TIDMMAJE
RNS Number : 3521Y
Majedie Investments PLC
05 December 2017
MAJEDIE INVESTMENTS PLC
ANNUAL FINANCIAL REPORT FOR THE YEARED 30 SEPTEMBER 2017
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 2017.
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 2017 2016
Total shareholder return (including dividends): 13.0% 3.0%
Net asset value total return (debt at fair value including dividends): 12.6% 16.3%
Net asset value total return (debt at par value including dividends): 10.4% 16.0%
Total dividends (per share): 9.75p 8.75p
Directors' valuation of investment in Majedie Asset Management Limited: GBP61.5m GBP57.1m
YEAR'S SUMMARY
Group Capital Structure Note 2017 2016 %
------------------------------------------------------ ----- ---------- ---------- ------
As at 30 September
Total assets 1 GBP216.5m GBP203.9m +6.2
Which are attributable to:
Debenture holders (debt at par value) 2 GBP34.0m GBP33.9m
Equity Shareholders GBP182.5m GBP170.0m +7.4
Gearing 4 17.1% 18.5%
Potential Gearing 4 18.6% 20.0%
------------------------------------------------------ ----- ---------- ---------- ------
Group total returns (capital growth plus dividends) 5
Net asset value per share (debt at par value) 3 +10.4% +16.0%
Net asset value per share (debt at fair value) 3 +12.6% +16.3%
Share price +13.0% +3.0%
------------------------------------------------------ ----- ---------- ---------- ------
Group capital returns
Net asset value per share (debt at par value) 3 341.6p 318.1p +7.4
Net asset value per share (debt at fair value) 327.8p 299.8p +9.3
Share price 281.5p 257.1p +9.5
------------------------------------------------------ ----- ---------- ---------- ------
Discount of share price to net asset value per share
Debt at par value 17.6% 19.2%
Debt at fair value 14.1% 14.2%
------------------------------------------------------ ----- ---------- ---------- ------
Group revenue and dividends
Net revenue available to Equity Shareholders GBP6.0m GBP4.9m*
Net revenue return per share 11.1p 9.3p* +19.4
Total dividends per share 9.75p 8.75p +11.4
------------------------------------------------------ ----- ---------- ---------- ------
Total administrative expenses GBP1.8m GBP1.9m*
Ongoing Charges Ratio: 6
Group and Company 1.5% 1.6%
Notes:
Definitions used in the Annual Report 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 2017 2016
----------------------------------------- ------ ------- -------
Share price High 310.0p 272.3p
Low 249.9p 240.0p
Net asset value - debt at par High 344.0p 318.1p
Low 308.6p 260.1p
Discount - debt at par High 21.4% 19.2%
Low 7.1% 2.6%
(Premium)/Discount - debt at fair value High 17.2% 14.3%
Low 2.5% (3.4%)
TEN YEAR RECORD
to 30 September 2017
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 % % %
------ -------- --------- --------- ------ --------- --------- ------------ ----------- -------- ---------- ---------
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
------ -------- --------- --------- ------ --------- --------- ------------ ----------- -------- ---------- ---------
2017 216,507 182,544 341.6 281.5 17.59 11.14 9.75 9.75 17.09 18.61 1.54
------ -------- --------- --------- ------ --------- --------- ------------ ----------- -------- ---------- ---------
Notes:
Calculated in accordance with AIC guidance.
Includes both continuing and discontinued operations.
# As from May 2012, Ongoing Charges replace previous cost
ratios.
** 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 2017 the NAV (net asset value
with debt at par) rose by 10.4% on a total return basis whilst the
share price rose by 13.0%, also on a total return basis. The Board
is recommending a total dividend for the year of 9.75p, an increase
of 11.4%. The FTSE All Share Index and MSCI World Index (in
sterling terms) rose by 11.9% and 14.9% respectively, on a total
return basis.
The Company's shares have continued to trade at a discount to
NAV (debt at fair value) and the Board continues to monitor
opportunities to reduce the discount. Against a backdrop of
political instability in the UK following the inconclusive General
Election in June and the tortuous Brexit negotiations Stock Markets
have reached all-time highs. The Board decided on 6 November 2017
to redeem its 2020 9.5% Debenture to reduce the Company's
gearing.
Results and Dividends
The Company had a capital return for the year of GBP11.6m
compared to GBP18.7m in 2016. Total income for the Company was
GBP7.5m compared to GBP6.5m in 2016. The increase in income
reflects higher dividends from Majedie Asset Management (MAM) and
the MAM UK Equity Segregated Portfolio.
Total administrative expenses and management fees have fallen
from GBP1.9m to GBP1.8m which reflects lower administrative
expenses of GBP0.2m owing to a further reduction in property costs
and the fund administration function being insourced offset in part
by higher fund management fees which increased by GBP0.1m due to
higher assets under management.
The self-managed nature of the Company and its size mean costs
are somewhat higher than average, though the Fund costs paid to
MAM, as fund manager and included in the ongoing charges ratio
(OCR), are more than offset by the dividend received from MAM.
Costs remain a key area of focus for the Board.
The net revenue return after taxation for the year to September
2017 was GBP6.0m compared to GBP4.9m in the year to 30 September
2016. The Board increased the interim dividend by 16.7% to 3.5p
partially to rebalance the split between the interim and final
dividend. The Board is recommending a final dividend of 6.25p which
is an increase of 11.4% for the full year. This follows an increase
of 9.4% in the year to 30 September 2016. The final dividend will
be payable on 24 January 2018 to shareholders on the register on 12
January 2018. The Board retains its policy to increase dividends
above the rate of inflation over the long term and since rebasing
the dividend in 2014 has increased the dividend by 30.0%. The
dividend is fully covered by current year earnings and the Company
retains sizable revenue reserves.
MiFID II and PRIIPs
New European regulation through the Packaged Retail and
Insurance based Investment Regulation (PRIIPs) and MiFID II come
into force on 1 January and 3 January 2018 respectively. The
Company, as an Investment Company is not subject to MiFID II as
under the Alternative Fund Managers Directors (AIFMD) it is
regulated by the Financial Conduct Authority (FCA) as an
Alternative Investment Fund (AIF). However, the Company's
securities are distributed by parties who are subject to MiFID II
rules and so the Company will be required to provide certain
additional disclosures.
PRIIPs requires the Company to publish a Key Investor Document
(KID) which will be on the website. The KID requires the disclosed
costs of the Company to include costs of investing such as Stamp
Duty, transaction costs and Debenture interest. The cost
calculation set out in the KID will therefore be different from the
OCR which the Company will continue to publish for comparison.
Share Issuance
The Company retains its ambition to narrow the discount to NAV
and eventually grow the Company through further share issuance. The
benefits to shareholders of growing the Company would be to reduce
the ratio of ongoing charges and increase the liquidity of the
shares 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). It is intended to renew this permission at the AGM.
Gearing
The redemption of the 2020 9.5% Debenture reduces the Company's
gearing to approximately 11% which is more in line with the peer
group. The Debenture was issued in 1994 when the interest rate
environment was very different. Historically, early redemption was
punitive from a cost perspective. It is therefore pleasing to be
able to retire expensive debt at only a 0.6% dilution of NAV (debt
at fair value) and at a time when stock markets are close to
all-time highs. In the future the lower interest payable, lower
management fees and lower investment income will improve the net
revenue return after taxation by GBP0.2m per annum. The Company
realised assets sufficient to repay the Debenture immediately prior
to issuing the notice of redemption.
Asset Allocation
The asset allocation of the Company provides exposure to funds
that are managed by a highly regarded boutique manager in which the
Company retains a significant stake of 16.8%.This produces some key
points of differentiation which sets the Company apart from many of
its peers in the Global Growth Sector.
Firstly, the value of the holding in MAM is derived from a long
agreed formula that is calculated twice a year. Over the long term
this provides a good comparator, but in the short term can produce
distortions such as appearing to lag the performance of
competitors.
Secondly your Company's holding in the MAM Tortoise Fund, an
Absolute Return Fund, is designed, in part, to reduce the downside
volatility of returns to shareholders. In times of rapidly rising
markets this holding can therefore depress relative returns which
will, all else being equal, be recouped in less buoyant market
conditions.
Thirdly, the long only funds performed well with the MAM UK
Equity Segregated Portfolio, the MAM UK Income Fund, the MAM Global
Equity Fund and the MAM Global Focus Fund, which together make up
51.2% of gross assets, all ahead of their benchmarks, although the
MAM US Equity Fund, which makes up 3.8% of gross assets, was
marginally behind.
Finally, the Company's geographic allocation superficially
appears more UK centric (see below) than others in the sector.
However on a look through basis the FTSE All Share Index derives up
to 70% of its earnings from overseas. Thus shareholders are more
exposed to global equity earnings than the simple domicile of
quoted companies would suggest.
The Board views the Company's key differentiators as positive
for shareholders over the medium term, but recognises returns may
be less correlated to Stock Market performance as a result.
Political risk in the UK and US seems to be at high levels and
markets have enjoyed an eight year rally since the depths of 2009.
The world economy has performed well, but further progress may be
more difficult as the interest rate cycle turns and Quantitative
Easing is curtailed. I am confident that against such a background
the broad spread of the Company's holdings and lower gearing will
provide resilience.
AGM
The AGM will be held on 17 January 2018 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 meeting in the full annual report on
the Company's website. There will be presentations from MAM and the
Board and an opportunity to ask questions. I hope you will be able
to attend.
Andrew J Adcock
Chairman
4 December 2017
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 of 16.8%. The Company
has no overall benchmark; rather each fund has its own benchmark.
The Company's total assets were GBP216.5m at 30 September 2017. In
the year, the main change in asset allocation was a reduction in
the MAM UK Segregated Portfolio of GBP5.25m and the MAM UK Income
Fund of GBP3.75m and an increased allocation to the MAM Tortoise
Fund of GBP5.0m. 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 2017 has
returned 12.9% per annum net of fees with a relative outperformance
against its benchmark FTSE All Share Index of 3.4% per annum. The
Company's assets are invested in a segregated portfolio that is
managed pari passu to the MAM UK Equity Fund. The funds are
predominantly 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 MAM UK Equity
Segregated Portfolio at 30 September 2017 was GBP64.2m which
represents 29.7% of the Company's total assets. In the year to 30
September 2017 the MAM UK Equity Segregated Portfolio returned
12.9% net of fees which is an outperformance of 1.0% against its
benchmark. The positive contributors at a sector level over twelve
months were overweight positions in Banks, Support Services and the
MAM UK Smaller Companies Fund and underweight positions in Tobacco,
whilst the negative contributors were overweight positions in
Telecoms, Food Retailers and General Retailers.
The MAM Tortoise Fund is a global equity absolute return product
which started in August 2007. Its objective is to achieve positive
absolute returns in all market conditions, through investment
primarily in long and synthetic short positions in equities over
rolling three year periods, with less volatility than a
conventional long only equity fund. Since inception the Fund has
returned 8.1% per annum net of fees. At 30 September 2017, the
Company has an allocation of GBP35.5m, which represents 16.4% of
total assets. The Fund returned -4.4% net of fees in the year to 30
September 2017. The positive contributors were long positions in
Banks and Diversified Telecoms and short positions in Food
Producers whilst the detractors were short positions in Aerospace
and Defence, Healthcare Providers and Luxury Goods. Overall the
Fund was positioned too defensively and was at times during the
year net short of a strong equity market.
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 up to 20% of the Fund
invested in overseas equities. The historic yield is 4.9%. Since
inception the Fund has returned 15.1% per annum net of fees, which
is an outperformance of 4.4% per annum against its benchmark. At 30
September 2017 the Company has an allocation of GBP17.1m, which
represents 7.9% of the Company's total assets. In the year to 30
September 2017 the Fund returned 12.0% net of fees, which
represents an outperformance against its benchmark of 0.1%. The
positive contributors were overweight positions in Financial
Services, Life Insurers and Travel and Leisure whilst the
detractors were overweight positions in Oil and underweight
positions in Mining and Banks.
The MAM Global Equity and Global Focus Funds were launched in
June 2014. Their objectives are to provide a total return in excess
of the MSCI All Country World Index over the long term through
investment in a diversified portfolio (Global Equity Fund) or
concentrated portfolio (Global Focus Fund) of global equities
including emerging markets. Since inception the funds have returned
14.7% and 14.1% per annum net of fees for the sterling share
classes which represents an outperformance of 0.5% per annum for
the MAM Global Equity Fund and an underperformance of 0.1% per
annum for the MAM Global Focus Fund against their benchmark the
MSCI All Country World Index. At 30 September 2017 the Company has
allocations of GBP21.8m and GBP7.7m respectively to the MAM Global
Equity Fund and MAM Global Focus Fund, representing 10.1% and 3.5%
of total assets. In the year to 30 September 2017 the funds
returned 16.4% and 16.0% net of fees respectively, which represents
outperformance of 1.5% and 1.1%. The positive contributors at the
sector level were overweight positions in Software and Consumer
Services and underweight positions in Pharmaceuticals whilst the
detractors were overweight positions in Internet Marketing and
Mining and an underweight position in Banks.
The MAM US Equity Fund was launched in June 2014 and since its
inception has returned 16.6% per annum net of fees for the sterling
share class. This represents an underperformance of 1.3% per annum
against its benchmark S&P 500 Index. At 30 September 2017 the
Company had an allocation of GBP8.3m, which represents 3.8% of
total assets, and in the year the Fund returned 12.6% net of fees
which represents an underperformance of 1.5%. The positive
contributors at the sector level were overweight positions in
Software, Consumer Services and IT Services whilst the detractors
were overweight positions in Mining, Food Retail and Professional
Services.
The aggregate geographic and sector exposures and performance 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. The exposures are determined by the domicile of
the stock exchange on which the underlying equity is listed and do
not attempt to determine the domicile of the earnings. The
factsheets for the funds in which the Company is invested are
available on the Company's website and show the largest overweight
and underweight positions for each fund as well as other relevant
information.
Majedie Asset Management
The Company retains its holding of 16.8% of MAM having not sold
any shares in MAM in the year to 30 September 2017. 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
founder shareholders to the MAM Employee Benefit Trust, up to a
maximum of 1.0% each year. The Board has increased the value of the
holding in MAM to GBP61.5m. The valuation is formulaic and reflects
three year historic average earnings and cash held on the balance
sheet. The Board believes it reflects fair value. The holding
represents 28.4% of the Company's total assets at 30 September
2017. The Company also received dividends of GBP4.2m from its
holding in MAM during the year.
MAM's assets under management increased to GBP14.6bn from
GBP12.3bn during the year, which reflects stock market increases
and net fund inflows during the year. The main contributor to fund
inflows was the Tortoise Fund which had a capacity window that was
subsequently closed. It is pleasing that the long only funds
broadly outperformed their respective indices. The Global funds,
having passed their important three year milestones have received
broad endorsement from a number of investment consultants. The
Tortoise Fund had a more difficult year as it was positioned too
defensively.
Post Balance Sheet Date Events
Since the year end, the Company announced on 6 November 2017
that it will redeem the 9.5% 2020 Debenture on 6 December 2017. The
NAV will be diluted by 0.6% (debt at Fair Value) and gearing will
be reduced to approximately 11%. As stock markets have attained
all-time highs it seems sensible and prudent to reduce the
expensive gearing that the Company has borne for 22 years. The
funds to repay the debenture holders have been raised pro rata
across the long only funds and with a slightly higher proportion
from the Tortoise Fund which has historically been a counterweight
to the Company's gearing.
The Funds are currently positioned more defensively as markets
have reached new heights and as the economic outlook seems to be
changing with questions as to how markets react to a change in the
interest rate cycle, the end of Quantitative Easing and pinch
points being reached in labour markets in the US, UK, Germany and
Japan.
Development of Net Asset Value
The chart below outlines the change in the Company's Net Asset
Value (debt at par) over the year ended 30 September 2017. In
aggregate, the NAV has increased by GBP12.5m, comprised of
investment gains of GBP22.0m being offset by expenses and interest
of GBP4.6m and dividends paid to shareholders of GBP4.9m.
NAV 30.09.2016 GBP170.0m
------------------------- ----------
MAM UK Equity Segregated +GBP8.3m
Portfolio
MAM +GBP8.6m
MAM Funds +GBP5.1m
Admin Costs and Other (GBP1.8m)
Finance Costs (GBP2.8m)
Dividend Paid (GBP4.9m)
NAV 30.09.2017 GBP182.5m
Allocation of Total Assets as at 30 September 2017
Value % of
GBP000 Total Assets
------------------------------------ -------- --------------
MAM UK Equity Segregated Portfolio 64,237 29.7
MAM UK Income Fund 17,119 7.9
MAM Global Equity Fund 21,812 10.1
MAM Global Focus Fund 7,677 3.5
MAM US Equity Fund 8,251 3.8
MAM Tortoise Fund 35,485 16.4
MAM 61,549 28.4
Net Cash/realisation fund* 377 0.2
216,507 100.0
-------- --------------
* Net Cash and realisation fund does not include cash held in
the MAM UK Equity Segregated Portfolio or MAM funds.
MAM Fund Performance
12 months
to 30
September Since
2017 MI invested
% Fund % Benchmark % Relative % Fund % benchmark % Relative
return return performance return return Performance
--------------- ----------- ------------- ------------- ------------- ------------ -------------
MAM UK Equity
Segregated
Portfolio 12.9 11.9 1.0 26.5 26.9 (0.4)
MAM UK Income
Fund 12.0 11.9 0.1 33.3 31.3 2.0
MAM Global
Equity Fund 16.4 14.9 1.5 56.3 54.1 2.2
MAM Global
Focus Fund 16.0 14.9 1.1 53.7 54.1 (0.4)
MAM US Equity
Fund 12.6 14.1 (1.5) 65.0 71.1 (6.1)
MAM Tortoise
Fund (4.4) - - 3.1 - -
Notes:
All Fund returns are quoted in Sterling, net of fees.
The initial investment in the MAM UK Equity Segregated Portfolio
was made on 22 January 2014.
The initial investment in the MAM UK Income Fund was made on 29
January 2014.
The initial investments in the MAM Global Equity Fund, MAM
Global Focus Fund and MAM US Equity Fund were made on 30 June 2014
and 26 June 2014 respectively, at the inception of each fund. 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
4 December 2017
FUND ANALYSIS
at 30 September 2017
Geographic and Sector Analysis at 30 September 2017
United Kingdom North America Emerging Markets Asia Pacific
Europe Cash Total
-------------------- --------------- -------------- --------- ----------------- ------------- ------- ------
Basic Materials 5.5 2.6 0.0 0.4 0.3 8.8
Consumer Goods 1.0 2.4 0.3 0.5 0.4 4.6
Consumer Services 12.9 2.1 0.9 1.4 0.7 18.0
Financials 13.2 3.2 0.1 0.8 0.1 17.4
Healthcare 2.1 2.5 0.8 0.0 0.0 5.4
Industrials 6.7 0.7 1.2 0.2 0.0 8.8
Oil & Gas 12.9 1.0 0.0 0.0 0.0 13.9
Technology 1.4 4.6 0.0 1.9 0.0 7.9
Telecommunications 3.3 0.0 3.9 0.0 0.9 8.1
Utilities 3.0 0.7 0.0 0.0 0.0 3.7
Cash 3.3 3.3
62.0 19.8 7.2 5.3 2.4 3.3 100.0
--------------- -------------- --------- ----------------- ------------- ------- ------
Notes:
The assets analysed above are the aggregate exposure of the 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 55.0% of the Company's total
assets.
Exposures are classified on the stock exchange on which the
underlying equity is listed and the relevant FTSE sector
classification
Twenty Largest MAM UK Equity Segregated Portfolio Holdings
at 30 September 2017
% of UK
Fair Value Equity Segregated
Company GBP000 Portfolio
------------------------------- ----------- -------------------
MAM UK Smaller Companies Fund 5,779 9.0
Royal Dutch Shell PLC 4,351 6.8
BP PLC 4,025 6.3
HSBC Holdings PLC 3,225 5.0
Tesco PLC 2,563 4.0
WM Morrison Supermarkets PLC 1,984 3.1
Vodafone Group PLC 1,956 3.0
Centrica PLC 1,883 2.9
GlaxoSmithKline PLC 1,730 2.7
Orange SA 1,561 2.4
Marks & Spencer PLC 1,553 2.4
BT Holdings PLC 1,514 2.4
Barclays PLC 1,328 2.1
Anglo American PLC 1,281 2.0
Royal Bank of Scotland PLC 1,253 2.0
Electrocomponents PLC 1,210 1.9
Rentokil Initial PLC 1,014 1.6
Barrick Gold Corporation 970 1.5
Standard Chartered PLC 950 1.5
KAZ Minerals PLC 934 1.5
----------- -------------------
Sub-total 41,064 63.9
----------- -------------------
Other (including cash) 23,173 36.1
----------- -------------------
Total 64,237 100.0
----------- -------------------
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.
The Company's broker is J.P. Morgan Cazenove, and the Company is
a member of the AIC (the trade body for closed-ended investment
companies).
The purpose of the Strategic Report 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
The Company has been streamlining its operations in recent times
which has now resulted in the removal of all other group entities.
At the start of the year, Majedie Portfolio Management Limited
(MPM) was in the process of being de-authorised by the FCA and then
liquidated, having not traded since June 2016. MPM was
de-authorised by the FCA on 1 December 2016, placed into
liquidation on 5 January 2017 and was dissolved on 4 October 2017.
As such, this Annual Report and Accounts are presented as group
accounts for the final time. Further details about MPM can be found
in note 14 to the Annual Report 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 AIFM, and in
accordance with the Company's investment objective and policy,
directs and monitors the overall performance, operations and
direction of the Company. The Company undertakes all administration
operations itself under the Company's business model.
The Company's Employee, Social, Environmental, Ethical and Human
Rights policy is contained in the Directors' Report 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 Guidance 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 and updated in
January 2017. 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 GBP24.6m, the revenue reserves
represent over four 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
investments is insufficient to completely cover 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 NAV 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 the discount
has moved within a range ending the year at a slightly lower value
to that at the start of the year (with the NAV with debt at par),
resulting in the Company's share price gain outperforming 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 current 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 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 3 years to 30 September 2017, which
is for the period after the rebasing of the dividend in 2014,
average dividend growth has been 9.2 % per annum, which is well
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. Additionally the Brexit outcome provides
another element to the investment risk faced by 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 (including Brexit).
Under the terms of the Investment Agreement, the Investment
Manager manages the majority of the Company's investment assets.
The portfolios of MAM UK Equity Segregated Portfolio 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 MAM UK Equity
Segregated Portfolio 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.
Given the nature of the Company's operations, the Board believes
that Brexit is likely to have a minimal impact on the Company.
On behalf of the Board
Andrew J Adcock
Chairman
4 December 2017
DIRECTORS' REPORT
The Directors submit their report and the accounts for the year
ended 30 September 2017.
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
operations amounted to GBP5,964,000
(2016: continuing operations consolidated net revenue return of
GBP4,956,000, and a net loss before taxation arising from
discontinued operations of nil).
The Directors recommend a final ordinary dividend of 6.25p per
ordinary share, payable on 24 January 2018 to shareholders on the
register at the close of business on 12 January 2018. Together with
the interim dividend of 3.50p per share paid on 16 June 2017, this
makes a total distribution of 9.75p per share in respect of the
financial year (2016: 8.75p 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 full 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 recommend
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
2017 2016
------------------ ------------------- -------------------
Mr AJ Adcock 50,000 50,000
Mr JWM Barlow 692,083 692,083
Mr PD Gadd 54,224 52,589
Mr RDC Henderson 24,700 24,700
Non-beneficial interests in ordinary shares as trustees for
various settlements as at:
30 September 1 October
2017 2016
--------------- -------------- -----------
Mr JWM Barlow 2,828,251 2,828,251
There have been no changes to any of the above holdings between
30 September 2017 and the date of this report.
Substantial Shareholdings
At 30 September 2017, the Company has been notified of the
following substantial holdings in shares carrying voting
rights:
Mr HS Barlow 15,017,619 28.10%
Aviva plc 6,941,341 12.99%
Mr MHD Barlow 1,776,241 3.32%
Miss AE Barlow 2,029,148 3.80%
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 September 2017 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, 17 January 2018
at 12 noon. The notice convening the Annual General Meeting is
available on the Company's website.
The Board considers that Resolutions 1 to 14 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 18 January 2017, to allot new shares for cash, and without first
offering them to existing shareholders in proportion to their
holdings, up to a maximum of 5,338,000 shares (being approximately
9.99% of the Company's existing share capital at that time). These
two existing authorities will expire at the 2018 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 no shares have been allotted. (2016: a total of
306,000 shares were allotted (for total consideration of GBP806,000
with issue costs of GBP1,000).
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 5,338,556 shares
(being approximately 9.99% of the Company's existing share
capital). The renewed authority will expire at the 2019 AGM.
Since 1 October 2016, and up to the date of this report, the
Company has made no buybacks for cancellation of its ordinary
shares. At the AGM in 2017 the Directors were given power to buy
back 8,010,505 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 2018 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 AGM
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
shall be 8,010,506 ordinary shares (being approximately 14.99% of
the Company's 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 2019 AGM.
Capital Structure
As part of its corporate governance the Board keeps under review
the capital structure of the Company. At 30 September 2017, 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.
The Company holds no shares in Treasury.
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. On
6 November 2017 the Company gave notice that it would exercise its
right to redeem the entire outstanding holdings of the March 2020
debenture - see note 27 below.
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 clear days' notice should a matter require urgency. The Board
will therefore, as last year, propose a resolution at the AGM 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 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 2017 (2016: nil).
Donations
The Company made no political or charitable donations during the
year (2016: nil) to organisations either within or outside of the
EU.
Gender Diversity
The Board are aware of the recommendations made in the
Hampton-Alexander Review in respect of gender diversity in the
boardroom. The Company's policy on diversity is included in the
section on the Nomination Committee in the Company's full 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 Date Events
On 6 November 2017, the Company gave notice that it was to
redeem GBP13.5 million, (being the total outstanding) of the 9.50%
March 2020 debentures. Further details are contained in the
Chairman's Statement and Chief Executive's Report above, and in
note 27 below.
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.
-- Link Market Services Limited (Link)
Company Secretarial services are provided by Link, following
their acquisition of Capita Asset Services on 6 November 2017. Such
services continue to be provided under the previous Company
Secretarial Services Agreement, dated 25 April 2016. The agreement
mandates that Link Company Matters Limited will act as Link'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 confirms that there are no items which require
disclosure under Listing Rule 9.8.4R in respect of the year ended
30 September 2017.
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 GBP5,000 of 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
2017 had leverage of 1.17 times under the Gross method and 1.19
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 2017. During the year an Audit tender was undertaken in
accordance with EU regulation. Further details are contained in the
Report of the Audit Committee in the Company's full Annual Report
and Accounts. 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 2022. The Directors believe that
this period is appropriate as the Company is a long-term investor
in equity markets.
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 1.17 times (Gross method) and 1.19 times (Commitment
method) are well below the 1.5 times limit. In addition the current
borrowings of GBP34.0m are over 5 times covered by the current
total assets) plus as the Company's investments primarily comprise
readily realisable securities (equal to 71.2% of total assets as at
30 September 2017), 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
2022.
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
Link Company Matters Limited
Company Secretary
4 December 2017
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 shown in the
Company's full Annual 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
4 December 2017
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 2017
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 2017
and 2016 but is derived from those accounts. Statutory accounts for
2016 have been delivered to the Registrar of Companies, and those
for 2017 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 2017
2017 2016
Revenue Capital Revenue Capital
return return Total return return Total
Group and Company Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ----- ------- ------- ------- ------- ------- -------
Investments
Gains on investments
at fair value
through profit
or loss 13 14,680 14,680 21,919 21,919
Net investment
Result 14,680 14,680 21,919 21,919
------- ------- ------- ------- ------- -------
Income
Income from investments 3 7,414 7,414 6,433 6,433
Other income 3 49 49 47 47
Total income 7,463 7,463 6,480 6,480
Expenses
Management fees 4 (122) (364) (486) (109) (325) (434)
Performance fees 4 (4) (4)
Administration
expenses 5 (673) (650) (1,323) (712) (779) (1,491)
------- ------- ------- ------- ------- -------
Return before
finance cost
and taxation 6,668 13,662 20,330 5,659 20,815 26,474
Finance costs 8 (704) (2,112) (2,816) (703) (2,110) (2,813)
------- ------- ------- ------- ------- -------
Net return before
taxation 5,964 11,550 17,514 4,956 18,705 23,661
Taxation 9 (13) (13) (17) (17)
------- ------- ------- ------- ------- -------
Net return after
taxation for
the year from
continuing operations 5,951 11,550 17,501 4,939 18,705 23,644
------- ------- ------- ------- ------- -------
Discontinued
operations
Net return for
the year from
discontinued
operations 15
Total comprehensive
income for the
year 5,951 11,550 17,501 4,939 18,705 23,644
------- ------- ------- ------- ------- -------
Return per Ordinary
Share pence pence pence pence pence pence
Basic for continuing
operations 11 11.1 21.6 32.7 9.3 35.0 44.3
Basic for discontinued
operations 11
Basic total 11 11.1 21.6 32.7 9.3 35.0 44.3
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.
All amounts relatable to continuing operations.
The notes below form part of these accounts
COMPANY STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2017
2017 2016
Revenue Capital Revenue Capital
return return Total return return Total
Group and Company Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------------------- ----- ------- ------- ------- ------- ------- -------
Investments
Gains on investments at fair value through profit and
loss 13 14,680 14,680 21,919 21,919
Net Investment Result 14,680 14,680 21,919 21,919
------- ------- ------- ------- ------- -------
Income
Income from investments 3 7,414 7,414 6,433 6,433
Other income 3 49 49 47 47
Total income 7,463 7,463 6,480 6,480
Expenses
Management fees 4 (122) (364) (486) (109) (325) (434)
Performance fees 4 (4) (4)
Administration expenses 5 (673) (650) (1,323) (712) (779) (1,491)
------- ------- ------- ------- ------- -------
Return before finance costs and taxation 6,668 13,662 20,330 5,659 20,815 26,474
Finance costs 8 (704) (2,112) (2,816) (703) (2,110) (2,813)
------- ------- ------- ------- ------- -------
Net Return before taxation 5,964 11,550 17,514 4,956 18,705 23,661
Taxation 9 (13) (13) (17) (17)
------- ------- ------- ------- ------- -------
Net Return after taxation for the year 5,951 11,550 17,501 4,939 18,705 23,644
------- ------- ------- ------- ------- -------
Return per Ordinary Share pence pence pence pence pence pence
Basic 11 11.1 21.6 32.7 9.3 35.0 44.3
The total column of this statement is the Statement of
Comprehensive Income of the Company 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.
All amounts relate to continuing operations.
The notes below form part of these accounts.
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2017
Capital
Share Share redemption Capital
capital premium reserve reserve Retained earnings Total
Group Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- ------ --------- --------- ------------ --------- ------------------ --------
Year ended 30
September 2017
As at 1 October 2016 5,344 3,054 56 141,648 19,884 169,986
Net return for the
year from continuing
operations 11,550 5,951 17,501
Dividends declared and
paid in year 10 (4,943) (4,943)
As at 30 September
2017 5,344 3,054 56 153,198 20,892 182,544
--------- --------- ------------ --------- ------------------ --------
Company
Year ended 30
September 2017
As at 1 October 2016 5,344 3,054 56 137,949 23,583 169,986
Net return for the
year 11,550 5,951 17,501
Dividends declared and
paid in year 10 (4,943) (4,943)
As at 30 September
2017 5,344 3,054 56 149,499 24,591 182,544
Group
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 19 (1) (1)
Dividends declared and
paid in year 10 (4,720) (4,720)
As at 30 September
2016 5,344 3,054 56 141,648 19,884 169,986
--------- --------- ------------ --------- ------------------ --------
Company
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
Share issue 19 31 775 806
Share issue expenses 19 (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
The notes below form part of these accounts.
CONSOLIDATED AND COMPANY BALANCE SHEET
as at 30 September 2017
Group Company Group Company
2017 2017 2016 2016
Notes GBP000 GBP000 GBP000 GBP000
Non-current assets
Property and equipment 12 50 50 52 52
Investments at fair value through profit or loss 13 213,748 213,748 201,359 201,359
Investment in Subsidiary 14 162
--------- --------- --------- ---------
213,798 213,798 201,411 201,573
Current assets
Trade and other receivables 16 228 228 356 356
Cash and cash equivalents 17 3,566 3,566 3,467 3,467
--------- --------- --------- ---------
3,794 3,794 3,823 3,823
--------- --------- --------- ---------
Total assets 217,592 217,592 205,234 205,396
--------- --------- --------- ---------
Current liabilities
Trade and other payables 18 (1,085) (1,085) (1,317) (1,479)
--------- --------- --------- ---------
Total assets less current liabilities 216,507 216,507 203,917 203,917
--------- --------- --------- ---------
Non-current liabilities
Debentures 18 (33,963) (33,963) (33,931) (33,931)
--------- --------- --------- ---------
Total liabilities (35,048) (35,048) (35,248) (35,410)
--------- --------- --------- ---------
Net assets 182,544 182,544 169,986 169,986
--------- --------- --------- ---------
Represented by:
Ordinary share capital 19 5,344 5,344 5,344 5,344
Share premium account 20 3,054 3,054 3,054 3,054
Capital redemption reserve 56 56 56 56
Capital reserve 153,198 149,499 141,648 137,949
Revenue reserve 20,892 24,591 19,884 23,583
--------- --------- --------- ---------
Equity Shareholders' Funds 182,544 182,544 169,986 169,986
--------- --------- --------- ---------
Net asset value per share 21 pence pence pence pence
Basic 341.6 341.6 318.1 318.1
Approved by the Board of Majedie Investments PLC (Company no.
109305) and authorised for issue on 4 December 2017.
Andrew J Adcock
Chairman
The notes below form part of these accounts.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENT
for the year ended 30 September 2017
Group Company Group Company
2017 2017 2016 2016
Notes GBP000 GBP000 GBP000 GBP000
------------------------------------------------------------------ ------ --------- --------- --------- ---------
Net cash flow from operating activities
Company net return before taxation* 17,514 23,661
Consolidated net return before taxation from continuing
operations* 17,514 23,661
Consolidated net return before taxation from discontinued
operations
Adjustments for:
Gains on investments 13 (14,680) (21,919)
Gains on investments relating to continuing operations 13 (14,680) (21,919)
Gains on investments relating to discontinued operations 15
Accumulation dividends (338) (338) (329) (329)
Depreciation 25 25 78 78
Foreign exchange losses/ (gains) (1) (1) (10) (10)
Purchases of investments (26,043) (26,043) (13,378) (13,378)
Sales of investments 28,580 28,580 15,838 15,838
--------- --------- --------- ---------
5,057 5,057 3,941 3,941
Finance costs 2,816 2,816 2,813 2,813
--------- --------- --------- ---------
Operating cashflows before movements in working capital 7,873 7,873 6,754 6,754
Increase/(decrease) in trade and other payables 5 5 (11) 151
(Increase)/decrease in trade and other receivables (46) (46) 146 241
Net cash inflow from operating activities before tax 7,832 7,832 6,889 7,146
--------- --------- --------- ---------
Tax recovered 31 31 2 2
Tax on unfranked income (15) (15) (34) (34)
--------- --------- --------- ---------
Net cash inflow from operating activities 7,848 7,848 6,857 7,114
--------- --------- --------- ---------
Attributable to:
Net cash inflow from operating activities from continuing
operations 7,848 6,857
Net cash inflow from operating activities from discontinued
operations
--------- ---------
Investing activities
Purchase of tangible assets (23) (23) (66) (66)
--------- --------- --------- ---------
Net cash outflow from investing activities (23) (23) (66) (66)
--------- --------- --------- ---------
Financing activities
Interest paid (2,783) (2,783) (2,783) (2,783)
Dividends paid (4,943) (4,943) (4,270) (4,270)
Net proceeds from share issues 1,192 1,192
--------- ---------
Net cash outflow from financing activities (7,726) (7,726) (5,861) (5,861)
--------- --------- --------- ---------
Increase/(Decrease) in cash and cash equivalents for the year 22 99 99 930 1,187
Cash and cash equivalents at start of year 3,467 3,467 2,537 2,280
--------- --------- ---------
Cash and cash equivalents at end of year 3,566 3,566 3,467 3,467
--------- --------- --------- ---------
* Includes dividends received in the year of GBP7,040,000 (2016:
GBP6,132,000) and interest received of GBP3,000 (2016:
GBP1,000).
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 provided investment management
services and is not itself an investment entity and as such is
consolidated into the Group accounts. MPM was placed into
liquidation on 5 January 2017 and was dissolved on 4 October
2017.
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,
but excluding the MAM funds) represent 33.8% (2016: 33.7%) 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 2017, 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, and updated in
January 2017, 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.
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 the entity 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. 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
---------------------------------------------------------------------------- ---------------
IAS 7 Disclosure Initiative Amendments to IAS 7 Statement of Cash Flows 1 January 2017
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 initial assessment is that it is not anticipated
that the adoption of the above Standards and Interpretations would
have a material impact on the financial statements in the period of
initial application. In respect of IFRS 9 and IFRS 15 which will
first be adopted by the Company during the year ended 30 September
2019, a detailed assessment of any quantitative impact of the
adoption of these standards will be undertaken during the year
ended 30 September 2018.
Management anticipates that all of the relevant pronouncements
will be adopted in the relevant accounting period in which the
standard is effective.
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.
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.
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.
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.
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, as defined by IAS 39.
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 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.
Trade Receivables
Trade receivables do not carry any interest and are stated at
carrying value which is 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.
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 above, 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
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 to exposure to different
currencies is disclosed in note 25 below.
3 INCOME
Group and Company Group and Company
2017 2016
GBP000 GBP000
----------------- ----- ----------------- -----
Income from investments
Franked dividend income* 6,967 5,943
Accumulation income 338 329
Overseas dividends 109 161
7,414 6,433
----------------- ----- ----------------- -----
Other income
Deposit interest 3 1
Sundry income 46 46
49 47
----------------- ----- ----------------- -----
Total income 7,463 6,480
----------------- ----- ----------------- -----
Total income comprises:
Dividends 7,414 6,433
Interest 3 1
Other income 46 46
7,463 6,480
----------------- ----- ----------------- -----
Income from investments
Listed UK 1,910 3,016
Listed overseas 109 184
Unlisted - MAM funds 1,253
Unlisted 4,142 3,233
7,414 6,433
----------------- ----- ----------------- -----
* Includes MAM Ordinary dividend income of GBP4,142,000 (2016:
GBP3,233,000)
4 MANAGEMENT FEES
Group and Company Group and Company
2017 2016
Revenue Capital Revenue Capital
return return Total return return Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------- ------- ------- ------- ------- -------
Investment management 122 364 486 109 325 434
Performance 4 4
------- ------- ------- ------- ------- -------
122 368 490 109 325 434
------- ------- ------- ------- ------- -------
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
investment management fees charged and shown are only in respect of
the investment in the MAM UK Equity Segregated Portfolio.
Investment management 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 2017,
an amount of GBP122,000 was outstanding for payment of investment
management fees due to MAM on the MAM UK Equity Segregated
Portfolio (2016: GBP115,000).
Performance fees are also payable to MAM in respect of the
investment in the MAM Tortoise fund, but not on any other MAM fund
investment. The performance fees are calculated in accordance with
the fund's prospectus using an equalisation method. As these fees
are individual to each investor they are charged to each investor
and not the fund. The MAM Tortoise fund charges performance fees on
the basis of its fund year and these fees are in respect of the
fund year ended 30 September 2016. In accordance with the AIC SORP
these fees are charged wholly to capital. There were no amounts
outstanding as at 30 September 2017.
5 ADMINISTRATIVE EXPENSES
Group and Company Group and Company
2017 2016
GBP000 GBP000
Staff costs - note 7 451 414
Other staff costs and Directors' fees 185 178
Advisers' costs 315 352
Information costs 124 93
Establishment costs 30 56
Operating lease rentals - premises 60 79
Depreciation on tangible assets 25 78
Auditor's remuneration (see below) 43 34
Relocation costs 72
Other expenses 89 135
1,322 1,491
----------------- ----- ----------------- -----
A charge of GBP650,000 (2016: GBP779,000) to capital and an
equivalent credit to revenue has been made in the Group and Company
to recognise the accounting policy of 75% of direct investment
administration expenses to capital.
Total fees charged by the Auditor for the year, all of which
were charged to revenue, comprised:
Group and Company Group and Company
2017 2016
GBP000 GBP000
Audit services - statutory audit 33 33
Other audit related services 1 1
Liquidation services 9
43 34
----------------- -----------------
Other audit related services relate to a review of the Company's
debenture covenant in 2017 and in 2016.
6 DIRECTORS' EMOLUMENTS
Company Company
2017 2016
GBP000 GBP000
Fees 143 143
Salary 177 173
Other benefits 8 8
328 324
-------- ---- -------- ----
The Report on Directors' Remuneration in the Company's full
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 and Company Group and Company
2017 2016
GBP000 GBP000
----------------- --- ----------------- ---
Salaries and other payments 370 341
Social security costs 50 45
Pension contributions 31 28
451 414
----------------- --- ----------------- ---
Group Group
2017 2016
Number Number
--------- --------
Average number of employees:
Management and office staff 3 3
--------
8 FINANCE COSTS
Group and Company Group and Company
2017 2016
Revenue Capital Revenue Capital
return return Total return return Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- ------- ------- ------- ------- ------- -------
Interest on 9.50%
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 8 25 33 7 23 30
704 2,112 2,816 703 2,110 2,813
------- ------- ------- ------- ------- -------
Further details of the debenture stocks in issue are provided in
note 25 and note 27.
9 TAXATION
Analysis of tax charge
Group and Company Group and Company
2017 2016
GBP000 GBP000
------------------ ------------------
Tax on overseas dividends 13 17
------------------ ------------------
Reconciliation of tax charge:
The current taxation rate for the year is lower (2016: lower)
than the standard rate of corporation tax in the UK of 19.5% (2016:
20.0%). The differences are explained below:
Group and Company Group and Company
2017 2016
GBP000 GBP000
----------------- ------ ----------------- ------
Net return before taxation for the year from continuing
operations 17,514 23,661
----------------- ------ ----------------- ------
Net return before taxation for the year from discontinued
operations
----------------- ------ ----------------- ------
Net return before taxation 17,514 23,661
----------------- ------ ----------------- ------
Taxation at UK Corporation Tax rate of 19.5% (2016: 20.0%) 3,414 4,732
----------------- ------ ----------------- ------
Effects of:
- UK dividends which are not taxable (1,424) (1,189)
- foreign dividends which are not taxable (21) (37)
- gains on investments which are not taxable (2,863) (4,384)
- expenses which are not deductible for tax purposes 12 23
- excess expenses for the current year 882 855
- overseas taxation which is not recoverable 13 17
Actual current tax charge 13 17
----------------- ------ ----------------- ------
Group
After claiming relief against accrued income taxable on receipt,
the Group has unrelieved excess expenses of GBP83,056,000 (2016:
GBP78,499,000). 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 GBP83,028,000 (2016:
GBP78,471,000). 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
2017 2016
GBP000 GBP000
---------- ------ ---------- ------
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
2016 Final dividend of 5.75p paid on 25 January 2017 3,073
2017 Interim dividend of 3.50p paid on 16 June 2017 1,870
4,943 4,270
---------- ------ ---------- ------
2017 2016
GBP000 GBP000
---------- ------ ---------- ------
Proposed final dividend for the year ended 30 September 2017 of 6.25p
(2016: final dividend
of 5.75p) per ordinary share 3,340 3,073
3,340 3,073
---------- ------ ---------- ------
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.
2017 2016
GBP000 GBP000
-------- ------ -------- ------
Interim dividend for the year ended 30 September 2017 of 3.50p (2016: 3.00p)
per ordinary
share. 1,870 1,603
Final dividend for the year ended 30 September 2016 of 6.25p (2016: 5.75p) per
ordinary share. 3,340 3,073
5,210 4,676
-------- ------ -------- ------
Distributable reserves of the Company comprise the Capital and
Revenue Reserves.
Dividends for the year (and for 2016) have been solely made from
the Revenue Reserve.
11 RETURN PER ORDINARY SHARE
Basic return per ordinary share from continuing operations is
based on 53,439,000 ordinary shares, being the weighted average
number of shares in issue (2016: Basic return from continuing and
discontinued operations of 53,366,070). Basic returns per ordinary
share from continuing operations are based on the net return after
taxation attributable to equity shareholders. (2016: Basic returns
per ordinary share from continuing and discontinued operations are
based on the net return after taxation attributable to equity
shareholders).
Group Group
2017 2016
GBP000 GBP000
-------- ------- -------- -------
Basic revenue returns from
continuing operations are based on net revenue after
taxation of: 5,951 4,939
Basic revenue returns from
discontinued operations are based on net revenue after taxation of:
Basic capital returns from
continuing operations are based on net capital return of: 11,550 18,705
Basic capital returns from
discontinued operations are based on net capital return of:
Basic total returns are based on a
return of: 17,501 23,644
-------- ------- -------- -------
Company Company
2017 2016
GBP000 GBP000
-------- ------- -------- -------
Basic revenue returns are based
on net revenue after taxation of: 5,951 4,939
Basic capital returns are based
on net capital return of: 11,550 18,705
Basic total returns are based on a
return of: 17,501 23,644
-------- ------- -------- -------
12 PROPERTY AND EQUIPMENT
Group and Company Group and Company
Leasehold Office
Improvements Equipment Total
GBP000 GBP000 GBP000
---------------------- ------------------ --- ------------------ ---- -------- ----
Cost:
At 1 October 2016 28 207 235
Additions 23 23
Disposals
At 30 September 2017 28 230 258
------------------ --- ------------------ ---- -------- ----
Depreciation:
At 1 October 2016 4 179 183
Charge for year 5 20 25
Disposals
At 30 September 2017 9 199 208
------------------ --- ------------------ ---- -------- ----
Net book value:
At 30 September 2017 19 31 50
------------------ --- ------------------ ---- -------- ----
At 30 September 2016 24 28 52
------------------ --- ------------------ ---- -------- ----
13 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Group 2017 Group 2016
Unlisted (MAM
Listed Funds) Unlisted Total Listed Unlisted Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------- ------------------ -------- -------- -------- ---------- --------
Opening cost at
beginning of year 52,282 2,680 134,859 133,565 2,530 136,095
Gains/(losses) at
beginning of year 1,714 54,558 66,500 (4,348) 49,897 45,549
-------- ------------------ -------- -------- -------- ---------- --------
Opening fair value
at beginning of
year 53,996 57,238 201,359 129,217 52,427 181,644
-------- ------------------ -------- -------- -------- ---------- --------
Purchases at cost 20,805 5,337 26,142 13,701 13,701
Sales - proceeds (24,085) (4,348) (28,433) (15,905) (15,905)
Gains on sales 2,583 196 2,779 968 968
(Decrease)/Increase
in investment
holding gains (7,593) 15,040 4,454 11,901 16,290 4,661 20,951
Transfer on
delisting of
shares* (79,897) 79,897 (150) 150
--------
Closing fair value
at end of year 55,934 96,122 61,692 213,748 144,121 57,238 201,359
-------- ------------------ -------- -------- -------- ---------- --------
Closing cost at end
of year 51,585 81,082 2,680 135,347 132,379 2,680 134,859
Gains at end of year 4,349 15,040 59,012 78,401 11,942 54,558 66,500
--------
Closing fair value
at end of year 55,934 96,122 61,692 213,748 144,121 57,238 201,359
-------- ------------------ -------- -------- -------- ---------- --------
Company
2017
Unlisted (MAM funds) Subsidiary
Listed GBP000 Unlisted company Total
GBP000 GBP000 GBP000 GBP000
-------- -------------------- -------- ---------- --------
Opening cost at beginning of year 52,282 2,680 1,000 135,859
Gains/(losses) at beginning of year 1,714 54,558 (838) 65,662
-------- -------------------- -------- ---------- --------
Opening fair value at beginning of year 53,996 57,238 162 201,521
-------- -------------------- -------- ---------- --------
Purchases at cost 20,805 5,337 26,142
Sales - proceeds (24,085) (4,348) (28,433)
Gains on sales 2,583 196 (838) 1,941
(Decrease)/Increase in investment holding
gains (7,593) 15,040 4,454 838 12,739
Return of Capital on liquidation of
subsidiary (162) (162)
Transfer on delisting of shares* (79,897) 79,897
Closing fair value at end of year 55,934 96,122 61,692 213,748
-------- -------------------- -------- ---------- --------
Closing cost at end of year 51,585 81,082 2,680 135,347
Gains at end of year 4,349 15,040 59,012 78,401
Closing fair value at end of year 55,934 96,122 61,692 213,748
-------- -------------------- -------- ---------- --------
* During the year the MAM funds were delisted. This change has
no impact on the pricing or liquidity of these funds (2016:
Delisting of a realisation portfolio holding).
Company 2016
------------------------------------------------ -------- --------------------- --------
Subsidiary
Listed Unlisted entities 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
(Decrease)/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 132,379 2,680 1,000 135,859
Gains/(losses) 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.
Unlisted investments include an amount of GBP142,000 in 4
companies (2016: GBP118,000 in 3 companies) and GBP61,550,000
(2016: GBP57,120,000) for the Company's investment in MAM as
detailed below. The increase in the number of unlisted holdings
from 3 to 4 is due to a corporate action on an existing nil valued
holding during the year resulting in a gain for the period. During
the year the MAM Funds delisted and accordingly were re-classified
as Level 2 investments. Further details concerning the investments
in the MAM Funds are shown below.
During the year the Company incurred transaction costs amounting
to GBP127,000 (2016: GBP84,000), of which GBP107,000 (2016:
GBP71,000) related to the purchase of investments and GBP20,000
(2016: GBP13,000) 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
2017 2016 2017 2016
GBP000 GBP000 GBP000 GBP000
-------------------------------------------- ------- ------ ------- ------ ------- ------ ------- ------
Net gains on sales of equity investments 2,779 968 1,941 968
Increase in holding gains on equity
investments 11,901 20,951 12,739 20,951
Net return on investments 14,680 21,919 14,680 21,919
------- ------ ------- ------ ------- ------ ------- ------
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
2017 2016
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 55,934 55,934 53,996 53,996
Listed equity securities (MAM funds) 90,125 90,125
Unlisted equity securities (MAM Funds) 96,122 96,122
Unlisted equity securities 61,692 61,692 57,238 57,238
55,934 96,122 61,692 213,748 144,121 57,238 201,359
------- ------- ------- ------- ------- ------- ------- -------
Company Company
2017 2016
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 55,934 55,934 53,996 53,996
Listed equity securities (MAM funds) 90,125 90,125
Unlisted equity securities (MAM funds) 96,122 96,122
Unlisted equity securities 61,692 61,692 57,400 57,400
55,934 96,122 61,692 213,748 144,121 57,400 201,521
------- ------- ------- ------- ------- ------- ------- -------
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 2017 or 2016).
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 GBP90,125,000 (2016: GBPnil) from Level 1
to Level 2 for the MAM funds which delisted during the year. This
change in classification has no impact on the pricing or liquidity
of these 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
2017 2016
Equity Equity
Total investments Total investments
GBP000 GBP000 GBP000 GBP000
---------------------------------------------------------------------- ------- ------------ ------- ------------
Opening balance 57,238 57,238 52,427 52,427
Transfers from Level 1 150 150
Total gains for the year included in the Statement of Comprehensive
Income 4,454 4,454 4,661 4,661
61,692 61,692 57,238 57,238
------- ------------ ------- ------------
Company Company
2017 2016
Equity Equity
Total investments Total investments
GBP000 GBP000 GBP000 GBP000
---------------------------------------------------------------------- ------- ------------ ------- ------------
Opening balance 57,400 57,400 52,589 52,589
Transfers from Level 1 150 150
Return of capital on liquidation of subsidiary (162) (162)
Total gains for the year included in the Statement of Comprehensive
Income 4,454 4,454 4,661 4,661
61,692 61,692 57,400 57,400
------- ------------ ------- ------------
Investments in Investment Funds
The Company has a number of investments in investment funds
managed by MAM. Details of these investments are:
30 September 2017 30 September 2016
Investment Proportion Investment Proportion
Value Held Value Held
GBP000 % GBP000 %
-------------------------------- ----------- ----------- ----------- -----------
MAM Tortoise Fund 35,485 2.5 32,382 3.2
MAM Income Fund 17,119 1.9 19,752 2.2
MAM Global Equity Fund 21,812 45.0 18,735 45.1
MAM Global Focus Fund 7,677 4.6 6,617 31.9
MAM US Equity Fund 8,251 3.8 7,326 4.2
MAM UK Smaller Companies Fund* 5,779 1.0 5,312 1.3
* 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 2017 was GBP154.6 million (2016: GBP146.0 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 in the MAM Global Equity
Fund (which has a fair value of GBP21.8m as at September 2017).
This is a substantial interest in that fund at 30 September 2017
(2016: MAM Global Equity Fund and MAM Global Focus Fund of GBP15
million and GBP5 million respectively). This holding is not
assessed as a subsidiary or associate, and is accounted for as an
investment held at fair value through profit or loss, in accordance
with IAS 39.
Majedie Asset Management (MAM)
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.
2017 2016
GBP000 GBP000
-------- ------- -------- -------
Cost of investment 540 540
Holding gains 61,010 56,580
Fair value of investment at 30 September 61,550 57,120
-------- ------- -------- -------
The carrying 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 carrying
value), being the 3 year average earnings of MAM together with
earnings multiples applied to those earnings, and the value of
surplus cash held by MAM. A 5% increase/decrease in MAM's earnings
would result in an increase/decrease of 4.4% in the carrying 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, or in 2016.
As at 30 September 2017, the Company holds 57,523 ordinary 0.1p
shares representing a 16.8% shareholding in MAM (2016: 57,523
ordinary 0.1p shares representing a 16.7% shareholding).
14 INVESTMENT IN SUBSIDIARY
Majedie Portfolio Management Limited (MPM) was dormant having
not traded since June 2016. It was placed into liquidation on 5
January 2017 and was dissolved on 4 October 2017.
15 DISCONTINUED OPERATIONS
There were no discontinued operations in the year. Discontinued
operations shown relate to the closure of MPM, in 2016 as reported
in last year's accounts. These are shown as nil because 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 did 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 did report
a nil net return and all such revenues and expenses incurred by it
were eliminated on consolidation.
16 TRADE AND OTHER RECEIVABLES
Group and Company Group and Company
2017 2016
GBP000 GBP000
------------------ ---- ------------------ ----
Sales for future settlement 44 191
Prepayments 75 47
Dividends receivable 60 42
Taxation recoverable 49 76
228 356
------------------ ---- ------------------ ----
The Directors consider that the carrying amounts of trade and
other receivables approximates to their fair value.
17 CASH AND CASH EQUIVALENTS
Group and Company Group and Company
2017 2016
GBP000 GBP000
------------------ ------ ------------------ ------
Deposits at banks 2,900 2,857
Other cash balances* 666 610
3,566 3,467
------------------ ------ ------------------ ------
*Other cash balances includes GBP666,000 (2016: GBP602,000) 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 and Company Group Company
2017 2016 2016
GBP000 GBP000 GBP000
----------------- ----- ------- ----- ------- -----
Purchases for future settlement 79 318 318
Accrued expenses 295 300 300
Amounts due to subsidiary undertakings 162
Other creditors 711 699 699
1,085 1,317 1,479
----------------- ----- ------- ----- ------- -----
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 and Company Group and Company
2017 2016
GBP000 GBP000
----------------- ------ ----------------- ------
GBP13.5m (2016: GBP13.5m) 9.50% 2020 debenture stock 13,459 13,445
GBP20.7m (2016: GBP20.7m) 7.25% 2025 debenture stock 20,504 20,486
33,963 33,931
----------------- ------ ----------------- ------
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, and in note 27 in respect of the redemption of
the GBP13.5m 9.50% 2020 debenture stock.
19 ORDINARY SHARE CAPITAL
Company Company
2017 2016
Number GBP000 Number GBP000
----------- -------- ----------- --------
As at 1 October 54,439,000 5,344 53,133,000 5,313
Ordinary 10p shares issued 306,000 31
As at 30 September 53,439,000 5,344 53,439,000 5,344
----------- -------- ----------- --------
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
2017 2016
GBP000 GBP000
---------- ------ ---------- ------
As at 1 October 3,054 2,280
Ordinary 10p shares issued 775
Issue costs (1)
As at 30 September 3,054 3,054
---------- ------ ---------- ------
21 NET ASSET VALUE
The net asset value per share (Group and Company) has been
calculated based on equity shareholders' funds of GBP178,173,000
(2016: GBP169,986,000), and on 53,439,000 (2016: 53,439,000)
ordinary shares, being the number of shares in issue at the year
end.
22 ANALYSIS OF CHANGES IN NET DEBT
At 30 Non At 30
September Cash Cash September
2016 Flows Items 2017
Group and Company GBP000 GBP000 GBP000 GBP000
---------- -------- ------- ------- ---- ---------- --------
Cash at bank and
other cash balances 3,467 99 3,566
Debt due after one year (33,931) (32) (33,963)
(30,464) 99 (32) (30,397)
---------- -------- ------- ------- ---- ---------- --------
23 OPERATING LEASE COMMITMENTS
The Company operates in its premises by way of a sub-lease
arrangement with a superior lease, which has three years remaining.
The arrangement allows for participation in rent reviews etc as
they occur. Following a rent review in the prior year the Company
has an annual commitment of GBP60,000 under its sub-lease
arrangement (2016: GBP60,000). This operating lease commitment is
disclosed in the table below:
Group Group
2017 2016
Expiry Date GBP000 GBP000
-------- ---- -------- ----
Between one and two years 60 60
Between two and three years 60 60
Between three and four years 60 60
Between four and five years 60
180 240
-------- ---- -------- ----
24 FINANCIAL COMMITMENTS
At 30 September 2017 the Company had no financial commitments
which had not been accrued for (2016: 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 had 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 2017 or 2016. 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 (2016:
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
2017 was GBP6,787,000 (2016: Group and Company: GBP5,791,000
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 Director's receive regular reports on
exposures.
The Company is able to, 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
2017 2016
Total Total
Overseas Currency Overseas Currency
Investments Exposure Investments Exposure
Currency exposure GBP000 GBP000 GBP000 GBP000
------------- ---------- ------------- ----------
US Dollar 1,763 1,763 945 945
Euro 4,096 4,096 4,026 4,026
Yen 251 251 595 595
Other non-Sterling 677 677 225 225
6,787 6,787 5,791 5,791
------------- ---------- ------------- ----------
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
2016. 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
2017 2016
Income Statement GBP000 GBP000
------------------ ------ ------------------ ------
Revenue return
Capital return (339) (290)
Net assets (339) (290)
------------------ ------ ------------------ ------
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
2017 2016 2016
GBP000 GBP000 GBP000
------------------------ -------- -------- -------- -------- -------- --------
Floating rate financial
assets:
UK Sterling 3,566 3,467 3,467
Financial assets
not carrying interest 213,976 201,715 201,877
217,542 205,182 205,344
-------- -------- -------- -------- -------- --------
Fixed rate financial
liabilities:
UK Sterling (33,963) (33,931) (33,931)
Financial liabilities
not carrying interest (1,805) (1,317) (1,479)
(35,048) (35,248) (35,410)
-------- -------- -------- -------- -------- --------
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 on a nominal basis. 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
2017 2016
Income Statement GBP000 GBP000
------------------ --- ------------------ ---
Revenue return 15 14
Net assets 15 14
------------------ --- ------------------ ---
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 and its investments in
the unlisted MAM Funds, where although the funds themselves are
unlisted they are invested in listed equity securities, which are
both 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 would be
marked to market and exposure to counterparties is also monitored
on a daily basis by MAM. As at the year end of the Company did not
hold any derivatives (2016: nil).
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 listed and unlisted equity investments:
Group
and
Company Group Company
2017 2016 2016
GBP000 GBP000 GBP000
-------- ------- ------- ------- ------- -------
Non-current investments
held at fair value
through profit or
loss
Listed equity investments 55,934 53,996 53,996
Listed equity investments
(MAM Funds) 90,125 90,125
Unlisted equity
investments (MAM
Funds) 96,122
Unlisted equity
investments 61,692 57,238 57,238
Subsidiary company 162
213,748 201,359 201,521
-------- ------- ------- ------- ------- -------
Sensitivity Analysis
If share prices on listed equity security investments and the
unlisted equity investments (MAM Funds) 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
2017 2016
Income Statement GBP000 GBP000
----------------- ------ ----------------- ------
Capital return 15,206 14,412
----------------- ------ ----------------- ------
Net assets 15,206 14,412
----------------- ------ ----------------- ------
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.
Credit Risk Exposure
The table below sets out the financial assets exposed to credit
risk as at the reporting date:
Group and Company Group and Company
2017 2016
GBP000 GBP000
----------------- ----- ----------------- -----
Cash on deposit and at banks 3,566 3,467
Sales for future settlement 44 191
Interest, dividends and other receivables 184 165
3,794 3,823
Minimum exposure during the year 3,249 2,163
Maximum exposure during the year 10,920 5,549
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 28.4% (2016: 28.3%) of the Company's
investment portfolio. This investment is closely monitored by the
Board which receives regular financial and operational reports, and
it is believed that the current concentration risk here is
mitigated somewhat by the diversification undertaken within the MAM
business itself.
The Company maintains an appropriate level of non-investment
related cash balances in order to finance its operations. The
Company regularly monitors such 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
2017
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
9.50% 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 6,753 15,102
Trade payables and other liabilities 1,085 1,085
3,868 2,783 2,783 40,953 50,387
Group 2016
Due Due Due Due
within between between 3 years
1 year 1 and 2 years 2 and 3 years and beyond Total
Undiscounted cash flows GBP000 GBP000 GBP000 GBP000 GBP000
9.50% 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
Company 2016
Due Due Due Due
within between between 3 years
1 year 1 and 2 years 2 and 3 years and beyond Total
Undiscounted cash flows GBP000 GBP000 GBP000 GBP000 GBP000
9.50% 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 1,479 1,479
4,262 2,783 2,783 43,095 52,923
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
2017 2016 2016
Financial assets GBP000 GBP000 GBP000
Financial assets at fair value through profit or
loss
Equity securities 213,748 201,359 201,359
Subsidiary 162
213,748 201,359 201,521
Other financial assets(*) 3,794 3,823 3,823
205,182 205,344
Financial liabilities
Financial liabilities measured at amortised
cost(**) 35,048 35,248 35,410
35,048 35,248 35,410
* 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
2017 2016 2017 2016
Group and Company GBP000 GBP000 GBP000 GBP000
GBP13.5m (2016: GBP13.5m) 9.50%
2020 debenture stock 13,459 13,445 15,620 16,605
GBP20.7m (2016: GBP20.7m) 7.25%
2025 debenture stock 20,504 20,486 25,706 27,111
33,963 33,931 41,326 43,716
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
2017 2016 2016
GBP000 GBP000 GBP000
Net Debt
Adjusted cash and cash equivalents* (2,709) (2,506) (2,344)
Debentures 33,963 33,931 33,931
Sub total 31,254 31,425 31,587
Equity
Equity share capital 5,344 5,344 5,344
Retained earnings and other reserves 177,200 164,642 164,642
Shareholders' funds 182,544 169,986 169,986
Gearing
Net debt as a percentage of shareholders' funds 17.1% 18.5% 18.6%
*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 2017 this was 18.6% (2016: Group and
Company 20.0%).
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
2017 2016 2016
Gross Method GBP000 GBP000 GBP000
Investments held at fair value through profit or loss 213,748 201,359 201,359
Investment in subsidiary held at fair value through profit or loss 162
Total investments at exposure value as defined under the AIFMD 213,748 201,359 201,521
Shareholders' funds 182,544 169,986 169,986
Leverage (times) 1.17 1.18 1.19
Company Group Company
2017 2016 2016
Commitment Method GBP000 GBP000 GBP000
Investments held at fair value through profit or loss 213,748 201,359 201,359
Investment in subsidiary held at fair value through profit or loss 162
Cash and cash equivalents 3,566 3,467 3,467
Total investments at exposure value as defined under the AIFMD 217,314 204,826 204,988
Shareholders' funds 182,544 169,986 169,986
Leverage (times) 1.19 1.20 1.21
The leverage figures calculated above represent leverage as
calculated under the gross and commitment methods as defined under
the AIFMD (and a figure of 1 represents no leverage or borrowings).
The two methods differ in their 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 1.5 times, 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)
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 Statement & Chief Executive's Report above.
MAM is also entitled to receive performance fees on the
Company's investment in the MAM Tortoise Fund. Further details on
performance fees for the MAM Tortoise Fund are shown in the
Directors' Report above and in Note 4 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 Statement &
Chief Executive's Report above and in note 13 above.
Majedie Portfolio Management (MPM)
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 was
dormant during the year and has been liquidated.
The table below discloses the transactions and balances between
those entities:
2017 2016
Transactions during the period: GBP000 GBP000
Dividend income received from MAM 4,142 3,233
MPM costs recharged by the Company 28
Performance fee income due to MAM (MAM Tortoise Fund only) 4
Management fee income due to MAM (segregated portfolio only) 486 434
Balances outstanding at the end of the period:
Between the Company and MAM (Segregated Portfolio investment management fees) 122 115
Value of the Company's investment in MAM 61,550 57,120
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 2017 for Directors
fees or salary (2016: nil). Further information about the
remuneration of individual directors is provided in the audited
section of the Report on Directors' Remuneration in the full Annual
Report and Accounts.
2017 2016
GBP000 GBP000
Short term employee benefits 338 324
338 324
27 POST BALANCE SHEET DATE EVENTS
On 6 November 2017, the Company gave irrevocable notice that it
would be exercising its right to redeem the entire outstanding
amount, being GBP13.5m, of the 9.50% March 2020 debenture stock.
The redemption value was as calculated in accordance with the Trust
Deed giving rise to a cost of GBP16.6m, including accrued interest,
with a settlement date of 6 December 2017.
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.
Link Company Matters Limited Shareholders may check details 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 (UK) Limited Auditors
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 Custodian, The Stockbrokers
Bank of New York Mellon SA/NV, London J.P. Morgan Cazenove
Branch. 25 Bank Street
London E14 5JP
AIFM
Majedie Investments PLC
ISIN
Solicitor Ordinary: GB0005555221
Dickson Minto W.S. Debenture 7.25% 31/03/2025: GB0006733058
16 Charlotte Square
Edinburgh EH2 4DF Ticker
Ordinary: MAJE
Legal Entity Identifier Debenture 7.25% 31/03/2025: BD22
2138007QEY9DYONC2723
Sedol
Ordinary: 0555522
Debenture 7.25% 31/03/2025: 0673305
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 17 January
2018 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 EAXALEDPXFFF
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