Final Results

PRELIMINARY ANNOUNCEMENT OF UNAUDITED RESULTS OF THE MAJEDIE INVESTMENTS PLC GROUP for the year ended 30 September 2007 Highlights for the Year - Total shareholder return: 25.2% - Net asset value total return: 23.1% - Benchmark total return*: 12.6% - Special dividend (per share) 4.5p - Final dividend (per share) 6.2p - Total dividends (per share): 14.5p - Total dividend increase on 2006: 52.6% - Directors' valuation of investment in Majedie Asset Management Limited not reflected in NAV 26.4p per share Performance for three years ended 30 September 2007 - Total shareholder return: 98.4% - Net asset value total return: 84.2% - Benchmark total return*: 58.2% * The benchmark is 70% FTSE All-Share Index + 30% FTSE World ex UK Index (Sterling) and is calculated by The WM Company. Chairman's Statement I am delighted to report that during the 2007 financial year there has been a significant increase in the net asset value of the Company of over £40m to £239.6m. About one half of this increase relates to a general rise in stock markets, the other half has been generated through much hard work by Gill Leates and her investment team. Furthermore total dividends of £5.1m have been paid during the year. The net asset value total return for the year was 23.1% compared with 12.6% for the benchmark - a substantial outperformance of 10.5%. It is always a challenge to beat the benchmark, and this year's result represents a particularly commendable achievement in light of the considerable recent market turmoil. This investment return excludes the increase in the valuation of our investment in Majedie Asset Management Limited. This success with the portfolio has driven growth in the share price which has increased by 22.2% during the year generating total shareholder return of 25.2% exactly doubling the benchmark return of 12.6%. There is a saying that stock markets climb a `wall of worry' and indeed there are currently global and local factors giving cause for concern. However it is important to be able to look through short term market volatility and hold to a clear course to achieve growth over the longer term. Much of the research and investment analysis, which has delivered the strong performance this year, was carried out over the last three years or so. It is thought that this valuable work will continue to yield good gains in the future combining with new investment opportunities which are continually being evaluated and implemented. The overall investment strategy has been consistent over the last few years. One key aspect has involved identifying companies where the underlying business is driven by one or more of the following: strong management, intellectual property rights, the successful development of resource assets or the innovative implementation of new technologies. Such companies are less vulnerable to outside economic and general stock market factors. For the last couple of years the group net return before tax has been particularly buoyant due to the impact of Majedie Asset Management. This year's net return before tax was £8.2m. This year's income includes £3.8m of special dividends from Majedie Asset Management and accordingly the Board is recommending an additional special dividend of 4.5p per share be included with this year's final dividend. A normal core final dividend of 6.2p per share is proposed and, when combined with the interim of 3.8p, the core total dividend of 10p per share represents an increase of 5.3% over last year's dividend of 9.5p. The Majedie dividend has been increased by more than the rate of inflation in each of the last eighteen years. The Board will consider next year whether a second special dividend should be paid, taking into account the incidence and extent of the fourth and final instalment of the special dividends from MAM. Thereafter the Majedie distributions will revert to the normal level of the past. The increase in Company costs since last year arises from an increase in bonuses and an increased charge for the Long Term Incentive Plan. This is appropriate in light of the strong progress achieved over the last few years with investment performance and with our investment in MAM. The AGM will be held at 11.30am on 16 January 2008 at a new venue at the Watermen's Hall in London. There will be brief presentations from the executive directors and an opportunity to ask questions. The main global trends are continuing including slowing growth in the developed economies partly linked to the US housing market, reducing interest rates and a weakening US dollar. China and India in particular are likely to continue to contribute significantly to global demand. However the ongoing repercussions of the sub-prime crisis and the threat of inflation are complicating policy decisions for central banks. Much effort and application on the part of the investment team has resulted in superb investment performance. I would like to thank all staff for their contributions to this achievement. I am also very grateful to my fellow directors for their considerable dedication and support over the last twelve months. Henry S Barlow Chairman Chief Executive's Statement This year's significant investment performance has further strengthened the three year record for both net asset value (NAV) total return and total shareholder return. Against the three year benchmark return of 58.2%, the NAV total return was 84.2% and the total shareholder return was 98.4%. During the year we have again benefited from the gearing from our long term debentures which have contributed about 1.4% to our net asset value total return and over the last three years have added more than 5% after taking into account the payment of interest. This strong performance excludes the growth in the value of our investment in Majedie Asset Management Limited over the period - see below. Majedie Asset Management The MAM business has continued to grow during the year with assets under management increasing from £3.7bn to circa £4.5bn. Our 30% investment has been valued in the Company balance sheet by the Board at £16.2m plus a special dividend receivable of £2.1m. The £16.2m reflects a 41% increase from last year's value of £11.5m and due to accounting rules is not included in the Consolidated balance sheet nor in the weekly announced net asset value which merely includes £2.6m being our investment in associate. If the investment was fully reflected in our net asset value, it would result in an uplift of 26.4p per share on 464.4p per share at 30 September 2007 - an increase of 5.7%. Income This year's income includes the second and third instalments of four special dividends receivable from MAM totalling £3.8m. The Chairman has already referred to the proposed payment of a special Majedie Investments dividend of 4.5p per share and this will be in addition to a proposed core final dividend of 6.2p. Both the interim dividend of 3.8p per share and the core final dividend of 6.2p have been increased compared with last year. Over the next couple of years total income is likely to reduce as dividends from MAM are paid at a normal level. Costs The consolidated costs for the group have reduced from £9.0m to £2.9m due to MAM no longer being consolidated since it ceased to be a subsidiary in 2006. Company costs have increased by 15% compared with 2006 due to increases in bonuses and the charge for share incentives. Other core costs have remained static. The Company's total expenditure ratio of 1.3% compares with the investment trust sector average of 1.4%. The increase in bonuses relates to the strong investment performance achieved during the year and payment of the exceptional MAM-related bonuses approved at last year's AGM. For the first time last year as required by International Financial Reporting Standards the Company included a charge against income in relation to share-based incentive awards made to executive directors and senior employees. For the next few years this charge is likely to increase as the 2006 Long Term Incentive Plan becomes fully implemented. The plan includes incentive awards which vest over 3 and 5 year periods. Listing Rules New Listing Rule requirements were introduced with effect from 28 September 2007 requiring investment companies to publish in the annual report the full text of their investment policy and a statement explaining how investment risk has been spread in accordance with the published investment policy. In common with a number of other investment trusts reporting at this time we have sought and received a temporary waiver of these requirements from the Financial Services Authority allowing us to publish our investment policy and an explanation of the spread of investment risk for the first time in our interim report next year or beforehand if we are able to do so. Business Development The investment management sector is undergoing rapid change. However we continue to seek business development opportunities which involve significant fund management skill with a proven track record and a simple, scaleable business model. This should ultimately contribute to our overall objective of generating superior returns for shareholders. Robert E Clarke Chief Executive Investment Report 2007 has been a year of great challenges in the global markets, culminating in the turmoil caused by the US sub-prime crisis. Despite this the fund has achieved a strong NAV total return of 23.1% Performance Majedie's net asset value total return outperformed the benchmark by 10.5%, rising by 23.1% compared to the benchmark increase of 12.6%. This relates to a £40m increase in the portfolio value and a £20m increase over and above the benchmark, plus £5.1m of dividends paid during the year. The outperformance was broadly spread with both the UK and overseas portfolios strongly ahead of their respective benchmarks of the FTSE All-Share Index and the FTSE World ex UK Index. The investment policy followed during the year included the full deployment of gearing resulting in an enhancement to performance of 1.4% to 23.1%. UK investments represented 76% of the portfolio and rose 23.9% against the FTSE All-Share Index rise of 13.3%. This strong performance was driven by the investments in the small and mid-cap companies in the portfolio. Sectors which outperformed were resources, general industrials, engineering, tobacco, media, non-life and life insurance, pharmaceuticals, general financials and technology hardware. In North America, which represents about 11.3% of the portfolio, the return was 13.5% against 8.3% from the benchmark, an outperformance of 5.2%. This was mainly produced from large investments in the oil and mining sectors. Europe was the only geographic area which performed below the benchmark, but this was outweighed by strong performance elsewhere. Particular areas of outperformance were Australia and South Africa through a number of mining companies. Strategy As set out in the report and accounts for the last two years, the strategy has been to focus the portfolio on sectors which have long term macro factors in their favour. An example is the natural resources sector where the strong growth in China and India will continue to drive fundamental demand for many years to come. In particular remaining overweight in companies which have greater control of their destinies, through a combination of long term contracts, intellectual property superiority through technology and patents, or resource companies which can considerably enhance their asset values through successful drilling programmes. Geographically the portfolio is overweight the UK, Asia ex-Japan, Canada and underweight US, Europe and Japan. This geographic distribution has been in place for some time, particularly underweighting the US due to our view that the dollar would continue to weaken. The portfolio continues to be structured in anticipation of future interest rate cuts, which are now emerging. Although these have been catalysed by the sub-prime crisis, rather than the anticipated slowing of the US economy the effects should still be beneficial to the portfolio. The global banking system has been severely tested by the sub-prime problem. However, in order to avoid contagion of this crisis, the US and other governmental authorities around the world have brought in measures in partnership with the banks and other financial institutions. Base metals and oil prices have continued to rise through the year driven by the continued expansion of demand from the world's developing economies, notably China and India. Together they account for 12% of global consumption of oil compared to 7-8% ten years ago. According to International Energy Agency estimates, increases in global supply are unable to match the pace of global demand increases. The UK's overweighting in the portfolio is due to this market's higher yield, its greater exposure to international businesses, sterling being the reporting currency and the steady decline of the dollar over the last five years. The prospect of declining interest rates in the US and a weakening economy mean that the dollar could decline further. The high yields of both utilities and banks, where the fund is overweight, offer both income and defensive qualities in a difficult market. The UK also offers international diversification with over 60% of UK earnings being derived from overseas assets. Outlook After the sub-prime crisis consensus forecasts for global GDP growth have been reduced to 2-2.5% in 2008. Within these figures the developed world is expected to grow at 2.0%, whilst in Asia Pacific ex-Japan the forecast is 3.5%-4%. However, China and India are still forecast to continue to grow at over 8%. China's economy is now as big as that of the UK, and the combined effect of China and India is a new positive balancing item in the world economy. Markets worldwide responded very strongly to the cut in rates by the Federal Reserve in September 2007. Investors perceive that the monetary cycle has turned and more cuts are expected in the US. In the UK there is now even discussion that rates may be cut later in the year or early in 2008. In the EU the ECB has held rates and discussion is now about whether the European Central Bank will have to cut rates in the future. In Japan the Bank of Japan did not raise rates over the summer and looks unlikely to do so because economic activity is slowing. Inflation remains benign giving a reasonable background for a further reduction in rates. Retail sales in the US fell over the summer, but US industrial production was up. In addition banks worldwide are now rushing to quantify their exposures to these sub-prime loans and provide for them so that their balance sheets are cleared for the New Year. Against this general background and with the prospect of further monetary easing by the major central banks, it is reasonable to expect that economic growth will be stimulated to prevent a major downturn and therefore provide a reasonable backdrop for world stockmarkets. Gillian M Leates Investment Director For further information please contact Robert Clarke on 020 7645 8711; e-mail: rec@majedie.co.uk UNAUDITED CONSOLIDATED INCOME STATEMENT for the year ended 30 September 2007 2007 2006 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Investments Gains on investments at fair value through profit or loss 42,080 42,080 22,738 22,738 Net investment result 42,080 42,080 22,738 22,738 Income Dividends and interest 8,963 8,963 6,271 6,271 Client fee income in subsidiary company 10,915 10,915 Other income 120 120 62 62 Total income 9,083 9,083 17,248 17,248 Expenses Administration expenses (1,288) (1,568) (2,856) (7,593) (1,423) (9,016) Return before finance costs, share of net return of associate and taxation 7,795 40,512 48,307 9,655 21,315 30,970 Share of net return of 1,058 1,058 340 340 associate Finance costs (700) (2,098) (2,798) (699) (2,098) (2,797) Net return before taxation 8,153 38,414 46,567 9,296 19,217 28,513 Taxation (51) (51) (1,331) (1,331) Net return after taxation for the year 8,102 38,414 46,516 7,965 19,217 27,182 Attributable to: Equity holders of the parent 8,102 38,414 46,516 6,815 19,217 26,032 Minority interest 1,150 1,150 8,102 38,414 46,516 7,965 19,217 27,182 Return per ordinary pence pence pence pence pence pence share: Basic and diluted 15.6 74.2 89.8 13.1 36.9 50.0 The total column of this statement is the Consolidated Income Statement of the Group prepared under International Financial Reporting Standards (IFRS). The supplementary revenue and capital columns are prepared under guidance published by the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. These accounts have been prepared in compliance with the recognition and measurement criteria of IFRS. UNAUDITED COMPANY INCOME STATEMENT for the year ended 30 September 2007 2007 2006 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Investments Gains on investments at fair value through profit or loss 42,080 42,080 23,706 23,706 Gain on revaluation of associate 4,668 4,668 3,517 3,517 Net investment result 46,748 46,748 27,223 27,223 Income Dividends and interest 8,963 8,963 6,881 6,881 Other income 120 120 71 71 Total income 9,083 9,083 6,952 6,952 Expenses Administration expenses (1,288) (1,568) (2,856) (1,061) (1,423) (2,484) Return before finance costs and taxation 7,795 45,180 52,975 5,891 25,800 31,691 Finance costs (700) (2,098) (2,798) (699) (2,098) (2,797) Net return before taxation 7,095 43,082 50,177 5,192 23,702 28,894 Taxation (51) (51) (37) (37) Net return after taxation for the year 7,044 43,082 50,126 5,155 23,702 28,857 Return per ordinary share: pence pence pence pence pence pence Basic and diluted 13.6 83.2 96.8 9.9 45.6 55.5 The total column of this statement is the Income Statement of the Company prepared under International Financial Reporting Standards (IFRS). The supplementary revenue and capital columns are prepared under guidance published by the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. These accounts have been prepared in compliance with the recognition and measurement criteria of IFRS. UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30 September 2007 Share Share Capital Share Capital Capital Retained Own Equity Minority Total capital premium redemption options reserve reserve - earnings shares attributable interest reserve reserve - unrealised reserve to the realised equity holders of the parent £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Year ended 30 September 2007 As at 30 5,253 785 56 85 118,723 47,502 28,723 (1,908) 199,219 0 199,219 September 2006 Net return after tax for the year 8,102 8,102 8,102 Investments at fair value through profit or loss - Increase in unrealised appreciation before transfer on disposal 38,588 38,588 38,588 - Transfer on disposal of investments 14,534 (14,534) - Net gain on realisation of investments 3,492 3,492 3,492 Costs charged to (3,666) (3,666) (3,666) capital Total recognised income and expenditure 14,360 24,054 8,102 46,516 46,516 Share options 177 177 177 expense Dividends declared and paid in year (5,131) (5,131) (5,131) Own shares purchased by Employee Incentive Trust (EIT) (1,145) (1,145) (1,145) As at 30 5,253 785 56 262 133,083 71,556 31,694 (3,053) 239,636 0 239,636 September 2007 Year ended 30 September 2006 As at 30 5,253 785 56 37 89,507 57,501 26,723 (1,422) 178,440 405 178,845 September 2005 Net return after tax for the year 6,815 6,815 1,150 7,965 Investments at fair value through profit or loss - Increase in unrealised appreciation before transfer on disposal 18,353 18,353 18,353 - Transfer on disposal of investments 28,352 (28,352) - Net gain on realisation of investments 5,353 5,353 5,353 Loss on deemed (968) (968) (968) disposal Costs charged to (3,521) (3,521) (3,521) capital Total recognised income and expenditure 29,216 (9,999) 6,815 26,032 1,150 27,182 Share options 72 72 72 expense Dividends declared and paid in year (4,815) (4,815) (4,815) Own shares purchased/sold by Employee Incentive Trust (EIT) (24) (486) (510) (510) Adjustment due to 25% reduction in the Company's holding in Majedie Asset Management Limited 804 804 Removal of minority interest (2,359) (2,359) As at 30 5,253 785 56 85 118,723 47,502 28,723 (1,908) 199,219 0 199,219 September 2006 These accounts have been prepared in compliance with the recognition and measurement criteria of IFRS. UNAUDITED COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 30 September 2007 Share Share Capital Share Capital Capital Retained Own Total capital premium redemption options reserve reserve - earnings shares reserve reserve - unrealised reserve realised £000 £000 £000 £000 £000 £000 £000 £000 £000 Year ended 30 September 2007 As at 30 5,253 785 56 85 119,758 57,055 28,103 (1,908) 209,187 September 2006 Net return after tax for the year 7,044 7,044 Investments at fair value through profit or loss - Increase in unrealised appreciation before transfer on disposal 38,588 38,588 - Movement between reserves 3 (3) - Transfer on disposal of investments 14,534 (14,534) -Net gain on realisation of investments 3,492 3,492 Revaluation of investment in associated 4,668 4,668 undertaking Costs charged to (3,666) (3,666) capital Total recognised income and expenditure 14,363 28,719 7,044 50,126 Share options 177 177 expense Dividends declared and paid in year (5,131) (5,131) Own shares purchased by Employee Incentive Trust (EIT) (1,145) (1,145) As at 30 5,253 785 56 262 134,121 85,774 30,016 (3,053) 253,214 September 2007 Year ended 30 September 2006 As at 30 5,253 785 56 37 89,574 63,537 27,763 (1,422) 185,583 September 2005 Net return after tax for the year 5,155 5,155 Investments at fair value through profit or loss - Increase in unrealised appreciation before transfer on disposal 18,353 18,353 - Transfer on disposal of investments 28,352 (28,352) - Net gain on realisation of investments 5,353 5,353 Revaluation of investment in associated 3,517 3,517 undertaking Costs charged to (3,521) (3,521) capital Total recognised income and expenditure 30,184 (6,482) 5,155 28,857 Share options 72 72 expense Dividends declared and paid in year (4,815) (4,815) Own shares purchased/sold by Employee Incentive Trust (EIT) (24) (486) (510) As at 30 5,253 785 56 85 119,758 57,055 28,103 (1,908) 209,187 September 2006 These accounts have been prepared in compliance with the recognition and measurement criteria of IFRS. UNAUDITED CONSOLIDATED BALANCE SHEET at 30 September 2007 2007 2006 £000 £000 Non-current assets Property and equipment 69 89 Investments at fair value through profit or loss 262,153 227,085 Investment in associate 2,605 1,547 264,827 228,721 Current assets Trade and other receivables 3,221 3,766 Cash and cash equivalents 6,764 4,546 9,985 8,312 Total assets 274,812 237,033 Current liabilities Trade and other payables (1,448) (4,100) Total assets less current liabilities 273,364 232,933 Non-current liabilities Debentures (33,728) (33,714) Total liabilities (35,176) (37,814) Net assets 239,636 199,219 Represented by: Ordinary share capital 5,253 5,253 Share premium 785 785 Capital redemption reserve 56 56 Share options reserve 262 85 Capital reserve - realised 133,083 118,723 Capital reserve - unrealised 71,556 47,502 Retained earnings 31,694 28,723 Own shares reserve (3,053) (1,908) Equity Shareholders Funds 239,636 199,219 Net asset value per share pence pence Basic and fully diluted 464.4 384.0 These accounts have been prepared in compliance with the recognition and measurement criteria of IFRS. UNAUDITED COMPANY BALANCE SHEET at 30 September 2007 2007 2006 £000 £000 Non-current assets Investments at fair value through profit or 262,153 227,085 loss Investment in subsidiaries 194 194 Investments in associate 16,185 11,517 278,532 238,796 Current assets Trade and other receivables 3,092 3,597 Cash and cash equivalents 6,434 4,297 9,526 7,894 Total assets 288,058 246,690 Current liabilities Trade and other payables (1,116) (3,789) Total assets less current liabilities 286,942 242,901 Non-current liabilities Debentures (33,728) (33,714) Total liabilities (34,844) (37,503) Net assets 253,214 209,187 Represented by: Ordinary share capital 5,253 5,253 Share premium 785 785 Capital redemption reserve 56 56 Share options reserve 262 85 Capital reserve - realised 134,121 119,758 Capital reserve - unrealised 85,774 57,055 Retained earnings 30,016 28,103 Own shares reserve (3,053) (1,908) Equity Shareholders Funds 253,214 209,187 Net asset value per share Pence Pence Basic and fully diluted 490.7 403.2 These accounts have been prepared in compliance with the recognition and measurement criteria of IFRS. UNAUDITED CONSOLIDATED CASH FLOW STATEMENT for the year ended 30 September 2007 2007 2006 £000 £000 Net cash flow from operating activities Consolidated net return before taxation 46,567 28,513 Adjustments for: Gains on investments (42,080) (22,738) Share of net return of associate (1,058) (340) Dividends reinvested (24) Depreciation 27 123 Loss on sale of fixed assets 1 Share based remuneration 177 72 3,609 5,631 Finance costs 2,798 2,797 Operating cashflows before movements in working capital 6,407 8,428 Increase in trade and other payables 443 1,451 Increase in trade and other receivables (589) (2,015) Net cash inflow from operating activities before tax 6,261 7,864 Tax recovered 20 14 Tax on unfranked income (52) (43) Net cash inflow from operating activities 6,229 7,835 Investing activities Purchases of investments (108,693) (133,592) Sales of investments 113,749 137,973 Purchases of tangible assets (7) (42) Exclusion of cash on Majedie Asset Management Limited ceasing to be a subsidiary (3,869) Net cash inflow from investing activities 5,049 470 Financing activities Interest paid (2,784) (2,783) Dividends paid (5,131) (4,815) Purchases of own shares into Employee Incentive Trust (1,145) (582) Net cash outflow from financing activities (9,060) (8,180) Increase in cash and cash equivalents for year 2,218 125 Cash and cash equivalents at start of year 4,546 4,421 Cash and cash equivalents at end of year 6,764 4,546 These accounts have been prepared in compliance with the recognition and measurement criteria of IFRS. UNAUDITED COMPANY CASH FLOW STATEMENT for the year ended 30 September 2007 2007 2006 £000 £000 Net cash flow from operating activities Company net return before taxation 50,177 28,894 Adjustments for: Gains on investments (42,080) (23,706) Gains on revaluation of associate (4,668) (3,517) Dividends reinvested (24) Share based remuneration 177 72 Recharge expenses 104 3,582 1,847 Finance costs 2,798 2,797 Operating cashflows before movements in working capital 6,380 4,644 Increase in trade and other payables 422 53 Increase in trade and other receivables (629) (1,124) Net cash inflow from operating activities before tax 6,173 3,573 Tax recovered 20 14 Tax on unfranked income (52) (43) Net cash inflow from operating activities 6,141 3,544 Investing activities Purchases of investments (108,693) (133,592) Sales of investments 113,749 137,973 Net cash inflow from investing activities 5,056 4,381 Financing activities Repayment of preference shares and loan 2,350 Interest paid (2,784) (2,783) Dividends paid (5,131) (4,815) Purchases of own shares into Employee Incentive Trust (1,145) (582) Net cash outflow from financing activities (9,060) (5,830) Increase in cash and cash equivalents for year 2,137 2,095 Cash and cash equivalents at start of year 4,297 2,202 Cash and cash equivalents at end of year 6,434 4,297 These accounts have been prepared in compliance with the recognition and measurement criteria of IFRS. NOTES 1. Accounting Policies The accounts above comprise the unaudited results of the Company, its subsidiaries and associate for the year to 30 September 2007, and are presented in pounds sterling, as this is the principal currency in which the Group and Company transactions are undertaken. While the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in December 2007. Accounting policies under International Financial Reporting Standards Basis of accounting The accounts of the Group and the Company have been prepared in accordance with International Financial Reporting Standards (IFRS). They comprise standards and interpretations approved by the International Accounting Standards Board, and International Financial Reporting Committee, interpretations approved by the International Accounting Standards Committee that remain in effect, and to the extent they have been adopted by the European Union. Where presentational guidance set out in the Statement of Recommended Practice (SORP) for investment trusts issued by the Association of Investment Companies in January 2003 (as revised in December 2005) is consistent with the requirements of IFRSs, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. The financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments. The principal accounting policies adopted are set out below. 2. Majedie Asset Management Limited ("MAM") Since 30 April 2006, when the Group's shareholding reduced to 30%, the results of Majedie Asset Management have been accounted for in the Group's accounts as an associate. 3. 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 at the date of the grant which is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. 4. Calculation of Returns per Ordinary Share Basic returns per ordinary share in each year are based on the return on ordinary activities after taxation attributable to equity shareholders. Basic returns per ordinary share are based on 51,791,114 (2006: 52,016,698) ordinary shares, being the weighted average number of shares in issue having adjusted for the shares held by the Employee Incentive Trust. There is no dilution to the basic return per ordinary share since share options, if exercised, would be satisfied by shares already held by the Employee Incentive Trust. 5. Investments All investments held by the Company are designated as at fair value through profit or loss. For listed investments actively traded in organised financial markets, fair value is generally determined by reference to stock exchange quoted bid market prices at the close of business on the balance sheet date. Unlisted investments are stated at the Board's estimate of their fair value. 6. Net Asset Value per Ordinary Share The net asset value per share has been calculated based on equity shareholders' funds and on 51,600,167 (2006: 51,884,274) ordinary shares, being the shares in issue at the year end having deducted the number of shares held by the Employee Incentive Trust. 7. Dividends In accordance with International Accounting Standard 10: `Events After the Balance Sheet Date', interim dividends are not accounted for until paid, and final dividends are only recognised when approved in General Meeting. The following table summarises the amounts recognised as distributions to equity shareholders in the period: 2007 2006 £000 £000 2005 Final dividend of 5.85p paid on 25 3,045 January 2006 2006 Interim dividend of 3.40p paid on 1,770 30 June 2006 2006 Final dividend of 6.10p paid on 24 3,165 January 2007 2007 Interim dividend of 3.80p paid on 1,966 29 June 2007 5,131 4,815 The Directors propose a special dividend of 4.50p per share and a normal final dividend for 2007 of 6.20p per share, both to be paid on 23 January 2008. 8. Financial information for the years ended 30 September 2007 and 2006 The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2007 or 2006. The financial information for the year ended 30 September 2006 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified and did not contain statements under Section 237(2) or Section 237(3) of the Companies Act 1985. The statutory accounts for the year ended 30 September 2007 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

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