Camellia Regulatory News (CAM)

Chairman's statement

The headline profit before tax for the year to 31 December 2013 amounted to £38.15 million compared with £48.98 million in the previous year. Headline profit is a measure of underlying performance which is not impacted by exceptional and other items considered non-operational in nature.

Yet again our accounts are distorted by the inclusion of exceptional gains mostly arising from changes in the fair value of biological assets. As in the preceding year the devaluation of the Malawian Kwacha has resulted in a substantial credit to the income statement of £11.03 million with in effect a corresponding charge made to reserves.

The International Accounting Standards Board has unfortunately not yet issued a revised IAS 41 in respect of the treatment of permanent plantings. The indication is that such plantings will be treated as fixed assets to be depreciated over their expected lifespan. The adoption of such a policy will make our accounts that much easier to understand.

After taking account of exceptional and other one off items the profit before tax for the year to 31 December 2013 amounted to £59.65 million compared with £69.71 million in the previous year.

Dividend

The board is recommending a final dividend of 91p per share which, together with the interim dividend already paid of 34p per share, brings the total distribution for the year to 125p per share compared with 120p per share in 2012.

Agriculture and horticulture

The group's income principally derives from our agricultural and horticultural operations. The markets in which we operate have been beneficial over the last five years and we have enjoyed reasonable profitability. The continued success of our operations depends not only on our own expertise and managerial capacity but also on events that are totally outside our control, the main one of which is, of course, climatic. There is always a fine balance between the supply and demand of our commodities and any change in weather patterns, whether in the short term or indeed as part of any long term climate change, can distort the market significantly. We experienced this during 2013 in our operations in Kenya where, as a result of oversupply, tea prices were below our cost of production for a few months.

Tea

In 2013, profit from our tea operations was slightly lower than the previous year.

India

Production of tea from our gardens in India increased approximately 10 per cent. over the previous year due to better climatic conditions and the beneficial effect of irrigation facilities installed over the last three years. The intensive factory redevelopment programme has now come to an end and the benefits of the substantial capital investment made to our India gardens will hopefully manifest themselves in the years to come.

Bangladesh

Our production of tea for the year was almost exactly the same as the previous year. Prices were favourable at the beginning of the year but the government's withdrawal of the supplemental import tax of 20 per cent. allowed an influx of lower quality cheaper teas and this depressed the sales price of our own production.

Factory renovations continue and, as in India, we are deploying considerable resources for the improvement of our irrigation infrastructure.

Kenya

Our tea production increased in Kenya during the year as did that for the rest of the tea producing operations in that country. This led to a surplus of tea on the Mombasa auctions resulting in considerably reduced prices. During the second half of the year we were selling our tea at below cost of production, a matter of great concern. The average sale price of our Kenya production was 60US cents per kilo below that of the previous year.

Malawi

The recovery from the drought in the latter part of 2012 was much quicker and more widespread than had been anticipated and resulted in a substantially increased crop for the year. Sale prices were also slightly higher than the previous year. As stated above the further devaluation of the Malawi Kwacha during 2013 against both the US dollar and Sterling has led to a further exceptional gain of £11.03 million in the income statement. The lack of foreign exchange continued to be a problem making it difficult to secure essential inputs such as fertilizers and fuel.

Edible Nuts

2013 was an 'off-year' for our pistachio orchards at Horizon Farms in California and therefore production was minimal. The new areas of almonds planted on this farm are showing encouraging growth.

Our macadamia production in Malawi was ahead of the previous year but that in South Africa was lower. Further macadamia planting has taken place in both Kenya and South Africa. Overall, sale prices remained stable.

Other horticulture

Avocado production at Kakuzi, one of our Kenyan subsidiaries, declined substantially over the year. This was mainly the result of inclement weather at the time of fruit set. Sale prices were however considerably higher than the previous year.

Production and prices of rubber from our Bangladeshi operations were both lower than the previous year. Theft of latex continues to be a problem.

Our Brazilian operation reduced its planting in maize and increased that of soya. Prices for both commodities were reasonable during the year, however production costs continued to increase. A Brazilian government committee appointed to review the ownership of agricultural land by foreigners has yet to report.

Our citrus production at Horizon Farms in California was slightly in excess of the previous year. Costs declined and sale prices improved resulting in a satisfactory profit.

The wine grape harvest from our farm in South Africa declined during the year and the sale of bottled wine remains difficult. We are however concentrating our marketing effort on our higher value wine and this will hopefully improve the results of the operation in the years to come.

Food storage and distribution

In the UK, the profit of Associated Cold Stores and Transport improved again in 2013 against the background of a continued over supply of facilities. The results from our food distribution businesses in the Netherlands improved during the year but are still considered unsatisfactory. It is hoped that the signs of an emergence of the Netherlands from recession will improve the future viability of these businesses.

Engineering

The results of our engineering companies are clearly unacceptable. The main contributor to this disappointing scenario is AKD Engineering at Lowestoft. AKD has incurred substantial losses in completing a large fabrication contract for the North Sea Oil industry. It is our position that these costs were incurred mainly due to the non-compliance by our customer of their contractual obligations and we have therefore issued proceedings against that customer. Whilst we have been advised that we have a strong claim, we have not included any potential settlement which may eventuate from the proceedings in our results for this period.

The other disappointment continued to be the results of Abbey Metal Finishing where, as stated last year, it will take more time than initially anticipated for them to recover the business lost as a result of fire at their previous premises in 2010. Abbey Metal does however have state of the art facilities both at Hinckley in this country and at Atfin in Germany, where the group owns a 51 per cent. interest. We remain confident this company will return to profitability in due course.

GU Cutting and Grinding unfortunately suffered from the premature cancellation of a major contract during the year. This company continues to develop its wide ranging expertise in the cutting of materials by water jet machinery. Its other major skill is grinding, especially of large plate.

On a more positive note, AJT Engineering produced good results at its three operations in Aberdeen, East Kilbride and Port Glasgow and the prospects for this company remain encouraging.

Banking and financial Services

With the present lack of ability to secure any reasonable margin on depositors' funds and the ever increasing cost of compliance it remains difficult for Duncan Lawrie to make a reasonable return on its capital. The policy of expanding our customer base and raising general awareness of Duncan Lawrie has proved to be successful and facilities are in place to allow this company to prosper when interest rates return to normal. Duncan Lawrie occupies a prime position in a niche market which relies on a high level of service to its customers.

Associates

Despite the difficulty of operating in Bangladesh during the last year it is encouraging to report United Leasing increased profitability whilst that at United Insurance was similar to the previous year.

As previously advised, we are no longer able to exercise significant influence over BF&M Limited and therefore from 1 January 2013 we have accounted for our shareholding in this company as an investment rather than as an associate. Accordingly, we have recognised dividends received in our income statement as opposed to a share of the profits. We did nonetheless increase our holding in BF&M during the year as an opportunity arose to simplify our holdings in Bermudian companies. This increase has not changed our ability to exercise influence.

Development

We will continue to develop the group by organic growth, which has been a priority over the last six years, whilst examining opportunities for acquisitions. We will only make acquisitions if we are totally convinced that all our required parameters are fully satisfied. This may take a year, a decade or even longer.

In the meantime we will retain sufficient reserves to ride out such economic and political storms that seem almost inevitable until some form of stability returns.

The graveyard of failed corporations is littered with examples of companies that felt it necessary to 'do a deal' either in response to short term shareholder pressure or the bonus culture or to satisfy the ego of the chief executive. Camellia has no intention of booking a plot in such a graveyard.

Directors

Charles Vaughan-Johnson who has been a director of your company since 1999 is retiring as the conclusion of the annual general meeting in June. Charles has made a major contribution to the deliberation of our board and I am sorry I have been unable to persuade him to stay on longer. His experience and guidance have been invaluable.

Staff

The environment in which we operate gets more difficult year by year and the necessity to comply with the ever increasing burden of regulation and compliance requires considerable dedication and expertise. I am pleased to report that our staff continues to rise to this and many other challenges and have made a great contribution to our success for which I thank them.

M C Perkins

Chairman

24 April 2014

Strategic Report

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 2013 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:

Group strategy

The board has adopted the following strategy for the group:

- to develop a worldwide group of businesses requiring management to take a long term view,

- the achievement of long-term shareholder returns through sustained and targeted investment,

- investing in the sustainability, environment and the communities in which we do business,

- ensuring that the quality and safety of our products and services meet the highest international standards,

- the continuous refinement and improvement of the group's existing businesses using our internal expertise and financial strength.

The progress against this strategy during the year is set out in further detail in the chairman's statement shown on pages 3 to 5 and within the report of the directors.

Business model

The group consists of a portfolio of businesses mainly in agriculture and horticulture, private banking and financial services, food storage and distribution and engineering. Each business is managed at local level with independent management who report to the board regularly on performance against an annual budget.

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, Malawi 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, Darjeeling and the Dooars. In Bangladesh, there have been instances of civil unrest during 2013 prompted by political protests in the country. 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 now regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) and has a well-developed compliance process. The following risks have been identified:

- compliance risk - the FCA and the PRA have the power to stop trading activity should there be a serious breach of their regulations. Following the recent global banking crisis, there have been moves by the authorities to tighten regulatory standards and this may lead to a requirement for further capital to be invested in Duncan Lawrie Limited.

- credit risk - the lending of money gives rise to a credit risk. It lends money to customers and places money with other banks and holds interest bearing securities. This credit risk is managed by strict internal procedures. It limits itself to lending to customers no more than its share capital and reserves.

- liquidity, interest and foreign exchange rate risk - these risks are monitored closely and reported upon daily against conservative exposure limits.

Duncan Lawrie Limited has no exposure to the sub-prime mortgage market but in periods of low interest rates or 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 39 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 in 2011. 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 appropriately 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 antiretroviral 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.

Greenhouse Gas (GHG) Emissions

Our emissions have been calculated based on the GHG Protocol Corporate Standard. Emissions reported correspond with our financial year.

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.

The board has adopted an anti-bribery policy which complies with the requirements of the Bribery Act 2010. The policy has being introduced across the group and its implementation is being monitored. The board does not permit bribery as part of its business practices.

Performance

There is 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 legislation during the year. Abbey Metal Finishing Limited was prosecuted for a breach of environmental legislation following the fire at its former premises. 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 per cent. The ratio achieved at 31 December 2013 was 0.96% (2012: 1.86%).

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 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.

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.

The table below provides a breakdown of the gender of the directors and employees at 31 December 2013:

(i) Company directors consists of the company's board as detailed on page 2.

(ii) "Other senior managers" is as defined in The Companies Act 2006 (Strategic report and directors report) Regulations 2013, and includes persons responsible for planning, directing or controlling the activities of the company, or a strategically significant part of the company, other than company directors and who are members of the executive committee.

By order of the board

J A Morton

Secretary

24 April 2014

Report of the directors

The directors present their report together with the audited accounts for the year ended 31 December 2013.

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 £37,543,000 (2012: £44,048,000). The board has proposed a final dividend for the year of 91p per share payable on 4 July 2014 to holders of ordinary shares registered at the close of business on 13 June 2014. The total dividend for 2013 is therefore 125p per share (2012: 120p per share). Details are shown in note 12.

Directors

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

*C J Ames purchased 100 shares on 2 January 2013 and 200 shares on 10 September 2013.

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 F Vuilleumier will retire and, being eligible, seek re-election at the AGM on 5 June 2014. Mr C P T Vaughan-Johnson will not seek re-election at the next AGM and will retire as a director at the conclusion of the meeting.

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 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 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 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 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 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 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. He will retire as a director from the Board at end of the AGM on 5 June 2014.

Mr F Vuilleumier was appointed as a non-executive independent director on 7 March 2013. Mr Vuilleumier is a partner of Oberson Avocats, a law office based in Geneva, Switzerland. He is also a Swiss Certified tax expert and a lecturer in tax law at the University of Lausanne.

Secretary

Mrs J A Morton was appointed as company secretary on 8 September 2011.

Substantial shareholdings

As at 24 April 2014 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 (51.67 per cent. of total voting rights).

Alcatel Bell Pensioenfonds VZW held through HSBC Global Custody Nominees (UK) Limited 277,000 ordinary shares (10.03 per cent. of total voting rights).

Taube Hodson Stonex & Partners held through State Street Nominees Limited 87,946 ordinary shares (3.18 per cent. of total voting rights).

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 33 to the accounts.

At the annual general meeting in 2013, shareholders gave authority for the company to purchase up to 277,950 of its own shares. Following that AGM, the company has purchased 12,300 of its own shares for cancellation during the year and a further 5,200 since 1 January 2014. This authority expires at the conclusion of this year's annual general meeting on 5 June 2014.

Disclosure of information to 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 2014 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.

Corporate governance

The company's statement on corporate governance can be found in the corporate governance report on pages 15 to 18.

By order of the board

J A Morton

Secretary

24 April 2014

Corporate governance

Statement of compliance

This statement describes how the company applies the main principles of UK Corporate Governance Code 2012 ("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 area of the Code that has not been implemented:

The roles of chairman and chief executive have continued to be fulfilled during the year by Mr Perkins and not separated as required by the Code. Mr Ames and Mr Field are joint managing directors and have responsibility for aspects of the day to day management of the group.

The board

The board currently comprises eight directors. Four are non-executive directors, of which three 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 appear on pages 12 and 13.

Mr Vaughan-Johnson was first appointed to the board in 1999. The board, having taken into consideration provision B.1.1 of the Code, considered it is in the best interest of the company for Mr Vaughan-Johnson to continue to act as a non-executive director. The board considered that Mr Vaughan-Johnson remained independent during year and that given the relative complexity and geographical spread of the group, his experience continues to be of considerable benefit. Mr Vaughan-Johnson will be retiring from the board following the forthcoming AGM.

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 is reviewed annually and covers, inter alia, the following areas:

- Strategy

- Acquisitions and disposals

- Financial reporting and control

- Internal controls

- Approval of expenditure above specified limits

- Approval of transactions and contracts above specified limits

- Responsibilities for corporate governance

- Board membership and committees

- Approval of changes to capital structure

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 judgments on matters referred to the board. The board met ten times in 2013.

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.

(ii) Mr Reeves retired from the Board on 6 June 2013.

(iii) Mr Vuilleumier was appointed as a director on 7 March 2013.

(iv) Mr Vuilleumier was appointed as member of the audit committee from 1 July 2013.

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:

*appointed with effect from 1 January 2014.

Nomination committee

The nomination committee is chaired by Mr Perkins. Its other members are Mr Vaughan-Johnson and Mr Relleen.

The principal responsibilities of the nomination committee are set out below:

- review the balance and composition (including gender and diversity) of the board, ensuring that they remain appropriate

- be responsible for overseeing the board's succession planning requirements including the identification and assessment of potential board candidates and making recommendations to the board for its approval

- keep under review the leadership needs of, and succession planning for, the group in relation to both its executive and non-executive directors and other senior executives

The committee did not meet during the year.

Audit committee

The audit committee is chaired by Mr Relleen. The other members of the committee are Mr Vuilleumier and Mr Vaughan-Johnson. Mr Reeves was a member of the committee until he retired from the board on 6 June 2013. During 2013, the committee met on three occasions.

Principal responsibilities

The principal responsibilities of the audit committee are set out below which were undertaken during the year:

- to review and monitor the financial statements of the company and the audit of those statements - to monitor compliance with relevant financial reporting requirements and legislation

- to monitor the effectiveness and independence of the external auditor

- to review effectiveness of the group's internal control system. The committee regularly reviews the effectiveness of internal audit activities carried out by the company's group accounting function and senior management

- to review non-audit services provided by the external auditors

Significant issues in relation to financial statements

The audit committee assesses whether suitable accounting policies have been adopted and whether management have made appropriate estimates and judgements. In the year under review, the audit committee considered the following significant matters in relation to the financial statements:

Biological assets - One of the key areas of judgment that the committee considered in reviewing the financial statements was the valuation of biological assets in accordance with IAS 41. Valuations are carried out by external professional valuers or are based on discounted cash flows. These were agreed for consistency of approach and assumptions agreed as reasonable. For more details see note 18 to the accounts.

Pensions - A key area of judgment is in relation to the value of the pension scheme obligation. Whilst this is conducted by independent expert actuaries, the size of the obligation means that a relatively minor difference in the assumptions could result in a material change in the obligation. The committee considered the competence of the actuaries and the assumptions adopted and concluded that the work performed is sufficient to support the value.

Goodwill and intangibles - The value of goodwill and intangibles is inherently complex and relies on judgment and estimation. The committee consider the performance of the underlying assets and their ability to continue to support the carrying value. As a result, the committee is satisfied that the carrying value is supported.

External auditors

To assess the effectiveness of the external audit process, the external auditor is required to report to the audit committee and confirm their independence in accordance with ethical standards and that they had maintained appropriate internal safeguards to ensure their independence and objectivity. In addition to the steps taken by the Board to safeguard auditor objectivity, PwC operates a five year rotation policy for audit partners for a listed entity.

The company's external audit was last tendered in 2009, which resulted in a change to PwC at that point. We are aware of the regulatory developments and transitional arrangements in relation to audit tendering provisions and will continue to monitor guidance.

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 external auditors objectivity and independence were safeguarded.

The committee confirms that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's performance, business model and strategy.

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 review of the group's policy relating to remuneration of the chairman, executive directors and members of the executive committee

- to determine the terms of employment and remuneration of the chairman, executive directors and those members of the executive committee that are employed in the United Kingdom with a view to ensuring that those individuals are fairly but responsibly rewarded

- to approve compensation packages or arrangements following the severance of any executive director's service contract

- at its discretion, the committee may make such enquiries as it sees fit concerning the remuneration packages of those members of the executive committee that are employed outside the United Kingdom

The committee met once during 2013. The remuneration report appears on pages 20 to 22.

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 in note 33.

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

24 April 2014

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:

- select suitable accounting policies and apply them consistently

- make judgements and accounting estimates that are reasonable and prudent

- state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business

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 group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the group

- the strategic report contained on pages 6 to 11 includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal risks and uncertainties that it faces.

In addition, each of the directors considers that the annual report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's performance, business model and strategy.

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

On behalf of the board

M C Perkins

Chairman

24 April 2014

Remuneration report

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

Remuneration committee

A report of the proceedings during 2013 of the remuneration committee ("the committee") is set out on page 18 and includes details of the membership of the committee.

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 2012. The committee seeks to provide remuneration packages that will attract, retain and motivate the best possible person for each position. The committee 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 and market prices for our produce), and this is a significant consideration as to why the company does not operate profit related bonus, share option or share incentive schemes for directors.

The remuneration policy for executives reflects the overriding remuneration philosophy and principles of the wider group. When determining the remuneration policy and arrangements for directors, the committee considers pay and employment conditions elsewhere in the group to ensure that pay structures are appropriately aligned and that levels of remuneration remain appropriate in this context. It is intended that the remuneration policy, if approved by shareholders at the forthcoming AGM, will take effect from the date of this AGM and be applied for a period of 3 years until the AGM in 2017. This policy takes into account any views of the shareholders expressed to the committee on directors' remuneration.

At the AGM on 6 June 2013, the remuneration report for the year to 31 December 2012 was approved by shareholders with 98.598% of the votes cast in favour, 0.002% of the votes cast against and 1.400% of the votes withheld.

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.

Directors' remuneration

Notes:

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 were members of the Linton Park Pension Scheme 2011 until 5 April 2012. 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. 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 £41,997 was paid to Mr Ames's personal pension arrangement during the year. Accrual for pension for Messrs Perkins, Field and Mathur has ceased and there was no pensionable service for these directors during 2013.

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

24 April 2014

Consolidated income statement

for the year ended 31 December 2013

Statement of comprehensive income

for the year ended 31 December 2013

Consolidated balance sheet

at 31 December 2013

Company balance sheet

at 31 December 2013

The notes on pages 30 to 80 form part of the financial statements.

The financial statements were approved on 24 April 2014 by the board of directors and signed on their behalf by:

M C Perkins

Chairman

Consolidated cash flow statement

for the year ended 31 December 2013

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 2013