investment properties initially are measured at cost, including related transaction costs, and thereafter are stated at their fair value in the balance sheet. Expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.All other repairs and maintenance costs are charged to the income statement. Gains or losses arising from changes in the fair value of investment properties are recorded in the income statement. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 25 M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 2. ACCOUNTING POLICIES (continued) (e) Income Tax The charge for current tax is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base used in the computation of taxable profit. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction, which affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in Subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is calculated at the rates that are expected to apply when the asset or liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Provisions Provisions for legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Revenue Revenue includes proceeds of sales of properties, rents from properties, which are held as trading stock, investment and other sundry items of revenue before charging expenses. Rental income is recognised over the rental period. Sales of properties are recognised on legal completion as in the Directors’ opinion this is the point at which the substantial risks and rewards of ownership have been transferred. (f) (g) (h) Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved. (i) Interest Expense Interest expense for borrowings are recognised within “finance costs” in the income statement using the effective interest rate method. The effective interest method is a method of calculating the financial liability and of allocating the interest expense over the relevant period. 26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 2. ACCOUNTING POLICIES (continued) (j) Property, Plant and Equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the item. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset using the straight-line method as follows: Freehold property Fixtures and fittings and office equipment Computer equipment Motor Vehicles – reducing balance method – – – – 2% 20% 25% 20% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each financial year. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement. (k) Impairment of Assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Any impairment is recognised in the Income Statement in the year in which it occurs. (l) Investment Property Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property. Investment property is measured initially at its cost including related transaction costs. After initial recognition, investment property is carried at fair value. Fair value is based on active market prices adjusted, if necessary, for any difference in the nature, location or condition of the specified asset. If this information is not available the Group uses alternative valuation methods such as recent prices or less active markets or discounted cash flow projections. Subsequent expenditure is included in the carrying amount of the property when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred. Gains or losses arising from changes in the fair value of the Group’s investment properties are included in the income statement of the period in which they arise. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 27 M O U N T V I E W E S T A T E S P. L. C. 2. ACCOUNTING POLICIES (continued) for the year ended 31 March 2009 (m) (n) (o) (p) (r) Inventories These comprise residential properties all of which are held for resale, and are valued at the lower of cost and estimated net realisable value. Cost to the Group includes legal fees and commission charges incurred during acquisition together with improvement costs. Net realisable value is the net sale proceeds which the Group expects on sale of a property in its current condition. A net realisable value provision of £3 million has been made at 30 September 2008 against the Magdalen Park Estate portfolio to write down properties expected to be sold ultimately at vacant possession value. The analysis of the Group trading portfolio as at 31 March 2009 is on page 30. Pension Costs The Group operates a stakeholder contribution pension scheme for employees. The annual contributions payable are charged to the Income Statement. The Group has no further payment obligations once the contributions have been paid. Financial Instruments Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group has become a party to the contractual provisions of the instrument. Trade and other receivables and trade and other payables and cash and cash equivalents are measured at their net realisable value. Bank Borrowings Loans are recorded at fair value at initial recognition and thereafter at amortised costs under the effective interest method. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. (s) Derivatives The Group uses derivative instruments to help manage its interest rate risk. In accordance with its treasury policy, the Group does not hold or issue derivatives for trading purposes. The derivatives are recognised initially at fair value. Subsequently, the gain or loss on remeasurement to fair value is recognised immediately in the income statement, unless the derivatives qualify for cash flow hedge accounting in which case any gain or loss is taken to equity in a cash flow hedge reserve. In order to qualify for hedge accounting, the Group is required to document in advance the relationship between the item being hedged and the hedging instrument. The Group is also required to demonstrate that the hedge will be highly effective on an ongoing basis. The effectiveness testing is reperformed at each period end to ensure that the hedge remains highly effective. (t) Impact of standards and interpretations in issue but not yet effective At the date of authorisation of these financial statements there are a number of standards, amendments and interpretations to existing standards that have been published but which are not yet effective and which have not been early adopted by the Group. These are as follows: • IFRS 8 ‘Operating Segments’ (effective from 1 January 2009). IFRS 8 amends the current segmental reporting requirements of IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131. It requires a ‘management approach’ to be adopted so that segment information is presented on the same basis as that used for internal reporting purposes. This standard will apply to the Group from 1 April 2009 and is expected to impact upon the Group by requiring additional disclosures in the annual financial statements; 28 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 2. ACCOUNTING POLICIES (continued) (t) Impact of standards and interpretations in issue but not yet effective (continued) • Amendments to IFRS 3 ‘Business Combinations’ (effective from 1 July 2009) and IAS 27 ‘Consolidated and Separate Financial Statements’ (effective from 1 January 2009). The amendment to both of these standards is still subject to endorsement by the European Union. Some of the key changes are: i) the requirement to measure all consideration at fair value at acquisition date, with any subsequent changes (e.g. contingent consideration) remeasured at fair value through income, ii) the expensing of all transaction costs; and iii) stepped acquisitions to be accounted for as a disposal of existing interests and an acquisition of an enlarged interest, giving rise to potential profits or losses on disposal of the existing interest. (u) Estimates and Judgements Going concern The Directors are required to make an assessment of the Group’s ability to continue to trade as a going concern. Because of the difficult market conditions prevailing this assessment has been subject to more uncertainties that are usual. The Directors have given this matter due consideration and have concluded that it is appropriate to prepare the Group financial statements on a going concern basis. Further, the Directors are confident that the Group has adequate resources to continue in existence for the foreseeable future. Distinction between investment and trading property The Group considers the intention at the outset when each property is acquired in order to classify the property as either an investment or a trading property. Where the intention is to either trade the property or where the property is held for immediate sale upon receiving vacant possession within the ordinary course of business, the property is classified as trading property. Where the intention is to hold the property for its long-term retail yield and/or capital appreciation, the property is classified as an investment property. Investment properties In considering the values attributable to the investment portfolio, the following factors are taken into consideration: • sales of properties within the Group’s portfolio during the preceding 12 months • sales of properties in the same district whenever the information is available • published market research concerning the performance of the property market in this region and district • factors affecting individual properties and units in relation to value, and factors in the district which might affect the values of individual properties and units. Carrying value of trading stock The average length of time a unit of stock is held by the Group is 15 years and historically, the value of properties has increased steadily due to favourable market conditions. In addition it is the Company’s policy to ensure that each unit of stock is kept in a good state of repair, in order that the value of trading stock will be maintained. As the Group’s business model is to sell trading stock on recovery net realisable value is the net sales proceeds which the Group expects on the sale of a property with vacant possession. A net realisable value provision of £3 million has been made at 30 September 2008 against the ‘Magdalen Park Estate’ portfolio to allow for some further decline in property prices. This is based on our review of recent sales and information concerning the performance of the property market in this district. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 29 M O U N T V I E W E S T A T E S P. L. C. 3. FINANCIAL RISK MANAGEMENT for the year ended 31 March 2009 1. Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (including price risk and cash flow risk) credit risk and liquidity risk. The financial risks relate to the following financial instruments: trade receivables, cash and cash equivalents, trade and other payables and borrowings. (a) Market risk Price risk – the Group is exposed to property price and property rental risk. Cash flow and fair value interest rate risk – as the Group has no significant interest bearing assets, its income and operating cash flows are substantially independent of changes in market interest rates. Long Term Borrowings – borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group’s cash flow and fair value interest rate risk is periodically monitored by the Group’s management. The Group uses derivative instruments to help manage its interest rate risk. The Board is confident that based on the historical performance of the Group, the finance costs are sufficiently covered by profits from operations. During the year we decreased our long term borrowings by £7 million to £88 million (2008: £90 million). The Group has two covenants covering loan to value ratio and interest cover. These covenants were complied with during the financial year and we are confident to meet them at 30 September 2009. (b) Credit risk Exposure to credit risk and interest risk arises in normal course of the Group’s business. The Group has no significant concentration of credit risk. Credit risk arises from cash and cash equivalents as well as credit exposures with respect to rental customers, including outstanding receivables. The Directors are of the opinion that credit risk is minimal due to the low level of trade receivables relative to the Balance Sheet totals. The receivables are reviewed on a regular basis to ensure that they are recoverable. (c) Liquidity risk The Group’s liquidity position is monitored daily by management and is reviewed quarterly by the Board of Directors. A summary table with maturity of financial liabilities are presented in the note 19. 30 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 3. FINANCIAL RISK MANAGEMENT (continued) 2. Capital risk management The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total debt and equity. Total borrowings Less cash and cash equivalents Net borrowings Total equity Total borrowings plus equity Gearing ratio 4. ANALYSIS OF REVENUE AND COST OF SALES Revenue Gross sales of properties Gross rental income Cost of Sales Cost of properties sold Property expenses Gross Profit Sales of properties Net rental income 2009 £000 101,026 (840) 100,186 187,490 287,767 35% 2009 £000 39,372 14,227 53,599 22,344 5,313 27,657 17,028 8,914 25,942 2008 £000 107,685 (802) 106,883 187,757 294,640 36% 2008 £000 41,755 12,583 54,338 12,117 6,230 18,347 29,638 6,353 35,991 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 5. SEGMENTAL INFORMATION A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. The Group monitors its operations in the following segments: 2009 Property Property Trading Investment £’000 £’000 2008 Property Property Trading Investment £’000 £’000 Group £’000 Group £’000 Revenue 52,829 770 53,599 53,548 790 54,338 Operating profit before changes in fair value of investment properties 21,859 316 22,175 31,382 402 31,784 Finance costs (5,903) (5,903) (4,039) Profit after tax 9,389 (4,039) 20,668 Assets 272,725 32,343 305,068 275,822 36,381 312,203 Liabilities 106,636 59 106,695 110,711 56 110,766 Fixed assets capital expenditure Depreciation 58 164 350 28 408 192 382 159 339 31 721 190 The Group’s two main business segments operate within the United Kingdom. 6. PROFIT FROM OPERATIONS The operating profit is stated after charging: Depreciation of tangible fixed assets Loss on disposal of fixed assets Auditors’ remuneration – the audit of the parent company and consolidated financial statements – the audit of the company’s subsidiaries pursuant to legislation – for other services operating expenses for investment properties And after crediting: – net rental income – administrative charges to related companies (Note 25) 2009 £000 192 2 33 12 9 283 8,914 63 2008 £000 190 21 33 12 9 386 6,353 61 32 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 7. STAFF COSTS (including Directors) Wages and salaries Social security costs Pension costs Directors’ Remuneration Total Directors’ Remuneration including salary, bonuses, benefits in kind and pensions contributions amounted to: 2009 £000 2,171 272 85 2,528 2009 £000 1,490 2008 £000 2,461 312 73 2,846 2008 £000 1,546 The details of Directors’ Remuneration are shown in the audited section of the Remuneration Report on page 18. The Company contributes 3% of the total annual gross salaries and bonuses of each employee to a Stakeholder Pension Scheme. The average weekly number of employees during the year was as follows: Office and management 8. FINANCE COSTS Interest on bank overdrafts, and loans 9. INCOME FROM INVESTMENTS Interest on bank deposits 2009 27 2009 £000 5,906 2009 £000 3 2008 28 2008 £000 4,043 2008 £000 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 33 M O U N T V I E W E S T A T E S P. L. C. 10. INCOME TAX EXPENSE (a) Analysis of charge in the year Current tax: UK Corporation Tax 28% (2008: 30%) Deferred tax: Current year 28% (2008: 30%) for the year ended 31 March 2009 2009 £000 2008 £000 4,864 8,358 (1,191) 503 Taxation attributable to the Company and its Subsidiaries 3,673 8,861 (b) Factors affecting income tax expense The charge for the year can be reconciled to the profit per the income statement as follows: Profit on ordinary activities before taxation 13,062 29,529 Profit on ordinary activities multiplied by rate of tax 28% (2008: 30%) Expenses not deductible for tax Depreciation in excess of capital allowances Taxation on capital gains Marginal relief Revaluation surplus in subsidiaries not taxed Deferred tax Sundry adjusting items 3,657 73 31 189 (5) 899 (1,191) 20 Taxation attributable to the Company and its Subsidiaries 3,673 8,859 20 7 – – (535) 503 7 8,861 11. DIVIDENDS On 18 August 2008 a dividend of 105p per share (2007: 100p per share) was paid to the shareholders. On 30 March 2009 a dividend of 50p per share (2008: 50p per share) was paid to the shareholders. This resulted in total dividends paid in the year of £6.042 million (2008: £5.848 million). In respect of the current year, the Directors propose that a final dividend of 105p per share will be paid to the shareholders on 17 August 2009. This dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The proposed final dividend for 2009 is payable to all shareholders on the Register of Members on 17 July 2009. The total estimated final dividend to be paid is £6.042 million. 34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 March 2009 12. EARNINGS PER SHARE The calculations of earnings per share are based on the following profits and number of shares. Net profit for financial year (basic and fully diluted) 9,389 20,668 2009 £000 2008 £000 Weighted average number of ordinary shares for basic and fully diluted earnings per share 3,899,014 3,899,014 Basic and Diluted Earnings per share 241.0p 530.1p M O U N T V I E W E S T A T E S P. L. C. The Company has no dilutive potential ordinary shares. 13. PROPERTY, PLANT AND EQUIPMENT COST At 1 April 2007 Additions Disposals At 31 March 2008 DEPRECIATION At 1 April 2007 Charge for the year On disposals At 31 March 2008 NET BOOK VALUE At 31 March 2007 At 31 March 2008 Freehold Fixtures Property & Fittings £000 £000 Motor Computer Vehicles Equipment £ 000 £000 2,671 – – 2,671 330 53 – 383 2,341 2,288 237 35 – 272 148 41 – 189 89 83 280 217 (150) 347 110 61 (70) 101 170 246 43 130 – 173 36 35 – 71 7 102 Total £000 3,231 382 (150) 3,463 624 190 (70) 744 2,607 2,719 Property, Plant and Equipment are located within United Kingdom. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 35 13. PROPERTY, PLANT AND EQUIPMENT (continued) for the year ended 31 March 2009 COST At 1 April 2008 Additions Disposals At 31 March 2009 DEPRECIATION At 1 April 2008 Charge for the year On disposals At 31 March 2009 NET BOOK VALUE At 31 March 2008 At 31 March 2009 Freehold Fixtures Property & Fittings £000 £000 Motor Computer Vehicles Equipment £ 000 £000 2,671 – – 2,671 383 53 – 436 2,288 2,235 272 17 – 289 189 48 – 237 83 52 347 41 (35) 353 101 54 (17) 138 246 215 173 – – 173 71 37 – 108 102 65 Total £000 3,463 58 (35) 3,486 744 192 (17) 919 2,719 2,567 M O U N T V I E W E S T A T E S P. L. C. Property, Plant and Equipment are located within United Kingdom. 14. INVESTMENT PROPERTIES Fair Value at 1 April 2008 (2007) Additions: Subsequent expenditure Disposals (Decrease)/Increase in Fair Value during the year At 31 March 2009 £000 36,203 350 (1,148) (3,210) 32,195 2008 £000 34,080 339 – 1,784 36,203 Louise Goodwin Limited and ALG Properties Limited The Companies’ investment properties were valued on a Fair Value basis as at 31 March 2009 by External Valuers, Mr S.W. Philp FRICS and Mr J.A. Rollings MRICS of Castles Surveyors Limited. The valuations were in accordance with the requirements of the RICS Valuation Standards and IAS 40. The valuation of each investment property assumed that the property would be sold subject to any existing leases, regulated and assured tenancies, but otherwise, with vacant possession. On this basis, the aggregate Fair Value of the Company’s interests in its investment properties was: Louise Goodwin Limited £26,350,000 (twenty six million, three hundred and fifty thousand pounds) ALGL Properties Limited £5,845,000 (five million, eight hundred and forty five thousand pounds) 36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 15. INVESTMENTS Fixed Asset Investments These represent the cost of shares in the following wholly owned Subsidiary undertakings, which are incorporated and operate in England and Wales. Their results are consolidated in the accounts of the Group, for the period during which they are Subsidiary undertakings. Principal Activity Hurstway Investment Company Limited Property Dealing Louise Goodwin Limited A.L.G. Properties Limited Property Investment Property Investment 16. INVENTORIES Residential properties 17. TRADE AND OTHER RECEIVABLES Trade receivables Prepayments and accrued income 2009 £000 268,806 2009 £000 283 377 660 Cost 2008 2009 £000 1 15,351 2,924 18,276 2008 £000 271,361 2008 £000 504 614 1,118 The Directors consider that the carrying amount of trade and other receivables approximates their fair value. 18. TRADE AND OTHER PAYABLES Trade creditors Other taxes and social security costs Other creditors 2009 £000 949 145 961 2,055 2008 £000 854 191 2,036 3,081 The Directors consider that the carrying amount of trade and other payables approximates their fair value. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 37 19. BANK OVERDRAFTS AND LOANS Bank overdrafts Bank loans Other loans (a) Cash and cash equivalents Bank overdrafts Cash Cash and cash equivalents as at 31 March for the year ended 31 March 2009 2009 £000 12,051 88,000 975 2008 £000 9,600 95,000 3,085 101,026 107,685 2009 £000 (12,051) 840 (11,211) M O U N T V I E W E S T A T E S P. L. C. 2008 £000 (9,600) 802 (8,798) 2008 £000 12,685 – 95,000 107,685 12,685 95,000 2008 6.74% 6.80% 6.04% Maturity profile of financial liabilities at 31 March 2009 was as follows: Amounts repayable: In one year or less Between one and two years Between two and five years Less: amount due for settlement within 12 months (shown under current liabilities) Amount due for settlement after 12 months The average interest rates paid were as follows: Bank overdrafts Bank loans Other loans 2009 £000 13,026 – 88,000 101,026 13,026 88,000 2009 5.04% 5.07% 4.11% The Directors consider that the carrying amount of bank overdrafts and loans approximates their fair value. The other principal features of the Group’s borrowings are as follows. 1. 2. The bank overdrafts are repayable on demand. The bank overdrafts are secured by a Letter of Negative Pledge by Mountview Estates P.L.C. The Group has a £75 million long term borrowing facility with Barclays Bank. The amount outstanding at 31 March 2009 is £68 million. This is a revolving loan and the termination date of this facility is November 2012. The rate of interest payable on the loan is 0.9% above Libor. The loan is secured by a cross guarantee between Mountview Estates P.L.C. and its Subsidiaries. The loan is not repayable by instalments. 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 19. BANK OVERDRAFTS AND LOANS (continued) 3. 4. The Group has a £20 million long term borrowing facility with HSBC Bank. The amount outstanding at 31 March 2009 is £20 million. This is a revolving loan and the termination date of this facility is September 2011. The rate of interest payable on the loan is 1.05% above Libor. The loan is secured by Letter of Negative Pledge. Other loans consist of loans from connected persons, and companies of which Mr. D.M. Sinclair is a Director. Loans of £975,000 (2008: £3.08 million) are repayable within one year. Interest payable on these loans is at 0.5% above Barclays Bank Plc base rate. 20. DEFERRED TAX Analysis for financial reporting purposes Deferred tax liabilities Net position at 31 March 2009 £000 8,506 8,506 The movement for the year in the Group’s net deferred tax position was as follows. At 1 April (Credit)/charge to income for the year At 31 March 2009 £000 9,697 (1,191) 8,506 2008 £000 9,697 9,697 2008 £000 9,194 503 9,697 The following are in deferred tax liabilities recognised by the Group and movements thereon during the period. At 1 April (Credit)/charge to income for the year At 31 March 21. FINANCIAL INSTRUMENTS Fair value of financial assets Revaluation of properties 2008 2009 £000 £000 9,697 (1,191) 8,506 9,194 503 9,697 The Group’s financial assets at the year end consist of trade receivables and cash at bank and in hand of £1.5 million (2008: £1.920 million) The Directors consider that the carrying amount of cash at bank and in hand approximates their fair value. The trade receivables amounted to £660,000 (2008: £1.118 million). The Directors consider that the carrying amount of trade receivables approximates their fair value. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 39 M O U N T V I E W E S T A T E S P. L. C. 21. FINANCIAL INSTRUMENTS (continued) Fair value of borrowings Bank overdrafts Secured bank loans Unsecured loans for the year ended 31 March 2009 2009 £000 12,051 88,000 975 2008 £000 9,600 95,000 3,085 101,026 107,685 Interest charged in the income statement for the above borrowings amounted to £5.906 million (2008: £4.043 million). The Directors consider that the carrying amount of borrowings approximates their fair value. The details of the terms of the borrowings together with the average interest rates can be seen in Note 19. As at 31 March 2009 it is estimated that general increase of 1 point in interest rates would decrease the Group’s profit before tax by approximately £480,000 (2008: £550,000). Derivative financial instruments The Group has entered into an Interest Rate Swap Agreement in January 2008 in order to help manage its interest rate risk. The interest rate swap matures in March 2013 and is based on £40 million non-amortising notional amount. As at 31 March 2009 the fixed interest rate was 4.98% (31 March 2008: 4.98%). The financial derivative was valued by an external consultant, using discounted cash flow model and quoted market information. As at 31 March 2009 the market value of derivatives under IAS 39 is a charge of £3.6 million (2008: charge £139,000). In accordance with IAS 39 when the cash flow hedges have been viewed as being effective, any gains or losses have been taken through the cash flow hedge reserve. Undiscounted maturity profile of financial liabilities The following table analyses the Group’s financial liabilities and derivative financial liabilities at the balance sheet date into relevant maturity groupings based on the remaining period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. As the amounts included in the table are the contractual undiscounted cash flows, these amounts will not always equal the amounts disclosed on the balance sheet for borrowings, derivative financial instruments, and trade and other payables. A reconciliation to the balance sheet amounts is given on page 44. Trade and other payables due within 12 months equal their carrying balances as the impact of discounting is not significant. At 31 March 2009 Less than Between Between 1 year 1 & 2 years 2 & 5years £ 000 £000 £000 Interest bearing loans and borrowings Cash flow hedges Trade and other payables 13,903 3,614 2,055 – – – 103,684 – – At 31 March 2008 Less than Between Between 1 year 1 & 2 years 2 & 5years £ 000 £000 £000 Interest bearing loans and borrowings Cash flow hedges Trade and other payables 13,323 – 3,081 – – – 123,825 – – Total £000 117,587 3,614 2,055 Total £000 137,148 – 3,081 40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 21. FINANCIAL INSTRUMENTS (continued) Reconciliation of maturity analysis At 31 March 2009 Interest bearing loans and borrowings per accounts Interest Financial liability cash flows as above At 31 March 2008 Interest bearing loans and borrowings per accounts Interest Financial liability cash flows as above 22. CALLED UP SHARE CAPITAL Authorised: 5,000,000 ordinary shares of 5p each Allotted, issued and fully paid: 3,899,014 ordinary shares of 5p each 23. OTHER RESERVES Capital redemption reserve Capital reserve Other reserves Less than Between Between 1 year 1 & 2 years 2 & 5years £ 000 £000 £000 Total £000 13,026 877 13,903 – – – 88,000 15,684 101,026 16,561 103,684 117,587 Less than Between Between 1 year 1 & 2 years 2 & 5years £ 000 £000 £000 Total £000 12,685 638 13,323 – – – 95,000 28,825 107,685 29,463 123,825 137,148 2009 £000 250 195 2009 £000 55 25 56 136 2008 £000 250 195 2008 £000 55 25 56 136 Capital redemption reserve relates to buy-back of the Company’s own shares. The Group does not maintain insurance cover against other risks except where several properties are located in close physical vicinity. A reserve is maintained to deal with such non-insured risks and at 31 March 2009 stood at £56,000 (2008: £56,000). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 41 M O U N T V I E W E S T A T E S P. L. C. 24. RETAINED EARNINGS Balance at 1 April 2008 Net profit for the year Dividends paid Balance at 31 March 2009 25. RELATED PARTY TRANSACTIONS for the year ended 31 March 2009 £000 187,426 9,389 (6,042) 190,773 (a) Mountview Estates P.L.C. provides general management and administration services to Ossian Investors Limited and Sinclair Estates Limited, companies of which Mr. D.M. Sinclair is a Director. Fees of £45,130 (2008: £46,186) were charged for these services. The same services were also provided to Viewthorpe Limited, fees of £18,136 (2008: £15,649) were charged for these services. All directors of Viewthorpe Limited are significant shareholders of the Company, one director of Viewthorpe Limited is also the wife of a Director of the Company. (b) Included within other loans repayable in less than one year and on demand is a loan from Sinclair Estates Limited. The balance outstanding at the balance sheet date was £700,000 (2008: £1,450,000). Interest was payable on the loan at a rate of 0.5 percent above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £22,605 (2008: £36,849). (c) Included within other loans repayable in less than one year and on demand is a loan from Ossian Investors Limited. The balance outstanding at the balance sheet date was £100,000 (2008: £110,000). Interest was payable on the loan at a rate of 0.5 percent above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £5,466 (2008: £9,498). (d) Included within other loans repayable in less than one year and on demand is a loan from Viewthorpe Limited. The balance outstanding at the balance sheet date was £nil (2008: £1,350,000). Interest was payable on the loan at a rate of 0.5 percent above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £71,456 (2008: £85,786). (e) Included within other loans, repayable in less than one year and on demand is a loan from Mrs. D. Sinclair, a shareholder of the Company. The balance outstanding at the balance sheet date was £175,000 (2008: £175,000). Interest was payable on the loan at a rate of 0.5 percent above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £8,256 (2008: £10,600). (f) All of the above loans are unsecured. (g) Transactions between the Group and its Subsidiaries, which are related parties, have been eliminated on consolidation and have not been disclosed in this note. 42 INDEPENDENT AUDITORS’ REPORT M O U N T V I E W E S T A T E S P. L. C. to the Members of Mountview Estates P.L.C. We have audited the Group financial statements of Mountview Estates P.L.C. for the year ended 31 March 2009 which comprise the principal accounting policies, the Group income statement, the Group balance sheet, the Group cash flow statement, the Group statement of changes in shareholders equity and notes on pages 24-41. These Group financial statements have been prepared under the accounting policies set out therein. We have reported separately on the parent company financial statements of Mountview Estates P.L.C. for the year ended 31 March 2009 and 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 auditors’ 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 financial statements in accordance with United Kingdom law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, are set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the Group financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the Group financial statements give a true and fair view, and whether the Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulations and whether the information given in the Directors’ Report is consistent with the financial statements. We also report to you if, in our opinion, we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed. We review whether the Corporate Governance Statement reflects the Company’s compliance with the nine provisions of the 2006 FRC Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the Boards statement on internal control covers all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures. We read other information contained in the Annual Report and consider whether it is consistent with the audited Group financial statements. The other information comprises only the Directors’ Report, the Chairman’s Statement, the unaudited part of the Remuneration Report, the Operational Review and the Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Group financial statements. Our responsibilities do not extend to any other information. BASIS OF 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 Group financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the Group financial statements, and of whether the accounting policies are appropriate to the Group’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 Group 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 Group financial statements. INDEPENDENT AUDITORS’ REPORT 43 to the Members of Mountview Estates P.L.C. OPINION In our opinion: (cid:1) (cid:1) (cid:1) the Group financial statements give a true and fair view, in accordance with IFRS as adopted by the European Union, of the state of the Group’s affairs as at 31 March 2009 and of its profit for the year then ended; the Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation; and the information given in the Directors’ Report is consistent with the financial statements for the year ended 31 March 2009. BSG Valentine Registered Auditors Chartered Accountants London 16 July 2009 M O U N T V I E W E S T A T E S P. L. C. 44 COMPANY BALANCE SHEET UNDER UK GAAP M O U N T V I E W E S T A T E S P. L. C. as at 31 March 2009 FIXED ASSETS Tangible assets Investments CURRENT ASSETS Stocks Debtors Cash at bank and in hand CREDITORS: Amounts falling due within one year NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES CREDITORS: Amounts falling due after more than one year CAPITAL AND RESERVES Called up share capital Capital redemption reserve Capital reserve Other reserves Cash flow hedge reserve Profit and Loss Account As at 31.03.2009 £000 Notes As at 31.03.2008 £000 3 4 5 6 7 8 9 10 10 10 11 12 2,534 18,276 20,810 255,554 573 706 256,833 (20,650) 236,183 2,672 18,276 20,948 258,212 1,024 685 259,921 (19,168) 240,753 256,993 261,701 (109,221) 147,772 (114,074) 147,627 195 55 25 39 (3,614) 151,072 147,772 195 55 25 39 – 147,313 147,627 Approved by the Board on 16 July 2009. D.M. SINCLAIR Chairman K. LANGRISH-SMITH Director NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP 45 M O U N T V I E W E S T A T E S P. L. C. 1. ACCOUNTING POLICIES for the year ended 31 March 2009 (a) (b) (c) (d) (e) (f) (g) Basis of Accounting The Accounts have been prepared under the historical cost convention, and in accordance with applicable Accounting Standards. Investments Fixed assets investments in Subsidiary undertakings are stated at costs less any provision for impairment. Taxation Corporation tax payable is provided on taxable profits at the current rate. Turnover Turnover includes proceeds of sales of properties, rents from properties which are held as trading stock, or investment and any other sundry items of revenue before charging expenses. Sales of properties are recognised on completion. Depreciation Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset using the straight-line method as follows: Freehold property Fixtures and fittings and office equipment Computer equipment Motor Vehicles – reducing balance method – – – – 2% 20% 25% 20% Impairment of Fixed Assets Fixed Assets are subject to review for impairment in accordance with FRS11 “Impairment of Fixed Assets and Goodwill”. Any impairment is recognised in the Profit and Loss Account in the year in which it occurs. Stocks These comprise residential properties all of which are held for resale, and are valued at the lower of cost and estimated net realisable value. Cost to the Group includes legal fees and commission charges incurred during acquisition together with improvement costs. Net realisable value is the net sale proceeds which the Group expects on sale of a property in its current condition. The analysis of the Group trading portfolio as at 31 March 2009 is on page 5. (h) Deferred tax Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or right to pay less or to receive more, tax, with the following exceptions: (cid:1) provision is made for tax on gains arising from the revaluations (and similar fair value adjustments) of fixed assets, and gains on disposal of fixed assets that have been rolled over into replacement assets, only to the extent that, at balance sheet date, there is binding agreement to dispose of these assets concerned. However, no provision is made where, on the basis of all available evidence at the balance sheet date, it is more likely than not that the taxable gain will be rolled over into replacement assets and charged to tax only where the replacement assets are sold; (cid:1) deferred tax assets are recognised only to the extent that the directors consider that it is more likely that not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. 46 NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 2. STAFF COSTS (including Directors) Wages and salaries Social security costs Pension costs DIRECTORS’ REMUNERATION Total Directors’ Remuneration including salary, bonuses, benefits in kind and pensions contributions amounted to: 2009 £000 2,171 272 85 2,528 2009 £000 1,490 2008 £000 2,461 312 73 2,846 2008 £000 1,546 The details of Directors’ Remuneration are shown in the audited section of the Remuneration Report on page 18. The Company contributes 3% of the total annual gross salaries and bonuses of each employee to a Stakeholder Pension Scheme. The average weekly number of employees during the year was as follows: Office and management 3. TANGIBLE ASSETS 2009 27 2008 28 COST At 1 April 2007 Additions Disposals At 31 March 2008 DEPRECIATION At 1 April 2006 Charge for the year On disposals At 31 March 2008 NET BOOK VALUE At 31 March 2007 At 31 March 2008 Freehold Fixtures Property & Fittings £000 £000 Motor Computer Vehicles Equipment £ 000 £000 2,671 – – 2,671 330 53 – 383 2,341 2,288 97 1 – 98 50 12 – 62 47 36 280 217 (150) 347 110 61 (70) 101 170 246 43 130 – 173 36 35 – 71 7 102 Total £000 3,091 348 (150) 3,289 526 161 (70) 617 2,565 2,672 All tangible assets of the Company are located within the United Kingdom. NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP 47 M O U N T V I E W E S T A T E S P. L. C. 3. TANGIBLE ASSETS (continued) for the year ended 31 March 2009 COST At 1 April 2008 Additions Disposals At 31 March 2009 DEPRECIATION At 1 April 2008 Charge for the year On disposals At 31 March 2009 NET BOOK VALUE At 31 March 2008 At 31 March 2009 Freehold Fixtures Property & Fittings £000 £000 Motor Computer Vehicles Equipment £ 000 £000 2,671 – – 2,671 383 53 – 436 2,288 2,235 98 3 – 101 62 20 – 82 36 19 347 41 (35) 353 101 54 (17) 138 246 215 173 – – 173 71 37 – 108 102 65 Total £000 3,289 44 (35) 3,298 617 164 (17) 764 2,672 2,534 All tangible assets of the Company are located within the United Kingdom. 4. INVESTMENTS Fixed Asset Investments These represent the cost of shares in the following wholly owned Subsidiary undertakings, which are incorporated and operate in England and Wales. Their results are consolidated in the accounts of the Group, for the period during which they are Subsidiary undertakings. Hurstway Investment Company Limited Louise Goodwin Limited A.L.G. Properties Limited Cost 2008 2009 £000 1 15,351 2,924 18,276 The Company owns 100% of the ordinary share capital of the following companies: Subsidiary Undertaking Country of Incorporation Principal Activity Hurstway Investment Company Limited Louise Goodwin Limited A.L.G. Properties Limited UK UK UK Property Dealing Property Investment Property Investment 48 NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP for the year ended 31 March 2009 5. STOCKS Residential properties 6. DEBTORS: due within one year Trade debtors Prepayments and accrued income M O U N T V I E W E S T A T E S P. L. C. 7. CREDITORS: Amounts falling due within one year Bank loans and overdrafts Trade creditors Corporation Tax Other taxes and social security costs Other creditors Other loans Derivative financial instruments 2009 £000 255,554 2009 £000 217 356 573 2009 £000 12,051 949 2,025 145 891 975 3,614 20,650 2008 £000 258,212 2008 £000 440 584 1,024 2008 £000 9,600 812 3,490 191 1,990 3,085 – 19,168 Other loans consist of loans from connected persons. Interest payable on these loans was at 0.5% above Barclays Bank Plc Base rate. 8. CREDITORS: Amounts falling due after more than one year Bank loans Amounts owed to Subsidiary undertakings Other loans 2009 £000 88,000 21,221 – 109,221 2008 £000 95,000 19,074 – 114,074 NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP 49 M O U N T V I E W E S T A T E S P. L. C. 8. CREDITORS: Amounts falling due after more than one year (continued) Maturity profile of financial liabilities at 31 March 2009 was as follows: for the year ended 31 March 2009 Amounts repayable: In one year or less Between one and two years Between two and five years More than five years Less: amount due for settlement within 12 months (shown under current liabilities) Amount due for settlement after 12 months 2009 £000 13,026 – 88,000 21,221 122,247 13,026 109,221 2008 £000 12,685 – 95,000 19,074 126,759 12,685 114,074 The Directors consider that the carrying amount of bank overdrafts and loans approximates their fair value. The other principal features of the Group’s borrowings are as follows. 1. 2. 3. 4. The bank overdrafts are repayable on demand. The bank overdrafts are secured by a Letter of Negative Pledge by Mountview Estates P.L.C. The Group has a £75 million long term borrowing facility with Barclays Bank. The loan outstanding at 31 March 2009 is £68 million. This is a revolving loan and the termination date of this facility is November 2012. The rate of interest payable on the loan is 0.9% above Libor. The loan is secured by a cross guarantee between Mountview Estates P.L.C. and its Subsidiaries. The loan is not repayable by instalments. The Group has a £20 million long term borrowing facility with HSBC Bank. The loan is not repayable by instalments. The loan outstanding at 31 March 2009 is £20 million. This is a revolving loan and the termination date of this facility is September 2011. The rate of interest payable on the loan is 1.05% above Libor. The loan is secured by Letter of Negative Pledge. Other loans consist of loans from connected persons, and companies of which Mr. D.M. Sinclair is a Director. Loans of £975,000 (2008: £3.08 million) are repayable within one year. Interest payable on these loans is at 0.5% above Barclays Bank Plc base rate. 9. CALLED UP SHARE CAPITAL Authorised: 5,000,000 ordinary shares of 5p each Allotted, issued and fully paid: 3,899,014 ordinary shares of 5p each 2009 £000 250 195 2008 £000 250 195 50 NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP M O U N T V I E W E S T A T E S P. L. C. for the year ended 31 March 2009 10. OTHER RESERVES Capital redemption reserve Capital reserve Other reserves Balance at 31 March 2009 £000 55 25 39 119 2008 £000 55 25 39 119 Capital redemption reserve relates to buy-back of the Company’s own shares. The Group does not maintain insurance cover against other risks except where several properties are located in close physical vicinity. A reserve is maintained to deal with such non- insured risks and at 31 March 2009 stood at £39,000 (2008: £39,000). 11. DERIVATIVE FINANCIAL INSTRUMENTS The Company entered into an Interest Rate Swap Agreement in January 2008 in order to help manage its interest rate risk. The financial derivative was valued by an external consultant, using discounted cash flow model and quoted market information. 12. PROFIT AND LOSS ACCOUNT Balance at 1 April Net profit for the year Dividends paid Balance at 31 March 13. RELATED PARTY TRANSACTIONS 2009 £000 147,313 9,801 (6,042) 151,072 2008 £000 136,526 16,635 (5,848) 147,313 (a) Mountview Estates P.L.C. provides general management and administration services to Ossian Investors Limited and Sinclair Estates Limited, companies of which Mr. D.M. Sinclair is a Director. Fees of £45,130 (2008: £46,186) were charged for these services. The same services were also provided to Viewthorpe Limited, fees of £18,136 (2008: £15,649) were charged for these services. All directors of Viewthorpe Limited are significant shareholders of the Company, one director of Viewthorpe Limited is also the wife of a Director of the Company. (b) Included within other loans repayable in less than one year and on demand is a loan from Sinclair Estates Limited. The balance outstanding at the balance sheet date was £700,000 (2008: £1,450,000). Interest was payable on the loan at a rate of 0.5 percent above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £22,605 (2008: £36,849). NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP 51 13. RELATED PARTY TRANSACTIONS (continued) for the year ended 31 March 2009 (c) Included within other loans repayable in less than one year and on demand is a loan from Ossian Investors Limited. The balance outstanding at the balance sheet date was £100,000 (2008: £110,000). Interest was payable on the loan at a rate of 0.5 percent above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £5,466 (2008: £9,498). (d) Included within other loans repayable in less than one year and on demand is a loan from Viewthorpe Limited. The balance outstanding at the balance sheet date was £nil (2008: £1,350,000). Interest was payable on the loan at a rate of 0.5 percent above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £71,456 (2008: £85,786). (e) Included within other loans, repayable in less than one year and on demand is a loan from Mrs. D. Sinclair, a shareholder of the Company. The balance outstanding at the balance sheet date was £175,000 (2008: £175,000). Interest was payable on the loan at a rate of 0.5 percent above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £8,256 (2008: £10,600). (f) All of the above loans are unsecured. (g) Transactions between the Group and its Subsidiaries, which are related parties, have been eliminated on consolidation and have not been disclosed in this note. M O U N T V I E W E S T A T E S P. L. C. 52 INDEPENDENT AUDITORS’ REPORT M O U N T V I E W E S T A T E S P. L. C. to the Members of Mountview Estates P.L.C. We have audited the parent Company financial statements of Mountview Estates P.L.C. for the year ended 31 March 2009 which comprise the principal accounting policies, the balance sheet and notes from 1 to 13. These parent Company financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the Directors’ Remuneration Report that is described as having been audited. We have reported separately on the Group’s financial statements of Mountview Estates P.L.C. for the year ended 31 March 2009. 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 auditors’ 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, the Directors’ Remuneration Report and the parent Company financial statements in accordance with United Kingdom law and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the parent Company financial statements and the part of Directors’ Remuneration Report to be audited in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the parent Company financial statements give a true and fair view, and whether the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985 and whether the information given in the Directors’ Report is consistent with the financial statements. We also report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed. We read other information contained in the Annual Report and consider whether it is consistent with the audited parent Company financial statements. The other information comprises only the Directors’ Report, the Chairman’s Statement, the unaudited part of the Remuneration Report, the Operational Review and the Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Group 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 examination, on a test basis, of evidence relevant to the amounts and disclosures in the Group financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the Group financial statements, and of whether the accounting policies are appropriate to the Group’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 parent Company 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 parent Company financial statements and the part of the Directors’ Remuneration Report to be audited. OPINION In our opinion: • The parent Company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice of the state of the Company’s affairs as at 31 March 2009; • the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985; and • the information given in the Directors’ Report is consistent with the financial statements for the year ended 31 March 2009 BSG Valentine Registered Auditors Chartered Accountants London 16 July 2009 TABLE OF COMPARATIVE FIGURES 53 as at 31 March 2009 UK GAAP 2004 £000 IFRS 2005 £000 IFRS 2006 £000 IFRS 2007 £000 IFRS 2008 £000 IFRS 2009 £000 Revenue 55,087 48,778 47,456 68,168 54,338 53,599 Profit before taxation 28,593 24,848 22,660 50,227 29,529 13,062 Taxation 8,584 7,482 6,738 15,167 8,861 Profit after taxation 20,009 17,366 15,922 35,060 20,668 3,673 9,389 Dividend in relation to the year 4,757 4,913 5,069 5,848 6.042 6.042* Earnings per share 513.2p 445.4p 408.4p 899.2p 530.1p 241.0p Rate of dividend 122p 126p 130p 150p 155p 155p *The £6.042 million dividend in relation to 2009 is made up of the interim dividend of £1.949 million and the final dividend of £4.093 million, which will be paid on 17 August 2009, subject to approval at the AGM on 12 August 2009. M O U N T V I E W E S T A T E S P. L. C. 54 NOTICE OF MEETING M O U N T V I E W E S T A T E S P. L. C. Notice is hereby given that the Seventy-Second Annual General Meeting of the Members of Mountview Estates P.L.C. (incorporated in England and Wales with registered number 00328020) will be held at the offices of Norton Rose LLP, 3 More London Riverside, London SE1 2AQ on 12 August 2009 at 11.30a.m., for the following purposes: 1. 2. 3. 4. 5. 6. 7. 8. 9. To receive and consider the Reports of the Directors and the Auditors and the audited Statements of Accounts of the Company for the year ended 31 March 2009. To declare a final dividend of 105p per share payable on 17 August 2009 to Shareholders on the register at 17 July 2009. To re-appoint Mrs. M.M. Bray as a Director of the Company. To re-appoint Mr. J.B. Fulton as a Director of the Company. To appoint Mr. J.A.N. Laing as a Director of the Company. To approve the Directors’ Remuneration Report set out in the Annual Report and Accounts for the year ended 31 March 2009. To re-appoint Messrs BSG Valentine as Auditors of the Company to hold office from the conclusion of the Meeting to the conclusion of the next meeting at which the accounts are laid before the meeting. To authorise the Directors to determine the Auditors’ remuneration for the ensuing year. To consider and, if thought fit, pass the following Special Resolution: THAT with effect from 00.01a.m. on 1 October 2009: (i) (ii) the Articles of Association of the Company be amended by deleting all the provisions of the Company’s Memorandum of Association which, by virtue of section 28 Companies Act 2006, are to be treated as provisions of the Company’s Articles of Association; and the Articles of Association of the Company produced to the meeting and initialled by the Chairman of the meeting for the purpose of identification be adopted as the Articles of Association of the Company in substitution for, and to the exclusion of, the existing Articles of Association. By Order of the Board M.M. BRAY Secretary Mountview House 151 High Street Southgate London N14 6EW 17 July 2009 NOTICE OF MEETING 55 M O U N T V I E W E S T A T E S P. L. C. Notes:– 1. 2. 3. 4. 5. 6. A Member who is entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend, speak and vote instead of him/her. A proxy need not also be a Member of the Company. If a Member appoints more than one proxy to attend the Meeting, each proxy must be appointed to exercise the rights attached to a different share or shares held by the Member. If a Member wishes to appoint more than one proxy and so requires additional forms of Proxy, the Member should contact Capita Registrars (Proxies), The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. A form of Proxy is enclosed with this Report and Accounts and should be completed in accordance with the instructions contained therein. Completion and return of the form of Proxy will not prevent a Member from attending the Meeting and voting in person. To be effective, the form of Proxy and any power of attorney or other authority under which it is signed (or a notarially certified copy of such authority) must be deposited at the office of the Company’s Registrars, Capita Registrars (Proxies), The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, not later than 48 hours before the time of the Meeting or any adjournment thereof. To appoint a proxy or to give or amend an instruction to a previously appointed proxy via the CREST system, the CREST message must be received by the issuer’s agent RA10 by no later than 48 hours before the time of the Meeting or any adjournment thereof. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message. After this time any change of instructions to a proxy appointed through CREST should be communicated to the proxy by other means. CREST Personal Members or other CREST sponsored members, and those CREST Members who have appointed voting service provider(s) should contact their CREST sponsor or voting service provider(s) for assistance with appointing proxies via CREST. For further information on CREST procedures, limitations and system timings please refer to the CREST Manual. We may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5) (a) of the Uncertificated Securities Regulations 2001. In any case your proxy instruction must be received by the company’s registrars no later than 48 hours before the time of the Meeting or any adjournment thereof. Any person receiving a copy of this Notice as a person nominated by a Member to enjoy information rights under section 146 of the Companies Act 2006 (a “Nominated Person”) should note that the provisions in Notes 1 and 2 above concerning the appointment of a proxy or proxies to attend the Meeting in place of a Member, do not apply to a Nominated Person as only shareholders have the right to appoint a proxy. However, a Nominated Person may have a right under an agreement between the Nominated Person and the Member by whom he or she was nominated to be appointed, or to have someone else appointed, as a proxy for the Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may have a right under such an agreement to give instructions to the Member as to the exercise of voting rights at the Meeting. Nominated persons should also remember that their main point of contact in terms of their investment in the Company remains the Member who nominated the Nominated Person to enjoy information rights (or, perhaps the custodian or broker who administers the investment on their behalf). Nominated Persons should continue to contact that Member, custodian or broker (and not the Company) regarding any changes or queries relating to the Nominated Person’s personal details and interest in the Company (including any administrative matter). The only exception to this is where the Company expressly requests a response from a Nominated Person. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, entitlement to attend and vote at the Meeting and the number of votes which may be cast thereat will be determined by reference to the register of members of the Company as at 11.30 a.m. on the day which is two days before the day of the Meeting or adjourned Meeting. Changes to entries on the register of members after that time shall be disregarded in determining the rights of any person to attend and vote at the Meeting. In order to facilitate voting by corporate representatives at the Meeting, arrangements will be put in place at the Meeting so that (i) if a corporate shareholder has appointed the Chairman of the Meeting as its corporate representative with instructions to vote on a poll in accordance with the directions of all of the other corporate representatives for that shareholder at the Meeting, then on a poll those corporate representatives will give voting directions to the Chairman and the Chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and (ii) if more than one corporate representative for the same corporate shareholder attends the Meeting but the corporate shareholder has not appointed the Chairman of the Meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative. Corporate shareholders are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate representatives (www.icsa.org.uk) for further details of this procedure. The guidance includes a sample form of representation letter if the Chairman is being appointed as described in (i) above. 56 NOTICE OF MEETING 7. 8. 9. M O U N T V I E W E S T A T E S P. L. C. If the Chairman, as a result of any proxy appointments, is given discretion as to how the votes the subject of those proxies are cast and the voting rights in respect of those discretionary proxies, when added to the interests in the Company’s securities already held by the Chairman, result in the Chairman holding such number of voting rights that he has a notifiable obligation under the Disclosure and Transparency Rules, the Chairman will make the necessary notifications to the Company and the Financial Services Authority. As a result, any Member holding 3% or more of the voting rights in the Company who grants the Chairman a discretionary proxy in respect of some or all of those voting rights and so would otherwise have a notification obligation under the Disclosure and Transparency Rules, need not make a separate notification to the Company and the Financial Services Authority. As at 16 July 2009, being the last business day prior to the printing of this Notice, the Company’s issued capital consisted of 3,899,014 Ordinary Shares carrying one vote each. Therefore, the total voting rights in the Company as at 16 July 2009 are 3,899,014. Resolution 9, which will be proposed as a special resolution, seeks to delete the provisions of the Company’s Memorandum of Association and to amend the Company’s existing Articles of Association to remove all references therein to authorised share capital. Since the adoption of the existing Articles of Association at the 2008 AGM, further provisions of the Companies Act 2006 (CA 2006) will come into force in October 2009. The Company intends to make further changes to the Articles of Association in 2010 to reflect these provisions following the proposed implementation of the Shareholder Rights Directive on 3 August 2009. However, as a result of the changes in law, the requirement for the Company to have provisions in its Memorandum of Association setting out the objects of the Company will be abolished from 1 October 2009 and from this date any existing provisions in the Company’s Memorandum of Association will be deemed to be contained in the Company’s Articles of Association. Whilst provisions in the existing Memorandum of Association (including the objects clause and authorised share capital statement) will, by virtue of the Companies Act 2006 (Commencement No., 8, Transitional Provisions and Savings) Order 2008, be deemed to be part of the Company’s Articles of Association, these provisions can be removed by special resolution. The removal of these provisions would enable the Company to take advantage of the abolition of the requirements for companies to have an objects clause and an authorised share capital. This would also mean that all the provisions of the Articles of Association are contained in one document. The Company therefore asks shareholders to consent to the deletion of the provisions of the Company’s Memorandum of Association and to the adoption of the new Articles of Association by special resolution. Directors will still be limited as to the number of shares they can allot at any time by virtue of the fact that allotment authority continues to be required under the CA 2006. As such, the allotment of shares by the Board will remain subject to the Board obtaining the requisite authority from shareholders prior to such allotment. 10. Copies of the Directors’ service contracts and a copy of the proposed new Articles of Association of the Company together with a copy of the existing Articles of Association are available for inspection at the registered office at Mountview House, 151 High Street, Southgate, London N14 6EW during normal business hours on weekdays (Saturdays, Sundays and English public holidays excepted) from the date of this notice until the conclusion of the Meeting and will also be available for inspection on the date and at the place of the Meeting from 15 minutes prior to the commencement of the Meeting until the conclusion of the Meeting. SHAREHOLDERS’ INFORMATION 57 M O U N T V I E W E S T A T E S P. L. C. FINANCIAL CALENDAR 2009 Final dividend record date 17 July Annual Report Posted to Shareholders 17 July Annual General Meeting Final dividend payment Interim Results 12 August 17 August 26 November Copies of this statement are being sent to shareholders. Copies may be obtained from the Company’s registered office: Mountview House 151 High Street Southgate London N14 6EW All administrative enquiries relating to shareholdings should be addressed to the Company’s Registrars: Capita Registrars Northern House Woodsome Park Fenay Bridge Huddersfield West Yorkshire HD8 0GA 

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