TIDMMAJE
RNS Number : 8793Q
Majedie Investments PLC
05 December 2016
MAJEDIE INVESTMENTS PLC
ANNUAL FINANCIAL REPORT FOR THE YEARED 30 SEPTEMBER 2016
The full Annual Report and Accounts will shortly be available
via the Company's website at www.majedieinvestments.com or by
contacting the Company Secretary on telephone number 020 7954
9531.
The Directors present the results of the Company for the year
ended 30 September 2016.
INVESTMENT OBJECTIVE
The Company's investment objective is to maximise total
shareholder return whilst increasing dividends by more than the
rate of inflation over the long term.
Highlights 2016 2015
Total shareholder return (including dividends): 3.0% 15.7%
Net asset value total return (debt at par including dividends): 16.0% 12.9%
Total dividends (per share): 8.75p 8.00p
Directors' valuation of investment in Majedie Asset Management Limited: GBP57.1m GBP52.3m
YEAR'S SUMMARY
Group Capital Structure Note 2016 2015 %
------------------------------------------------------ ----- ---------- ---------- ------
As at 30 September
Total assets 1 GBP203.9m GBP183.7m +11.0
Which are attributable to:
Debenture holders (debt at par value) 2 GBP33.9m GBP33.9m
Equity Shareholders GBP170.0m GBP149.8m +13.5
Gearing 4 18.5% 21.3%
Potential Gearing 4 20.0% 22.6%
------------------------------------------------------ ----- ---------- ---------- ------
Group total returns (capital growth plus dividends) 5
Net asset value per share (debt at par value) 3 +16.0% +12.9%
Net asset value per share (debt at fair value) 3 +16.3% +13.0%
Share price +3.0% +15.7%
------------------------------------------------------ ----- ---------- ---------- ------
Group capital returns
Net asset value per share (debt at par value) 3 318.1p 281.9p +12.8
Net asset value per share (debt at fair value) 299.8p 265.5p +12.9
Share price 257.1p 257.3p -0.1
------------------------------------------------------ ----- ---------- ---------- ------
Discount of share price to net asset value per share
Debt at par value 19.2% 8.7%
Debt at fair value 14.2% 3.1%
------------------------------------------------------ ----- ---------- ---------- ------
Group revenue and dividends
Net revenue available to Equity Shareholders GBP4.9m* GBP4.9m
Net revenue return per share 9.3p* 9.4p -0.1
Total dividends per share 8.75p 8.00p +9.4
------------------------------------------------------ ----- ---------- ---------- ------
Total administrative expenses GBP1.9m* GBP2.1m
Ongoing Charges Ratio: 6
Group and Company 1.6% 1.9%
Notes:
Definitions used in the above summary are as follows:
1. Total Assets: Total assets are defined as total assets less current liabilities.
2. Debt at par or fair value: Par value is the nominal or face
value attached to the debentures which will be paid by the Company
to the debenture holders at maturity. Fair value is the estimated
market value the Company would pay (on the relevant reporting
date), as a willing buyer, to a debenture holder, as a willing
seller, in an arms-length transaction.
3. Net Asset Value: The Net Asset Value (NAV) is the value of
all of the Company's assets less all liabilities. The NAV is
usually expressed as an amount per share.
4. Gearing and Potential Gearing: Gearing represents the amount
of borrowing that a company has and is calculated using the
Association of Investment Companies (AIC) guidance. It is usually
expressed as a percentage of equity shareholders' funds and a
positive percentage or ratio above one shows the extent of the
level of borrowings. Gearing is calculated as borrowings less net
current assets to arrive at a net borrowings figure. Potential
Gearing excludes cash from the calculation. Details of the
calculation for the Company are in note 25 below.
5. Total Return: Total returns include any dividends paid as
well as capital returns as a result of an increase or decrease in a
company's share price or NAV.
6. Ongoing Charge Ratio (OCR): Ongoing charges are a measure of
the normal ongoing costs of running a company. Further information
is shown in the Business Review section of the Strategic Report
below.
* Includes both continuing and discontinued operations.
Year's high/low 2016 2015
----------------------------------------- ------ ------- -------
Share price high 272.3p 281.0p
low 240.0p 213.3p
Net asset value - debt at par high 318.1p 294.2p
low 260.1p 229.2p
Discount - debt at par high 19.2% 14.2%
low 2.6% 1.4%
(Premium)/Discount - debt at fair value high 14.3% 8.4%
low (3.4%) (5.5%)
TEN YEAR RECORD
to 30 September 2016
NAV
Per
Equity Share
share- (Debt at Company
Total holders' par Share Ordinary Total Potential Ongoing
Year Assets Funds value) Price Discount Earnings Dividend** Dividend Gearing Gearing Charges#
End GBP000 GBP000 Pence Pence % Pence Pence Pence** % % %
------- -------- --------- --------- ------ --------- --------- ------------ --------- -------- ---------- ---------
2007* 286,944 253,216 490.7 413.3 15.77 13.60 10.00 14.50 10.65 13.32 1.00
------- -------- --------- --------- ------ --------- --------- ------------ --------- -------- ---------- ---------
2008 187,209 153,465 296.5 250.0 15.68 12.45 10.50 12.75 16.69 21.99 1.30
------- -------- --------- --------- ------ --------- --------- ------------ --------- -------- ---------- ---------
2009 157,943 124,181 238.7 189.8 20.51 8.14 10.50 10.50 17.22 27.19 1.71
------- -------- --------- --------- ------ --------- --------- ------------ --------- -------- ---------- ---------
2010 150,940 117,159 225.2 191.5 15.00 11.83 10.50 13.00 24.11 28.83 1.85
------- -------- --------- --------- ------ --------- --------- ------------ --------- -------- ---------- ---------
2011 145,683 111,634 214.5 139.5 34.96 4.66 10.50 10.50 (1.72) 30.28 1.92
------- -------- --------- --------- ------ --------- --------- ------------ --------- -------- ---------- ---------
2012 146,057 112,234 215.6 155.8 27.74 4.90 10.50 10.50 9.24 30.14 1.83
------- -------- --------- --------- ------ --------- --------- ------------ --------- -------- ---------- ---------
2013 159,013 125,166 240.5 160.0 33.47 6.80 10.50 10.50 21.47 27.04 1.73
------- -------- --------- --------- ------ --------- --------- ------------ --------- -------- ---------- ---------
2014 167,934 134,061 256.7 229.0 10.79 9.36 7.50 7.50 23.39 25.27 1.66
------- -------- --------- --------- ------ --------- --------- ------------ --------- -------- ---------- ---------
2015 183,708 149,807 281.9 257.3 8.74 9.42 8.00 8.00 21.25 22.63 1.88
------- -------- --------- --------- ------ --------- --------- ------------ --------- -------- ---------- ---------
2016 203,917 169,986 318.1 257.1 19.18 9.25 8.75 8.75 18.46 19.96 1.58
------- -------- --------- --------- ------ --------- --------- ------------ --------- -------- ---------- ---------
Notes:
Calculated in accordance with AIC guidance.
Includes both continuing and discontinued operations.
# As from May 2012, Ongoing Charges replace previous cost
ratios.
* Restated to reflect the review of the treatment of the
investment in Majedie Asset Management.
** Dividends disclosed represent dividends that relate to the
Company's financial year. Under International Financial Reporting
Standards (IFRS) dividends are not accrued until paid or approved.
Total dividends include special dividends paid, if any.
STRATEGIC REPORT
CHAIRMAN'S STATEMENT
In the year ended 30 September 2016 the NAV (net asset value
with debt at par) rose by 16.0% on a total return basis whilst the
share price rose by 3.0%, also on a total return basis. The Board
is recommending a total dividend for the year of 8.75p per share,
an increase of 9.4%. The FTSE All Share Index and MSCI World Index
(in Sterling terms) rose by 16.8% and 30.6% respectively, on a
total return basis.
The Company's shares which had traded periodically at a premium
to NAV (debt at fair value) in the first half of the year traded at
a discount in the second half of the year. This reflects increased
volatility in both stock markets and currency markets in the wake
of the European Referendum result that impacted the Investment
Company sector in general. Specifically in relation to the Company
a large holding in the Company has been transferred to a new fund
management group which is not expected to be a long term investor.
The Board is uncomfortable with the level of the discount and is
looking at all opportunities to reduce it.
Results and Dividends
The Company had a capital return for the year of GBP18.7m
compared to GBP12.5m in 2015. Total income for the Company was
GBP6.5m compared to GBP6.6m in 2015. The small decrease in income
reflects a variety of factors, namely the sale of 2.5% of Majedie
Asset Management (MAM) shares in December 2014 and a reallocation
in August 2015 of GBP10m from the higher yielding UK Equity
Segregated Portfolio to the lower yielding MAM Global Equity Fund.
This was partially offset by a higher dividend per share from MAM
and increased income from the MAM UK Income Fund. The allocation
from the UK Equity Segregated Portfolio to the Global Fund has
however benefitted the capital return. There were no further sales
of MAM shares over the year.
Total administrative expenses and management fees have fallen to
GBP1.9m from GBP2.1m in 2015 which largely reflects a reduction in
property costs and general cost reductions. Further benefits should
be achieved in 2017 as one off costs associated with moving office
fall away and the fund administration function is insourced.
Notwithstanding these actions, the self-managed nature of the
Company and its current size mean costs will be somewhat higher
than average, though costs will continue to be an area of focus for
the Board.
The net revenue return after taxation for the year to 30
September 2016 was GBP4.9m compared to GBP4.9m in the year to 30
September 2015.
The Board increased the total dividend by 6.7% to 8.0p in 2015
and, having paid an interim dividend of 3.0p, the Board is
recommending a final dividend of 5.75p, an increase of 9.4% for the
full year. The final dividend will be paid on 25 January 2017 to
shareholders on the register on 13 January 2017.
Corporate Broker
The Company announced on 29 November 2016 that it has appointed
J.P. Morgan Cazenove as its Corporate Broker.
AGM
The AGM will be held on 18(th) January 2017 at 12.00 noon at the
City of London Club, 19 Old Broad Street, London EC2N 1DS. Details
are set out in the notice of the meeting in the full Annual Report.
There will be presentations from MAM and the Board and an
opportunity to ask questions. I hope you will be able to
attend.
Majedie Share Plan
Following a review we decided to close the Company's share plan
and adopt a replacement share plan operated by Equiniti. There
should be no changes for investors as the Company subsidises the
costs and the share plan represents an efficient way to invest in
the Company's shares.
Summary
It is disappointing that the discount has widened following two
years of the shares trading at historically tighter discounts and
at times, a premium. One of our aims has been to grow the Company
through share issuance, and to this end the Company has permission
to issue up to 10% of its equity at a premium to the prevailing NAV
(debt at fair value). In the year to 30 September 2016 the Company
issued 306,000 shares at a premium. The benefits to shareholders of
further share issuance will be to dilute the cost of the
debentures, to reduce the ratio of ongoing charges and to increase
the liquidity of the Company's shares. It is intended to renew this
permission at the AGM.
The Board maintains an asset allocation that provides a unique
exposure to funds that are run by a highly regarded boutique
investment manager in which the Company retains a significant stake
of 16.7%. The geographic exposure of the Company's portfolio is
shown below. We are conscious that our exposure appears to be more
UK-centric than other Investment Companies in the Global Growth
sector. However on a look through basis, determined by earnings,
the Company's portfolio is more heavily exposed to overseas
earnings because the UK Market (FTSE All Share) derives 70% of its
earnings from overseas. UK listed equities also pay a higher
dividend yield than equities that are listed overseas. The yield
from the segregated mandate, the funds and the dividend from MAM
enables the Company to pay an attractive dividend from its current
year income without recourse to its sizable revenue reserves. The
Company also retains exposure to an absolute return fund that will
reduce volatility of returns for shareholders.
The past year has been extraordinary in terms of political
shocks with the European Referendum result and more recently the US
Presidential election. The economic consequences and the effect on
the stock markets were and remain difficult to predict. I am
confident however that the broad spread of the Company's holdings
and the good long term track record of the funds managed by MAM
will provide your Company with resilience and growth in its
assets.
Andrew J Adcock
Chairman
2 December 2016
EXTRACTS FROM THE STRATEGIC REPORT
CHIEF EXECUTIVE'S REPORT
The Company's assets are allocated at the discretion of the
Board between a number of investment strategies managed by MAM and
the Company retains an equity holding in MAM. The Company has no
overall benchmark; rather each fund has its own benchmark. The
Company's total assets were GBP203.9m at 30 September 2016. In the
year, the main change in asset allocation was a reduction in the
MAM UK Equity Segregated Portfolio by GBP3.4m; there were no sales
of MAM shares during the year.
MAM Funds and Investment Performance
The MAM UK Equity Fund is the flagship product of MAM, having
started in March 2003, and since inception to 30 September 2016 has
returned 12.9% per annum net of fees with a relative outperformance
against its benchmark FTSE All Share Index of 3.6% per annum. The
Company's assets are invested in a segregated portfolio that is
managed in parallel to the MAM UK Equity Fund. The funds are
predominately invested in UK equities with overseas equities
limited to 20% and the strategy incorporates a dedicated allocation
to UK smaller companies. The sum invested in the Segregated
Portfolio at 30 September 2016 was GBP61.2m which represents 30.0%
of the Company's total assets. In the year to 30 September 2016 the
Segregated Portfolio returned 14.4% net of fees, which is an
underperformance of 2.4% against its benchmark. The positive
contributors at a sector level over twelve months were overweight
positions in Mining, Support Services and Oil whilst the negative
contributors were overweight positions in Banks, Tobacco and Fixed
Line Telecoms.
The MAM Tortoise Fund is a global equity absolute return fund
which started in August 2007 and since inception has returned 9.6%
per annum net of fees. At 30 September 2016, the Company has an
allocation of GBP32.4m, which represents 15.9% of total assets. The
fund returned 17.5% net of fees in the year to 30 September 2016.
The positive contributors at a sector level were long positions in
Mining, Oil and Software whilst the detractors were long positions
in Banks and short positions in REITs and Distributors. The
Tortoise Fund has capacity restrictions.
The MAM UK Income Fund started in December 2011. Its objective
is to maintain an attractive yield whilst outperforming the FTSE
All Share Index over the longer term, with at least 80% of the fund
invested in UK equities. Since inception the fund has returned
15.7% per annum net of fees, which is an outperformance of 5.3% per
annum. At 30 September 2016 the Company has an allocation of
GBP19.8m, which represents 9.7% of total assets. In the year to 30
September 2016 the fund returned 2.6% net of fees, which represents
an underperformance of 14.2%. The positive contributors at the
sector level were overweight positions in Travel and Leisure, Food
Producers and Nonlife Insurers whilst the detractors were
overweight Life Insurers and underweight Oil and Mining.
The MAM Global Equity and Global Focus funds were launched in
June 2014. Since inception the funds have returned 14.0% and 13.3%
per annum net of fees for the Sterling share classes. This
represents a flat performance for the Global Equity Fund and an
underperformance of 0.6% per annum for the Global Focus Fund
against their benchmark MSCI ACWI (Developed and Emerging Markets).
At 30 September 2016 the Company has an allocation of GBP18.7m and
GBP6.6m to the MAM Global Equity and Global Focus Funds,
respectively representing 9.1% and 3.2% of total assets. In the
year to 30 September 2016 the funds returned 28.7% and 22.6% net of
fees respectively, which represents an underperformance of 1.9% and
7.9%. The absolute returns of the funds have benefitted from the
weakness of Sterling though there was no effect in relative terms
because the Company is invested in the Sterling share class. The
positive contributors at the sector level were overweight positions
in Software, Mining and Diversified Financials whilst the
detractors were overweight positions in Telecoms, Banks and
Biotechnology.
The MAM US Equity Fund was launched in June 2014 and since its
inception has returned 18.4% per annum net of fees for the Sterling
share class. This represents an underperformance of 1.2% per annum
against its benchmark S&P 500 Index. At 30 September 2016 the
Company had an allocation of GBP7.3m, which represents 3.6% of
total assets and in the year ended 30 September 2016 the fund
returned 22.8% net of fees, which represents an underperformance of
10.9%. The Company is invested in the Sterling share class. The
positive contributors at a sector level were overweight positions
in Diversified Financials, Software and Media whilst the detractors
were overweight positions in Consumer Services, Leisure and
Healthcare Providers.
The aggregate geographic and sector exposures of the MAM UK
Equity Segregated Portfolio, MAM UK Income Fund, MAM Global Equity
Fund, MAM Global Focus Fund and MAM US Equity Fund are shown below.
In order to enhance the transparency for shareholders on each of
the MAM funds the factsheets are available on the Company's
website. The factsheets show the five largest overweight and
underweight stocks and other relevant information for investors on
the funds.
Majedie Asset Management
The Company retains its holding of 16.7% of MAM, having not sold
any shares in MAM in the year to 30 September 2016. The Company has
no current intention to sell any shares in MAM, other than the
obligation, if required, to sell shares in proportion to other
shareholders to the MAM EBT, up to a maximum of 1.0% in each year.
The Board has increased the value of its holding in MAM to
GBP57.1m. The valuation is formulaic and reflects three-year
historic average earnings and the Board believes it reflects fair
value. The holding represents 28.0% of the Company's total assets
and in the year ended 30 September 2016 the Company received
dividends of GBP3.3m from MAM.
MAM's AUM increased to GBP12.3bn from GBP11.2bn during the year,
which reflects stock market movement especially in the second half
of the year. The increase in AUM is creditable with the UK fund
management industry, as a whole, facing large outflows in the 2(nd)
and 3(rd) quarters of 2016. In terms of relative performance the
MAM long-only funds had a testing year, though the upturn in
relative performance over recent months builds on the strong medium
to long term track record. It is pleasing that the MAM Tortoise
Fund had a good year. The MAM Global Equity, MAM Global Focus and
MAM US Equity Funds continue to receive enquiries and in October
the MAM Global Focus Fund received a sizeable allocation from a
major UK Company Pension Fund.
Realisation Portfolio
The realisation portfolio is now immaterial for the Company
though the remaining holdings are monitored in case further value
can be achieved. It is now less than 0.1% of total assets and
therefore will no longer be commented on in future reports.
Summary
Stock markets in the past year have seen a major divergence in
sector performance. Until August, sector and stock selection was
largely driven by investors adding to positions in income producing
stocks as bond yields fell to record low levels. The so called bond
proxy sectors rose to historically expensive valuations. Broadly
the MAM funds underperformed until the final quarter as they were
underweight the bond proxy sectors, overweight commodity producers
and value stocks in the expectation that inflation expectations
were too low and bond rates would begin to rise. In recent months
the market has seen a significant sector rotation that has caused
the funds to outperform. The performance of the MAM UK Income Fund
was impacted by the market reaction to the European Referendum
result because it was overweight UK Financial Services companies
that underperformed the market. I am pleased, however, that the
relative performance of the fund stabilised in the final quarter of
the financial year.
Development of Net Asset Value
The table below outlines the change in the Company's Net Asset
Value (debt at par) over the year ended 30 September 2016. In
aggregate, the NAV has increased by GBP20.2m, comprised of
investment gains of GBP28.3m and inflows from the issue of new
shares of GBP0.8m being offset by expenses and interest of GBP4.6m
and dividends paid to shareholders of GBP4.3m.
NAV 30.09.2015 GBP149.8m
---------------------- ----------
MAM UKES Portfolio +GBP8.3m
MAM +GBP8.0m
MAM Funds +GBP12.0m
Realisation Portfolio Nil
Share Issues GBP0.8m
Admin Costs & Other (GBP1.8m)
Finance Costs (GBP2.8m)
Dividend Paid (GBP4.3m)
NAV 30.09.2016 GBP170.0m
Allocation of Total Assets as at 30 September 2016
Value % of
GBP000 Total Assets
------------------------------------ -------- --------------
MAM UK Equity Segregated Portfolio 61,200 30.0
MAM UK Income Fund 19,752 9.7
MAM Global Equity Fund 18,735 9.1
MAM Global Focus Fund 6,617 3.2
MAM US Equity Fund 7,326 3.6
MAM Tortoise Fund 32,382 15.9
MAM 57,100 28.0
Net cash/realisation portfolio* 805 0.5
203,917 100.0
-------- --------------
* Net Cash and realisation portfolio excludes cash held in the
MAM UK Equity Segregated portfolio or MAM funds.
MAM Fund Performance
12 months
to 30 September Since
2016 MI invested
% Fund % Benchmark % Relative % Fund % benchmark % Relative
return return performance return return Performance
----------------------- ----------------- ------------- ------------- ------------- ------------ -------------
MAM UK Equity
Segregated Portfolio 14.4 16.8 (2.4) 11.6 13.4 (1.8)
MAM UK Income
Fund 2.6 16.8 (14.2) 19.0 17.3 1.7
MAM Global Equity
Fund 28.7 30.6 (1.9) 34.2 34.1 0.1
MAM Global Focus
Fund 22.6 30.6 (8.0) 32.5 34.1 (1.6)
MAM US Equity
Fund 22.8 33.7 (10.9) 46.5 50.0 (3.5)
MAM Tortoise Fund 17.5 7.9
Notes:
All fund returns are shown net of fees.
The MAM UK Equity Segregated Portfolio commenced on 22 January
2014.
The initial investment in the MAM UK Income Fund was made on 29
January 2014.
The initial investments in MAM Global Equity Fund, MAM Global
Focus Fund and MAM US Equity Fund were made on 30 June 2014 and 27
June 2014 respectively. The Company is invested in the Sterling
share classes.
The initial investment in the MAM Tortoise Fund was made on 29
January 2014.
William Barlow
CEO
2 December 2016
FUND ANALYSIS
at 30 September 2016
Geographical Analysis
% of Total
------------------ -----------
UK 64.5
Europe 7.7
North America 18.2
Asia Pacific 2.4
Emerging Markets 3.9
Cash 3.3
100.0
-----------
Sector Analysis
% of Total
-------------------- -----------
Basic Materials 8.8
Consumer Goods 4.9
Consumer Services 17.2
Financials 20.3
Healthcare 6.7
Industrials 8.8
Oil & Gas 11.9
Technology 6.0
Telecommunications 10.4
Utilities 1.7
Cash 3.3
100.0
-----------
Notes:
The assets analysed above are the aggregate exposure of MAM UK
Equity Segregated Portfolio, MAM UK Income Fund, MAM Global Equity
Fund, MAM Global Focus Fund and MAM US Equity Fund. The aggregate
represents a total of 55.6% of the Company's total assets.
Exposures are classified on the stock exchange on which the
underlying equity is listed and FTSE sector classification.
Twenty Largest MAM UK Equity Segregated Portfolio Holdings
at 30 September 2016
% of UK
Fair Value Equity Segregated
Company GBP000 Portfolio
MAM UK Smaller Companies Fund 5,312 8.7
BP PLC 4,356 7.1
Royal Dutch Shell PLC 4,303 7.0
HSBC Holdings PLC 4,186 6.8
Vodafone Group PLC 2,523 4.1
GlaxoSmithKline PLC 2,401 3.9
Tesco PlC 2,228 3.6
Anglo American PLC 2,115 3.5
Barclays Bank PLC 1,887 3.1
Rentokil Initial PLC 1,721 2.8
BHP Billiton PLC 1,670 2.7
BT Holdings PLC 1,606 2.6
WM Morrison Supermarkets PLC 1,415 2.3
Standard Chartered PLC 1,382 2.3
Orange SA 1,179 1.9
Royal Bank of Scotland PLC 1,157 1.9
AstraZeneca PLC 900 1.5
Rio Tinto PLC 782 1.3
Barrick Gold Corporation 766 1.3
Ryanair Holdings PLC 755 1.3
Sub-total 42,644 69.7
Other (Including Cash) 18,556 30.3
----------- -------------------
Total 61,200 100.0
----------- -------------------
BUSINESS REVIEW
Introduction and Strategy
Majedie Investments PLC (the Company) is an investment trust
company and an Alternative Investment Fund (AIF), with an
investment objective to maximise total shareholder return, whilst
increasing dividends by more than the rate of inflation over the
long term. In seeking to achieve this objective, the Board has
determined an investment policy and related guidelines or limits.
The investment objective and policy (as detailed below) were both
last approved by shareholders at a General Meeting of the Company
on 27 February 2014.
The Company is subject to the Alternative Investment Fund
Managers Directive (AIFMD). The AIFMD regulates the Alternative
Investment Fund Managers (AIFMs) of AIFs. The Company's status
under the AIFMD is that it is a self-managed AIF (meaning that it
is an AIFM as well as an AIF), which requires the Company to be
authorised and regulated by the Financial Conduct Authority (FCA).
The AIFMD also requires the appointment of a depositary and the
Company has appointed Bank of New York Mellon UK (BNYM (UK)) to be
its depositary. Further details concerning the Company's regulatory
environment are set out below.
Since January 2014, the Company has been a member of the AIC
(the trade body for closed-ended investment companies).
The purpose of the Strategic Report (which is the Strategic
Report for the Group) is to inform the shareholders of the Company
and help them assess how the directors have performed their duty to
promote the success of the Company in accordance with section 172
of the Companies Act 2006 by:
-- analysing development and performance using appropriate Key Performance Indicators (KPIs);
-- providing a fair and balanced review of the Company's business;
-- outlining the principal risks and uncertainties affecting the Company;
-- describing how the Company manages these risks;
-- setting out the Company's environmental, social and ethical policy;
-- outlining the main trends and factors likely to affect the
future development, performance and position of the Company's
business; and
-- explaining the future business plans of the Company.
Business Model
In pursuing its investment objective, the Company's business
model includes one other entity which together form the Group.
During the year the Majedie Share Plan was closed, with a
replacement share plan scheme being provided by Equiniti Financial
Services Limited. As such Majedie Portfolio Management Limited
(MPM) has ceased operations and is in the process of being
de-authorised by the FCA and then liquidated. As this has not
occurred by 30 September 2016, MPM remains in the Group for the
year. Further details about MPM can be found in note 15
(discontinued operations) to the Accounts below.
The business model currently used by the Company delegates
certain arrangements to other service providers. These delegations
are in accordance with the AIFMD (the details of the material
delegations can be found below), but the Board, as an AIFM and in
accordance with the Company's investment objective and policy,
directs, controls and monitors the overall performance, operations
and direction of the Company. During the year and as previously
advised, Capita Sinclair Henderson Limited was replaced as fund
administrator by an in-house solution, utilising existing company
resources. This approach is considered appropriate as it provides
for more effective and efficient fund administration operations
under the Company's business model.
The Company's Employee, Social, Environmental, Ethical and Human
Rights policy is contained in the Directors' Report on below.
Investment Objective
The Company's investment objective is to maximise total
shareholder return whilst increasing dividends by more than the
rate of inflation over the long term.
Investment Policy
-- General
The Company invests principally in securities of publicly quoted
companies worldwide and in funds managed by its investment manager,
though it may invest in unquoted securities up to levels set
periodically by the Board, including its investment in MAM.
Investments in unquoted securities, other than those managed by its
investment manager or made prior to the date of adoption of this
investment policy (measured by reference to the Company's cost of
investment), will not exceed 10% of the Company's gross assets.
-- Risk Diversification
Whilst the Company will at all times invest and manage its
assets in a manner that is consistent with spreading investment
risk, there will be no rigid industry, sector, region or country
restrictions. The overall approach is based on an analysis of
global economies 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 will not invest in any holding that would, at the
time of investment, represent more than 15% of the value of its
gross assets save that the Company may invest up to 25% of its
gross assets in any single fund managed by its Investment Manager
where the Board believes that the investment policy of such funds
is consistent with the Company's objective of spreading investment
risk.
The Company may utilise derivative instruments including
index-linked notes, contracts for difference, covered options and
other equity-related derivative instruments for efficient portfolio
management and investment purposes.
Any use of derivatives for investment purposes will be made on
the basis of the same principles of risk spreading and
diversification that apply to the Company's direct investments, as
described above.
-- Investment Restrictions
For the avoidance of doubt, as a listed investment company, if
and for so long as required by the Listing Rules in relation to
closed-ended investment companies, the Company will also continue
to comply with the following investment and other restrictions:
-- The Company will at all times, invest and manage its assets
in a way which is consistent with its object of spreading
investment risk and in accordance with its published investment
policy;
-- The Company will not conduct any trading activity which is
significant in the context of the Company (or, if applicable, its
Group as a whole); and
-- Not more than 10% in aggregate of the value of the gross
assets of the Company at the time the investment is made will be
invested in other closed-ended investment funds which are listed on
the Official List (except to the extent that those funds have
published investment policies to invest no more than 15% of their
gross assets in other investment companies which are listed on the
Official List). However, no more than 15% of the gross assets of
the Company at the time the investment is made will be invested in
other closed-ended investment funds which are listed on the
Official List.
-- Asset Allocation
The assets of the Company will be allocated principally between
investments in publicly quoted companies worldwide and in
investments intended to provide an absolute return (in each case
either directly or through other funds or collective investment
schemes managed by the Company's investment manager) and the
Company's investment in MAM itself.
-- Benchmark
The Company does not have one overall benchmark, rather each
distinct group of assets is viewed independently. Any investments
made into funds managed by the Company's investment manager will be
measured against the benchmark or benchmarks, if any, whose
constituent investments appear to the Company to correspond most
closely to those investments. It is important to note that in all
cases 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 from time to time, which remain subject to the investment
restrictions set out in this section.
-- Gearing
The Company uses gearing currently via long-term debentures. The
Board has the ability to borrow up to 100% of adjusted capital and
reserves. The Board also reviews the level of 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 66 2/3%, and any additional indebtedness is
not to exceed 20%, of adjusted capital and reserves.
Regulatory and Competitive Environment
The Company is an investment trust and has a premium listing on
the London Stock Exchange. It is subject to United Kingdom and
European legislation and regulations including UK company law,
IFRS, Listing, Prospectus and Disclosure and Transparency Rules,
taxation law and the Company's own Articles of Association. The
directors are charged with ensuring that the Company complies with
its objectives as well as these regulations.
Under the Companies Act 2006, section 833, the Company is
defined as an investment company.
As outlined previously the Company is subject to the AIFMD. The
AIFMD requires that all AIFs are managed by a regulated AIFM in
accordance with the requirements of the Directive. These
requirements are in respect of risk management, conflicts of
interest, leverage, liquidity management, delegation, the
requirement to appoint a depositary, regulatory capital,
valuations, disclosure of information to investors or potential
investors, remuneration and marketing.
The financial statements report on 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 IFRS as adopted by the EU, supplemented by the Statement of
Recommended Practice for Investment Trust Companies and Venture
Capital Trusts (SORP) issued in November 2014. The principal
accounting policies of the Company are set out in note 1 to the
accounts below.
Total Return Philosophy & Dividend Policy
The Directors believe that investment returns will be maximised
if a total return policy is followed whereby the Investment Manager
pursues the best opportunities. The policy aim is to increase
dividends by more than inflation over the long term. Further
details are under the Dividend Growth section below. The Company
has a comparatively high level of revenue reserves for the
investment trust sector. At GBP23.6m, the revenue reserves
represent over five times the current annual dividend distribution.
The strength of these reserves will assist in underpinning the
Company's progressive dividend policy in years when the income from
the portfolio is insufficient to cover completely the annual
distribution.
Performance Management
The Board uses the following KPIs to help assess progress
against the Company's objectives. Further comments on these KPIs
are contained in the Chairman's Statement and Chief Executive's
Report sections of the Strategic Report respectively.
-- NAV and Total Shareholder Return:
The Board believes that asset return is fundamental to
delivering value over the long-term and is a key determinant of
shareholder return. The Board further believes that, in accordance
with the Company's objective, the total return basis (which
includes dividends paid out to shareholders) is the best measure of
how to measure long-term shareholder return. The Board, at each
meeting, receives reports detailing the Company's NAV and
shareholder total return performance, asset allocation and related
analyses. Details of the NAV and share price total return
performance for the year are shown in the Year's Summary above.
-- Investment Group performance:
The Board believes that after asset allocation, the performance
of each of the investment groups is the key driver of NAV return
and hence shareholder return. The Board receives, at each meeting,
detailed reports showing the performance of the investment groups
which also includes relevant attribution analysis. The Chief
Executive's Report provides further detail on each investment
group's performance for the year.
-- Share price premium/discount:
As a closed-ended listed investment company, the share price of
the Company can and does differ from that of the NAV. This can give
rise to either a premium or discount and as such is another
component of Total Shareholder Return. During the year, and in
common with other companies in the sector, the discount widened
substantially in the case of the Company (with the NAV with Debt at
par), resulting in the Company's share price gain underperforming
the gain in the Company's NAV (with Debt at par).
The Board continually monitors the Company's premium or
discount, and does have the ability to buy back shares if thought
appropriate, although it must be noted that this ability is limited
by the majority shareholding held by members of the Barlow family.
Additionally the Board has approval (and is seeking to renew such
approval for another year) to issue new shares, at a premium to the
relevant NAV (with debt at fair value), in order to meet any
natural market demand. Details of movements in the Company's share
price discount or premium over the year are shown in the Year's
Summary above.
-- Expenses:
The Board is aware of the impact of costs on returns and is
conscious of seeking to minimise these (taking into account the
Company's self-managed status). The industry-wide measure for
investment trusts is the OCR, which seeks to quantify the ongoing
costs of running the Company. This measures the annual normal
ongoing costs of an investment trust, excluding performance fees,
one-off expenses and investment dealing costs, as a percentage of
average equity shareholders' funds. Any investments made into
pooled funds are included using the Company's share of estimated
ongoing fund running costs. The Chairman's Statement above provides
further details on the expenses during the year. Details of the OCR
for the year are shown in the Year's Summary above.
-- Dividend Growth:
Dividends paid to shareholders are an important component of
Total Shareholder Return and this has been included in the
Company's investment objective. The Board is aware of the
importance of this objective to the Company's shareholders but
wishes to be prudent and is of the view that moving to a
sustainable and progressive dividend policy, paying dividends out
of current year income and not reserves is appropriate.
The Board receives detailed management accounts and forecasts
which show the actual and forecast financial outturns for the
Company and the Group. For the 2 years to 30 September 2016, which
is for the period after the rebasing of the dividend in 2014,
average dividend growth has been 8.0% per annum, which is ahead of
inflation.
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.
i. Investment Risk:
The Company has a range of equity investments, including a
substantial investment in an unlisted asset management business, UK
and global equities (both on a direct basis (via the MAM UK Equity
Segregated Portfolio (UKES)) and via collective investment vehicles
(the MAM Funds), and an investment in an absolute return fund, the
MAM Tortoise Fund. The major risk for the Company remains
investment risk, primarily market risk; however it is recognised
that the investment in MAM continues to represent concentration
risk for the Company.
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.
Under the terms of the Investment Agreement, the Investment
Manager manages the majority of the Company's investment assets.
The portfolios of UKES and the MAM Funds are actively managed by
MAM against benchmarks and each have specific limits for individual
stocks and market sectors that are monitored in real time. It
should be noted that UKES and the MAM Funds' returns will differ
from the benchmark returns. The MAM Tortoise Fund is an absolute
return fund whose returns are not correlated to equity markets.
The investment risks are moderated by strict control of position
sizing, low use of leverage and investing in liquid stocks. 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:
ii. Strategy Risk:
An inappropriate investment strategy could result in poor
returns for shareholders and the introduction or widening of the
discount of the share price to the NAV per share. It is important
to note that the investments in the MAM funds do provide the
Company with exposure to a range of strategies. The Board regularly
reviews strategy in relation to a range of issues including
investment policy and objective, the allocation of assets between
investment groups, the level and effect of gearing and currency or
geographic exposure;
iii. Business Risk:
Inappropriate management or controls in the Company or at MAM
could result in financial loss, reputational risk and regulatory
censure. The Board has representation on the MAM governing board to
monitor business financial performance and operations and receives
detailed reports from Company management on financial and
non-financial performance;
iv. Compliance Risk:
Failure to comply with regulations could result in the Company
losing its listing, losing its FCA authorisation as a self-managed
AIF or being subjected to corporation tax on its capital gains.
The Board receives and reviews regular reports from its service
providers and Company management on the 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 1158
of the Corporation Tax Act 2010; and
v. Operational Risk:
Inadequate financial controls, failure by an outsourced supplier
to perform to the required standard, or dependency on a small
number of individuals could result in misappropriation of assets,
loss of income and debtor receipts and misreporting of NAVs. The
Board and Audit Committee regularly review statements on internal
controls and procedures and subject the books and records of the
Company to an annual external audit. In addition the Company's
Depositary provides an additional level of oversight over the
Company's operations. The Corporate Governance statement and the
Report of the Audit Committee in the Company's Annual Report and
Accounts provide further information in respect of internal control
systems and risk management procedures.
On behalf of the Board
Andrew J Adcock
Chairman
2 December 2016
DIRECTORS' REPORT
The directors submit their report and the accounts for the year
ended 30 September 2016.
Introduction
The Directors' Report includes the Corporate Governance
statement, the Report of the Audit Committee, and the Directors'
Remuneration Report. A review of the Company's business is
contained in the Strategic Report (which includes the Chairman's
statement) and should be read in conjunction with the Directors'
Report.
Principal Activity and Status
The Company is a public limited company and an investment
company under section 833 of the Companies Act 2006. It operates as
an investment trust and is not a close company. The Company has
been a member of the AIC since 20 January 2014.
The Company has received historic written confirmation from HM
Revenue & Customs that it meets the eligibility conditions and
is an approved investment trust for taxation purposes under section
1158 of the Corporation Tax Act 2010, with effect from 1 October
2012, subject to it continuing to meet the eligibility conditions
and on-going requirements. In the opinion of the directors, the
Company continues to direct its affairs so as to enable it to
continue to qualify as an approved investment trust.
Results and Dividend
The consolidated net revenue return before taxation arising from
continuing operations amounted to
GBP4,956,000 (2015: GBP4,966,000), and the net loss before
taxation arising from discontinued operations was nil (2015: none).
The discontinued operations relate to the closure of The Majedie
Share Plan which was managed by MPM. The replacement savings plan,
which will have similar operating costs borne by the Company, is
the Equiniti Investment Account, managed and operated by Equiniti
Financial Services Limited. MPM has ceased operating and is
currently being de-authorised and will then be placed into
liquidation.
The directors recommend a final ordinary dividend of 5.75p per
ordinary share, payable on 25 January 2017 to shareholders on the
register at the close of business on 13 January 2017. Together with
the interim dividend of 3.0p per share paid on 24 June 2016, this
makes a total distribution of 8.75p per share in respect of the
financial year (2015: 8.0p per share).
Risk Management and Objectives
The Company as an investment trust, and the Group, are subject
to various risks in pursuing their objectives. The nature of these
risks and the controls and policies in place across the Group that
are used to minimise these risks are further detailed in the
Strategic Report and in note 25 of the Accounts.
Directors
The directors in office at the date of this report are listed in
the Company's Annual Report and Accounts.
Directors' retirement by rotation and appointment is subject to
the minimum requirements of the
Company's Articles of Association and the AIC Code of Corporate
Governance.
The Company's Articles of Association require that at every
Annual General Meeting any director who has not retired from office
at the preceding two Annual General Meetings shall stand for
re-appointment by the Company. However, the Board have agreed that
it is good practice that all directors be re-appointed annually. As
such Messrs. AJ Adcock, PD Gadd and RDC Henderson will retire at
the forthcoming Annual General Meeting and, being eligible, will
offer themselves for re-appointment.
In accordance with Listing Rule 15.2.13A, Mr JWM Barlow, being a
non-executive director of Majedie
Asset Management Limited, the Investment Manager, must submit
himself for annual re-appointment.
The Board believes that the performance of the directors
continues to be effective, that they demonstrate commitment to
their roles and that they have a range of business, financial and
asset management skills and experience relevant to the direction
and control of the Company.
The Board, having considered the retiring directors' performance
within the annual Board performance evaluation, hereby recommends
that shareholders vote in favour of the proposed
re-appointments.
Qualifying Third Party Indemnity Provisions
There are no qualifying third party indemnity provisions or
qualifying pension scheme indemnity provisions which would require
disclosure under section 236 of the Companies Act 2006.
Directors' Interests
Beneficial interests in ordinary shares as at:
30 September 1 October
2016 2015
------------------ ------------------- ----------
Mr AJ Adcock 50,000 50,000
Mr JWM Barlow 692,083 692,083
Mr PD Gadd 52,589 41,198
Mr RDC Henderson 24,700 4,700
Non-beneficial interests in ordinary shares as trustees for
various settlements as at:
30 September 1 October
2016 2015
--------------- -------------- -----------
Mr JWM Barlow 2,828,251 1,959,165
It has been identified that on 23 January 2015, Mr PD Gadd
acquired 750 shares in the Company pursuant to a dividend
reinvestment plan. The Company's Annual Report and Accounts for the
year ended 30 September 2015 incorrectly stated Mr PD Gadd's
beneficial holding as being 40,448 ordinary shares. The figures
shown in the table above reflect the correct beneficial holdings at
their respective dates.
There have been no changes to any of the above holdings between
30 September 2016 and the date of this report.
Substantial Shareholdings
At 30 November 2016, the Company has been notified of the
following substantial holdings in shares carrying voting
rights:
Mr HS Barlow 15,017,619 28.26%
Aviva plc 6,969,798 12.99%
Mr MHD Barlow 1,776,241 3.34%
Miss AE Barlow 2,048,448 3.83%
Mr JWM Barlow Non-beneficial 2,828,251 5.32%
The substantial voting rights disclosed above include the total
holdings of shares within certain trusts where there are other
beneficiaries.
There have been no changes to any of the above holdings between
30 November 2016 and the date of this report.
Annual General Meeting
The Annual General Meeting will be held at City of London Club,
19 Old Broad Street, London EC2N 1DS on Wednesday, 18 January 2017
at 12 noon. The notice convening the Annual General Meeting is
available on the Company's website.
The Board considers that Resolutions 1 to 13 are likely to
promote the success of the Company and are in the best interests of
the Company and its shareholders as a whole. The Directors
unanimously recommend that you vote in favour of the Resolutions as
they intend to do in respect of their own beneficial holdings.
Issue and Buyback of Shares
The Board is of the view that an increase of the Company's stock
in issue provides benefits to shareholders including a dilution of
the Company's gearing and cost of its debentures, a reduction in
the Company's administrative expenses on a per share basis and
increased liquidity in the Company's shares. As such the Board
sought and received approval, at the Annual General Meeting (AGM)
on 20 January 2016, to allot new shares for cash, and without first
offering them to existing shareholders in proportion to their
holdings, up to a maximum of 5,300,000 shares (being approximately
9.99% of the Company's existing share capital at that time). These
two existing authorities will expire at the 2017 AGM. The directors
undertake not to allot any such new shares unless they are allotted
at a price representing a premium to the Company's then prevailing
NAV per share, with debt at fair value.
During the year a total of 306,000 shares have been allotted
(for total consideration of GBP806,000 with issue costs of
GBP1,000), 275,000 shares under the prior authority that expired at
the 2016 AGM, with an additional 31,000 shares under the current
authority, being from the date of the AGM to 30 September 2016, or
subsequently to the date of this report (2015: 605,000 shares
issued for a total consideration of GBP1,557,000 with issue costs
of GBP2,000).
The Board continue to be prepared to issue new shares in order
to meet natural market demand, subject to the restriction that any
new shares will be issued at a premium, and as such shareholder
approval is sought at the AGM to renew the authority to issue new
shares, without first offering them to existing shareholders in
proportion to their holdings, up to a maximum of 5,338,000 shares
(being approximately 9.99% of the Company's existing share
capital). The renewed authority will expire at the 2018 AGM.
Since 1 October 2015, and up to the date of this report, the
Company has made no buybacks for cancellation of its ordinary
shares. At the AGM in 2016 the directors were given power to buy
back 7,964,636 ordinary shares (being 14.99% of the Company's
existing share capital). Since the AGM the directors have not
bought any shares under this authority. This authority will also
expire at the 2017 AGM.
In order to provide maximum flexibility, the directors consider
it appropriate that the Company be authorised to make such
purchases and accordingly shareholder approval is sought at the
Annual General Meeting to renew the authority of the Company to
exercise the power contained in its Articles of Association to make
buybacks of its own shares. The maximum number of shares which may
be purchased is 14.99% of the issued share capital. Any shares so
purchased will be cancelled or held in treasury. The restrictions
on such purchases (including minimum and maximum prices) are
outlined in the Notice of Meeting. The Authority will be used where
the directors consider it to be in the best interests of the
shareholders and will expire at the 2018 AGM.
Capital Structure
As part of its corporate governance the Board keeps under review
the capital structure of the Company. At 30 September 2016, the
Company had a nominal issued share capital of GBP5,343,900,
comprising 53,439,000 ordinary shares of 10p each, carrying one
vote each. All of the shares of the Company are listed on the
London Stock Exchange, which is a regulated market.
As described previously, the directors consider that new shares
should be issued to meet natural market demand, so long as any such
shares are issued at a premium to the Company's NAV (as measured
with debt at fair value). During the year and following demand for
the Company's shares, a total of 306,000 10p ordinary shares were
allotted.
Additionally the Board has each year renewed the authority of
the Company to make market buybacks of its own shares. However, the
Board is only likely to use such authority in special
circumstances. In general the directors believe that a discount to
net assets will be reduced sustainably over the long term by the
creation of value through the development of the Company.
The Company deploys gearing through two long-term debentures:
GBP15m 9.5% debenture stock 2020 and GBP25m 7.25% debenture stock
2025, which were issued in 1994 and 2000 respectively. In 2004 the
Company redeemed GBP1.5m of the 2020 issue and GBP4.3m of the 2025
issue as an opportunity arose to redeem at an attractive price.
The limits on the ability to borrow are described in the
investment policy above. The Board is responsible for managing the
overall gearing of the Company. Details of gearing levels are
contained in the Year's Summary above, and in note 25 to the
Accounts.
There are: no restrictions on voting rights; no restrictions
concerning the transfer of securities in the
Company; no special rights with regard to control attached to
securities; no agreements between holders of securities regarding
their transfer known to the Company; and no agreements which the
Company is party to that might affect its control or trigger any
compensatory payments for directors, following a takeover bid.
Notice period for general meetings
The Board believes that it is in the best interests of
shareholders of the Company to have the ability to call meetings on
14 days' clear notice should a matter require urgency. The Board
will therefore, as last year, propose a resolution at the Annual
General Meeting to approve the reduction in the minimum notice
period from 21 clear days to 14 clear days for all general meetings
other than annual general meetings. The directors do not intend to
use the authority unless immediate action is required.
Future Developments
The Chairman's Statement and the Chief Executive's report above
provide details as concerning relevant future developments of the
Company in the forthcoming year.
Employee, Social, Environmental, Ethical and Human Rights
policy
The Company, as an investment trust, has limited direct impact
upon the environment. In carrying out its activities and
relationships with its employees, suppliers and the community, the
Company aims to conduct itself responsibly, ethically and
fairly.
The Company falls outside the scope of the Modern Slavery Act
2015 as it does not meet the turnover requirements under that act.
The Company does operate by outsourcing significant parts of its
operations to reputable professional companies, including
investment management to MAM. In doing so MAM complies with all the
relevant laws and regulations and also takes account of social,
environmental, ethical and human rights factors, where
appropriate.
Carbon Reporting
In accordance with the Companies Act 2006 (Strategic Report and
Directors' Reports) Regulations 2013, the Company is required to
report on its greenhouse gas emissions. In accordance with the
regulations, the Company has determined that its organisational
boundary, to which entities the regulations apply, is consistent
with its consolidated accounts.
The Company operates in the financial services sector, and in
common with many organisations employs outsourcing such that most
of its activities are performed by other outside organisations
which do not give rise to any reportable emissions by the
Group.
However the Company, as a self-managed investment trust, does
undertake activities at its sub-leased premises. In accordance with
the provision of the centrally provided building services
(including heating, light, cooling etc) to all lessees in the
building by the landlord, and by the superior lessee, it is
considered that the Company does not have emissions responsibility
in respect of these services, which rather rest with the landlord
or superior lessee. The Company does however have responsibility
for various other emissions in the usage of electricity by its
office equipment in the course of undertaking its duties but it is
not able to determine their amounts as compared to those provided
by the landlord or superior lessee.
Additionally, the Company has many investments in companies
around the world; however the Company does not have the ability to
control the activities of these investee companies and as such has
no responsibility for their emissions. Therefore, the directors
believe that the Group has no reportable emissions for the year
ended 30 September 2016 (2015: nil).
Donations
The Company made no political or charitable donations during the
year (2015: nil) to organisations either within or outside of the
EU.
Gender Diversity
The Board are aware of the recommendations made in the Lord
Davies Review in 2011 in respect of Board diversity. The Company's
policy on diversity is included in the section on the Nomination
Committee in the Company's Annual Report and Accounts and this is
applied when a new appointment to the Board is required. There has
been no change in the Board and at the year end the composition of
the Board was that all the directors were male. The composition of
the Company's employees is 66.6% male and 33.3% female.
Post Balance Sheet Events
There have been no significant post balance sheet events of the
Company or its subsidiary.
Material Contracts
-- Majedie Asset Management Limited
The Board has appointed MAM as its investment manager the terms
of which are defined under an Investment Agreement dated 13 January
2014. The agreement divides the Company's investment assets into a
combination of a segregated portfolio and the MAM in-house funds,
with the Board having the ability, subject to certain capacity
constraints in respect of the MAM funds, for the determination of
the asset allocation of its investment assets, both initially and
on an on-going basis.
The Investment Agreement provides that the segregated portfolio
is to be managed on the same basis as the MAM UK Equity Fund, with
other investments being made into the various MAM Funds, as decided
by the Board as part of their asset allocation requirements.
Further details on the allocation of the investments managed by MAM
are included in the Chief Executive's Report above.
The fees payable under the Investment Agreement are detailed
below:
Management Performance
Portfolio/Fund* Fee Fee
------------------------------------- ----------------- ------------
MAM UK Equity Segregated Portfolio 0.75% p.a. Nil
MAM Tortoise Fund 1.50% p.a. 20%
MAM UK Income Fund 0.75% p.a. Nil
MAM Global Equity Fund 0-0.75% p.a.** Nil
MAM Global Focus Fund 0-1.00% p.a.** Nil
MAM US Equity Fund 0.75% p.a. Nil
* The fees are calculated under the terms of the Investment
Agreement or the relevant fund prospectus.
The fees charged to the MAM UK Equity Segregated Portfolio are
charged directly to the Company's Statement of Comprehensive
Income. All other fund fees are charged within the relevant
fund.
The performance fee entitlement only occurs once the 5% p.a.
hurdle has been exceeded and is calculated on a high water mark
basis.
** The management fee range reflects the investments made into
different share classes.
The Investment Agreement entitles either party to terminate the
arrangement with six months' notice after an initial period which
ended on 31 December 2015.
-- BNY Mellon Trust & Depositary (UK) Limited
The Company has appointed BNYM (UK) Limited (BNYM (UK)) to
provide depositary services as required by the AIFMD and certain
other associated services under the terms of a depositary agreement
dated 19 June 2014. The services provided by BNYM (UK) as
Depositary for the Company include:
-- general oversight responsibilities over the issue and
cancellation of the Company's share capital, the carrying out of
net asset value calculations, the application of income, and the
ex-post review of investment transactions;
-- monitoring of the Company's cash flows and ensuring that all
cash is booked in appropriate accounts in the name of the Company
or BNYM (UK) acting on behalf of the Company; and
-- ensuring that the Bank of New York Mellon SA/NV, London
Branch (BNYM) (to whom BNYM (UK) has delegated the safekeeping of
all assets held within the Company's investment portfolio,
including those classed as financial instruments for the purpose of
the AIFMD), in accordance with the terms of a Global Custody
Agreement, retains custody of the Company's financial instruments
in segregated accounts so that they can be clearly identified as
belonging to the Company and maintains records sufficient for
verification of the Company's ownership rights in relation to
assets other than financial instruments.
No specific conflicts have been identified as arising as a
result of the delegation of the provision of custody and
safekeeping services by BNYM (UK) to BNYM. The terms of the
depositary agreement provide that, where certain assets of the
Company are invested in a country whose laws require certain
financial instruments to be held in custody by a local entity and
no such entity is able to satisfy the requirements under the AIFMD
in relation to use of delegates by depositaries, BNYM (UK) may
still delegate its functions to such a local entity and be fully
discharged of all liability for loss of financial instruments of
the Company by such local entity.
The Depositary receives an annual fee for its services based on
a sliding scale on the total gross portfolio assets of the Company,
payable monthly in arrears. The depositary agreement in place with
BNYM (UK) and the related custody agreement in place with BNYM
continues unless and until terminated: without cause upon the
Company and BNYM (UK) giving not less than 90 days' notice and upon
BNYM (UK) giving notice expiring not less than 18 months after the
date of the agreement, in each case such notice to be effective
only if a new Depositary has been appointed.
-- Capita Sinclair Henderson Limited
As advised last year, the Board decided to in-source fund
administration activities and therefore the arrangements with
Capita Sinclair Henderson were terminated with effect from 30
September 2016. The agreement did provide for fees to be based on a
fixed annual amount and to be subject to an annual RPI increase,
with fees to be paid monthly in arrears.
-- Capita Registrars Limited
Also as previously advised in conjunction with the in-sourcing
of its fund administration activities, the Board has agreed to
continue with Company Secretarial services from Capita. Such
services are provided under the new Company Secretarial Services
Agreement dated 25 April 2016. The agreement mandates that Capita
Company Secretarial Services Limited will act as Capita's nominated
corporate secretary. The agreement also provides for fees to be
paid quarterly and to be based on a fixed annual amount and be
subject to annual RPI increases with either party to give notice to
terminate the agreement with 12 months' notice.
Listing Rule Disclosure
The Company is listed on the London Stock Exchange and is
subject to the UKLA listing rules. These require, inter alia,
various disclosures, which are included in this report, and now
also include the requirement, under Listing Rule 9.8.4R, to
disclose, where applicable, certain specific items separately.
These, as they apply to the Company, in respect of the year ended
30 September 2016, are:
-- that the Company has not capitalised any interest during the
year (all interest charged has been included in the Group and
Company's respective Statement of Comprehensive Income);
-- that no director waived or has agreed to waive any
entitlements during the year, nor for any future periods;
-- that the Company had no contracts of significance; and
-- that no shareholder has agreed to waive its entitlement to
dividends in respect of its holdings of Company shares.
AIFMD
The Company is subject to the AIFMD, which requires certain
financial and non-financial disclosures in respect of Annual
Reports.
These disclosures are met by the Company in its Annual Report.
In addition certain specific disclosures are required which
are:
-- Remuneration
Total remuneration details for the directors (who are considered
to be code staff under the Directive) are shown in the Report on
Directors' Remuneration. Remuneration details for staff are
included in Note 7 to the accounts. There was no variable
remuneration paid during the year.
-- Leverage
Under the AIFMD, the Company is required to disclose its actual
leverage (calculated in accordance with the Directive under the
Gross & Commitment methods) and it must also set a limit in
respect of leverage it can use. The Company has set a limit of 1.5
times (1 times being defined as no leverage) and as at 30 September
2016 had leverage of 1.18 times under the Gross method and 1.20
times under the Commitment method. Note 25 to the accounts provides
further details.
-- Investor Pre-investment information
The AIFMD requires that potential investors are provided with
certain information. The Company provides this information on its
website at www.majedieinvestments.com and there have been no
material changes over the year to the date of this report.
Disclosure of Information to Auditors
As far as each of the directors are aware:
-- there is no relevant audit information of which the Company's Auditors are unaware; and
-- they have taken all steps that they ought to have taken as
directors in order to make themselves aware of any relevant audit
information and to establish that the Company's Auditors are aware
of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the Companies Act
2006.
Auditors
Ernst & Young LLP were re-appointed as Auditors on 20
January 2016. Ernst & Young LLP have indicated their
willingness to continue in office and a resolution will be proposed
at the AGM to re-appoint them as Auditors.
Viability
The Directors have assessed the prospects of the Company over
the five year period to September
2021. The Directors believe that this period is appropriate as
the Company is a long-term investor in equity markets, and it
includes the maturity of the Company's 9.50% 2020 debenture
stock.
In their assessment of the viability of the Company, the
Directors have considered each of the Company's principal risks and
uncertainties. The Directors have also considered the Company's
income and expenditure projections, the level of borrowings
(leverage of 1.18 times (Gross method) and 1.20 times (Commitment
method) is well below the 1.5 times limit. In addition the current
borrowings of GBP33.9m are over 6 times covered by the current
total assets) plus as the Company's investments primarily comprise
readily realisable securities (equal to 72.9% of total assets as at
30 September 2016), these can be sold to meet funding requirements
as necessary.
Based on the Company's processes for monitoring expenses, share
price discounts or premium, the
allocation in its investment portfolio to an absolute return
fund, the Investment Manager's compliance with the investment
restrictions and objective, concentration and liquidity risk, the
current large margin of safety over the covenants on its debentures
and financial controls, the Directors have concluded that there is
a reasonable expectation that the Company will be able to continue
in operation and meet its liabilities as they fall due over the
five year period to September 2021.
Going Concern
The Directors believe, after review and due consideration of
future forecast and cashflow projections, that the Company has
adequate financial resources to continue in operational existence
for a period of at least 12 months from the date that the financial
statements were approved. For this reason and taking account of the
large number of readily realisable investments held within its
portfolio, the Board continues to adopt the going concern basis in
preparing the financial statements.
By Order of the Board
Capita Company Secretarial Services Limited
Company Secretary
2 December 2016
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the Group financial statements in accordance with applicable
United Kingdom law and those IFRS as adopted by the European Union.
Under Company Law the Directors must not approve the Group
financial statements unless they are satisfied that they present
fairly the financial position, financial performance and cash flows
of the Group for that period. In preparing the Group financial
statements the Directors are required to:
-- select suitable accounting policies in accordance with IAS 8:
Accounting Policies, Changes in Accounting Estimates and Errors and
then apply them consistently;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- 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 Group's financial position and financial
performance;
-- state that the Group has complied with IFRS, subject to any
material departures disclosed and explained in the financial
statements;
-- make judgements and estimates that are reasonable and prudent; and
-- state that the Annual Report, taken as a whole, is fair,
balanced and understandable and provides sufficient information to
allow shareholders to assess the Group's performance.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that the
Group 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 Group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, a Corporate
Governance Statement, a Directors' Remuneration Report and a
Directors' Report that comply with that law and those
regulations.
The Directors of the Company, whose names are in the Company's
Report and Accounts, each confirm to the best of their knowledge
that:
-- the financial statements, which have been prepared in
accordance with applicable accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Group;
-- the Annual Report includes a fair review of the development
and performance of the business and the position of the Group,
together with a description of the principal risks and
uncertainties that it faces; and
-- they consider that the Annual Report, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
By order of the Board
Andrew J Adcock
Chairman
2 December 2016
REPORT OF THE DEPOSITARY
Report of the Depositary to the shareholders of Majedie
Investments PLC
Depositary's responsibilities
The Depositary is responsible for the safekeeping of all
custodial assets of the Company, for verifying and maintaining a
record of all other assets of the Company and for the collection of
income that arises from those assets.
It is the duty of the Depositary to take reasonable care to
ensure that the Company is managed in accordance with the
Alternative Investment Fund Managers Directive (AIFMD), the FUND
Sourcebook and the Company's Instrument of Incorporation, in
relation to the calculation of the net asset value per share and
the application of income of the Company. The Depositary also has a
duty to monitor the Company's compliance with investment
restrictions and leverage limits set in its offering documents.
Report of the Depositary to the shareholders of Majedie
Investments PLC for the year ended 30 September 2016
Having carried out such procedures as we consider necessary to
discharge our responsibilities as Depositary of the Company, it is
our opinion, based on the information available to us and the
explanations provided, that in all material respects the Company,
acting through the AIFM has been managed in accordance with AIFMD,
the FUND sourcebook, the Instrument of Incorporation of the Company
in relation to the calculation of the net asset value per share,
the application of income of the Company; and with investment
restrictions and leverage limits set in its offering documents.
For and on behalf of
BNY Mellon Trust & Depositary (UK) Limited
160 Queen Victoria Street
London EC4V 4LA
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 30 September 2016
and 2015 but is derived from those accounts. Statutory accounts for
2015 have been delivered to the Registrar of Companies, and those
for 2016 will be delivered in due course. The Auditors have
reported on those accounts; their report was (i) unqualified, (ii)
did not include a reference to any matters to which the Auditors
drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under Section 498 (2) or (3)
of the Companies Act 2006. The text of the Auditors' report can be
found in the Company's full Annual Report and Accounts at
www.majedieinvestments.com.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2016
2016 2015
Revenue Capital Revenue Capital
return return Total return return Total
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ----- ------- ------- ------- ------- ------- -------
Investments
Gains on investments
at fair value through
profit or loss 13 21,919 21,919 15,854 15,854
Net investment result 21,919 21,919 15,854 15,854
------- ------- ------- ------- ------- -------
Income
Income from investments 3 6,433 6,433 6,534 2 6,536
Other income 3 47 47 38 38
Total income 6,480 6,480 6,572 2 6,574
Expenses
Management fees 4 (109) (325) (434) (123) (369) (492)
Administrative expenses 5 (712) (779) (1,491) (780) (844) (1,624)
------- ------- ------- ------- ------- -------
Net return before
finance cost and taxation 5,659 20,815 26,474 5,669 14,643 20,312
Finance costs 8 (703) (2,110) (2,813) (703) (2,108) (2,811)
------- ------- ------- ------- ------- -------
Net return before
taxation 4,956 18,705 23,661 4,966 12,535 17,501
Taxation 9 (17) (17) (32) (32)
------- ------- ------- ------- ------- -------
Net return after taxation
for the year from
continuing operations 4,939 18,705 23,644 4,934 12,535 17,469
------- ------- ------- ------- ------- -------
Discontinued operations
Net return after taxation
for the year from
discontinued operations 15
Total comprehensive
income for the year 4,939 18,705 23,644 4,934 12,535 17,469
------- ------- ------- ------- ------- -------
Return per Ordinary
Share: pence pence pence pence pence pence
Basic and diluted
for continuing operations 11 9.3 35.0 44.3 9.4 24.0 33.4
Basic and diluted
for discontinued operations 11
Basic and diluted
total 11 9.3 35.0 44.3 9.4 23.9 33.4
The total column of this statement is the Consolidated Statement
of Comprehensive Income of the Group prepared in accordance with
IFRS as adopted by the European Union. The supplementary revenue
return and capital return columns are prepared under guidance
published by the AIC.
The notes below form part of these accounts.
COMPANY STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2016
2016 2015
Revenue Capital Revenue Capital
return return Total return return Total
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------------------- ----- ------- ------- ------- ------- ------- -------
Investments
Gains on investments at fair value through profit or
loss 13 21,919 21,919 15,853 15,853
Net Investment Result 21,919 21,919 15,853 15,853
------- ------- ------- ------- ------- -------
Income
Income from investments 3 6,433 6,433 6,534 2 6,536
Other income 3 47 47 38 38
Total income 6,480 6,480 6,572 2 6,574
Expenses
Management fees 4 (109) (325) (434) (123) (369) (492)
Administrative expenses 5 (712) (779) (1,491) (779) (844) (1,623)
------- ------- ------- ------- ------- -------
Net return before finance costs and taxation 5,659 20,815 26,474 5,670 14,642 20,312
Finance costs 8 (703) (2,110) (2,813) (703) (2,108) (2,811)
------- ------- ------- ------- ------- -------
Net return before taxation 4,956 18,705 23,661 4,967 12,534 17,501
Taxation 9 (17) (17) (32) (32)
------- ------- ------- ------- ------- -------
Net return after taxation for the year 4,939 18,705 23,644 4,935 12,534 17,469
------- ------- ------- ------- ------- -------
Return per Ordinary Share: pence pence pence pence pence pence
Basic and diluted 11 9.3 35.0 44.3 9.4 24.0 33.4
The total column of this statement is the Statement of
Comprehensive Income of the Company prepared under IFRS as adopted
by the European Union. The supplementary revenue return and capital
return columns are prepared under guidance published by the
AIC.
The notes below form part of these accounts.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2016
Capital Share Own
Share Share redemption options Capital Revenue shares
capital premium reserve reserve reserve reserve reserve Total
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ------ -------- -------- ----------- -------- -------- -------- -------- --------
Year ended 30
September
2016
As at 1
October 2015 5,313 2,280 56 122,943 19,215 149,807
Net return
for the year
from
continuing
operations 18,705 4,939 23,644
Net return
for the year
from
discontinued
operations 15
Share issue 19 31 775 806
Share issue
expenses (1) (1)
Dividends
declared and
paid in year 10 (4,270) (4,270)
As at 30
September
2016 5,344 3,054 56 141,648 19,884 169,986
-------- -------- ----------- -------- -------- -------- -------- --------
Year ended 30
September
2015
As at 1
October 2014 5,253 785 56 (104) 110,910 18,200 (1,039) 134,061
Net return
for the year
from
continuing
operations 12,535 4,934 17,469
Share options
expense 3 (8) (5)
Sale of own
shares by
EBT (147) 793 646
Share options
exercised (246) 246
Transfer
between
reserves 347 (347)
Share Issue 19 60 1,497 1,557
Share issue
expenses (2) (2)
Dividends
declared and
paid in year 10 (3,919) (3,919)
As at 30
September
2015 5,313 2,280 56 122,943 19,215 149,807
-------- -------- ----------- -------- -------- -------- -------- --------
The notes below form part of these accounts.
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2016
Capital Share Own
Share Share redemption options Capital Revenue shares
capital premium reserve reserve reserve reserve reserve Total
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------- ------ -------- -------- ----------- -------- --------- --------- -------- --------
Year ended
30
September
2016
As at 1
October
2015 5,313 2,280 56 119,244 22,914 149,807
Net return
for the
year 18,705 4,939 23,644
New shares
issued 19 31 775 806
Share
issue
expenses (1) (1)
Dividends
declared
and paid
in year 10 (4,270) (4,270)
As at 30
September
2016 5,344 3,054 56 137,949 23,583 169,986
-------- -------- ----------- -------- --------- --------- -------- --------
Year
ending 30
September
2015
As at 1
October
2014 5,253 785 56 (104) 107,212 21,898 (1,039) 134,061
Net return
for the
year 12,534 4,935 17,469
Share
options
expense 3 (8) (5)
Sale of
own
shares by
EBT (147) 793 646
Transfer
between
reserves 347 (347)
Share
Options
exercised (246) 246
New Shares
issued 19 60 1,497 1,557
Share
issue
expenses (2) (2)
Dividends
declared
and paid
in year 10 (3,919) (3,919)
As at 30
September
2015 5,313 2,280 56 119,244 22,914 149,807
-------- -------- ----------- -------- --------- --------- -------- --------
The notes below form part of these accounts.
CONSOLIDATED BALANCE SHEET
as at 30 September 2016
2016 2015
Notes GBP000 GBP000
------------------------------------------------------- ------ --------- ---------
Non-current assets
Property and equipment 12 52 64
Investments held at fair value through profit or loss 13 201,359 181,644
--------- ---------
201,411 181,708
Current assets
Trade and other receivables 16 356 799
Cash and cash equivalents 17 3,467 2,537
--------- ---------
3,823 3,336
--------- ---------
Total assets 205,234 185,044
--------- ---------
Current liabilities
Trade and other payables 18 (1,317) (1,336)
--------- ---------
Total assets less current liabilities 203,917 183,708
--------- ---------
Non-current liabilities
Debentures 18 (33,931) (33,901)
--------- ---------
Total liabilities (35,248) (35,237)
--------- ---------
Net assets 169,986 149,807
--------- ---------
Represented by:
Ordinary share capital 19 5,344 5,313
Share premium account 20 3,054 2,280
Capital redemption reserve 56 56
Capital reserve 141,648 122,943
Revenue reserve 19,884 19,215
Equity Shareholders' Funds 169,986 149,807
--------- ---------
Net asset value per share pence pence
Basic 22 318.1 281.9
Approved by the Board of Majedie Investments PLC (Company no.
109305) and authorised for issue on 2 December 2016.
Andrew J Adcock
Chairman
The notes below form part of these accounts.
COMPANY BALANCE SHEET
as at 30 September 2016
2016 2015
Notes GBP000 GBP000
--------- ---------
Non-current assets
Property and equipment 12 52 64
Investments held at fair value through profit or loss 13 201,359 181,644
Investment in subsidiaries 13 162 162
--------- ---------
201,573 181,970
Current assets
Trade and other receivables 16 356 894
Cash and cash equivalents 17 3,467 2,280
--------- ---------
3,823 3,174
--------- ---------
Total assets 205,396 185,044
--------- ---------
Current liabilities
Trade and other payables 18 (1,479) (1,336)
--------- ---------
Total assets less current liabilities 203,917 183,708
--------- ---------
Non-current liabilities
Debentures 18 (33,931) (33,901)
--------- ---------
Total liabilities (35,410) (35,237)
--------- ---------
Net assets 169,986 149,807
--------- ---------
Represented by:
Ordinary share capital 19 5,344 5,313
Share premium account 20 3,054 2,280
Capital redemption reserve 56 56
Capital reserve 137,949 119,224
Revenue reserve 23,583 22,914
--------- ---------
Equity Shareholders' Funds 169,986 149,807
--------- ---------
Approved by the Board of Majedie Investments PLC (Company no.
109305) and authorised for issue on 2 December 2016.
Andrew J Adcock
Chairman
The notes below form part of these accounts.
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 September 2016
2016 2015
Notes GBP000 GBP000
------------------------------------------------------------------------- ------ --------- ---------
Net cash flow from operating activities
Consolidated net return before taxation from continuing operations* 23,661 17,501
Consolidated net return before taxation from discontinued operations
Adjustments for:
Gains on investments relating to continuing operations 13 (21,919) (15,854)
Accumulation dividends (329) (183)
Share based remuneration 3
Depreciation 78 17
Unrealised foreign exchange gains on dividend tax recoverables (10)
Purchases of investments (13,378) (44,053)
Sales of investments 15,838 43,806
--------- ---------
3,941 1,237
Finance costs 2,813 2,811
--------- ---------
Operating cashflows before movements in working capital 6,754 4,048
Decrease in trade and other payables (11) (108)
Decrease in trade and other receivables 146 20
Net cash outflow from operating activities before tax 6,889 3,960
--------- ---------
Tax recovered 2 11
Tax on unfranked income (34) (57)
Net cash inflow from operating activities 6,857 3,914
--------- ---------
Attributable to:
Net cash inflow from operating activities from continuing operations 6,857 3,914
Net cash outflow from operating activities from discontinued operations
Investing activities
Purchase of tangible assets (66) (1)
--------- ---------
Net cash outflow from investing activities (66) (1)
--------- ---------
Financing activities
Interest paid (2,783) (2,783)
Dividends paid (4,270) (3,919)
Net proceeds from share issues 1,192 1,168
Proceeds from sale of own shares by EBT 646
Net cash outflow from financing activities (5,861) (4,888)
--------- ---------
Increase/(Decrease) in cash and cash equivalents for year 22 930 (975)
Cash and cash equivalents at start of year 2,537 3,512
Cash and cash equivalents at end of year 3,467 2,537
--------- ---------
* Includes dividends received in the year of GBP6,132,000 (2015:
GBP6,583,000) and interest received of GBP1,000 (2015: GBPnil).
The notes below form part of these accounts.
COMPANY CASH FLOW STATEMENT
for the year ended 30 September 2016
2016 2015
Notes GBP000 GBP000
---------------------------------------------------------------- ------ --------- ---------
Net cash flow from operating activities
Company net return before taxation* 23,661 17,501
Adjustments for:
Gains on investments 13 (21,919) (15,853)
Accumulation dividends (329) (183)
Share based remuneration 3
Depreciation 78 17
Unrealised foreign exchange gains on dividend tax recoverables (10)
Purchases of investments (13,378) (44,053)
Sales of investments 15,838 43,806
3,941 1,238
Finance costs 2,813 2,811
--------- ---------
Operating cashflows before movements in working capital 6,754 4,049
Increase/(decrease) in trade and other payables 151 (108)
Decrease in trade and other receivables 241 19
Net cash inflow from operating activities before tax 7,146 3,960
--------- ---------
Tax recovered 2 11
Tax on unfranked income (34) (57)
Net cash inflow from operating activities 7,114 3,914
--------- ---------
Investing activities
Proceeds from liquidation of subsidiaries 9
Purchase of tangible assets (66) (1)
Net cash (outflow)/inflow from investing activities (66) 8
--------- ---------
Financing activities
Interest paid (2,783) (2,783)
Dividends paid (4,270) (3,919)
Net proceeds from share issues 1,192 1,168
Proceeds from sale of own shares by EBT 646
Net cash outflow from financing activities (5,861) (4,888)
--------- ---------
Increase/(decrease) in cash and cash equivalents for the year 22 1,187 (966)
Cash and cash equivalents at start of year 2,280 3,246
Cash and cash equivalents at end of year 3,467 2,280
--------- ---------
* Includes dividends received in the year of GBP6,132,000 (2015:
GBP6,583,000) and interest received of GBP1,000 (2015: GBPnil).
The notes below form part of these accounts.
NOTES TO THE ACCOUNTS
General Information
Majedie Investments PLC is a company incorporated and domiciled
in England under the Companies Act 2006. 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 address of the
registered office is given below. The nature of the Group's
operations and its principal activities are set out in the Business
Review section of the Strategic Report above.
Critical Accounting Assumptions and Judgements
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting assumptions. It
also requires management to exercise its judgement in the process
of applying the Group's accounting policies. The areas requiring a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements are set out below.
Assessment as investment entity
Entities that meet the definition of an investment entity within
IFRS 10 are required to measure their subsidiaries at fair value
through profit or loss rather than consolidate them, unless their
main purpose and activities are providing services that relate to
the investment entity's investment activities. The criteria which
define an investment entity are, as follows:
-- obtains funds from one or more investors for the purpose of
providing those investors with investment services;
-- commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income or both; and
-- measures and evaluates the performance of substantially all
of its investments on a fair value basis.
The Board has agreed with the recommendation of the Audit
Committee that the Company meets the definition of an investment
entity. This conclusion will be reassessed on an annual basis, if
any of these criteria or characteristics change.
The Company's subsidiary MPM provides investment management
services and is not itself an investment entity and as such is
consolidated into the Group accounts.
Unquoted Investments
Unquoted investments are valued at management's best estimate of
fair value in accordance with IFRS having regard to International
Private Equity and Venture Capital Valuation Guidelines as
recommended by the British Venture Capital Association. The
principles which the Group applies are set out below. The inputs
into the valuation methodologies adopted include historical data
such as earnings or cash flow as well as more subjective data such
as earnings forecasts, discount rates and earnings multiples. As a
result of this, the determination of fair value requires management
judgement. At the year end, unquoted investments (including MAM)
represent 33.7% (2015: 35.0%) of consolidated shareholders'
funds.
1 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted are set out as
follows:
The accounts above comprise the audited results of the Company
and its subsidiary for the year ended 30 September 2016, and are
presented in pounds Sterling rounded to the nearest thousand, as
this is the functional currency in which the Group and Company
transactions are undertaken.
Going Concern
The directors have a reasonable expectation that the Company has
sufficient resources to continue in operational existence for a
period of at least 12 months from the date that the financial
statements were approved. Accordingly, the financial statements
have been prepared on a going concern basis.
Presentation of Statement of Comprehensive Income
In order to reflect better the activities of an investment trust
company and in accordance with guidance issued by the AIC,
supplementary information which analyses the Statement of
Comprehensive Income between items of a revenue and capital nature
has been presented alongside the Statement of Comprehensive Income.
Additionally the net revenue is the measure that the directors
believe to be appropriate in assessing the Company's compliance
with certain requirements set out in section 1158 of the
Corporation Tax Act 2010.
Basis of Accounting
The accounts of the Group and the Company have been prepared in
accordance with 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, to the extent they have been adopted by the
European Union.
Where presentational guidance set out in the SORP regarding the
financial statements of investment trust companies and venture
capital trusts issued by the AIC in November 2014 is not
inconsistent with the requirements of IFRS, the directors have
sought to prepare the financial statements on a basis compliant
with the recommendations of the SORP.
Discontinued operations
Following a review of the provision of savings plans to the
Company, it was decided that the Majedie Share Plan, as managed by
MPM, would close. On 4 June 2016, the Majedie Share Plan was
closed, MPM ceased operations and is now in the process of being
de-authorised and liquidated. Accordingly, these have been
classified as discontinued operations of the Group.
Discontinued operations are excluded from the results of
continuing operations and are presented as a single amount as
profit or loss after tax from discontinued operations in the
Consolidated Statement of Comprehensive Income.
Additional disclosures are provided in note 15. All other notes
to the financial statements include amounts for continuing
operations, unless otherwise mentioned.
Basis of Consolidation
The Company is an investment entity as defined by IFRS 10 and,
as such, does not consolidate the entities it controls unless they
provide investment related services to the Company. Instead,
interests in such entities are classified as fair value through
profit or loss, and measured at fair value.
The Consolidated Accounts incorporate the accounts of the
Company and entities controlled by the Company which provide
investment related services made up to 30 September each year. An
investor controls an investee when it is exposed, or has rights, to
variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the
investee.
The results of subsidiaries acquired or disposed of are included
in the Consolidated Statement of Comprehensive Income from the
effective date of acquisition or disposal as appropriate. When the
Group ceases to have control any retained interest in the entity is
re-measured to its fair value at the date when control is lost,
with the change in carrying amount recognised in profit or loss.
The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate,
joint venture or financial asset. In addition, any amounts
previously recognised in other comprehensive income in respect of
that entity are accounted for as if the Group had directly disposed
of the related assets or liabilities. This may mean that amounts
previously recognised in other comprehensive income are
reclassified to profit or loss. All Group entities have the same
year end date.
Where necessary, adjustments are made to the financial
statements of the subsidiary 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.
Standards Issued But Not Yet Effective
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 and/or adopted:
International Accounting Standards and Interpretations (IAS/IFRS/IFRICs) Effective date
--------------------------------------------------------------------------- ---------------
IFRS 9 Financial Instruments: Classification & Measurement 1 January 2018
IFRS 15 Revenue from Contracts with Customers 1 January 2018
IFRS 16 Leases 1 January 2019
The Directors do not anticipate that the adoption of the above
Standards and Interpretations would have a material impact on the
financial statements in the period of initial application.
Management anticipates that all of the relevant pronouncements
will be adopted in the relevant accounting period in which the
standard is effective.
Changes in accounting policies and disclosures
Foreign Currencies
The individual financial statements of each Group entity are
presented in the currency of the primary economic environment in
which the entity operates, i.e. its functional currency. For the
purpose of the consolidated financial statements, the results and
financial position of each entity are expressed in Pounds Sterling
(Sterling) which is the functional currency of the Company, and the
presentational currency of the Group. Transactions in currencies
other than Sterling are recorded at the rate of exchange prevailing
on the dates of the transactions. At each balance sheet date,
monetary items and non-monetary assets and liabilities that are
fair valued and are denominated in foreign currencies are
re-translated at the rates prevailing on the balance sheet
date.
Income
Dividend income from investments is taken to the revenue account
on an ex-dividend basis. UK dividends are included net of tax
credits. Overseas dividends are included gross of any withholding
tax. Where the Company has elected to receive scrip dividends in
the form of additional shares rather than in cash, the amount of
the cash dividend foregone is recognised as income. Any excess in
the value of the shares received over the amount of the cash
dividend is recognised in the capital column.
Special dividends are taken to the revenue or capital account
depending on their nature.
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 and other interest receivable is
included on an accruals basis.
Expenses
All administrative expenses are accounted for on an accruals
basis. In respect of the analysis between revenue and capital items
presented within the Statement of Comprehensive Income, 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 13).
-- 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.
-- The investment management performance fee, which is based on
capital out-performance, is charged wholly to capital.
Pension Costs
Payments made to the Group's defined contribution group personal
pension plan are charged as an expense as they fall due on an
accruals basis.
Finance Costs
75% of finance costs arising from the debenture stocks are
allocated to capital; 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. In
addition, other interest payable is allocated 75% to capital and
25% to the revenue account. Finance costs are debited on an
accruals basis using the effective interest method.
Share Based Payments
The Group has issued 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 the number 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
Statement of Comprehensive Income 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 Statement
of Comprehensive Income 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
Statement of Comprehensive Income, 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 depreciated 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
The Group classifies its investments in debt and equity
securities, as financial assets or financial liabilities 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 classified as 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 for listed securities, 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.
Fair values for unquoted investments, or investments for which
the market is inactive, are established by using various valuation
techniques in accordance with the International Private Equity and
Venture Capital Valuation (IPEV) Guidelines. These may include
recent arm's length market transactions, the current fair value of
another instrument which has substantially the same earnings
multiples, discounted cash flow analysis and option pricing models.
Where there is a valuation technique commonly used by market
participants to price the instrument and that technique has been
demonstrated to provide reliable estimates of prices obtained in
actual market transactions, that technique is utilised.
The fair value of an investment at the beginning of the year is
used when an investment is transferred between hierarchy
levels.
Changes in the fair value of investments and gains on the sale
of investments are recognised as they arise in the Statement of
Comprehensive Income.
Investment in Subsidiary
In its separate financial statements the Company recognises its
investment in its subsidiary at fair value.
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. Financial assets and
financial liabilities are initially measured at fair value.
Trade Receivables
Trade receivables do not carry any interest and are stated at
carrying value which equates to their fair value as reduced by
appropriate allowances for estimated irrecoverable amounts.
Cash and Cash Equivalents
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.
Non current liabilities
The debentures are initially recognised at cost, being the fair
value of the consideration received less issue costs where
applicable. After initial recognition, all interest-bearing loans
and borrowings are subsequently measured at amortised cost using
the effective interest rate. The effective interest rate is the
rate that exactly discounts estimated future payments over the
expected life of the financial liabilities to the net carrying
amount on initial recognition.
Trade Payables
Trade payables are not interest bearing and are stated at
carrying value which equates to their fair value.
Capital Reserve
Gains and losses on the sale of investments and investment
holding gains and losses are accounted for in the Statement of
Comprehensive Income and subsequently in the Capital Reserve.
Additionally and as detailed in these notes, finance costs and
expenses are allocated to the Capital Reserve.
Share Premium Account
Share premium account represents the excess over nominal value
of consideration received for equity shares, net of expenses of the
share issue.
Revenue Reserve
The net revenue return for the year is included in the Revenue
Reserve along with dividends to shareholders (when they are paid or
approved in general meetings).
Dividends payable to shareholders
Dividends to shareholders are accounted for in the period in
which they are paid or approved in general meetings. Dividends
payable to shareholders are recognised in the Statement of Changes
in Equity.
2 BUSINESS SEGMENTS
Segmental Reporting
A segment is a distinguishable component of the Group that is
engaged in business activities from which it may earn revenues and
incur expenses (including intra-group revenues and expenses), for
which discrete financial information is available and whose
operating results are regularly reviewed by the entity's chief
decision maker who can make decisions on resource allocation and
performance assessment. An operating segment could engage in
business activities in order to earn potential future revenues.
For management purposes the Company and Group are organised into
one principal activity, being investing activities, as detailed
below:
Investing activities
The Company's investment objective is to maximise total
shareholder return whilst increasing dividends by more than the
rate of inflation over the long term. 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 above and exposure to different
currencies is disclosed in note 25 below.
3 INCOME
Group Group Company Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
----------------------------- ------- ----- ------- ----- ------- ----- ------- -----
Income from investments
Franked dividend income* 5,944 6,086 5,944 6,086
Accumulation dividend income 328 183 328 183
Overseas dividends 161 267 161 267
6,433 6,536 6,433 6,536
------- ----- ------- ----- ------- ----- ------- -----
Other income
Deposit interest 1 1 1 1
Sundry income 46 37 46 37
47 38 47 38
------- ----- ------- ----- ------- ----- ------- -----
Total income 6,480 6,574 6,480 6,574
------- ----- ------- ----- ------- ----- ------- -----
Total income comprises:
Dividends 6,433 6,536 6,433 6,536
Interest 1 1 1 1
Other income 46 37 46 37
6,480 6,574 6,480 6,574
------- ----- ------- ----- ------- ----- ------- -----
Income from investments
Listed UK 3,016 2,996 3,016 2,996
Listed overseas** 184 267 184 267
Unlisted 3,233 3,273 3,233 3,273
6,433 6,536 6,433 6,536
------- ----- ------- ----- ------- ----- ------- -----
* Includes MAM Ordinary dividend income of GBP3,233,000 (2015:
GBP3,273,000)
** Includes accumulation income of GBP23,000 (2015: nil)
4 MANAGEMENT FEES
Group and Company Group and Company
2016 2015
Revenue Capital Revenue Capital
return return Total return return Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ------- ------- ------- ------- ------- -------
Investment management 109 325 434 123 369 492
------- ------- ------- ------- ------- -------
109 325 434 123 369 492
------- ------- ------- ------- ------- -------
The investment management fees are payable to MAM in accordance
with an Investment Agreement. Further details on the terms of this
Investment Agreement are given in the Directors' Report above. The
fees charged and shown are only in respect on the investment in the
MAM UKES Segregated Portfolio. Fees in respect of the investments
made in the other MAM funds are charged directly in the relevant
fund and included in the relevant fund's published net asset value
price and hence form part of that investment's valuation in the
Company's accounts. These costs are however included in the
Company's OCR calculation above on a best estimates basis. At 30
September 2016, an amount of GBP115,000 was outstanding for payment
of investment management fees due to MAM on the UKES Segregated
portfolio (2015: GBP106,000).
5 ADMINISTRATIVE EXPENSES
Group Group Company Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
Staff costs - note 7 414 485 414 485
Other staff costs and directors' fees 178 172 178 172
Advisers' costs 352 348 352 348
Information costs 93 83 93 83
Establishment costs 56 164 56 164
Operating lease rentals - premises 79 133 79 133
Depreciation on tangible assets 78 17 78 17
Auditor's remuneration (see below) 34 40 34 40
Relocation costs 72 72
Other expenses 135 182 135 182
1,491 1,624 1,491 1,623
------- ----- ------- ----- ------- ----- ------- -----
A charge of GBP779,000 (2015: GBP844,000) to capital has been
made in the Group and the Company has been made to recognise the
accounting policy of 75% of direct investment administration
expenses to capital.
Administration expense disclosures are in respect of continuing
operations only. Further details on discontinued operations are in
note 15 below.
Total fees charged by the Auditor for the year, all of which
were charged to revenue, comprised:
Group Group Company Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
Audit services - statutory audit 33 38 33 38
Other assurance services 1 2 1 2
34 40 34 40
------- ------- ------- -------
Other assurance related services relate to a review of the
Company's debenture covenant in 2016 and in 2015.
6 DIRECTORS' EMOLUMENTS
Group and
Company Group and Company
2016 2015
GBP000 GBP000
Fees 143 143
Salary 173 169
Other benefits 8 7
Bonuses/Partnership profit shares 40
324 359
---------- ---- ------------------ ----
The Report on Directors' Remuneration in the Company's Annual
Report and Accounts, explains the Company's policy on remuneration
for directors for the year. It also provides further details of
directors' remuneration.
7 STAFF COSTS INCLUDING CEO
Group Group Company Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
---------------------------- ------- --- ------- --- ------- --- ------- ---
Salaries and other payments 341 376 341 376
Social security costs 45 77 45 77
Pension contributions 28 29 28 29
Share based remuneration 3 3
414 485 414 485
------- --- ------- --- ------- --- ------- ---
Group Group
2016 2015
Number Number
------------------------------ --------- --------
Average number of employees:
Management and office staff 3 3
--------
8 FINANCE COSTS
Group and Company Group and Company
2016 2015
Revenue Capital Revenue Capital
return return Total return return Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ------- ------- ------- ------- ------- -------
Interest on 9.5% 2020 debenture
stock 321 961 1,282 321 961 1,282
Interest on 7.25% 2025
debenture stock 375 1,126 1,501 375 1,126 1,501
Amortisation of issue expenses
on the debenture stocks 7 23 30 7 21 28
703 2,110 2,813 703 2,108 2,811
------- ------- ------- ------- ------- -------
Further details of the debenture stocks in issue are provided in
note 18.
9 TAXATION
Analysis of tax charge
Group Group Company Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
--------------------------- -------- -------- -------- --------
Tax on overseas dividends 17 32 17 32
-------- -------- -------- --------
Reconciliation of tax charge:
The current taxation rate for the year is lower (2015: lower)
than the standard rate of corporation tax in the UK of 20.5%
(2015:20.5%). The differences are explained below:
Group Group Company Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
-------------------------------------------- ------- ------ ------- ------ ------- ------ ------- ------
Net return before taxation for the year from
continuing operations 23,661 17,501 23,661 17,501
------- ------ ------- ------ ------- ------ ------- ------
Net return before taxation for the year from
discontinued operations
------- ------ ------- ------ ------- ------ ------- ------
Net return before taxation 23,661 17,501 23,661 17,501
------- ------ ------- ------ ------- ------ ------- ------
Taxation at UK Corporation Tax rate of 20.0%
(2015: 20.5%) 4,732 3,588 4,732 3,588
------- ------ ------- ------ ------- ------ ------- ------
Effects of:
- UK dividends which are not taxable (1,189) (1,293) (1,189) (1,293)
- foreign dividends which are not taxable (37) (55) (37) (55)
- gains on investments which are not taxable (4,384) (3,250) (4,384) (3,250)
- expenses which are not deductible for tax
purposes 23 12 23 12
- excess expenses for the current year 855 998 855 998
- overseas taxation which is not recoverable 17 32 17 32
Actual current tax charge 17 32 17 32
------- ------ ------- ------ ------- ------ ------- ------
Group
After claiming relief against accrued income taxable on receipt,
the Group has unrelieved excess expenses of GBP78,499,000 (2015:
GBP73,914,000). It is not yet certain 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 GBP78,471,000 (2015:
GBP73,886,000). It is not yet certain that the Group 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 approved investment
trust, and the intention to continue meeting the required
conditions in the foreseeable future, the Company has not provided
for deferred tax on any capital gains and losses arising on the
revaluation or disposal of its investments.
10 DIVIDS
The following table summarises the amounts recognised as
distributions to equity shareholders in the period:
Group and Group and
Company Company
2016 2015
GBP000 GBP000
---------------------------------------------------------------------------- ---------- ------ ---------- ------
2014 Final dividend of 4.50p paid on 21 January 2015 2,350
2015 Interim dividend of 3.00p paid on 27 June 2015 1,569
2015 Final dividend of 5.00p paid on 27 January 2016 2,667
2016 Interim dividend of 3.00p paid on 24 June 2016 1,603
4,270 3,919
---------- ------ ---------- ------
2016 2015
GBP000 GBP000
---------------------------------------------------------------------------- ---------- ------ ---------- ------
Proposed final dividend for the year ended 30 September 2016 of 5.75p
(2015: final dividend
of 5.00p) per ordinary share 3,073 2,657
3,073 2,657
---------- ------ ---------- ------
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 1158 of the Corporation Tax Act 2010 are considered.
2016 2015
GBP000 GBP000
-------------------------------------------------------------------------------- -------- ------ -------- ------
Interim dividend for the year ended 30 September 2016 of 3.00p (2015: 3.00p)
per ordinary
share 1,603 1,569
Final dividend for the year ended 30 September 2016 of 5.75p (2015: 5.00p) per
ordinary share 3,073 2,657
4,676 4,226
-------- ------ -------- ------
Distributable reserves of the Company comprise the Capital and
Revenue Reserves.
Dividends for the year (and for 2015) have been solely made from
the Revenue Reserve.
11 RETURN PER ORDINARY SHARE
Basic return per ordinary share from continuing and discontinued
operations is based on 53,366,070 ordinary shares, being the
weighted average number of shares in issue (2015: 52,355,999 being
the weighted average number of shares in issue having adjusted for
the shares held by the Employee Benefit Trust). Basic returns per
ordinary share from continuing and discontinued operations are
based on the net return after taxation attributable to equity
shareholders. (2015: There are no potentially dilutive shares
arising from the share options. These do not give rise to a
material dilution to the return per ordinary share and therefore no
diluted return per ordinary share has been calculated).
Group Group
2016 2015
GBP000 GBP000
---------------------------------------------------------------------- -------- ------- -------- -------
Basic and diluted revenue returns from
continuing operations are based on net revenue after
taxation of: 4,939 4,934
Basic and diluted revenue returns from
discontinued operations are based on net revenue after taxation of:
Basic and diluted capital returns from
continuing operations are based on net capital return of: 18,705 12,535
Basic and diluted capital returns from
discontinued operations are based on net capital return of:
Basic and diluted total returns are based on a
return of: 23,644 17,469
-------- ------- -------- -------
Company Company
2016 2015
GBP000 GBP000
---------------------------------------------------------------------- -------- ------- -------- -------
Basic and diluted revenue returns are based
on net revenue after taxation of: 4,939 4,935
Basic and diluted capital returns are based
on net capital return of: 18,705 12,534
Basic and diluted total returns are based on a
return of: 23,644 17,469
-------- ------- -------- -------
12 PROPERTY AND EQUIPMENT
Group Group and Company
Leasehold and Company Office
Improvements Equipment Total
GBP000 GBP000 GBP000
---------------------- ----------------------- --- ------------------ ---- -------- ----
Cost:
At 1 October 2015 171 169 340
Additions 28 38 66
Disposals (171) (171)
At 30 September 2016 28 207 235
----------------------- --- ------------------ ---- -------- ----
Depreciation:
At 1 October 2015 108 168 276
Charge for year 67 11 78
Disposals (171) (171)
At 30 September 2016 4 179 183
----------------------- --- ------------------ ---- -------- ----
Net book value:
At 30 September 2016 24 28 52
----------------------- --- ------------------ ---- -------- ----
At 30 September 2015 63 1 64
----------------------- --- ------------------ ---- -------- ----
13 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Group 2016 Group 2015
Listed Unlisted Total Listed Unlisted Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------------- -------- -------- -------- -------- ---------- --------
Opening cost at beginning of year 133,565 2,530 136,095 124,723 4,083 128,806
(Losses)/gains at beginning of year (4,348) 49,897 45,549 (1,036) 37,572 36,536
-------- -------- -------- -------- ---------- --------
Opening fair value at beginning of year 129,217 52,427 181,644 123,687 41,655 165,342
-------- -------- -------- -------- ---------- --------
Purchases at cost 13,701 13,701 44,333 44,333
Sales - proceeds (15,905) (15,905) (38,114) (5,771) (43,885)
Gains on sales 968 968 2,323 4,518 6,841
Increase/(Decrease) in investment holding
gains 16,290 4,661 20,951 (3,312) 12,325 9,013
Transfer on delisting/listing of shares (150) 150 300 (300)
Closing fair value at end of year 144,121 57,238 201,359 129,217 52,427 181,644
-------- -------- -------- -------- ---------- --------
Closing cost at end of year 132,179 2,680 134,859 133,565 2,530 136,095
Gains/(losses) at end of year 11,942 54,558 66,500 (4,348) 49,897 45,549
Closing fair value at end of year 144,121 57,238 201,359 129,217 52,427 181,644
-------- -------- -------- -------- ---------- --------
Company
2016
Subsidiary
Listed Unlisted company Total
GBP000 GBP000 GBP000 GBP000
---------------------------------------- -------- -------- ---------- --------
Opening cost at beginning of year 133,565 2,508 1,000 137,073
Adjustment to opening cost* 22 22
(Losses)/gains at beginning of year (4,348) 49,897 (838) 44,711
-------- -------- ---------- --------
Opening fair value at beginning of year 129,217 52,427 162 181,806
-------- -------- ---------- --------
Purchases at cost 13,701 13,701
Sales - proceeds (15,905) (15,905)
Gains on sales 968 968
Increase in investment holding gains 16,290 4,661 20,951
Transfer on delisting of shares (150) 150
Closing fair value at end of year 144,121 57,238 162 201,521
-------- -------- ---------- --------
Closing cost at end of year 132,179 2,680 1,000 135,859
Gains at end of year 11,942 54,558 (838) 65,662
Closing fair value at end of year 144,121 57,238 162 201,521
-------- -------- ---------- --------
* The opening cost adjustment reflects a realignment of Group
and Company costs in respect of the investment in MAM.
Company
2015
Subsidiary
Listed Unlisted entities Total
GBP000 GBP000 GBP000 GBP000
------------------------------------------------ -------- -------- ---------- --------
Opening cost at beginning of year 124,723 4,059 1,010 129,792
(Losses)/gains at beginning of year (1,036) 37,596 (838) 35,722
-------- -------- ---------- --------
Opening fair value at beginning of year 123,687 41,655 172 165,514
-------- -------- ---------- --------
Purchases at cost 44,333 44,333
Sales - proceeds (38,114) (5,771) (9) (43,894)
Gains/(losses) on sales 2,323 4,520 (1) 6,842
(Decrease)/increase in investment holding gains (3,312) 12,323 9,011
Transfer on listing of shares 300 (300)
-------- -------- ---------- --------
Closing fair value at end of year 129,217 52,427 162 181,806
Closing cost at end of year 133,565 2,508 1,000 137,073
(Losses)/gains at end of year (4,348) 49,919 (838) 44,733
-------- -------- ---------- --------
Closing fair value at end of year 129,217 52,427 162 181,806
-------- -------- ---------- --------
Unlisted investments include an amount of GBP118,000 in 3
various companies (2015: GBP127,000 in 3 companies) and
GBP57,120,000 (2015: GBP52,300,000) for the Company's investment in
MAM as detailed below.
During the year the Company incurred transaction costs amounting
to GBP84,000 (2015: GBP186,000), of which GBP71,000 (2015:
GBP160,000) related to the purchase of investments and GBP13,000
(2015: GBP26,000) related to the sales of investments. These
amounts are included in gains on investments at fair value through
profit or loss, as disclosed in the Consolidated and Company
Statement of Comprehensive Income.
The composition of the investment return is analysed below:
Group Group Company Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
-------------------------------------------- ------- ------ ------- ------ ------- ------ ------- ------
Net gains on sales of equity investments 968 6,841 968 6,842
Increase/(Decrease) in holding gains on
equity investments 20,951 9,013 20,951 9,011
Net return on investments 21,919 15,854 21,919 15,853
------- ------ ------- ------ ------- ------ ------- ------
Fair value hierarchy disclosures
The Company is required to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
consists of the following three levels:
-- Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
An active market is a market in which transactions for the asset
or liability occur with sufficient frequency and volume on an
ongoing basis such that quoted prices reflect prices at which an
orderly transaction would take place between market participants at
the measurement date. Quoted prices provided by external pricing
services, brokers and vendors are included in Level 1, if they
reflect actual and regularly occurring market transactions on an
arm's length basis.
-- Level 2 - Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from
prices).
Level 2 inputs include the following:
-- quoted prices for similar (i.e. not identical) assets in active markets.
-- inputs other than quoted prices that are observable for the
asset (e.g. interest rates and yield curves observable at commonly
quoted intervals).
-- inputs that are derived principally from, or corroborated by,
observable market data by correlation or other means (market
corroborated inputs).
-- Level 3 - Inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
The level in the fair value hierarchy within which an asset or
liability is categorised is determined on the basis of the lowest
level input that is significant to the fair value measurement of
the asset. For this purpose, the significance of an input is
assessed against the fair value measurement of an asset or
liability in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement requires judgement, considering factors specific to the
asset or liability.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
observable data to be investments actively traded in organised
financial markets, fair value is generally determined by reference
to stock exchange quoted market bid prices at the close of business
on the balance sheet date, without adjustment for transaction costs
necessary to realise the asset.
The table below sets out fair value measurements of financial
assets in accordance with the IFRS fair value hierarchy system:
Group Group
2016 2015
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Financial assets held at fair value through
profit or loss - equities and managed funds:
Listed equity securities 144,121 144,121 129,217 129,217
Unlisted equity securities 57,238 57,238 52,427 52,427
144,121 57,238 201,359 129,217 52,427 181,644
------- ------- ------- ------- ------- ------- ------- -------
Company Company
2016 2015
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Financial assets held at fair value through
profit or loss - equities and managed funds:
Listed equity securities 144,121 144,121 129,217 129,217
Unlisted equity securities 57,238 57,238 52,589 52,589
144,121 57,238 201,359 129,217 52,589 181,806
------- ------- ------- ------- ------- ------- ------- -------
Investments whose values are based on quoted market prices in
active markets, and therefore are classified within Level 1,
include active listed equities. The Company does not normally
adjust the quoted price for these instruments (although it may
invoke its fair value pricing policy in times of market disruption
- this was not the case for 30 September 2016 or 2015).
Financial instruments that trade in markets that are not
considered to be active but are valued based on quoted market
prices, dealer quotations or alternative pricing sources supported
by observable inputs are classified within Level 2. As Level 2
investments include positions that are not traded in active markets
and/or are subject to transfer restrictions, valuations may be
adjusted to reflect liquidity and/or non-transferability, which are
generally based on available market information. During the year
there were transfers of GBPnil (2015: GBPnil) between Level 2 and
Level 1 for listed exchange traded funds.
Investments classified within Level 3 have significant
unobservable inputs. As observable prices are not available for
these securities, the Company has used valuation techniques to
derive the fair value. In respect of unquoted instruments, or where
the market for a financial instrument is not active, fair value is
established by using recognised valuation methodologies, in
accordance with IPEV Valuation Guidelines. New investments are
initially held at cost, for a limited period, then at the price of
the most recent investment in the investee. This is in accordance
with IPEV Guidelines as the cost of recent investments will
generally provide a good indication of fair value. Fair value is
the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date.
The following table presents the movement in Level 3 instruments
for the year:
Group Group
2016 2015
Equity Equity
Total investments Total investments
GBP000 GBP000 GBP000 GBP000
---------------------------------------------------------------------- ------- ------------ ------- ------------
Opening balance 52,427 52,427 41,655 41,655
Transfers from/(to) Level 1 150 150 (300) (300)
Sales - proceeds (5,771) (5,771)
Total gains for the year included in the Statement of Comprehensive
Income 4,661 4,661 16,843 16,843
57,238 57,238 52,427 52,427
------- ------------ ------- ------------
Company Company
2016 2015
Equity Equity
Total investments Total investments
GBP000 GBP000 GBP000 GBP000
---------------------------------------------------------------------- ------- ------------ ------- ------------
Opening balance 52,589 52,589 41,827 41,827
Transfers from/(to) Level 1 150 150 (300) (300)
Sales - proceeds (162) (162) (5,780) (5,780)
Total gains for the year included in the Statement of Comprehensive
Income 4,661 4,661 16,842 16,842
57,238 57,238 52,589 52,589
------- ------------ ------- ------------
Investments in Investment Funds
The Company has a number of investments in investment funds
managed by MAM. Details of these investments are:
2016 2015
Investment Proportion Investment Proportion
Value Held Value Held
GBP000 % GBP000 %
-------------------------------- ----------- ----------- ----------- -----------
MAM Tortoise Fund 32,382 3.2 27,547 2.8
MAM Income Fund 19,752 2.2 20,470 2.0
MAM Global Equity Fund 18,735 45.1 14,564 45.2
MAM Global Focus Fund 6,617 31.9 5,397 33.8
MAM US Equity Fund 7,326 4.2 5,970 6.1
MAM UK Smaller Companies Fund* 5,312 1.3 5,202 1.0
* The MAM UK Smaller Companies Fund forms part of the MAM UK
Equity Segregated Portfolio.
The fees charged on these investments are disclosed in the
material contracts section of the Directors' Report above.
In addition, the total value of all investments managed by MAM
at 30 September 2016 was GBP146.0 million (2015: GBP130.2 million).
Further details on the investments in the MAM investment funds are
contained in the Chief Executive's Report above.
Substantial Share Interests
The Company has invested GBP15 million and GBP5 million in the
MAM Global Equity Fund and MAM Global Focus Fund respectively which
are substantial interest in those funds at 30 September 2016 and
2015. These holdings are accounted for as an investment held at
fair value through profit or loss, in accordance with IFRS 10.
Majedie Asset Management
MAM is a UK based asset management firm providing investment
management and advisory services across a range of UK and global
equity strategies. The carrying value of the investment in MAM is
included in the Consolidated and Company Balance Sheet as part of
investments held at fair value through profit or loss.
2016 2015
GBP000 GBP000
---------------------------- -------- ------- -------- -------
Deemed cost of investment 540 540
Holding gains 56,580 51,760
Fair value at 30 September 57,120 52,300
-------- ------- -------- -------
The fair value is usually assessed and approved twice a year by
the directors following the relevant recommendation by the Audit
Committee. The fair value calculation is formulaic, with the
significant input in assessing the price (and hence fair value),
being the earnings of MAM together with earnings multiples applied
to those earnings. A 5% increase/(decrease) in MAM's earnings would
result in an increase/(decrease( of 4.4% in the fair value of
MAM.
In accordance with the revised shareholders' agreement, the
Company may sell a certain number of shares to the MAM Employee
Benefit Trust at the relevant prescribed price (as calculated in
accordance with the revised shareholders' agreement). The Company
sold no shares during the year (2015: 9,305 shares for a total
consideration of GBP5,746,000 with a realised gain of
GBP5,659,000).
As at 30 September, the Company holds 57,523 ordinary 0.1p
shares representing a 16.7% shareholding in MAM (2015: 57,523
ordinary 0.1p shares representing a 16.7% shareholding).
14 INVESTMENT IN SUBSIDIARY
MPM (registered and incorporated in the UK) ceased to trade on 4
June 2016 and is in the process of being de-authorised and
liquidated. The Company's investment in MPM represents 1 million
ordinary shares which is 100% of MPM.
15 DISCONTINUED OPERATIONS
Following a review of the provision of savings plans for the
Company it was decided that the Majedie Share Plan, as managed by
MPM, would close. The Board however wished to continue to offer a
share plan to investors and as such a new share plan, the Equiniti
Investment Account (EIA), managed and operated by Equiniti
Financial Services Limited, was offered. In conjunction with the
closure of the Majedie Share Plan existing investors were able to
transfer to the new EIA. On 4 June 2016 the Share Plan was closed
and MPM ceased operations. MPM is now in the process of being
de-authorised and liquidated after completing all regulatory
requirements with the closure of the Majedie Share Plan.
In accordance with the provision of its services, MPM charged
the Company a fee for managing the Majedie Share Plan on a cost
recovery basis only (MPM does not receive any fees from investors).
All expenses incurred by MPM were paid for by the Company and
netted off against any management fees due. As such MPM reports a
nil net return and all such revenues and expenses incurred by it
are eliminated on consolidation.
16 TRADE AND OTHER RECEIVABLES
Group Group Company Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
------------------------------------------ -------- ---- -------- ---- -------- ---- -------- ----
Sales for future settlement 191 124 191 124
Prepayments 47 131 47 131
Dividends receivable 42 104 42 104
Amounts due from share issues 387 387
Taxation recoverable 76 53 76 53
Amounts due from subsidiary undertakings 95
356 799 356 894
-------- ---- -------- ---- -------- ---- -------- ----
The directors consider that the carrying amounts of trade and
other receivables approximates to their fair value.
17 CASH AND CASH EQUIVALENTS
Group Group Company Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
---------------------------------------- -------- ------ -------- ------ -------- ------ -------- ------
Deposits at banks 2,857 1,674 2,857 1,674
Cash attributable to discontinued
operations 257
Other cash balances* 610 606 610 606
3,467 2,537 3,467 2,280
-------- ------ -------- ------ -------- ------ -------- ------
*Other cash balances includes GBP602,000 (2015: GBP573,000) in
relation to unclaimed dividends by shareholders. Such cash is held
in a separate account by the Company's registrar and is not
available to the Company for general operations.
18 TRADE AND OTHER PAYABLES
Amounts falling due within one year:
Group Group Company Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
--------------------------------------- ------- ----- ------- ----- ------- ----- ------- -----
Purchases for future settlement 318 325 318 325
Accrued expenses 300 211 300 211
Amounts due to subsidiary undertakings 162
Other creditors 699 800 669 800
1,317 1,336 1,479 1,336
------- ----- ------- ----- ------- ----- ------- -----
The directors consider that the carrying amounts of trade and
other payables approximates to their fair value.
Amounts falling due after more than one year:
Group Group Company Company
2016 2015 2016 2015
GBP000 GBP000 GBP000 GBP000
-------------------------------------------- ------- ------ ------- ------ ------- ------ ------- ------
GBP13.5m (2015: GBP13.5m) 9.50% 2020
debenture stock 13,445 13,433 13,445 13,433
GBP20.7m (2015: GBP20.7m) 7.25% 2025
debenture stock 20,486 20,468 20,486 20,468
33,931 33,901 33,931 33,901
------- ------ ------- ------ ------- ------ ------- ------
Both debenture stocks are secured by a floating charge over the
Company's assets. Expenses associated with the issue of the
debenture stocks were deducted from the gross proceeds at issue and
are being amortised over the life of the debentures. Further
details on interest and the amortisation of the issue expenses are
provided in note 8.
19 ORDINARY SHARE CAPITAL
Company Company
2016 2015
Number GBP000 Number GBP000
---------------------------- ----------- -------- ----------- --------
As at 1 October 53,133,000 5,313 52,528,000 5,253
Ordinary 10p shares issued 306,000 31 605,000 60
As at 30 September 53,439,000 5,344 53,133,000 5,313
----------- -------- ----------- --------
All shares are allotted fully paid up, and are of one class
only. New ordinary shares can only be issued at a premium to the
relevant NAV (with debt at fair value).
Ordinary shares carry one vote each on a poll. The Companies Act
2006 abolished the requirement for the Company to have authorised
share capital. The Company adopted new Articles of Association on
20 January 2010 which, inter alia, reflected the new legislation.
Accordingly the Company has no authorised share capital. The
directors will still be limited as to the number of shares they can
allot at any one time as the Companies Act 2016 requires that
directors seek authority from the shareholders for the allotment of
new shares.
20 SHARE PREMIUM
Group and Group and
Company Company
2016 2015
GBP000 GBP000
---------------------------- ---------- ------ ---------- ------
As at 1 October 2,280 785
Ordinary 10p shares issued 775 1,497
Issue costs (1) (2)
As at 30 September 3,054 2,280
---------- ------ ---------- ------
21 NET ASSET VALUE
The net asset value per share, (Group and Company), has been
calculated based on equity shareholders' funds of GBP169,986,000
(2015: GBP149,807,000), and on 53,439,000 (2015: 53,133,000)
ordinary shares, being the number of shares in issue at the year
end.
22 ANALYSIS OF CHANGED IN NET DEBT
At 30 Non At 30
September Cash Cash September
2015 Flows Items 2016
Group GBP000 GBP000 GBP000 GBP000
------------------------ ---------- -------- ------- ----- ------- ---- ---------- --------
Cash at bank and
other cash balances 2,537 930 3,467
Debt due after one year (33,901) (30) (33,931)
(31,364) 930 (30) (30,464)
---------- -------- ------- ----- ------- ---- ---------- --------
At 30 Non At 30
September Cash Cash September
2015 Flows Items 2016
Company GBP000 GBP000 GBP000 GBP000
------------------------ ---------- -------- ------- ----- ------- ---- ---------- --------
Cash at bank and
other cash balances 2,280 1,187 3,467
Debt due after one year (33,901) (30) (33,931)
(31,621) 1,187 (30) (30,464)
---------- -------- ------- ----- ------- ---- ---------- --------
23 OPERATING LEASE COMMITMENTS
The Company operates in its premises by way of a sub-lease
arrangement with a superior leasee, which has four years remaining.
The arrangement allows for participation in rent reviews as they
occur. During the year a new rent was agreed following a rent
review. Under the new terms the Company has an annual commitment of
GBP60,000 under its sub-lease arrangement (2015: GBP69,000 based on
estimated rent review outcome). This operating lease commitment is
disclosed in the table below:
Group Group
2016 2015
Expiry Date GBP000 GBP000
--------------------------------------------------- -------- ---- -------- ----
Not later than one year 60 86
Later than one year and not later than five years 180 276
Later than five years
240 362
-------- ---- -------- ----
24 FINANCIAL COMMITMENTS
At 30 September 2016 the Company had no financial commitments
which had not been accrued for (2015: none).
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 the Company is a long term investor and it is
the Board's policy that no trading in investments or other
financial instruments be undertaken. Given the nature of the Group,
the risk management processes of the Company have primacy but are
aligned with those of the Group as a whole. Therefore the
disclosures in this note primarily reflect that of the Company but
are shown separately where materially different to the Group
position.
Management of Market Risk
Management of market risk is fundamental to the Company's
investment objective and the investment portfolio is regularly
monitored to ensure an appropriate balance of risk and reward.
Exposure to any one entity is monitored by the Board and the
Investment Manager (MAM). The Board has complied with the
investment policy requirement not to invest more than 15% of the
total value of the Company's gross assets, save that the Company
can invest up to 25% of its gross assets in any single fund managed
by MAM where the Board believes that the investment policy of such
funds is consistent with the Company's objective of spreading
investment risk.
From time to time the Company itself may seek to reduce or
increase its exposure to equity markets and currencies by taking
positions in index futures and/or options relating to one or more
equity markets or currency forward contracts. There are no such
positions as at 30 September 2016 or 2015. These instruments are
used for the purpose of hedging some, or all, of the existing
exposure with the Company's investment portfolio to those
particular currencies or equity markets, or to enable increased
exposure when deemed appropriate, and with the specific approval of
the Board. In addition, MAM as Investment Manager, can utilise
derivative instruments for efficient portfolio management and
investment purposes as it sees fit. There have been no derivatives
used in the MAM UK equity Segregated Portfolio in the period (2015:
none). Some MAM funds do use derivatives to meet their investment
objectives.
The Company's financial instruments comprise its investment
portfolio (see note 13), cash balances, debtors and creditors that
arise directly from its operations such as sales and purchases
awaiting settlement, accrued income, and the debenture loans used
to partially finance its operations.
In the pursuit of its investment objective, the Company is
exposed to various risks which could cause short term variation in
its net assets and which could result in both or either a reduction
in its net assets or a reduction in the revenue 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, concentration risk and credit risk.
The Board does set the overall investment strategy and
allocation 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 change materially from the previous accounting
period.
Market Risk
The principal risk in the management of the investment portfolio
is market risk - i.e. the risk that values and future cashflows
will fluctuate due to changes in market prices. Market risk is
comprised of:
-- foreign currency risk; and
-- interest rate risk; and
-- other price risk i.e. movements in the value of investment
portfolio holdings caused by factors other than interest rates or
currency movements.
These risks are taken into account when setting the investment
policy or allocation and when making investment decisions.
Foreign Currency Risk
Exposure to foreign currency risk arises primarily and directly
through investments in securities listed on overseas equity
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
2016 was GBP5,791,000 (2015: Group and Company: GBP9,154,000
respectively).
The Company's investments in the MAM funds are in Sterling
denominated share classes. These share classes themselves are not
hedged within the relevant MAM fund. The Company also has Sterling
denominated investments which may pay dividends in foreign
currencies. Additionally the investment portfolio is subject to
indirect foreign currency risk impacts by having investments in
investee companies that, whilst listed in the UK, have global
operations and as such are subject to currency impacts on their
assets and revenues. It is not possible to accurately quantify
these exposures and impacts.
MAM, as Investment Manager, monitors the Company's exposure to
foreign currencies and the directors receive regular reports on
exposures.
The Company is able, though unlikely, to enter into forward
currency contracts as a means of limiting or increasing its
exposure to particular currencies. Such contracts can be used for
the purpose of hedging an existing currency exposure of the
Company's investment portfolio (as a means of reducing risk), or to
enable increased exposure when this is deemed appropriate.
The currency risk of the non-Sterling monetary financial assets
and liabilities at the reporting date was:
Group and Company Group and Company
2016 2015
Total Total
Overseas currency Overseas currency
investments exposure investments exposure
Currency exposure GBP000 GBP000 GBP000 GBP000
-------------------- ------------- ---------- ------------- ----------
US Dollar 945 945 589 589
Euro 4,026 4,026 8,020 8,020
Yen 595 595 478 478
Other non-Sterling 225 225 67 67
5,791 5,791 9,154 9,154
------------- ---------- ------------- ----------
Sensitivity Analysis
If Sterling had strengthened by 5% relative to all currencies on
the reporting date, with all other variables held constant, the
income and net assets would have decreased by the amounts shown in
the table below. The analysis was performed on the same basis for
2015. The revenue impact is an estimated annualised figure based on
the relevant foreign currency denominated balances at the reporting
date.
Group and Company Group and Company
2016 2015
Income Statement GBP000 GBP000
------------------ ------ ------------------ ------
Revenue return
Capital return (290) (458)
Net assets (290) (458)
------------------ ------ ------------------ ------
A 5% weakening of Sterling against the same currencies would
have resulted in an equal and opposite effect on the above amounts,
on the basis that all other variables remain constant. It should
also be noted that the calculations are done at the reporting date
and may not be representative of a year as a whole.
Interest Rate Risk
The Company's direct interest rate risk exposure affects the
interest received on cash balances and the fair value of its
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, from time to time, hold small
investments which pay 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 gearing to the Company which is monitored
within limits and is also reported to the directors regularly. Cash
balances can also be used to manage the level of gearing to within
the range as set by the Board. The Board sets the overall
investment strategy and allocation 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 investee
company valuations. Regular reports are received by the Board in
respect of the Company's investment portfolio and the relevant
limits.
The interest rate risk profile of the financial assets and
liabilities at the reporting date was:
Group
and Company Group Company
2016 2015 2014
GBP000 GBP000 GBP000
------------------------ ------------ -------- -------- -------- -------- --------
Floating rate financial
assets:
UK Sterling 3,467 2,537 2,280
Financial assets not
carrying interest 201,715 182,443 182,700
205,182 184,980 184,980
------------ -------- -------- -------- -------- --------
Fixed rate financial
liabilities:
UK Sterling (33,931) (33,901) (33,901)
Financial liabilities
not carrying interest (1,317) (1,336) (1,336)
(35,248) (35,237) (35,237)
------------ -------- -------- -------- -------- --------
Floating rate financial assets usually comprise cash on deposit
with banks which is repayable on demand and receives a rate of
interest based, in part, on the UK base rates in force over the
period. The Company does not normally hold non-UK cash as all
foreign currency receivables or payables are converted back into
Sterling at the settlement date of the relevant transaction. The
fixed rate financial liabilities comprise the Company's debentures,
totalling GBP34.2 million in total. They pay an average rate of
interest of 8.1% per annum and mature in March 2020 (GBP13.5
million nominal) and March 2025 (GBP20.7 million nominal).
Sensitivity Analysis
Based on closing cash balances held as on deposit with banks, a
notional 0.5% decrease in the UK base interest rates would have no
effect on net assets and the net revenue return before tax of the
Company.
A 0.5% increase in interest rates would result in a larger
impact due to the extremely low rates at the moment as is shown in
the table below. Both analyses are solely based on balances at the
reporting date and is not representative of the year as a
whole.
Group and Company Group and Company
2016 2015
Income Statement GBP000 GBP000
------------------ ------------------ --- ------------------
Revenue return 14 8
Net assets 14 8
------------------ --- ------------------
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 security investments which are disclosed in
note 13 above. The Company also has unlisted investments which are
indirectly impacted by movements in listed equity prices and
related variables. The Board sets the overall investment strategy
and allocation which aims to achieve a spread of investments across
sectors and regions in order to reduce risk. 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 the investment policy.
MAM's policy as Investment Manager is to manage risk through a
combination of monitoring the exposure to individual securities,
industry and geographic sectors, whilst maintaining a constant
awareness in real time of the portfolio exposures in accordance
with the investment strategy. Any derivative positions are marked
to market and exposure to counterparties is also monitored on a
daily basis by MAM.
As mentioned earlier, MAM may, and do, use derivative
instruments including index-linked notes, contracts for difference,
covered options and other equity-related derivative instruments for
efficient portfolio management and investment purposes. As also
noted previously this occurs in the MAM funds and there have been
no derivatives used in the MAM UK Equity Segregated Portfolio. The
directors have regular presentations from MAM on their investment
strategy and approach.
The following table details the exposure to market price risk on
the quoted and unquoted equity investments:
Group
and Company Group Company
2016 2015 2015
GBP000 GBP000 GBP000
------------ ------- ------- ------- ------- -------
Non-current investments
at fair value through
profit or loss
Listed equity investments 144,121 129,217 129,217
Unlisted equity investments 57,238 52,427 52,427
Subsidiary Company 162
201,359 181,644 181,806
------------ ------- ------- ------- ------- -------
Sensitivity Analysis
If share prices on listed equity security investments had
decreased by 10% at the reporting date with all other variables
remaining constant, the net return before tax and the net assets
would have decreased by the amounts shown below. Details of the
sensitivity analysis in respect of the investment in MAM is shown
in note 13 above.
Group and Company Group and Company
2016 2015
Income Statement GBP000 GBP000
----------------- -------- ----------------- --------
Capital return (14,412) (12,922)
----------------- -------- ----------------- --------
Net assets (14,412) (12,922)
----------------- -------- ----------------- --------
A 10% increase in listed equity security share prices would have
resulted in a proportionately equal and opposite effect on the
above amounts on the basis that all other variables remain
constant. The analysis has been calculated on the investment
portfolio held at the reporting date and this may not be
representative of the year as a whole.
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 investments are held on its behalf by the
Company's Depositary, who delegates safekeeping to the Custodian,
the Bank of New York Mellon SA/NV, London branch, which if it
became bankrupt or insolvent could cause the Company's rights with
respect to securities held to be delayed. However under the AIFMD,
the Depositary provides certain indemnities in respect of the
Company's investments. The Company receives regular internal
control reports from the Custodian which are reported to and
reviewed by the Audit Committee.
-- Investment transactions are undertaken by MAM with a number
of approved brokers in the ordinary course of business on a
contractual delivery versus payment basis. MAM has procedures in
place whereby all new brokers are subject to credit checks and
approval by them prior to any business being undertaken. MAM
utilises the services of a large range of approved brokers thereby
mitigating credit risk by diversification.
-- Company cash is held at banks that are considered to be
reputable and of high quality. Cash balances above a certain
threshold are spread across a range of banks to reduce
concentration risk.
-- If the Company makes an investment in a loan or any other
security with credit risk, that credit risk would be assessed and
considered as part of the investment decision making process. There
are regular reports to the directors on the composition of the
investment portfolio.
-- A credit exposure could arise in respect of non-exchange
traded (being Over The Counter or OTC) derivative contracts. Any
such contracts would only be entered into with approved
counterparties whose credit risk has been assessed as within
limits.
Credit Risk Exposure
The table below sets out the financial assets exposed to credit
risk as at the reporting date:
Group and Company Group Company
2016 2015 2015
GBP000 GBP000 GBP000
------------------------------------------ ----------------- ----- ------- ----- ------- -----
Cash on deposit and at banks 3,467 2,537 2,280
Sales for future settlement 191 124 124
Interest, dividends and other receivables 165 675 770
3,823 3,336 3,174
----------------- ----- ------- ----- ------- -----
Minimum exposure during the year 2,163 2,733 2,562
Maximum exposure during the year 5,549 5,548 5,377
----------------- ----- ------- -----
All amounts included in the analysis above are based on their
carrying values.
None of the financial assets were past due or impaired at the
current or prior reporting date.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter
difficulties in meeting its obligations as they fall due.
Liquidity risk is monitored, although it is recognised that the
majority of the Company's assets are invested in quoted equities
and other quoted securities that are readily realisable (All MAM
fund investments are highly liquid). The Board has various limits
in respect to how much of the Company's assets can be invested in
any one company. The unlisted investments in the portfolio are
subject to liquidity risk but such investments (excluding MAM) are
a very small part of the portfolio and are in realisation mode.
Nonetheless limits remain for any such investments and liquidity
risk is always considered when making investment decisions in such
securities. The Company is subject to concentration risk due to its
investment in MAM, at 28.3% (2015: 28.8%) of the Company's
investment portfolio. This investment is closely monitored by the
Board who receive regular financial and operational reports, and it
is believed that the current concentration risk here is mitigated
somewhat by the diversification undertaken with the MAM business
itself, and additionally, the investment in MAM is one of the
investment groups used to diversify its investment portfolio as per
the investment
policy.
The Company maintains an appropriate level of non-investment
related cash balances in order to finance its operations. The
Company regularly monitors its non-investment related 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 undrawn
borrowing facilities to provide liquidity.
A maturity analysis of financial liabilities showing remaining
contractual maturities is detailed below;
Group and Company
2016
Due within Due between Due between Due 3 years
1 year 1 and 2 years 2 and 3 years and beyond Total
Undiscounted cash flows GBP000 GBP000 GBP000 GBP000 GBP000
9.5% 2020 debenture stock 13,500 13,500
7.25% 2025 debenture stock 20,700 20,700
Interest on financial liabilities 2,783 2,783 2,783 8,895 17,244
Trade payables and other liabilities 1,317 1,317
4,100 2,783 2,783 43,095 52,761
Group and Company
2015
Due within Due between Due between Due 3 years
1 year 1 and 2 years 2 and 3 years and beyond Total
Undiscounted cash flows GBP000 GBP000 GBP000 GBP000 GBP000
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 11,680 20,029
Trade payables and other liabilities 1,336 1,336
4,119 2,783 2,783 45,880 55,565
Categories of financial assets and liabilities
The following table analyses the carrying amounts of the
financial assets and liabilities by categories as defined in IAS
39:
Group and Company Group Company
2016 2015 2015
Financial assets GBP000 GBP000 GBP000
Financial assets at fair value through profit or
loss
Equity securities 201,359 181,644 181,806
201,359 181,644 181,806
Other financial assets(*) 3,823 3,336 3,174
205,182 184,980 184,980
----------------- ------- ------- ------- -------
Financial liabilities
Financial liabilities measured at amortised
cost(**) 35,248 35,237 35,237
35,248 35,237 35,237
----------------- ------- ------- ------- -------
* Other financial assets include cash and cash equivalents,
sales for future settlement, dividend and interest receivable and
other receivables.
** Financial liabilities measured at amortised cost include;
debenture stock in issue, purchases for future settlement,
investment management fees and other payables and accrued
expenses.
The investment portfolio has been valued in accordance with the
accounting policy in note 1 to the accounts, i.e. at fair value.
The debenture stocks are classified as level 3 under the fair value
hierarchy. The fair value of the debenture stocks is calculated
using a standard bond pricing method, using a redemption yield of a
similar UK Gilt stock with an appropriate margin being applied.
Book Book Fair Fair
Value Value Value Value
2016 2015 2016 2015
Group and Company GBP000 GBP000 GBP000 GBP000
GBP13.5m (2015: GBP13.5m) 9.50%
2020 debenture stock 13,445 13,433 16,605 16,839
GBP20.7m (2015: GBP20.7m) 7.25%
2025 debenture stock 20,486 20,468 27,111 25,805
33,931 33,901 43,716 42,644
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
shareholders through a mix of equity capital and debt. The
directors set a range for the Company's net debt (comprised as
debentures less cash) at any one time which is maintained by
management of the Company's cash balances.
Group and Company Group Company
2016 2015 2015
GBP000 GBP000 GBP000
Net Debt
Adjusted cash and cash equivalents* (2,506) (2,000) (1,838)
Debentures 33,931 33,901 33,901
Sub total 31,425 31,901 32,063
Equity
Equity share capital 5,344 5,313 5,313
Retained earnings and other reserves 164,642 144,494 144,494
Shareholders' funds 169,986 149,807 149,807
Gearing
Net debt as a percentage of shareholders' funds 18.5% 21.3% 21.4%
*Adjusted cash and cash equivalents comprise cash plus current
assets less current liabilities.
Maximum potential gearing represents the highest gearing
percentage on the assumption that the Company had no net current
assets. As at 30 September 2016 this was 20.0% (2015: Group and
Company: 22.6%).
The Board monitors and reviews the broad structure of the
Company's capital on an ongoing basis. The review includes:
-- the level of gearing, taking into account MAM's views on capital markets; and
-- the level of the Company's free float of shares as the Barlow
family owns approximately 53% 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 also subject to various externally imposed
capital requirements which are that:
-- the debentures are not to exceed, in aggregate, 66 2/3% of
the adjusted share capital and reserves in accordance with the
relevant Trust Deeds; and
-- the Company has to comply with statutory requirements
relating to dividend distributions; and
-- the AIFMD imposes a requirement for all AIFs to have in place
a limit on the amount of leverage that they may hold. It is then
the responsibility of the relevant AIFM to ensure that this limit
is not exceeded, which in this case is the Company (being a
self-managed AIF).
Leverage is similar to gearing (as calculated in accordance with
AIC guidelines previously), but the AIFMD mandates a certain
calculation methodology which must be applied. Leverage as
calculated under the AIFMD methodology for the Company is:
Company Group Company
2016 2015 2015
Gross method GBP000 GBP000 GBP000
Investments held at fair value through profit or loss 201,359 181,644 181,644
Investments in subsidiaries held at fair value through profit or loss 162
Total investments at exposure value as defined under the AIFMD 201,359 181,644 181,806
Shareholders' Funds 169,986 149,807 149,807
Leverage (times) 1.18 1.21 1.21
Company Group Company
2016 2015 2015
Commitment Method GBP000 GBP000 GBP000
--------
Investments held at fair value through profit or loss 201,359 181,644 181,644
Investments in subsidiaries held at fair value through profit or loss 162
Cash and cash equivalents 3,467 2,537 2,280
Total investments at exposure value as defined under the AIFMD 204,826 184,181 184,085
Shareholders' Funds 169,986 149,807 149,807
Leverage (times) 1.20 1.23 1.23
The leverage figures calculated above represent leverage as
calculated under the gross and commitment methods as defined under
the AIFMD (and a figure of 1x represents no leverage or
borrowings). The two methods differ in their treatment of amounts
outstanding under derivative contracts with the same counterparty,
which are not applicable to the Company, and of the treatment of
cash balances. In both methods the Company has included the
debentures by including the value of investments purchased by those
borrowings, rather than their balance sheet value. The Company's
leverage limit under the AIFMD is 1.5x, which equates to a
borrowing level of 50% (the Company has not exceeded this limit at
any time during the past or prior year).
These requirements are unchanged from the prior year and the
Company has complied with them.
26 RELATED PARTY TRANSACTIONS
Majedie Asset Management
MAM became Investment Manager to the Company from 13 January
2014 under the terms of an Investment Agreement. The agreement
provides for MAM to manage the Company's investment assets on both
a segregated portfolio basis and also by investments into various
MAM collective investment vehicles or funds. Details of the
Investment Agreement are contained in the material contracts
section of the directors' report above. As Investment Manager, MAM
is entitled to receive investment management fees. In respect of
the segregated portfolio investment these are charged directly to
the Company and are shown as an expense in its accounts. Any fees
due in respect of investments made into any MAM funds are charged
in the fund's accounts and are therefore included as part of the
investment value of the relevant holdings. Details concerning the
Company's investments in the period in the MAM funds are shown in
the Chairman's & Chief Executive's Report above.
In addition to the above, the Company retains an investment in
MAM itself. Mr JWM Barlow is a non-executive director of MAM, but
receives no remuneration for this role. MAM is accounted for as an
investment in both the Company and Group accounts and is valued at
fair value through profit or loss. Details concerning the Company's
investment in MAM are included in the Chairman's & Chief
Executive's Report above and on note 12 above.
Majedie Portfolio Management
The Company did pay certain costs on behalf of MPM for operating
the Company's Majedie Share Plan and was additionally charged a
management fee by MPM. Any such costs that had been paid by the
Company were recharged to MPM, net of any management fees due.
Following a review of the provision of the Company's share savings
plans, the Majedie Share Plan closed on 4 June 2016. MPM has now
ceased operations and is being de-authorised and liquidated.
The table below discloses the transactions and balances between
those entities:
2016 2015
Transactions during the year: GBP000 GBP000
Dividend income received from MAM 3,233 3,273
MAM share sale realised gains 5,659
MPM costs recharged by the Company 28 36
Management fee income due to MAM (segregated account only) 434 492
Balances outstanding at the end of the year:
Between the Company and MAM (segregated portfolio investment management fees) 115 106
Value of the Company's investment in MAM 57,120 52,300
Between the Company and MPM 162 96
Transactions between group companies during the year were made
on terms equivalent to those that occur in arm's length
transactions.
Remuneration
The remuneration of the directors, who are the key management
personnel of the Company, are set out below in aggregate for each
of the categories specified in IAS 24: Related Party disclosures.
There are no amounts outstanding at 30 September 2015 for directors
fees or salary (2015: nil). Further information about the
remuneration of individual directors is provided in the audited
section of the Report on Directors' Remuneration in the Company's
Report and Accounts.
2016 2015
GBP000 GBP000
Short term employee benefit 324 359
324 359
Registered Office Registrars
1 King's Arms Yard Computershare Investor Services
PLC
London EC2R 7AF The Pavilions
Telephone: 020 7626 1243 Bridgwater Road
Fax: 020 7374 4854 Bristol BS99 6ZZ
E-mail: majedie@majedieinvestments.com Telephone: 0370 707 1159
Registered Number: 109305 England
Shareholders should notify all
changes of name
Company Secretary and address in writing to the
Registrars.
Capita Company Secretarial Services Shareholders may check details
Limited of their holdings,
The Registry historical dividends, graphs
and other data by
34 Beckenham Road accessing www.computershare.com.
Beckenham
Kent BR3 4TU Shareholders wishing to receive
communications
from the Registrars by email
(including
Investment Manager notification of the publication
of the annual and
Majedie Asset Management Limited interim reports) should register
on-line at
10 Old Bailey http://www-uk.computershare.com/investor.
London EC4M 7NG Shareholders will need their
shareholder number,
Telephone: 020 7618 3900 shown on their share certificate
and dividend
Email: info@majedie.com vouchers, in order to access
both of the above
services.
Depositary
BNY Mellon Trust & Depositary Auditors
(UK) Limited
BNY Mellon Centre Ernst & Young LLP
160 Queen Victoria Street 25 Churchill Place
London EC4V 4LA Canary Wharf
London E14 5EY
The Depositary has delegated
the safe keeping
of the Company's assets to the Stockbrokers
Custodian, The
Bank of New York Mellon SA/NV, J.P. Morgan Cazenove
London
Branch. 25 Bank Street
London E14 5JP
AIFM
Majedie Investments PLC
National Storage Mechanism
A copy of the Annual Report and Financial Statements will be
submitted shortly to the National Storage Mechanism ("NSM") and
will be available for inspection at the NSM, which is situated at:
http://www.morningstar.co.uk/uk/NSM.
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.majedieinvestments.com.
Annual General Meeting
The Company's Annual General Meeting will be held on 18 January
2017 at 12.00 pm at City of London Club, 19 Old Broad Street,
London EC2N 1DS.
ENQUIRIES
If you have any enquiries regarding this announcement please
contact Mr William Barlow on 020 7382 8185.
END
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on this announcement (or
any other website) is incorporated into, or forms part of, this
announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAXAAEEKKFFF
(END) Dow Jones Newswires
December 05, 2016 02:45 ET (07:45 GMT)
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