MAJEDIE INVESTMENTS PLC
FINAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2009
The full Annual Report and Accounts can be accessed via the
Company's website at www.majedie.co.uk or by contacting the Company Secretary
on telephone 01392 412122.
The Directors present the results of the Company for the year ended
30 September 2009
Overview
Majedie Investment PLC is a self-managed investment trust with total portfolio
assets under management of over £157 million as at 30 September 2009.
Our Objective is to maximise total shareholder return over the long term
whilst increasing dividends by more than the rate of inflation.
Our Benchmark is 70% FTSE All-Share Index and 30% FTSE World ex UK Index
(Sterling) on a total return basis.
Investment Objective
The Company's objective is to maximise total shareholder return over the long
term whilst increasing dividends by more than the rate of inflation.
Investment Policy
The Company invests principally in securities of publicly quoted companies
worldwide, though it may invest in unquoted securities up to levels set
periodically by the Board.
The overall approach is based on analysis of global economies and sector
trends with a focus on companies and sectors judged likely to deliver strong
growth over the long term. The number of investments held, together with the
geographic and sector diversity of the portfolio, enable the Company to spread
its risks with regard to liquidity, market volatility, currency movements and
revenue streams.
The Company's benchmark comprises 70% FTSE All-Share Index and 30% FTSE World
ex UK Index (Sterling) on a total return basis. It is used to assess the
performance and risk of the Company and investment portfolio. Whilst
performance is measured against the benchmark, investment decisions and
portfolio construction are made on an independent basis. The Board however
sets various specific portfolio limits for stocks and sectors in order to
restrict risk levels.
Although, exceptionally, derivative instruments may be employed, usually for
hedging purposes and with specific prior approval of the Board, generally the
Company is a long-only investor and would be unlikely to use such instruments.
The Company will not invest in any holding that would, at the time of
investment, represent more than 15% of the value of its gross assets.
The Company uses gearing to enhance the long term returns to shareholders. The
Articles of Association give the Board the ability to borrow up to 100% of
adjusted capital and reserves. The Board also reviews the level of net gearing
(borrowings less cash) on an ongoing basis and sets a range at its discretion
as appropriate. The Company's current debenture borrowings are limited by
covenant to 662/3%, and any additional indebtedness is not to exceed 20%, of
adjusted capital and reserves.
Highlights for 2009
Total shareholder return: (18.3%)
Net asset value total return: (14.9%)
Benchmark total return: 11.3%
Final dividend (per share): 6.3p
Total dividends (per share): 10.5p
Directors' valuation of
investment in Majedie Asset Management
Limited: £30.0m
Performance year ended 30 September 2009 2008
Investment portfolio return (total assets)† (7.9%) (31.1%)
Net asset value total return (14.9%) (36.2%)
Total shareholder return (18.3%) (36.9%)
Benchmark total return† 11.3% (19.9%)
† Source: The WM Company
Chairman's Statement
The Chairman's Statement forms part of the Director's Report
In the year to 30 September 2009 the Company's Net Asset Value and Share
Price, both on a total return basis fell by 14.9% and 18.3% respectively,
which compares to an increase in the benchmark total return of 11.3%.
This result is of course disappointing with the Company continuing to suffer
from its exposure at last year end to small cap equities and sterling assets
over what has been a most unusual and volatile period in world equity markets.
The Board however has acted promptly to restructure the portfolio so that it
is properly positioned for the long term in the current economic environment.
On a much more positive note we have been making substantial progress on the
launch of a new asset management business which we believe will have the
potential to bring significant benefits to the Company in the future.
Results and dividends
The Group's net profit before tax for the year was £4.3m which is a decrease
of £2.2m or 33.8% compared to the prior year of £6.5m. This is primarily the
result of a fall in Group income of £2.4m to £6.5m this year reflecting
reductions in both dividend and interest income. Group income includes £1.9m
in dividend income from Majedie Asset Management (MAM) compared to £2.5m in
2008. Group total costs for the year were £2.9m, falling £0.4m or 12.1% from
the £3.3m in 2008. The considerable reduction in costs in 2009, while
expected, was adversely impacted by non-recurring costs associated with the
office relocation and the departure of the former Investment Director.
As I indicated in my previous statements, we have undertaken a review of the
Company's dividend policy to determine if it remains appropriate.
Consideration was given to a range of factors and was given impetus by the
current year's substantial decrease in dividend income due to the economic
environment. The Board is mindful of the importance of the Company's dividends
to its shareholders and has concluded that the dividend policy should remain
unchanged.
The Board has therefore decided to recommend a final dividend of 6.3p per
share, which when combined with the interim dividend of 4.2p per share,
results in a total dividend of 10.5p per share which is the same as 2008,
excluding the 2.25p per share special dividend paid last year. This is above
the rate of inflation for the year with the Retail Prices Index (RPI) at -1.4%
reflecting the weak economy. A diagram in the Annual Report & Accounts will
illustrate the Majedie dividend history over the last ten years in comparison
with the RPI. This shows that Majedie dividends have been increasing by more
than the rate of inflation.
Investment Portfolio and Performance
The year began in the immediate aftermath of the Lehman Brothers bankruptcy
which resulted in the liquidity crisis turning into a full global economic
recession. Developed World GDP fell at the fastest rate since the Great
Depression of the 1930s, consumer and business confidence evaporated and
unemployment rates soared. Not surprisingly values across all major asset
classes fell, including equities, corporate bonds, property and commodities.
Equity investors shunned any company considered to be risky, particularly
those with significant borrowings, unproven management or business models
dependent on the economic cycle. Global equity markets collapsed, with our
benchmark down by over 27% at its lowest point in early March.
The remainder of the year was a period of economic stabilisation. Evidence
began to show that the pace of GDP declines was abating and that signs of
growth were beginning to emerge, albeit from highly depressed levels. This was
strongly influenced by government stimulus spending packages, tax cuts, record
low interest rates and continued economic strength from China and India.
Equity markets have experienced a sharp and swift bounce, pricing in an
expectation of continued economic recovery rather than reflecting continuing
high levels of unemployment and low consumer spending. From the trough levels
of mid-March, our benchmark rebounded by over 50% to close the year up 10.4%
in capital terms.
There were two main factors that negatively impacted the investment
performance during the period. Firstly, the Company entered the year with
large exposure to certain early stage small cap positions that had previously
contributed positively to performance, but which significantly underperformed
during the first half of the year. Secondly, the portfolio was heavily
weighted in favour of sterling denominated assets whilst sterling severely
weakened against all major currencies during the period.
These issues were addressed following the change in the management of the
portfolio that took place on 1 January 2009. The revised strategy focused on
enhancing the quality of securities. This was facilitated by the cash held at
the end of 2008 and by switching out of lower quality smaller companies as
deemed appropriate. The illiquidity of many of these investments made this
exercise difficult, although it was largely complete by the year end.
The underweight position in overseas stocks has been dealt with through the
construction of a portfolio of assets in the major markets of USA, Europe and
Japan. These are predominantly highly regarded companies that fit within the
overall investment strategy now being adopted.
Implementing these changes has been far from painless, although the Board
believes that the action taken to enhance the quality of investments is in the
long term interests of the Company. The majority of the listed equity
positions now held are in well financed, large cap companies with proven track
records of delivering profit and dividend growth. Investment risk and
volatility relative to the benchmark have been materially reduced.
Importantly, a base level of investment income has been secured that should
provide solid foundations for the business over the longer term.
The Board is required to review the valuation of all unlisted investments and
during the year we have felt it prudent to reduce the holding value of certain
positions where the situation has deteriorated. In contrast the performance of
MAM continues to exceed expectations both financially by again increasing
profitability year on year, and reputationally where a number of high profile
industry awards have been deservedly received. The Board has considered it
appropriate to increase our valuation to £30m which it believes more
accurately reflects the fair value of our stake in this business.
Board & Management Changes
There have been a number of changes to the Board which aim to position the
Company for the future. Firstly, Mr Paul Gadd has been appointed as a
non-executive director from 1 October 2009. Paul has spent 20 years as a
solicitor in the City of London working in corporate finance. He retired as a
partner of Ashurst in April 2009, prior to which he was head of Ashurst's
investment company practice. I am confident that the Company will benefit from
Paul's experience and that he will make a valuable contribution to our
deliberations. Secondly due to the development of our new asset management
business Mr Gerry Aherne became an executive director from 24 November 2009
and stood down as Chairman of the Remuneration Committee with effect from 1
October 2009. He was replaced by Mr Hubert Reid. Thirdly, Chris Arnheim will
join the Board from 1 January 2010. He has spent 25 years working as a
solicitor in private practice, and for over 10 years was the Company's primary
external corporate legal adviser, for
example advising on the establishment and development of MAM. He stepped down
from this role following last year's AGM. The Board will benefit greatly from
his general experience and his personal knowledge of the Company and its
affairs.
Finally after 10 years as Chairman and in light of the increased demands which
will be made of this role, I have decided to retire with effect from the 2010
AGM. The Board has invited Mr Andrew Adcock to succeed me who will work
closely with Gerry Aherne on the development of the Group. Andrew will stand
down as Chairman of the Audit Committee at that time and be replaced by Mr
Hubert Reid.
The development of a new asset management business which will, inter alia,
manage the Company's investment portfolio led to the departure of Mr Bill
Baker by mutual agreement. I would like to thank Bill for his stewardship and
restructuring of the portfolio in what were very turbulent times. Mr Nick
Rundle has been appointed Investment Director. Nick is an experienced
investment manager with an excellent track record, who has worked in the City
of London for over 20 years in a variety of institutions and positions
including Barclays, Morley Fund Management, Gerrard and National and recently
Taylor Young Investment Management.
Business Development
As outlined at last year's AGM the Company has been seeking an expansion of
its activities. We have made good progress and anticipate being able to launch
a substantial new venture, Javelin Capital LLP, with a group of highly
experienced and talented individuals. Last year Gerry Aherne explained that we
would focus on an investment management business which would concentrate on
offering investment management expertise in Global Equities and Global
Emerging Markets. We have been fortunate to recruit senior investment
individuals as well as marketing and operational staff who are experienced in
growing investment management companies and handling the associated
operational risks. We have applied to the FSA and other regulatory authorities
and are hopeful that we shall commence trading early in 2010, subject to the
necessary consents.
The Company will initially hold 70% of the equity of Javelin Capital LLP and under the
partnership agreement this will fall to 51% provided certain profit related
benchmarks are successfully met. Gerry Aherne will become Managing Partner of
the enterprise but will remain a member of the Board.
This venture is intended to be a genuine partnership between the operational
team of Javelin and the Board of Majedie. It is to be hoped that it will be as
highly successful as our previous investment in MAM.
Annual General Meeting
The AGM will be held on 20 January 2010 at 11:30am at the Fishmongers Company,
Fishmongers Hall London Bridge. Details are set out in the Annual Report &
Accounts. As in prior years there will be presentations and an opportunity to
ask questions. I do hope you will be able to attend.
Companies Act 2006 and New Articles of Association
The implementation of the final provisions of the Companies Act 2006 came into
force on 1 October 2009. At this year's AGM and as included in the notice of
meeting included in the Annual Report & Accounts, the Company proposes to
adopt new Articles which reflect these changes, including the abolition of
authorised share capital, the deletion of the enabling provision of authority
to purchase our own shares and reduce share capital and notice periods of
general meetings.
Strategy & Outlook
Markets have experienced a sharp and swift recovery from the lows suffered in
March 2009 and now appear to be pricing in an economic recovery into 2010
which is by no means certain. The global economy has clearly passed its worst,
but the strength and speed of the continued rebound may be more prolonged and
drawn out than envisaged. Economic recoveries are typically punctuated with
negative surprises, so an important indicator of equity market sustainability
is whether setbacks are seen as investment opportunities or triggers that
precipitate sell-offs. Longer term there continues to be upside to equity
markets as record low interest rates have reduced credible alternatives for
the generation of meaningful investment returns from bank deposits and
government securities.
Entering the new financial year, the portfolio is positioned to be underweight
in stocks that are reliant on the overstretched consumers and governments of
the developed world. It is overweight in companies that are exposed to the
faster growing emerging markets and overweight in oil and mining companies
that supply industries that are fundamentally undersupplied on a long term
basis. My over-riding message is that the portfolio is more appropriately
balanced and invested in higher quality stocks than twelve months ago, and so
the relative investment risk and volatility has been significantly reduced.
As the growth in equity markets slows, dividend income should become an
important source of total return. In this context, the positioning of the
investment portfolio to give exposure to high quality companies with dividend
growth potential is likely to be increasingly attractive over the medium term.
In what has been another challenging and demanding year I would like to
express my appreciation of the hard work and commitment shown by the Company's
staff and fellow directors which has certainly eased the burden. In my final
year as Chairman and indeed with the Company's 100 year anniversary falling in
April 2010 I am excited by the opportunities ahead and confident that the
Company is in good hands.
Henry S Barlow Chairman
24 November 2009
Twenty Largest UK Investments
at 30 September 2009
2009 2008
Market Value Market Value
Company £000 % of Fund £000 % of Fund
Majedie Asset Management 30,000 19.0 22,500 12.0
HSBC 8,926 5.6 7,929 4.2
BP 7,189 4.5 2,431 1.3
Royal Dutch Shell 'B' 5,208 3.3 2,905 1.6
Vodafone 4,557 2.9 6,272 3.3
GlaxoSmithKline 4,303 2.7 2,537 1.4
BHP Billiton 3,775 2.4 2,682 1.4
Vostok Energy 2,863 1.8 2,569 1.4
Rio Tinto 2,645 1.7 3,232 1.7
Rolls Royce 2,505 1.6 1,790 1.0
Unilever* 2,400 1.5
Aviva 2,241 1.4 1,070 0.6
BG Group 2,163 1.4 1,481 0.8
Prudential 2,015 1.3 1,700 0.9
BAE Systems 1,851 1.2 2,413 1.3
Majedie Asset Management Tortoise Fund 'B'* 1,645 1.0
Capital Lease Aviation 1,500 0.9 2,344 1.3
Hydrodec 1,440 0.9 3,477 1.9
KSK Power Venture 1,406 0.9 1,355 0.7
Accsys Technologies 1,367 0.9 5,348 2.9
89,999 56.9 74,035 39.7
*There is no comparative for the investments listed they all represent new
holdings.
Ten Largest Overseas Investments
at 30 September 2009
2009
Market Value
Company £000 % of Fund
Wells Fargo (USA)* 1,318 0.8
Telefonica (Spain)* 1,292 0.8
China Construction Bank (China)* 1,248 0.8
ENI (Italy)* 1,244 0.8
Toyota (Japan)* 1,240 0.8
Microsoft Corp (USA)* 1,049 0.7
Roche (Switzerland)* 1,009 0.6
Coca-Cola Co (USA)* 1,006 0.6
Johnson & Johnson (USA)* 951 0.6
Schlumberger (USA)* 931 0.6
11,288 7.1
*There is no comparative for the investments listed as they all represent new
holdings.
Extracts from the Directors' Report
Introduction
A review of developments during the year and of future prospects is contained
in the Chairman's Statement above.
Principal Activity
The Company operates as an investment trust company engaged primarily in
investment in listed securities.
Results and Dividend
Consolidated net revenue return before taxation amounted to £4,325,000 (2008:
£6,462,000). The directors recommend a final ordinary dividend of 6.3p per
ordinary share, payable on 27 January 2010 to shareholders on the register at
the close of business on 8 January 2010. Together with the interim dividend of
4.2p per share paid on 30 June 2009, this makes a total distribution of 10.5p
per share in respect of the financial year (2008: 12.75p per share).
Business Review
Introduction
The purpose of the Business Review is to provide a review of the business of
the Company by:
- analysing development and performance using appropriate Key Performance
Indicators ("KPIs");
- outlining the principal risks and uncertainties affecting the Company;
- setting out the Company's environmental, social and ethical policy;
- providing information about persons with whom the Company has contractual or
other arrangements which are essential to the business of the Company;
- outlining the main trends and factors likely to affect the future
development, performance and position of the Company's business;
- describing how the Company manages these risks; and
- explaining the future business plans of the Company.
Regulatory and Competitive Environment
The Company is a self-managed investment trust and is listed on the London
Stock Exchange. It is subject to UK company law, International Financial
Reporting Standards, Listing, Prospectus and Disclosure and Transparency
Rules, taxation law and the Company's own Articles of Association. The
appointment of the Board is approved by shareholders and the directors are
charged with ensuring that the Company complies with its objectives as well as
these regulations. The majority of investment trusts outsource the management
of their investment portfolios to external fund management companies. Majedie
Investments PLC is a self-managed investment trust where the investment
portfolio is managed by an internal investment team led by the Investment
Director. The directors remain committed to seeking new business development
opportunities which can contribute to the strategic objective of generating
superior returns for shareholders.
Under the Companies Act 2006, Section 833, the Company is defined as an
investment company. As such, it analyses its Income Statement between profits
available for distribution by way of dividends, revenue profits and capital
profits. The financial statements, starting on page -, report on these
profits, the changes in equity, the balance sheet position and the cash flows
in the current and prior financial period. This is in compliance with current
International Financial Reporting Standards, supplemented by the Revised
Statement of Recommended Practice for Investment Trust Companies (SORP) issued
by the Association of Investment Companies in January 2009. The principal accounting
policies of the Company are set out in note 1 to the accounts. The Auditors'
opinion on the financial statements, which is unqualified, appears in the Annual
Report & Accounts which are available at www.majedie.co.uk.
In addition to the annual and half-yearly results and Interim Management
Statements, the Company makes weekly net asset value (NAV) announcements via
an authorised Stock Exchange regulatory information service. The Company also
reports to shareholders on performance against benchmark, corporate governance
and investment activities.
At least one shareholders' meeting is held in each year in January to allow
shareholders to vote on the appointment of directors and the Auditors, the
payment of dividends, authority for share buybacks and any other special
business. The business of the next such shareholders' meeting, being the
Annual General Meeting, scheduled for 20 January 2010 is set out in the Notice
of Meeting enclosed in the Annual Report & Accounts.
The Company is subject to corporation tax on its net revenue profits but is
exempt from corporation tax on capital gains, provided it complies at all
times with Section 842 of the Income and Corporation Taxes Act 1988. Section
842 requires, broadly, that:
- the Company's revenue (including dividend and interest receipts but
excluding profits on sale of shares and securities) should be derived wholly
or mainly from shares and securities;
- the Company must not retain in respect of any accounting period more than
15% of its income from shares and securities;
- no holding in a company should represent more than 15% by value of the
Company's investments in shares and securities unless the holding was acquired
previously and the value has risen to exceed the 15% limit without any action
having been taken; and
- realised profits on sale of shares and securities may not be distributed by
way of dividend.
Compliance with these rules is proved annually in retrospect to HM Revenue and
Customs (HMRC). HMRC approval of the Company as an investment trust is granted
'subject to there being no subsequent enquiry under corporation tax
self-assessment'. Such approval has been received in respect of all relevant
years up to and including the year ended 30 September 2008, since when the
Company has continued to comply with these rules.
Governance
The Company's Board of directors is responsible for the overall stewardship of
the Company, including corporate strategy, corporate governance, risk and
controls assessment, overall investment policy, asset allocation and gearing
limits. There are six members of the Board, of which five are non-executive.
Three members of the Board are considered to be independent. This Board
structure satisfies the Combined Code recommendations. Nonetheless the Board
considers that all its directors exercise their judgement in an independent
manner.
Investment performance is measured primarily against a benchmark comprising
70% FTSE All-Share Index and 30% FTSE World ex UK Index (Sterling) on a total
return basis.
In the process of its governance of the Company, the Board regularly reviews
internally generated reports and reports from other independent sources such
as The WM Company to assess the on going investment performance of the
Company. Income and cost forecasts are reviewed to enable costs to be
controlled within budget and to ensure that the Company is able to pursue a
progressive dividend policy while remaining in compliance with the relevant
tax rules. Other regularly reviewed reports include those covering the list of
investments, the level of gearing, the discount to net asset value and the
shareholder register. The Board's assessment of the major risks faced by the
Company, together with the principal controls in place to mitigate the risks,
is set out later in this review.
Capital Structure
As part of its corporate governance the Board keeps under review the capital
structure of the Company. At 30 September 2009 the Company had an issued share
capital of £5,252,800, comprising 52,528,000 ordinary shares of 10p each,
carrying one vote each. The Board seeks each year to renew the authority of the
Company to make market purchases of its own shares. However, the Board is only
likely to use such authority in special circumstances. In general the
directors believe that the discount to net assets will be reduced sustainably
over the long term by the creation of value through the development of the
business.
In 1994 and 2000 the Company issued two long term debentures: £15m 9.5%
debenture stock 2020 and £25m 7.25% debenture stock 2025 respectively. In 2004
the Company redeemed £1.5m of the 2020 issue and £4.3m of the 2025 issue as an
opportunity arose to redeem at an attractive price.
The Board is responsible for setting the overall gearing range within which
the Investment Director may operate.
Principal Risks
The principal risks and the Company's policies for managing these risks and
the policy and practices with regard to financial instruments are summarised
below and in note 25 to the accounts.
The Company's assets consist mainly of quoted equity securities and its
principal risks are therefore market related. The number of investments held,
together with the geographic and sector diversity of the portfolio, enables
the Company to spread its risks with regard to liquidity, market volatility,
currency movements and revenue streams.
The portfolio has various specific limits for individual stocks and market
sectors which are employed to restrict risk levels. The level of portfolio
risk is assessed in relation to the benchmark utilising various portfolio risk
management tools. It should be noted that whilst we have a benchmark, the
portfolio is constructed independently and can be significantly different.
Therefore the portfolio can experience periods of volatility over the short
term. Also, the level of risk at a net asset value level increases with
gearing. In certain circumstances cash balances may be raised to reduce the
effective level of gearing. This would result in a lower level of risk in
absolute terms.
Other risks faced by the Company include the following:
i. an inappropriate investment strategy could result in poor returns for
shareholders and a widening of the discount of the share price to the NAV per
share. The Board regularly reviews strategy in relation to a range of issues
including the allocation of assets between geographic regions and industrial
sectors, and level and effect of gearing;
ii. failure to comply with regulations could result in the Company losing its
listing and/or being subjected to corporation tax on its capital gains. The
Board receives and reviews regular reports from the fund administrator on its
controls in place to prevent non-compliance of the Company with rules and
regulations. The Board also receives regular investment listings and income
forecasts as part of its monitoring of compliance with Section 842;
iii. inadequate financial controls could result in misappropriation of assets,
loss of income and debtor receipts and mis-reporting of NAVs. The Board
regularly reviews statements on internal controls and procedures and subjects
the books and records of the Company to an external annual audit. The
financial risks are set out in more detail in note 25 below; and
iv. loss of key staff could affect investment returns. The quality of the
management team and contingency planning is a crucial factor in delivering
good performance. The Company develops its recruitment and remuneration
packages in order to retain key staff and undertakes succession planning.
The systems in place to manage the Company's internal controls are described
further in the Annual Report & Accounts.
Management of Assets and Shareholder Value
The Company invests around the world in markets, sectors and companies that
the Board and Investment Director believe will generate long term growth in
capital and income for shareholders. Many potential investments are considered
each year. The Investment Director meets a number of management teams from
potential corporate investments. Assessing the quality of management is a key
input into the investment process. Extensive work is also done on analysing
potential investments for their market positioning/competitive advantage,
financial strength and cashflow characteristics. Various valuation parameters
are used to provide an indication of the potential attractiveness of the
investment opportunity in relation to other potential investments in the
area/sector and in relation to similar investments within the portfolio.
The Board measures the overall investment performance of the Company against
the benchmark. Investment risks are spread through holding a range of
securities in different industrial sectors.
The directors meet with larger shareholders outside the Annual General Meeting
as appropriate. Meetings are also held with investment trust analysts and
stockbroking firms. The Company has three investor savings schemes which
provide shareholders with cost effective and convenient ways of investing.
Communication of up-to-date information is provided through the website at
www.majedie.co.uk.
Performance Highlights
The Board uses the following Key Performance Indicators (KPIs) to help assess
progress against the Company's objectives:
- NAV total return; and
- total shareholder return;
both measured against the benchmark total return.
The above KPIs are commented on and displayed in graphical form within the
Chairman's Statement above. The following KPIs are commented on in this
Business Review:
- investment portfolio return (total assets): see Investment Performance
below..
- share price discount: the level of the discount at the end of the financial
year calculated with debt at par was 20.5% and was higher than at the start of
the year.
- total expense ratio: see Costs below.
- annual dividend growth: See Total Return Philosophy & Dividend Policy below.
Investment Performance
The following table summarises the relative investment performance comparing
the returns from total assets with those of the benchmark:
Arithmetic
Period ended Return from Return from Outperformance/
30 September Total Assets Benchmark (Underperformance)
1 year (7.87%) 11.27% (19.14%)
3 years (21.80%) 0.27% (22.07%)
5 years 17.30% 41.19% (23.89%)
10 years 14.48% 29.45% (14.97%)
The Company's investment in Majedie Asset Management Limited (MAM) is included
in the investment performance table on the basis that it is treated the same
as the Company's other unlisted investments being held at fair value with
gains or losses included in the income statement. As at 30 September 2009 the
Total Assets portfolio totalled £157.9m and included investments of £147.3m
(inclusive of MAM at £30.0m) and cash balances of £12.4m.
At the Net Asset Value level, the Attribution Analysis table below shows the
composition of difference between the NAV total return and the benchmark (on a
total return basis) for the year ended 30 September 2009. The investment
portfolio relative performance shown, as calculated by The WM Company and
excluding MAM, is split between asset allocation and stock selection and
includes the impact of our change to an income inclusive NAV during the year.
The rest of the difference between the NAV total return for the year and the
benchmark return arose from the net impact of the gearing effect of the
debentures less debenture interest costs, and the total contribution from MAM
(being the increase in the value of the investment in the year plus dividend
income received). Total shareholder return for the year was -18.3%. The level
of net gearing during the year ranged between 13.0% and 28.6%.
A detailed Attribution Analysis is included in the full Annual Report.
Costs
The Company's expense ratio over net assets is 2.1% which compares with the
investment trust sector average of 1.7%. The ratio for the year has been
negatively impacted by the sharp fall in the Company's assets. The Board pays
close attention to cost control and the current situation is referred to
further in the Chairman's Statement above.
Total Return Philosophy & Dividend Policy
The directors believe that investment returns will be maximised if a total
return policy is followed whereby the investment team pursues the best
opportunities irrespective of the associated dividend yield. The Company has a
comparatively high level of revenue reserves for the investment trust sector.
The strength of these reserves will from time to time assist in underpinning
our progressive dividend policy in years when the income from the portfolio is
insufficient to cover completely the annual distribution.
During the year the Board reviewed the Company's dividend policy and has
decided to retain the current progressive dividend policy. This aims to
increase the dividend each year by more than the rate of inflation and this
has been achieved in each of the last nineteen years. At £26.7m, the revenue
reserves represent more than four times the current annual core dividend
distribution. Over the last ten years the average annual growth of the
dividend has been 4%.
Majedie Asset Management Limited
In 2002 the Company established a new fund management subsidiary specialising
in UK equities: Majedie Asset Management, which was launched in March 2003.
Having started with a 70% shareholding, the Company now retains a 30%
interest. The relevant developments during the year are referred to in the
Chairman's Statement above and further referred to in note 12 to the financial
statements.
Business Development
The Company has made significant progress in respect of business development
and is now in a position to launch a substantial new venture being Javelin
Capital LLP. Javelin is an asset management entity focusing on equity markets
both in the UK and overseas. It is also proposed that Javelin Capital LLP will
become the investment manager for the Company's investment portfolio assuming
responsibility for the existing staff and relevant fixed assets. We have
applied to the FSA and other regulatory authorities and subject to permissions
should be able to commence trading in early 2010.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable United Kingdom law and
those International Financial Reporting Standards adopted by the European
Union.
Company law requires the Directors to prepare financial statements for each
financial year which present fairly the financial position of the Company and
of the Group and the financial performance and cash flows of the Company and
of the Group for that period. In preparing these financial statements, the
Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
- state whether applicable International Financial Reporting Standards have
been followed, subject to any material departures disclosed and explained in
the financial statements; and
- provide additional disclosures when compliance with the specific
requirements in IFRS is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the entity's
financial position and financial performance.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy, at any time, the financial position of the
Company and of the Group and to enable them to ensure that the financial
statements comply with the Companies Act 2006 and Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors, to the best of their knowledge, state that:
- the financial statements, prepared in accordance with International
Financial Reporting Standards as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and results of
the Company and the Group; and
- the Chairman's Statement and Directors' Report include a fair review of the
development and performance of the business and the position of the Company
and the Group together with a description of the principal risks and
uncertainties that they face.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
On behalf of the Board of Directors
Henry S Barlow Chairman
24 November 2009
Consolidated Income Statement
for the year ended 30 September 2009
2009 2008
Revenue Capital Revenue Capital
return return Total return return Total
Notes £000 £000 £000 £000 £000 £000
Investments
Losses on investments at
fair value through profit or loss 12 (23,723) (23,723) (95,341) (95,341)
Net investment result (23,723) (23,723) (95,341) (95,341)
Income
Dividends and interest 2 4,594 4,594 6,306 6,306
MAM dividend income 1,906 1,906
MAM special dividend income 2,484 2,484
Other income 34 34 75 75
Total income 6,534 6,534 8,865 8,865
Expenses
Administration expenses 3 (1,507) (1,359) (2,866) (1,702) (1,571) (3,273)
Return/(deficit) before
finance costs and taxation 5,027 (25,082) (20,055) (7,163) (96,912) (89,749)
Finance costs 6 (702) (2,100) (2,802) (701) (2,099) (2,800)
Net return/(deficit)
before taxation 4,325 (27,182) (22,857) 6,462 (99,011) (92,549)
Taxation 7 (92) (92) (51) (51)
Net return/(deficit)
after taxation for the year 4,233 (27,182) (22,949) 6,411 (99,011) (92,600)
Return/(deficit) per
ordinary share: pence pence pence pence pence pence
Basic and diluted 10 8.1 (52.3) (44.2) 12.5 (192.3) (179.8)
The total column of this statement is the Consolidated Profit and Loss Account
of the Group prepared under International Financial Reporting Standards
(IFRS). The supplementary revenue return and capital return columns are
prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the year.
The notes below form part of these accounts.
These accounts have been prepared in compliance with the recognition and
measurement criteria of IFRS.
Company Income Statement
for the year ended 30 September 2009
2009 2008
Revenue Capital Revenue Capital
return return Total return return Total
Notes £000 £000 £000 £000 £000 £000
Investments
Losses on investments
at fair value through
profit or loss 12 (23,723) (23,723) (95,341) (95,341)
Net investment result (23,723) (23,723) (95,341) (95,341)
Income
Dividends and interest 2 4,594 4,594 6,306 6,306
MAM dividend income 1,906 1,906
MAM special dividend income 2,484 2,484
Other income 34 34 75 75
Total income 6,534 6,534 8,865 8,865
Expenses
Administration expenses 3 (1,507) (1,359) (2,866) (1,702) (1,571) (3,273)
Return/(deficit) before
finance costs and taxation 5,027 (25,082) (20,055) 7,163 (96,912) (89,749)
Finance costs 6 (702) (2,100) (2,802) (701) (2,099) (2,800)
Net return/(deficit)
before taxation 4,325 (27,182) (22,857) 6,462 (99,011) (92,549)
Taxation 7 (92) (92) (51) (51)
Net return/(deficit)
after taxation
for the year 4,233 (27,182) (22,949) 6,411 (99,011) (92,600)
Return/(deficit) per
ordinary share: pence pence pence pence pence pence
Basic and diluted 10 8.1 (52.3) (44.2) 12.5 (192.3) (179.8)
The total column of this statement is the Profit and Loss Account of the
Company prepared under IFRS. The supplementary revenue return and capital return columns
are prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the year
Consolidated Statement of Changes in Equity
for the year ended 30 September 2009
Capital Share Own
Share Share redemption options Capital Revenue share
capital premium reserve reserve reserve reserve reserve Total
Notes £000 £000 £000 £000 £000 £000 £000 £000
Year ended 30 September 2009
As at 30 September 2008 5,253 785 56 291 120,606 29,047 (2,573) 153,465
Net return after tax for the year 4,233 4,233
Investments at fair value
through profit or loss
- Increase in investment
holding gains 30,345 30,345
- Net loss on realisation
of investments (54,068) (54,068)
Costs charged to capital (3,459) (3,459)
Total recognised income
and expenditure (27,182) 4,233 (22,949)
Share options expense 24 251 251
Dividends declared
and paid in year 9 (6,631) (6,631)
Own shares (sold)/purchased
by Employee Incentive Trust (EIT) 18 (826) 871 45
As at 30 September 2009 5,253 785 56 (284) 93,424 26,649 (1,702) 124,181
Year ended 30 September 2008
As at 30 September 2007 5,253 785 56 262 219,617 30,296 (3,053) 253,216
Net return after tax
for the year 6,411 6,411
Investments at fair value
through profit or loss
- Decrease in investment
holding gains (87,499) (87,499)
- Net loss on realisation
of investments (7,842) (7,842)
Costs charged to capital (3,670) (3,670)
Total recognised income
and expenditure (99,011) 6,411 (92,600)
Share options expense 24 516
Dividends declared
and paid in year 9 (7,660) (7,660)
Own shares (sold)/purchased
by Employee Incentive Trust (EIT) 18 (487) 480 (7)
As at 30 September 2008 5,253 785 56 291 120,606 29,047 (2,573) 153,465
Company Statement of Changes in Equity
for the year ended 30 September 2009
Capital Share Own
Share Share redemption options Capital Revenue share
capital premium reserve reserve reserve reserve reserve Total
Notes £000 £000 £000 £000 £000 £000 £000 £000
Year ended 30 September 2009
As at 30 September 2008 5,253 785 56 291 120,884 28,767 (2,573) 153,463
Net return after tax for the year 4,233 4,233
Investments at fair value
through profit or loss
- Decrease in investment
holding gains 22,815 22,815
- Dormant subsidiaries
now struck off 30 30
- Net loss on realisation
of investments (54,068) (54,068)
Revaluation of investment
in Majedie Asset Management 7,500 7,500
Costs charged to capital (3,459) (3,459)
Total recognised income
and expenditure (27,182) 4,233 (22,949)
Share options expense 24 251 251
Dividends declared
and paid in year 9 (6,631) (6,631)
Own shares (sold)/purchased
by Employee Incentive Trust (EIT) 18 (826) 871 45
As at 30 September 2009 5,253 785 56 (284) 93,702 26,369 (1,702) 124,179
Year ended 30 September 2008
As at 30 September 2007 5,253 785 56 262 219,895 30,016 (3,053) 253,214
Net return after tax for the year 6,411 6,411
Investments at fair value
through profit or loss
- Decrease in investment
holding gains (93,814) (93,814)
- Net loss on realisation
of investments (7,842) (7,842)
Revaluation of investment
in Majedie Asset Management 6,315 6,315
Costs charged to capital (3,670) (3,670)
Total recognised income
and expenditure (99,011) 6,411 (92,600)
Share options expense 24 516 516
Dividends declared
and paid in year 9 (7,660) (7,660)
Own shares (sold)/purchased
by Employee Incentive Trust (EIT) 18 (487) 480 (7)
As at 30 September 2008 5,253 785 56 291 120,884 28,767 (2,573) 153,463
Consolidated Balance Sheet
as at 30 September 2009
2009 2008
Notes £000 £000
Non-current assets
Property and equipment 11 224 48
Investments at fair value through profit or loss 12 147,291 178,981
147,515 179,029
Current assets
Trade and other receivables 14 1,897 2,340
Cash and cash equivalents 15 12,384 8,135
14,281 10,475
Total assets 161,796 189,504
Current liabilities
Trade and other payables 16 (3,853) (2,295)
Total assets less current liabilities 157,943 187,209
Non-current liabilities
Debentures 16 (33,762) (33,744)
Total liabilities (37,615) (36,039)
Net assets 124,181 153,465
Represented by:
Ordinary share capital 17 5,253 5,253
Share premium 785 785
Capital redemption reserve 56 56
Share options reserve (284) 291
Capital reserve 93,424 120,606
Revenue reserve 26,649 29,047
Own shares reserve 18 (1,702) (2,573)
Equity Shareholders' Funds 124,181 153,465
Net asset value per share pence pence
Basic and fully diluted 19 238.7 296.5
Approved by the Board of Majedie Investments PLC and authorised for issue on
24 November 2009.
Henry S Barlow
Andrew J Adcock
Directors
Company Balance Sheet
as at 30 September 2009
Notes 2009 2008
Non-current assets £000 £000
Property and equipment 11 224
Investments at fair value through profit or loss 12 147,291 178,981
Investment in subsidiaries 13 161 194
147,676 179,175
Current assets
Trade and other receivables 14 1,986 2,413
Cash and cash equivalents 15 12,131 7,718
14,117 10,131
Total assets 161,793 189,306
Current liabilities
Trade and other payables 16 (3,852) (2,099)
Total assets less current liabilities 157,941 187,207
Non-current liabilities
Debentures 16 (33,762) (33,744)
Total liabilities (37,614) (35,843)
Net assets 124,179 153,463
Represented by:
Ordinary share capital 17 5,253 5,253
Share premium 785 785
Capital redemption reserve 56 56
Share options reserve (284) 291
Capital reserve 93,702 120,884
Revenue reserve 26,369 28,767
Own shares reserve 18 (1,702) (2,573)
Equity Shareholders' Funds 124,179 153,463
Approved by the Board of Majedie Investments PLC and authorised for issue on
24 November 2009.
Henry S Barlow
Andrew J Adcock
Directors
Consolidated Cash Flow Statement
for the year ended 30 September 2009
2009 2008
Notes £000 £000
Net cash flow from operating activities
Consolidated net return before taxation (22,857) (92,549)
Adjustments for:
Losses on investments 12 23,723 95,341
Dividends reinvested (132) (171)
Share based remuneration 251 516
Depreciation 58 25
Purchases of investments (57,427) (51,830)
Sales of investments 67,202 56,133
10,818 7,465
Finance costs 2,802 2,800
Operating cashflows before movements in working capital 13,620 10,265
Increase/(decrease) in trade and other payables 241 (454)
Decrease in trade and other receivables 96 2,071
Net cash inflow from operating activities before tax 13,957 11,882
Tax recovered 2
Tax on unfranked income (106) (56)
Net cash inflow from operating activities 13,853 11,826
Investing activities
Purchases of tangible assets (234) (4)
Net cash outflow from investing activities (234) (4)
Financing activities
Interest paid (2,783) (2,784)
Dividends paid (6,631) (7,660)
Purchases of own shares into Employee Incentive Trust (914)
Exercise of options on own shares 44 907
Net cash outflow from financing activities (9,370) (10,451)
Increase in cash and cash equivalents for year 20, 21 4,249 1,371
Cash and cash equivalents at start of year 8,135 6,764
Cash and cash equivalents at end of year 12,384 8,135
Company Cash Flow Statement
for the year ended 30 September 2009
2009 2008
Notes £000 £000
Net cash flow from operating activities
Company net return before taxation (22,857) (92,549)
Adjustments for:
Losses on investments 12 23,723 95,341
Dividends reinvested (132) (171)
Share based remuneration 251 516
Depreciation 58
Purchases of investments (57,427) (51,830)
Sales of investments 67,202 56,133
10,818 7,440
Finance costs 2,802 2,800
Operating cashflows before movements in working capital 13,620 10,240
Increase in trade and other payables 437 1,869
Decrease/(increase) in trade and other receivables 112 (318)
Net cash inflow from operating activities before tax 14,169 11,791
Tax recovered 2
Tax on unfranked income (106) (56)
Net cash inflow from operating activities 14,065 11,735
Investing activities
Purchases of tangible assets (282)
Net cash outflow from investing activities (282)
Financing activities
Interest paid (2,783) (2,784)
Dividends paid (6,631) (7,660)
Purchases of own shares into Employee Incentive Trust (914)
Exercise of options on own shares 44 907
Net cash outflow from financing activities (9,370) (10,451)
Increase in cash and cash equivalents for year 20, 21 4,413 1,284
Cash and cash equivalents at start of year 7,718 6,434
Cash and cash equivalents at end of year 12,131 7,718
Notes to the Accounts
General Information
Majedie Investments PLC is a company incorporated in England under the
Companies (Consolidation) Act 1908. The Company is registered as a public
limited company and is an investment company as defined by Section 833 of the
Companies Act 2006. The nature of the Group's operations and its principal
activities are set out in the Business Review above.
At the date of authorisation of these financial statements, the following
relevant Standards and Interpretations have not been applied in these
financial statements since they were in issue but not yet effective:
International Accounting
Standards (IAS/IFRSs) Effective date
Amendment to IFRS 2 -
IFRS 2 Vesting Conditions and Cancellations 1 January 2009
Business Combinations
IFRS 3 (revised January 2008) 1 July 2009
IFRS 8 Operating Segments 1 January 2009
IFRS 9 Financial Instruments 1 January 2013
Presentation of Financial Statements
IAS 1 (revised September 2007) 1 January 2009
IAS 23 Borrowing Costs (revised March 2007) 1 January 2009
Consolidated and Separate Financial
IAS 27 Statements (revised January 2008) 1 July 2009
Amendment - Puttable Financial
instruments and obligations existing
IAS 32 on liquidation 1 January 2009
IAS 39 Amendment - Eligible hedged items 1 July 2009
International Financial
Reporting Interpretations
Committee (IFRIC) Effective date
Hedges of a Net Investment
IFRIC 16 in a Foreign Operation 1 October 2008
Distribution of non-cash assets
IFRIC 17 to owners 1 July 2009
IFRIC 18 Transfer of Assets from Customers 1 July 2009
The directors anticipate that the adoption of the above Standards and
Interpretations in future periods will have no material impact on the
financial statements of the Group.
1 Accounting Policies
The accounts above comprise the audited results of the Company and its
subsidiaries for the year ended 30 September 2009, and are presented in pounds
sterling rounded to the nearest thousand, as this is the principal currency in
which the Group and Company transactions are undertaken.
Accounting Policies under International Financial Reporting Standards
Basis of Accounting
The accounts of the Group and the Company have been prepared in accordance
with International Financial Reporting Standards (IFRS). They comprise
standards and interpretations approved by the International Accounting
Standards Board, and International Financial Reporting Committee,
interpretations approved by the International Accounting Standards Committee
that remain in effect, and to the extent they have been adopted by the
European Union.
Where presentational guidance set out in the Statement of Recommended Practice
(SORP) regarding the Financial Statements of Investment Trust Companies and
Venture Capital Trusts issued by the Association of Investment Companies in
January 2009 and adopted early is consistent with the requirements of IFRSs,
the directors have sought to prepare the financial statements on a basis
compliant with the recommendations of the SORP. The early adoption of this
SORP had no effect on the financial statements of the Company other than the
recommendation to separately disclose capital reserves that relate to the
revaluation of investments held at the balance sheet date. This new
requirement replaces the requirement to disclose the value of the capital
reserve that is unrealised. All the companies' activities are continuing.
The principal accounting policies adopted are set out as follows:
Basis of Consolidation
The Consolidated Accounts incorporate the accounts of the Company and entities
controlled by the Company (its subsidiaries) made up to 30 September each
year. Control is achieved where the Company has the power to govern the
financial and operating policies of an investee entity so as to obtain
benefits from its activities.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used
by the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Foreign Currencies
The individual financial statements of each Group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group company are
expressed in pounds sterling, which is the functional currency of the Company,
and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity's functional currency
(foreign currencies) are recorded at the rates of exchange prevailing on the
dates of the transactions. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated at the
rates prevailing on the balance sheet date. Non-monetary items carried at fair
value that are denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Non-monetary items
that are measured in terms of historical cost in the foreign currency are not
retranslated.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in profit or loss for the
period. Exchange differences arising on the retranslation of non-monetary
items carried at fair value are included in profit or loss for the period
except for differences arising on the retranslation of non-monetary items in
respect of which gains and losses are recognised directly in equity. For such
non-monetary items, any exchange component of that gain or loss is also
recognised directly in equity.
Segmental Reporting
A segment is a distinguishable component of the Group that is engaged either
in providing products or services (business segment), or in providing products
or services within a particular economic environment (geographical segment),
which is subject to risks and rewards that are different from those of other
segments.
Investment Income
Dividend income from investments is taken to the revenue account on an
ex-dividend basis and net of any associated tax credit.
The fixed return on a debt security is recognised on a time apportionment
basis so as to reflect the effective yield on the debt security. Deposit
interest is included on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis. In respect of the
analysis between revenue and capital items presented within the income
statement, all expenses have been presented as revenue items except as
follows:
- Expenses which are incidental to the acquisition or disposal of an
investment are treated as capital costs and separately identified and
disclosed (see note 12 ).
- Expenses are split and presented partly as capital items where a connection
with the maintenance or enhancement of the value of the investments held can
be demonstrated, and accordingly the investment management expenses have been
allocated 75% to capital, in order to reflect the directors' expected long-term
view of the nature of the investment returns of the Company.
Pension Costs
Payments made to the Company's defined contribution group personal pension
plan are charged as an expense as they fall due.
Finance Costs
75% of finance costs arising from the debenture stocks are allocated to
capital at a constant rate on the carrying amount of the debt; 25% of the
finance costs are charged on the same basis to the revenue account. Premiums
payable on early repurchase of debenture stock are charged 100% to capital.
Share Based Payments
The Group has applied the requirements of IFRS 2: Share-based Payments. In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested as of 1
October 2004.
The Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value determined at
the date of grant, which is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of shares that will eventually vest.
Fair value is measured by use of the Black-Scholes model. The expected life
used in the model has been adjusted, based on management's best estimate, for
the effects of non-transferability, exercise restrictions, and behavioural
considerations.
Taxation
The tax charge represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
In line with the recommendations of the SORP, the allocation method used to
calculate tax relief on expenses presented against capital returns in the
supplementary information in the income statement is the marginal basis. Under
this basis, if taxable income is capable of being offset entirely by expenses
presented in the revenue return column of the income statement, then no tax
relief is transferred to the capital return column.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised.
No provision is made for tax on capital gains since the Company operates as an
investment trust for tax purposes.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
any recognised impairment loss. Leasehold improvements are written off in
equal annual instalments over the minimum period of the lease whereas
depreciation for other tangible assets is provided for at 25% to 33% per annum
using the straight-line method.
Leasing
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
Rentals payable under operating leases are charged to profit or loss on a
straight-line basis over the term of the relevant lease.
Investments Held at Fair Value Through Profit or Loss
When a purchase or sale is made under a contract, the terms of which require
delivery within the timeframe of the relevant market, the investments
concerned are recognised or derecognised on the trade date.
All investments are accounted at fair value through profit or loss as defined
by IAS 39.
All investments are designated upon initial recognition as held at fair value
through profit or loss, and are measured at subsequent reporting dates at fair
value, which is either the bid price or the last traded price, depending on
the convention of the exchange on which the investment is quoted. Investments
in unit trusts or open ended investment companies are valued at the closing
price, the bid price or the single price as appropriate, released by the
relevant investment manager.
Unlisted investments are normally reviewed on a semi-annual basis by the Board
of directors taking into account relevant information as appropriate including
market prices, latest dealings, accounting information, professional advice
and the guidelines issued by the International Private Equity and Venture
Capital Association.
Financial Instruments
Financial assets and financial liabilities are recognised on the Group's
balance sheet when the Group becomes a party to the contractual provisions of
the instrument.
Derivative Financial Instruments
The Group does not enter into derivative contracts for the purpose of hedging
risks on its investment portfolio as it is a long term investor. The Group
does, however, receive or purchase warrants on shares which are classified as
equity instruments under IAS 32. These equity instrument derivatives are
recognised at fair value on the date the contract is entered into and are
subsequently re-valued at their fair value.
Changes in the fair value of derivative financial instruments are recognised
as they arise in the income statement.
Trade Receivables
Trade receivables do not carry any interest and are stated at their fair value
as reduced by appropriate allowances for estimated irrecoverable amounts.
Cash and Cash Equivalents
Cash comprises cash in hand and demand deposits. Cash equivalents are
short-term, highly liquid investments that are readily convertible to known
amounts of cash and that are subject to an insignificant risk of changes in
value.
Financial Liabilities and Equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities.
Debentures
All debentures are recorded at proceeds received, net of direct issue costs
and held at amortised cost.
Trade Payables
Trade payables are not interest bearing and are stated at their fair value.
Reserves
Gains and losses on the realisation of investments and foreign currency are
accounted for in the capital reserve. Increases and decreases in the valuation
of investments and currency held at the year end are accounted for in the
capital reserve.
Own Shares
Own shares held under option are accounted for in accordance with IFRS 2:
Share-based Payments. This requires that the consideration paid for own shares
held be presented as a deduction from shareholders' funds, and not recognised
as an asset.
Critical Accounting Judgement
In the process of applying the Company's accounting policies described above,
the directors have made critical accounting judgements regarding the fair
value of the unlisted investments (including Majedie Asset Management Limited
(MAM)) that may have a significant effect on the financial statements of the
Company. Note 12 sets out the relevant details of the MAM valuation including
the assumptions on which the valuation is based.
2 Dividends and Interest
Group Group Company Company
2009 2008 2009 2008
£000 £000 £000 £000
Listed investments
- UK dividend income 3,633 5,438 3,633 5,438
- unfranked 811 457 811 457
Unlisted investments
- unfranked 59 98 59 98
Interest on deposits 95 315 95 315
Exchange differences on income (4) (2) (4) (2)
4,594 6,306 4,594 6,306
3 Administration Expenses
Group Group Company Company
2009 2008 2009 2008
£0 £0 £0 £0
Staff costs - note 5 1,165 1,923 1,165 1,923
Other staff costs and directors' fees 314 155 314 155
Advisers' costs 410 399 410 399
Relocation costs 128 128
Information costs 146 127 146 127
Establishment costs 113 130 113 130
Operating lease rentals - premises 139 146 139 146
Depreciation on tangible assets 58 25 58
Auditors' remuneration 59 63 56 55
(see below)
Restructuring costs 121 121
Other expenses 334 184 337 217
2,866 3,273 2,866 3,273
A charge of £1,359,000 (2008: £1,571,000) to capital and an equivalent credit
to revenue has been made in both the Group and Company to recognise the
accounting policy of charging 75% of investment management expenses to
capital.
Total fees charged by the Auditors for the year, all of which were charged to
revenue, comprised:
Group Group Company Company
2009 2008 2009 2008
£000 £000 £000 £000
Audit services
- statutory audit 59 62 56 54
Other non-audit services
- relating to Employee Share
Option Scheme 1 1
59 63 56 55
4 Directors' Emoluments - Company
2009 2008
£000 £000
Salaries and fees 282 607
Bonuses 200
Pension contributions 82
Other benefits 60
282 949
The Report on Directors' Remuneration included in the Company's Annual Report
and Accounts explains the Company's policy on remuneration for non-executive
directors for the year. It also provides further details of directors'
remuneration.
5 Staff Costs including Executive Directors - Group
2009 2008
£000 £000
Salaries and other payments 724 1,100
Social security costs 126 180
Pension contributions 64 127
Share based remuneration - note 24 251 516
1,165 1,923
2009 2008
Number Number
Average number of employees:
Management and office staff 5 7
6 Finance Costs - Group and Company
2009 2008
Revenue Capital Revenue Capital
return return Total return return Total
£000 £000 £000 £000 £000 £000
Interest on 9.5% debenture stock 2020 321 962 1,283 321 962 1,283
Interest on 7.25% debenture stock 2025 375 1,126 1,501 375 1,126 1,501
Amortisation of expenses associated with debenture issue 6 12 18 5 11 16
702 2,100 2,802 701 2,099 2,800
Further details of the debenture stocks in issue are provided in note 16
7 Taxation
Analysis of tax charge - Group and Company
Group Group Company Company
2009 2008 2009 2008
£000 £000 £000 £000
Tax on overseas dividends 92 51 92 51
Reconciliation of tax charge:
The current taxation for the year is higher than the standard rate of
corporation tax in the UK (28%), (2008: 29%). The differences are explained
below:
Group Group Company Company
2009 2008 2009 2008
£000 £000 £000 £000
Net return before taxation (22,857) (92,549) (22,857) (92,549)
Taxation at UK Corporation Tax
rate of 28% (2008: 29%) (6,400) (26,839) (6,400) (26,839)
Effects of:
- UK dividends which are
not taxable (1,551) (2,297) (1,551) (2,297)
- other income which is
not taxable (102) (4) (102) (4)
- losses on investments
which are not taxable 6,643 27,649 6,643 27,649
- expenses charged to
capital reserve (231) (231)
- expenses not deductible for
tax purposes 107 52
- excess expenses for
current year 1,550 1,439 1,550 1,439
- group relief surrendered 107 52
- overseas taxation which is
not recoverable 92 51 92 51
- offset relief for foreign WHT (16) (16)
Actual current tax charge 92 51 92 51
Group
After claiming relief against accrued income taxable on receipt, the Group has
unrelieved excess expenses of £48,200,000 (2008: £43,400,000). It is unlikely
that the Group will generate sufficient taxable income in the future to
utilise these expenses and therefore no deferred tax asset has been
recognised.
Company
After claiming relief against accrued income taxable on receipt, the Company
has unrelieved excess expenses of £48,200,000 (2008: £43,400,000). It is
unlikely that the Company will generate sufficient taxable income in the
future to utilise these expenses and therefore no deferred tax asset has been
recognised.
The allocation of expenses to capital does not result in any tax effect. Due
to the Company's status as an investment trust, and the intention to continue
meeting the conditions required to obtain approval in the foreseeable future,
the Company has not provided deferred tax on any capital gains and losses
arising on the revaluation or disposal of investments.
8 Segment Reporting
The Group comprises the Company and its wholly owned subsidiaries. The Group's
activity as an investment trust represents the sole significant business
segment.
The Company operates as an investment trust company and its portfolio contains
investments in companies listed in a number of countries. Geographical
information about the portfolio is provided in the Annual Report & Accounts
and exposure to different currencies is disclosed in note 25.
9 Dividends - Group and Company
The following table summarises the amounts recognised as distributions to
equity shareholders in the period:
2009 2008
£000 £000
2007 Special dividend of 4.50p paid on 23 January 2008 2,315
2007 Final dividend of 6.20p paid on 23 January 2008 3,189
2008 Interim dividend of 4.20p paid on 30 June 2008 2,156
2008 Special dividend of 2.25p paid on 28 January 2009 1,170
2008 Final dividend of 6.30p paid on 28 January 2009 3,276
2009 Interim dividend of 4.20p paid on 30 June 2009 2,185
6,631 7,660
2009 2008
£000 £000
Proposed final dividend for the year ended
30 September 2009 of 6.30p (2008: final dividend
of 6.30p) per ordinary share 3,277 3,261
Proposed special dividend for the year ended
30 September 2009 of Nil (2008: 2.25p) per
ordinary share 1,165
3,277 4,426
The proposed final dividend has not been included as a liability in these
accounts in accordance with IAS 10: Events after the Balance Sheet date.
Set out below is the total dividend to be paid in respect of the financial
year. This is the basis on which the requirements of Section 842 of the Income
and Corporation Taxes Act 1988 are considered.
2009 2008
£000 £000
Interim dividend for the year ended 30 September 2009
of 4.20p (2008: 4.20p) per ordinary share 2,185 2,156
Proposed final dividend for the year ended 30 September
2009 of 6.30p (2008: 6.30p) per ordinary share 3,277 3,261
Proposed special dividend for the year ended 30 September
2009 of £nil (2008: 2.25p) per ordinary share 1,165
5,462 6,582
10 Return per Ordinary Share - Group and Company
Basic return per ordinary share is based on 51,973,767 (2008: 51,478,751)
ordinary shares, being the weighted average number of shares in issue having
adjusted for the shares held by the Employee Incentive Trust referred to in
note 18. Basic returns per ordinary share are based on the net return after
taxation attributable to equity shareholders. There is no dilution to the
basic return per ordinary share shown for the years ended 30 September 2009
and 2008 since the share options referred to in note 18 would, if exercised,
be satisfied by the shares already held by the employee incentive trust.
2009 2008
£000 £000
Basic and diluted revenue returns are based on net
revenue after taxation of: 4,233 6,411
Basic and diluted capital returns are based on net
capital return of: (27,182) (99,011)
Basic and diluted total returns are based on
return of: (22,949) (92,600)
11 Property and Equipment - Group and Company
Leasehold Office
Improvements Equipment Total
£000 £000 £000
Cost:
At 1 October 2008 355 266 621
Additions 171 63 234
Disposals (355) (355)
At 30 September 2009 171 329 500
Depreciation:
At 1 October 2008 319 254 573
Charge for year 42 16 58
Disposals (355) (355)
At 30 September 2009 6 270 276
Net book value:
At 30 September 2009 165 59 224
At 30 September 2008 36 12 48
12 Investments at Fair Value Through Profit or Loss - Group and Company
2009 2008
Listed Unlisted Total Listed Unlisted Total
£000 £000 £000 £000 £000 £000
Opening cost at beginning of year 169,975 9,971 179,946 179,363 12,441 191,804
(Losses)/gains at beginning of year (21,638) 20,673 (965) 70,450 16,084 86,534
Opening fair value at beginning of year 148,337 30,644 178,981 249,813 28,525 278,338
Purchases at cost 58,826 50 58,876 51,910 1,394 53,304
Sales - proceeds (66,843) (66,843) (52,734) (4,584) (57,318)
(Losses)/gains on sales (54,068) (54,068) (9,415) 1,571 (7,844)
Increase/(decrease) in investment holding gains 28,434 1,911 30,345 (92,088) 4,589 (87,499)
Adjustments for listing/delisting during
financial year (3,429) 3,429 851 (851)
Closing fair value at end of year 111,257 36,034 147,291 148,337 30,644 178,981
Closing cost at end of year 104,461 13,450 117,911 169,975 9,971 179,946
Gains/(losses) at end of year 6,796 22,584 29,380 (21,638) 20,673 (965)
Closing fair value at end of year 111,257 36,034 147,291 148,337 30,644 178,981
Unlisted investments include an amount of £5,465,000 in 10 various companies
and £30,000,000 for our investment in MAM as detailed below and £569,000
(2008: £972,000) of loan or convertible notes that pay a fixed rate of
interest. The valuation of investments includes 11 unlisted investments of
over £100,000 (including MAM).
During the year the Company incurred transaction costs amounting to £374,000
(2008: £345,000) of which £243,000 (2008: £238,000) related to the purchases
of investments and £131,000 (2008: £107,000) related to the sales of
investments. These amounts are included in losses on investments at fair value
through profit or loss, as disclosed in the Consolidated and Company income
statement.
The composition of the investment return is analysed below:
2009 2008
£000 £000
Net loss on investments (54,068) (7,844)
Exchange gains on settlement 2
Increase/(decrease) in holding gains on investments 30,345 (87,499)
(23,723) (95,341)
Substantial Share Interests
The Company has a number of investee company holdings where its investment is
greater than 3% of any class of capital in those companies. Those that are
considered material (excluding MAM which is disclosed separately below) in the
context of these accounts are shown below:
Fair Value % of
£000 Class Held
Hydrodec 1,440 4.064
Capital Lease Aviation 1,500 3.195
Majedie Asset Management
Majedie Investments PLC owns a 30% equity shareholding in MAM, which provides
investment management and advisory services relating to UK equities.
The carrying value of the Company's investment in MAM is included in the
consolidated balance sheet as part of investments at fair value through profit
or loss:
2009 2008
£000 £000
Deemed cost of investment 1,207 1,207
Holding gains 28,793 21,293
Fair value at 30 September 30,000 22,500
The carrying value of MAM in the 30 September 2009 Consolidated Financial
Statements is its fair value as assessed at 30 September 2009. The above
valuation exercise was carried out by the Board in accordance with the
Company's accounting policy for the valuation of unlisted investments. The
approach adopted involved the consideration of earnings for the 2009 and the
2010 financial years, the inclusion of estimated performance fee income on a
discounted basis, the application of a relevant market-based multiple to
earnings and an overall illiquidity discount.
The results of MAM for the year ended 30 September 2009 show a net profit
after taxation of £14,222,000 (2008: £8,101,000) and shareholders' funds of
£25,945,000 (2008: £16,180,000). In accordance with the review of the
treatment of the investment in MAM these results are not consolidated in the
Group's results but are incorporated into the directors' valuation of the fair
value of MAM as detailed above.
13 Investment in Subsidiaries - Company
The Company's subsidiaries at 30 September 2009 are as follows:
Barlow Service Company Limited - non trading
Majedie Portfolio Management Limited - manager of the Majedie Share Plan,
authorised and regulated by the Financial Services Authority
All the subsidiaries are incorporated in Great Britain and are wholly owned.
During the year Majedie Investment Trust Management Limited; Barlow
Investments Limited; Majedie Properties Limited; and Majedie Securities
Limited were struck off the Register of Companies. Additionally on 8 September
2009, a further application was made to the Register of Companies to
voluntarily strike off Barlow Service Company Limited.
2009 2008
Company £000 £000
Cost:
At beginning of year 1,002 1,002
Disposals (2)
At end of year 1,000 1,002
Depreciation:
At beginning of year (808) (808)
Depreciation in year (31)
At end of year (839) (808)
Valuation at end of year 161 194
14 Trade and Other Receivables
Group Group Company Company
2009 2008 2009 2008
£000 £000 £000 £000
Sales for future settlement 1,078 1,437 1,078 1,437
Payments in advance 435 225 434
Dividends receivable 343 647 343 647
Other amounts due from MAM 6 6
Accrued income 18 14 18 14
Taxation recoverable 23 11 23 11
Amounts due from subsidiary
undertakings 90 298
1,897 2,340 1,986 2,413
15 Cash and Cash Equivalents
Group Group Company Company
2009 2008 2009 2008
£000 £000 £000 £000
Deposits 11,830 7,484 11,856 7,484
Other balances 554 651 275 234
12,384 8,135 12,131 7,718
16 Trade and Other Payables
Amounts falling due within one year:
Group Group Company Company
2009 2008 2009 2008
£000 £000 £000 £000
Purchases for future settlement 2,618 1,301 2,618 1,301
Accrued expenses 590 377 589 4
Other creditors 645 617 645 617
Amounts owed to subsidiary
undertakings 177
3,853 2,295 3,852 2,099
Amounts falling due after more than one year:
Group Group Company Company
2009 2008 2009 2008
£000 £000 £000 £000
£13.5m (2008: £13.5m) 9.5%
debenture stock 2020 13,376 13,369 13,376 13,369
£20.7m (2008: £20.7m) 7.25%
debenture stock 2025 20,386 20,375 20,386 20,375
33,762 33,744 33,762 33,744
Both debenture stocks are secured by a floating charge over the Company's
assets. Expenses associated with the issue of debenture stocks were deducted
from the gross proceeds and are being accounted for, at a constant rate, the
effect of which is immaterially different to applying the effective interest
rate method, over the life of the debentures. Further details on interest and
the amortisation of issue expenses are provided in note 6.
17 Called Up Share Capital
2009 2008
£000 £000
Allotted and fully paid at 30 September:
52,528,000 (2008: 52,528,000) ordinary shares of 10p each 5,253 5,253
Authorised at 30 September:
70,000,000 (2008: 70,000,000) ordinary shares of 10p each 7,000 7,000
There are 505,490 (2008: 763,852) ordinary shares of 10p each held by the
Employee Incentive Trust. See note 18
Ordinary shares carry one vote each on a poll.
18 Own Shares - Group and Company
Following the exercise of share options under the Long Term Incentive Plan
(LTIP) during the year 258,362 shares were sold by the Majedie Investments PLC
Employee Incentive Trust (EIT) at a value of £44,000 resulting in a loss of
£826,000. The total number of options outstanding at the date of this report
is 106,656 under the Discretionary Share Option Scheme 2000 and nil under the
LTIP and the total shareholding of the Trust is 505,490 ordinary shares. The
shares will be held by the Trust until the relevant options are exercised or
until they lapse. They are presented on the Balance Sheet as a deduction from
shareholders' funds, in accordance with the policy detailed in note 1.
Own Shares
Number of Reserve
Shares £000
As at 30 September 2008 763,852 (2,573)
Net disposals (258,362) 871
As at 30 September 2009 505,490 (1,702)
19 Net Asset Value
The consolidated net asset value per share has been calculated based on equity
shareholders' funds of £124,181,000 (2008: £153,465,000) and on 52,022,510
(2008: 51,764,148) ordinary shares, being the shares in issue at the year end
having deducted the number of shares held by the EIT.
20 Reconciliation of Net Cash Flow to Movement in Net Debt
2009 2008
Group £000 £000
Increase in cash in the year 4,249 1,371
Non cash items (18) (16)
Change in net debt 4,231 1,355
Net debt beginning of year (25,609) (26,964)
Net debt at end of year (21,378) (25,609)
2009 2008
Company £000 £000
Increase in cash in the year 4,413 1,284
Non cash items (18) (16)
Change in net debt 4,395 1,268
Net debt at beginning of year (26,026) (27,294)
Net debt at end of year (21,631) (26,026)
21 Analysis of Changes in Net Debt
At 30 Non At 30
September Cash Cash September
2008 Flows Items 2009
Group £000 £000 £000 £000
Cash at bank 8,135 4,249 12,384
Debt due after one year (33,744) (18) (33,762)
(25,609) 4,249 (18) (21,378)
At 30 Non At 30
September Cash Cash September
2008 Flows Items 2009
Company £000 £000 £000 £000
Cash at bank 7,718 4,413 12,131
Debt due after one year (33,744) (18) (33,762)
(26,026) 4,413 (18) (21,631)
22 Operating Lease Commitments
During the year the Company entered into a new 10 year non-cancellable
operating lease (with a break clause in 5 years) in respect of premises, which
included a rent free period. The rent free element has been apportioned over
the lease up to the date of the break clause. The Company has an annual
commitment at 30 September 2009 under the new lease of £145,000 (2008:
£146,000 under the prior lease). This operating lease commitment is disclosed
in the table below:
Expiry Date 2009 2008
new lease prior lease
£000 £000
Within one year 121 70
Between one and two years 145
Between two and three years 145
Between three and four years 145
Five years and above 35
589 70
23 Financial Commitments
At 30 September 2009 the Group had no financial commitments which had not been
accrued for (2008: none).
24 Share-based Payments
The Group operates two share-based payment schemes: the Discretionary Share
Option Scheme 2000 and the 2006 Long Term Incentive Plan (LTIP) which in turn
has two sections relating to TSR-based Awards and Matching Awards. The LTIP
replaced the Discretionary Share Option Scheme 2000 for executive directors
and senior executives, and the first awards were made in January 2006.
Discretionary Share Option Scheme 2000
The Scheme involved the granting of share options, with an exercise price
equal to the average quoted market price of the Company's shares on the date
of grant, to executives in 2001, 2002, and 2004. Following a review of
executive directors' remuneration in 2005, it was decided that no further
awards of options would be made under the Scheme. Share options in the Scheme
have a performance condition based on a specified annualised hurdle rate
applying between the grant date and the exercise date. If the performance
condition has been achieved up to the exercise date the share options may be
exercised within a seven year period beginning three years after the date of
grant.
Long Term Incentive Plan: TSR-based Awards
Awards of restricted shares up to a maximum value of one year's salary have
performance conditions based on total shareholder return in relation to two
separate performance conditions over a period of five years. The performance
conditions contain higher and lower thresholds that determine the extent of
the vesting of the award.
Long Term Incentive Plan: Matching Awards
Executive directors and senior executives receive a certain percentage of
their overall bonus for the year in deferred shares. The shares granted
according to these matching awards only vest once the executive has completed
three years' further service. There are no other performance conditions.
2009
Discretionary
Share Option TSR- based Matching
Scheme 2000 Awards Awards
Weighted Weighted Weighted
No. Average No. Average No. Average
Of Exercise Of Exercise Of Exercise
Options Price (p) Options Price (p) Options Price (p)
Outstanding at 1 October 2008 255,803 330.09 369,394 0.0 213,085 0.0
During the year:
Awarded 106,207 0.0
Forfeited
Exercised (30,925) 0.0 (197,272) 0.0
Expired (149,147) 330.14 (290,498) 0.0
Increase in awards due to dividends paid 12,249 0.0 1,258 0.0
Outstanding at 30 September 2009 106,656 330.03 166,427 0.0 17,071 0.0
Exercisable at 30 September 2009
2008
Discretionary
Share Option TSR-based Matching
Scheme 2000 Awards Awards
Weighted Weighted Weighted
No. Average No. Average No. Average
Of Exercise Of Exercise Of Exercise
Options Price (p) Options Price (p) Options Price (p)
Outstanding at 1 October 2007 655,265 260.80 207,344 0.0 122,424 0.0
During the year:
Awarded 147,072 0.0 84,245 0.0
Forfeited
Exercised (399,462) 216.35
Expired
Increase in awards due to dividends paid 14,978 6,416
Outstanding at 30 September 2008 255,803 330.09 369,394 0.0 213,085 0.0
Exercisable at 30 September 2008 28,270 0.0 101,108 0.0
The aggregate estimated fair value of the 106,207 TSR-based awards on 4
December 2008, being the date on which the awards were granted was £51,000
(2008: £213,000 relating to the aggregate estimated fair value of 147,072
options granted on 3 December 2007).
There were no matching awards granted in 2009. The 84,245 matching awards
granted in 2008 were made on 3 December 2007, 10 June and 19 November 2008 and
had an aggregate estimated fair value on those dates of £179,000.
On 5 December 2008, 101,982 share options were exercised at a share price of
155.5p giving a gain to the employee of £159,000. Similarly on 12 December
2008, 126,215 share options were exercised at a share price of 148p with a
gain to the employee of £187,000 (2008: 230,784 share options were exercised
at a share price of 304p and a resultant gain to the employee of £202,000, and
168,678 share options were exercised at a share price of 296.5p and resultant
gain to the employee of £136,000).
During the year 290,498 share options lapsed in accordance with the leaving
agreements for two former directors.
The options and awards outstanding at 30 September 2009 had a weighted average
remaining contractual life of 0.2 years, 3.9 years and 2.1 years in respect of
the Discretionary Share Options Scheme 2000, TSR-based Awards and Matching
Awards respectively (2008: 2.7 years, 3.3 years and 1.9 years respectively).
Awards and options are usually forfeited if the employee leaves employment
before vesting.
The following table lists the assumptions and weighted average inputs used in
the Black Scholes model for share awards granted in the year:
2009 2008 2008
TSR-based TSR-based Matching
Awards Awards Awards
Weighted Average share price 162.5p 350.0p 323.1p
Weighted Average exercise price 0.0p 0.0p 0.0p
Expected Volatility 33.0% 15.0% 19.3%
Expected Life 5yrs 5 yrs 3 yrs
Risk Free rate 3.0% 4.5% 4.8%
Expected dividends 6.5% 2.8% 3.2%
Expected volatility was determined by calculating the historical volatility of
the Company's share price over the last three years. The expected life used in
the model had been adjusted, based on the management's best estimate, for the
effects of non-transferability, exercise restrictions and behavioural
considerations.
As a consequence of an employee leaving the Company on 28 November 2008 future
period share option charges have been required to be recognised on that date
in accordance with the early vesting provisions of IFRS 2. This results in a
one-off charge of £191,000 (2008: £246,000) being included as part of the
total expense of £251,000 (2008: £516,000) relating to share-based payment
transactions in the year ended 30 September 2009.
25 Financial Instruments and Risk Profile
As an investment trust, the Company invests in securities for the long term in
order to achieve its investment objective as stated above. Accordingly it is
the Board's policy that no trading in investments or other financial
instruments be undertaken. The Company's financial instruments comprise its
investment portfolio - see note 12, cash balances, debtors and creditors that
arise directly from its operations such as sales and purchases awaiting
settlement and accrued income, and the debenture loans used to finance its
operations. The Company is unlikely to use derivatives for hedging purposes
and then only in exceptional circumstances with the specific prior approval of
the Board.
In pursuing its investment objective the Company is exposed to various risks
which could cause short term variation in the Company's net assets and which
could result in both or either a reduction in the Company's net assets or a
reduction in the profits available for distribution by way of dividend. The
main risk exposures for the Company from its financial instruments are market
risk, (including currency risk, interest rate risk and other price risk),
liquidity risk and credit risk.
The Board sets the overall investment strategy and has in place various
controls and limits and receives various reports in order to monitor the
Company's exposure to these risks. The risk management policies identified in
this note have not changed materially from the previous accounting period.
Market Risk
The principal risk in the management of the portfolio is market risk i.e. the
risk that values and future cashflows will fluctuate due to changes in market
prices. This comprises:
- foreign currency risk;
- interest rate risk; and
- other price risk i.e. movements in the value of investment holdings caused
by factors other than interest rate or currency movements.
These risks are taken into account when setting investment policy and making
investment decisions.
Foreign Currency Risk
Exposure to foreign currency risk arises through investments in securities
listed on overseas stock markets. A proportion of the net assets of the
Company are denominated in currencies other than sterling, with the effect
that the balance sheet and total return can be materially affected by currency
movements. The Company's exposure to foreign currencies through its
investments in overseas securities as at 30 September 2009 was £37,026,000
(2008: £22,400,000).
The Investment Director monitors the Company's exposure to foreign currencies
and the Board receives reports on a regular basis. In making investment
decisions the Investment Director is mindful of the Company's benchmark
allocation to foreign currencies but takes independent positions based on a
long term view on the relative strengths and weaknesses of currencies.
Additionally the currency of investment is not the only relevant factor
considered as many portfolio investment companies are global in scope and
nature. The Company does not normally hedge against foreign currency
movements.
The currency risk of the Company's financial assets and liabilities at the
Balance Sheet date was:
2009 2008
£000 £000
Monetary exposures
UK sterling 12,131 7,718
Non-monetary exposures
US dollar 18,804 9,121
Euro 8,940 8,341
Hong Kong dollar 2,021 855
Indonesian rupiah 113
Swiss franc 1,623 207
Singapore dollar 735
Thai baht 476
Japanese yen 4,376
Canadian dollar 670
Australian dollar 526 2,617
UK sterling 112,637 159,188
149,662 181,588
Total assets 161,793 189,306
Liabilities
Monetary exposures
UK sterling (33,762) (33,744)
Non-monetary exposures
UK sterling (3,852) (2,099)
(37,614) (35,843)
Total net assets 124,179 153,463
Sensitivity analysis
A 5% increase in sterling at 30 September 2009 against the relevant foreign
currencies, with all other variables held constant, would have had the effect
of reducing the Company's net assets and total return by £1,851,000 (2008:
£1,067,000). A 5% decrease in sterling would have had the equal and opposite
effect.
Interest Rate Risk
The Company's direct interest rate risk exposure affects the interest received
on cash balances and the fair value of its fixed rate portfolio investments
and debentures. Indirect exposure to interest rate risk arises through the
effect of interest rate changes on the valuation of the investment portfolio.
The vast majority of the financial assets held by the Company are equity
shares, which pay dividends, not interest. The Company may however from time
to time hold small investments which pay a fixed rate of interest.
The Board sets limits for cash balances and receives regular reports on the
cash balances of the Company. The Company's fixed rate debentures introduce an
element of gearing to the Company which is monitored within limits and
reported to the Board. Cash balances are used to manage the level of gearing
within a range set by the Board. The Board sets an overall investment strategy
and also has various limits on the investment portfolio which aim to spread
the portfolio investments to reduce the impact of interest rate risk on
company valuations. Regular reports are received by the Board in respect of
the Company's investment portfolio and the respective limits.
The interest rate risk profile of the Company's financial assets and
liabilities at the Balance Sheet date was:
2009 2008
£000 £000
Floating rate financial assets
UK sterling 12,131 7,718
Fixed rate financial assets
As referred to in note - 569 972
Financial assets not carrying interest 149,093 180,616
Total assets 161,793 189,306
Fixed rate financial liabilities
UK sterling (33,762) (33,744)
Financial liabilities not carrying interest
UK sterling (3,852) (2,099)
Total liabilities (37,614) (35,843)
Total net assets 124,179 153,463
Floating rate financial assets usually comprise cash on deposit which is
repayable on demand and receive a rate of interest based on the base rates in
force over the period. Fixed rate financial assets comprise convertible bonds
or loan notes. The fixed rate financial liabilities comprise the Company's
debentures totaling £34.2m nominal. They pay a weighted average rate of
interest of 8.1% per annum and mature in 2020 (£13.5m) and 2025 (£20.7m).
Sensitivity analysis
Movements in interest rates would not have had a significant direct impact on
net assets or total return but could indirectly, have a material, but
unquantifiable impact on the investments held.
Other Price Risk
Exposure to market price risk is significant and comprises mainly movements in
the market prices and hence value of the Company's listed equity investments
which are disclosed in note 12. The Company also has unlisted investments
which are indirectly impacted by movements in listed equity prices and related
variables. The Board sets an overall investment strategy to achieve a spread
of investments across sectors and regions in order to reduce risk. Investments
are considered independently of the Company's benchmark which may result in
volatility in the short term. The Board receives reports on the investment
portfolio, performance and volatility on a regular basis in order to ensure
that the investment portfolio is in accordance with current strategy.
Sensitivity analysis
A 5% increase in listed equity valuations at 30 September 2009 would have
increased total assets and total return by £5,563,000 (2008: £7,417,000). A 5%
decrease in listed equity valuations would have had the equal but opposite
effect.
Credit Risk
Credit risk is the risk of other parties failing to discharge an obligation
causing the Company financial loss. The Company's exposure to credit risk is
managed by the following:
- The Company's listed investments are held on its behalf by RBC Dexia
Investor Services Trust, the Company's custodian which if it became bankrupt
or insolvent could cause the Company's rights with respect to securities held
to be delayed. The Company receives regular internal control reports from the
Custodian which are reviewed by Management and reported to the Board;
- Investment transactions are undertaken with a number of approved brokers in
the ordinary course of business. All new brokers are reviewed by a Board
committee for credit worthiness and added to an approved brokers list if not
considered to be a credit risk;
- Cash is held at banks that are considered to be reputable and high quality.
Cash balances are spread across a range of banks to reduce concentration risk;
- Where the Company makes an investment in a loan or other security with
credit risk, that credit risk is assessed and considered as part of the
investment decision making process by the Investment Director. The Board
receives regular reports on the composition of the investment portfolio.
Credit Risk Exposure
As at 30 September 2009, cash balances total £12,131,000 (2008: £7,718,000),
debtors and prepayments total £1,986,000 (2008: £2,413,000). Also included
within the portfolio are a number of convertible notes or loan notes
designated at fair value through profit or loss. The total value of these
notes are £569,000 (2008: £972,000). One loan note with a cost of £422,000 is
currently impaired and has been written down to £nil. The minimum exposure to
credit risk during the year was £20,069,000 and the maximum exposure was
£10,404,000.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulties
meeting its obligations as they fall due.
Liquidity risk is not significant as the majority of the Company's assets are
investments in quoted equities and other quoted securities that are readily
realisable. The Board has various limits in respect of how much of the
Company's resources can be invested in any one company. The unlisted
investments in the portfolio are subject to liquidity risk but such
investments are subject to limits set by the Board and liquidity risk is taken
into account by the directors when arriving at their valuation. The increase
in the value of unlisted investments primarily reflects the increase in the
value of MAM during the year.
The Company maintains an appropriate level of cash balances in order to
finance its operations and the Investment Director regularly monitors the
Company's cash balances to ensure all known or forecasted liabilities can be
met. The Board receives regular reports on the level of the Company's cash
balances. The Company does not have any overdraft or other borrowing
facilities to provide liquidity.
A maturity analysis of financial liabilities showing the remaining contractual
maturities is detailed below:
Undiscounted cash flows Due within Due between Due between Due 3 years
1 year 1 and 2 years 2 and 3 years and beyond Total
2009 £000 £000 £000 £000 £000
9.5% debenture stock 2020 13,500 13,500
7.25% debenture stock 2025 20,700 20,700
Interest on financial liabilities 2,783 2,783 2,783 29,216 37,565
Trade payable and other liabilities
(excluding social security and sundry taxes) 3,852 3,852
At 30 September 2009 6,635 2,783 2,783 63,416 75,617
Undiscounted cash flows Due within Due between Due between Due 3 years
1 year 1 and 2 years 2 and 3 years and beyond Total
2008 £000 £000 £000 £000 £000
9.5% debenture stock 2020 13,500 13,500
7.25% debenture stock 2025 20,700 20,700
Interest on financial liabilities 2,783 2,783 2,783 31,999 40,348
Trade payable and other liabilities
(excluding social security and sundry taxes) 2,098 2,099
At 30 September 2008 4,881 2,783 2,783 66,199 76,647
Fair value of financial assets and liabilities
The Company's financial instruments at 30 September comprised the following:
Book Value Book Value Fair Value Fair Value
2009 2008 2009 2008
£000 £000 £000 £000
Financial assets
Investment portfolio 147,291 178,981 147,291 178,981
Cash 12,131 7,718 12,131 7,718
Financial liabilities
£13.5m (2008: £13.5m) 9.5%
debenture stock 2020 13,376 13,369 16,462 17,016
£20.7m (2008: £20.7m) 7.25%
debenture stock 2025 20,386 20,375 21,870 22,257
The investment portfolio has been valued in accordance with the accounting
policy in note 1 to the accounts. Accordingly, book value equates to fair
value. The fair value of the debenture stock is based on a combination of
information provided by FT Interactive Data and Discounted cash flow analysis
as at 30 September in each year.
Capital Management Policies and Procedures
The Company's capital management objectives are:
- to ensure that it is able to continue as a going concern; and
- to maximise the revenue and capital returns to its equity shareholders
through an appropriate mix of equity capital and debt. The Board sets a range
for the Company's net debt (comprised of debentures less cash) at any one time
which is maintained by management of the Company's cash balances.
The Company's capital at 30 September comprises:
2009 2008
£000 £000
Net debt
Cash (12,131) (7,718)
Debentures 33,762 33,744
Sub total 21,631 26,026
Equity
Equity share capital 5,253 5,253
Retained earnings and other reserves 118,926 148,210
Sub total 124,179 153,463
Net debt as a percentage of net assets 17.4% 17.0%
The Board monitors and reviews the broad structure of the Company's capital on
an ongoing basis. The review includes:
- the level of net gearing, taking into account the Investment Director's
views on the market;
- the level of the Company's free float of shares as the Barlow family owns
approximately 55% of the share capital of the Company; and
- the extent to which revenue in excess of that required to be distributed
should be retained.
These objectives, policies and processes for managing capital are unchanged
from the prior period.
The Company is subject to various externally imposed capital requirements:
- the debentures are not to exceed in aggregate 662/3% of adjusted share
capital and reserves in accordance with the respective Trust Deeds; and
- the Company has to comply with statutory requirements regarding minimum
share capital and restriction tests relating to dividend distributions.
These requirements are unchanged since last year and the Company has complied
with them.
26 Derivative Financial Instruments
In the course of its investment activities the Company receives warrants on
ordinary shares which provide exposure to companies on favourable terms. At 30
September 2009, the fair value of the Company's warrants, both listed and
unlisted was £nil (2008: £18,000).
Changes in the fair value of warrants amounting to £18,000 (2008: £3,000) have
been debited to the income statement in the year ended 30 September 2009.
27 Related Party Transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
Majedie Asset Management Limited (MAM) is a related party. It is accounted for
as an investment in the portfolio valued at fair value through profit or loss.
Amounts Owed Amounts Owed
Details of by Related to Related
Transactions Parties Parties
2009 2008 2009 2008 2009 2008
£000 £000 £000 £000 £000 £000
Majedie Asset Management Limited
Ordinary dividend due to Group 1,906
Special dividend due to Group 2,484
At 30 September 2009 the Company held investments in funds managed by MAM
representing 1.0% (2008: 1.5%) of the Company's investment portfolio as set
out in the table below.
2009 2008
Market Value Market Value
Fund £000 £000
Majedie Asset Management UK Opportunities 'A' 2,447
Majedie Asset Management UK Focus 'B' 248
Majedie Asset Management UK Equity 'B' 246
Majedie Asset Management Tortoise Fund 'B' 1,645
1,645 2,941
Distributions totalling £23,000 (2008: £78,000) from these investments were
received by the Company during the year.
The investment in the Tortoise fund has incurred direct fees of £81,000 (2008:
£nil) during the year.
The remuneration of the directors, who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in
IAS 24: Related Party Disclosures. Further information about the remuneration
of individual directors is provided in the audited part of the Report on
Directors' Remuneration which can be found in the Annual Report & Accounts.
2009 2008
£000 £000
Short-term employee benefits 282 949
Share-based payments 492
282 1,441
DOCUMENTS AVAILABLE FOR INSPECTION
At the Annual General Meeting to be held on 20 January 2010, it is proposed
that new Articles of Association be adopted, primarily to reflect the
provisions of the Companies Act 2006 that are due to come into force on or
before 1st October 2009 and the provisions of the Companies (Shareholders'
Rights) Regulations 2009 which came into force on 3rd August 2009. An
explanation of the principal changes is set out in the Annual Report and
Accounts for the year ended 30 September 2009, a copy of which can be found at
www.majedie.co.uk.
A copy of the proposed New Articles of Association marked up to show the
proposed amendments will be available for inspection from the date of this
report until the conclusion of the Annual General Meeting during normal
business hours on any weekday at the registered office of the Company. The
proposed New Articles of Association will be available for inspection at any
time until the conclusion of the Annual General Meeting on the Company's
website at www.majedie.co.uk and will be available at the venue of the Annual
General Meeting from 15 minutes prior and until the conclusion of the meeting.
A copy of the proposed New Articles of Association is being lodged with the UK
Listing Authority and will shortly be available for inspection through the
Document Viewing Facility, which is situated at Financial Services Authority,
25 The North Colonnade, Canary Wharf, London E14 5HS (Tel no. 020 7676 8224).
A copy of the Annual Report and Accounts and Notice of Annual General Meeting
will be delivered to shareholders shortly and can also be found at
www.majedie.co.uk.
ENQUIRIES
If you have any enquiries regarding this announcement please contact Mr Gerry
Aherne on 020 7626 1243.
ENDMAJEDIE INVESTMENTS PLC
