Camellia Regulatory News (CAM)

Chairman's statement

The profit before tax for the year to 31 December 2011 amounted to £58.65 million compared with £73.14 million in the previous year. The profit for 2011 includes a gain of £7.3 million (£11.1 million in 2010) in respect of changes in the fair value of biological assets. This gain is unrealised and is dependent on the maintenance of the value of those companies subject to IAS 41 "Biological Assets". The group performed well in 2011 with a trading profit of £39.23 million compared to £48.38 million in 2010 which had benefited from unusually high tea production.

Dividend

The board is recommending a final dividend of 84p per share which, together with the interim dividend already paid of 30p per share, brings the total distribution for the year to 114p per share compared with 110p per share in 2010.

Agriculture and horticulture

Tea

In 2011 our tea operations continued to benefit from an increase in demand over supply resulting in high sales prices. Profitability has been adversely affected by increases in input costs and slightly lower production following less favourable weather conditions compared with the prior year.

India

Despite the 34 per cent. increase in tea garden wages and uncertainties in the market during the year, our Indian operations achieved a satisfactory outcome. Tea production increased to 31.8 million kilos and prices generally remained firm. Factory developments and infrastructure expenditure continued during the year.

Both the packet tea operations and the instant tea plant achieved improved results.

Bangladesh

Tea production at 10.3 million kilos suffered a decline over the previous year due to pest and weather related problems. The import of tea by local blenders also caused a significant reduction in auction prices. However the increase of import duty on tea has led to a hardening of sale prices and it is to be hoped that such duty will not be temporary.

The programme of factory redevelopment and installation of irrigation systems is continuing.

Kenya

Production in Kenya decreased on our own estates. Smallholder leaf intake increased slightly but our overall production was down during the year to 22.8 million kilos from a record 26.5 million kilos in 2010. The strength of the market resulted in high prices on the Mombasa auction and, as a result, profitability was similar to the previous year. Little progress has been made on implementing the necessary legislative reforms relating to the new constitution. Ambiguities on the future of land tenure are still to be resolved but all leasehold property owned by non-Kenyan citizens or corporations are subject to a maximum term of 99 years. The timing of the next elections under the new constitution and the outcome of the International Criminal Court Proceedings are the subject of considerable debate.

Malawi

Our production in Malawi at 17.7 million kilos was below the 19.3 million kilos produced in 2010 due to less favourable weather conditions. In September a fire destroyed one of our tea processing factories in Thyolo district. A mothballed factory has been reopened and re-equipped on a temporary basis to ensure sufficient production facilities for the current season. Negotiations are continuing with the insurance company to settle our claim. The first major upgrade in the programme of improvements to our factories was completed during the year. The factory is operating successfully and the quality of tea produced is showing an improvement. The Malawi Kwacha devalued during the year but remains unrealistically firm and foreign exchange continues to be critically short resulting in difficulties in procuring imports, particularly fuel and fertilisers.

Edible nuts

2011 was an 'off-year' in the biennial bearing pattern of the pistachio orchards of Horizon Farms in California and production was minimal.

Macadamia production in Malawi was the highest on record. Our South African operation suffered from reduced production due to inclement weather but sales prices increased significantly during the year resulting in very satisfactory profits. Demand from the Far East remains buoyant. New areas of macadamia continued to be planted at Kakuzi in Kenya and at Maclands in South Africa.

Other horticulture

Kakuzi's avocado production in Kenya decreased but profitability increased due to substantially higher sale prices caused by the weaker Kenyan shilling and a shortage of supply in the European market. Port and shipping logistics remain problematic and, combined with the risk of piracy, continue to be a cause for concern for this perishable crop.

Weather conditions in Bangladesh hampered latex collection and consequently rubber production declined from the previous year's level. Prices however continued their firmer trend.

Maize and soya yields combined with improved market prices resulted in a satisfactory performance from CC Lawrie's farm in Brazil. We continue to increase our irrigation capacity but future opportunities in this regard are now limited. The possible expansion of our agricultural operations in Brazil is on hold pending the outcome of deliberations by the government regarding the extent of foreign ownership of agricultural land.

Citrus production at Horizon Farms in California increased over the prior year but profitability decreased following a substantial reduction in prices caused by undersized fruit.

Production of wine grapes in South Africa improved marginally and the quality of wine produced is pleasing. The sales of everyday wines are showing positive results and the marketing efforts are being concentrated on improving premium quality wine sales.

Food storage and distribution

In the UK, Associated Cold Stores and Transport (ACS&T) returned to profit after a very difficult year in 2010 as the effects of the financial crisis impacted our customers. The marketplace continues to suffer from over capacity and the management team is to be commended for the improvement in cold storage utilisation levels achieved during the year. ACS&T has net cash and is well placed to take advantage of any opportunities that might arise in the future.

Both our businesses in the Netherlands suffered from the impact of the double dip recession in the Netherlands and made losses during the year after producing satisfactory profits in 2010.

Engineering

2011 was another challenging year for our UK based engineering companies, notwithstanding an improvement in revenue compared with the prior year and the achievement of a modest trading profit overall. The new factory at Abbey Metal became fully operational in the latter part of 2011. Limited sales were achieved from their paint shop operations during the year. Customer certifications have now been received for the new site and the scale of enquiries is encouraging. AKD had a slow start to the year, however trading picked up in the second half of the year and the order book is currently healthy. Loddon Engineering's performance continues to be weak and has not achieved what we had hoped for due to the lack of demand in the UK stabling market and securing fewer export orders. GU Cutting and Grinding Services had significant one off costs as a result of the move of premises but will now be well placed to develop its business for the future with increased capacity and new equipment. BMT felt the effects of the downturn in the construction sector. AJT Engineering had a satisfactory year at each of its locations in Aberdeen, Port Glasgow and East Kilbride. The major facilities upgrade was completed at the AJT Altens site and its operations are now being integrated with those on the Tullos site.

Banking and financial services

Profit before tax in Duncan Lawrie increased over last year and it successfully increased its current account base. Net fee and commission income rose during the year and despite significant fluctuations in the global stock markets, investment management revenues achieved satisfactory levels of growth overall. The bank continues with its conservative policy of restricting its lending book to the equivalent of shareholder's funds. Depositors' funds are placed with only the highest rated financial institutions or with the Bank of England. This policy does of course severely restrict margins but is considered appropriate to protect our customers' funds in these uncertain times. The capital base of the bank comfortably exceeds the requirements of the regulatory authority. Considerable effort and expenditure are being deployed in raising the awareness in the marketplace of the bank's very high level of service and its conservative operating policy.

Associates

Our shareholding in West Hamilton Holdings has fallen from 28.2 per cent. to 14.1 per cent. following a rights issue which was not taken up by us. As a result, with effect from 1 August 2011 West Hamilton was reclassified from an associated company to an available-for-sale investment.

As previously announced the proposed sale of our shareholdings in United Leasing and United Insurance in Bangladesh did not materialise and, with effect from 1 January 2011, these companies have been reclassified from assets held for sale to associated companies.

Development

The group continues with its policy of developing existing businesses. Considerable further expenditure in the year related to on-going investment in the tea operations, edible nuts and engineering facilities. The development of Duncan Lawrie, as referred to above, is also a priority. The group has a significant portfolio of listed investments and freehold properties and this portfolio will be added to as and when appropriate opportunities arise.

Staff

It is again my pleasure to thank all our staff for the very professional manner in which they have discharged their duties over the past year.

M C Perkins

Chairman

26 April 2012

Report of the directors

The directors present their report together with the audited accounts for the year ended 31 December 2011.

Principal activities

The company is a holding company and its country of incorporation is England. The principal activities of its subsidiary and associated undertakings comprise:

Agriculture and horticulture - the production of tea, edible nuts, citrus, rubber, fruits, other horticultural produce and general farming

Engineering - metal finishing, fabrication, precision engineering and heat treatment Food storage and distribution

Private banking and financial services

The holding of investments

Further details of the group's activities are included in the chairman's statement on pages 3 to 5.

Results and dividends

The profit for the year amounted to £41,790,000 (2010: £51,034,000). The board has proposed a final dividend for the year of 84p per share payable on 6 July 2012 to holders of ordinary shares registered at the close of business on 15 June 2012. The total dividend for 2011 is therefore 114p per share (2010: 110p per share). Details are shown in note 10 on page 42.

Directors

The directors of the company are listed on page 2. The following directors had beneficial interests in the share capital of the company:

There have been no changes in the interests of directors between 31 December 2011 and the date of this report.

Under the company's articles of association all the directors are required to retire annually. Accordingly, Mr M C Perkins, Mr C J Relleen, Mr C J Ames, Mr M Dünki, Mr P J Field, Mr A K Mathur, Mr D A Reeves, and Mr C P T Vaughan-Johnson retire and, being eligible, seek re-election.

None of the directors or their families had a material interest in any contract of significance with the company or any subsidiary during and at the end of the financial year.

Executive directors

Mr M C Perkins was appointed a director in 1999 and chairman in 2001 having joined Eastern Produce (Holdings) Limited (now Linton Park Plc) in 1972. He is a chartered accountant. Mr Perkins is also chairman of Duncan Lawrie Holdings Limited and chairman of the nomination committee.

Mr C J Ames, a chartered accountant, is a joint managing director of Camellia Plc, a non-executive director of Kakuzi Limited and a non-executive director of Duncan Lawrie Holdings Limited. He was previously managing director of Douglas Deakin Young Limited which was acquired by the Camellia group in 2005. Prior to that he was a partner of PricewaterhouseCoopers.

Mr P J Field is a joint managing director of Camellia Plc, is chairman of Goodricke Group Limited and from 30 April 2010 a non-executive director of Duncan Lawrie Holdings Limited. Before joining the group in 1987, Mr Field was with Grindlays Bank engaged primarily with their business in the Indian subcontinent.

Mr A K Mathur, is a chartered accountant and joined the group in 1981. He was appointed finance director in 1999 and is also a director of Goodricke Group Limited.

Non-executive directors

Mr C J Relleen was formerly a partner in PricewaterhouseCoopers. He was appointed an independent non-executive director and deputy chairman in January 2006 having previously been a non-executive director of Linton Park Plc. Mr Relleen is also a non-executive director of Duncan Lawrie Holdings Limited. He is the senior independent director, chairman of the audit committee and a member of the nomination and remuneration committees.

Mr M Dünki was appointed a non-executive director on 1 April 2010. Mr M Dünki was a director of Rahn & Bodmer Co., a Zurich based private bank until 31 January 2012. He is also a director of The Camellia Private Trust Company Limited and a trustee of The Camellia Foundation and a director of Camellia Holding AG.

Mr D A Reeves was appointed a director in 2001. Following a long career with the Bank of England, Mr Reeves joined the group in 1998 and was managing director of Duncan Lawrie Limited. He became a non-executive director of the company in 2002 and is a member of the audit committee. Mr Reeves is a director of The Camellia Private Trust Company Limited and a trustee of The Camellia Foundation and a director of Camellia Holding AG.

Mr C P T Vaughan-Johnson, who was formerly president and chief executive officer of the Bank of Bermuda, was appointed a director in 1999. He is chairman of the remuneration committee and a member of the audit and nomination committees. Mr Vaughan-Johnson was also a non-executive director of Duncan Lawrie Holdings Limited until 1 June 2011.

Secretary

In March 2011, Mr M D Conway resigned as the company secretary and Mr A K Mathur was appointed in his place.

On 8 September 2011, Mr A K Mathur resigned as the company secretary and Mrs J A Morton was appointed in his place.

Business review

The company is required to set out in this report a fair review of the business of the group during the year ended 31 December 2011 and a description of principal risks and uncertainties facing the group. A fair review of the business of the group is incorporated within the chairman's statement on pages 3 to 5. The chairman's statement together with information contained within the report of the directors highlight the key factors affecting the group's development and performance. Other matters are dealt with below:

Principal risks and uncertainties

There are a number of possible risks and uncertainties that could impact the group's businesses. As the group's businesses are widely spread both in terms of activity and location, it is unlikely that any one single factor could have a material impact on the group's long-term performance. The following risks relating to the group's principal operations have been identified:

Agriculture and horticulture

The group's agricultural based businesses are located in Kenya, Malawi, South Africa, Bangladesh, India, Brazil and the USA. The success of these activities is greatly dependent on climatic conditions, the control of plant disease, the cost of labour and the market price for the produce. We export a considerable amount of produce through the port of Mombasa in Kenya. Such exports can be seriously delayed by inefficiencies in the operation of the port. In addition, exports from these businesses are subject to foreign exchange fluctuations as products, particularly those from Africa, are normally priced in US dollars.

In Kenya and South Africa there are long-term issues concerning land ownership over which the group has little control but monitors closely.

The board continues to work with local management to monitor land ownership issues that may impact the group's operations. In Kenya, the length of the leases owned by non-Kenyan citizens and corporations has been reduced from 999 years to 99 years in accordance with the new constitution. In South Africa, on land where ownership claims have been made, any substantiated claim is required to be resolved on a willing buyer willing seller basis and crops are generally only planted following notification to the Land Claims Commission.

In India, violence from separatist groups which has been a problem for some years has recently been greatly reduced in Assam. Over the last four years, there has been an increase in activity by separatist groups in Darjeeling and the Dooars. The situation continues to be monitored and the group's operations in these regions have generally been able to trade normally.

UK engineering

A number of the UK engineering companies are dependent for a significant part of their revenue on the aerospace and the oil and gas industries. A downturn in either of these sectors would have an impact on the level of activity in these businesses.

Some of the processes used by the companies involved in metal treatment require high standards of health and safety and environmental management. Failure to maintain these standards could give rise to accidents or environmental damage.

Cold storage and transport

Cold storage and transport in the UK is a highly competitive industry and is largely dependent on the food industry for the utilisation of cold stores.

Cold stores are heavy users of electricity and any significant movement in energy costs can affect the operation's profitability. Similarly, the transport division is affected by sharp movements in the cost of fuel.

The business is dependent upon a sophisticated computer system. The failure of this system could have significant consequences for the business although a disaster recovery plan is in place.

Banking and financial services

Duncan Lawrie Limited is regulated by the Financial Services Authority (FSA) and has a well developed compliance process. The following risks have been identified:

Duncan Lawrie Limited has no exposure to the sub-prime mortgage market but in periods of low interest rates and low stock market values its income stream will inevitably be affected. Bank failures in the jurisdiction within which Duncan Lawrie operates can also impact its results as a consequence of industry wide compensation schemes to which it is required to contribute.

Further information on the group's financial risks are disclosed in note 37 of the accounts.

Investments

The group owns a number of investments including listed investments. The value of these investments is therefore likely to fluctuate in line with global stock market movements.

Pension schemes

There is one final salary scheme in the UK, following the merger of three schemes during the year. It is closed to new entrants and permits an element of future accrual for existing members in the defined benefit section. A material proportion of the assets of the scheme are invested in equities and the value of these assets will fluctuate in line with global equity markets. Continuing improvements in mortality rates may also increase the liabilities of the scheme.

Credit Risk

Credit control procedures are in place throughout the group but the risk remains that some customers may have difficulty making payments.

Social and environmental responsibility

Background

The group has a wide range of businesses operating around the world in diverse commercial, cultural and regulatory environments. These businesses encompass a correspondingly wide spectrum of employment and environmental issues and our main challenge is to ensure that these are consistently managed across the group.

The group's businesses have a duty to meet local regulatory requirements and will always strive to do so. In this respect, there is a distinction between our UK businesses and our agricultural and horticultural businesses based mostly in developing countries. Whilst the UK businesses are subject to well developed regulatory regimes in the areas of employment and environmental protection, this is not necessarily the case elsewhere. Our agricultural and horticultural businesses have however more than responded to the increasing amount of relevant local legislation and to the demands of the marketplace, as many of our major customers for agricultural products now expect us to meet their own social and environmental standards, or to achieve certification against recognised international standards such as 'Fairtrade' labelling.

Particular challenges and opportunities for the group lie in the following areas:

Child labour: We have a clear policy not to use child labour and all of our businesses meet local legal requirements. The minimum legal working age varies around the world and in some countries it is both the cultural norm and permissible for parents to involve their children in the productive process. We do not subscribe to this approach and therefore translating our policy into unambiguous local rules and enforcing these rules requires vigilance.

Health and safety: Our UK, European and North-American businesses operate in a strong regulatory climate, and have a good health and safety culture and record. Achieving equivalent standards of health and safety management in our operations in some developing countries is a continuing challenge.

Medical care and education: In some countries, our workers and their children do not have access to good state provision of medical or educational services. However, the majority of tea estates in India and Bangladesh have a hospital and a qualified doctor and our operations in both these countries have central group hospitals to which more serious illnesses are referred. A number of our African businesses report a high incidence of HIV/AIDS related illnesses. We provide, as a very minimum, basic medical services including where appropriate retroviral drugs, and give support to schools that are either run by our companies, or in the local neighbourhood.

Casual labour: Some of our agricultural businesses rely on seasonal labour, notably at harvest time. Our agricultural companies give casual and contract workers employment rights in accordance with local legislation.

Environmental management: Our UK-based engineering businesses have the greatest potential to create pollution and hazardous waste and need to meet tight legislative standards. Where appropriate, our UK businesses have formal environmental management systems in place and most are independently certified to the international standard ISO 14001. The enforcement of environmental legislation in many countries where we operate is poor and our businesses in these locations have to act on their own initiative to meet international standards of environmental protection.

Our approach

We believe that good management of employment and environmental issues is essential in ensuring the long-term success of our businesses. We are therefore committed to devoting the resources necessary to continually improve our performance with the same vigour that we apply to other aspects of managing our business.

The board has a corporate social responsibility policy which is available on the company's website and which has been adopted across the group.

In December 2011, the board adopted a new anti-bribery policy which complies with the requirements of the Bribery Act 2010 which came into force during the year. The policy is being introduced across the group. The board does not permit bribery as part of its business practices.

Performance

There are no current employment or environmental issues that prejudice the continuing development of the group. No group businesses were prosecuted for any significant breach of employment or environmental legislation during 2011. The executive committee has established a process for ensuring that the corporate social responsibility policy is enforced across the group.

Key financial performance indicators

Return on segmental assets

The nature of the group's principal activities is such that the board takes a long-term view on its operations, particularly in agriculture. It is also concerned to improve the quality of the group's assets over the long-term and monitors that by reference to return on segmental assets achieved in the main segments of the business which are then compared against budget. The returns achieved in the current and prior year were as follows:

Segment net assets (segment assets less segment liabilities) and segment profit are as reported in the consolidated accounts.

Group borrowings ratio

The board's objective is to ensure that gross borrowings as a percentage of tangible net assets do not exceed 50%. The ratio achieved was 2.39% (2010: 2.0%).

Gross borrowings and tangible net assets (share capital and reserves less goodwill and intangible assets) are derived from the consolidated accounts.

Key non-financial performance indicators

The following information has been compiled based on data provided by a majority of the group's subsidiary undertakings. The board considers that this information demonstrates the level of compliance with important elements of its business principles. The board will regularly review which key non-financial performance indicators are most appropriate.

(i) This excludes tea garden workers in India who have a contractual entitlement to fourteen days sickness absence. It should be noted that in Malawi there is high level of sickness due to HIV/AIDS related conditions and malaria.

(ii) Injury and sickness claim figures now include those from operations in Malawi which were unavailable in 2009.

Substantial shareholdings

As at 26 April 2012 the company had been advised of the following interests in the share capital of the company:

Camellia Private Trust Company Limited held through its subsidiary, Camellia Holding AG 1,427,000 ordinary shares (51.34 per cent. of total voting rights).

Taube Hodson Stonex & Partners Limited held through State Street Nominees Limited 227,176 ordinary shares (8.17 per cent. of total voting rights).

Alcatel Bell Pensioenfonds VZW held through HSBC Global Custody Nominees (UK) Limited 223,015 ordinary shares (8.02 per cent. of total voting rights).

Charitable contributions

During the year the group made charitable donations totalling £14,638 (2010: £8,548). Of this amount £13,218 was paid to arts, sports and education related charities and £1,420 was paid to local hospitals and health related charities.

Employees

It is group policy to keep employees informed, through internal publications and other communications, on the performance of the group and on matters affecting them as employees and arrangements to that end are made by the management of individual subsidiary undertakings.

It is also group policy that proper consideration is given to applications for employment received from disabled persons and to give employees who become disabled every opportunity to continue their employment.

Payment of creditors

It is group policy to agree payment terms with suppliers when negotiating business transactions and to pay suppliers in accordance with contractual or other legal obligations. The company has no trade creditors. Group trade creditors at 31 December 2011 represented 40 days (2010: 39 days) of annual purchases.

Share capital and purchase of own shares

The company's share capital comprises one class of ordinary shares of 10 pence each which carry no restrictions on the transfer of shares or on voting rights (other than as set out in the company's articles of association). There are no agreements known to the company between shareholders in the company which may result in restrictions on the transfer of shares or on voting rights in relation to the company. Details of the issued share capital are contained in note 31 to the accounts.

At the annual general meeting in 2011, shareholders gave authority for the company to purchase up to 277,950 of its own shares. This authority expires at the conclusion of this year's annual general meeting on 7 June 2012.

Independent auditors

PricewaterhouseCoopers LLP has expressed its willingness to continue as auditors of the company and a resolution proposing PricewaterhouseCoopers LLP re-appointment will be put to the annual general meeting.

Each of the persons who were directors at the time when this directors' report was approved has confirmed that:

Going concern

After reviewing the group's budget for 2012 and other forecasts, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Therefore they continue to adopt the going concern basis in preparing the accounts.

By order of the board

J A Morton

Secretary

26 April 2012

Corporate governance

Statement of compliance

This statement describes how the company applies the main principles of UK Corporate Governance Code 2010 ("the Code"). In implementing the Code, the directors have taken account of the company's size and structure and the fact that there is a controlling shareholder.

The company has complied with the relevant provisions set out in the Code throughout the year with the exception of the following areas of the Code that have not been implemented:

The board

The board currently comprises eight directors. Four are non-executive directors, of which two are considered independent. The remaining directors are executive directors, including the executive chairman. Mr Relleen, the deputy chairman, has been designated as the senior independent director. The names and brief biographical details of each director appears on page 7.

Mr Vaughan-Johnson and Mr Reeves were first appointed to the board in 1999 and 2001 respectively. The board, having taken into consideration provision B.1.1 of the Code, considers it is in the best interest of the company for Mr Vaughan-Johnson and Mr Reeves to continue to act as non-executive directors. The board considers that they remain independent and that given the relative complexity and geographical spread of the group, their experience continues to be of considerable benefit.

There is on-going dialogue between the chairman and the majority shareholder whose views are reported to the board. The company is also in contact with other significant shareholders.

The board has established a nomination committee chaired by Mr Perkins, the other members being Mr Relleen and Mr Vaughan-Johnson.

The board has established a remuneration committee, audit committee and executive committee. Terms of reference of each of these committees can be viewed on the company's website.

The board undertook a performance evaluation during the year by way of an internal review.

The board is responsible for managing the group's business and has adopted a schedule of matters reserved for its approval. The schedule will be reviewed annually and covers, inter alia, the following areas:

A full copy of the schedule is available on the company's website.

A report summarising the group's financial and operational performance including detailed information on each of its businesses is sent to directors each month. Each director is provided with sufficient information in advance of board meetings to enable the directors to make informed judgements on matters referred to the board. The board met nine times in 2011.

Attendance by directors at board and committee meetings held during the year was as follows:

(i) Mr Mathur attends meetings of the audit committee by invitation in his capacity as finance director.

Executive committee

The board has delegated the day to day management of the group's operations to the executive committee which is also responsible for implementing board policy. The members of the committee are:

 (i) appointed to the executive committee with effect from 1 January 2012.

Audit committee

The audit committee is chaired by Mr Relleen. The other members of the committee are Mr Reeves and Mr Vaughan-Johnson. During 2011, the committee met on three occasions.

The principal responsibilities of the audit committee are:

During the year the committee's work included discharging these responsibilities and, in addition, it reviewed its terms of reference taking into account the Guidance on Audit Committees issued by the Financial Reporting Council.

The committee reviewed those non-audit services provided by the external auditor and satisfied itself that the scale and nature of those services were such that the auditors' objectivity and independence were safeguarded.

Remuneration committee

The committee comprises the board's two independent non-executive directors, being Mr Vaughan-Johnson who is chairman of the committee and Mr Relleen.

The committee's full terms of reference are available on the company's website. The responsibilities of the committee include:

The committee met twice during 2011. The remuneration report appears on pages 18 to 20.

Insurance

The company purchases insurance to cover its directors in respect of legal actions against them in their capacity as directors of the company. The level of cover is currently £20 million. All directors have access to independent professional advice at the company's expense.

Share capital structure

The share capital of the group is set out on page 12 of the report of the directors.

Internal control and risk management systems

The directors acknowledge that they are responsible for maintaining a sound system of internal control. During the year, the audit committee, on behalf of the board, reviewed the effectiveness of the framework of the group's system of internal control, the principal features of which are described below.

Decentralisation is a key management philosophy with responsibility for efficient day to day operations delegated to local management. Accountability and delegation of authority are clearly defined with regular communication between group head office and local management. The performance of each company is continually monitored centrally including a critical review of annual budgets, revised forecasts and monthly sales, profits and cash reports. Financial results and key business statistics and variances from approved plans are carefully monitored. Senior management regularly visit and review the group's operating units. However, any system of internal control can provide only reasonable, and not absolute, assurance against material mis-statement or loss.

By order of the board

J A Morton

Secretary

26 April 2012

Statement of directors' responsibilities

The directors are responsible for preparing the annual report, the directors' remuneration report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law the directors have prepared the group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of both the group and the parent company and of the profit or loss of the group and company for that period.

In preparing these financial statements, the directors are required to:

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Each of the directors, whose names and functions are listed on page 2 confirm that, to the best of their knowledge:

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website.

By order of the board

M C Perkins

Chairman

26 April 2012

Remuneration report

This report is drawn up in accordance with the Companies Act 2006 and the rules of the UK Listing Authority.

Policy on directors' remuneration

In determining remuneration policy and the remuneration of directors, full consideration has been given to the relevant provisions of the UK Corporate Governance Code 2010. The board seeks to provide remuneration packages that will attract, retain and motivate the best possible person for each position. The board also wishes to align the interests of executives with shareholders. The group's activities are based largely on agriculture and horticulture, which are highly dependent on factors outside management control (e.g. weather, market prices for our produce etc.), and is a significant consideration as to why the company does not operate profit related bonus, share option or share incentive schemes for directors.

Service contracts

Messrs Perkins, Ames, Field and Mathur are each employed on rolling service contracts. Mr Perkins's service contract is dated 25 April 2002, Mr Mathur's service contract is dated 1 December 2003, Mr Ames's service contract is dated 24 April 2009 and Mr Field's service contract is dated 19 December 2011. The service contracts are terminable at any time by a one year period of notice from the company or the director. Following their initial appointment non-executive directors may seek re-election by shareholders at each subsequent annual general meeting. Non-executive directors do not have service agreements. There are no specific contractual provisions for compensation upon early termination of a non-executive director's employment. The remuneration committee reviews salaries annually and will seek independent professional advice when appropriate.

The following sections on directors' remuneration and pensions have been audited.

Benefits in kind include the value attributed to benefits such as medical insurance, permanent health insurance, spouse/partner travel and cash alternatives to company cars.

Directors' pensions

Most UK employees, including executive directors, are eligible to join pension schemes operated within the group. Mr Perkins was a member of The Linton Park Group Pension Scheme up until 28 February 2010. Mr Field and Mr Mathur are members of The Linton Park Pension Scheme (2011). This Pension Scheme was formerly the Unochrome Group Pension Scheme and was merged with the Linton Park Pension Scheme and the Lawrie Group Pension Scheme on 1 July 2011. Pension accrues at the rate of 1/60th up to 30 June 2011 and 1/80th thereafter of basic final salary per year of service for Messrs Field and Mathur. Formerly under The Linton Park Group Pension Scheme the normal retirement age was 63 up until 31 December 2003 in respect of service up until that date. With effect from 1 January 2004 the normal retirement age was increased to 65.

From 1 May 2007 the normal retirement age of members of The Lawrie Group Pension Scheme was increased to 65. Pension benefits accrued prior to that date can be paid at age 63 without actuarial reduction. In a few cases pensions can be paid from age 60 without actuarial reduction. The Linton Park Pension Scheme (2011) provides for a lump sum death in service benefit of four times basic salary and a spouse's pension of half of the member's pension, based on prospective service.

All benefits are subject to HM Revenue and Customs limits. Up until 6 April 2005, under The Linton Park Group Pension Scheme, post retirement pension increases were based on the annual increase in the retail price index, subject to a maximum of 5 per cent. From 6 April 2005, the maximum increase reduced to 2.5 per cent. per annum in respect of pension accrued on or after that date. Also, under The Linton Park Group Pension Scheme there is a minimum increase of 3 per cent. per annum in respect of service before 1 January 2002. Under The Lawrie Group Pension Scheme for entrants prior to 1 January 1996, pension earned prior to April 2003 is subject to a 5 per cent. increase per annum. From 1 May 2007, the maximum increase reduced to 2.5 per cent. in respect of pension accrual on or after that date.

A sum of £39,208 was paid to Mr Ames's personal pension arrangement during the year.

Further information on pension arrangements:

Defined benefit pension schemes

The increase in transfer value and the transfer value of pension accrued in the year are stated net of directors' contributions.

Notes:

In addition to the above, an unfunded pension of US$200,000 per annum is paid to Mr G Fox, a former director of the company.

By order of the board

J A Morton

Secretary

26 April 2012

Consolidated income statement

for the year ended 31 December 2011

Statement of comprehensive income 

for the year ended 31 December 2011

Consolidated balance sheet

at 31 December 2011

Company balance sheet

at 31 December 2011

The financial statements were approved on 26 April 2012 by the board of directors and signed on their behalf by:

M C Perkins

Chairman

Registered Number 29559

Consolidated cash flow statement

for the year ended 31 December 2011

For the purposes of the cash flow statement, cash and cash equivalents are included net of overdrafts repayable on demand. These overdrafts are excluded from the definition of cash and cash equivalents disclosed on the balance sheet.

Company cash flow statement

for the year ended 31 December 2011

Statement of changes in equity

for the year ended 31 December 2011