Annual Financial Report

MAJEDIE INVESTMENTS PLC FINAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2010 The full Annual Report and Accounts can be accessed via the Company's website at www.majedie.co.uk or by contacting the Company Secretary on telephone 01392 412122. The Directors present the results of the Company for the year ended 30 September 2010. Investment Objective and Policy Statement Investment Objective The Company's objective is to maximise total shareholder return over the long term whilst increasing dividends by more than the rate of inflation. Investment Policy The Company invests principally in securities of publicly quoted companies worldwide, though it may invest in unquoted securities up to levels set periodically by the Board. This can include products managed by Javelin Capital, its investment manager. The overall approach is based on analysis of global economies and sector trends with a focus on companies and sectors judged likely to deliver strong growth over the long term. The number of investments held, together with the geographic and sector diversity of the portfolio, enable the Company to spread its risks with regard to liquidity, market volatility, currency movements and revenue streams. The assets of the Company are split into four major groups. These are the Core Portfolio, funds managed by Javelin Capital LLP, and the Company's investments in Majedie Asset Management (MAM) and Javelin Capital LLP. An analysis and description of these groups is contained in the Investment Managers' Report. The Company does not have one overall benchmark, rather each distinct group of assets is viewed independently. For the actively managed Core Portfolio the benchmark comprises 70% FTSE All-Share Index and 30% FTSE World ex UK Index (Sterling) on a total return basis. Any investments made into Javelin Capital products are measured against the relevant fund benchmark as contained in the fund's prospectus. 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. Although, exceptionally, derivative instruments may be employed by the Company, usually for hedging purposes and with specific prior approval of the Board, generally the Company is a long-only investor and would be unlikely to use such instruments. The Company will not invest in any holding that would, at the time of investment, represent more than 15% of the value of its gross assets. The Company uses gearing, currently via longer term debentures. The Articles of Association give the Board the ability to borrow up to 100% of adjusted capital and reserves. The Board also reviews the level of net gearing (borrowings less cash) on an ongoing basis and sets a range at its discretion as appropriate. The Company's current debenture borrowings are limited by covenant to 662/3%, and any additional indebtedness is not to exceed 20%, of adjusted capital and reserves. Highlights for 2010 Total shareholder return: 7.9% Net asset value total return: (0.6%) Final dividend (per share): 6.3p Special dividend (per share): 2.5p Total dividends (per share): 13.0p Directors' valuation of investment in Majedie Asset Management Limited: Â£30.0m Investment in Javelin Capital LLP of: Â£4.5m Group Summary Total assets* Â£150.9m Shareholders' funds Â£117.2m Market capitalisation Â£99.6m Capital structure 10p ordinary shares 52,528,000 Â£13.5m 9.5% debenture stock Debt 2020 Â£20.7m 7.25% debenture stock 2025 ISA Status Up to Â£10,200 2010/11 tax year. * Represents total assets less current liabilities as at 30 September 2010. Year's Summary Financial* 2010 2009 % as at 30 September Total assets less current Â£150.9m Â£157.9m (4.4) liabilities Shareholders' funds Â£117.2m Â£124.2m (5.7) Net asset value per share 225.2p 238.7p (5.7) Share price 191.50p 189.75p 0.9 Discount to net assets (debt at par 15.0% 20.5% value) Discount to net assets (debt at fair 9.4% 17.5% value) Revenue return before tax Â£6.3m Â£4.3m 45.3 Earnings per share 11.8p 8.1p 45.7 Core dividends per share** 10.5p 10.5p Total dividends per share** 13.0p 10.5p Group costs (administrative Â£5.1m Â£2.9m expenses) Company costs/average Company net 2.4% 2.1% assets Company costs/average Company total 1.8% 1.7% assets Maximum potential gearing 28.8% 27.2% * Financial information is disclosed in respect of the consolidated accounts unless otherwise stated. * Both core and total dividends per share represent dividends that relate to the Company's financial year. However under IFRS dividends are not accrued until paid or approved. Year's high/low 2010 2009 Share price high 214.7p 256.0p low 167.5p 135.0p Net asset value high 256.6p 304.2p low 210.4p 177.1p Discount (debt at high 24.7% 35.2% par) low 15.0% 8.8% Discount (debt at high 20.6% 30.1% fair value) low 9.9% 4.2% Chairman's Statement The Chairman's Statement forms part of the Director's Report The current year has been one of change for the Company. It included the launch of Javelin Capital LLP, its appointment as Investment Manager and the reorganisation of the management of the Company's assets. For the year to 30 September 2010 the Company's Net Asset Value and Share Price, both on a total return basis fell by 0.6% and increased by 7.9% respectively. Results and Dividends The results for the year ended 30 September 2010 include Javelin Capital LLP in the Group, whose results are consolidated as required by accounting rules. The Group's net profit before tax for the year was Â£6.3m which is an increase of Â£2m or 45.3% compared to the prior year of Â£4.3m. This reflects an increase of Â£3.6m in Group income being partially offset by an increase of Â£1.6m in Group costs. Group income of Â£10.1m includes total dividend income received from Majedie Asset Management (MAM) of Â£6.2m, including a special dividend of Â£5.4m, which is an increase of Â£4.3m from the prior year. Portfolio dividend and interest income for the year was impacted by market conditions and totalled Â£3.8m, a decrease of Â£0.7m from FY2009. All Javelin Capital income is within the Group for the current year and is eliminated on consolidation. Group costs of Â£5.1m include Â£2.4m of Javelin Capital expenses reflecting the extensive start-up phase of the business and is in-line with the financial plan. Additionally Â£0.6m in set up costs incurred by the Company have been expensed to capital in accordance with IFRS. Offsetting this has been a reduction in Company costs of Â£0.5m primarily reflecting the non-recurring costs in FY2009 in respect of the office relocation and the departure of a former Investment Director. The Company is in a transitional phase and as noted above has incurred additional costs this year which have negatively impacted the Company's Total Expense Ratio. However, the Board believes that underlying ongoing operating costs should be expected to reduce in the future. A final dividend for the year of 6.3p per share is recommended by the Board which is considered appropriate after taking into account the future needs of the wider Group and forecasted investment outturn over the forthcoming year. This when combined with the interim and special dividends paid during the year of 4.2p and 2.5p per share results in total dividends of 13.0p per share (10.5p per share excluding the special) which compares to total dividends of 10.5p for last year. This meets our objective of growing dividends over the longer term by more than the rate of inflation. A Diagram that shows the Company dividend history over the last ten years as compared to the RPI can be seen in my statement in the Annual Report. Investment Portfolio This year for the first time following the appointment of Javelin Capital LLP as the Company's investment manager, we have a separate Investment Manager's Report. However, I do wish to provide an overview on changes relating to how we manage the Company's assets now and in the future. The Company has changed significantly over the last few years and our approach to the management of our assets needed to be revised. This does not though change our investment objective to maximise total shareholder return over the long term which remains a prime focus of the Board. In the past the return on the Company's investment portfolio, which was comprised of quoted and some unquoted equities, under the direct control of the Investment Director, determined the NAV performance. Today the Company's assets are managed in four distinct major groups, namely: 1. The Core portfolio which is currently managed by reference to its benchmark; 2. Majedie Asset Management, an asset management business in which the Company has a significant shareholding; 3. Javelin Capital LLP which is a newly formed asset management partnership; 4. Funds managed by Javelin Capital. Currently the Company has an investment in the Javelin Capital Global Equity Strategies Fund. Javelin Capital After a longer than anticipated period of development, primarily due to the provision of a sophisticated trading platform, the various Javelin Capital agreements and regulatory approvals were completed and the business commenced operations on 1 September 2010. On this date Javelin Capital assumed responsibility for the investment management and general administration of the Company, along with all employees and use of the premises and other relevant fixed assets. Further details in respect of Javelin Capital are included in the Business Review and Report on Directors' Remuneration sections. On 20 September, after receipt of the regulatory approvals, Javelin Capital's first fund, the Javelin Capital Global Equity Strategies Fund, was launched with a Â£20 million seed investment from the Company. The fund's objective is to deliver superior absolute returns with low volatility. The Investment Manager's report provides further information and the Board is of the view that this investment should be the start of a new stream of investment returns to the Company. Review of Investment Trust tax Rules In June of this year a review of the current rules for taxation of Investment Trusts was announced. The proposals' intent is to modernise the tax treatment which has remained unchanged since 1965 and are to be welcomed. However they also include changes that if implemented could have adverse consequences for the Company. These are the specific proposals in respect of the close company and income retention rules, the former of which exposes the Company to loss of investment trust status by changes to its shareholder base and the latter which reduces the flexibility of the Company in applying its dividend policy. These issues are of course not unique to the Company and the industry has made various submissions to HMRC. We have also made a submission and I hope that the views of the industry and common sense will prevail but I will report further on this as developments arise. Annual Report This year's Annual Report is different from prior years and reflects the appointment of an investment manager, the introduction of Javelin Capital and the new approach to how we view our assets. For the most part these changes are required by regulation but we have also reviewed our disclosures to ensure they are appropriate. Annual General Meeting The AGM will be held on 19 January 2011 at 11:30am at the Pewterers' Hall, Oat Lane, London EC2V 7DE. Details can be found in the Annual report or at www.majedie.co.uk. As in prior years there will be presentations and an opportunity to ask questions. I do hope you will be able to attend. Outlook Although at current levels equity markets are relatively inexpensive the current economic climate is such that the investment outlook is uncertain. The Board is confident that our range of investment assets with their different risk and return characteristics in conjunction with the performance of the Investment Manager will provide a suitable investment return in these uncertain times. It has been a challenging first year as Chairman and I wish to thank my fellow directors for their help and support during this time. I also would like to thank the former staff of the Company and wish them well in their new roles within Javelin Capital. I am delighted that Javelin Capital is now operational and I am hopeful it will be a successful investment for the Company. Andrew J Adcock Chairman 24 November 2010 Investment Manager's Report The Company's assets are managed in four separate major groups which the Board now believes provides the correct balance in order to achieve the Investment Objective of maximising shareholder return in the long term whilst increasing dividends by more than the rate of inflation. Each investment group has distinct characteristics and drivers of performance that in combination determine the direction and value of the Company's net assets. A chart in the Annual Report demonstrates the impact that each investment group and other characteristics of the Company has made on the Net Assets Performance during the year. Note that the reports in the Annual Report are based on the aggregate value of the total assets of the Company. Core Portfolio The Core Portfolio comprises holdings in large-cap UK and international stocks and a small number of carefully selected mid-cap companies, managed under an equity income investment mandate. The majority of positions are held in well financed, high quality companies with a proven track record of delivering profit and dividend growth. The portfolio is invested approximately 70% in UK listed companies, and 30% overseas in line with the Core Portfolio investment benchmark. As at 30 September 2010, the value of the Core Portfolio, including cash available for investment, was Â£90.2m, representing 60% of the Company's Total Assets. The past eighteen months has been a period of economic stabilisation after the depths that global economies reached, or threatened to reach, in early 2009. In autumn 2009 and spring 2010, evidence continued to emerge that the worst of the recession had passed, global trade had been re-established and GDP growth was appearing to be sustainable. This was no doubt influenced by the magnitude of government stimulus packages throughout the world and further economic strength from China and India, both of which continue to gain in economic influence as power shifts from the traditional base in the West to the East. Equity markets were reasonably buoyant as ample liquidity and record low interest rates encouraged investors to increase exposures in riskier assets. The Core Portfolio benchmark returned +12.7% in the first six months of the year. The second half of the year has been particularly volatile. From mid April to early July, stock markets globally declined by over 15% as investors lost their appetite for riskier asset classes such as equities. There was no individual reason for this but signals of a faltering USA recovery, policy tightening in China, sovereign debt default fears in Europe and political change in the UK all contributed. The FTSE All-share was further impacted by the experience of BP, one of the largest constituents of the index, in the Gulf of Mexico. In July risk appetite suddenly returned and in the three months to September, markets recovered much of the value lost since the April peak. The Core Portfolio benchmark was down 1% in the six month period to end the full year up 11.6% on a total return basis. Once again there was no individual catalyst but markets were driven by confidence taken from macro economic releases that demonstrated global recovery being sustained, and the acknowledgement that corporate profits and balance sheets remained strong. During the year the Core Portfolio Total Return was +5.9%, a credible performance compared with the wider UK and Global equity income peer groups. The equity income asset class has not performed as strongly as the wider benchmark as investors have shunned more mature, dividend paying companies in preference for higher risk positions. The portfolio remains biased towards income stocks that are, in our judgement, best placed to benefit from the faster growing areas of the global economy, particularly those exposed directly or indirectly to the Far East. Investments in the mining sector, such as Antofagasta, have been increased. New positions have been taken in engineering companies such as Alstom, Illinois Tool Works and IMI, and support service providers Bunzl, Compass and G4S. These companies all earn significant proportions of their revenues in high growth overseas markets. The portfolio remains under exposed to developed market consumers and governments as these areas are likely to remain tough for the foreseeable future. At current levels, equity markets remain relatively inexpensive, especially in comparison to the returns available from other asset classes and against historic profit multiples and dividend growth. Corporate balance sheets are generally strong which should lead to a combination of higher levels of capital spending, M&A activity, share buy backs and increased dividend payouts. In the long term, fundamentals drive the direction of markets but the short term is determined by the on-off nature of risk appetite. This continues to cause significant and rapid shifts in share prices. Volatility in markets is likely to remain a key factor for some time as global economic recovery continues to be sporadic. Investing under an income mandate requires natural patience, as positions are retained in order to collect the dividend. It is important to retain valid convictions in the knowledge that high quality companies may be subject to market volatility temporarily, but will ultimately be correctly valued on fundamentals. Finally, we also manage a small non-core realisation portfolio. This portfolio consists of small-cap and early stage investments that were initiated between 2005 and 2008. The objective is to maximise the amount and speed of capital return by seeking to exit these positions, although by nature the positions are illiquid. A number of partial or full realisations were made during the year. As at 30 September 2010 the value of the non-core realisation portfolio was Â£7.5m. This represents less than 5% of the Company's Total Assets and is expected to reduce over time as further liquidations are achieved. Javelin Capital Global Equity Strategies Fund In late September 2010 a $31m (Â£20m) investment was made as seed capital into the first flagship product to be launched by Javelin Capital LLP. The fund is managed by an investment team of experienced portfolio managers and will have a range of long-short equity strategies which include Fundamental, Systematic and Tactical approaches. Using proprietary models the team will analyse and judge which strategy is most appropriate for different regions and sectors. The strategies are expected to be uncorrelated or negatively correlated to each other and hence the combination within the fund should result in lower volatility and reduced risk. By seeding this fund, the Company is not only assisting its new asset management business in gaining traction in a competitive market, but also expects to benefit from lower risk capital growth in otherwise volatile equity markets. As at 30 September 2010, the value of this holding was $31m (Â£19.7m) representing 13% of the Company's Total Assets. Majedie Asset Management Majedie Asset Management (MAM) was launched in 2002 using finance provided by the Company, which retains a 30% equity interest. The business has grown to approximately Â£5bn in assets under management, predominantly long-only UK equity mandates for institutional clients. Its market leading investment performance record has been recognised by the loyalty of its clients and the number of high profile industry accolades that it continues to receive. It remains well financed and highly profitable. During the year, Â£6.2m was received in dividend income from MAM, including a Â£5.4m special dividend in December 2009. In addition, the Company entered into positive and constructive discussions with MAM which resulted in a new shareholders agreement which more appropriately reflects the business that MAM has become. Changes include an increase in the minimum dividend payout ratio and a provision for all current shareholders, on a pari passu basis, to provide an incentive for MAM staff to share in the success of that company through an Employee Benefit Trust. Notwithstanding the Â£5.4m special dividend income received during the year, the Board has decided to retain its valuation of the Company's holding at Â£30m, representing almost 20% of the Company's Total Assets. Javelin Capital LLP The Company launched Javelin Capital LLP, a long-short and long-only equity boutique, on 1 September 2010. Â£4.5m has been invested by the Company to finance the start-up, initial operating costs and regulatory capital. The business plan envisages that this will be substantially repaid over three years. Javelin Capital is now focussed on gaining assets under management upon which Javelin Capital's business plan is predicated. The Company holds an initial equity participation of 70% whilst a 30% interest is held by partners and staff. Full details were disclosed in the announcement made on 1 September 2010 that can be read on the Company's website. Launching Javelin Capital LLP should enable the Company's annual cost base to reduce as all staff have transferred to Javelin Capital LLP. The assets of the Company continue to be managed by the same team, albeit as members of Javelin Capital LLP under an arms-length management agreement. As Javelin Capital LLP attracts external assets, an additional source of return should be generated for Majedie. As mentioned previously the first product, the Javelin Capital Global Equity Strategies Fund, was launched in September 2010 and seed capital was invested by the Company. We are encouraged by the initial performance of the fund which is a key requirement for success. Further long-short and long-only products are planned to be launched in due course. As at 30 September 2010 the net assets in Javelin Capital LLP have been included in the Consolidated Report & Accounts at Â£2.1m, representing 2% of the Company's Total Assets. This represents the original investment less start-up costs and losses incurred to date and is in accordance with consolidation accounting rules. In the Company accounts the value of the investment in Javelin Capital LLP has been valued by the Board at cost, being Â£4.5m. Development of Net Asset Value The table below demonstrates the Net Asset Value development of the Company during the year to 30 September 2010. In aggregate, the NAV has fallen by Â£7.0m having generated an investment return of Â£7.6m, incurred total expenses of Â£7.9m and distributed Â£6.7m in dividends. The Core Portfolio contributed Â£5.8m through a combination of dividend income and capital appreciation, dividends worth Â£6.2m were received from our holding in Majedie Asset Management, whilst the Non-Core Realisation Portfolio lost Â£4.2m in value. The Javelin Capital Global Equity Strategies Fund (JCGESF) retained its value in its base currency but was impacted by Â£0.2m due to the translation effect of adverse currency movements. Total expenses during the period were Â£7.9m of which Administration Costs were Â£5.1m and Finance Costs were Â£2.8m. Administration Costs include the recognition of Â£2.4m incurred by Javelin Capital LLP during its start-up phase. Total dividends of Â£6.7m (13.00p per share) were paid during the year including a special dividend of 2.50p that was paid in March 2010. NAV 30.09.09 Â£124.2m Core Portfolio +Â£5.8m MAM +Â£6.2m Non-Core Portfolio (Â£4.2m) JCGESF (Â£0.2m) Admin Costs (Â£5.1m) Finance Costs (Â£2.8m) Dividends (6.7m) NAV 30.09.10 Â£117.2m Nick Rundle Investment Director Javelin Capital LLP 24 November 2010 Twenty Largest UK Investments at 30 September 2010 2010 2009 Market Value Market Value Company Â£000 % of Fund Â£000 % of Fund Majedie Asset Management 30,000 19.2 30,000 19.0 HSBC 5,644 3.7 8,926 5.6 Royal Dutch Shell 'B' 5,385 3.6 5,208 3.3 GlaxoSmithKline 4,014 2.7 4,303 2.7 Vodafone 4,006 2.7 4,557 2.9 BP 3,850 2.6 7,189 4.5 Rio Tinto 3,163 2.1 2,645 1.7 Vostok Energy 2,906 1.9 2,863 1.8 BHP Billiton 2,835 1.9 3,775 2.4 Aviva 1,855 1.2 2,241 1.4 BG Group 1,846 1.2 2,163 1.4 Antofagasta* 1,792 1.2 Unilever 1,657 1.1 2,400 1.5 Barclays 1,648 1.1 1,110 0.7 Legal & General* 1,501 1.0 British Land 1,279 0.8 1,069 0.7 Charter International* 1,249 0.8 Inchcape* 1,247 0.8 Sainsbury (J)* 1,172 0.8 BAE Systems 1,095 0.7 1,851 1.2 78,144 51.8 80,300 50.8 *There is no comparative for the investments listed as they all represent new holdings. Ten Largest Overseas Investments at 30 September 2010 2010 2009 Market Value Market Value Company Â£000 % of Fund Â£000 % of Fund Javelin Global Equity Strategies (Ireland)* 19,738 13.1 Sanofi-Aventis (France) 1,006 0.7 687 0.4 Telefonica (Spain) 975 0.6 1,292 0.8 Alstom (France)* 972 0.6 Toyota (Japan) 932 0.6 1,240 0.8 Canon Inc. (Japan) 929 0.6 880 0.6 AT&T (USA) 907 0.6 843 0.5 Illinois Tools (USA)* 895 0.6 Johnson & Johnson (USA) 884 0.6 951 0.6 Schlumberger (USA) 860 0.6 931 0.6 28,098 18.6 6,824 4.3 * There is no comparative for the investments listed as they represent new holdings. Extracts from the Directors' Report The directors submit their report and the accounts for the year ended 30 September 2010. Introduction The Directors' Report includes the Business Review. A review of the developments during the year and of the changing nature of the Company is contained in 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 received written confirmation from HM Revenue & Customs that it was an approved investment trust for taxation purposes under Section 1158/9 of the Corporation Tax Act 2010 (formerly Section 842 of the Income and Corporation Taxes Act 1988) in respect of the year ended 30 September 2009. In the opinion of the directors the Company has subsequently directed its affairs so as to enable it to continue to qualify for such approval and the Company will continue to request formally written confirmation of investment trust status each year. Results and Dividend Consolidated net revenue return before taxation amounted to Â£6,287,000 (2009: Â£4,325,000). The directors recommend a final ordinary dividend of 6.3p per ordinary share, payable on 26 January 2011 to shareholders on the register at the close of business on 7 January 2011. Together with the interim dividend of 4.2p per share paid on 30 June 2010, and the special interim dividend of 2.5p per share paid on 8 March 2010, this makes a total distribution of 13.0p per share in respect of the financial year (2009: 10.5p per share). Extract from the Business Review Introduction The purpose of the Business Review is to provide a review of the business of the Company by: - analysing development and performance using appropriate Key Performance Indicators ("KPIs"); - outlining the principal risks and uncertainties affecting the Company; - describing how the Company manages these risks; - setting out the Company's environmental, social and ethical policy; - providing information about persons with whom the Company has contractual or other arrangements which are essential to the business of the Company; - outlining the main trends and factors likely to affect the future development, performance and position of the Company's business; and - explaining the future business plans of the Company. The current year has seen the Company change from a self managed investment trust to an externally managed trust with the appointment of a manager, in common with most other investment trusts. This occurred on 31 August 2010 when Javelin Capital LLP, a related party, was appointed as investment manager and general administrator. The Board has elected to treat Javelin Capital on an arms length basis, even though it is a subsidiary, for reporting and disclosure purposes. Regulatory and Competitive Environment The Company is an investment trust and is listed on the London Stock Exchange. It is subject to United Kingdom and European legislation and regulations including UK company law, International Financial Reporting Standards, Listing, Prospectus and Disclosure and Transparency Rules, taxation law and the Company's own Articles of Association. The 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 such, it analyses its Statement of Comprehensive Income between profits available for distribution by way of dividends and capital profits. The financial statements report on these profits, the changes in equity, the balance sheet position and the cash flows in the current and prior financial period. This is in compliance with current International Financial Reporting Standards, supplemented by the Revised Statement of Recommended Practice for Investment Trust Companies and Venture Capital Trusts (SORP) issued in January 2009. The principal accounting policies of the Company are set out in note 1 to the accounts. The Auditors' opinion on the financial statements, which is unqualified, appears in the Report of the Independent Auditors. In addition to the annual and half-yearly results and Interim Management Statements, the Company makes weekly net asset value (NAV) announcements via an authorised Stock Exchange regulatory information service. The Company also reports to shareholders on performance against benchmark, corporate governance and investment activities. The directors meet with larger shareholders outside the Annual General Meeting as appropriate. Meetings are also held with investment trust analysts and stockbroking firms. The Company has three investor savings schemes which provide shareholders with cost effective and convenient ways of investing. Communication of up-to-date information is provided through the website at www.majedie.co.uk. At least one shareholders' meeting is held in each year in January to allow shareholders to vote on the appointment of directors and the Auditors, the payment of dividends, authority for share buybacks and any other special business. The business of the next such shareholders' meeting, being the Annual General Meeting, scheduled for 19 January 2011 is set out in the Annual Report. The Company is subject to corporation tax on its net revenue profits but is exempt from corporation tax on capital gains, provided it complies at all times with Sections 1158 to 1162 of the Corporation Tax Act 2010 (previously, Section 842 of the Income and Corporation Taxes Act 1988). These sections broadly require that: - the Company's revenue (including dividend and interest receipts but excluding profits on the sale of shares and securities) should be derived wholly or mainly from shares and securities; - the Company must not retain in respect of any accounting period more than 15% of its income from shares and securities; - no holding in a company should represent more than 15% by value of the Company's investments in shares and securities unless the holding was acquired previously and the value has risen to exceed the 15% limit; and - realised profits on the sale of shares and securities may not be distributed by way of dividend. Compliance with these rules is proved annually in retrospect to HM Revenue and Customs (HMRC). HMRC approval of the Company as an investment trust is granted `subject to there being no subsequent enquiry under corporation tax self-assessment'. Such approval has been received in respect of all relevant years up to and including the year ended 30 September 2009, since when the Company has continued to comply with these rules. Capital Structure As part of its corporate governance the Board keeps under review the capital structure of the Company. At 30 September 2010 the Company had a nominal issued share capital of Â£5,252,800, comprising 52,528,000 ordinary shares of 10p each, carrying one vote each. The Board seeks each year to renew the authority of the Company to make market purchases of its own shares. However, the Board is only likely to use such authority in special circumstances. In general the directors believe that the discount to net assets will be reduced sustainably over the long term by the creation of value through the development of the business. In 1994 and 2000 the Company issued two long term debentures: Â£15m 9.5% debenture stock 2020 and Â£25m 7.25% debenture stock 2025 respectively. In 2004 the Company redeemed Â£1.5m of the 2020 issue and Â£4.3m of the 2025 issue as an opportunity arose to redeem at an attractive price. The Board is responsible for setting the overall gearing range within which the Investment Manager may operate. 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 following a takeover bid. Principal Risks The principal risks and the Company's policies for managing these risks and the policy and practices with regard to financial instruments are summarised below and in note 25 to the accounts. The Company has a range of equity investments including substantial investments in two unlisted asset management businesses, large cap global equities and a new investment in a global equities absolute return fund. The major risk for the Company remains, investment risk, primarily market risk. The number of investments held, together with the geographic and sector diversity of the portfolio, enables the Company to spread its risks with regard to liquidity, market volatility, currency movements and revenue streams. Under the terms of the Management Agreement the Investment Manager manages the Company's assets. The core portfolio is managed with various specific limits for individual stocks and market sectors which are employed to restrict risk levels. The level of portfolio risk in the core portfolio is assessed in relation to the benchmark utilising various portfolio risk management tools. It should be noted that whilst we have a benchmark in the core portfolio, the portfolio is constructed independently and can be significantly different. Therefore the core portfolio can experience periods of volatility over the short term. Also the level of risk at a net asset value level increases with gearing. In certain circumstances cash balances may be raised to reduce the effective level of gearing. This would result in a lower level of risk in absolute terms. Other risks faced by the Company include the following: i. Strategy Risk: an inappropriate investment strategy could result in poor returns for shareholders and a widening of the discount of the share price to the NAV per share. The Board regularly reviews strategy with the Investment Manager in relation to a range of issues including the allocation of assets between geographic regions and industrial sectors, level and effect of gearing and currency exposure; ii. Business Risk: inappropriate management or controls in either Majedie Asset Management and/or Javelin Capital LLP could result in financial loss, reputational risk and regulatory censure. The Board has representation on both entities' governing boards to monitor business, financial performance and operations; iii. Compliance Risk: failure to comply with regulations could result in the Company losing its listing and/or being subjected to corporation tax on its capital gains. The Board receives and reviews regular reports from the fund administrator on its controls in place to prevent noncompliance 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 Sections 1158 to 1162 of the Corporation Tax Act 2010; iv. Operational Risk: Inadequate financial controls and failure by an outsourced supplier to perform to the required standard could result in misappropriation of assets, loss of income and debtor receipts and mis-reporting of NAVs. The Board regularly reviews statements on internal controls and procedures and subjects the books and records of the Company to an external annual audit. The Board has representation on the governing board of Javelin Capital LLP who will also monitor the performance of other outsourced service providers. The financial risks are set out in more detail in note 25; and The systems in place to manage the Company's internal controls are described further in the Corporate Governance Statement. Management of Assets and Shareholder Value The Company invests around the world in markets, sectors and companies that the Board and Investment Manager believe will generate long term growth in capital and income for shareholders. The Company now manages its assets by allocating resources to the following major groups: - Core portfolio; - Funds managed by Javelin Capital LLP; - MAM; and - Javelin Capital LLP. The Board believe that the groups will enable a spread of risk and deliver a higher quality of earnings. The Investment Manager manages the core portfolio by analysing potential and current investments against a range of parameters. Many potential investments are considered each year. Investment risks are spread through holding a range of securities across a range of sectors and countries. In respect of funds managed by Javelin Capital LLP, the Company currently invests in the Javelin Capital Global Equity Strategies Fund which employs an approach that involves a range of strategies, analysis and algorithms. Investment risks are managed by having a spread of investments, a range of strategies and sophisticated risk management techniques. Finally the Company has significant investments in Majedie Asset Management Limited and Javelin Capital LLP, both asset management businesses. The Board believes that these investments provide or will provide a valuable source of future return. The Board has representation on both entities' governing boards in order to monitor and control strategy and financial performance. The Board reviews the investment performance of the Company against a range of measures relevant to each group. Performance Highlights The Board uses the following Key Performance Indicators (KPIs) to help assess progress against the Company's objectives. The KPIs are commented on and displayed in graphical form within the Chairman's Statement and Investment Manager's Report. - NAV total return and total shareholder return. - Investment group portfolio return: see the chart in the Investment Manager's Report in the Annual report. - Share price discount: The level of the discount at the end of the financial year calculated with debt at par was 15.0% and was lower than at the start of the year. - Net Asset Value performance The Company's Net Asset Value has decreased by 5.7% in the year to 30 September 2010, compared with a decrease of 19.5% over the same period to 30 September 2009. The net assets decreased by Â£7 million to Â£117.2 million. The performance of the Net Asset Value is expanded within the Chairman's statement. - Total expense ratio The total expense ratio of the Company for the year ended 30 September 2010 was 2.4% (2009: 2.1%). - Annual dividend growth Annual dividend growth has seen an increase in the total distribution of 23.8% in respect of the financial year ended 30 September 2010 (2009: Nil%). Further details regarding the results and dividends can be found in the Chairman's Statement above. Total Return Philosophy & Dividend Policy The directors believe that investment returns will be maximised if a total return policy is followed whereby the Investment Manager pursues the best opportunities. The Company has a comparatively high level of revenue reserves for the investment trust sector. At Â£26m, the revenue reserves represent more than four times the current annual core dividend distribution. The strength of these reserves will from time to time assist in underpinning our progressive dividend policy in years when the income from the portfolio is insufficient to cover completely the annual distribution. The policy aims to increase the dividend over the longer term by more than the rate of inflation and this has been achieved over the last nineteen years. Over the last ten years the average annual growth of the core dividend (excluding special dividends) has been 3.2%. Corporate Social Responsibility In common with many investment trust companies, the Company has no direct impact on the environment. When considering its day-to-day operations, the Company aims to conduct itself responsibly, ethically and fairly. The Company has appointed Javelin Capital LLP to manage its portfolio of investments. Javelin has been tasked with managing the portfolio, and its operations, with a view to achieving the Company's investment objective and in doing so takes account of social, environmental and ethical factors, where appropriate. Costs The Company's expense ratio over net assets is 2.4% which compares with the investment trust sector average of 1.6%. The Company operating costs have decreased from Â£2.9m to Â£2.2m (excluding Â£0.6m of Javelin Capital setup costs) this year but the ratio has been negatively impacted by the lower average asset base in the current period. The Board pays close attention to cost control and the current situation is referred to further in the Chairman's Statement. Material Contracts - Javelin Capital LLP i. LLP Agreement The investment in Javelin Capital LLP is in accordance with the terms of a Limited Liability Partnership Agreement dated 31 August 2010. The terms include: - The Company will provide up to a Â£4.5 million partners' capital contribution. This will attract interest at a commercial rate, until it is repaid from future Javelin Capital LLP profits. This repayment has priority over other distributions from residual profits. Further capital can be provided at the Company's discretion. - The Company initially has a 70% interest in Javelin Capital LLP with the other partners and employees holding the remaining 30%. On achieving certain pre-set financial targets the Company will reduce its interest to ultimately 51%. - The agreement provides for bonuses which are determined in a formulaic manner. Performance fees are shared between the Company, partners and employees on a time dependent sliding scale based on the fund. Annual bonuses depend on Javelin Capital profitability but the bonus pool will be determined on the basis that total staff costs equal 55% of revenues. - The agreement is not for a fixed term and can be terminated by members resolution. - The Board has representation on the Javelin Capital Management Board (Javelin governance is outlined in the Corporate Governance Statement in the Annual Report), including the appointment of the Chairman. This includes certain control, meeting and voting rights. The agreement also provides for the requirement to obtain Majedie approval in a variety of areas including anything considered a restricted matter. The Board can appoint or remove the Managing Partner/ Chief Executive who has day to day operational control and also must approve his remuneration. - In the event of a sale proposed by the Company the agreement includes drag along provisions including certain pre-emption rights to the other partners. There are also two side letters that relate to the LLP Agreement which provide for a possible change in control rights and provide for the liability of partners in respect of their capital and current account balances. ii. Management and Administration Services Agreements The Board has appointed Javelin Capital LLP as its investment manager and general administrator. The terms of the appointment are defined under a Management Agreement and Administration Services Agreement dated 31 August 2010. The agreement divides the Company's investments into distinct portfolios which are the core portfolio, non-core portfolio, MAM, Javelin Capital Funds and the Treasury account. The fees payable under the Management Agreement are detailed below: Fund/Portfolio Management Fee* Performance Feeâ€ Core Portfolio*** 0.70%p.a. 10% Treasury Account 0.70%p.a. NIL MAM NIL NIL** Javelin Capital Global Equity Strategies 1.25%p.a. 20% â€¡ Fund â€¡ * The management fee is on a sliding scale ranging from 0.7% p.a. to 0.4% p.a. based on the combined value of the core and non-core realisation portfolios. â€ The performance fee is based on outperformance against the benchmark on a rolling three year basis. # The Javelin Capital Global Equity Strategies Fund is a sub-fund of Javelin Capital Strategies plc, which is an Irish Qualifying Investment Fund listed on the Irish Stock Exchange. This is the first fund managed by Javelin Capital LLP and further sub-funds can be launched in due course. ** The agreements provide for a fee of Â£60,000 per annum in respect of MAM duties. â€¡ The fees are as set in the supplement to the fund prospectus for the Javelin Capital Global Equity Strategies Fund. The performance fee entitlement only occurs once the hurdle has been exceeded and is calculated on a high water mark basis using an equalisation method. *** The non-core realisation portfolio attracts a management fee of 0.70% p.a. and no performance fee. The Management Agreement entitles either party to terminate the arrangement with six months' notice after an initial period of three years. Additionally the Company can terminate the Manager's appointment in respect of a distinct portfolio if the performance of that portfolio falls below a nominated benchmark. The Administration Services Agreement delegated, to Javelin Capital LLP, various rights to enable it to act as general administrator. Fees payable under the Administration Services Agreement are capped at Â£265,000 per annum with fees agreed on a cost only basis. The Administration Services Agreement may be terminated on three months' notice. iii. Contribution and Transfer Agreement Under this agreement the Company agreed to transfer to Javelin Capital LLP the majority of its business and the use of certain assets. However some assets will remain with the Company. iv. Intra Group Asset Lease Agreement The asset lease agreement with Javelin Capital Services Limited identifies certain assets to be leased to and used by Javelin. Javelin will pay a lease charge equal to the depreciation suffered by the Company on those assets. The agreement provides for these assets to be transferred to Javelin at a future date at net book value. - Capita Sinclair Henderson Ltd The Board has appointed Capita Sinclair Henderson Ltd (trading as Capita Financial Group - Specialist Fund Services) to act as Company Secretary and undertake certain administration services. The terms of Capita Sinclair Henderson Ltd's appointment are defined under a secretarial and administration services agreement dated 17 November 2000. The agreement entitles either party to terminate the arrangement with twelve months' notice. Policy on Payment of Suppliers It is the Company's policy to settle all investment transactions in accordance with the terms and conditions of the relevant market in which it operates. All other expenses are paid on a timely basis in the ordinary course of business. At 30 September 2010 the Company had four days of suppliers' invoices outstanding in respect of trade creditors (2009: four days). Majedie Asset Management Limited In 2002 the Company established a new fund management subsidiary specialising in UK equities: Majedie Asset Management, which was launched in March 2003. Having started with a 70% shareholding, the Company now retains a 30% interest. The relevant developments during the year are referred to in the Investment Manager's Report and further referred to in note 13. Javelin Capital LLP After a substantial start-up process to ensure that the appropriate systems, processes and controls were in place and following regulatory approval and the completion of the relevant legal agreements, Javelin Capital LLP commenced operations on 1 September 2010. On that date Javelin Capital assumed responsibility for managing the Company's investments and provide general administration services. All previous Majedie employees transferred to Javelin Capital under the new arrangements. On 20 September 2010 the Company also invested Â£20m into the Javelin Capital Global Equity Strategies fund, the first fund launch by Javelin Capital LLP. The characteristics of this investment are detailed in the Investment Manager's Report section. The Company has provided Â£4.5m in operational and regulatory capital for Javelin Capital LLP and has an initial 70% ownership. This will fall to 51% if the partnership achieves certain preset financial targets. The Chairman's Statement and additionally note 14 to the accounts provides further information. Statement of Directors' Responsibilities The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards adopted by the European Union. Company law requires the Directors to prepare financial statements for each financial year which present fairly the financial position of the Company and of the Group and the financial performance and cash flows of the Company and of the Group for that period. In preparing these financial statements, the Directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and estimates that are reasonable and prudent; - present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; - state whether applicable International Financial Reporting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and - provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy, at any time, the financial position of the Company and of the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors, to the best of their knowledge, state that: - the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and results of the Company and the Group; and - the Chairman's Statement and Directors' Report include a fair review of the development and performance of the business and the position of the Company and the Group together with a description of the principal risks and uncertainties that they face. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the Board of Directors Andrew J Adcock Chairman 24 November 2010 Report of the Independent Auditors Independent Auditors' Report to the Members of Majedie Investments PLC The Company's financial statements for the year ended 30 September 2010 have been audited by Ernst & Young LLP. The text of the Auditor's report can be found in the Company's Annual Report and Accounts at www.majedie.co.uk. Consolidated Statement of Comprehensive Income for the year ended 30 September 2010 2010 2009 Revenue Capital Revenue Capital return return Total return return Total Notes Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Investments Losses on investments at fair value through profit or loss 13 (2,361) (2,361) (23,723) (23,723) Net investment result (2,361) (2,361) (23,723) (23,723) Income Income from investments 3 10,011 10,011 6,409 6,409 Other income 3 82 82 125 125 Total income 10,093 10,093 6,534 6,534 Expenses Administration expenses 5 (3,105) (2,017) (5,122) (1,507) (1,359) (2,866) Return before finance costs and taxation 6,988 (4,378) 2,610 5,027 (25,082) (20,055) Finance costs 8 (701) (2,101) (2,802) (702) (2,100) (2,802) Net return before taxation 6,287 (6,479) (192) 4,325 (27,182) (22,857) Taxation 9 (131) (131) (92) (92) Net return after taxation for the year 6,156 (6,479) (323) 4,233 (27,182) (22,949) Return per ordinary share: pence pence pence pence pence pence Basic and diluted 11 11.8 (12.4) (0.6) 8.1 (52.3) (44.2) The total column of this statement is the Consolidated Statement of Comprehensive Income of the Group prepared under International Financial Reporting Standards (IFRS). The supplementary revenue return and capital return columns are prepared under guidance published by the Association of Investment Companies (AIC). All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The notes below form part of these accounts. Company Statement of Comprehensive Income for the year ended 30 September 2010 2010 2009 Revenue Capital Revenue Capital return return Total return return Total Notes Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Investments Losses on investments at fair value through profit or loss 13 (2,361) (2,361) (23,723) (23,723) Net investment result (2,361) (2,361) (23,723) (23,723) Income Income from investments 3 10,011 10,011 6,409 6,409 Other income 3 130 130 125 125 Total income 10,141 10,141 6,534 6,534 Expenses Investment Management fees 4 (34) (44) (78) Administration expenses 5 (1,038) (1,735) (2,773) (1,507) (1,359) (2,866) Return before finance costs and taxation 9,069 (4,140) 4,929 5,027 (25,082) (20,055) Finance costs 8 (701) (2,101) (2,802) (702) (2,100) (2,802) Net return before taxation 8,368 (6,241) 2,127 4,325 (27,182) (22,857) Taxation 9 (131) (131) (92) (92) Net return after taxation for the year 8,237 (6,241) 1,996 4,233 (27,182) (22,949) Return per ordinary share: pence pence pence pence pence pence Basic and diluted 11 15.8 (12.0) 3.8 8.1 (52.3) (44.2) The total column of this statement is the Statement of Comprehensive Income of the Company prepared under IFRS. The supplementary revenue return and capital return columns are prepared under guidance published by the AIC. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year The notes form part of these accounts. Consolidated Statement of Changes in Equity for the year ended 30 September 2010 Capital Share Share Share redemption options Capital Revenue Own share capital premium reserve reserve reserve reserve reserve Total Notes Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Year ended 30 September 2010 As at 30 September 2009 5,253 785 56 (284) 93,424 26,649 (1,702) 124,181 Net loss for the year (6,479) 6,156 (323) Share options expense 24 64 64 Dividends declared and paid in year 10 (6,763) (6,763) As at 30 September 2010 5,253 785 56 (220) 86,945 26,042 (1,702) 117,159 Year ended 30 September 2009 As at 30 September 2008 5,253 785 56 291 120,606 29,047 (2,573) 153,465 Net loss for the year (27,182) 4,233 (22,949) Share options expense 24 251 251 Dividends declared and paid in year 10 (6,631) (6,631) Own shares (sold)/purchased by Employee Incentive Trust (EIT) (826) 871 45 As at 30 September 2009 5,253 785 56 (284) 93,424 26,649 (1,702) 124,181 The notes form part of these accounts. Company Statement of Changes in Equity for the year ended 30 September 2010 Capital Share Share Share redemption options Capital Revenue Own share capital premium reserve reserve reserve reserve reserve Total Notes Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Year ended 30 September 2010 As at 30 September 2009 5,253 785 56 (284) 93,702 26,369 (1,702) 124,179 Net profit for the year (6,241) 8,237 1,996 Share options expense 24 64 64 Dividends declared and paid in year 10 (6,763) (6,763) As at 30 September 2010 5,253 785 56 (220) 87,461 27,843 (1,702) 119,476 Year ended 30 September 2009 As at 30 September 2008 5,253 785 56 291 120,884 28,767 (2,573) 153,463 Net loss for the year (27,182) 4,233 (22,949) Share options expense 24 251 251 Dividends declared and paid in year 10 (6,631) (6,631) Own shares (sold)/purchased by Employee Incentive Trust (EIT) (826) 871 45 As at 30 September 2009 5,253 785 56 (284) 93,702 26,369 (1,702) 124,179 The notes form part of these accounts. Consolidated Balance Sheet as at 30 September 2010 2010 2009 Notes Â£000 Â£000 Non-current assets Property and equipment 12 531 224 Investments at fair value through profit or loss 13 145,423 147,291 145,954 147,515 Current assets Trade and other receivables 15 1,691 1,897 Cash and cash equivalents 16 5,538 12,384 7,229 14,281 Total assets 153,183 161,796 Current liabilities Trade and other payables 17 (2,243) (3,853) Total assets less current liabilities 150,940 157,943 Non-current liabilities Debentures 17 (33,781) (33,762) Total liabilities (36,024) (37,615) Net assets 117,159 124,181 Represented by: Ordinary share capital 18 5,253 5,253 Share premium 785 785 Capital redemption reserve 56 56 Share options reserve (220) (284) Capital reserve 86,945 93,424 Revenue reserve 26,042 26,649 Own shares reserve 19 (1,702) (1,702) Equity Shareholders' Funds 117,159 124,181 Net asset value per share pence pence Basic and fully diluted 20 225.2 238.7 Approved by the Board of Majedie Investments PLC and authorised for issue on 24 November 2010. Andrew J Adcock Hubert V Reid Directors The notes form part of these accounts. Company Balance Sheet as at 30 September 2010 Notes 2010 2009 Non-current assets Â£000 Â£000 Property and equipment 12 221 224 Investments at fair value through profit or loss 13 145,423 147,291 Investment in subsidiaries 14 4,671 161 150,315 147,676 Current assets Trade and other receivables 15 1,676 1,986 Cash and cash equivalents 16 3,057 12,131 4,733 14,117 Total assets 155,048 161,793 Current liabilities Trade and other payables 17 (1,791) (3,852) Total assets less current liabilities 153,257 157,941 Non-current liabilities Debentures 17 (33,781) (33,762) Total liabilities (35,572) (37,614) Net assets 119,476 124,179 Represented by: Ordinary share capital 18 5,253 5,253 Share premium 785 785 Capital redemption reserve 56 56 Share options reserve (220) (284) Capital reserve 87,461 93,702 Revenue reserve 27,843 26,369 Own shares reserve 19 (1,702) (1,702) Equity Shareholders' Funds 119,476 124,179 Approved by the Board of Majedie Investments PLC and authorised for issue on 24 November 2010. Andrew J Adcock Hubert V Reid Directors The notes form part of these accounts. Consolidated Cash Flow Statement for the year ended 30 September 2010 2010 2009 Notes Â£000 Â£000 Net cash flow from operating activities Consolidated net return before taxation (192) (22,857) Adjustments for: Losses on investments 13 2,361 23,723 Dividends reinvested (45) (132) Share based remuneration 64 251 Depreciation 84 58 Purchases of investments (57,963) (57,427) Sales of investments 55,741 67,202 50 10,818 Finance costs 2,802 2,802 Operating cashflows before movements in working capital 2,852 13,620 Increase in trade and other payables 410 241 (Increase)/decrease in trade and other receivables (18) 96 Net cash inflow from operating activities before tax 3,244 13,957 Tax recovered 10 2 Tax on unfranked income (163) (106) Net cash inflow from operating activities 3,091 13,853 Investing activities Purchases of tangible assets (420) (234) Disposals of tangible assets 29 Net cash outflow from investing activities (391) (234) Financing activities Interest paid (2,783) (2,783) Dividends paid (6,763) (6,631) Exercise of options on own shares 44 Net cash outflow from financing activities (9,546) (9,370) (Decrease)/increase in cash and cash equivalents for year 21 (6,846) 4,249 Cash and cash equivalents at start of year 12,384 8,135 Cash and cash equivalents at end of year 5,538 12,384 The notes form part of these accounts. Company Cash Flow Statement for the year ended 30 September 2010 2010 2009 Notes Â£000 Â£000 Net cash flow from operating activities Company net return before taxation 2,127 (22,857) Adjustments for: Losses on investments 13 2,361 23,723 Dividends reinvested (45) (132) Share based remuneration 64 251 Depreciation 64 58 Purchases of investments (57,963) (57,427) Sales of investments 55,741 67,202 2,349 10,818 Finance costs 2,802 2,802 Operating cashflows before movements in working capital 5,151 13,620 (Decrease)/increase in trade and other payables (41) 437 Decrease in trade and other receivables 86 112 Net cash inflow from operating activities before tax 5,196 14,169 Tax recovered 10 2 Tax on unfranked income (163) (106) Net cash inflow from operating activities 5,043 14,065 Investing activities Purchases of tangible assets (90) (282) Disposals of tangible assets 29 Purchases of subsidiaries (4,510) Net cash outflow from investing activities (4,571) (282) Financing activities Interest paid (2,783) (2,783) Dividends paid (6,763) (6,631) Exercise of options on own shares 44 Net cash outflow from financing activities (9,546) (9,370) (Decrease)/increase in cash and cash equivalents for year 21 (9,074) 4,413 Cash and cash equivalents at start of year 12,131 7,718 Cash and cash equivalents at end of year 3,057 12,131 The notes form part of these accounts. Notes to the Accounts General Information Majedie Investments PLC is a company incorporated 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 Tower 42, 25 Old Broad Street, London, EC2N 1HQ.The nature of the Group's operations and its principal activities are set out in the Business Review above and in note 2. At the date of authorisation of these financial statements, the following relevant Standards and Interpretations have not been applied in these financial statements since they were in issue but not yet effective: International Accounting Standards (IAS/IFRSs) Effective date IFRS 1 Amendments to IFRS 1 - Additional Exemptions for First-time Adopters 1 January 2010 IFRS 1 Amendments to IFRS 1 - Limited Exemption from Comparative IFRS 7 disclosures 1 July 2010 IFRS 2 Amendments to IFRS 2 - Group Cash settled Share-based Payment Transactions 1 January 2010 IFRS 9 Financial Instruments: Classification & Measurement 1 January 2013 IAS 24 Related Party Disclosures (revised) 1 January 2011 The directors anticipate that the adoption of the above Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. 1 Accounting Policies The accounts above comprise the audited results of the Company and its subsidiaries for the year ended 30 September 2010, 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. Accounting Policies under International Financial Reporting Standards Basis of Accounting The accounts of the Group and the Company have been prepared in accordance with International Financial Reporting Standards (IFRS). They comprise standards and interpretations approved by the International Accounting Standards Board and International Financial Reporting Committee, interpretations approved by the International Accounting Standards Committee that remain in effect to the extent they have been adopted by the European Union. Where presentational guidance set out in the Statement of Recommended Practice (SORP) regarding the Financial Statements of Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies in January 2009 is not inconsistent with the requirements of IFRSs, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. All the companies' activities are continuing. The principal accounting policies adopted are set out as follows: Basis of Consolidation The Consolidated Accounts incorporate the accounts of the Company and entities controlled by the Company (its subsidiaries) made up to 30 September each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during this year 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. Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority's share of changes in equity since the date of combination. Losses applicable to the minority in excess of the minority's interest in the subsidiary's equity are allocated against the interest of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover losses. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. 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. In accordance with the Company's status as a UK investment company under section 833 of the Companies Act 2006, net capital returns may not be distributed by way of dividend. 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. Foreign Currencies The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in the foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity. Segmental Reporting A segment is a distinguishable component of the Group that is engaged in business activities from which it may earn revenues and incur expenses (including intra-group revenues and expenses), for which discrete financial information is available and whose operating results are regulatory reviewed by the entity's chief decision maker who can make decisions on resource allocation and performance assessment. An operating segment could engage in business activities for which it has yet to earn revenues. 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. The fixed return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Deposit interest and other interest receivable is included on an accruals basis. Expenses All 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. Ã¢â€”Â The investment management performance fee, which is based on capital out-performance, is charged wholly to capital. Pension Costs Payments made to the Company's defined contribution group personal pension plan are charged as an expense as they fall due. Finance Costs 75% of finance costs arising from the debenture stocks are allocated to capital at a constant rate on the carrying amount of the debt; 25% of the finance costs are charged on the same basis to the revenue account. Premiums payable on early repurchase of debenture stock are charged 100% to capital. Share Based Payments The Group has applied the requirements of IFRS 2: Share-based Payments. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 October 2004. The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value determined at the date of grant, which is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of shares that will eventually vest. Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. Taxation The tax charge represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive Income is the marginal basis. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital return column. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. No provision is made for tax on capital gains since the Company operates as an investment trust for tax purposes. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Leasehold improvements are written off in equal annual instalments over the minimum period of the lease whereas depreciation for other tangible assets is provided for at 25% to 33% per annum using the straight-line method. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Investments Held at Fair Value Through Profit or Loss When a purchase or sale is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date. All investments are accounted at fair value through profit or loss as defined by IAS 39. All investments are designated upon initial recognition as held at fair value through profit or loss, and are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Investments in unit trusts or open ended investment companies are valued at the closing price, the bid price or the single price as appropriate, released by the relevant investment manager. 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 Guidelines. These may include recent arm's length market transactions, the current fair value of another instrument which is substantially the same, 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. Where no reliable fair value can be estimated for such instruments, they are carried at cost subject to any provision for impairment. Investments in Subsidiaries In its separate financial statements the Company recognises its investment in subsidiaries at cost, less any permanent diminution or if they are investment vehicles they are valued at fair value. Financial Instruments Financial assets and financial liabilities are recognised on the Group's Balance Sheet when the Group becomes a party to the contractual provisions of the instrument. Derivative Financial Instruments The Group does not enter into derivative contracts for the purpose of hedging risks on its investment portfolio as it is a long term investor. The Group does, however, receive or purchase warrants on shares which are classified as equity instruments under IAS 32. These equity instrument derivatives are recognised at fair value on the date the contract is entered into and are subsequently re-valued at their fair value. Changes in the fair value of derivative financial instruments are recognised as they arise in the Statement of Comprehensive Income. Trade Receivables Trade receivables do not carry any interest and are stated at their fair value as reduced by appropriate allowances for estimated irrecoverable amounts. Cash and Cash Equivalents Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. Financial Liabilities and Equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Debentures All debentures are recorded at proceeds received, net of direct issue costs and held at amortised cost with the interest expense being recognised on an effective yield basis. Trade Payables Trade payables are not interest bearing and are stated at their fair value. Reserves Gains and losses on the realisation of investments and foreign currency are accounted for in the capital reserve. Own Shares Own shares held under option are accounted for in accordance with IFRS 2: Share-based Payments. This requires that the consideration paid for own shares held be presented as a deduction from shareholders' funds, and not recognised as an asset. Use of estimates The preparation of financial statements requires the Group to make estimates and assumptions that affect items reported in the Balance Sheets and Statement of Comprehensive Income and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management's best knowledge of current facts, circumstances and to, some extent, future events and actions, actual results ultimately may differ from those estimates, possibly significantly. The only estimates and assumptions that may cause material adjustment to the carrying value of assets and liabilities relate to the valuation of unquoted investments. These are valued in accordance with the policies as set out in note 1 above. At the year end, unquoted investments represent 29.8% of net assets. 2. Business segments For management purposes, the Group is currently organised into the following two principal activities: Investing activities The Company's investment objective is to maximise shareholder return over the long term whilst increasing dividends by more than the rate of inflation. 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 set out above and exposure to different currencies is disclosed in note 25. Investment management services To complement this investment objective and create income and capital for the Group, Javelin Capital LLP has been launched to market a range of funds to third party investors and provide investment management and advisory services. For the year ended 30 September 2010 For the year ended 30 September 2009 Investment Investment management management Investing and and advisory Investing advisory activities services Eliminations Total activities services Eliminations Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Group Income from investment management services Other operating and 10,091 2 10,093 6,534 6,534 investment income Intra-group income 50 92 (142) 10,141 94 (142) 10,093 6,534 6,534 Performance shares and options fair value charge (64) (64) (251) (251) Other administrative (2,054) (2,356) (4,410) (2,538) (2,538) costs Intra-group expenses (85) (25) 110 Other operating expenses (648) (648) (77) (77) (2,851) (2,381) 110 (5,122) (2,866) (2,866) Operating profit/(loss) 7,290 (2,287) (32) 4,971 3,668 3,668 Finance costs (2,802) (2,802) (2,802) (2,802) Intra-group finance (25) 25 costs Gains/(losses) on fair value through profit and loss (2,361) (2,361) (23,723) (23,723) Profit/(loss) before tax 2,127 (2,312) (7) (192) (22,857) (22,857) Dividends (6,763) (6,763) (5,462) (5,462) Total assets 150,241 2,942 153,183 161,796 161,796 Total liabilities (35,571) (453) (36,024) (37,615) (37,615) Intra-group 4,801 (4,801) assets/(liabilities) Net assets 119,471 (2,312) 117,159 124,181 124,181 3. Income Group Group Company Company 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Income from investments Franked investment incomeâ€ 8,778 5,539 8,778 5,539 UK unfranked investment income 21 11 21 11 Overseas dividends 1,156 800 1,156 800 Fixed interest and convertible bonds 56 59 56 59 10,011 6,409 10,011 6,409 Other income Deposit interest 44 95 43 95 Other interest 25 Sundry income 38 30 62 30 82 125 130 125 Total income 10,093 6,534 10,141 6,534 Total income comprises: Dividends 9,955 6,350 9,955 6,350 Fixed interest 56 59 56 59 Interest 44 95 68 95 Other income 38 30 62 30 10,093 6,534 10,141 6,534 Income from investments Listed UK 2,618 3,644 2,618 3,644 Listed overseas 1,156 800 1,156 800 Unlisted 6,237 1,965 6,237 1,965 10,011 6,409 10,011 6,409 â€ Includes MAM special dividend income of Â£5,400,000 (2009: Â£1,359,000). 4. Management Fees - Company 2010 2009 Revenue Capital Revenue Capital return return Total return return Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Investment management 14 44 58 Administration 20 20 34 44 78 A summary of the terms of the management agreement with Javelin Capital LLP is given in the Directors' Report. At 30 September 2010, an amount of Â£58,000 was outstanding for payment of investment management fees when due (2009: Â£nil) and outstanding administration fees of Â£20,000 (2009: Â£nil). The Manager is also entitled to a performance fee in accordance with the provisions of the management agreement, the calculation of which is also described in the Directors' Report. No performance fee is due in respect of the year ended 30 September 2010 (2009: Â£nil). 5. Administration Expenses Group Group Company Company 2010 2009 2010 2009 Â£'000 Â£'000 Â£'000 Â£'000 Staff costs - note 7 851 1,165 768 1,165 Other staff costs and directors' fees 232 314 232 314 Advisers' costs 498 410 444 410 Relocation costs 128 128 Information costs 129 146 82 146 Establishment costs 132 113 113 113 Operating lease rentals - premises 132 139 132 139 Depreciation on tangible assets 84 58 64 58 Auditors' remuneration 66 59 52 56 (see below) Pre start-up costs 2,516 627 Other expenses 482 334 259 337 5,122 2,866 2,773 2,866 Pre start-up costs of Â£2,516,000 relate to costs incurred by Javelin Capital LLP prior to 1 September 2010. These costs comprise staff costs of Â£1,085,000; IT costs of Â£320,000; Advisors costs of Â£400,000, other costs of Â£84,000 and set up costs of Â£627,000. A charge of Â£1,390,000 (2009: Â£nil) to capital and an equivalent credit to revenue has been made in the Group and a charge of Â£1,167,000 (2009: Â£1,359,000) in the Company has been made to recognise the accounting policy of charging 75% of direct investment management expenses to capital. Total fees charged by the auditors for the year, all of which were charged to revenue, comprised: Group Group Company Company 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Audit services - statutory audit 60 53 46 50 Other non-audit services 6 6 6 6 66 59 52 56 6. Directors' Emoluments - Company 2010 2009 Â£000 Â£000 Salaries and fees 332 282 Bonuses Pension contributions Other benefits 332 282 The Report on Directors' Remuneration explains the Company's policy on remuneration for directors for the year. It also provides further details of directors' remuneration. 7. Staff Costs including Executive Directors Group Group Company Company 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Salaries and other payments 684 724 607 724 Social security costs 73 126 67 126 Pension contributions 30 64 30 64 Share based remuneration - note 24 64 251 64 251 851 1,165 768 1,165 Group Group Company Company 2010 2009 2010 2009 Number Number Number Number Average number of employees: Management and office staff 17 5 7 5 8. Finance Costs - Group and Company 2010 2009 Revenue Capital Revenue Capital return return Total return return Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Interest on 9.5% debenture stock 2020 321 962 1,283 321 962 1,283 Interest on 7.25% debenture stock 2025 375 1,125 1,500 375 1,126 1,501 Amortisation of expenses associated with debenture issue 5 14 19 6 12 18 701 2,101 2,802 702 2,100 2,802 Further details of the debenture stocks in issue are provided in note 17. 9. Taxation Analysis of tax charge - Group and Company Group Group Company Company 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Tax on overseas dividends 131 92 131 92 Reconciliation of tax charge: The current taxation for the year is higher than the standard rate of corporation tax in the UK (28%), (2009: 28%). The differences are explained below: Group Group Company Company 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Net return before taxation (192) (22,857) 2,127 (22,857) Taxation at UK Corporation Tax rate of 28% (2008: 29%) (54) (6,400) 595 (6,400) Effects of: - UK dividends which are not taxable (2,455) (1,551) (2,455) (1,551) - foreign dividends which are not taxable (302) (102) (302) (102) - losses on investments which are not taxable 661 6,643 661 6,643 - expenses charged to capital reserve (231) (231) - expenses not deductible for tax purposes 221 107 227 - excess expenses for current year 1,929 1,550 1,274 1,550 - group relief surrendered 107 - overseas taxation which is not recoverable 131 92 131 92 - offset relief for foreign WHT (16) (16) Actual current tax charge 131 92 131 92 Group After claiming relief against accrued income taxable on receipt, the Group has unrelieved excess expenses of Â£54,432,000 (2009: Â£47,543,000). 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 Â£52,093,000 (2009: Â£47,543,000). It is not yet certain that the Company will generate sufficient taxable income in the future to utilise these expenses and therefore no deferred tax asset has been recognised. The allocation of expenses to capital does not result in any tax effect. Due to the Company's status as an investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. 10. Dividends - Group and Company The following table summarises the amounts recognised as distributions to equity shareholders in the period: 2010 2009 Â£000 Â£000 2008 Special dividend of 2.25p paid on 28 January 2009 1,170 2008 Final dividend of 6.30p paid on 28 January 2009 3,276 2009 Interim dividend of 4.20p paid on 30 June 2009 2,185 2009 Final dividend of 6.30p paid on 27 January 2010 3,277 2010 Special dividend of 2.50p paid on 8 March 2010 1,301 2010 Interim dividend of 4.20p paid on 30 June 2010 2,185 6,763 6,631 2010 2009 Â£000 Â£000 Proposed final dividend for the year ended 30 September 2010 of 6.30p (2009: final dividend of 6.30p) per ordinary share 3,277 3,277 3,277 3,277 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. 2010 2009 Â£000 Â£000 Interim dividend for the year ended 30 September 2010 of 4.20p (2009: 4.20p) per ordinary share 2,185 2,185 Proposed final dividend for the year ended 30 September 2010 of 6.30p (2009: 6.30p) per ordinary share 3,277 3,277 Special dividend for the year ended 30 September 2010 of 2.50p (2009: nil p) per ordinary share 1,301 6,763 5,462 11. Return per Ordinary Share - Group Basic return per ordinary share is based on 52,022,510 (2009: 51,973,767) ordinary shares, being the weighted average number of shares in issue having adjusted for the shares held by the Employee Incentive Trust referred to in note 19. Basic returns per ordinary share are based on the net return after taxation attributable to equity shareholders. There is no dilution to the basic return per ordinary share shown for the years ended 30 September 2010 and 2009 since the share options referred to in note 19 would, if exercised, be satisfied by the shares already held by the Employee Incentive Trust. Group 2010 2009 Â£000 Â£000 Basic and diluted revenue returns are based on net revenue after taxation of: 6,156 4,233 Basic and diluted capital returns are based on net capital return of: (6,479) (27,182) Basic and diluted total returns are based on return of: (323) (22,949) Company 2010 2009 Â£000 Â£000 Basic and diluted revenue returns are based on net revenue after taxation of: 8,237 4,233 Basic and diluted capital returns are based on net capital return of: (6,241) (27,182) Basic and diluted total returns are based on return of: 1,996 (22,949) 12. Property and Equipment - Group Leasehold Office Improvements Equipment Total Â£000 Â£000 Â£000 Cost: At 30 September 2009 171 329 500 Additions 420 420 Disposals (255) (255) At 30 September 2010 171 494 665 Depreciation: At 30 September 2009 6 270 276 Charge for year 17 67 84 Disposals (226) (226) At 30 September 2010 23 111 134 Net book value: At 30 September 2010 148 383 531 At 30 September 2009 165 59 224 Property and Equipment - Company Leasehold Office Improvements Equipment Total Â£000 Â£000 Â£000 Cost: At 30 September 2009 171 329 500 Additions 90 90 Disposals (255) (255) At 30 September 2010 171 164 335 Depreciation: At 30 September 2009 6 270 276 Charge for year 17 47 64 Disposals (226) (226) At 30 September 2010 23 91 114 Net book value: At 30 September 2010 148 73 221 At 30 September 2009 165 59 224 13. Investments at Fair Value Through Profit or Loss - Group and Company 2010 2009 Listed Unlisted Total Listed Unlisted Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Opening cost at beginning of year 104,461 13,450 117,911 169,975 9,971 179,946 Gains/(losses) at beginning of year 6,796 22,584 29,380 (21,638) 20,673 (965) Opening fair value at beginning of year 111,257 36,034 147,291 148,337 30,644 178,981 Purchases at cost 55,988 55,988 58,826 50 58,876 Sales - proceeds (55,401) (94) (55,495) (66,843) (66,843) Gains/(losses) on sales 5,903 (107) 5,796 (54,068) (54,068) (Decrease)/Increase in investment holding gains (6,427) (1,730) (8,157) 28,434 1,911 30,345 Adjustments for listing/delisting during financial year (785) 785 (3,429) 3,429 Closing fair value at end of year 110,535 34,888 145,423 111,257 36,034 147,291 Closing cost at end of year 110,166 14,034 124,200 104,461 13,450 117,911 Gains at end of year 369 20,854 21,223 6,796 22,584 29,380 Closing fair value at end of year 110,535 34,888 145,423 111,257 36,034 147,291 Unlisted investments include an amount of Â£4,330,000 in 22 various companies, Â£30,000,000 for our investment in MAM as detailed below and Â£558,000 (2009: Â£569,000) of loan or convertible notes that pay a fixed rate of interest. The valuation of investments includes 10 unlisted investments of over Â£100,000 (including MAM). During the year the Company incurred transaction costs amounting to Â£296,000 (2009: Â£374,000) of which Â£186,000 (2009: Â£243,000) related to the purchases of investments and Â£110,000 (2009: Â£131,000) related to the sales of investments. These amounts are included in losses on investments at fair value through profit or loss, as disclosed in the Consolidated and Company Statement of Comprehensive income. The composition of the investment return is analysed below: 2010 2009 Â£000 Â£000 Net loss on investments 5,796 (54,068) (Decrease)/increase in holding gains on investments (8,157) 30,345 (2,361) (23,723) Substantial Share Interests The Company has a number of investee company holdings where its investment is greater than 3% of any class of capital in those companies. Those that are considered material (excluding MAM which is disclosed separately below) in the context of these accounts are shown below: Fair Value % of Â£000 Class Held Javelin Global Equity Strategies Fund 19,738 100.000 Capital Lease Aviation 422 3.195 The Company has provided seed capital to the Javelin Capital Global Equity Strategies Fund. The fund is being actively marketed to potential external investors and it is forecast that the Company's interest will reduce significantly in the future. The Company does not exercise significant influence over the operating and financial polices of the above companies which are therefore not considered to be associated companies. Majedie Asset Management The Company has maintained a 30% equity shareholding in MAM, which provides investment management and advisory services relating to UK equities. The carrying value of the Company's investment in MAM is included in the Consolidated Balance Sheet as part of investments at fair value through profit or loss: 2010 2009 Â£000 Â£000 Deemed cost of investment 1,207 1,207 Holding gains 28,793 28,793 Fair value at 30 September 30,000 30,000 The carrying value of MAM in the 30 September 2010 Consolidated Financial Statements is its fair value as assessed at 30 September 2010. The above valuation exercise was carried out by the Board in accordance with the Company's accounting policy for the valuation of unlisted investments. The approach adopted involved the consideration of earnings for the 2010 and the 2011 financial years, the inclusion of estimated performance fee income on a discounted basis, the application of a relevant market-based multiple to earnings and an overall illiquidity discount. The results of MAM for the year ended 30 September 2010 show a net profit after taxation of Â£14,399,000 (2009: Â£14,222,000) and shareholders' funds of Â£18,192,000 (2009: Â£25,945,000). In accordance with the review of the treatment of the investment in MAM these results are not consolidated in the Group's results but are incorporated into the directors' valuation of the fair value of MAM as detailed above. 14. Investment in Subsidiaries - Company 2010 2009 Company Â£000 Â£000 Cost: At beginning of year 1,000 1,002 Additions 4,510 Disposals (2) At end of year 5,510 1,000 Depreciation: At beginning of year (839) (808) Depreciation in year (31) At end of year (839) (839) Valuation at end of year 4,671 161 All operating subsidiaries are held at cost, less any permanent diminution, unless considered to be an investment and then held at fair value. a) Subsidiary undertakings at 30 September 2010 Country of Profit after Registration Number and Capital tax for the Incorporation class of Group Reserves at year ended shares Company and and Operation held by Holdings 30.09.10 30.09.10 business group Â£'000 Â£'000 Majedie Portfolio Management Limited UK 1,000,000 100% 162 - Majedie share Ordinary plan manager, shares authorised and regulated by the FSA Majedie Unit Trust UK 10,000 100% 10 - Unauthorised Units unit trust to receive Javelin Capital income Javelin Capital UK 70% 70% 2,120 (2,308) LLP - Asset Management interest Javelin Capital Services Limited UK 100 70% - Administration Ordinary Services shares Javelin Capital Fund Management Limited Ireland 125,000 70% 118 (7) Ordinary shares Javelin Capital Guernsey Â£200 70% EBT - Employee Benefit Trust Trust capital Javelin Capital Services Limited, Javelin Capital Fund Management Limited and the Javelin Capital EBT are all wholly owned subsidiaries of Javelin Capital LLP. (b) Minority Interest In accordance with the Company's accounting policies and the income and loss recognition provisions of the Limited Liability Partner Agreement for Javelin Capital LLP there is no minority interest to be recognised in the Consolidated Statement of Comprehensive Income or Balance Sheet. 15. Trade and Other Receivables Group Group Company Company 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Sales for future settlement 832 1,078 832 1,078 Payments in advance 451 435 36 434 Dividends receivable 346 343 346 343 Accrued income 17 18 17 18 Taxation recoverable 45 23 45 23 Amounts due from subsidiary undertakings 400 90 1,691 1,897 1,676 1,986 16. Cash and Cash Equivalents Group Group Company Company 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Deposits 4,903 11,830 2,686 11,856 Other balances 635 554 371 275 5,538 12,384 3,057 12,131 17. Trade and Other Payables Amounts falling due within one year: Group Group Company Company 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Purchases for future settlement 598 2,618 598 2,618 Accrued expenses 449 590 522 589 Other creditors 1,196 645 671 645 2,243 3,853 1,791 3,852 Amounts falling due after more than one year: Group Group Company Company 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Â£13.5m (2009: Â£13.5m) 9.5% debenture stock 2020 13,384 13,376 13,384 13,376 Â£20.7m (2009: Â£20.7m) 7.25% debenture stock 2025 20,397 20,386 20,397 20,386 33,781 33,762 33,781 33,762 Both debenture stocks are secured by a floating charge over the Company's assets. Expenses associated with the issue of debenture stocks were deducted from the gross proceeds and are being accounted for, at a constant rate, the effect of which is immaterially different to applying the effective interest rate method, over the life of the debentures. Further details on interest and the amortisation of issue expenses are provided in note 8. 18. Called Up Share Capital 2010 2009 Â£000 Â£000 Allotted and fully paid at 30 September: 52,528,000 (2009: 52,528,000) ordinary shares of 10p each 5,253 5,253 There are 505,490 (2009: 505,490) ordinary shares of 10p each held by the Employee Incentive Trust. See note 19. Ordinary shares carry one vote each on a poll. 19. Own Shares - Group and Company The total number of options outstanding at the date of this report is 309,080 under the LTIP and the total shareholding of the Trust is 505,490 ordinary shares. The shares will be held by the Trust until the relevant options are exercised or until they lapse. They are presented on the Balance Sheet as a deduction from shareholders' funds, in accordance with the policy detailed in note 1. Own Shares Number of Reserve Shares Â£000 As at 30 September 2009 505,490 (1,702) Net movements As at 30 September 2010 505,490 (1,702) 20. Net Asset Value The consolidated net asset value per share has been calculated based on equity shareholders' funds of Â£117,159,000 (2009: Â£124,181,000) and on 52,022,510 (2009: 52,022,510) ordinary shares, being the shares in issue at the year end having deducted the number of shares held by the EIT. 21. Analysis of Changes in Net Debt At 30 Non At 30 September Cash Cash September 2009 Flows Items 2010 Group Â£000 Â£000 Â£000 Â£000 Cash at bank 12,384 (6,846) 5,538 Debt due after one year (33,762) (19) (33,781) (21,378) (6,846) (19) (28,243) At 30 Non At 30 September Cash Cash September 2009 Flows Items 2010 Company Â£000 Â£000 Â£000 Â£000 Cash at bank 12,131 (9,074) 3,057 Debt due after one year (33,762) (19) (33,781) (21,631) (9,074) (19) (30,724) 22. Operating Lease Commitments The Group has a 10 year non-cancellable operating lease (with a break clause in 5 years) in respect of premises, including a rent free period. The rent free element has been apportioned over the lease up to the date of the break clause. The Group has an annual commitment at 30 September 2010 under the new lease of Â£145,000 (2009: Â£145,000). This operating lease commitment is disclosed in the table below: Expiry Date 2010 2009 new lease prior lease Â£000 Â£000 Within one year 145 121 Between one and two years 145 145 Between two and three years 145 145 Between three and four years 35 145 Five years and above 35 470 591 23. Financial Commitments At 30 September 2010 the Group had no financial commitments which had not been accrued for (2009: none). 24. Share-based Payments The Group currently operates one share-based payment scheme being the 2006 Long Term Incentive Plan (LTIP) which in turn has two sections relating to TSR-based Awards and Matching Awards. The previous scheme, the Discretionary Share Option Scheme 2000, closed during the year. With the introduction of Javelin Capital LLP and resultant employee transfers from the Company no further awards will be made under the LTIP. Javelin Capital LLP does not operate any share-based payment schemes. Discretionary Share Option Scheme 2000 The remaining options under the scheme lapsed during the year and the scheme was closed. Long Term Incentive Plan: TSR-based Awards Awards of restricted shares up to a maximum value of one year's salary have performance conditions based on total shareholder return in relation to two separate performance conditions over a period of five years. The performance conditions contain higher and lower thresholds that determine the extent of the vesting of the award. Long Term Incentive Plan: Matching Awards Executive directors and senior executives receive a certain percentage of their overall bonus for the year in deferred shares. The shares granted according to these matching awards only vest once the executive has completed three years' further service. There are no other performance conditions. 2010 Discretionary Share Option TSR- based Matching Scheme 2000 Awards Awards Weighted Weighted Weighted No. Average No. Average No. Average Of Exercise of Exercise of Exercise Options Price (p) Options Price (p) Options Price (p) Outstanding at 1 October 2009 106,656 330.03 166,427 0.0 17,071 0.0 During the year: Awarded 112,721 0.0 Forfeited Exercised Expired (106,656) 330.03 Increase in awards due to dividends paid 12,120 0.0 741 0.0 Outstanding at 30 September 2010 291,268 0.0 17,812 0.0 Exercisable at 30 September 2010 2009 Discretionary Share Option TSR-based Matching Scheme 2000 Awards Awards Weighted Weighted Weighted No. Average No. Average No. Average Of Exercise Of Exercise Of Exercise Options Price (p) Options Price (p) Options Price (p) Outstanding at 1 October 2008 255,803 330.09 369,394 0.0 213,085 0.0 During the year: Awarded 106,207 0.0 Forfeited Exercised (30,925) 0.0 (197,272) 0.0 Expired (149,147) 330.14 (290,498) 0.0 Increase in awards due to dividends paid 12,249 0.0 1,258 0.0 Outstanding at 30 September 2009 106,656 330.03 166,427 0.0 17,071 0.0 Exercisable at 30 September 2009 The aggregate estimated fair value of the 112,721 TSR-based awards on 8 December 2010, being the date on which the awards were granted was Â£154,000 (2009: Â£51,000 relating to the aggregate estimated fair value of 106,207 options granted on 4 December 2008). There were no matching awards granted in 2010 or 2009. During the year 106,656 share options lapsed in accordance with the leaving agreement for a former director. The awards outstanding at 30 September 2010 had a weighted average remaining contractual life of 3.4 years and 0.13 years in respect of the TSR-based Awards and Matching Awards respectively (2009: 0.2 years for the Discretionary Share Options Scheme 2000 and then 3.9 years and 2.1 years respectively). Awards and options are usually forfeited if the employee leaves employment before vesting. The following table lists the assumptions and weighted average inputs used in the Black Scholes model for share awards granted in the year: 2010 2009 TSR-based TSR-based Awards Awards Weighted Average share price 200.0p 162.5p Weighted Average exercise price 0.0p 0.0p Expected Volatility 34.0% 33.0% Expected Life 5yrs 5yrs Risk Free rate 2.5% 3.0% Expected dividends 5.25% 6.5% Expected volatility was determined by calculating the historical volatility of the Company's share price over the last three years. The expected life used in the model had been adjusted, based on the management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. For the year ended 30 September 2010, the Company recognised a total share options expense of Â£64,000 (2009: Â£251,000 including a one-off vesting charge of Â£191,000) relating to share-based payment transactions in the year ended 30 September 2010. 25 Financial Instruments and Risk Profile As an investment trust, the Company invests in securities for the long term in order to achieve its investment objective as stated above. Accordingly it is the Board's policy that no trading in investments or other financial instruments be undertaken. The Group'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 and accrued income, and the debenture loans used to finance its operations. The Company is unlikely to use derivatives for hedging purposes and then only in exceptional circumstances with the specific prior approval of the Board. In pursuing its investment objective the Company is exposed to various risks which could cause short term variation in the Group's net assets and which could result in both or either a reduction in the Company's net assets or a reduction in the profits available for distribution by way of dividend. The main risk exposures for the Group from its financial instruments are market risk, (including currency risk, interest rate risk and other price risk), liquidity risk and credit risk. The Board sets the overall investment strategy and has in place various controls and limits and receives various reports in order to monitor the Company's exposure to these risks. The risk management policies identified in this note have not changed materially from the previous accounting period. Market Risk The principal risk in the management of the portfolio is market risk i.e. the risk that values and future cashflows will fluctuate due to changes in market prices. This comprises: - foreign currency risk; - interest rate risk; and - other price risk i.e. movements in the value of investment holdings caused by factors other than interest rate or currency movements These risks are taken into account when setting investment policy and making investment decisions. Foreign Currency Risk Exposure to foreign currency risk arises through investments in securities listed on overseas stock markets. A proportion of the net assets of the Group 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 Group's exposure to foreign currencies through its investments in overseas securities as at 30 September 2010 was Â£51,717,000 (2009: Â£37,026,000). The Investment Manager monitors the Group's exposure to foreign currencies and the Board receives reports on a regular basis. In making investment decisions the Investment Director is mindful of the Group's benchmark allocation to foreign currencies but takes independent positions based on a long term view on the relative strengths and weaknesses of currencies. Additionally the currency of investment is not the only relevant factor considered as many portfolio investment companies are global in scope and nature. The Group does not normally hedge against foreign currency movements. The currency risk of the Group and Company's financial assets and liabilities at the Balance Sheet date was: Group Company 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Monetary exposures UK sterling 5,538 12,384 3,057 12,131 Non-monetary exposures US dollar 37,173 18,804 37,173 18,804 Euro 6,579 8,940 6,579 8,940 Hong Kong dollar 3,167 2,021 3,167 2,021 Swiss franc 828 1,623 828 1,623 Singapore dollar 578 735 578 735 Phillipine peso 491 491 Japanese yen 2,476 4,376 2,476 4,376 Australian dollar 425 526 425 526 UK sterling 95,928 112,387 100,274 112,637 147,645 149,412 151,991 149,662 Total assets 153,183 161,796 155,048 161,793 Liabilities Monetary exposures UK sterling (33,781) (33,762) (33,781) (33,762) Non-monetary exposures UK sterling (2,243) (3,853) (1,791) (3,852) (36,024) (37,615) (35,572) (37,614) Total net assets (117,159) 124,181 119,476 124,179 Sensitivity analysis A 5% increase in sterling at 30 September 2010 against the relevant foreign currencies, with all other variables held constant, would have had the effect of reducing the Group and Company's net assets and total return by Â£2,586,000 (2009: Â£1,851,000). A 5% decrease in sterling would have had the equal and opposite effect. Interest Rate Risk The Group's direct interest rate risk exposure affects the interest received on cash balances and the fair value of its fixed rate portfolio investments and debentures. Indirect exposure to interest rate risk arises through the effect of interest rate changes on the valuation of the investment portfolio. The vast majority of the financial assets held by the Group are equity shares, which pay dividends, not interest. The Group may however from time to time hold small investments which pay a fixed rate of interest. The Board sets limits for cash balances and receives regular reports on the cash balances of the Group. The Group's fixed rate debentures introduce an element of gearing to the Group which is monitored within limits and reported to the Board. Cash balances are used to manage the level of gearing within a range set by the Board. The Board sets an overall investment strategy and also has various limits on the investment portfolio which aim to spread the portfolio investments to reduce the impact of interest rate risk on company valuations. Regular reports are received by the Board in respect of the Group's investment portfolio and the respective limits. The interest rate risk profile of the Group's financial assets and liabilities at the Balance Sheet date was: Group Company 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Floating rate financial assets UK sterling 5,538 12,384 7,557 12,131 Fixed rate financial assets As referred to in note 13 558 569 558 569 Financial assets not carrying interest 147,087 148,843 146,933 149,093 Total assets 153,183 161,796 155,048 161,793 Fixed rate financial liabilities UK sterling (33,781) (33,762) (33,781) (33,762) Financial liabilities not carrying interest UK sterling (2,243) (3,853) (1,791) (3,852) Total liabilities (36,024) (37,615) (35,572) (37,614) Total assets 117,159 124,181 119,476 124,179 Floating rate financial assets usually comprise cash on deposit which is repayable on demand and receive a rate of interest based on the base rates in force over the period. The Company balance includes the Â£4.5m investment in Javelin Capital LLP which receives a commercial rate of interest from 31 August 2010 until full repayment occurs in accordance with the terms of the LLP Agreement. Fixed rate financial assets comprise convertible bonds or loan notes. The fixed rate financial liabilities comprise the Group and Company's debentures totalling Â£34.2m nominal. They pay a weighted average rate of interest of 8.1% per annum and mature in 2020 (Â£13.5m) and 2025 (Â£20.7m). Sensitivity analysis Movements in interest rates would not have had a significant direct impact on net assets or total return but could indirectly, have a material, but unquantifiable impact on the investments held. Other Price Risk Exposure to market price risk is significant and comprises mainly movements in the market prices and hence value of the Company's listed equity investments which are disclosed in note 13. The Group also has unlisted investments which are indirectly impacted by movements in listed equity prices and related variables. The Board sets an overall investment strategy to achieve a spread of investments across sectors and regions in order to reduce risk. Investments are considered independently of the Company's benchmark which may result in volatility in the short term. The Board receives reports on the investment portfolio, performance and volatility on a regular basis in order to ensure that the investment portfolio is in accordance with current strategy. Sensitivity analysis A 5% increase in listed equity valuations at 30 September 2010 would have increased total assets and total return by Â£5,527,000 (2009: Â£5,563,000). A 5% decrease in listed equity valuations would have had the equal but opposite effect. Credit Risk Credit risk is the risk of other parties failing to discharge an obligation causing the Group financial loss. The Group's exposure to credit risk is managed by the following: - The Company's listed investments are held on its behalf by RBC Dexia Investor Services Trust, the Company's custodian which if it became bankrupt or insolvent could cause the Company's rights with respect to securities held to be delayed. The Company receives regular internal control reports from the Custodian which are reviewed by Management and reported to the Board; - Investment transactions are undertaken by the Investment Manager with a number of approved brokers in the ordinary course of business. All new brokers are reviewed by the Investment Manager for credit worthiness and added to an approved brokers list if not considered to be a credit risk; - Cash is held at banks that are considered to be reputable and high quality. Cash balances are spread across a range of banks to reduce concentration risk; - Where the Company makes an investment in a loan or other security with credit risk, that credit risk is assessed and considered as part of the investment decision making process by the Investment Director. The Board receives regular reports on the composition of the investment portfolio. Credit Risk Exposure At 30 September 2010, Group cash balances total Â£5,538,000 (2009: Â£12,384,000), Group debtors and prepayments total Â£1,691,000 (2009: Â£1,897,000). Company cash balances total Â£3,057,000 (2009: Â£12,131,000), Company debtors and prepayments total Â£1,676,000 (2009: Â£1,986,000). Also included within Company's investment the portfolio are a number of convertible notes or loan notes designated at fair value through profit or loss. The total value of these notes are Â£558,000 (2009: Â£569,000). One loan note with a cost of Â£422,000 is currently impaired and has been written down to Â£nil. The minimum exposure to credit risk during the year was Â£16,373,000(Company: Â£16,210,000) and the maximum exposure was Â£7,787,000 (Company: Â£5,290,000). Liquidity Risk Liquidity risk is the risk that the Group will encounter difficulties meeting its obligations as they fall due. Liquidity risk is not significant as the majority of the Company's assets are investments in quoted equities and other quoted securities that are readily realisable. The Board has various limits in respect of how much of the Group's resources can be invested in any one company. The unlisted investments in the portfolio are subject to liquidity risk but such investments are subject to limits set by the Board and liquidity risk is taken into account by the directors when arriving at their valuation. The Company maintains an appropriate level of cash balances in order to finance its operations and the Investment Director regularly monitors the Company's cash balances to ensure all known or forecasted liabilities can be met. The Board receives regular reports on the level of the Company's cash balances. The Company does not have any overdraft or other borrowing facilities to provide liquidity. A maturity analysis of financial liabilities showing the remaining contractual maturities is detailed below: Undiscounted cash flows Due within Due between Due between Due 3 years Group 1 year 1 and 2 years 2 and 3 years and beyond Total 2010 Â£000 Â£000 Â£000 Â£000 Â£000 9.5% debenture stock 2020 13,500 13,500 7.25% debenture stock 2025 20,700 20,700 Interest on financial liabilities 2,783 2,783 2,783 26,433 34,782 Trade payable and other liabilities (excluding social security and sundry taxes) 2,243 2,243 At 30 September 2010 5,026 2,783 2,783 60,633 71,255 Undiscounted cash flows Due within Due between Due between Due 3 years Group 1 year 1 and 2 years 2 and 3 years and beyond Total 2009 Â£000 Â£000 Â£000 Â£000 Â£000 9.5% debenture stock 2020 13,500 13,500 7.25% debenture stock 2025 20,700 20,700 Interest on financial liabilities 2,783 2,783 2,783 29,216 37,565 Trade payable and other liabilities (excluding social security and sundry taxes) 3,583 3,853 At 30 September 2009 6,636 2,783 2,783 63,416 75,618 Undiscounted cash flows Due within Due between Due between Due 3 years Company 1 year 1 and 2 years 2 and 3 years and beyond Total 2010 Â£000 Â£000 Â£000 Â£000 Â£000 9.5% debenture stock 2020 13,500 13,500 7.25% debenture stock 2025 20,700 20,700 Interest on financial liabilities 2,783 2,783 2,783 26,433 34,782 Trade payable and other liabilities (excluding social security and sundry taxes) 1,791 1,791 At 30 September 2010 4,574 2,783 2,783 60,633 70,773 Undiscounted cash flows Due within Due between Due between Due 3 years Company 1 year 1 and 2 years 2 and 3 years and beyond Total 2009 Â£000 Â£000 Â£000 Â£000 Â£000 9.5% debenture stock 2020 13,500 13,500 7.25% debenture stock 2025 20,700 20,700 Interest on financial liabilities 2,783 2,783 2,783 29,216 37,565 Trade payable and other liabilities (excluding social security and sundry taxes) 3,852 3,852 At 30 September 2009 6,635 2,783 2,783 63,416 75,617 Fair value of financial assets and liabilities The Group's financial instruments at 30 September comprised the following: Group Book Value Book Value Fair Value Fair Value 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Financial assets Investment portfolio 145,423 147,291 145,423 147,291 Cash 5,538 12,384 5,538 12,384 Financial liabilities Â£13.5m (2009: Â£13.5m) 9.5% debenture stock 2020 13,384 13,376 17,532 16,462 Â£20.7m (2009: Â£20.7m) 7.25% debenture stock 2025 20,397 20,386 23,473 21,870 Company Book Value Book Value Fair Value Fair Value 2010 2009 2010 2009 Â£000 Â£000 Â£000 Â£000 Financial assets Investment portfolio 145,423 147,291 145,423 147,291 Cash 3,057 12,131 3,057 12,131 Financial liabilities Â£13.5m (2009: Â£13.5m) 9.5% debenture stock 2020 13,384 13,376 17,532 16,462 Â£20.7m (2009: Â£20.7m) 7.25% debenture stock 2025 20,397 20,386 23,473 21,870 The investment portfolio has been valued in accordance with the accounting policy in note 1 to the accounts. Accordingly, book value equates to fair value. The fair value of the debenture stock is calculated using Discounted Cash Flow analysis and by reference to the redemption yields of a similar company's debt instrument, with an appropriate margin spread added. Fair value hierarchy disclosures The Group has adopted the amendment to IFRS 7, effective 1 January 2009. This requires the Group 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 arms 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. - quoted prices for identical or similar assets or liabilities in markets that are not active. Characteristics of an inactive market include a significant decline in the volume and level of trading activity, the available prices vary significantly over time or among market participants or the prices are not current. - inputs other than quoted prices that are observable for the asset (for example, 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 the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement 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 in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes `observable' requires significant judgement by the Group. The Group considers observable data to 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: Financial Assets at fair value through profit or loss at Total Level 1 Level 2 Level 3 30 September 2010 Â£'000 Â£'000 Â£'000 Â£'000 Group Equity investments 144,789 110,464 34,325 Convertible bonds 260 260 Convertible loan notes 298 298 Preference shares 76 71 5 145,423 110,535 34,888 Financial Assets at fair value through profit or loss at Total Level 1 Level 2 Level 3 30 September 2010 Â£'000 Â£'000 Â£'000 Â£'000 Company Equity investments 149,460 110,464 38,996 Convertible bonds 260 260 Convertible loan notes 298 298 Preference shares 76 71 5 150,094 110,535 39,559 Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1, include active listed equities. The Group does not adjust the quoted price for these instruments. 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 illiquidity and/or non-transferability, which are generally based on available market information. Investments classified within level 3 have significant unobservable inputs. Level 3 instruments include private equity and corporate debt securities. As observable prices are not available for these securities, the Group 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 International Private Equity and Venture Capital ("IPEVC") Valuation Guidelines. New investments are initially carried at cost, for a limited period, being the price of the most recent investment in the investee. This is in accordance with IPEVC Guidelines as the cost of recent investments will generally provide a good indication of fair value. Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction. The following table presents the movement in level 3 instruments for the period ended 30 September 2010: Equity Convertible Convertible Preference Group Total investments bonds loan notes shares Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Opening balance 36,034 35,465 274 294 1 Purchases Transfers from Level 1 785 785 Sales - proceeds (94) (94) Total (losses)/gains for the year included in the income statement (1,837) (1,831) (14) 4 4 34,888 34,325 260 298 5 Equity Convertible Convertible Preference Company Total investments bonds loan notes shares Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Opening balance 36,195 35,627 276 294 1 Purchases 4,510 4,510 Transfers from Level 1 785 785 Sales - proceeds (94) (94) Total (losses)/gains for the year included in the income statement (1,837) (1,831) (14) 4 4 39,559 38,996 260 298 5 Capital Management Policies and Procedures The Group's capital management objectives are: - to ensure that it is able to continue as a going concern; and - to maximise the revenue and capital returns to its equity shareholders through an appropriate mix of equity capital and debt. The Board sets a range for the Company's net debt (comprised of debentures less cash) at any one time which is maintained by management of the Company's cash balances. The Company's capital at 30 September comprises: 2010 2009 Â£000 Â£000 Net debt Cash (3,057) (12,131) Debentures 33,781 33,762 Sub total 30,724 21,631 Equity Equity share capital 5,253 5,253 Retained earnings and other reserves 114,223 118,926 Sub total 119,476 124,179 Net debt as a percentage of net assets 25.7% 17.4% The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. The review includes: - the level of net gearing, taking into account the Investment Director's views on the market; - the level of the Company's free float of shares as the Barlow family owns approximately 55% of the share capital of the Company. - the extent to which revenue in excess of that required to be distributed should be retained. These objectives, policies and processes for managing capital are unchanged from the prior period. The Company is subject to various externally imposed capital requirements: - the debentures are not to exceed in aggregate 662/3% of adjusted share capital and reserves in accordance with the respective Trust Deeds; - the Company has to comply with statutory requirements regarding minimum share capital and restriction tests relating to dividend distributions. These requirements are unchanged since last year and the Company has complied with them. 26. Derivative Financial Instruments In the course of its investment activities the Company receives warrants on ordinary shares which provide exposure to companies on favourable terms. At 30 September 2010, the fair value of the Company's warrants, both listed and unlisted was Â£nil (2009: Â£nil). Changes in the fair value of warrants amounting to Â£nil (2009: Â£18,000) have been debited to the Statement of Comprehensive Income in the year ended 30 September 2010. 27. Related Party Transactions Javelin Capital Javelin Capital LLP is a subsidiary of the Company and is consolidated into the Group accounts. On 31 August 2010 various agreements were signed in relation to the introduction of Javelin Capital LLP. Additionally and not on the same date certain other agreements were signed to give effect to the operational structure of the Javelin Capital group. The table below provides a summary of each respective agreement: Agreement Signatories/Parties Nature of Agreement LLP Agreement Majedie Investment PLC; As described in the directors' Majedie Unit Trust; report Javelin Capital UK Limited; Javelin Capital EBT; Mr GP Aherne; Mr V Pina Mr CJ Edge; Mr RJ Mace; Mr SP Asprey; Mr NR Rundle; Management Agreement Majedie Investments PLC; As described in the directors' Javelin Capital LLP report Administration Majedie Investments PLC; As described in the Services directors' Agreement Javelin Capital LLP report Contribution and Majedie Investments PLC; As described in the transfer directors' Agreement Javelin Capital LLP report Intra Group Asset Majedie Investments PLC; As described in the Lease directors' Agreement Javelin Capital Services Ltd report International Prime Javelin Capital Strategies plc; Appointment of Prime Brokerage Broker Agreement Morgan Stanley & Co to Javelin Capital International plc; Strategies BNP Paribas Securities Plc "the fund Services, company" Dublin Branch (which is the Irish listed fund vehicle for the current fund managed by Javelin Capital LLP) Prime Brokerage Javelin Capital Strategies plc; Appointment of Prime Agreement Broker Goldman Sachs International; to Javelin Capital Strategies Javelin Capital LLP; Plc "the fund company" BNP Paribas Securities (which is the Irish Services, listed fund Dublin Branch vehicle for the current fund managed by Javelin Capital LLP) Administration Javelin Capital Strategies plc; Appointment of Agreement administrator Javelin Capital Fund Management to the fund company Limited BNP Paribas Fund Services Dublin Limited Management Agreement Javelin Capital Strategies plc; Appointment of manager to Javelin Capital Fund Management the fund manager Limited Investment Management Javelin Capital LLP; Appointment of and investment Distribution Agreement Javelin Capital Fund Management manager and Limited distributor to the fund company Javelin Capital Strategies plc is an Irish Stock Exchange listed Qualifying Investment Fund "the fund company". It currently has one sub-fund called the Javelin Capital Global Equity Strategies Fund whose investment manager is Javelin Capital LLP. Javelin Capital Fund Management Limited (JCFM), a wholly owned subsidiary of Javelin Capital LLP, acts as manager for the fund company. For the year ended 30 September 2010 management and performance fees due to the manager amounted to Â£7,000 of which all was outstanding at year end (2009: nil). On 23 September 2010 the Company made an investment of Â£20m into the Javelin Capital Global Equity Strategies Fund for an initial period of two years, subject to performance. This investment is subject to management and performance fees which totalled Â£7,000 and nil respectively for the period to 30 September 2010. At that time the full balance was outstanding (2009:Â£nil). Before Javelin Capital LLP was operational the Company paid certain expenses or assets on its behalf. These were charged to JCS and amounted to Â£1,889,000 and as at year end Â£283,000 was outstanding (2009: nil). As investment manager and general administrator for the Company. Javelin Capital LLP receives fees in accordance with the relevant agreements. As these only came into effect from 1 September when the agreements took effect, the total income accrued by Javelin Capital was Â£58,000 and Â£25,000 respectively, all of which was outstanding at year end (2009: nil). The Company receives interest at a commercial rate on its investment in Javelin Capital LLP. Under the terms of the LLP Agreement this starts from 31 August 2010 and continues until it is fully repaid. During the period this was accrued as Â£25,000 all of which was outstanding at the year end (2009:nil). Mr Aherne is a partner in Javelin Capital LLP and a director of Javelin Capital Strategies plc and Javelin Capital Investments plc, which are both Irish listed fund companies (although Javelin Capital Investments plc is not yet trading) for funds that are or would be managed by Javelin Capital LLP. His only source of remuneration from the Group, as from 31 August 2010 is as a partner of Javelin Capital LLP, details of which are provided in the Directors' Remuneration Report. Mr Aherne has also made an investment of Â£50,000 in the Javelin Capital Global Equity Strategies Fund on terms available to staff, which are no more favourable than those received by the Company. In addition to the LLP Agreement detailed above there are two side letters that relate to Javelin Capital LLP between the Company and the individual partners. The first relates to the potential ability to make changes to the relevant control rights under the LLP Agreement if the business is successful. The second is in respect of circumstances in which individual partner capital and current account balances are repaid. The Company has paid certain start-up costs on behalf of the individual partners and as such the LLP Agreement provides for an additional profit share element of Â£385,000 to be awarded to the Company to recoup such costs in full. The Company incurs certain costs on behalf of Majedie Portfolio Management Limited (MPM) for operating the Majedie Investments PLC Share Plan. These costs, net of any income in MPM, are recharged to MPM and for the year ended 30 September 2010 these totalled Â£35,000 (2009: Â£35,000) and as at year end a balance of Â£92,000 was outstanding at year end (2009: Â£91,000). Transactions between group companies during the year were made on terms equivalent to those that occur in arm's length transactions. Majedie Asset Management (MAM) MAM is accounted for as an investment in both the Company and Group accounts and is valued at fair value through profit or loss. During the year the Company received dividends from MAM of Â£6,181,000 of which none was outstanding at year end (2009: Â£1,906,000 and nil). On 4 February 2010 the Company redeemed in full its B share investment in the Majedie Asset Management Tortoise Fund for proceeds totalling Â£1,646,000 and a gain over cost of Â£375,000. During the year no distributions were received and fees of Â£2,800 were incurred (2009: Â£23,000 and Â£81,000 respectively). There were no balances outstanding at year end (2009: nil). The Company has no other investments in any MAM funds. Remuneration The remuneration of the directors, who are the key management personnel of the Company, is set out below in aggregate for each of the categories specified in IAS24: Related Party Disclosures. Further information about the remuneration of individual directors is provided in the audited part of the Report on Directors Remuneration 2010 2009 Â£'000 Â£'000 Short term employee 332 282 benefits Share-based payments 332 282 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: www.hemscott.com/nsm.do. A copy of the Annual Report and Accounts and Notice of Annual General Meeting will be delivered to shareholders shortly and can also be found at www.majedie.co.uk. Annual General Meeting The Company's Annual General Meeting will be held on 19 January 2011 at 11.30am at the Pewterers' Hall, Oat Lane, London EC2V 7DE. ENQUIRIES If you have any enquiries regarding this announcement please contact Mr Gerry Aherne on 020 7626 1243.

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Majedie Investments (MAJE)

Thursday, 23rd May 2024

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HL. QQ. AJB

Another day and another round of takeover talk with Hargreaves Lansdown being eyed by private equity suitors. AJ Bell also advances on upbeat earnings news whilst QinetiQ upgrades its profit guidance, too.

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