2005 Annual report Location of the Group’s properties and those of its associates SIMPANG KIRI (cid:2) Medan (cid:2) KERASAAN (cid:2) (cid:2) BERTAM SUNGEI REYLA SUNGEI KRUIT MALAYSIA (cid:2) Kuala Lumpur MAJORITY HELD 3,750 ha MINORITY HELD 1,200 ha SENNAH (cid:2) BILAH (cid:2) PANGKATAN (cid:2) PERHENTIAN TINGGI LENDU (cid:2) BERADIN Singapore (cid:2) Padang (cid:2) MUKO MUKO SUMATRA (cid:2) Bengkulu MAJORITY HELD 22,000 ha INCLUDES NEW BANGKA PROJECT MINORITY HELD 25,250 ha BANGKA ISLAND KALIMANTAN AUSTRALIA MAJORITY HELD 11,800 ha MINORITY HELD 6,400,000 ha AREA OF NAPCo PROPERTIES WOODLANDS (cid:2) Brisbane (cid:2) Sydney (cid:2) Melbourne (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) for the year ended 31 December 2005 Oil-palm nursery. NAPCo cattle at the Company’s Wainui feedlot. The M. P. Evans Group operates oil-palm and rubber plantations in Indonesia oil-palm plantations and property development in Malaysia and beef-cattle farming in Australia Contents Officers, professional advisers and representatives 2 Summary of results 3 Chairman’s statement 4 Review of operations 6 Report of the directors 19 Corporate governance 22 Corporate social responsibility 23 Report of the board to the shareholders on directors’ remuneration 24 Statement of directors’ responsibilities 27 Independent auditors’ report 28 Consolidated profit and loss account 29 Statement of total recognised gains and losses 30 Reconciliation of movements in equity shareholders’ funds 30 Consolidated balance sheet 31 Company balance sheet 32 Consolidated cash-flow statement 33 Notes to the accounts 34 Subsidiary and associated undertakings 59 Analysis of land areas 60 5-year summary 61 Notice of meeting 62 Appendix to the notice of annual general meeting 64 Map of annual general meeting venue inside back cover 1 3 Officers, professional advisers and representatives Chairman Non-executive directors Konrad P Legg Senior independent Appointed a director in 1987. A non- executive director of Coburg Group plc. A former non-executive director of Lendu Holdings PLC. Chairman of the audit and remuneration committees. (Age 62) J Derek Shaw, FRAgS Independent Appointed a director in 2005. A director of The North Australian Pastoral Company Pty Limited. Former chairman of Linden Foods Limited and former chairman and founder of the Australian cotton producer, Colly Farms Cotton Limited. Former non-executive deputy chairman of Lendu Holdings PLC. Member of the audit and remuneration committees. (Age 65) Left to right standing; Konrad Legg, David Wilkinson, Derek Shaw, seated; Philip Fletcher, Richard Robinow, Peter Hadsley-Chaplin. Richard M Robinow Non-executive independent Appointed a director in 1999 and chairman in February 2005. Chairman of R.E.A. Holdings plc and a non- executive director of the Belgian plantation group, SA SIPEF NV. Member of the audit and remuneration committees. (Age 60) Executive directors Philip A Fletcher, FCA Joint chief executive Appointed a director in 1987, managing director in 1991 and executive chairman between 1999 and 2005. Former executive director of Bertam Holdings PLC and Lendu Holdings PLC. Joined the Group in 1982 after initial career in accountancy with KPMG in London and Sydney and in industry with The RTZ Corporation PLC group. (Age 56) Peter E Hadsley-Chaplin, MA MBA Joint chief executive Appointed a director in 1989. Former executive chairman of Bertam Holdings PLC and Lendu Holdings PLC. A director of The North Australian Pastoral Company Pty Limited. Former chairman of The Association of the International Rubber Trade. Prior to joining the Group in 1988 he was a commodity broker with C Czarnikow Limited. (Age 48) O David Wilkinson, BSc Appointed a director in 2005. Former executive director of Bertam Holdings PLC. Formerly a planter with Harrisons Malaysian Plantations Berhad (now Golden Hope Berhad) before involvement in the retail and property- development sectors in Malaysia, where he is resident. (Age 47) 2 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Summary of results For the year ended 31 December 2005 Turnover Gross profit Profit on ordinary activities before taxation Profit on ordinary activities attributable to members 2005 £’000 2004 as restated* £’000 12,182 12,911 5,082 6,374 7,576 10,862 4,460 6,599 Equity shareholders’ funds 70,970 59,834 Net cash inflow from operating activities 5,499 9,160 Pence Pence Basic earnings per 10p share 8.86 13.86 Equity dividend per 10p share in respect of the year 6.25 6.00 * Details concerning the restatement of the comparative figures are dealt with in notes 1(b) and 11 to the financial statements on pages 34 and 41 respectively. 3 Secretary and registered office John F Elliott 3 Clanricarde Gardens, Tunbridge Wells Kent TN1 1HQ Tel: 01892 516333 Fax: 01892 518639 Website: www.mpevans.co.uk Company number: 1555042 Independent auditors Deloitte & Touche LLP Chartered Accountants and Registered Auditors, Crawley Registrars Computershare Investor Services PLC PO Box 82, The Pavilions Bridgwater Road, Bristol BS99 7NH Tel: 0870 702 0000 Fax: 0870 703 6101 Website: www.computershare.com Email: web.queries@computershare.co.uk Managing agents in Indonesia P.T. Tolan Tiga Indonesia Bank Sumut Building, 7th Floor Jln Imam Bonjol No 18 Medan 20152, North Sumatra Principal bankers National Westminster Bank Plc 1 Princes Street, London EC2R 8PA Bank Mandiri (Persero) Plaza Mandiri Kav. 36-38 Jln. Jend. Gatot Subroto Jakarta 12190, Indonesia Standard Chartered Bank Malaysia Berhad 2 Leboh Pantai 10710 Pulau Pinang, Malaysia Commonwealth Bank of Australia 368-374 Ruthven Street, Toowoomba Queensland 4350, Australia Nominated adviser and broker Westhouse Securities LLP Clements House, 14-18 Gresham Street London EC2V 7NN Solicitors Lovells Atlantic House, Holborn Viaduct London EC1A 2FG Chairman’s statement for the year ended 31 December 2005 Results As foreshadowed in the interim report, trading conditions (mainly palm-oil prices) were not as operations difficult and a number of young cattle had to be turned off earlier and lighter than would have been ideal. Nevertheless, a satisfactory profit was favourable in 2005 compared with 2004. As a result, achieved for the year as a whole. the profit before taxation amounted to £7,576,000 against 2004’s (restated) £10,862,000. The Group generated net operating cash flows of £5,499,000 (2004 £9,160,000 (restated)). The balance sheet remains strong. Crops of oil palm fresh fruit bunches (“f.f.b.”) on both the majority-owned estates (222,700 tonnes (2004 - 228,300 tonnes)) and those held by associates (334,800 tonnes (2004 - 336,000)) were broadly similar to 2004 but, as world production and stocks increased, the palm-oil price eased. The average for 2005 was US$420 per tonne compared with the high level of US$475 in 2004. The weakness of the US Dollar against Sterling in the first half of the year had a negative effect on the results although this improved in the second half. As a consequence, plantation profits for the year were lower than the previous year. A small profit was recorded from the Group’s cattle- fattening property in Queensland, Woodlands, after its first full year of operation. Of the non-plantation associates, the 40%-held Bertam Properties Sdn. Bhd. reported fewer property disposals during 2005 and, as a result, lower profits. However, the 27.92%-owned (now 29.29% following a purchase in 2006) The North Australian Pastoral Dividend As referred to below, agreements have been signed for the sale of three of the Malaysian estates, with the funds having been received in respect of Sungei Reyla. In the light of this, and of the results referred to above, your board proposes a final dividend of 4.25p per share which, together with the interim dividend of 2.00p paid in November 2005, makes 6.25p for the year, compared with 6.00p in respect of 2004. Strategy implementation Substantial progress has been achieved in the implementation of the new strategy since the merger with Bertam Holdings PLC and Lendu in February last year. The strategy remains, as stated in the 2005 merger documentation, to take advantage of the substantial real-estate value that has accrued to the Malaysian plantations by selling them and investing both into substantially larger oil-palm developments in Indonesia and also into the Australian beef-cattle sector. Over the past year or so, agreements have been signed in relation to the sale of three of the Group’s six Malaysian estates for a total of approximately £16.5 million. With regard to new investment, progress Company Pty. Limited (“NAPCo”), which was primarily has been made on the 12,000-hectare oil-palm acquired with the acquisition of Lendu Holdings PLC development on Bangka Island, which lies off the (“Lendu”) in February 2005, contributed to the south-east coast of Sumatra. It remains the Group’s Group’s results for the first time. A severe drought in policy to identify further areas of new land suitable for the eastern part of Australia in the first half made oil-palm development in Indonesia. 4 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Encouraging progress has also been made in relation price level. Beef-cattle prices have held up well, to new Australian investments. On 31 March 2006, helped by the continuing ban by Japan of American the acquisition of Flinton Station (“Flinton”), beef because of BSE fears. comprising 7,586 hectares, was completed for a total of A$7.5 million. Flinton lies immediately adjacent to the Group’s 11,826-hectare property, Woodlands. By combining the two operations, greater economies of scale are expected to be achieved and it is also believed that the average value per acre of both properties is likely to have risen. Since the 2005 interim report, the Group has slightly increased its share in NAPCo from 27.92% to 29.29%. Further investment in NAPCo will be considered by the board as and when appropriate opportunities arise. On the exchange-rate front, the most notable matter has been the strength of the Indonesian Rupiah against the US Dollar. At US$1 = Rp8,750, this represents a near 11% appreciation from the rate at the year end and reflects the level of interest rates in Indonesia. This strengthening of the Rupiah has a negative effect on our earnings in Sterling terms. The board remains positive about the long-term strategic prospects for the Group and specifically for both the palm-oil and beef markets. Prospects Acknowledgements F.f.b. crops on the majority-owned Indonesian estates have been slightly below expectations to date in 2006 but, at this stage, it is anticipated that a modest I should like to express the board’s appreciation to all our managers, staffs and workforces in our various areas of operation. As shareholders will be aware, increase over last year as a whole will be achieved. some of those connected with our Malaysian Those Malaysian estates which have not yet been sold operations have already left the Group’s employment are anticipated to show similarly increased crops but or will be doing so in the near future as the Malaysian it is possible that some of these too may be disposed estates are sold. I should like to pay tribute to all of during the year. Of the associated companies, those employees who have been so loyal over the PT Agro Muko is again expected to show a marked years and who have accepted the situation with increase in palm-oil production. It is, however, a little equanimity. May I, on behalf of the board and early in the year to make precise predictions. shareholders alike, wish them all well in their future Palm-oil prices have, to date in 2006, continued in endeavours. the acceptable US$400 to US$450 range. After threatening to drop down through the US$400 level, positive sentiment derived from expectations of a slowing of the increase in palm-oil production and the under-pinning effect of increased demand for Richard Robinow Chairman vegetable oil for use in bio fuels, has maintained the 10 May 2006 5 Review of operations for the year ended 31 December 2005 Review of results Gross profit This is the first full set of annual accounts reflecting 2005 was characterised by crops of oil palm fresh the merger that was completed in February 2005. fruit bunches (“f.f.b.”) similar to the previous year, The 2004 Group results, balance sheet and cash-flow statement have all been restated as if the merger with Bertam Holdings PLC had been in place throughout that year. Lendu Holdings PLC (“Lendu”) has been treated on an acquisition-accounting basis and its results, net assets and cash flows have been brought into account as from the date of the merger. weaker palm oil prices, a volatile Sterling/US Dollar exchange rate and a generally weakening Indonesian Rupiah against the US Dollar. The first profits from the upgraded Australian cattle-fattening property, Woodlands, were recorded. As a result, gross profit for the year amounted to £5,082,000 compared with £6,374,000 for 2004, as restated. The palm-oil market Palm oil traded within a relatively narrow band in 2005 between US$390 and US$450 per tonne which was, at US$420 on average, lower than 2004’s US$475. World production of the two biggest vegetable oils, palm and soybean, increased markedly during 2005 and stocks rose despite continued strong demand. As a result, prices eased. Exchange rates The Group’s earnings, cash flows and net assets (reported in sterling) continued to be susceptible to the movements of the currencies in the various areas of operation. The Indonesian Rupiah was generally weak throughout 2005 against the US Dollar but the US Dollar, having remained weak against Sterling in the first half, strengthened in the second so that the average for the whole year was similar to 2004. The average rate for the Malaysian Ringgit against Sterling was similar to 2004. During 2005, the Australian Dollar strengthened a little against Sterling. 6 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC The results and the operations of the Group Associated companies companies in Indonesia, Malaysia and Australia The share of operating profits/(losses) in associates are reviewed in more detail in the reports on was as follows: pages 8, 12 and 16 respectively. Other administrative expenses Other administrative expenses, at £2,075,000 (prior to the credit for goodwill amortisation of P T Agro Muko P T Kerasaan Indonesia Bertam Properties Sdn. Bhd. Kennedy, Burkill & Co. Berhad £942,000), were some 42% higher than 2004’s Asia Green Environmental Sdn. Bhd. restated £1,464,000. This was due primarily to legal costs incurred in defending against the continuing lawsuit in connection with Sennah Estate in Indonesia and the increased provision for potential NAPCo Lendu Holdings PLC Held % 31.53 36.00 40.00 20.00 30.00 27.92 35.11 2005 £’000 2004 £’000 1,759 2,622 605 395 134 16 885 — 714 1,211 212 25 — (182) 3,794 4,602 Weaker commodity prices and similar f.f.b. crops national insurance on unexercised share options. to the previous year in the associated plantation The increase in the share price during the year was companies resulted in lower profits. A continuing responsible for the requirement for a higher provision. Administrative expenses for the Australian activities and the new Bangka project were brought in for the first time in 2005. The higher cost for administrative expenses was, however, more than offset by the credit arising from the amortisation of negative goodwill. This negative goodwill arose both from the inclusion of Lendu further to the merger in the early part of the year and from the acquisition of shares in The North Australian lacklustre housing market in Malaysia and fewer land disposals resulted in lower profits in Bertam Properties Sdn. Bhd. but these lower results were offset by the inclusion for the first time of the Group’s share of NAPCo. The results and the operations of the Group’s associated companies in Indonesia, Malaysia and Australia are reviewed in more detail in the reports on pages 8, 12 and 16 respectively. Exceptional items Professional costs in connection with the merger in February 2005 amounted to £590,000. As referred to below under “Planting programme”, rubber areas on Pastoral Company Pty. Limited (“NAPCo”). In both Pangkatan Estate and oil-palm areas on Bilah and cases, the Group’s acquisition cost was less than the Simpang Kiri Estates have been replanted early. fair value of the net assets on the balance sheets of the companies acquired, giving rise to negative goodwill. This negative goodwill will be amortised in proportion to the recovery, through usage or sale, of Accordingly, the net book values of these plantings amounting to £72,000 have been written off during 2005. As a result of all of the above, the profit on ordinary activities before taxation for the year amounted to £7,576,000 compared with £10,862,000 for 2004 the acquired non-monetary assets. (as restated). 7 Review of operations Indonesia The new palm-oil mill on Pangkatan Estate is now processing f.f.b. from its own estate as well as from Bilah and Sennah Estates ANNUAL REPORT 2005 M. P. EVANS GROUP PLC SUMATRA BANGKA ISLAND Oil-palm and rubber plantations MAJORITY-OWNED ESTATES F.f.b. crops were in line with budget but slightly lower than 2004. The small remaining areas of rubber on Pangkatan and Sennah Estates produced markedly lower crops than last year, albeit at very high prices, as the programme of replanting into oil palm continues. Turnover and results from the Indonesian plantation operations are set out in note 2 to the accounts on page 35. Pangkatan palm-oil mill The new palm-oil mill on Pangkatan Estate was commissioned in January 2005 and is now processing f.f.b. from its own estate as well as from Bilah and Sennah Estates. This is the first year in which palm oil and kernels, rather than f.f.b., have been produced and is therefore not comparable with 2004 in that respect. 21,500 tonnes of crude palm oil and 5,000 tonnes of kernels were produced during 2005 and sales by regular tender in the local market were undertaken. As expected, the extraction rate from the mill has been on the low side, at around 21%, largely due to the poor-quality planting material which was inherited on Sennah Estate. The “Dura” planting material on the estate results in oversize kernels and a thin “mesocarp” which is the fibre from which palm oil is extracted. Palm oil yields are therefore low from Sennah’s f.f.b. A replanting programme to counter this problem is referred to in more detail below under “Planting programme”. Composting One particular feature of the new Pangkatan mill is the composting system which was installed by our associated company, Asia Green Environmental Sdn. Bhd. The key features of the system are that the bunches from which the fruitlets have been removed Composting at Pangkatan Mill. are shredded, laid out in windrows and then liquid effluent and an inoculant are applied. The decomposition process takes around three months, after which the resulting nutritious compost is applied in the field. Not only does the system mean that no effluent reaches streams and rivers but the application of the organic compost should, over time, reduce the need for expensive inorganic fertilisers. Planting programme Reference was made above to the poor-quality planting material on Sennah Estate which is having the effect of reducing the extraction rate at the Pangkatan mill. The intention is, now that Sennah’s old rubber has been replanted with oil palms, to institute a programme of replanting the existing 950 or so hectares of mature palms with modern, high- quality material. This programme is currently under review and the intention will be to balance the cash-flow implications of such a programme in the most efficacious way possible. As at the end of 2005, Sennah Estate had 373 hectares immature (21% of the planted area) and this is expected to rise to 620 hectares (38%) at the end of 2006. Pangkatan Estate has been in the process of replanting its rubber areas in order to maximise the throughput in the new mill. At the end of 2005, 700 hectares (29%) of the estate were immature and this is 9 Review of operations Indonesia continued expected to increase to 775 hectares (32%) by the end of 2006. These proportionately large areas of replanting on Sennah and Pangkatan are being done with high-class planting material and not only will they contribute to a substantial increase in crops when they mature but they should also have a beneficial effect on the mill’s extraction rate. Both Simpang Kiri and Bilah Estates are undertaking replanting of areas slightly earlier than would Associated-company estates Oil-palm f.f.b crop ‘000 tonnes 340 320 300 280 260 240 220 200 180 160 140 120 100 80 60 40 20 0 Majority-owned estates Oil-palm f.f.b crop ‘000 tonnes 180 160 140 120 100 80 60 40 20 0 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 10 normally be the case. These areas are deemed not to be of an acceptable standard and it is felt to be more beneficial to upgrade them sooner rather than later. On Bilah Estate, the areas in question are very low lying and prone to prolonged flooding, so yields are poor. The replanting is being carried out on platforms and, although this is expensive, it is deemed worthwhile as the resulting yields are expected to be at much higher levels when the palms mature. ASSOCIATED-COMPANY ESTATES Both PT Agro Muko (31.53% owned) and PT Kerasaan Indonesia (36% owned) reported f.f.b. crops similar to last year. The expected upturn in the second half of the year in the crops of the PT Agro Muko estates disappointingly failed to materialise as the palms took longer than expected to emerge from their down cycle and, in addition, very wet weather was experienced. Similar rubber crops to 2004, but at very strong prices, partially offset the downturn in palm-oil operations. The planting of the PT Agro Muko estates is expected to be completed by the end of 2006 with some 830 hectares of oil palm and 100 of rubber scheduled for the year. At this point some 19,500 hectares will have been planted; 17,500 with oil palm and 2,000 with rubber. Kerasaan Estate continues to be a well-run mature estate. Palm-oil price US$ per tonne - Rotterdam c.i.f. 500 400 300 200 2001 2002 2003 2004 2005 2006 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC BANGKA PROJECT Both infrastructural and planting work on the new 12,000-hectare project has been carried out to a high-quality level. A number of roads have been constructed in addition to several buildings, including an office and staff quarters. So far, 700 hectares have been cleared and some 390 hectares of young oil palms planted. These have responded well, with little or no evidence of any transplanting shock. The million or so seedlings of young oil palms currently in the nursery are also in healthy condition. The rate of planting to date has been slower than originally planned as there have been some delays resulting from differences over compensation claims. Although it is expected that the rate of both clearing and planting will accelerate considerably as the year progresses, it is possible that a proportion of the 4,000-hectare programme may be carried forward for completion in 2007. NEW LAND It remains the Group’s policy to secure another 30 to 40,000 hectares of land in Indonesia, probably in Kalimantan, for development into oil-palm plantations. Any such land will be subject to rigorous financial, social and environmental assessment. NEW JAKARTA OFFICE In view of the board’s commitment to expand substantially into the Indonesian palm-oil domain, New road in a young oil-palm area on the Bangka project. it has been decided to open an office in Jakarta. David Wilkinson will be moving to Jakarta with his family around July 2006 in order to take charge of the new Indonesian projects. He will also continue to be responsible for the Malaysian operations and will therefore make regular visits back to Penang. SENNAH ESTATE LAWSUIT The hearing of DR Rahmat Shah’s appeal in the Supreme Court in Jakarta is awaited. The Group is vigorously contesting this appeal. Sterling-v-Indonesian Rupiah £1 = Indonesian Rupiah US Dollar-v-Indonesian Rupiah US$1 = Indonesian Rupiah Sterling-v-US Dollar £1 = US$ 18,000 16,000 14,000 12,000 10,000 2001 2002 2003 2004 2005 2006 12,000 10,000 8,000 6,000 2001 2002 2003 2004 2005 2006 2.00 1.90 1.80 1.70 1.60 1.50 1.40 1.30 2001 2002 2003 2004 2005 2006 11 Review of operations Malaysia Bertam Properties’ housing development activities remain profitable... The value of raw land continued at robust levels ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Oil-palm plantations and property development Majority-owned estates Oil-palm f.f.b crop ‘000 tonnes 90 80 70 60 50 40 30 20 10 0 2001 2002 2003 2004 2005 MAJORITY-OWNED ESTATES Operations Oil palm f.f.b. F.f.b. crops were similar to last year but below original expectations as yields generally fell back in Malaysia in reaction to the high yields of the previous year. Rubber manufacturing The rubber manufacturing activities which are located in Southern Thailand, but are managed, and the produce marketed, by the Malaysian head office in Penang, experienced adverse trading conditions in 2005. The weather was unusually wet which meant that latex was difficult to obtain, resulting in production of some 1,480 tonnes compared with some 1,900 in 2004. The rubber market was strong throughout the year but this also meant that latex purchases cost more. Nevertheless, a small profit was achieved. Turnover and results from the Malaysian plantation and Thai rubber-manufacturing operations are set out in note 2 to the accounts on page 35. ASSOCIATED COMPANIES Bertam Properties Sdn. Bhd. (“Bertam Properties”) (40% owned) The housing market in Malaysia remained lacklustre during 2005. The value of raw land, however, as referred to in more detail below under “Land disposals”, continued at robust levels. Bertam Properties’ housing- development activities remained profitable but the company made fewer land disposals during 2005 than the previous year and overall profits fell accordingly. 13 Review of operations Malaysia continued Kennedy, Burkill & Co. Berhad (“KB”) LAND DISPOSALS (20% owned) Significant progress has been made in respect of the KB reported lower profits in 2005 mainly because of sale of the Malaysian estates since last year’s merger. property-development activities at a reduced level A summary of the status of the various sales is as compared with 2004. As with the Group’s plantation follows: operations, profits were lower because of the weaker palm-oil price. Sungei Reyla Asia Green Environmental Sdn. Bhd. (“AG”) (30% owned) As announced to the Stock Exchange on 4 May 2006, the sale of the 660-hectare estate, for a total of RM31.4 million (£4.7 million) has recently been AG made a small profit in 2005, as it did in 2004. Although the board remains confident that the completed. concept of palm-oil waste-composting systems is a Lendu sound one with exciting prospects, it remains the intention to dispose of this investment at the appropriate time as it is not regarded as a core part of the Group’s future activities. Part of the Bertam Properties housing development. The sale and purchase agreement in respect of this 195-hectare estate was signed in June 2005 for a total of RM26.0 million (£3.9 million). One condition remains outstanding, namely that of the approval of the Estate Land Board (“ELB”). It is not uncommon for the ELB approval system to take up to a year or so. It is understood that the approval relating to Lendu is likely to be satisfied very shortly. Settlement is scheduled to occur within two months thereafter. Beradin The sale and purchase agreement in respect of this 1,085-hectare estate was signed in January 2006 for a total of RM53.2 million (£7.9 million). As with Lendu Estate, the only condition which remains to be satisfied is the ELB approval. This is hoped to be achieved within the next three months. Settlement is expected to follow within a further two months. 14 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Sungei Kruit This 828-hectare estate is being actively marketed for sale. It was valued at RM61.5 (£9.2 million) for the purposes of the February 2005 merger. Perhentian Tinggi Negotiations are at an advanced stage with regard to the sale of a 200-hectare portion of this 926-hectare estate. The balance of the estate is being actively marketed. The whole estate was valued at RM91.0 (£13.6 million) for the purposes of the 2005 merger. Bertam This 74-hectare piece of land which was not sold to Bertam Properties in the 1990’s has appreciated substantially since then, chiefly as a result of the Bertam Properties development itself. The land was valued at a total of RM23.8 million (£3.6 million) for the purposes of the 2005 merger and is believed to have risen further in value since then. The land is not being actively marketed for sale as, in view of the rate at which the other estates are being sold, there is no immediate cash requirement. It is also considered likely that raw-land values in this area will continue to escalate over the next year or so. Bertam Properties As announced to the Stock Exchange on 2 December 2005, agreement was reached to sell 339 hectares of raw land to Naza Motor Sdn. Bhd. for RM376,750 per hectare, equivalent to a total of RM127.50 million (£19.0 million). This is for the purpose of establishing an automotive manufacturing plant on the site. A “ground-breaking” ceremony was recently held, attended by the Malaysian Prime Minister, in whose constituency the project lies. Because settlement of the transaction is payable in several instalments over a two-year period and ownership does not pass until the consideration has been paid in full, no account will be taken of the profit on any part of the disposal until the final instalment has been paid in two years’ time. Other raw land sales on the project area are in the course of negotiation. PENANG TOURIST PROJECTS The Straits Beach Properties Sdn. Bhd. (“Straits Beach”) restaurant project site, as yet undeveloped, was recently independently valued at RM5.8 million (£0.9 million), compared with its cost of approximately RM5.2 million. The planning approval for the project is due to expire in May 2006 and, accordingly, an application in respect of its renewal was recently submitted to the relevant authorities. Once this has been obtained, a more aggressive marketing campaign to sell the project, in its undeveloped state, will be launched. Whilst the Tropical Spice Garden project has been well designed, has received abundant favourable media coverage in Malaysia and is well managed, visitor numbers have, to date, been a little below earlier expectations. The cost of this project is RM1.65 million (£255,000) and, while it too is planned to be sold, there is no immediate urgency in this regard, particularly as it is believed that the project will attract a higher price once its reputation has been more firmly established and visitor numbers have increased. 15 Review of operations Australia On ‘Woodlands’, the first year of full-scale operations resulted in some 2,100 head being sold... and a profit achieved ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Beef cattle MAJORITY-OWNED OPERATIONS Work has already commenced in enabling the two During the severe drought conditions in eastern Australia in the first half of 2005, many operators were forced to turn off more cattle than they would have wished and this, in turn, had a negative impact on prices. However, welcome rains were received in the second half and beef prices soon recovered. On the Group’s property, Woodlands, the first year of full-scale operations resulted in some 2,100 head being sold at generally good prices and a profit achieved. There were some 2,500 head on the property at the end of the year. Turnover and results from the Australian cattle operations are set out in note 2 to the accounts on page 35. Flinton Station (“Flinton”) purchase As announced to the Stock Exchange on 31 March 2006, the acquisition of the neighbouring 7,586- hectare property, Flinton, has been completed. The Woodlands/Flinton aggregation, comprising 19,412 hectares, is managed by Michael Wright, who formerly managed Woodlands alone. properties to be managed more effectively as a single entity. This is through the establishment of, primarily, a more efficient watering system, a new set of cattle yards and a new cattle “laneway” between the two properties. These capital works will cost in the region of A$400,000 (£165,000). It is believed that these improvements will prove beneficial from an operational perspective and also add value to the aggregation. ASSOCIATED COMPANY - NAPCo (27.92%-owned) As referred to above in connection with Woodlands, the cattle-breeding and fattening activities of NAPCo were also adversely affected by the severe drought conditions in the company’s areas of operation. As a result, some 12,000 head had to be sold in the first half of the year at lighter weights and at lower prices than would apply in more normal circumstances. Consequently, most of the profit for the year occurred in the first half. NAPCo properties 17 Review of operations Australia continued Recently, NAPCo acquired, at a cost of A$35.5 million, a 20,000-hectare, first-class backgrounding property, named Cungelella, located north of Roma in Central Queensland. The company has for some time been short of suitable additional backgrounding country, where young steers and heifers are grass fed before being grain fed at the company’s feedlot, Wainui, located near Brisbane. This will now permit the company’s strategy to be implemented more effectively. This involves, inter alia, the construction of further bore holes on the company’s premier breeding station, Alexandria, which comprises a total of some 1.6 million hectares. This will allow more of the hitherto-unutilised country to be grazed which, in turn, will permit more breeders to be run and therefore more calves to be produced. As more cattle are put through the system, there will be a requirement for the feedlot to be expanded. The relevant approvals for this area are already in the process of being applied for. All of this is only likely both to improve earnings and to add further value to the company. The net asset value per share, as stated in the company’s 2005 consolidated balance sheet, stands at A$12.65 per share. This compares favourably with the Group’s average purchase cost of its now 29.29% holding of approximately A$7.30 per share. Beef-cattle prices remain firm in Australia, buoyed by the continuing ban on US beef imports into Japan as a result of further incidents of BSE in North America. Prices may be subject to some downward pressure once this ban is lifted but longer-term demand prospects for Australian beef, particularly from Asia, continue to appear favourable. Average dressed-weight prices received by NAPCo for major product lines Heifers (grain fed) Steers (grain fed) Cows 3.75 3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 2001 2002 2003 2004 2005 2006 Head NAPCo cattle sales and brandings 2000 - 2005 Sales Brandings Closing stock 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 18 8 7 4 , 7 8 1 0 2 6 , 4 8 1 1 7 9 , 4 8 1 4 6 3 , 3 8 1 5 4 1 , 1 7 1 9 1 2 , 6 4 1 9 0 4 , 9 4 1 0 9 , 4 4 8 8 1 , 9 5 4 0 6 , 6 4 0 5 5 , 0 6 5 7 5 , 1 6 9 1 0 , 0 5 8 6 7 , 3 5 0 1 0 , 9 4 7 2 7 , 1 5 9 0 3 , 6 5 9 1 6 , 9 4 2000 2001 2002 2003 2004 2005 Report of the directors for the year ended 31 December 2005 Principal activities At 31 December 2005, the Company, through its subsidiary and associated undertakings, had interests in oil-palm and rubber plantations in Indonesia, oil-palm plantations and property development in West Malaysia and beef-cattle operations in Australia. A review of the year and future prospects are included in the chairman’s statement and review of operations and incorporated in this report by reference. Results and dividend Details of the profit for the year are given in the consolidated profit and loss account on page 29. An interim dividend of 2.00p per share (2004 nil) was paid on 4 November 2005. The board recommends a final dividend of 4.25p (2004 - 6.00p) per 10p share. This dividend will be paid on or after 20 June 2006 to those shareholders on the register at the close of business on 19 May 2006. Share capital and significant event during the year Details of the authorised, allotted and fully-paid capital of the Company are as follows: Shares of 10p each Authorised capital 87,000,000 Allotted and fully-paid capital At 1 January 2005 48,073,072 Issued in respect of two schemes of arrangement on 2 February 2005 23,220,527 Cancelled in respect of two schemes of arrangement on 2 February 2005 (20,792,133) Share options exercised 16 May 2005 25 May 2005 26 May 2005 11 July 2005 19 July 2005 30 September 2005 7 October 2005 10 October 2005 70,000 26,895 5,379 60,000 12,000 10,413 60,000 30,000 At 31 December 2005 50,776,153 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC During the year the authorised share capital was increased from 64,000,000 to 87,000,000 shares of 10p each. In addition 23,220,527 shares have been issued and 20,792,133 shares have been cancelled as a result of the implementation of two schemes of arrangement used to merge the Company with Bertam Holdings PLC and Lendu Holdings PLC. Further details of the merger are set out in notes 32 to 35 to the accounts on pages 55 to 58. The issued share capital as of the date of this report is 50,776,153 shares of 10p, which includes 609,049 shares held by M. P. Evans (Malaysia) Sdn. Berhad now an 80.6%-owned subsidiary. Directors and directors’ interests The present membership of the board is set out on page 2. Messrs. Wilkinson, Shaw and Ahamad Mohamad were appointed to the board on 2 February 2005. Mr Ahamad Mohamad resigned from the board on 14 September 2005. Messrs Fletcher and Hadsley-Chaplin will retire from the board at the forthcoming annual general meeting in accordance with the articles of association and, being eligible, offer themselves for re-election. They both have service contracts with the Company which continue until terminated by either party giving not less than one year’s notice in writing but not, in any event, beyond their normal retirement dates. The directors serving at the end of the year, together with their interests at the beginning (or later date of appointment) and end of the year, in the shares of 10p each in the Company, were as follows: Beneficial 42,086 392,842 554,766 — 584,389 266,170 At 31 December 2005 Options Non- beneficial — 76,361 166,439 — 22,412 — — 1,508,235 1,508,235 228,951 — — R M Robinow P A Fletcher P E Hadsley-Chaplin O D Wilkinson K P Legg J D Shaw At 1 January 2005 or date of appointment Options Beneficial Non- beneficial R M Robinow P A Fletcher P E Hadsley-Chaplin O D Wilkinson K P Legg J D Shaw 30,000 416,199 484,802 — 202,233 — — 75,000 — — — — — 800,000 800,000 368,951 — — 19 Report of the directors Continued Further details of the directors’ interests in share options are disclosed in the report of the board to the shareholders on directors’ remuneration on page 25. Messrs Fletcher and Hadsley-Chaplin are beneficially interested in 4,500 (0.5%) and 3,600 (0.4%) shares respectively of M.P. Evans (Malaysia) Sdn. Berhad. Apart from these shareholdings, none of the directors holds any beneficial interest in, or holds options to buy shares in, any subsidiary undertaking of the Company as at the date of this report. No director has had a material interest in any contract of significance in relation to the business of the Company, or any of its subsidiary undertakings, during the financial year or had such an interest at the end of the financial year. Substantial interests The following interests under Part VI of the Companies Act 1985 (as modified by the Companies Act 1989) have been notified to the Company as at the date of this report: Alcatel Bell Pensioenfonds VZW JPMorgan Fleming Mercantile Investment Trust Plc M M Hadsley-Chaplin Aberdeen Asian Smaller Companies Investment Trust Plc Shares % 5,948,497 11.72 3,517,103 2,342,254 6.93 4.61 1,680,000 3.31 In addition to the above, Aberdeen Asset Management PLC has notified the Company that it has an interest, as fund manager, in 6,965,767 shares (13.72%) which includes all of the shares held by Aberdeen Asian Smaller Companies Investment Trust PLC. Tangible fixed assets In the opinion of the directors the open-market value of the Group’s interests in land and buildings at the year end was approximately £74.4 million compared to £39.3 million as shown in note 14 to the accounts on page 42. The Group’s liability to taxation if the land and buildings were sold at their estimated value would be approximately £9.4 million. Authority to allot shares At the annual general meeting a general authority is being sought, under resolution 6, for the directors to allot shares up to a maximum nominal amount of £1,692,369, which represents 33.33% of the Company’s issued equity share capital. The Company does not currently hold any shares as treasury shares within the meaning of section 162A of the Companies Act 1985. 20 The directors do not have any present intention of issuing any shares other than in respect of shares allotted to the holders of share options as and when they are exercised. It is also proposed, under resolution 7, to empower the directors to allot equity securities for cash pursuant to this general authority (and to sell any treasury shares which it may acquire for cash) otherwise than in accordance with shareholders’ statutory pre- emption rights so as to deal with practical problems arising in connection with rights issues or otherwise up to an aggregate nominal amount of £507,761, representing 10% of the Company’s issued equity share capital. The authorities conferred by resolutions 6 and 7 will last for up to 15 months from the date of the annual general meeting. Authority to make market purchases of shares The directors propose to seek authority for the Company to purchase its own shares on the Alternative Investment Market of the London Stock Exchange for up to 15 months. The authority will give the directors flexibility to purchase the Company’s shares as and when they consider it appropriate. The board will only exercise the power of purchase when satisfied that it is in the best interests of the Company so to do and all such purchases will be market purchases made through the Alternative Investment Market of the London Stock Exchange. The directors would only consider making purchases if they believed that the earnings or net assets per share of the Company would be improved by such purchases. Companies are now allowed to hold their own shares which have been purchased in this way in treasury rather than having to cancel them. The directors would, therefore, consider holding the Company’s own shares which had been purchased by the Company as treasury shares as this would give the Company the flexibility of being able to sell such shares quickly and effectively where it considers it in the interests of shareholders to do so. Whilst any such shares are held in treasury, no dividends will be payable on them and they will not carry any voting rights. Resolution 8 set out in the notice of the annual general meeting will accordingly be proposed to authorise the purchase of up to a maximum of 5,077,615 shares, on the Alternative Investment Market of the London Stock Exchange, representing 10% of the Company’s current issued equity share capital. The maximum price which may be paid for a share on any exercise of the authority will be restricted to 5% above the average of the middle- market quotations for such shares as derived from the Daily Official List of the London Stock Exchange for the five business days before the purchase is made. The maximum number of shares and the price range are stated for the purpose of compliance with statutory requirements in seeking this authority and ANNUAL REPORT 2005 M. P. EVANS GROUP PLC should not be taken as an indication of the level of purchases, or the prices thereof, that the Company would intend to make. As at the date of this report there were options to subscribe for 3,462,316 shares outstanding under the executive share-option schemes. If all of the options were exercised, the resulting number of shares would represent (a) 6.38% of the enlarged issued equity share capital at that date; and (b) if the proposed authority to purchase shares was exercised in full 7.04% of the reduced issued equity share capital at that date (excluding any share capital which may be purchased and held in treasury). Adoption of amended articles of association Resolution 9, which is a special resolution, proposes amendments to the Company’s articles of association. The proposed amendments are summarised below: (a) An electronic communications regime was introduced by the Companies Act 1985 (Electronic Communications) Order 2000 (the “Electronic Communications Order”), which came into force on 22 December 2000, and permits companies to post information onto a website and communicate with shareholders via email. The order does not automatically amend a company’s articles of association and does not compel a company to adopt the new electronic regime; however, the best-practice guide of the Institute of Chartered Secretaries and Administrators recommends that companies take steps to amend their articles of association to take advantage of the electronic communications regime. As a result, certain alterations are required to be made to the Company’s articles of association to incorporate the provisions of the Electronic Communications Order. The amendments will allow the Company to provide these services if they are requested by shareholders and gives the directors the discretion to use electronic communications to distribute notices of meetings, annual reports and accounts and summary financial statements. (b) Further changes introduced by the Electronic Communications Order permit a proxy to be appointed electronically. An electronic proxy-voting service, which allows companies, agents and investors to liaise electronically regarding company meetings, was introduced by CRESTCo in January 2003. If a company permits it, a registered holder of securities in CREST is able to appoint and instruct a proxy by electronic means using the CREST system. It is proposed that the Company’s articles of association be amended to take advantage of the CREST automated proxy-voting service. (c) The Uncertified Securities Regulations 2001 replaced earlier regulations relating to the holding and transfer of shares in uncertified form and, although they largely repeat the earlier provisions, amendments are proposed to update the articles to accommodate the 2001 regulations. A copy of the amended articles of association will be available for inspection up to the date of the annual general meeting at the registered office of the Company, on the Company’s website (www.mpevans.co.uk) and at the place of the annual general meeting for 15 minutes prior to and during the meeting. The articles of association shall be amended in the manner set out in the appendix to the notice of annual general meeting. Payments to trade creditors It is the Company’s normal practice to make payments to suppliers in accordance with agreed terms provided that the supplier has performed in accordance with the relevant terms and conditions. The Company’s creditor days calculated as at 31 December 2005 amounted to nil (2004 nil). Financial instruments Details of the Group’s financial instruments, and the board’s policy on their use, are given in note 28 to the accounts on pages 53 and 54. Auditors Deloitte & Touche LLP have expressed their willingness to continue in office and a resolution to re-appoint them will be proposed at the forthcoming annual general meeting. Significant post-year-end events It was announced on 16 January 2006 that contracts had been exchanged for the acquisition of Flinton Station, a 7,586-hectare beef-cattle property in Queensland, Australia contiguous to the Group’s existing property, for a consideration of A$7.5 million (approximately £3.1 million at the current rate of exchange). This acquisition was completed on 31 March 2006. It was further announced on 23 January 2006 that one of the Group’s Malaysian plantations, Beradin Estate, had been sold for RM53.2 million (approximately £7.9 million at the current rate of exchange). Further details of the above transactions are set out in note 30 to the accounts on page 55 of this report, together with further developments since the year end and concerning the sale of the Sungei Reyla Estate. Approved by the board of directors and signed on its behalf J F Elliott Secretary 10 May 2006 21 Corporate governance The board recognises the importance of a sound system of internal control and of continuing to conduct the Group’s affairs according to good corporate-governance principles. An explanation of how the Company has applied the principles appears below. 1 Directors The details of the Company’s board, together with the audit and remuneration committees, are set out on page 2. The board comprises a non-executive chairman, three executive and two further non- executive directors, one of whom chairs the audit and remuneration committees. This structure is designed to ensure that there is a clear balance of responsibilities between the executive and the non-executive functions. The board meets at least quarterly and is provided with information which includes executive operating reports, management accounts and budgets. Each director retires and must seek re-election at least every three years. 2 Directors’ remuneration As set out in the report on page 24, the remuneration of the executive directors is determined by the remuneration committee whilst that of the non- executives is determined by the whole board. 3 Relations with shareholders The Company attaches importance to effective communications with both its institutional and private shareholders. All shareholders have at least twenty working days’ notice of the annual general meeting at which all of the directors, including the chairman of the committees, are normally available for questions. Comments and questions from shareholders are encouraged at the meeting. 4 Accountability and audit a) Financial reporting A detailed review of the performance and financial position of the Group is included in the chairman’s statement and the review of operations. The board uses these and the report of the directors to present a balanced and understandable assessment of the Group’s position and prospects. The directors’ responsibility for the financial statements is described on page 27. b) Internal control The directors acknowledge their responsibilities for the Group’s system of internal control. Such a system can provide reasonable, but not absolute, assurance against material misstatement or loss. A review of the process of risk identification, evaluation and management is carried out regularly and presented to the board for approval. The review process considers the control environment and the major business risks faced by the Group. Such risks include, but are not limited to: the effect of palm-oil price fluctuations on profitability; the effect of beef-cattle price fluctuations on profitability; the effect of fluctuations in the Malaysian property market on profitability and asset values; the effect of exchange-rate fluctuations on profitability and assets; political instability and social unrest in Indonesia; and day-to-day management remote from the UK board. 22 (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Corporate social responsibility Important control procedures, in addition to the day- A company’s success is not solely measured by its to-day supervision of holding-company business, financial performance but also by its social and include regular executive visits to the areas of operation environmental performance. of the Group and of the associates, comparison of The Group is fully committed to the well being of its operating performance and monthly management employees and their families. It undertakes to train and motivate the workforce, to help employees build on skill levels and to extend their education and qualifications. accounts with plans and budgets, application of authorisation limits, internal audit of subsidiary undertakings and frequent communication with local management. c) Audit committee and auditors The audit committee is formally constituted with written terms of reference and is chaired by Mr K P Legg. The executive directors are not members of the committee but can be invited to attend its meetings. The auditors of the Group may also attend part or all of each meeting and they have direct access to the committee for independent discussions, without the presence of the executive directors. The audit committee may examine any matters relating to the financial affairs of the Group or to the Group’s audit; this includes reviews of the annual accounts and announcements, accounting policies, compliance with accounting standards, the appointment and fees of auditors and such other related matters as the board may require. d) Going-concern basis After making enquiries, the directors have formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the directors continue to adopt the going- concern basis in preparing the financial statements. A joint initiative between the Group, SA SIPEF NV, Deloitte and the MAN Group funded the rehabilitation of a village in Aceh decimated by the 2004 tsunami. Pictured (right) is the opening ceremony. 23 Report of the board to the shareholders on directors’ remuneration The remuneration committee keeps under review the remuneration and terms of employment of the executive directors and recommends such remuneration and terms, and changes therein, to the board. The committee comprises all of the non-executive directors and is chaired by Mr K P Legg. Service contracts The executive directors, Messrs Fletcher, Hadsley- Chaplin and Wilkinson, have service contracts with the Company, or a wholly-owned subsidiary undertaking, which continue until terminated by either party giving not less than one year’s notice in writing but not, in any event, beyond their normal retirement dates. The non-executive directors do not have service contracts or provisions for pre-determined compensation on termination of their appointment. Remuneration policy Executive directors The remuneration of Messrs Fletcher and Hadsley- Chaplin is determined in accordance with both the level of responsibility undertaken and equivalent remuneration of executives of a similar standing in the U.K. where their responsibilities are undertaken. The remuneration committee has deemed it inappropriate to attach a performance-related element to the annual remuneration of Messrs Fletcher and Hadsley-Chaplin but rather to provide appropriate incentives by means of share options with a view to aligning the interests of these two executive joint managing directors with those of the shareholders. Mr Wilkinson’s remuneration is determined in accordance with both the level of responsibility undertaken and equivalent remuneration of executives of a similar standing in Malaysia, where his responsibilities are undertaken and where he resides. He participates in a discretionary bonus scheme related both to his performance and to the profitability of the Malaysian operations. Non-executive directors The fees of the non-executive directors are determined by the board in accordance with the articles of association of the Company. The details of the remuneration of the directors for the year ended 31 December 2005 are set out below: Salary and fees 2005 £ Bonus 2005 £ Pension costs Benefits in kind 2005 £ 2005 £ Total 2005 £ Total 2004 £ Executive directors P A Fletcher Reimbursement from other companies for which he acted P E Hadsley-Chaplin Reimbursement from other companies for which he acted 133,000 — £133,000 133,000 — £133,000 — — — — — — 32,222 9,221 174,443 169,153 — — — (18,218) £32,222 £9,221 £174,443 £150,935 25,406 14,516 172,922 168,984 — — — (32,826) £25,406 £14,516 £172,922 £136,158 O D Wilkinson £59,071 £20,900 £10,042 £1,982 £91,995 — Non-executive directors R M Robinow K P Legg J D Shaw Ahamad Mohamad See notes on next page. 24 £24,092 £19,800 £22,917 £11,667 — — — — — — — — — — — — £24,092 £14,100 £19,800 £17,600 £22,917 £11,667 — — ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Notes 1. Apart from the discretionary bonus paid to Mr Wilkinson referred to above, no performance-related bonuses were awarded to the directors during the year. 2. The pension costs for Messrs Hadsley-Chaplin and Fletcher set out above are the contributions made by the Company to the defined- contribution scheme described below. The pension costs for Mr Wilkinson are contributions made by a subsidiary undertaking to the Employees’ Provident Fund in Malaysia. 3. No long-term incentives, other than the share options described below, have been awarded to directors. 4. Directors’ fees for Messrs Robinow, Legg and Ahamad Mohamad were paid to third parties. 5. The 2004 comparatives have been restated in accordance with merger accounting principles. Executive share-option schemes The executive directors are members of executive share-option schemes which were established in 2001 under which options to subscribe for shares in the Company may be granted to selected employees. As at 31 December 2005, options over 3,245,421 shares which were granted to the executive directors between 17 July 2001 and 2 February 2005 remain outstanding. These include 1,685,421 share options granted to directors on 2 February 2005 (see * on page 26). During the year 140,000 options granted to directors were exercised and none lapsed. No performance criteria are attached to the options and no options are held by the non-executive directors. At 31 December 2005 the middle-market quotation for the Company’s shares, as derived from the London Stock Exchange Daily Official List, was 225.5p, as compared with the high and low quotations for the year of 234p and 174p respectively. The details of the options held over shares of the Company by the executive directors during the year ended 31 December 2005 are set out in the table below: Number of shares under option P A Fletcher Balance at 1 January 2005 Granted in the year (see * on page 26) 400,000 200,000 200,000 — — — — 358,600 — 179,300 — 143,440 — 26,895 Exercised Balance at in the year 31 December 2005 Exercise price Date Date from of grant which normally first exercisable Expiry date — 400,000 75.5p 17 July 2001 17 July 2004 17 July 2011 — 200,000 96.5p 1 May 2002 1 May 2005 1 May 2012 126.5p 2 May 2003 2 May 2006 2 May 2013 — 200,000 2 Feb 2005 17 July 2011 2 Feb 2005 85.05p — 358,600 2 Feb 2005 1 May 2005 1 May 2012 — 179,300 101.78p 2 Feb 2005 2 May 2006 2 May 2013 — 143,440 138.04p 2 Feb 2005 4 May 2007 4 May 2014 26,895 158.95p — P E Hadsley- Chaplin O D Wilkinson 800,000 708,235 — 1,508,235 400,000 200,000 200,000 — — — — 358,600 — 179,300 — 143,440 — 26,895 75.5p 17 July 2001 17 July 2004 17 July 2011 — 400,000 96.5p 1 May 2002 1 May 2005 1 May 2012 — 200,000 126.5p 2 May 2003 2 May 2006 2 May 2013 — 200,000 2 Feb 2005 17 July 2011 85.05p — 358,600 2 Feb 2005 2 Feb 2005 1 May 2005 1 May 2012 — 179,300 101.78p 2 Feb 2005 2 May 2006 2 May 2013 — 143,440 138.04p 2 Feb 2005 4 May 2007 4 May 2014 26,895 158.95p — 800,000 708,235 — 1,508,235 50,000 25,000 25,000 — (50,000) — — — — (90,000) — 134,475 — — 67,238 — — 53,790 — — 13,448 — 75.5p 17 July 2001 17 July 2004 17 July 2011 96.5p 1 May 2002 1 May 2005 1 May 2012 25,000 126.5p 2 May 2003 2 May 2006 2 May 2013 25,000 2 Feb 2005 44,475 2 Feb 2005 17 July 2011 85.05p 2 Feb 2005 1 May 2005 1 May 2012 67,238 101.78p 2 Feb 2005 2 May 2006 2 May 2013 53,790 138.04p 2 Feb 2005 4 May 2007 4 May 2014 13,448 158.95p 100,000 268,951 (140,000) 228,951 25 Report of the board to the shareholders on directors’ remuneration Continued * The options granted on 2 February 2005 were allotted in exchange for the directors’ former share options held under an option scheme of Bertam Holdings PLC (now Bertam Holdings Limited) as a result of the scheme of arrangement used to implement the merger with that company. Pensions Messrs Fletcher and Hadsley-Chaplin are members of a defined-contribution pension scheme. The benefits are pensions at retirement, a pension to a spouse payable on death before or after retirement and life- assurance cover based on a multiple of salary. The members contribute 5% of their pensionable salary to the scheme. The scheme is designed to comply with relevant legislation and to provide a good standard of benefit. No element of a director’s remuneration package, other than basic salary, is pensionable. Approved by the board of directors and signed on its behalf J F Elliott Secretary 10 May 2006 26 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Statement of directors’ responsibilities The directors are responsible for preparing the annual report and the financial statements . The directors have chosen to prepare the accounts for the Company and the Group in accordance with United Kingdom Generally Accepted Accounting Practice (“UK GAAP”). United Kingdom company law requires the directors to prepare financial statements for each financial year which give a true and fair view, in accordance with UK GAAP, of the state of affairs of the Company and of the Group as at the end of the financial year and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; state whether applicable accounting standards have been followed; and 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 to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for the Company’s system of internal control, for safeguarding the assets of the Company and hence for taking reasonable steps (cid:2) make judgements and estimates that are for the prevention and detection of fraud and other reasonable and prudent; irregularities. 27 (cid:2) (cid:2) (cid:2) Independent auditors’ report to the members of M. P. Evans Group PLC We have audited the financial statements of M.P. Evans Group PLC for the year ended 31 December 2005 which comprise the consolidated profit and loss account, the statement of total recognised gains and losses, the reconciliation of movements in equity shareholders’ funds, the balance sheets, the consolidated cash-flow statement and the related notes 1 to 35. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an 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 As described in the statement of directors’ responsibilities, the Company’s directors are responsible for the preparation of the financial statements in accordance with applicable United Kingdom law and United Kingdom Generally Accepted Accounting Practice. Our responsibility is to audit the financial statements in accordance with relevant United Kingdom legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report if, in our opinion, the directors’ report is not consistent with the financial statements, if 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 transactions with the Company and other members of the Group is not disclosed. We read the directors’ report and the other information contained in the annual report for the above year as described in the contents section and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. 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 financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the circumstances of the Company and the Group, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion: the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practices, of the state of the affairs of the Company and the Group as at 31 December 2005 and of the profit of the Group for the year then ended; and the financial statements have been properly prepared in accordance with the Companies Act 1985. DELOITTE & TOUCHE LLP Chartered Accountants and Registered Auditors, Crawley 10 May 2006 28 (cid:2) (cid:2) ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Consolidated profit and loss account for the year ended 31 December 2005 2005 Note £’000 Turnover* Cost of sales Gross profit Foreign-exchange gains Other administrative expenses Total administrative expenses Group operating profit* Share of operating profit in associates Total operating profit Exceptional (charge)/credit Profit on ordinary activities before interest Interest receivable Income from fixed-asset investments Interest payable Profit on ordinary activities before taxation Tax charge on profit on ordinary activities Profit on ordinary activities after taxation Equity minority interests Profit on ordinary activities attributable to the members of M. P. Evans Group PLC Basic earnings per 10p share – pence Diluted earnings per 10p share – pence 1(c) and 2 2 2 4 5 6 7 8 24 12 12 2004 as restated (see notes 1(b) and 11) £’000 12,911 (6,537) 12,182 (7,100) 5,082 6,374 234 (1,133) 177 (1,464) (899) (1,287) 4,183 3,794 7,977 (525) 7,452 318 89 (283) 7,576 (2,617) 4,959 (499) 5,087 4,602 9,689 715 10,404 393 72 (7) 10,862 (3,538) 7,324 (725) 4,460 6,599 8.86 8.56 13.86 13.37 * All operations are classed as continuing and included in the above is turnover of £840,000 and Group operating profit of £130,000 relating to acquired operations (see note 15). 29 Statement of total recognised gains and losses for the year ended 31 December 2005 Profit attributable to the members of the Company Unrealised share of movements in associated undertakings’ reserves Previously unrealised profit on sale of land to associated undertaking released to profit and loss account on sale of land by associate Tax credited straight to reserves Exchange differences on foreign-currency net investments Total recognised gains and losses for the year 2005 £’000 4,460 (1,020) (33) — 6,253 9,660 2004 as restated (see note 1(b)) £’000 6,599 1,469 (202) 27 (4,006) 3,887 Following the adoption of FRS21, dividends have been restated to be recorded when approved (see note 11 for further details). Reconciliation of movements in equity shareholders’ funds for the year ended 31 December 2005 Profit attributable to members of the Company Equity dividend paid (note 10) Issue of shares Other recognised gains and losses relating to the year Net addition to equity shareholders’ funds Opening equity shareholders’ funds before prior-year adjustment Prior-year adjustment Opening equity shareholders’ funds after prior-year adjustment Closing equity shareholders’ funds 30 2005 £’000 4,460 (4,049) 411 5,525 5,200 11,136 56,804 3,030 59,834 70,970 2004 as restated (see notes 1(b) and 11) £’000 6,599 (2,644) 3,955 — (2,712) 1,243 55,947 2,644 58,591 59,834 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Consolidated balance sheet at 31 December 2005 2005 Note £’000 £’000 £’000 2004 as restated (see notes 1(b) and 11) £’000 13 13 292 (889) (597) 13 14 40,500 16 31,789 — — — 31,565 19,646 71,692 51,211 17 18 19 20 21 22 23 24 24 24 24 24 24 1,622 3,516 2,790 3,006 666 3,866 4,633 6,752 10,934 (7,022) 3,912 75,604 (536) (779) (3,319) 70,970 5,078 10,317 20,372 2,139 (4,099) 5,093 32,070 70,970 Fixed assets Goodwill Negative goodwill Intangible assets Tangible assets Investments Current assets Stocks Debtors Investments 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 Provisions for liabilities and charges Equity minority interests Net assets Capital and reserves Called-up share capital Share premium account Revaluation reserve Capital redemption reserve Merger reserve Share of associated companies’ reserves Profit and loss account Total equity shareholders’ funds These financial statements were approved by the board of directors on 10 May 2006 and signed on its behalf. Philip Fletcher Peter Hadsley-Chaplin Directors 15,917 (2,539) 13,378 64,589 (1,183) (729) (2,843) 59,834 4,762 5,108 17,646 2,139 (4,522) 5,823 28,878 59,834 31 Company balance sheet at 31 December 2005 2005 Note £’000 £’000 £’000 2004 as restated (see notes 1(b) and 11) £’000 14 600 16 27,245 18 11,332 1,913 23 12,901 27,845 12,924 10,431 1,360 13,245 20 (15,279) (2,034) 25,811 5,078 10,283 2,139 743 7,568 25,811 23 24 24 24 24 11,791 (1,255) 10,536 23,460 4,807 5,073 60 — 13,520 23,460 Fixed assets Tangible assets Investments Current assets Debtors Cash at bank and in hand Creditors - amounts falling due within one year Net current (liabilities)/assets Total assets less current liabilities Capital and reserves Called-up share capital Share premium account Capital redemption reserve Merger reserve Profit and loss account Total equity shareholders’ funds These financial statements were approved by the board of directors on 10 May 2006 and signed on its behalf. Philip Fletcher Peter Hadsley-Chaplin Directors 32 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 2005 Note £’000 2004 as restated (see note 1(b)) £’000 26 26 26 26 26 26 26 27 5,499 1,180 (327) (1,838) (4,199) (4,276) (4,049) (8,010) 2,151 (214) 9,160 2,268 59 (2,226) (4,593) — (2,644) 2,024 1,019 1,555 (6,073) 4,598 Consolidated cash-flow statement for the year ended 31 December 2005 Net cash inflow from operating activities Dividends from associated undertakings Returns on investments and servicing of finance Taxation Capital expenditure and financial investment Acquisitions Equity dividend paid Net cash (outflow)/inflow before management of liquid resources and financing Management of liquid resources Financing (Decrease)/increase in cash 33 Notes to the accounts for the year ended 31 December 2005 1 ACCOUNTING POLICIES (a) (b) (c) (d) (e) (f) The particular accounting policies adopted by the directors are described below. Accounting convention These financial statements have been prepared under the historical-cost convention and in accordance with applicable United Kingdom accounting standards. Basis of consolidation The Group financial statements consolidate the financial statements of the Company and all of its subsidiary and associated undertakings. All subsidiary and associated undertakings prepare their financial statements to 31 December. Merger accounting Merger-accounting principles have been applied to the merger of M. P. Evans Group PLC with Bertam Holdings PLC. Under merger accounting, the results and cash flows of these groups are combined from the beginning of the financial period in which the merger occurred. Profit-and-loss-account, balance-sheet and cash-flow comparatives are restated on the combined basis. Further information is set out in notes 33 to 35. Acquisition accounting In accordance with FRS2, goodwill arising on the acquisition of Lendu Holdings PLC has been calculated on a piecemeal basis. The Companies Act 1985 requires that the calculation of goodwill is performed once, at the date that control passes. The directors consider that, as the one-stage process would result in reclassifying the Group’s share of Lendu Holdings PLC’s profits and reserve movements to goodwill, the one-stage process would not give a true and fair view, and that it is necessary to adopt the FRS2 approach to give a true and fair view. If this departure from the Act had not been made, the negative goodwill arising on the acquisition of Lendu Holdings PLC would have been increased by £431,000. Turnover Turnover represents the invoiced value of crops, livestock and produce sold during the year, excluding sales taxes. Income is recognised at the point of delivery. Investment income Investment income is taken into account by reference to the date on which it is declared payable. Goodwill Goodwill arising on acquisition, representing any excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired, is capitalised and written off on a straight line basis over its useful economic life, which is twenty years. Provision is made for any impairment. Negative goodwill is similarly included in the balance sheet and is credited to the profit and loss account in the period in which the acquired non-monetary assets are recovered through usage or sale. Tangible fixed assets Leasehold land in Indonesia is held on 25 and 30-year renewable leases and is not depreciated. Perpetual leasehold land in Malaysia and freehold land in Australia is treated in the same way. Short-leasehold land is depreciated over the life of the lease. All costs of planting and upkeep of immature areas on that land and replanting are capitalised and written off in equal annual instalments at 4% per annum. Other tangible fixed assets, other than construction in progress which is not depreciated, are written off over their estimated useful lives at rates which vary between 3% and 50% per annum. Interest is capitalised on borrowings used to finance the development of immature areas. The Group follows the transitional arrangements under FRS15 “Tangible Fixed Assets”. Under this arrangement the assets were frozen at their current cost or valuation and the valuation has not been updated. (g) Investments (i) The Group Undertakings over which the Group exerts significant influence via shareholdings and its membership on the board are treated as associated undertakings. Investments in associated undertakings are dealt with in the consolidated financial statements under the equity method of accounting. The consolidated profit and loss account includes the Group’s share of the profit on ordinary activities before taxation and attributable taxation of the associated undertakings based on audited financial statements for the year ended 31 December 2005. In the consolidated balance sheet, the investments in the associated undertakings are shown as the Group share of net assets at the balance-sheet date, as adjusted for any associated goodwill. (ii) The Company Investments in subsidiary undertakings and associated undertakings are stated at cost less provision for any impairment in value. Stocks Stocks are valued at the lower of cost and net realisable value. In the case of rubber stocks, cost represents the average cost of production, including appropriate overheads. Deferred taxation Deferred tax is provided in full on timing differences which result in an obligation at the balance-sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise, based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in financial statements. Deferred tax is not provided on unremitted earnings of subsidiaries and associates where there is no commitment to remit these earnings. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted. (h) (i) 34 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 1 ACCOUNTING POLICIES Continued (j) (k) (l) Foreign exchange The assets and liabilities of foreign subsidiary undertakings are translated into Sterling at the year-end rates of exchange. Results of foreign subsidiary undertakings and associated undertakings are translated at average rates of exchange. Differences on exchange arising from the translation of the net investments in subsidiary and associated undertakings, together with differences between results translated at average rates and at year-end rates, are dealt with in reserves. All other differences are dealt with in the profit and loss account. Pension The Group operates a defined-contribution pension scheme. The pension charge represents the contributions payable by the Group under the rules of the scheme. Share options In accordance with the requirement of UITF17 “Employee Share Schemes”, a charge is made in the profit and loss account if there is a difference between the fair value of the shares under option at the date of granting, and the exercise price. An accrual for National Insurance is made in respect of all options granted on the difference between the fair value of the shares at the year end and the exercise price to the extent that it is believed that the options are likely to be exercised. 2 TURNOVER, PROFIT AND NET ASSETS The following is a breakdown of turnover, profit and net assets into geographical areas and types of activity: Turnover £’000 Cost of sales £’000 2004 Gross profit £’000 Plantations Indonesia Malaysia Total plantations Cattle - Australia* Manufacturing - Thailand Other - UK Turnover £’000 Cost of sales £’000 7,222 2,957 10,179 840 1,139 24 12,182 (3,573) (1,787) (5,360) (665) (1,075) — (7,100) 2005 Gross profit £’000 3,649 1,170 4,819 175 64 24 7,734 3,514 11,248 — 1,630 33 5,082 12,911 Exchange gains Other administrative expenses Group operating profit Share of associated companies’ operating profits** Total operating profit Exceptional (charge)/credit Profit before interest Net interest and financial income Profit before tax 234 (1,133) 4,183 3,794 7,977 (525) 7,452 124 7,576 (3,300) (1,746) (5,046) — (1,491) — (6,537) 4,434 1,768 6,202 — 139 33 6,374 177 (1,464) 5,087 4,602 9,689 715 10,404 458 10,862 35 Notes to the accounts continued 2 TURNOVER, PROFIT AND NET ASSETS Continued Segmented net assets Plantations Indonesia Malaysia Total plantations Cattle - Australia Manufacturing - Thailand Other - UK Total segmented net assets Group share of net assets of associated undertakings** Unallocated net assets*** 2005 £’000 14,946 18,624 33,570 3,040 673 (272) 37,011 31,542 2,417 70,970 2004 £’000 11,576 18,225 29,801 — 462 359 30,622 16,968 12,244 59,834 The cattle operation was acquired during the year as part of the acquisition of Lendu Holdings PLC. * ** The Group’s share of associated companies’ profits and net assets is shown below and in note 16(b). *** Unallocated net assets include other investments, taxation, cash at bank and in hand, overdrafts and loans. 36 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 2 TURNOVER, PROFIT AND NET ASSETS Continued The Group’s aggregate share of the summarised results of its associated undertakings are shown below: Net assets 8,506 1,446 2005 Turnover Profit before tax Taxation Profit after tax Fixed assets Current assets Current liabilities Long-term liabilities 2004 Turnover Profit before tax Taxation Profit after tax Fixed assets Current assets Current liabilities Long-term liabilities Minority interests Bertam Properties Sdn. Bhd. Kennedy, Burkill & Co. Bhd. Asia Green Environmental Sdn. Bhd. PT Kerasaan Indonesia PT Agro Muko £’000 £’000 £’000 £’000 £’000 The North Australian Pastoral Company Pty Limited £’000 Total £’000 3,284 395 (112) 283 10,203 4,688 (5,084) (1,301) 154 131 (24) 107 809 647 (10) — 624 862 5,507 6,124 16,555 19 — 19 265 417 (383) (18) 281 607 (182) 1,766 (537) 885 (184) 3,803 (1,039) 425 1,229 701 2,764 216 188 (118) — 4,375 1,322 (400) (189) 22,912 4,092 (2,205) (1,700) 38,780 11,354 (8,200) (3,208) 286 5,108 23,099 38,726 Bertam Properties Sdn. Bhd. £’000 Kennedy, Burkill & Co. Bhd. £’000 Asia Green Environmental Sdn. Bhd. £’000 PT Kerasaan Indonesia PT Agro Muko £’000 £’000 Lendu Holdings PLC £’000 Total £’000 3,076 1,211 (112) 1,099 9,145 3,291 (3,985) (1,156) — 212 212 (53) 159 508 754 (6) — — 755 986 6,478 1,459 12,966 30 — 30 185 308 (230) (28) — 235 715 (215) 2,623 (794) (70) 100 4,721 (1,074) 500 1,829 30 3,647 179 224 (160) — — 3,595 1,433 (894) (186) — 4,976 275 (1,098) (46) (116) 18,588 6,285 (6,373) (1,416) (116) 243 3,948 3,991 16,968 Net assets 7,295 1,256 Further details of the Group’s associated undertakings are shown on page 59. 37 Notes to the accounts continued 3 EMPLOYEES Employee costs during year Wages and salaries Social security costs Past-service liabilities Other pension costs THE GROUP THE COMPANY 2005 £’000 2,081 99 139 267 2,586 2004 £’000 2,097 134 121 127 2,479 2005 £’000 436 71 — 90 597 2004 £’000 420 54 — 91 565 Number Number Number Number Average number of persons employed Estate manual staff United Kingdom directors 1,458 118 7 1,583 1,467 85 4 1,556 — 4 2 6 Details of directors’ remuneration required by the Companies Act 1985 are shown within the report of the board to the shareholders on directors’ remuneration on pages 24 and 25 and form part of these audited financial statements. 4 EXCEPTIONAL (CHARGE)/CREDIT Fundamental reorganisation expenses Group profit on sale of fixed-asset investments Group (loss)/profit on sale of tangible fixed assets Previously unrealised profit on sale of land to associated undertaking released to the profit and loss account on sale of land by associated undertaking to third party Share of associated undertakings’ net gains on sale of tangible fixed assets Total net exceptional (charge)/credit 2005 £’000 (590) 95 (72) 33 9 (525) There is no material impact on either the current or prior-year tax charge resulting from the exceptional (charge)/credit. — 4 2 6 2004 £’000 — 197 197 202 119 715 38 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 5 INTEREST RECEIVABLE Interest receivable on bank deposits 6 INTEREST PAYABLE 2005 £’000 318 2004 £’000 393 Interest payable on bank loans and overdrafts 283 7 7 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION Profit on ordinary activities before taxation is stated after charging/(crediting) Depreciation of tangible fixed assets Amortisation of net negative goodwill (including that of any associated undertaking) Auditors’ remuneration - audit fee 758 (942) 195 389 — 160 Included in auditors’ remuneration are fees of £10,000 (2004 £10,000) relating to the Company. 39 Notes to the accounts continued 8 TAX CHARGE ON PROFIT ON ORDINARY ACTIVITIES United Kingdom corporation tax charge for the year Relief for overseas taxation Overseas taxation Adjustments in respect of prior periods Share of associated undertakings’ taxation Total current tax Deferred taxation - origination and reversal of timing differences 2005 £’000 1,335 (1,382) (47) 1,734 15 1,702 1,039 2,741 (124) 2,617 2004 £’000 2,152 (2,032) 120 2,330 (4) 2,446 1,075 3,521 17 3,538 Unrelieved losses of £5,407,000 (2004 £4,151,000) remain available to offset future taxable profits of Group companies. The standard rate of tax for the year, based on the United Kingdom standard rate of corporation tax, is 30% (2004 - 30%). This was also the standard rate of Indonesian tax for the current and previous years. The actual tax charge is higher than the standard rate for the reasons set out in the following reconciliation. Profit on ordinary activities before tax Tax on profit on ordinary activities at standard rate Factors affecting the charge for the year Effect of amortisation of negative goodwill Expenses not deductible for tax purposes Unrelieved losses Exchange differences Differences on overseas dividends Lower rate applicable to associated undertakings’ profits Other differences Total actual amount of current tax 7,391 2,217 (284) 196 438 (46) 501 (103) (178) 10,862 3,259 — 30 173 160 331 (342) (90) 2,741 3,521 9 (LOSS)/PROFIT OF PARENT COMPANY As permitted by Section 230 of the Companies Act 1985, the profit and loss account of the parent company is not presented as part of these financial statements. The consolidated profit includes a loss before dividends of £1,903,000 (2004 profit £4,132,000) in respect of the parent company. 40 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 10 EQUITY DIVIDEND PAID AND PROPOSED 2005 interim dividend - 2.00p per 10p share (2004 interim dividend - nil) 2004 final dividend - 6.00p per 10p share (2003 final dividend - 5.50p) 2005 £’000 1,014 3,035 4,049 2004 £’000 — 2,644 2,644 Following the year end the board has proposed a final dividend for 2005 of 4.25p per 10p share. If confirmed at the annual general meeting, it will be paid on or after 20 June 2006 to those shareholders on the register at the close of business on 19 May 2006. 11 CHANGE OF ACCOUNTING POLICY - DIVIDEND PAYMENT FRS21, Events After the Balance-Sheet Date, came into force for accounting periods commencing on or after 1 January 2005. FRS21 does not allow for dividends proposed (but not declared) to be recorded as an adjusting post-balance-sheet event. The consolidated and Company profit and loss accounts for the prior year and the reconciliation of movement in shareholders’ funds have been restated to reflect the new standard. This has resulted in higher closing reserves in 2004 for the Group (£55,072,000 compared with £52,042,000) and higher closing reserves in 2004 for the Company (£18,653,000 compared with £15,623,000). 12 BASIC AND DILUTED EARNINGS PER SHARE The calculation of basic earnings per 10p share in 2005 is based on profits of £4,460,000 and on 50,361,470 shares, which was the average number of shares in issue during the year. The calculation of basic earnings per share in 2004 was based on restated profits of £6,599,000 and on 47,619,601 shares (see note 1(b)) which was the average number of shares deemed in issue during that year. The calculation of diluted earnings per 10p share in 2005 is based on profits of £4,460,000 and on 52,101,315 shares, which was the diluted average number of shares in issue during the year. The calculation of diluted earnings per share in 2004 is based on restated profits of £6,599,000 and on 49,359,446 shares (see note 1(b)), which was the diluted average number of shares deemed in issue during that year. The additional shares used in the calculations of the 2005 and 2004 diluted earnings per share represent adjustments made for shares under option. 13 INTANGIBLE FIXED ASSETS - GOODWILL Group Cost At 1 January 2005 Additions At 31 December 2005 Amortisation At 1 January 2005 Charge/(credit) for the year At 31 December 2005 Net book value At 31 December 2005 At 31 December 2004 Positive goodwill £’000 Negative goodwill £’000 — 297 297 — 5 5 292 — — (981) (981) — (92) (92) (889) — Total £’000 — (684) (684) — (87) (87) (597) — 41 Notes to the accounts continued 14 TANGIBLE FIXED ASSETS The Group Cost Valuation At 1 January 2005 Exchange differences Acquired on acquisition of Lendu Holdings PLC Additions Disposals Freehold land £’000 Leasehold land non- depreciable £’000 Leasehold land depreciable £’000 Buildings and structures £’000 Plant, equipment and vehicles £’000 Construction in progress Total £’000 £’000 — — — 129 2,326 76 — 12,709 11,542 24,251 1,889 — 15 — 2,749 196 2,945 193 — 572 (195) 5,762 90 5,852 409 545 1,013 (47) 2,409 7 2,416 208 318 471 (92) — — — — — 2,262 — 23,629 11,835 35,464 2,828 3,189 4,409 (334) At 31 December 2005 2,531 26,155 3,515 7,772 3,321 2,262 45,556 Accumulated depreciation At 1 January 2005 Exchange differences Acquired on acquisition of Lendu Holdings PLC Charge for the year Disposals At 31 December 2005 Net book value At 31 December 2005 Net book value At 31 December 2004 — — — — — — — — — — — — 1,033 72 1,212 130 1,654 147 — 97 (77) 58 422 (40) 192 239 (83) 1,125 1,782 2,149 — — — — — — 3,899 349 250 758 (200) 5,056 2,531 26,155 2,390 5,990 1,172 2,262 40,500 — 24,251 1,912 4,640 762 — 31,565 Included in leasehold land is capitalised interest amounting to £2,824,000 (2004 £2,824,000). 42 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 14 TANGIBLE FIXED ASSETS Continued The Company Cost At 1 January 2005 Transfers from Group companies Additions At 31 December 2005 Accumulated depreciation At 1 January 2005 Transfers from Group companies Charge for the year At 31 December 2005 Net book value At 31 December 2005 Net book value At 31 December 2004 Buildings £’000 Plant, equipment and vehicles £’000 — 528 — 528 — — — — 528 — 27 243 7 277 4 181 20 205 72 23 Total £’000 27 771 7 805 4 181 20 205 600 23 43 Notes to the accounts continued 15 ACQUISITION OF SUBSIDIARY UNDERTAKING Prior to the merger, the Group owned 35.12% of the share capital of Lendu Holdings PLC. With the merger, the Group acquired a further 3.62%. On 2 February 2005, the Group acquired the remaining 61.26% of the share capital by issuing new M. P. Evans Group PLC shares to the value of £5,331,000. This gave rise to negative goodwill of £981,000. The following table sets out the book values of the identifiable assets and liabilities acquired. On a provisional basis, no fair value adjustments have been made. Book value £’000 2,939 9,910 12,849 363 108 200 671 1,922 49 865 80 2,916 300 10,304 6,312 (5,331) 981 Fixed assets Tangible Investments Total fixed assets Current assets Stocks Debtors Cash Total current assets Creditors Bank overdraft Trade creditors Taxation Provisions Taxation Total liabilities Minority interest Net assets Net assets acquired (61.26%) Shares issued Negative goodwill (note 13) 44 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 15 ACQUISITION OF SUBSIDIARY UNDERTAKING Continued Lendu Holdings PLC earned a profit after taxation and minority interests of £169,000 in the period from 1 July 2004 to 2 February 2005. The summarised profit and loss account and statement of total recognised gains and losses for the period from 1 July 2004 to 2 February 2005 and for the year ended 30 June 2004, shown on the basis of the accounting policies of Lendu Holdings PLC, are as follows: Profit and loss account Turnover Cost of sales Gross (loss)/profit Other operating expenses (net) Operating loss Exceptional items Profit/(loss) on ordinary activities before interest Finance charges (net) Loss on ordinary activities before taxation Tax on loss on ordinary activities Loss on ordinary activities after taxation Minority interests Loss for the financial period Statement of total recognised gains and losses Loss for the financial period Tax on exchange differences Surplus on revaluation of tangible fixed assets Gain/(loss) on foreign-currency translation Total recognised gains and losses relating to the period Period from 1 July 2004 to 2 Feb 2005 £’000 Year ended 30 June 2004 £’000 1,217 (1,228) 3,168 (3,108) (11) (213) (224) 276 52 (139) (87) (949) (1,036) (3) (1,039) (1,039) — — 726 (313) 60 (320) (260) 15 (245) (590) (835) (5) (840) 94 (746) (746) 40 1,583 (541) 336 16 INVESTMENTS HELD AS FIXED ASSETS Investments in subsidiary undertakings Investments in associated undertakings Other investments THE GROUP THE COMPANY 2005 £’000 — 31,542 247 31,789 2004 £’000 — 16,968 2,678 19,646 2005 £’000 27,240 — 5 27,245 2004 £’000 12,499 402 — 12,901 Details of the subsidiary and associated undertakings are given on page 59. 45 Notes to the accounts continued 16 INVESTMENTS HELD AS FIXED ASSETS Continued (a) Subsidiary undertakings The Company At 1 January 2005, as restated - see note 1(b) Purchases from Group companies Re-classified from associated undertakings At 31 December 2005 (b) Associated undertakings The Group share of net assets At 1 January 2005, as restated - see note 1(b) Exchange differences Purchases Acquired on acquisition of Lendu Holdings PLC Re-classified to subsidiaries Re-classified from other investments Share of reserves At 31 December 2005 Negative goodwill At 1 January 2005 Addition Amortisation credit At 31 December 2005 Net book value At 31 December 2005 At cost £’000 19,982 14,339 402 34,723 Listed £’000 3,991 — — — (3,991) — — — — — — — — At 31 December 2004, as restated - see note 1(b) 3,991 At valuation Listed (market value) Unlisted (directors’ valuation) The Company At 1 January 2005, as restated - see note 1(b) Re-classified to subsidiaries At 31 December 2005 46 Provisions £’000 (7,483) — — (7,483) Net book value £’000 12,499 14,339 402 27,240 Share of net assets Unlisted £’000 12,977 2,015 1,878 9,861 — 2,211 9,784 38,726 — (8,039) 855 (7,184) 31,542 12,977 2005 £’000 — 61,700 61,700 Total £’000 16,968 2,015 1,878 9,861 (3,991) 2,211 9,784 38,726 — (8,039) 855 (7,184) 31,542 16,968 2004 £’000 5,300 37,000 42,300 At cost Listed £’000 402 (402) — ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 16 INVESTMENTS HELD AS FIXED ASSETS Continued At valuation Listed (market value) (c) Other investments The Group At 1 January 2005, as restated - see note 1(b) Exchange differences Acquired on acquisition of Lendu Holdings PLC. Disposals Re-classified to subsidiaries Re-classified to associated undertakings At 31 December 2005 At cost Listed £’000 147 14 — — — — 161 At valuation Listed (market value) Unlisted (directors’ valuation) At 31 December 2005 The Company At 1 January 2005 Purchases from Group companies At 31 December 2005 At valuation Listed (market value) 2005 £’000 2004 £’000 — 4,800 Unlisted £’000 2,531 74 49 (53) (304) (2,211) 86 2005 £’000 1,382 135 1,517 2005 £’000 9 Total Total £’000 2,678 88 49 (53) (304) (2,211) 247 2004 £’000 1,075 2,200 3,275 Listed £’000 — 5 5 2004 £’000 — 47 Notes to the accounts continued 17 STOCKS Livestock Stocks of rubber crop Estate stores Nurseries 18 DEBTORS Amount falling due within one year Trade debtors Amounts owed by subsidiary undertakings Amounts owed by associated undertakings Other debtors Tax recoverable Prepayments and accrued income Amount falling due after more than one year Prepayments and accrued income THE GROUP THE COMPANY 2005 £’000 678 508 244 192 1,622 426 — 1,977 117 795 155 3,470 46 3,516 2004 £’000 — 267 300 99 666 779 — 2,439 125 410 113 3,866 — 3,866 2005 £’000 — — — — — — 11,254 — 8 48 22 11,332 — 11,332 2004 £’000 — — — — — — 10,354 — 28 — 49 10,431 — 10,431 19 INVESTMENTS HELD AS CURRENT ASSETS Cash deposits with terms in excess of one day 2,790 4,633 — — 48 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 20 CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR Bank loan and overdrafts (see note 21) Trade creditors Amounts owed to subsidiary undertakings Amounts owed to associated undertakings Other creditors Tax payable THE GROUP THE COMPANY 2005 £’000 2,755 839 — 72 1,729 1,627 7,022 2004 £’000 518 801 — 93 546 581 2,539 2005 £’000 — — 14,484 — 218 577 15,279 2004 £’000 — — 1,026 — 229 — 1,255 Included in bank loan and overdrafts are overdrafts totalling £2,124,000 (2004 nil) which are secured on certain fixed assets within the Australian operations. 21 CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Bank loan Other creditors 533 3 536 1,037 146 1,183 — — — — — — A bank loan of £1,164,000 (2004 £1,555,000) is the Sterling equivalent at 31 December 2005 of US$2 million (2004 US$3 million). This loan was taken out in Indonesia by the 80% subsidiary, PT Pangkatan Indonesia, to finance the development of a new mill which is now operational. The loan is secured against the assets of the aforementioned subsidiary and of PT Bilah Plantindo, and is repayable as follows: Within one year Between one and two years Between two and five years 631 533 — 1,164 518 518 519 1,555 — — — — — — — — 49 Notes to the accounts continued 22 PROVISIONS FOR LIABILITIES AND CHARGES The Group At 1 January 2005 Exchange differences Balance acquired on acquisition of subsidiary Payments during the year Profit and loss account charge/(credit) At 31 December 2005 Provisions for deferred taxation consist of the following amounts: The Group Excess of capital allowances over depreciation Past-service liabilities Past-service liabilities £’000 Deferred taxation £’000 635 46 — (99) 139 721 94 8 80 — (124) 58 2005 £’000 274 (216) 58 Total £’000 729 54 80 (99) 15 779 2004 £’000 284 (190) 94 A deferred tax asset of £216,000 has been recognised at 31 December 2005 (2004 £190,000). This asset relates to a provision set up for liabilities arising under a presidential decree in Indonesia whereby employees in that country are entitled to a payment on leaving their company’s employment. The provision will be allowable for a tax deduction when paid. 23 CALLED-UP SHARE CAPITAL Authorised Number Allotted and fully paid Number Authorised £’000 Allotted and fully paid £’000 Shares of 10p each At 1 January 2005 Shares issued at merger Shares cancelled at merger 64,000,000 23,000,000 — At 1 January 2005, as restated - see note 1(b) 87,000,000 Issued during the year At 31 December 2005 — 87,000,000 48,073,072 20,338,662 (20,792,133) 47,619,601 3,156,552 50,776,153 6,400 2,300 — 8,700 — 8,700 4,807 2,034 (2,079) 4,762 316 5,078 Under the Company’s share-option scheme, directors and employees held options at 31 December 2005 as follows: Granted 17 July 2001 Granted 1 May 2002 Granted 2 May 2003 Granted 2 February 2005 Granted 2 February 2005 Granted 2 February 2005 Granted 2 February 2005 At 31 December 2005 Number of shares 890,000 475,000 475,000 761,675 425,838 367,565 67,238 3,462,316 Option price per share p 75.50 96.50 126.50 85.05 101.78 138.04 158.95 Options period ending 17 July 2011 1 May 2012 2 May 2013 17 July 2011 1 May 2012 2 May 2013 4 May 2014 The details of the directors’ share options are set out in the report of the board to the shareholders on directors’ remuneration on page 25. The issued share capital as at the date of this report is 50,776,153 shares of 10p, which includes 609,049 shares held by M. P. Evans (Malaysia) Sdn. Berhad, now an 80.6%-owned subsidiary undertaking. The authorised share capital has been increased from 64,000,000 to 87,000,000 shares of 10p each. In addition, 23,220,527 shares have been issued and 20,792,133 shares have been cancelled as a result of the implementation of two schemes of arrangement used to merge the Company with Bertam Holdings PLC and Lendu Holdings PLC. Further details of the merger are set out in notes 32 to 35 on pages 55 to 58. These share issues give rise to a total premium on issue of £5,043,000 being the premium on the 2,881,865 shares issued for the acquisition of Lendu Holdings PLC. Furthermore during the year 274,687 shares were issued under option agreements for a total cash consideration of £244,000. 50 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 24 RESERVES The Group £’000 £’000 £’000 £’000 Share premium account Revaluation reserve Capital redemption reserve Merger reserve Share of associated companies’ reserves £’000 Profit and loss account Total £’000 £’000 At 1 January 2005 Merger adjustments 5,108 — — 17,646 60 2,079 — (4,522) 18,699 (12,876) 17,093 8,755 40,960 11,082 Merged reserves at 1 January 2005 Restatement due to change 5,108 17,646 2,139 (4,522) 5,823 25,848 52,042 in dividend treatment (see note 11) — — — — — 3,030 3,030 At 1 January 2005, as restated Exchange differences Issue of shares Acquired on acquisition (transfer to subsidiaries) of subsidiary Released to profit and loss account Unrealised share of movements in associated undertakings’ reserves Profit for the financial year Equity dividend paid 5,108 — 5,209 — — — — — 17,646 1,340 — 1,419 (33) — — — 2,139 — — (4,522) — — — — — — — 423 — — — — 5,823 999 — (3,473) — (1,020) 2,764 — 28,878 3,914 — 1,631 — 55,072 6,253 5,209 — (33) — 1,696 (4,049) (1,020) 4,460 (4,049) At 31 December 2005 10,317 20,372 2,139 (4,099) 5,093 32,070 65,892 The Company At 1 January 2005 Restatement due to change in dividend treatment (see note 11) At 1 January 2005, as restated Issue of shares Purchase of own shares Loss for the financial year Equity dividend paid At 31 December 2005 25 PENSION SCHEME Share Capital premium redemption reserve account £’000 £’000 Merger reserve £’000 Profit and loss account £’000 Total £’000 5,073 — 5,073 5,210 — — — 60 — 60 — 2,079 — — 10,283 2,139 — — — 743 — — — 743 10,490 15,623 3,030 3,030 13,520 — — (1,903) (4,049) 18,653 5,953 2,079 (1,903) (4,049) 7,568 20,733 The Company operates a defined-contribution (money-purchase) pension scheme, the assets of which are held separately. The fund is under the control of trustees, who have invested it with UK insurance companies. The pension charge represents contributions to the fund payable by the Group under the rules of the scheme. The total charge for the year amounted to £90,000 (2004 £91,000). 51 Notes to the accounts continued 26 NOTE TO THE CONSOLIDATED-CASH FLOW STATEMENT The Group Reconciliation of operating profit to net cash inflow from operating activities Total operating profit Exchange differences Depreciation and amortisation Share of associated undertakings’ profits (Increase)/decrease in stocks Decrease in debtors Increase in creditors Net cash inflow from operating activities Returns on investments and servicing of finance Interest received Dividends received Interest paid Dividends paid to minorities Net cash (outflow)/inflow from returns on investments and servicing of finance Taxation Corporation tax paid Capital expenditure and financial investment Purchase of tangible fixed assets Sale of tangible fixed assets Purchase of fixed-asset investment Sale of fixed-asset investments Net cash outflow from capital expenditure and financial investment Acquisitions Fundamental re-organisation expenses Net overdraft acquired with subsidiary undertaking Investment in subsidiary undertaking Investment in associated undertaking Management of liquid resources Decrease in short-term deposits Financing New loan Repayment of loan Issue of shares 52 2005 £’000 7,977 27 (184) (3,794) (516) 1,169 820 5,499 318 89 (283) (451) (327) 2004 £’000 9,689 (204) 389 (4,602) 239 2,675 974 9,160 393 72 (7) (399) 59 (1,838) (2,226) (4,409) 62 — 148 (4,199) (640) (1,722) (36) (1,878) (4,276) (3,091) 591 (2,152) 59 (4,593) — — — — — 2,151 1,019 — (458) 244 (214) 1,555 — — 1,555 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 27 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS The Group (Decrease)/increase in cash in the year Decrease in liquid resources Movements in loans Exchange differences Movements in net funds Net funds at 1 January 2005 Net funds at 31 December 2005 Analysis of movements of net funds Cash at bank and in hand Overdrafts Short-term deposits Bank loan 2005 £’000 (6,073) (2,151) 458 444 (7,322) 9,830 2,508 At 1 January 2005 £’000 6,752 — 6,752 4,633 (1,555) 9,830 Cash flow Acquisitions Exchange differences £’000 £’000 (4,250) (101) (4,351) (2,151) 458 (6,044) 200 (1,922) (1,722) — — (1,722) £’000 304 (101) 203 308 (67) 444 2004 £’000 4,598 (1,019) (1,555) (749) 1,275 8,555 9,830 At 31 December 2005 £’000 3,006 (2,124) 882 2,790 (1,164) 2,508 28 FINANCIAL INSTRUMENTS The Group’s primary financial instruments comprise cash balances and deposits held with banks, fixed-asset investments, trade debtors, trade creditors, bank overdrafts and bank loans. The Group does not undertake any transactions in derivatives. The main purpose of these financial instruments is to provide funds to finance the Group’s operations. No trading in financial instruments takes place. The main risks arising from the Group’s financial instruments are foreign-currency risk and, to a lesser extent, interest-rate risk. The board reviews and agrees the policies for managing these risks. The policies and the impact of these risks on the Group’s balance sheet at the end of the financial year are summarised below. Short-term debtors and creditors have been omitted from all disclosures other than the currency-exposure profile. Foreign-currency risk The majority of the Group’s operations are undertaken in Indonesia, Malaysia and Australia. The Group does not have transactional currency exposures arising from sales or purchases by an operating unit but the Group’s balance sheet can be significantly affected by movements in exchange rates. Whilst the Group’s trading takes place in local currencies in South East Asia, commodity prices are determined by a world market which reduces the Group’s currency risk. The Group has no hedging policy and does not make use of forward-currency contracts. The following analysis of net monetary assets and liabilities shows the Group’s foreign-currency exposure profile. The amounts shown represent the transactional exposures that give rise to the net gains and losses recognised in the Group profit and loss account. Exposures comprise the monetary assets and liabilities of the Group that are not denominated in the functional currency of the operating units involved. Functional currency - Indonesian Rupiah - cash - loans 2005 US$ £’000 1,582 (1,164) 2004 US$ £’000 2,588 (1,555) Interest-rate risk The Group has significant cash balances and deposits held with banks. In order to optimise the income received on these deposits the Group continuously reviews the terms of these deposits to take advantage of the best market rates. UK funds are placed through a broker with banks who have a credit rating of at least AA. 53 Notes to the accounts continued 28 FINANCIAL INSTRUMENTS Continued The Group’s only financial liabilities other than short-term trade creditors are the bank overdraft and bank loan referred to in notes 20 and 21. The overdraft is denominated in Australian Dollars and interest is charged at a variable rate linked to the Australian base rate. The loan is denominated in US Dollars and interest is charged at a floating rate linked to US Dollar LIBOR. The currency profile of the Group’s financial assets, other than short-term trade debtors, is shown in the table below: The Group Floating-rate financial assets Sterling Indonesian Rupiah Malaysian Ringgit US Dollar Australian Dollar Thai Baht 2005 £’000 1,950 206 1,871 1,582 127 60 5,796 2004 £’000 2,533 147 5,955 2,674 — 76 11,385 Interest on floating-rate financial assets is earned at normal commercial rates. Undrawn facilities The Group has an undrawn Sterling overdraft facility renewable within one year of £750,000 (2004 £750,000). The Group has undrawn Australian Dollar overdraft facilities of £863,000 (2004 nil). Fair values of financial assets and liabilities In the opinion of the directors, there was no significant difference between the carrying values and the estimated fair values of the Group’s primary financial assets and liabilities at either the current, or preceding, financial year end. 29 RELATED-PARTY TRANSACTIONS The directors’ participation in the executive share-option scheme is disclosed on page 25. Apart from this, no director had an interest in any transaction with the Group at any time during the year. During the year, the Group undertook the following transactions with related parties: Fee paid to M. P. Evans (UK) Limited Sale of livestock to The North Australian Pastoral Company Pty. Limited 36 307 476 — 54 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 30 SIGNIFICANT POST-BALANCE-SHEET EVENTS (a) Purchase of Flinton Station As announced on 16 January 2006, an agreement was signed on that date in respect of the purchase of Flinton Station, for a cost of A$7.5 million (approximately £3.1 million at the current rate of exchange). Flinton comprises 7,586 hectares and is contiguous with the Group’s existing beef-cattle “growing” property, Woodlands, which is some 120 kilometres north west of Goondiwindi in Southern Queensland. Settlement took place on 31 March 2006. (b) Sale of Beradin Estate It was announced on 23 January 2006 that an agreement had been signed in respect of the sale of the Malaysian plantation, Beradin Estate. The total selling price for the 1,077-hectare estate is RM53.2million (approximately £7.9 million at the current rate of exchange). A 10% deposit has been received. This sale is subject to Malaysian Real Property Gains Tax and the related tax charge is expected to be approximately RM2.3 million (approximately £0.3 million at the current rate of exchange). The sale is conditional upon the approval of the Malaysian Foreign Investment Committee and the Estate Land Board. The former has now been received and the latter is expected within three to six months. Revenue earnings from the estate will accrue to the Group until completion. (c) Sale of Sungei Reyla Estate As announced on 27 April 2005, a conditional agreement was signed in respect of the sale of the 660-hectare Malaysian plantation, Sungei Reyla Estate, for RM31.4 million (approximately £4.7 million at the current rate of exchange). The conditions were the approval of the Malaysian Foreign Investment Committee and the Estate Land Board. The last of these was received in March 2006 and settlement was made in April 2006. The sale is subject to Malaysian Real Property Gains Tax and the related tax charge is expected to be RM1.4 million (approximately £0.2 million at the current rate of exchange). 31 CONTINGENT LIABILITY In March 2002, the Group’s 80% subsidiary, PT Pangkatan Indonesia (“Pg”) entered into a sale and purchase agreement with DR H Rahmat Shah to acquire from him 80% of PT Sembada Sennah Maju, the company owning Sennah Estate. On 9 September 2003, DR H Rahmat Shah initiated a lawsuit in Indonesia seeking to overturn this agreement. On 12 May 2004, the District Court of Medan found in his favour but Pg immediately appealed against the implementation of the District Court’s decision. This appeal was successful and, at the same time, Pg appealed to the Medan High Court to have the District Court’s decision overturned. As announced on 16 February 2005, this appeal was also successful. DR H Rahmat Shah has appealed to the Supreme Court in Jakarta to have the Medan High Court decision overturned. Pg, together with its Indonesian lawyers, is vigorously opposing this appeal and continues to be confident that there is no legal case for the original agreement signed in March 2002 to be set aside. Accordingly, no provision has been made in the 31 December 2005 accounts. 32 GROUP MERGER On 2 February 2005, two schemes of arrangement for the merger of M. P. Evans Group PLC (“MPEG”) with each of Bertam Holdings Limited (“BH”) and Lendu Holdings Limited (“LH”) were completed. BH and LH thereby became wholly-owned subsidiaries of the Company. Sungkai Holdings Limited (“SHL”), which was formerly an associated undertaking of both the Company (47.87%) and BH (49.71%), also became a wholly-owned subsidiary of the Company as a result of the BH scheme of arrangement. MPEG issued 23,220,527 new 10p shares pursuant to the schemes of arrangement in consideration for the cancellation of the shares held by the other shareholders in BH and LH. BH and SHL between them held 20,792,133 shares in MPEG and those shares were cancelled following implementation of the schemes. As a result, after this issue of new shares and subsequent cancellation of shares described above, the issued equity share capital of MPEG amounted to 50,501,466 shares, compared with the 48,073,072 in issue prior to the schemes of arrangement. As a result of the schemes of arrangement, BH’s results and net assets have been included in MPEG’s accounts from 2 February 2005 on the basis of merger accounting. LH has been included on an acquisition-accounting basis. 55 Notes to the accounts continued 33 ANALYSIS OF MERGED CONSOLIDATED PROFIT AND LOSS ACCOUNT Sungkai M. P. Evans M. P. Evans Holdings Limited £’000 (UK) Limited £’000 Merger Merged (Malaysia) adjustments M. P. Evans Group PLC Sdn. Bhd. £’000 £’000 £’000 2004 Turnover Cost of sales Gross profit/(loss) Foreign exchange gains/(losses) Other administrative expenses Total administrative expenses M. P. Evans Group PLC £’000 Bertam Holdings Limited £’000 7,734 (3,300) 5,110 (3,287) 4,434 1,823 258 (519) (261) (73) (836) (909) Group operating profit/(loss) 4,173 914 52 — 52 (8) (73) (81) (29) Share of operating profit in associate 5,658 2,336 2,141 Total operating profit/(loss) 9,831 3,250 2,112 Exceptional items 378 561 265 Profit/(loss) on ordinary activities before interest Interest receivable Income from fixed- asset investments Interest payable Profit on ordinary activities before tax Tax charge on profit on ordinary activities Profit on ordinary activities after tax 10,209 3,811 2,377 92 17 — 271 558 (7) 25 187 — 10,318 4,633 2,589 (3,151) (1,217) (724) 7,167 3,416 1,865 Equity minority interests (719) — — Profit on ordinary activities attributable to members 6,448 3,416 1,865 432 — 432 — (398) (398) 34 — 34 — 34 2 — — 36 — 36 — 36 49 — 49 — (55) (55) (6) (466) 50 12,911 (6,537) (416) 6,374 — 417 417 177 (1,464) (1,287) 1 5,087 — (5,533) 4,602 (6) (5,532) 9,689 — (489) 715 (6) (6,021) 10,404 3 34 — — 393 (724) — 72 (7) 31 (6,745) 10,862 (5) 1,559 (3,538) 26 — (5,186) 7,324 (6) (725) 26 (5,192) 6,599 An analysis of the current-year profit and loss account showing the amounts for each party to the merger up to 2 February 2005 and the amounts for the merged entity for the remainder of the year has not been provided. Given the proximity of the merger to the beginning of the financial year, the directors are of the opinion that the pre-merger analysis is not material to the financial statements. 56 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 34 ANALYSIS OF STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Profit attributable to the members of the Company M. P. Evans Group PLC to date of merger Bertam Holdings Limited to date of merger Sungkai Holdings Limited to date of merger M. P. Evans (UK) Limited to date of merger M. P. Evans (Malaysia) Sdn. Berhad to date of merger Merger adjustments Unrealised share of associated undertakings’ reserves M. P. Evans Group PLC to date of merger Bertam Holdings Limited to date of merger Sungkai Holdings Limited to date of merger Merger adjustments Previously unrealised profit on sale of land to associated undertaking released to profit and loss account on sale of land by associate Bertam Holdings Limited to date of merger Tax credited straight to reserves Bertam Holdings Limited to date of merger Exchange differences on foreign-currency net investments M. P. Evans Group PLC to date of merger Bertam Holdings Limited to date of merger Sungkai Holdings Limited to date of merger Total recognised gains and losses for the year 2004 £’000 6,448 3,416 1,865 36 26 (5,192) 6,599 (1,039) (33) (695) 3,236 1,469 (202) 27 (1,517) (2,477) (12) (4,006) 3,887 An analysis of the current year statement of total recognised gains and losses for each party to the merger up to 2 February 2005 and the amounts for the merged entity for the remainder of the year has not been provided. Given the proximity of the merger to the beginning of the financial year, the directors are of the opinion that the pre-merger analysis is not material to the financial statements. 57 Notes to the accounts continued 35 ANALYSIS OF CONSOLIDATED BALANCE SHEET M. P. Evans Group PLC £’000 Bertam Holdings Limited £’000 Sungkai M. P. Evans M. P. Evans Holdings Limited £’000 (UK) Limited £’000 Merger Merged (Malaysia) adjustments M. P. Evans Group PLC Sdn. Bhd. £’000 £’000 £’000 2004 Fixed assets Tangible assets Investments Total fixed assets Current assets Stocks Debtors Investments Cash at bank and in hand 14,925 34,895 15,984 21,037 528 15,077 49,820 37,021 15,605 212 622 2,651 1,530 454 3,211 1,982 4,036 5,015 9,683 — 13 — 728 741 28 5 33 — 48 — 346 394 Creditors due within one year (1,555) (707) (2) (312) Net current assets 3,460 8,976 739 Total assets less current liabilities Creditors due after more than one year 53,280 45,997 16,344 (1,037) (146) Provisions for liabilities and charges Minority interests (676) (2,770) (53) — 82 115 — — — — — — 100 158 — (51,526) 31,565 19,646 258 (51,526) 51,211 — 24 — 112 136 (14) 122 — (52) — — 666 3,866 4,633 6,752 (52) 15,917 51 (2,539) (1) 13,378 380 (51,527) 64,589 — — — — (1,183) — (73) (729) (2,843) Capital and reserves Called-up share capital Share premium account Revaluation reserve Capital redemption reserve Merger reserve Capital reserve Associated undertakings Profit and loss account 48,797 45,798 16,344 115 380 (51,600) 59,834 4,807 5,108 — 60 — — 18,699 20,123 2,691 1,117 17,646 720 (520) 828 9,814 13,502 194 4,714 — — — — 7,534 3,902 48,797 45,798 16,344 100 — — — — — — 15 115 (3,152) 122 (5,884) 53 — — 1,359 — (4,002) — — (828) — (30,224) (8,869) 205 4,762 5,108 17,646 2,139 (4,522) — 5,823 28,878 380 (51,600) 59,834 58 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Subsidiary and associated undertakings SUBSIDIARY UNDERTAKINGS Details of the principal subsidiary undertakings as at 31 December 2005 are as follows: Name of subsidiary Country of incorporation Country of operation % of shares and voting rights held P T Bilah Plantindo P T Gunung Pelawan Lestari P T Pangkatan Indonesia P T Sembada Sennah Maju P T Simpang Kiri Plantation Indonesia Beradin Estates Limited Bertam Consolidated Rubber Company Limited Bertam (U.K.) Limited Lendu Rubber Estates Limited Padang Senang Rubber Limited Sungkai Estates Limited Supara Company Limited The Singapore Para Rubber Estates, Limited Gubbagunyah Partnership 80 90 80 64 80 100 100 100 100 100 100 100 100 100 Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Field of activity Production of oil palm f.f.b. Production of oil palm f.f.b. Production of crude palm oil, palm kernels and rubber Production of oil palm f.f.b. and rubber Indonesia Indonesia Production of oil palm f.f.b. England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales Thailand England and Wales Malaysia Production of oil palm f.f.b. Malaysia United Kingdom and Australia Production of oil palm f.f.b. and holding of investments Investment holding company Malaysia Production of oil palm f.f.b. Malaysia Production of oil palm f.f.b. Malaysia Production of oil palm f.f.b. Thailand Malaysia Rubber manufacture Production of oil palm f.f.b. and rubber Australia Australia Beef-cattle farming The shareholdings in the above companies represent ordinary shares except Gubbagunyah Partnership which has no class of share. ASSOCIATED UNDERTAKINGS Details of the associated undertakings as at 31 December 2005 are as follows: Issued, fully-paid share capital % held Country of incorporation Country of operation Field of activity Unlisted Bertam Properties Sdn. Bhd. RM60.00m The North Australian Pastoral Company Pty. Limited A$16.80m 40.00 27.92 Malaysia Australia Malaysia Australia Property development Beef-cattle farming P T Agro Muko Rp54.58m 31.53 Indonesia Indonesia Production of palm oil, palm kernels and rubber P T Kerasaan Indonesia Kennedy, Burkill & Company Berhad Rp138.07m RM18.00m 36.00 20.01 Indonesia Indonesia Production of oil palm f.f.b. Malaysia Malaysia and Hong Kong Investment holding, plantation ownership and management and provision of professional services Production and sale of palm- oil waste-composting systems Asia Green Environmental Sdn. Bhd. RM4.76m 30.00 Malaysia Malaysia The associated undertakings incorporated in Great Britain are registered in England and Wales. The shareholdings in the above companies represent ordinary shares. The investments in associated undertakings are all held by subsidiary undertakings. 59 Analysis of land areas at 31 December 2005 The information in the following pages does not form part of the audited financial statements OIL PALM RUBBER UNPLANTED CATTLE TOTAL Owned Mature Immature Total Mature Immature oil palm Total rubber % Ha Ha Ha Ha Ha Ha Total Ha Total cattle Ha INDONESIA Subsidiary undertakings Bangka Bilah Pangkatan Sennah Simpang Kiri 90.00 80.00 80.00 64.00 80.00 — 2,484 1,545 958 2,148 87 290 699 373 272 87 2,774 2,244 1,331 2,420 — — 206 135 — — — — — — 206 — 135 — — 11,913 187 136 347 234 Total majority-owned 7,135 1,721 8,856 341 — 341 12,817 Associated undertakings P T Agro Muko P T Kerasaan Indonesia 31.53 36.00 14,963 2,117 1,381 198 16,344 2,315 1,733 — 93 1,826 — — Total minority-owned 17,080 1,579 18,659 1,733 93 1,826 4,744 47 4,791 — — — — — — — — — Ha 12,000 2,961 2,586 1,813 2,654 22,014 22,914 2,362 25,276 24,215 3,300 27,515 2,074 93 2,167 17,608 — 47,290 Total Indonesian majority and minority-owned MALAYSIA Subsidiary undertakings Beradin* Bertam Lendu* Perhentian Tinggi Sungei Kruit Sungei Reyla** 100.00 100.00 100.00 100.00 100.00 100.00 973 65 186 766 809 590 98 — — 108 — 52 258 1,071 65 186 874 809 642 3,647 Total majority-owned 3,389 Associated undertaking Bertam Properties Sdn. Bhd. Total Malaysian majority and minority-owned AUSTRALIA Subsidiary undertaking 40.00 799 — 799 4,188 258 4,446 — — — — — — — — — — — — — — — — — — — — — — — — — — — 14 9 9 52 19 18 121 409 530 — — — — — — — — — 1,085 74 195 926 828 660 3,768 1,208 4,976 Woodlands*** 100.00 — — — — — — — 11,826 11,826 Associated undertaking The North Australian Pastoral Company Pty Limited Total Australian majority and minority-owned 29.29 — — — — — — — — — — — — — 6,400,000 6,400,000 — 6,411,826 6,411,826 Subject to conditional sale agreements. Sold after the year end. * ** *** Since the year end, Flinton Station (7,586 hectares, contiguous with Woodlands) has been purchased. 60 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 5-year summary Production Palm oil Palm kennels Crops Oil palm fresh fruit bunches (“f.f.b.”) Majority-owned estates Associated company estates Average sale prices 2005 2004 (restated*) 2003 2002 2001 Tonnes 21,579 5,009 Tonnes — — Tonnes — — Tonnes — — Tonnes — — 222,683 334,830 228,287 335,997 213,620 319,779 187,131 267,341 185,650 252,399 Palm oil - Rotterdam c.i.f. US$/tonne 420 475 449 390 279 Exchange rates £1 = Indonesian Rupiah - average - year end US$1 = Indonesian Rupiah - average - year end £1 - US Dollar £1 = Malaysian Ringgit £1 = Australian Dollar - average - year end - average - year end - average - year end 17,653 16,893 9,712 9,840 1.82 11.72 6.89 6.49 2.39 2.34 16,385 17,925 8,953 9,336 1.83 1.92 6.96 7.30 2.49 2.47 Turnover - continuing activities 12,182 12,911 Gross profit 5,082 6,374 £’000 £’000 14,009 15,083 8,569 8,447 1.64 1.79 6.21 6.78 2.51 2.37 £’000 7,599 4,209 13,976 14,388 9,314 8,929 1.50 1.61 5.71 6.12 2.77 2.87 £’000 6,399 3,339 14,666 15,230 10,190 10,470 1.44 1.45 5.47 5.53 2.81 2.86 £’000 3,775 1,620 Profit on ordinary activities before taxation Basic earnings per share Equity dividends per share 7,576 10,862 8,358 6,698 3,192 Pence 8.86 6.25 Pence 13.86 6.00 Pence 10.59 5.50 Pence 8.84 4.75 Pence 4.43 4.25 £’000 £’000 £’000 £’000 £’000 Equity shareholders’ funds 70,970 59,834 44,906 44,896 49,377 Net cash inflow from operating activities 5,499 9,160 3,555 2,751 1,573 * The figures for 2004 have been restated for the merger of M. P. Evans Group PLC with Bertam Holdings Limited, as detailed in notes 1(b) and 32 to 35. The figures for the earlier years, 2001 to 2003 inclusive, have not been restated for this merger, except for the f.f.b. crops. 61 Notice of meeting NOTICE IS HEREBY GIVEN that the annual general meeting of M.P. Evans Group PLC will be held at Tallow Chandlers’ Hall, 4 Dowgate Hill, London EC4R 2SH on 13 June 2006 at 12:00 noon for the following purposes: As ordinary business 1 To receive and consider the report of the directors and the audited financial statements for the year ended 31 December 2005. RESOLUTION ON FORM OF PROXY No 1 2 To declare a dividend. RESOLUTION ON FORM OF PROXY No 2 3 To re-elect Mr P A Fletcher as a director. RESOLUTION ON FORM OF PROXY No 3 4 To re-elect Mr P E Hadsley-Chaplin as a director. RESOLUTION ON FORM OF PROXY No 4 5 To re-appoint Deloitte & Touche LLP as auditors and to authorise the directors to determine their remuneration. RESOLUTION ON FORM OF PROXY No 5 As special business To consider and, if thought fit, pass the following resolutions, of which resolution 6 will be proposed as an ordinary resolution and resolutions 7, 8 and 9 will be proposed as special resolutions: 6 That the maximum nominal amount of relevant securities (within the meaning of section 80 of the Companies Act 1985) which the directors are authorised to allot pursuant to article 4(B) of the Company’s articles of association shall be £1,692,369 provided that this authority shall expire at the conclusion of the next annual general meeting of the Company or on 13 September 2007, whichever shall be the earlier. RESOLUTION ON FORM OF PROXY No 6 7 That the directors be empowered to allot equity securities (as defined in section 94(2) of the Companies Act 1985) pursuant to the authority conferred by resolution 6 as if section 89(1) of the Companies Act 1985 did not apply to any such allotment provided that this power shall be limited to any allotment falling within the provisions of article 4(C)(a) of the Company’s articles of association or any allotment up to an aggregate nominal amount of £507,761 falling within the provisions of article 4(C)(b) of the Company’s articles of association. Such power will extend to the sale of treasury shares (within the meaning of section 162A of the Companies Act 1985) for cash as if in respect of any such sale the words “pursuant to the authority from time to time conferred by article 4(B) hereof” were omitted from the second line of article 4(C) and, for the purpose of such power, the reference in article 4(C)(a) to “where the equity securities attributable to the interests of all of the holders of the shares are proportionate (as nearly as may be) to the numbers of shares held by them” shall be deemed to exclude the Company in respect of any treasury shares held by it. RESOLUTION ON FORM OF PROXY No 7 8 That the Company is hereby generally and unconditionally authorised to make market purchases (within the meaning of section 163 of the Companies Act 1985) of shares of 10p each in the capital of the Company provided that: (a) the maximum number of shares hereby authorised to be purchased is 5,077,615; (b) the minimum price which may be paid for each share is 10p (exclusive of expenses); (c) the maximum price (exclusive of expenses) which may be paid for each share is an amount equal to 105% of the average of the middle-market quotations for such shares as derived from the Daily Official List of the London Stock Exchange for the five business days immediately preceding the day of purchase; and (d) the authority hereby conferred shall expire at the conclusion of the next annual general meeting of the Company or on 13 September 2007 whichever shall be the earlier save that the Company may, before the expiry of this authority, make a contract of purchase which will or may be executed wholly or partly after such expiry and may make a purchase of shares pursuant to any such contract. RESOLUTION ON FORM OF PROXY No 8 9 That the amendments to the articles of association of the Company, set out in the appendix to the notice of the annual general meeting dated 15 May 2006, be hereby approved. RESOLUTION ON FORM OF PROXY No 9 By order of the board J F Elliott Secretary 15 May 2006 See notes on next page. 62 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Notes 1 A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend. A proxy need not also be a member of the Company, but, except in the case of a proxy for a corporate member, is not entitled to vote except on a poll. A form of proxy is enclosed for this purpose. If you are unable to attend the meeting, please complete and return the enclosed form of proxy so as to reach the office of the registrars as soon as possible and, in any event, not less than 48 hours before the time appointed for holding the meeting. Completion of a form of proxy does not prevent a member from subsequently attending and voting in person. In line with regulation 41 of the Uncertificated Securities Regulations 2001, only shareholders entered in the register of members of the Company as at 11:00 p.m. on 11 June 2006, or their duly appointed proxies, will be entitled to attend and/or vote at the meeting. Shareholders will be entitled to vote in respect of the number of shares registered in their names at the above time and any subsequent changes will be disregarded in determining rights to attend and vote. 2 The register of directors’ interests showing all transactions of each director and, where applicable, of his family, in the share capital of the Company, will be available for inspection at the registered office of the Company on any weekday, Saturdays and public holidays excepted, during normal business hours from the date of this notice until the annual general meeting and at Tallow Chandlers’ Hall for a period of fifteen minutes prior to the annual general meeting and during the meeting. No director has a service contract with the Company that cannot be terminated by the Company without payment of compensation on not more than one year’s notice. 63 Appendix to the notice of annual general meeting The following is the text of the proposed amendments to the articles of association to be proposed at the annual general meeting: 1. By deleting the following definitions in article 2A: “Regulations The Uncertificated Securities Regulations 1995. Register The register of members of the Company.” and inserting the following new definitions: “Communication Has the meaning given to it in the Electronic Communications Act 2000. Electronic communication Has the meaning given to it in the Electronic Communications Act 2000. Operator Means a person approved by the Treasury under the Regulations as Operator of a relevant system. Means a person who has issued a security which is a Participating Security. Means a security title to units of which is permitted by an Operator to be transferred by means of a relevant system. Has the meaning given to it in the Regulations. Participating Issuer Participating Security properly authenticated dematerialised instruction Register Means: (a) (b) the register of members as required by section 352(1) of the 1985 Act; or if the Company is a Participating Issuer, the Company’s issuer register of members as required by regulation 20(2) of the Regulations. Regulations The Uncertificated Securities Regulations 2001. Uncertificated Proxy Instruction Means a properly authenticated dematerialised instruction, and/or other instruction or notification, which is sent by means of the Relevant System and received by such participant in that system acting on behalf of the Company as the board may prescribe, in such form and subject to such terms and conditions as may from time to time be prescribed by the board.” 2. By inserting the following new article as article 2.(B)(e): “2. (B) (e) a notice or document in writing does not include a notice or document in writing generated as a result of giving the notice or document by means of an Electronic Communication.” 3. By deleting all instances of the words “participating security” in articles 14 (A) to (E) and replacing them with “Participating Security”. 4. By deleting article 77 and replacing it with the following: “77. A vote given in accordance with the terms of an appointment of a proxy is valid notwithstanding the appointor’s death or insanity or the revocation of the appointment, or of the authority under which the appointment was made, unless the Company is notified of the death, insanity or revocation at least 48 hours before the start of the meeting or adjourned meeting to which the appointment relates. That notice must either: (a) be in writing and received at the Company’s registered office or at such other place within the United Kingdom as is specified in the notice of the meeting or adjourned meeting to which the appointment relates; or (b be: (i) contained in any form of Electronic Communication that the board had decided may be used for an Electronic Proxy Appointment for that meeting or adjourned meeting but only if it is possible for the Company to receive the notice by that form of Electronic Communication; and (ii) received at the address or number specified for the purpose of receiving an electronic proxy appointment for that meeting or adjourned meeting by that form of Electronic Communication.” 64 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC 5. By deleting article 81 and replacing it with the following: “81. The appointment of a proxy must either be: (a) in writing (a “Written Proxy Appointment”), in which case: (i) (ii) it must be in any usual form or in another form as the board may approve; it must be signed by the appointor or his agent duly authorised in writing, or, if the appointor is a corporation, under its common seal or by a duly authorised agent or officer; (iii) it need not be witnessed; and (iv) the board may require evidence of the authority of any agent or officer that signs a Written Proxy Appointment on behalf of the appointor; or (b) (c) (d) (e) contained in any form of Electronic Communication (including, in relation to any shares which are held in uncertificated form, an Uncertificated Proxy Instruction (subject always to the facilities and requirements of the relevant system)) that the board decides may be used in relation to the relevant meeting (an “Electronic Proxy Appointment”), in which case, it must comply with each requirement (including, without limitation, those as to authentication) that the board has specified for that form of Electronic Communication in relation to that meeting; the board may from time to time permit supplements to or amendments of revocations of any such Electronic Proxy Instruction which takes the form of an Uncertificated Proxy Instruction; the board may, in addition to the provisions of articles 81 (b) and (c), prescribe the method for determining the time at which any such properly authenticated dematerialised instruction (and/or other instruction or notification) is to be treated as received by the Company or such participant; and the board may treat any such Uncertificated Proxy Instruction which purports to be or is expressed to be sent on behalf of a holder of a share as sufficient evidence of the authority of the person sending that instruction to send it on behalf of the holder.” 6. By deleting article 82 and replacing it with the following: “82. (A) 88. (B) A Written Proxy Appointment is only valid if it and any power of attorney or other written authority under which it is signed, or a notarially certified or office copy of that power or authority is received at the office or at such other place within the United Kingdom as is specified in the notice of meeting or in the Written Proxy Appointment issued by the Company in relation to the meeting: (a) not less than 48 hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the Written Proxy Appointment proposes to vote; or (b) in the case of a poll taken otherwise than at or on the same day as the meeting or adjourned meeting, not less than 24 hours before the time appointed for the taking of the poll. An Electronic Proxy Appointment is only valid if it complies with each requirement specified pursuant to article 81(b) and it is received at the address or number specified by the board for the purpose of receiving that type of Electronic Proxy Appointment: (a) not less than 48 hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the Electronic Proxy Appointment proposes to vote; or (b) in the case of a poll taken otherwise than at or on the same day as the meeting or adjourned meeting, not less than 24 hours before the time appointed for taking of the poll.” 7. By deleting article 121 and replacing it with the following: “121. If: (a) (b) each director for the time being entitled to receive notice of a meeting of the board and not being less than a quorum, or each member of a committee of the board, agrees to the passing of a resolution; and the agreement of the director or member of the committee to the passing of the resolution is contained in: (i) any form of Electronic Communication that the board decides may be used in relation to this article and complies with each requirement (including, without limitation, those as to authentication) that the board has specified for that form of Electronic Communication; or 65 Appendix to the notice of annual general meeting Continued (ii) a document signed by the director or member, that resolution is as effective as a resolution passed at a meeting of the board or (as the case may be) a committee of the board duly convened and held. 121. (A) For the purposes of article 121(b)(ii): (a) (b) the agreement of the directors or members of the committee may be contained in several documents in the same form each signed by one or more of the directors or members of the committee; and a signature may be affixed to a copy of the document and the signed document is valid if the Company receives a copy sent using an Electronic Communication or the original. 121. (B) For the purposes of article 121 an alternate director need not agree to the passing of a resolution if his appointor has agreed to its passing and if an alternate director has agreed to the passing of a resolution, his appointor need not agree to its passing.” 8. By deleting articles 150 to 152 and replacing them with the following: “150. A notice or document to be given to or by a person pursuant to these articles must be: (a) (b) in writing; or contained in any form of Electronic Communication that the sender and the recipient of the notice or document have agreed may be used for the giving of that type of notice or document. 151. The Company may give a member a notice or document in writing: (a) personally; (b) by sending it by post in a pre-paid envelope addressed to the member at his registered address (or another address notified for that purpose by the member); (c) by leaving it at the member’s registered address (or another address notified for that purpose by the member) in an envelope addressed to the member; or (d) by giving or sending it in any other way permitted by the Act or (while any of the Company’s shares are admitted to trading on the Alternative Investment Market of the London Stock Exchange plc) the rules of the Alternative Investment Market. The Company may give a member a notice or document contained in an Electronic Communication by giving it using an Electronic Communication to an address or number notified by the member to the Company for that purpose. In the case of joint holders of a share, a notice or document must be given to the person who is named first in the register in respect of the joint holding, and notice given in this way is sufficient notice to all joint holders. If a member (or, in the case of joint holders, the member first named in the register) has a registered address outside the United Kingdom but has notified the Company of an address in the United Kingdom at which notices or documents in writing may be given to the member, the member is entitled to have a notice or document given to him at that address. The board may also permit (on such terms as the board may decide) such a member to have a notice or document contained in an Electronic Communication given to him using an Electronic Communication to an address or number notified by the member to the Company for that purpose.” 152. 152. (A) 152. (B) 9. By inserting the following new article as article 155. (A) “155. (A) A notice or document contained in an Electronic Communication is deemed to have been given 24 hours after it was given. In proving service it is sufficient to prove that the Electronic Communication was properly addressed and shown as given in a report or log retained by or on behalf of the Company.” 66 ANNUAL REPORT 2005 M. P. EVANS GROUP PLC Notes 67 Notes 68 Venue of annual general meeting Tallow Chandlers’ Hall Designed, typeset and printed by Michael R. Dalby Limited Mulberry Business Centre Quebec Way, London SE16 7LB 020 7394 1112