Half-year Report

RNS Number : 0225G

Majedie Investments PLC

24 May 2017

 

Majedie Investments PLC

Half-Yearly Financial Report

31 March 2017

The Directors announce the unaudited half-yearly financial report for the six months to 31 March 2017 as follows:

Copies of the half yearly-report can be obtained from the following website:

www.majedieinvestments.com

Financial Highlights for the half year ended 31 March 2017

Total shareholder return (including dividends):	+16.6%
Net asset value (NAV) total return (debt at par including dividends):	+8.4%
NAV per share (Debt at par value):	338.8p
NAV per share (Debt at fair value):	322.7p
Revenue Return per share:	6.8p
Interim Dividend:	3.5p
Directors' valuation of investment in Majedie Asset Management Limited:	£58.3m
Total assets*:	£215.0m
* Total assets are defined as total assets less current liabilities

Investment Objective and Policy Statement

Investment Objective

The Company's investment objective is to maximise total shareholder return whilst increasing dividends by more than the rate of inflation over the long term.

Investment Policy

General

The Company invests principally in securities of publicly quoted companies worldwide and in funds managed by its investment manager, though it may invest in unquoted securities up to levels set periodically by the Board, including its investment in Majedie Asset Management Limited (MAM). Investments in unquoted securities, other than those managed by its investment manager or made prior to the date of the adoption of this investment policy, (measured by reference to the Company's cost of investment) will not exceed 10% of the Company's gross assets.

Risk diversification

Whilst the Company will at all times invest and manage its assets in a manner that is consistent with spreading investment risk, there will be no rigid industry, sector, region or country restrictions. The overall approach is based on an analysis of global economies sector trends with a focus on companies and sectors judged likely to deliver strong growth over the long term. The number of investments held, together with the geographic and sector diversity of the portfolio, enable the Company to spread its risks with regard to liquidity, market volatility, currency movements and revenue streams.

The Company will not invest in any holding that would, at the time of investment, represent more than 15% of the value of its gross assets save that the Company may invest up to 25% of its gross assets in any single fund managed by its investment manager where the Board believes that the investment policy of such funds is consistent with the Company's objective of spreading investment risk.

The Company may utilise derivative instruments including index-linked notes, contracts for difference, covered options and other equity-related derivative instruments for efficient portfolio management and investment purposes.

Any use of derivatives for investment purposes will be made on the basis of the same principles of risk spreading and diversification that apply to the Company's direct investments, as described above.

Asset allocation

The assets of the Company will be allocated principally between investments in publicly quoted companies worldwide and in investments intended to provide an absolute return (in each case either directly or through other funds or collective investment schemes managed by the Company's investment manager) and the Company's investment in MAM itself.

Benchmark

The Company does not have one overall benchmark, rather each distinct group of assets is viewed independently. Any investments made into funds managed by the Company's investment manager will be measured against the benchmark or benchmarks, if any, whose constituent investments appear to the Company to correspond most closely to those investments. It is important to note that in all cases investment decisions and portfolio construction are made on an independent basis. The Board however sets various specific portfolio limits for stocks and sectors in order to restrict risk levels from time to time, which remain subject to the investment restrictions set out in this section.

Gearing

The Company uses gearing currently via long term debentures. The Board has the ability to borrow up to 100% of adjusted capital and reserves. The Board also reviews the level of net gearing (borrowings less cash) on an on-going basis and sets a range at its discretion as appropriate. The Company's current debenture borrowings are limited by covenant to 66 2/3% and any additional indebtedness is not to exceed 20%, of adjusted capital and reserves.

Chief Executive's Report

In the six months to March 2017 the NAV (Net Asset Value with debt at par) rose by 8.4% on a total return basis and the share price rose by 16.6% also on a total return basis. Stock markets rose strongly led by the US following the presidential election, increased investor optimism about the global economy and latterly a more stable political background in Europe following recent elections. Over the six months the FTSE All-Share and the MSCI World indices rose 8.1% and 12.4% respectively, in sterling terms.

It is pleasing that the discount at which the Company's shares trade has narrowed over the six months to 31 March 2017 from 14.2% to 8.9% (debt at fair value). The Chairman and Chief Executive have previously commented that a large holding in the Company was transferred to Aviva Investors, who are not expected to be a long term investor. We have met with representatives of Aviva Investors to understand their views and they confirmed that they are comfortable holders in the medium term given the uniqueness of the Company's investment proposition. This notwithstanding, the Board has and will continue to explore options to help Aviva Investors to exit their position as and when they might wish.

Results and Dividends

The capital return in the six months to 31 March 2017 was £12.1m and the total income from investments was £4.4m compared to £3.5m in the six months to 31 March 2016. The increase in income is due to an increase of £0.9m in the dividend received from Majedie Asset Management (MAM), to £3.0m, and smaller increases in dividends from the MAM UK Income Fund and UK Equity Segregated Portfolio. Total administrative expenses and management fees have fallen from £1.1m to £0.9m, which reflects lower property costs and other reductions in expenses. Costs remain a key focus for the Board though the main benefits of earlier Board decisions are now largely reflected in the Company's results.

The net revenue return after taxation for the six months to 31 March 2017 was £3.7m compared to £2.7m in the six months to 31 March 2016.

The Board has declared an interim dividend of 3.50 pence per share (2016: 3.00 pence), which will be paid on 16 June 2017 to shareholders on the register on 2 June 2017.

Investment Performance

The Company invests through a number of investment strategies managed by MAM and retains an equity holding in MAM of 16.8%. The Company has no overall benchmark; rather each fund has its own benchmark. The Company's total assets were £215.0m at 31 March 2017.

The largest allocation of £64.1m, which represents 29.8% of the Company's total assets, is in a segregated portfolio that is managed alongside the MAM UK Equity Fund. The funds are predominantly invested in UK equities, with overseas equities limited to 20%, and the strategy incorporates a dedicated allocation to UK smaller companies. It is the flagship product of MAM and since inception in March 2003 the Fund has returned 13.2% per annum net of fees, which is an outperformance of 3.6% per annum compared to its benchmark the FTSE All-Share Index. In the six months to 31 March 2017 our portfolio returned 10.3% net of fees, which is an outperformance of 2.2%. The positive contributors to performance were overweight positions in Banks, Miners and the MAM UK Smaller Companies Fund whilst the detractors were overweight positions in Telecoms and General Retailers and an underweight position in Life Insurance. In January 2017 £3.75m was redeemed by the Company from the segregated portfolio.

The MAM Tortoise Fund is a global long/short equity fund which since inception in August 2007 has returned 9.2% per annum net of fees. At 31 March 2017 the Company has an allocation of £37.7m, which represents 17.5% of total assets. Our holding in the Fund returned 1.3% net of fees in the six months to 31 March 2017. The positive contributors at a sector level were long positions in Mining, Banks and Telecoms whilst the detractors were short positions in Distributors, Luxury Goods and Healthcare Providers. In January 2017 the Company increased its allocation to the MAM Tortoise Fund by £5.0m.

The MAM UK Income Fund aims to maintain an attractive yield whilst outperforming the FTSE All Share Index over the longer term, with at least 80% of the Fund invested in UK equities. Since inception in December 2011 the Fund has returned 15.7% per annum net of fees, which is an outperformance of 4.7% per annum. At 31 March 2017 the Company has an allocation of £16.9m, which represents 7.9% of total assets. In the six months to 31 March 2017 our holding in the Fund returned 7.6% net of fees, which is an underperformance of 0.5%. The positive contributors at the sector level were overweight positions in Life Insurance, Financial Services and Travel & Leisure whilst the detractors were overweight positions in Electronic Equipment and underweight positions in Oil & Gas and Banks. In January 2017 the Company redeemed £3.75m from the MAM UK Income Fund.

The MAM Global Equity and Global Focus funds were launched in June 2014. Since inception our holding in the funds have returned 15.7% and 14.6% per annum net of fees respectively for the sterling share classes, which represents an underperformance of 0.4% and 1.4% against their benchmark MSCI ACWI (Developed and Emerging Markets). At 31 March 2017 the Company has an allocation of £20.9m and £7.3m to the MAM Global Equity and Global Focus Funds, respectively representing 9.7% and 3.4% of total assets. In the six months to 31 March 2017 the Funds returned 11.1% and 9.9% respectively, which represents an underperformance of 1.3% and 2.5%. The positive contributors at the sector level were overweight positions in Software and Semiconductors and an underweight position in Consumer Goods, whilst the detractors were overweight positions in Technology and Telecoms and an underweight position in Banks.

The MAM US Equity Fund was launched in June 2014 and since its inception has returned 20.3% per annum net of fees for the sterling share class, which represents an underperformance of 1.2% per annum against the S&P 500 Index. At 31 March 2017 the Company had an allocation of £8.3m, which represents 3.9% of total assets and in the six months ended 31 March 2017 the Fund returned 13.6%, which represents an underperformance of 0.4%. The positive contributors at a sector level were overweight positions in Consumer Services, Software and Oil & Gas whilst the detractors were overweight positions in Distributors, Mining and Professional Services.

The aggregate geographic and sector exposures of the MAM UK Equity Segregated Portfolio, MAM UK Income Fund, MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund are shown below. In order to enhance the transparency for shareholders, each of the MAM fund factsheets are available on the Company's website. The factsheets show the five largest overweight and underweight stocks and other relevant information for investors.

Majedie Asset Management

The Company retains its holding of 16.8% of MAM, having not sold any shares in MAM in the six months to 31 March 2017. The Company has no current intention to sell any shares in MAM, other than the obligation, if required, to sell a limited number of shares annually, in proportion to other shareholders, to the MAM EBT. The Board has increased the value of its holding in MAM to £58.3m. The valuation is formulaic and reflects three year average earnings and the Board believes it reflects fair value. The holding represents 27.1% of the Company's total assets.

MAM's assets under management increased from £12.2bn to £14.0bn in the six months to 31 March 2017, which reflects strong performance from stock markets and positive net fund flows particularly into the Global Focus Fund, the UK Equity Fund, the US Equity Fund and the Tortoise Fund. The increase in the dividend from MAM reflects a change to a more flexible dividend policy, good operational performance and a strong balance sheet.

Summary

The Total Return after Taxation of £14.1m reflects stock markets returning to all-time highs, which in the case of the UK, was last seen in December 1999. In light of recent equity market performance and potential future economic headwinds the Company modestly reduced its holdings in the MAM UK Equity Segregated Portfolio and MAM UK Income Fund. The proceeds were largely invested in the MAM Tortoise Fund which should be more resilient if markets turn more volatile. In aggregate, the Company's investments are more cautiously positioned than at 30 September 2016. The Board remains confident that the Company's well diversified portfolio and an excellent track record of the funds managed by MAM, will provide the Company with resilience and growth in its assets.

Development of Net Asset Value (NAV)

The chart below shows the NAV development during the six months to 31 March 2017. In aggregate the NAV has increased by £11.0m, having recorded total investment income and gains of £16.4m, having incurred net administration and finance costs of £2.3m, and having paid out dividends of £3.1m.

NAV 30.09.2016	£170.0m
UKES Segregated Portfolio	+£6.7m
MAM	+£4.2m
MAM Funds	+£5.5m
Admin Costs & Other	(£0.9m)
Finance Costs	(£1.4m)
Dividend Paid	(£3.1m)
NAV 31.03.2017	£181.0m

Allocation of Total Assets at 31 March 2017

	Value £000s	% of Total Assets
MAM UK Equity Segregated Portfolio	64,121	29.8
MAM UK Income Fund	16,920	7.9
MAM Global Equity Fund	20,930	9.7
MAM Global Focus Fund	7,306	3.4
MAM US Equity Fund	8,348	3.9
MAM Tortoise Fund	37,682	17.5
MAM	58,328	27.1
Net cash/realisation portfolio*	1,352	0.7
	214,987	100.0

* Net cash and realisation portfolio does not include cash held in the MAM UK Equity Segregated Portfolio or MAM funds.

MAM Fund Performance

	6 months to 31 March 2017			Since MI invested
	% Fund return	% Benchmark return	% Relative performance	% Fund return	% Benchmark return	% Relative performance
MAM UK Equity Segregated Portfolio	10.3	8.1	2.2	24.1	22.5	1.6
MAM UK Income Fund	7.6	8.1	(0.5)	28.0	26.7	1.3
MAM Global Equity Fund	11.1	12.4	(1.3)	49.3	50.7	(1.4)
MAM Global Focus Fund	9.9	12.4	(2.5)	45.6	50.7	(5.1)
MAM US Equity Fund	13.6	14.0	(0.4)	66.5	71.0	(4.5)
MAM Tortoise Fund	1.3			9.2

Notes:

All Fund returns are shown in cumulative terms, net of fees.

The initial investment in MAM UK Equity Segregated Portfolio was made on 22 January 2014.

The initial investment in the MAM UK Income Fund was made on 29 January 2014.

The initial investments in MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund were made on 30 June 2014 and 27 June 2014 respectively, at the inception of each fund. The Company is invested in the Sterling share classes.

The initial investment in the MAM Tortoise Fund was made on 29 January 2014.

William Barlow

Chief Executive
For and on behalf of the Board

23 May 2017

Fund Analysis

at 31 March 2017

Geographic and Sector Analysis at 31 March 2017

	% United Kingdom	% North America	% Europe	% Emerging Markets	% Asia Pacific	% Cash	% Total
Basic Materials	6.0	2.1		0.4	0.2		8.7
Consumer Goods	1.5	2.3	0.2	0.5	0.2		4.7
Consumer Services	12.1	2.5	1.0	1.3	0.7		17.6
Financials	14.0	3.3	0.9	0.7	0.1		19.0
Health Care	2.4	2.4	0.6				5.4
Industrials	6.9	0.6	1.4	0.1			9.0
Oil & Gas	12.0	1.5					13.5
Technology	1.3	4.4		1.3			7.0
Telecommunications	3.3	0.4	3.6		1.1		8.4
Utilities	2.3	0.3					2.6
Cash						4.1	4.1
	61.8	19.8	7.7	4.3	2.3	4.1	100.0

Notes:

The assets analysed above are the aggregate exposure of MAM UK Equity Segregated Portfolio, MAM UK Income Fund, MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund. The aggregate represents a total of 54.7% of the Company's total assets.

Exposures are classified on the stock exchange on which the underlying equity is listed and FTSE sector classification.

Twenty Largest MAM UK Equity Segregated Portfolio Holdings 

at 31 March 2017

Company	Market value £000	% of MAM UK Equity Segregated Portfolio
MAM UK Smaller Companies Fund	5,625	8.8%
Royal Dutch Shell PLC	4,502	7.0%
BP PLC	3,798	5.9%
HSBC Holdings PLC	3,263	5.0%
Tesco PLC	2,291	3.6%
GlaxoSmithKiline PLC	2,167	3.4%
Vodaphone Group PLC	2,091	3.3%
WM Morrison Supermarkets PLC	1,914	3.0%
Barclays PLC	1,833	2.9%
Anglo American PLC	1,654	2.6%
BT Holdings PLC	1,473	2.3%
Centrica PLC	1,472	2.3%
Orange SA	1,442	2.2%
Standard Chartered PLC	1,303	2.0%
Barrick Gold Corporation	1,248	1.9%
Rentokil Initial PLC	1,207	1.9%
Royal Bank of Scotland PLC	1,143	1.8%
Electrocomponents PLC	938	1.5%
Marks and Spencer Group PLC	931	1.5%
J Sainsbury PLC	909	1.4%
Sub-total	41,204	64.3%
Other (Including cash)	22,917	35.7%
Total	64,121	100.0%

Interim Management Report              

The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal uncertainties for the remaining six months of the financial year are set out in the Chief Executive's Report above. This half-yearly financial report has not been audited or reviewed by the Company's auditor.

The financial statements continue to be prepared on a going concern basis. The approach used for the Annual Report is applied, including proper consideration of financial and cashflow forecasts, and it is believed that the Company has adequate financial resources to continue to operate for the foreseeable future.

The principal risks facing the Company are unchanged since the date of the Annual Report for the year ended 30 September 2016 as set out in the Business Review within the Strategic Report in that report (pages 15 and 16) with no particular subsequent heightened uncertainty. Risks faced by the Company include, but are not limited to, market risk, discount volatility, regulatory risk, financial risk, risks associated with banking and hedging and non-compliance with Section 1158 of the Corporation Tax Act 2010.

Responsibility Statement of the Directors in respect of the Half-Yearly Financial Report

In accordance with the Disclosure Guidance and Transparency Rules 4.2.7R and 4.2.8R, we confirm that to the best of our knowledge:

(a)        the condensed set of financial statements has been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as adopted by the European Union, as required by the Disclosure Guidance and Transparency Rule 4.2.4R, and gives a true and fair view of the assets, liabilities and financial position of the Company;

(b)        the Chief Executive's Report includes a fair review of the information required to be disclosed under the Disclosure Guidance and Transparency Rule 4.2.7R, interim management report. This includes (i) an indication of important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial statements presented in the Half-Yearly Financial Report and (ii) a description of the principal risks and uncertainties for the remaining six months of the financial year; and

(c)        there were no changes in the transactions or arrangements with related parties as described in the Group's Annual Report for the year ended 30 September 2016 that would have had a material effect on the financial position or performance of the Group in the first six months of the current financial year.

Andrew J Adcock

Chairman

For and on behalf of the Board

23 May 2017

Condensed Consolidated Statement of Comprehensive Income  

for the half year ended 31 March 2017

		Half year ended 31 March 2017 (unaudited)			Half year ended 31 March 2016 (unaudited)			Year ended 30 September 2016 (audited)
	Notes	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Investments
Gains on investments at fair value through profit or loss			12,063	12,063		4,112	4,112		21,919	21,919
Net investment result			12,063	12,063		4,112	4,112		21,919	21,919
Income
Income from investments	2	4,378		4,378	3,431		3,431	6,433		6,433
Other income	2	30		30	30		30	47		47
Total income		4,408		4,408	3,461		3,461	6,480		6,480
Expenses
Management fees		(61)	(185)	(246)	(53)	(159)	(212)	(109)	(325)	(434)
Performance fees			(5)	(5)
Administration expenses		(345)	(338)	(683)	(394)	(455)	(849)	(712)	(779)	(1,491)
Return before finance costs and taxation		4,002	11,535	15,537	3,014	3,498	6,512	5,659	20,815	26,474
Finance costs		(351)	(1,056)	(1,407)	(351)	(1,055)	(1,406)	(703)	(2,110)	(2,813)
Net return before taxation		3,651	10,479	14,130	2,663	2,443	5,106	4,956	18,705	23,661
Taxation	3	(3)		(3)	(5)		(5)	(17)		(17)
Net return after taxation for the period		3,648	10,479	14,127	2,658	2,443	5,101	4,939	18,705	23,644
Return per ordinary share:		pence	pence	pence	pence	pence	pence	pence	pence	pence
Basic	4	6.8	19.6	26.4	5.0	4.6	9.6	9.3	35.0	44.3

The total column of this statement is the Consolidated Statement of Comprehensive Income of the Group, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The supplementary revenue return and capital return columns are prepared under guidance published by the Association of Investment Companies (AIC).

See notes 1 to 17.

Condensed Consolidated Statement of Changes in Equity

for the half year ended 31 March 2017

	Notes	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
Half year ended 31 March 2017 (unaudited)
30 September 2016		5,344	3,054	56	141,648	19,884	169,986
Net return after taxation for the period					10,479	3,648	14,127
Dividends declared and paid in period	6					(3,073)	(3,073)
31 March 2017		5,344	3,054	56	152,127	20,459	181,040
Half year ended 31 March 2016 (unaudited)
30 September 2015		5,313	2,280	56	122,943	19,215	149,807
Net return after taxation for the period					2,443	2,658	5,101
Share issue	12, 13	31	775				806
Share issue expenses	13		(1)				(1)
Dividends declared and paid in period	6					(2,667)	(2,667)
31 March 2016		5,344	3,054	56	125,386	19,206	153,046
Year ended 30 September 2016 (audited)
30 September 2015		5,313	2,280	56	122,943	19,215	149,807
Net return after taxation for the period					18,705	4,939	23,644
Share issue	12, 13	31	775				806
Share issue expenses	13		(1)				(1)
Dividends declared and paid in year	6					(4,270)	(4,270)
30 September 2016		5,344	3,054	56	141,648	19,884	169,986

Condensed Consolidated Balance Sheet

at 31 March 2017

	Notes	31 March 2017 (unaudited) £'000	31 March 2016 (unaudited) £'000	30 September 2016 (audited) £'000
Non-current assets
Property and equipment		63	52	52
Investments at fair value through profit or loss	7, 8	210,403	185,356	201,359
		210,466	185,408	201,411
Current assets
Trade and other receivables		385	382	356
Cash and cash equivalents		5,215	2,159	3,467
		5,600	2,541	3,823
Total assets		216,066	187,949	205,234
Current liabilities
Trade and other payables		(1,079)	(988)	(1,317)
Total assets less current liabilities		214,987	186,961	203,917
Non-current liabilities
Debentures	8	(33,947)	(33,915)	(33,931)
Total liabilities		(35,026)	(34,903)	(35,248)
Net assets		181,040	153,046	169,986
	Notes	31 March 2017 (unaudited) £'000	31 March 2016 (unaudited) £'000	30 September 2016 (audited) £'000
Represented by:
Ordinary share capital	12	5,344	5,344	5,344
Share premium account	13	3,054	3,054	3,054
Capital redemption reserve		56	56	56
Capital reserve		152,127	125,386	141,648
Revenue reserve		20,459	19,206	19,884
Equity Shareholders' Funds		181,040	153,046	169,986
Net asset value per share		pence	pence	pence
Basic	11	338.8	286.4	318.1

Condensed Consolidated Cash Flow Statement

for the half year ended 31 March 2017

	Notes	Half year ended 31 March 2017 (unaudited) £'000	Half year ended 31 March 2016 (unaudited) £'000	Year ended 30 September 2016 (audited) £'000
Net cash inflow from operating activities	14	6,236	2,545	6,857
Investing activities Purchase of tangible assets		(23)	(56)	(66)
Net cash outflow from investing  activities		(23)	(56)	(66)
Financing activities
Interest paid		(1,392)	(1,392)	(2,783)
Dividends paid	6	(3,073)	(2,667)	(4,270)
Net proceeds from share issues			1,192	1,192
Net cash outflow from financing activities		(4,465)	(2,867)	(5,861)
Increase/(decrease) in cash and cash equivalents for period		1,748	(378)	930
Cash and cash equivalents at start of period		3,467	2,537	2,537
Cash and cash equivalents at end of period		5,215	2,159	3,467

Notes to the Accounts

as at 31 March 2017

1. Accounting Policies

The Condensed Consolidated Financial Statements above comprise the unaudited results of the Company and subsidiary, Majedie Portfolio Management Limited (MPM) for the six months to 31 March 2017 and are presented in pounds sterling, as this is the functional currency of the Group.

MPM was liquidated in the period and has been removed from the Group as its carrying value with no gain or loss on disposal. The removal of MPM means that consolidated accounts will not be required from the next financial year.

The Condensed Consolidated Financial Statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all financial information required for full annual financial statements. The Condensed Consolidated Financial Statements have been prepared using the accounting policies adopted in the audited financial statements for the year ended 30 September 2016.

New standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 30 September 2016, and since 1 October 2016 no new standards were adopted.

2. Income

		Half year ended 31 March 2017 £'000			Half year ended 31 March 2016 £'000				Year ended 30 September 2016 £'000
Income from investments
UK investment income*		4,235			3,283				5,944
Accumulated income		119			104				328
Overseas dividends		24			44				161
		4,378			3,431				6,433
Other income
Deposit interest									1
Sundry income		30			30				46
		30			30				47
Total income		4,408			3,461				6,480
Total income comprises:
Dividends	4,378			3,431				6,433
Interest								1
Other income	30			30				46
	4,408			3,461				6,480
Income from investments
Listed UK	1,363			1,305				3,016
Listed overseas**	24			44				184
Unlisted	2,991			2,082				3,233
	4,378			3,431				6,433

* Includes MAM dividend income of £2,991,000 (half year to 31 March 2016: £2,082,000 and year ended 30 September 2016: £3,233,000).

** Includes accumulation income of £nil (half year to 31 March 2016: £nil and year ended 30 September 2016: £23,000).

3. Taxation

The charge for the half year to 31 March 2017 is £3,000 (half year to 31 March 2016: £5,000; year ended 30 September 2016: £17,000). These amounts represent irrecoverable withholding tax paid on overseas investment income.

The Company has an effective corporation tax rate of 0%. As investment gains are exempt from tax owing to the Company's status as an approved Investment Trust, and as there is expected to be an excess of management expenses over taxable income there is no charge for corporation tax.

4. Calculation of Returns per ordinary share

Basic returns per ordinary share in each period are based on the return on ordinary activities after taxation attributable to equity shareholders. Basic return per ordinary share for the period is based on 53,439,000 shares (half year ended 31 March 2016: 53,293,143; year ended 30 September 2016: 53,366,070), being the weighted average number of shares in issue.

5. Business segments

For management purposes the Group is organised into one principal activity, being investing activities:

Investing activities

The Company's investment objective is to maximise total shareholder return whilst increasing dividends by more than the rate of inflation over the long term. The Company operates as an investment trust company and its portfolio contains investments in companies listed in a number of countries. Geographical information about the portfolio is provided above.

6. Dividends

In accordance with IAS 10: Events After the Balance Sheet Date, interim dividends are not accounted for until paid. The following table summarises the amounts recognised as distributions to equity holders in the relevant period:

	Half year ended 31 March 2017 £'000	Half year ended 31 March 2016 £'000	Year ended 30 September 2016 £'000
2016 Final dividend of 5.75p paid on 25 January 2017	3,073
2016 Interim dividend of 3.00p paid on 24 June 2016			1,603
2015 Final dividend of 5.00p paid on 27 January 2016		2,667	2,667
	3,073	2,667	4,270

Distributable reserves of the Company comprise the Capital and Revenue Reserves.

Dividends for the half year ended 31 March 2017 (and for half year ended 31 March 2016; year ended 30 September 2016) have been solely made from the Revenue Reserve.

7. Investments

All investments are designated upon initial recognition as held at fair value through profit or loss, and are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price for listed securities, depending on the convention of the exchange on which the investment is quoted. Investments in unit trusts or open ended investment companies are valued at the closing price, the bid price or the single price as appropriate, released by the relevant investment manager.

Fair values for unquoted investments, or investments for which the market is inactive, are established by using various valuation techniques in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEV). These may include recent arm's length market transactions, the current fair value of another instrument which has substantially the same earnings multiples, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised.

8. Fair Value Hierarchy

Except for the Company's 9.50% 2020 and 7.25% 2025 Debenture Stock, which are measured at amortised cost under the effective interest rate method, financial assets and liabilities of the Company are carried in the Balance Sheet at their fair value (re investments) of the balance sheet amount is a reasonable approximation of fair value (re amounts due from brokers, dividends receivable, accrued income, cash at bank and amounts owing to brokers). The fair value is the amount at which the asset could be sold or the liability transferred in a current transaction between market participants, other than a forced or liquidation sale.

The table below sets out fair value measurements of financial assets in accordance with the IFRS fair value hierarchy system:

	Group
	Half year ended 31 March 2017
	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Financial assets
Financial assets held at fair value through profit or loss
Equities and managed funds
Listed equity securities	151,933	23		151,956
Unlisted equity securities			58,447	58,447
	151,933	23	58,447	210,403

	Group
	Half year ended 31 March 2016
	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Financial assets
Financial assets held at fair value through profit or loss
Equities and managed funds
Listed equity securities	132,054			132,054
Unlisted equity securities			53,302	53,302
	132,054		53,302	185,356

	Group
	Year ended 30 September 2016
	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Financial assets
Financial assets held at fair value through profit or loss
Equities and managed funds
Listed equity securities	144,121			144,121
Unlisted equity securities			57,238	57,238
	144,121		57,238	201,359

There have been no transfers during the period between Levels 1 and 2, and one transfer out of Level 3 into Level 2 (see table below).

Investments whose values are based on quoted market prices in active markets, and are therefore classified as Level 1, include active listed equities. The Company does not adjust the quoted price for these instruments in normal market conditions (although it may invoke its fair value pricing policy in times of market disruption - this was not the case in 31 March 2017, 31 March 2016 or 30 September 2016).

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified as Level 2. As Level 2 instruments 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.

Instruments 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 fair value. In respect of unquoted instruments, or where the market for a financial instrument is not active, fair value is established by using recognised valuation methodologies, in accordance with IPEV Valuation Guidelines. New instruments are initially valued at cost, for a limited period, being the price of the most recent in the investee. This is in accordance with IPEV Guidelines as the cost of recent investments will generally provide a good indication of fair value. Fair value is the price that would be received to sell and asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company's current level 3 classified investments comprise certain immaterial unlisted investments, which total in aggregate £119,000, and the investment in MAM valued at £58,328,000. The carrying value of MAM is normally assessed twice a year by the Audit Committee and is approved by the Board. The fair value of MAM is based on a price at which the Company may sell its shares back to MAM and its employees, which is currently considered to be the sole market for the Company's shares. The significant input in assessing the price is the earnings of MAM and a 5.0% increase/decrease in MAM's earnings would result in an increase/decrease of 4.4% in the carrying value of MAM.

The table below sets out the movement in Level 3 instruments for the period:

	31 March 2017
Group	Total £'000	Equity investments £'000
Opening balance	57,238	57,238
Transfer to Level 2 re a listing (transfer restricted until December 2017)*
Total gain for the period included in the Condensed Consolidated Statement of Comprehensive Income	1,209	1,209
	58,447	58,447

*Transfer occurred at £nil market value.

The fair value of the Company's debenture stocks are calculated using a standard present value methodology and by reference to the market yields of a comparable UK Treasury Bond instrument with a 2.50% risk premium being added.

	Half-year ended 31 March 2017		Half-year ended 31 March 2016		Year ended  30 September 2016
Group Financial liabilities	Book value £'000	Fair value £'000	Book value £'000	Fair value £'000	Book value £'000	Fair value £'000
£13.5m (2016: £13.5m) 9.50% 2020 debenture stock	13,452	16,159	13,438	16,745	13,445	16,605
£20.7m (2016: £20.7m) 7.25% 2025 debenture stock	20,495	26,373	20,477	26,183	20,486	27,111
	33,947	42,532	33,915	42,928	33,931	43,716

The above financial liabilities would be classified as Level 2 financial investments in the Fair Value Hierarchy.

9. Principal financial risks

The principal financial risks which the Company faces include exposure to:

• Market risk

• Foreign currency risk

• Interest rate risk

• Other price risk

• Credit risk

• Liquidity risk

Further details of the Company's management of these risks and the exposure to them are set out in Note 25 of the Company's Annual Report for the year ended 30 September 2016, as issued on 2 December 2016. There have been no changes to the management of or exposure to these risks since that date.

10. Majedie Asset Management Limited (MAM)

As at 31 March 2017, the Company has a 16.8% equity shareholding in MAM, which provides investment management and advisory services across a range of UK and global equity strategies.

The carrying value of the investment in MAM is included in the Condensed Consolidated Balance Sheet as part of investments at fair value through profit or loss:

	31 March 2017 £'000	31 March 2016 £'000	30 September 2016 £'000
Deemed cost of investment	540	540	540
Holding gains	57,788	52,669	56,580
Fair value at period end	58,328	53,209	57,120

The carrying value of MAM in the 31 March 2017 Condensed Consolidated Financial Statements is its fair value as assessed by the Audit Committee and approved by the Board as at 31 March 2017.

11. Net Asset Value

The consolidated net asset value per share has been calculated based on Equity Shareholders' Funds and on 53,439,000 (31 March 2016: 53,439,000 and 30 September 2016: 53,439,000) ordinary shares, being the number of shares in issue at the period end.

12. Ordinary Share Capital

	31 March 2017		31 March 2016		30 September 2016
	Number	£'000	Number	£'000	Number	£'000
Opening balance	53,439,000	5,344	53,133,000	5,313	53,133,000	5,313
Ordinary 10p shares issued			306,000	31	306,000	31
Closing balance	53,439,000	5,344	53,439,000	5,344	53,439,000	5,344

All shares are allotted fully paid up, and are of one class only, being ordinary 10p shares. New shares can only be issued at a premium to the relevant NAV (with debt at fair value).

Ordinary shares carry one vote each on a poll. The Companies Act 2006 abolished the requirement for the Company to have authorised share capital. The Company adopted new Articles of Association on 20 January 2010 which, inter alia, reflected the new legislation. Accordingly the Company has no authorised share capital. The directors' will still be limited in the number of shares they can allot at any one time as the Companies Act 2006 requires that directors seek authority from the shareholders for the allotment of new shares.

13. Share Premium

	Half year ended 31 March 2017 £'000	Half year ended 31 March 2016 £'000	Year ended 30 September 2015 £'000
Opening balance	3,054	2,280	2,280
Ordinary 10p shares issued		775	775
Issue costs		(1)	(1)
Closing balance	3,054	3,054	3,054

14. Reconciliation of Operating Profit to Operating Cash Flow

	Half year ended 31 March 2017 £'000	Half year ended 31 March 2016 £'000	Year ended 30 September 2016 £'000
Consolidated net return before taxation	14,130	5,106	23,661
Adjustments for:
Gains on investments	(12,063)	(4,112)	(21,919)
Accumulation dividends	(119)	(104)	(329)
Loss on disposal of tangible assets		58
Depreciation	12	10	78
Unrealised FX gains/(losses) on dividend tax recoverables	2		(10)
Purchases of investments	(18,447)	(6,994)	(13,378)
Sales of investments	21,470	7,297	15,838
	4,985	1,261	3,941
Finance costs	1,407	1,406	2,813
Operating cash flows before movements in working capital	6,392	2,667	6,754
Decrease in trade and other payables	(4)	(88)	(11)
(Increase)/decrease in trade and other receivables	(170)	(23)	146
Net cash flow from operating activities before tax	6,218	2,556	6,889
Tax recovered	22		2
Tax on unfranked income	(4)	(11)	(34)
Net cash inflow from operating activities	6,236	2,545	6,857

15. Reconciliation of Net Cash Flow to Movement in Net Debt

	Half year ended 31 March 2017 £'000	Half year ended 31 March 2016 £'000	Year ended 30 September 2016 £'000
Increase/(decrease) in cash	1,748	(378)	930
Non cash items	(16)	(14)	(30)
Change in net debt	1,732	(392)	900
Net debt beginning of period	(30,464)	(31,364)	(31,364)
Net debt at end of period	(28,732)	(31,756)	(30,464)

16. Related Party Transactions

Majedie Asset Management (MAM)

MAM is the Company's Investment Manager providing investment management services under an Investment Agreement. The agreement provides for MAM to manage the Company's investment assets on both a segregated portfolio basis and also by investments into various MAM funds. Details of the Investment Agreement are contained in the material contracts section of the Directors' Report in the Company's Annual Report for the year ended 30 September 2016. As Investment Manager MAM is entitled to receive investment management fees. In respect of the segregated portfolio these are charged directly to the Company and are shown as an expense in its accounts. Any management fees due in respect of the investments made into MAM funds are charged in the fund and are therefore included as part of the investment value of the relevant holding. MAM is also entitled to performance fees in respect of the investment in the MAM Tortoise fund. The fees crystallise annually on 30 September and are calculated and charged against each individual investor. As such these are also shown as an expense in the Company's accounts and are charged wholly to capital. Details concerning the Company's investments in the period in the MAM funds are shown in the Chief Executive's Report above.

In addition to the above, the Company retains an investment in MAM itself. Mr JWM Barlow is a non-executive director of MAM but receives no remuneration for this role. MAM is accounted for as an investment in both the Group and Company accounts and is valued at fair value through profit or loss. Details concerning the Company's investment in MAM are included in the Chief Executive's Report above.

Majedie Portfolio Management (MPM)

MPM was the manager of the Majedie Investments PLC Share Plan. The Share Plan was closed in June 2016 and the Company has been liquidated in the period. As such there are no transactions or balance information for the period. Upon being liquidated, MPM was removed from the Group at its carrying value resulting in no gain or loss on disposal. The removal of MPM, means that consolidated accounts will not be required from the next financial year.

The table below discloses the transactions and balances between those entities:

	Half year ended	Half year ended	Year ended
	31 March	31 March	30 September
	2017 £'000	2016 £0'000	2016 £'000
Transactions during the period:
Dividend income received from MAM	2,991	2,082	3,233
MPM costs recharged by the Company		18	28
Investment management fee income due to MAM (segregated portfolio only)	246	212	434
Performance fee income due to MAM (MAM Tortoise fund only)	5
Balances outstanding at the end of the period:
Between the Company and MAM (investment management fees)	119	104	115
Company's investment in MAM	58,328	53,209	57,120
Between the Company and MPM		96	162

Transactions between group companies during the period were made on terms equivalent to those that occur in arm's length transactions.

17. Financial Information

The financial information contained in this Half-Yearly Financial Report does not constitute full statutory accounts as defined in section 434 of the Companies Act 2006.

The information for the year ended 30 September 2016 has been extracted from the latest published audited accounts. Those accounts have been filed with the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. Those statutory accounts were prepared in accordance with IFRS, as adopted by the European Union.

Company Information

Board of Directors			Depository
A J Adcock, Chairman P D Gadd R D C Henderson J W M Barlow (Executive) All Directors are non-executive unless indicated Registered Office 1 King's Arms Yard London EC2R 7AF			BNY Mellon Trust & Depositary (UK) Limited BNY Mellon Centre 160 Queen Victoria Street London EC4V 4LA The Depositary also has delegated the safe keeping of the Company's assets to the Custodian, the Bank of New York Mellon SA/NV, London Branch.
Telephone: [phone] E-mail: [e-mail] Registered number: 109305 England Company Secretary Capita Company Secretarial Services Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Investment Manager Majedie Asset Management Limited 10 Old Bailey London EC4M 7NH Telephone: [phone] Email: [e-mail]			Registrars Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ Telephone: [phone] Auditors Ernst & Young LLP 25 Churchill Place Canary Wharf London E14 5EY Stockbrokers J.P. Morgan Cazenove 25 Bank Street London E14 5JP Website www.majedieinvestments.com
Financial Calendar
Year end	30 September
Annual results	December
Half year results	May
Annual General Meeting	January
Dividends paid	January and June
2017 Interim Dividend Timetable
The interim dividend for the period ended 31 March 2017 is 3.50p per share.
Ex-dividend date	1 June
Record date	2 June
Payment date	16 June

 

END

 

 

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