Annual Financial Report
MAJEDIE INVESTMENTS PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2013
The full Annual Report and Accounts will shortly be available via the Company's
website at www.majedie.co.uk or by contacting the Company Secretary on
telephone number 020 7954 9527.
The Directors present the results of the Company for the year ended
30 September 2013.
Investment Objective
The Company's investment objective is to maximise total shareholder return
whilst increasing dividends by more than the rate of inflation over the long
term.
Highlights 2013
Total shareholder return +9.7%
(including dividends):
Net asset value total return +16.9%
(including dividends):
Total dividends (per share): 10.5p
Directors' valuation of
investment
in Majedie Asset Management £46.0m
Limited:
Javelin Capital LLP
Net Asset Value included in £2.5m
Group accounts:
Year's Summary
Group Capital Structure Note 2013 2012 %
as at 30 September
Total Assets 1 £159.0m £146 +8.9
Which are attributable to:
Debenture holders (Debt at 2 £33.8m £33.8m
par value)
Equity shareholders £125.2m £112.2m +11.6
Gearing 4 21.5% 9.2%
Potential Gearing 4 27.0% 30.1%
Group total returns (capital
growth plus dividends) 5
Net asset value per share 3 +16.9% +5.5%
(debt at par value)
Share price +9.7% +19.6%
Group capital returns
Net asset value per share 3 240.5p 215.6p +11.5
(debt at par value)
Share price 160.0p 155.8p +2.7
Discount of share price to
net
asset value per share
Debt at par value 33.5% 27.8%
Debt at fair value 28.4% 20.0%
Group revenue and dividends
Net Revenue available to £3.7m £2.7m
Equity Shareholders
Net revenue return per share 6.8p 4.9p +38.8
Total dividends per share 10.5p 10.5p
Total administrative expenses £2.0m £3.2m
Ongoing charges: 6
Group (including costs of 2.1% 2.9%
running subsidiary entities)
Company (costs of operating 1.7% 1.8%
the Company)
Notes
Definitions of terms used in the above summary are as follows:
1. Total Assets
Total assets are defined as total assets less current liabilities.
2. Debt at par or fair value
Par value is the nominal or face value attaching to the debentures which will
be paid by the Company to the debenture holders on maturity. Fair value is the
estimated market price the Company would pay to the debenture holders if the
debentures were paid back before maturity at the relevant date.
3. Net Asset Value
The Net Asset Value (NAV) is the value of all the Company's assets less any
liabilities. The NAV is usually expressed as an amount per share.
4. Gearing and Potential Gearing
Gearing represents the amount of borrowings that a company has and is also
referred to as leverage. It is usually expressed as a percentage or ratio or
equity shareholders funds and a positive percentage or ratio above one shows
the extent of the borrowings. Gearing is calculated as borrowings less cash
balances to arrive at a net borrowings figure. Potential Gearing excludes cash
from the calculation. Details of the calculation for the Company are in note 25
below.
5. Total Return
Total returns include any dividends paid as well as capital returns as a result
of an increase or decrease in a company's share price or net asset value.
6. Ongoing charges
Ongoing charges are a measure of the normal ongoing costs of running a company.
Further information is contained in the Business Review section below.
Year's high/low 2013 2012
Share price high 183.0p 168.5p
low 151.5p 139.5p
Net asset value high 240.5p 226.5p
low 211.9p 202.7p
Discount (debt at par) high 33.5% 29.8%
low 21.7% 16.9%
Discount (debt at fair value) high 28.4% 35.0%
low 13.2% 20.0%
Chairman's Statement
Following a strong first half of the year for world equity markets the 3rd
quarter was weaker owing to concerns about a tightening of US Monetary policy.
However when this proved unfounded markets rebounded in the 4th quarter as
further evidence of economic recovery emerged. Overall for the year markets
showed a strong return.
During the year to 30 September 2013 the net asset value (NAV) and share price,
both on a total return basis, returned 16.9% and 9.7% respectively with the
difference reflecting an increase in the Company's discount over the year.
I highlight various aspects of performance for the period which is further
detailed in the Investment Manager's section below. In order to achieve the
Company's investment objective the portfolio, whilst mainly invested in
equities, is also invested in asset classes which are not correlated to equity
returns and which should provide protection to the portfolio in the event of
weak equity markets. Implicit in this strategy is that in a year of strong
equity markets, such as the past year, the Company's return will not fully
reflect the performance of underlying equities. The Company's return is in line
with other Investment Trusts that have adopted such a strategy over both the
last year and the last three years, on a total return basis.
Results and Dividends
The Company has adopted a suite of new accounting standards the major impact of
which is in the scope of the Group consolidation. The relevant change, which
has no impact on the Group NAV, is that the Company's investment in the Javelin
Capital Emerging Markets Alpha Fund (JCEMAF) is now held as an investment at
fair value through profit or loss consistent with the Company's other
investments, rather than being consolidated previously. Further details of this
change are in note 1 to the Financial Statements below.
The Group's net revenue return before tax for the year to 30 September 2013 was
£3.7m compared to £2.7m for the prior year period. Group income for the year
remained flat at £5.2m, which included dividends from Majedie Asset Management
Limited (MAM) of £2.3m (essentially unchanged from the prior year period).
Finally, Group income was modestly improved by a small amount of external fee
income from Javelin Capital LLP (Javelin Capital).
Total Group administrative expenses were £2.0m for the period compared to
£3.2m in the prior year period. This decrease primarily reflects continued cost
reductions at Javelin Capital but also reflects the closure of the Javelin
Capital Global Equity Strategies Fund in the prior year. At the Company level
expenses decreased by £0.1m during the year which in part reflects the
Company's ongoing charges percentage falling to 1.7% from 1.8%. As I have
mentioned in prior years, cost control remains a key focus of the Board.
The Board has decided that the final dividend is to be maintained at 6.3 pence
per share which is consistent with previous years. The final dividend will be
paid on 22 January 2014 to shareholders on the register on 10 January 2014.
During the year the Company reduced its equity holding in MAM for a total
consideration of £5.9m and a resultant total realised gain of £5.7m. As in
prior years, the valuation of the investment in MAM is regularly reviewed by
the Board. As such the Board have determined that the carrying value of our
remaining holding will increase to £46.0m as at 30 September 2013 as I explain
in the investment portfolio section below.
In contrast the investment in Javelin Capital is consolidated in the Group
accounts at £2.5m, being its net asset value (and is included at its net asset
value in the weekly NAVs released to the market), as required under IFRS, but
is held in the Company accounts at cost in accordance with our policy for
unquoted investments. The Board has reviewed the carrying value of Javelin
Capital and has determined that as at
30 September 2013 the carrying value of Javelin Capital will be kept at cost,
being £8.0m, in the Company accounts.
Investment Portfolio
The Investment Manager's section of the Strategic Report below provides the
detailed commentary on the Group's investment activity and performance.
However I would like to provide an overview of the key issues that affected the outturn
for the year.
The Core Portfolio returned 17.4%, a relative underperformance as against the
benchmark of 1.65% for the year. The portfolio's relative performance recovered
in the second half of the year having lagged the strong rally in the first
half, but it still remained behind the index for the full year. In terms of
geography the main positive performer was the UK whilst stock selection in the
US was the largest negative. I am pleased that the contribution from Japan was
neutral as that market was particularly volatile. The overall performance was
in line with other well known income managers. I would also like to comment on
the Realisation Portfolio which has been in existence since 2009 and consisted
of illiquid stocks that could not be immediately sold. The largest stock,
Vostok Energy has now been fully written down. The Portfolio is now immaterial
for the Company, but it has been a consistent drag to the performance of the
Group since 2009.
Secondly, I would like to turn to the absolute return fund managed by Javelin
Capital (JCEMAF). In emerging markets the lack of trends or market direction
has meant that the strategy has been unable to perform as I would have liked
and expected. The JCEMAF declined by 5.9% over the year, after costs and fees.
As markets return to normality I expect the JCEMAF to generate returns.
The rationale for investing in this fund is to provide returns that are not
correlated to that of equities with the objective to produce a more balanced
return for the Company across the investment cycle. I note that asset classes
such as Gilts and Gold which are used to achieve the same result have returned
over the past year -4.5% and -24.0% respectively so the performance of the
JCEMAF should remain in context.
Thirdly, I would draw attention to MAM who have had an exceptional year both in
terms of investment performance in their funds and financial performance.
The Company further reduced its holding in May, by the equivalent of 3.5% of the
total MAM shares in issue. The share sale was alongside and in equal proportion
to the other founding shareholders and the Company now owns 26.7% of MAM. The
Board has increased the valuation to £46.0m using a consistent methodology with
that used in previous years.
Javelin Capital
Whilst the investment environment has not been conducive for Javelin Capital's
investment strategy it has continued to cut its costs over the last year. These
amount to a fall of circa 30% and follow large savings in the previous year.
The breakeven level of external third party assets has fallen to approximately
£25m and the business is now very operationally leveraged to the receipt of
third party funds which will be predicated on an improved performance of the
JCEMAF.
New Company Reporting Framework
New regulations for listed company reporting have been introduced and have been
implemented for the first time by the Company in this Annual Report. These new
requirements include the introduction of a new Strategic Report, Audit
Committee Report and a revised Directors' Remuneration Report and Auditor's
Report. We have also updated relevant parts of the Annual Report in conjunction
with these new requirements which I hope will make the Annual Report more
comprehensible.
Alternative Investment Fund Managers Directive (AIFMD)
I have mentioned in previous statements that the Company, in common with other
Investment Trusts, will have to comply with this new European Directive. The
AIFMD will require the Company to appoint an Alternative Investment Fund
Manager (AIFM) which will be regulated by the Financial Conduct Authority
(FCA). After careful consideration we have determined that the most appropriate
outcome is for the Company to undertake this new role. This new regulation will
take effect for the Company from 22 July 2014 and it also requires the
appointment of a depositary. I will provide further updates in my future
statements.
Foreign Account Tax Compliance Act (FATCA)
FATCA is another piece of new regulation impacting the Company which would have
required reporting by the Company to the US tax authorities. I am pleased to
report that during the year HMRC has reached an agreement with the US tax
authorities such that the impact of FATCA has been substantially diminished.
As with the AIFMD, I will provide further updates in my future statements.
Annual General Meeting
The AGM will be held on 15 January 2014 at 12.00pm at the City of London Club,
19 Old Broad Street London EC2N 1DS. Details are set out in the notice of
meeting found in the Annual report. As in prior years there will be
presentations and an opportunity to ask questions. I do hope that you will be
able to attend.
Summary
There are still many uncertainties facing the financial markets despite signs
that in the developed world the recovery in financial markets is gaining
traction. Additionally there are numerous regulatory changes that your Company
needs to remain abreast of and I have spent some time on the AIFMD as this is
the most relevant from a time perspective.
Against this background and given the company's stated Investment Objectives it
is satisfactory that over the one and three year periods the performance has
begun to achieve results in line with the peer group of similarly aligned
Investment Trusts. We remain strongly focussed on continuing to improve the
Group's relative and absolute financial performance.
Andrew J Adcock Chairman
9 December 2013
Extracts from the Strategic Review
Introduction
Majedie Investments PLC (the Company) is an investment trust company with an
investment objective to maximise total shareholder return whilst increasing
dividends by more than the rate of inflation over the long term. In seeking to
achieve this objective the Board has determined an investment policy and
related guidelines and limits. Both the investment objective and the investment
policy were approved by shareholders at a general meeting of the Company on
9 October 2012.
In pursuing the investment objective the Company has a business model that
includes other entities, which together form the Group. The Group (as
consolidated in the financial statements presented in this Annual Report)
comprises the following active entities:
Entity name Nature of Operations
Majedie Investments PLC Investment Trust Company investing in
equities worldwide (including
investments in JCEMAF and MAM)
Javelin Capital LLP Asset Management (Investment Manager
and General Administrator to the
Company)
Majedie Portfolio Management Majedie Share Plan Manager
Limited
Javelin Capital Services Adminstrative Services for Javelin
Limited Capital
Majedie Unit Trust Unauthorised Unit Trust
Further details about the subsidiary entities can be found in note 14 to the
Accounts below.
Under the business model used by the Company all operations are outsourced to
other service providers (details can be found in the Annual Report) although in
accordance with the strategy and guidelines set by the Board and under its
oversight.
The purpose of the Strategic Report (which is the Strategic Report for the
Group) is to inform the shareholders of the Company and help them assess how
the directors have performed their duty to promote the success of the Company
in accordance with Section 172 of the Companies Act 2006 by:
• analysing development and performance using appropriate Key Performance
Indicators (KPIs);
• providing a fair and balanced review of the Company's business;
• outlining the principal risks and uncertainties affecting the Company;
• describing how the Company manages these risks;
• setting out the Company's environmental, social and ethical policy;
• outlining the main trends and factors likely to affect the future
development, performance and position of the
Company's business; and
• explaining the future business plans of the Company.
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 Javelin Capital LLP, though it may invest in
unquoted securities up to levels set periodically by the Board, including its
investment in MAM. Investments in unquoted securities, other than those managed
by Javelin Capital, (measured by reference to the Company's cost of investment)
will not exceed 10 per cent. of the Company's gross assets.
Risk Diversification
Whilst the Company will at 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 investment 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 per cent. of the value of its gross assets
save that the Company may invest up to 25 per cent. of its gross assets in any
single fund managed by Javelin Capital. The Company will only invest in funds
managed by Javelin Capital 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 are split into four major groups. These are the Core
Portfolio, funds managed by Javelin Capital LLP, and the Company's investments
in MAM and Javelin Capital LLP.
Benchmark
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 per cent. FTSE All-Share Index and 30 per cent. FTSE
World ex-UK Index (Sterling) on a total return basis. Any investments made into
Javelin Capital LLP 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 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 per cent. of adjusted capital and reserves. The
Board also reviews the level of gearing (borrowings less cash) on an ongoing
basis and sets a range at its discretion as appropriate. The Company's current
debenture borrowings are limited by covenant to 66 2/3 per cent. and any
additional indebtedness is not to exceed 20 per cent. of adjusted capital and
reserves.
Regulatory and Competitive Environment
The Company is an investment trust and has a premium listing on the London
Stock Exchange. It is subject to UK and European legislation and regulations
including UK company law, IFRS, Listing, Prospectus and Disclosure and
Transparency Rules, taxation law and the Company's own Articles of Association.
The directors are charged with ensuring that the Company complies with its
objectives as well as these regulations.
Under the Companies Act 2006, Section 833, the Company is defined as an
investment company.
The financial statements, below, report on profits, the changes in equity, the
balance sheet position and the cash flows in the current and prior financial
period. This is in compliance with current IFRSs, 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 below.
Total Return Philosophy & Dividend Policy
The directors believe that investment returns will be maximised if a total
return policy is followed whereby the Investment Manager pursues the best
opportunities. The Company has a comparatively high level of revenue reserves
for the investment trust sector. At £21.8m, the revenue reserves represent
approximately 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 aim is to increase dividends by more than inflation over the long
term.
Performance Management
The Board uses the following Key Performance Indicators (KPIs) to help assess
progress against the Company's objectives. Further comments on these KPIs are
contained in the Chairman's Statement and Investment Manager's Report.
• Net Asset Value (NAV) and Shareholder Total Return:
The Board believe that asset return is fundamental to delivering value over the
long term and is a key determinant of shareholder return. The Board further
believe that, in accordance with the Company's objective, the total return
basis (which includes dividends paid out to shareholders) is the best measure
of how to measure long term shareholder return. The Board at each meeting
receives reports from the Investment Manager detailing the Company's NAV and
shareholder total return performance, asset allocation and related analyses.
• Investment Group performance:
The Board believes that after asset allocation the performance of each of the
investment groups is the key driver of NAV return and hence shareholder return.
The Board receives at each meeting detailed reports from the Investment Manager
showing the performance of the investment groups which also includes relevant
attribution analysis. The Investment Manager's section provides further detail
on each investment group's performance for the year.
• Share Price Discount:
As a closed ended listed investment company the share price of the Company can
and does differ from that of the NAV. This can give rise to a premium or
discount and as such is another component of total shareholder return. The
Board is cognisant of the Company's share price discount but as noted
previously believes that the best approach to delivering shareholder value over
the long term is through asset growth. The Board continually monitors the
Company's discount and does have the ability to buy back shares if thought
appropriate although it must be noted that this ability is limited by the
majority shareholding held by members of the Barlow family.
• Expenses:
The Board is aware of the impact of costs on returns and is conscious of
seeking to minimise these both at the Company and Group level. The industry
wide measure for investment trusts is Ongoing Charges which seeks to quantify
the ongoing costs of running the Company. This measures the annual normal
ongoing costs of an Investment Trust excluding performance fees, one off
expenses and investment dealing costs as a percentage of average equity
shareholders funds. Any investments made into pooled funds are included using
the Company's share of estimated ongoing fund running costs. The calculation of
ongoing charges at the Group level is not considered as relevant as they
include expenses of operating subsidiaries which are run on the basis of
achieving a profit for the Company. Nonetheless the Board does pay close
attention to costs in the subsidiary entities. This can be seen by the
continued strong reduction in costs at Javelin Capital as detailed in the
Chairman's Statement above. Details of ongoing charges for the year are shown
in the Year's Summary above.
• DividendGrowth:
Dividends paid to shareholders are an important component of the total
shareholder return and this has been included in the Company's investment
objective. The Board is aware of the importance of this objective to the
Company's shareholders and has maintained the dividend by using some of the
Company's large revenue reserves which amount to in excess of £21m as at
30 September 2013. In monitoring this objective the Board considers that
requirement to increase dividends by more than the rate of inflation over the
long term should be measured from 1985 when the Company became an investment
trust. The Board receives detailed management accounts and forecasts which show
the actual and forecast financial outturns, and available reserves, for the
Company and the Group. For the year ended 30 September 2013 dividend growth
since 1985 has been 4.7% (5.3% including special dividends) which is ahead of
inflation over that period.
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 below.
The Company has a range of equity investments including substantial investments
in two unlisted asset management businesses, large cap global equities and an
investment in an emerging market equities absolute return fund. The major risk
for the Company remains investment risk, primarily market risk; however it is
recognised that the investments in the two unlisted asset management
businesses, and in particular the investment in MAM, represent a degree of
concentration risk for the Company.
The number of investments held, together with the geographic and sector
diversity of the portfolio,
enables the Company to spread its risks with regard to liquidity, market
volatility, currency movements and revenue streams.
Under the terms of the 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 MAM 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 non- compliance of the Company with rules and
regulations. The Board also receives regular investment listings and income
forecasts as part of its monitoring of compliance with Sections 1158 to 1162 of
the Corporation Tax Act 2010; and
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 and Audit
Committee regularly review statements on internal controls and procedures and
subject the books and records of the Company to an annual external audit.
The systems in place to manage the Company's internal controls are described
further in the Corporate Governance Statement in the Annual Report.
Employees, Social, Environmental, Ethical and Human Rights Policy
The Company is an investment trust company with no employees and as such the
Board considers that the Company has a very limited impact on the environment.
In respect of the Group the only operating business is Javelin Capital which as
a small asset manager operating in the financial services sector from leased
premises in the City of London, has a very limited impact on the environment.
The Company and the Group, when considering their day to day operations, aim to
conduct themselves responsibly, ethically and fairly. Javelin Capital, as the
Company's Investment Manager, provides investment management services to the
Company to assist it to meet its objectives. In doing so it operates within the
guidelines as set by the Board and takes account of social, environmental,
ethical and human rights factors where appropriate.
Gender Diversity
The Board are aware of the recommendations made in the Lord Davies Review in
2011 in respect to Board diversity. The Company's policy on diversity is
included under the Nomination Committee in the Annual Report and this is
applied when a new appointment to the Board is required. During the year no new
appointments were made, with the only movement being in respect of Mr HV Reid
who retired on 16 January 2013 and was not replaced. As such at the year end
the composition of the Board was that all the directors were male.
On behalf of the Board
Andrew J Adcock Chairman
9 December 2013
Investment Manager's Report.
The Company's assets are managed in four separate major groups which the Board
continues to believe provide the correct balance in order to achieve the
Investment Objective of maximising shareholder return whilst looking to
increase dividends by more than the rate of inflation over the long term.
Core Portfolio
As at 30 September 2013, the value of the Core Portfolio was £78.1m,
representing 49.1% of the Group's Total Assets. The Core Portfolio comprises
holdings in large-cap UK and international stocks, a small number of carefully
selected mid-cap companies and cash, managed under an equity income investment
mandate. The portfolio is benchmarked to perform against an index of 70% in UK
listed companies and 30% overseas.
During the year, the Core Portfolio Total Return was 17.4%, an underperformance
against its investment benchmark of 1.65%. The majority of this
underperformance occurred in the US portion of the portfolio whilst holding a
modest amount of cash, in what turned out to be a positive year overall for
markets was also a negative factor, particularly after investment sentiment
rebounded so quickly towards the end of June. However, the portfolio gained
around 0.6% against its investment benchmark during the second half of the
financial year as markets rotated away from international consumer stocks and
mining stocks gained ground following a significant derating during the earlier
part of the year.
Apart from a small sell-off during the latter half of November, equity markets
made steady progress during Q4 2012. There was, however, a certain amount of
tension at the end of the year as a stand-off developed in the US Congress over
funding requirements for the government; these were resolved in an
eleventh-hour compromise and, as a result, markets entered 2013 in robust form.
The FTSE 100 index rallied from the 6,000 level at the beginning of January
and, despite a degree of faltering during the end of March and early April,
posted strong gains to rally by the middle of May to near to its all time
record closing level of 6,930, last seen as long ago as December 1999.
Thereafter, a sharp retrenchment took place over the following month,
exacerbated mainly by fears of an ending of the Quantitative Easing programme
carried out by the Federal Reserve in the US and also by data indicating that
economic growth in China was slowing. Global Markets regained their equanimity,
however, towards the end of June following assurances that support for global
bond markets would not suddenly be turned off. Whilst in the UK, markets
reacted positively to forward guidance on monetary policy by the new Governor
of the Bank of England indicating that interest rates were unlikely to rise
until beyond 2015, despite the fact that economic data from the UK showed that
growth was starting to pick up quite sharply. Following a sharp rally early in
July, markets remained generally range-bound until the end of the summer.
In the UK, which comprises the majority of the portfolio's holding by value
(67%), it was satisfactory to note that investment performance of the Core
Portfolio outperformed its benchmark the All Share index which rose 18.9% on a
total return basis. A number of new holdings such as GKN, the automotive
engineer, Pennon, the domestic water utility, AMEC, the global oils service
provider, Hammerson, the UK and European property investor and developer, Smith
and Nephew, the medical equipment company, and Elementis, a global specialist
chemical company with a UK listing were introduced, along with Ultra
Electronics, the defence contractor. Entire holdings in Britvic, the soft
drinks manufacturer and distributor, Balfour Beatty, the building and
infrastructure contractor, and Group 4 Securicor, the money handling and prison
operating company were sold.
In terms of major contributions to the overall performance of the portfolio, in
the UK, ITV was the largest positive. This was a position that had been
increased during the year and benefitted from substantial earnings upgrades and
improved investor sentiment. Other significant positive contributors included
Inchcape, the international vehicle distributor, GKN and IMI, the specialist
engineering companies. On the negative front, 2013 proved a disappointing year
for mining stocks in general, although the sector picked up relative ground
against the broader market over the summer when a degree of sector rotation
away from large global consumer stocks took place.
BHP Billiton, Rio Tinto and, most particularly, Antofagasta were all poor
performers over the year but continue to be held as prospects for their markets
are improving, valuations are, by historical standards undemanding and recent
results have been more encouraging. Antofagasta once again paid a substantial
special dividend this year. BP continued to suffer throughout the year as the
legal action in the US concerning the oil spillage in the Gulf of Mexico in
April 2010 continued to gather momentum, whilst Group 4 Securicor battled poor
media coverage on a variety of fronts and also warned on profits. This holding,
as has been mentioned, has now been sold in its entirety.
In the banking sector, Lloyds TSB was the clear sector winner over the year;
although the Company does not hold Lloyds TSB. Holdings in Barclays and HSBC in
the UK and JP Morgan Chase and Wells Fargo in the US meant that performance was
in line with the banking sector over the year.
Exposure in Europe was again maintained by holding overweight positions in
countries such as Switzerland and Norway which are outside the Eurozone and it
was welcome to see some sound contributions from Telenor, the Norway based
telecommunications company, and Roche, the Swiss pharmaceutical company;
Statoil, the major Norwegian integrated oil company, on the other hand had a
rather dull year, along with many other large European oil businesses. In the
US, the performance of the portfolio was disappointing; Mosaic Company, the
fertilizer producer, experienced a poor year as the longstanding global potash
pricing agreements disintegrated with a harmful impact on profitability.
Kelloggs, the well known food producer, tailed off over the summer, in line
with a number of other global food groups. Southern Company, the domestic
utility company, suffered some marked underperformance as utility stocks in
general remained out of fashion. Technology stocks, where the portfolio is
underweight given the general lack of yield in the sector, also benefitted from
a pick up in the market over the summer, although overall for the year this
underweight position was broadly neutral. On a brighter note, 3M and Illinois
Tool Works in the industrials sector prospered over the year and at the end of
the summer a new investment was made in Eaton, the diversified industrial
supply company. The rest of the portfolio was broadened and restructured in
2012. In Japan, which is the largest component of the restructured portfolio,
the stock market (Nikkei225) rose 31.3% in sterling terms following a general
election in the Autumn of 2012 and a new resolve to revive the economy. The
Japanese section of the portfolio performed in line with the index as did the
Emerging Market section.
Markets are still prone to move sharply as a result of changes, or perceived
changes, in policies by the major Central Banks, but it was noticeable that the
recent dual threats of a shutdown in a range of US government agencies and
possible debt default on US treasuries were treated comparatively
phlegmatically by investors. September 2013 marked the sixth anniversary of the
beginning of the current round of market ferment, when a run developed in
Northern Rock, so it seems markets have become somewhat more accustomed to
weathering short term instabilities.
The portfolio, overall, continues to remain orientated towards sound income
generating stocks which have the ability to provide a rising level of dividend
payments over the long term. This policy results in overweight positions being
held in areas such as telecommunications, utilities, healthcare and major
global oil and gas companies.
The portfolio remains underweight in companies more directly exposed to
consumer expenditure and also to banks, where the need to rebuild balance
sheets may have an impact on dividend paying capacity in the medium term. The
portfolio also remains underweight in the technology and IT areas, where
dividend payments are small or non-existent.
Equity markets have made good progress over the past year and the outlook
remains promising given that global interest rates appear set to stay at
historically very low levels and patterns of economic growth are now definitely
appearing in the US and the UK. The Eurozone continues to suffer from high
levels of unemployment, particularly amongst the young, whilst the struggle to
retain the integrity of the common currency will continue to exercise
policymakers for some time. Given this outlook, the level of cash held within
the portfolio is lower than usual, although sufficient liquidity exists to take
advantage of any new investment opportunities should they occurFinally, we
continue to manage a small non-core realisation portfolio, consisting of
small-cap and early stage investments that were initiated between 2005 and
2008. The objective is to maximise the return available by exiting from these
stocks wherever possible, although by their very nature all of them tend to be
illiquid and difficult to sell. At the end of September 2013 the value of the
non-core realisation portfolio was £0.9m, representing less than 1% of the
Group's Total Assets, compared to £3.1m in 2012. The key decision in this part
of the portfolio was to write down the value of the holding in Vostok Energy,
the Russian gas producer from £1.8m to zero. The company has been trying to
either float or sell itself to a larger entity for some considerable time to no
avail and is now in a position of default to its bondholders. Over time, it is
possible that some value may accrue to shareholders from a wind-up of the
company but it is now prudent to assume this will not occur.
Javelin Capital Emerging Markets Alpha Fund (JCEMAF)
As at 30 September 2013, the value of this holding was £30.5m, representing
19.2% of the Group's Total Assets. In November 2012 the Company consolidated
its exposure to the Javelin Funds into JCEMAF following the closure of the QIF
Javelin Capital Global Equity Strategies Fund (JCGESF).
The JCEMAF utilises a range of proprietary long/short models with an emphasis
on Emerging Markets. The objective of the fund is to deliver absolute returns
that are uncorrelated to the direction of the Core Portfolio and therefore
lessening the overall market risk of the combined assets of the Company.
However Emerging Market equities were directionless over the past year meaning
that the strategies have been unable to capture market trends. This is
historically very unusual and looking forward, experience continues to suggest
that market trends will eventually reassert themselves and the strategies will
then be well placed to benefit. Over the year the UCITS fund returned -5.9%
after costs and fees.
Majedie Asset Management (MAM)
As at 30th September 2013 the value was raised to £46.0m, representing 28.9% of
the Group's Total Assets. MAM was launched in 2002 using finance provided by
the Company, which retains a 26.7% interest following some share sales during
the year. The business has grown to approximately £7.7bn in assets under
management, predominantly long-only equity mandates for institutional clients.
Its market leading investment performance has been recognised by the loyalty of
its clients. It remains well financed and highly profitable. During the year, £
2.3m was received in dividend income from MAM and the Company received £5.9m
from sales of MAM stock, in December 2012 and June 2013.
Further details concerning the valuation of MAM are described in the Report of
the Audit Committee in the Company's Annual Report.
Javelin Capital
As at 30 September 2013, the net assets in Javelin Capital have been included
in the Consolidated Accounts at £2.5m, representing 1.6% of the Group'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 has been
valued at cost, being £8.0m.
Javelin Capital remains focussed on gaining assets under management in
accordance with its revised business plan. The Company holds an equity
participation of 75% whilst the remaining 25% is held by the individual
partners. The performance of the UCITS fund (JCEMAF) has been discussed
earlier.
Further details concerning the determination of the valuation of Javelin
Capital in the Group and Company accounts are described in the Report of the
Audit Committee in the Annual Report.
Development of Net Asset Value
In aggregate, the NAV has increased by £13.0m, having incurred net
administration and finance costs of £4.4m, and having paid out £5.5m in
dividends. In relation to the Group's investments, the Core Portfolio gained £
11.6m, including the receipt of dividends, whilst MAM provided a total
contribution of £15.2m, being dividends of £2.3m, total capital gains of £12.9m
(comprising unrealised gains attributable to the increase in the valuation of £
7.2m and realised gains totalling £5.7m from the sale of MAM stock during the
year). Lastly the non core realisation portfolio declined by £2.1m and the
JCEMAF by £1.8m during the year.
Investment Outlook
The outlook for equity markets is, as has been mentioned, looking relatively
promising given the resumption of economic growth in the developed economies of
the West and the low level of interest rates globally. However, the peripheral
Eurozone countries continue to struggle with high levels of debt and
unemployment and the impasse between Democrats and Republicans over US
government expenditure, whilst temporarily resolved, is still a major issue to
be revisited early in 2014. The timing of the start of `tapering' by the
Federal Reserve - or the reduction in scope of its bond purchase programme - is
also a major factor in assessing the demand for equities. In China, where
growth seems to be resuming again after a pause during 2013, there are still
real worries about the integrity of the banking system and in Japan, Mr Abe's
ambitious reform plans are at a relatively early stage. Nevertheless, the
appetite amongst global investors for new equity issues has definitely risen
over the past few months and a pick-up in activity in mergers and acquisitions
can be anticipated given the healthy state of major corporate balance sheets.
On balance, we look forward to the prospects for markets in 2014 with cautious
optimism.
Nick Rundle Investment Director
Javelin Capital LLP
9 December 2013
Twenty Largest UK Investments at 30 September 2013
Market % Market %
Value of Value of
Company £000 Fund4 £000 Fund4
MAM1 46,000 29.2 39,000 26.8
Royal Dutch Shell `B' 3,842 2.4 4,176 2.9
HSBC 2,845 1.8 3,010 2.1
BP 2,815 1.8 3,164 2.2
Vodafone 2,646 1.7 2,856 2.0
GlaxoSmithKline 2,492 1.6 2,712 1.9
Rio Tinto 1,965 1.2 2,020 1.4
Barclays 1,857 1.2 1,397 0.9
ITV 1,753 1.1 575 0.4
BHP Billiton 1,547 1.0 1,732 1.2
Centrica 1,386 0.9 1,475 1.0
British Land 1,299 0.8 914 0.6
Imperial Tobacco 1,258 0.8 802 0.6
Antofagasta 1,228 0.8 1,578 1.1
GKN2 1,197 0.7
Smiths Group 1,119 0.7 933 0.6
Aviva 1,091 0.7 1,036 0.7
BAE Systems 1,091 0.7 1,203 0.8
Jardine Lloyd Thompson 1,087 0.7 766 0.5
W H Smith 992 0.6 750 0.5
79,510 50.4 70,099 48.2
Ten Largest Overseas Investments at 30 September 2013
2013 2012
Market % Market %
Value of Value of
Company £000 Fund4 £000 Fund4
JCEMAF (Lux)3 30,460 19.3 14,144 9.7
Roche (Switzerland) 999 0.6 810 0.6
Illinois Tool Works (USA) 942 0.6 736 0.5
Telenor (Norway) 917 0.6 785 0.5
3M (USA) 885 0.6 772 0.5
Schlumberger (USA) 873 0.6 806 0.5
Nestlé (Switzerland) 863 0.6 625 0.4
McDonalds (USA) 861 0.5 824 0.6
Vivendi (France) 853 0.5 605 0.4
Altria (USA) 849 0.5 827 0.6
38,502 24.4 20,934 14.3
1 Unlisted
2 There is no comparative information for the investments listed as they
represent new holdings.
3 JCEMAF is a sub-fund of the Serviced Platform SICAV, a Luxembourg UCITS
established by Goldman Sachs and advised by Javelin Capital.
4 As defined above.
Director's Report
The directors submit their report and the accounts for the year ended
30 September 2013.
Introduction
The Directors' Report includes the Corporate Governance Statement, which can be
found in the Annual Report, the Report of the Audit Committee, which can be
found in the Annual Report the Directors' Remuneration Report which can be
found in the Annual Report. A review of the Company's business is contained in
the Strategic Report which includes the Chairman's Statement and should be read
in conjunction with the Directors' Report.
Principal Activity and Status
The Company is a public limited company and an investment company under Section
833 of the Companies Act 2006. It operates as an investment trust and is not a
close company.
The Company has received written confirmation from HM Revenue & Customs that it
was an approved investment trust for taxation purposes under Sections 1158/59
of the Corporation Tax Act 2010 in respect of the year ended 30 September 2012.
In the opinion of the directors the Company has subsequently directed its
affairs so as to enable it to continue to qualify as an approved investment
trust.
Results and Dividend
Consolidated net revenue return before taxation amounted to £3,656,000
(2012: £2,681,000). The directors recommend a final ordinary dividend of 6.3p per
ordinary share, payable on 22 January 2014 to shareholders on the register at
the close of business on 10 January 2014. Together with the interim dividend of
4.2p per share paid on 26 June 2013, this makes a total distribution of 10.5p
per share in respect of the financial year (2012: 10.5p per share).
Risk Management and Objectives
The Company as an investment trust, and the Group, are subject to various risks
in pursuing their objectives. The nature of these risks and the controls and
policies in place across the Group that are used to minimise these risks are
further detailed in the Strategic Report in the Annual Report and in note 25 of
the Accounts below.
Qualifying Third Party Indemnity Provisions
There are no qualifying third party indemnity provisions or qualifying pension
scheme indemnity provisions which would require disclosure under Section 236 of
the Companies Act 2006.
Capital Structure
As part of its corporate governance the Board keeps under review the capital
structure of the Company. At 30 September 2013 the Company had a nominal issued
share capital of £5,252,800 comprising 52,528,000 ordinary shares of 10p each,
carrying one vote each. All of the shares of the Company are listed on the
London Stock Exchange which is a regulated market.
The 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: £15m 9.5%
debenture stock 2020 and £25m 7.25% debenture stock 2025 respectively. In 2004
the Company redeemed £1.5m of the 2020 issue and £4.3m of the 2025 issue as an
opportunity arose to redeem at an attractive price.
As noted above gearing is via two long term debentures. The limits on the
ability to borrow are described in the investment policy in the Annual Report.
The Board is responsible for setting the overall gearing range in which the
Investment Manager may operate.
Details of gearing levels are contained in the Year's Summary above, and in
note 25 to the Accounts on below.
There is one employee share scheme operated by the Group. Further details are
in note 24 to the accounts on below.
There are: no restrictions on voting rights; no restrictions concerning the
transfer of securities in the Company; no special rights with regard to control
attached to securities; no agreements between holders of securities regarding
their transfer known to the Company; and no agreements which the Company is
party to that might affect its control or trigger any compensatory payments for
directors, following a takeover bid.
Future Developments
The Chairman's Statement and the Investment Manager's Report sections of the
Strategic Report in the Annual Report provide details concerning relevant
future developments of the Company and the Group in the forthcoming year.
Employees, Social, Environmental, Ethical and Human Rights policy
The Company has no employees and as a result the Group has limited impact on
the environment.
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, ethical and human rights
factors, where appropriate.
Carbon Reporting
In accordance with the Companies Act 2006 (Strategic Report and Directors'
Reports) Regulations 2013, the Company is required to report on its greenhouse
gas emissions for those financial years ending on or after 30 September 2013.
In accordance with the regulations the Company has determined that its
organisational boundary, to which entities the regulations apply, is consistent
with its consolidated financial accounts.
The Group operates in the financial services sector and in common with many
organisations employs outsourcing such that most of its activities are
performed by other outside organisations which do not give rise to any
reportable emissions by the Group. However the Group, via its subsidiary
Javelin Capital LLP, does undertake activities at its leased premises. In
accordance with the provision of the centrally provided building services
(including heating, light, cooling etc) to all lessees in the building by the
landlord it is considered that the Group does not have emissions responsibility
in respect of these services, which rather rest with the landlord. Javelin does
however have responsibility for various other emissions in the usage of
electricity by its office equipment in the course of undertaking its duties but
it is not able to determine their amounts as compared to those provided by the
landlord.
Additionally the Company has many investments in companies around the world,
however the Company does not have the ability to control the activities of
these investee companies and as such has no responsibility for their emissions.
Therefore the directors' believe that the Group has no reportable emissions for
the year ended 30 September 2013.
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, which was
subsequently amended and restated on 29 June 2011. The revised terms include:
• The Company has provided £8m in capital, which 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.
• The Company has a 75% interest in Javelin Capital LLP with the other partners
holding the remaining 25%. On achieving certain pre-set financial targets,
which were revised in conjunction with the restructure in June 2011, the
Company will reduce its interest to ultimately 55%.
• The agreement provides for various types of profit share including
performance fee, bonus and residual profit share. Under the agreement the
Company is to receive an entitlement to profits equal to its capital
contribution plus accumulated interest first before other partners are entitled
to bonus or residual profit shares.
The Board has representation on the Javelin Capital Management Board (Javelin
Capital governance is outlined in the Corporate Governance Statement on page
•), including the appointment of the Chairman. This includes various 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 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
Fund/Portfolio Management Fee Performance Fee
Core Portfolio*** 0.70% p.a.* 10%â€
Treasury Account 0.70% p.a. NIL
MAM NIL** NIL**
JCEMAF^ 1-1.25% p.a. 10-20%‡
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:
*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 portfolios.
†The performance fee is based on outperformance against the benchmark on a
rolling three year basis.
^ The JCEMAF is a sub-fund of the Serviced Platform SICAV, which is a
Luxembourg based UCITS.
** The agreements provide for a fee of £60,000 per annum in respect of MAM
duties.
‡ The fees are as set in the funds documentation. The performance fee
entitlement only occurs once the hurdle has been exceeded and is calculated on
a high water mark basis.
*** The non-core portfolio attracts a management fee as per the Core Portfolio
but has 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 £265,000 per annum
with fees agreed on a cost only basis. The Administration Services Agreement
may be terminated on three months' notice.
iii. 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 Asset
Services) in November 2000 to act as Company Secretary and undertake fund
administration services. The terms of Capita Sinclair Henderson Ltd's
appointment are defined under a secretarial and administration services
agreement dated 6 February 2012. 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 2013 the Group and the Company had eleven and ten days
respectively of suppliers' invoices outstanding in respect of trade creditors
(2012: Group: nine days; Company: eight days).
By Order of the Board
Capita Sinclair Henderson Limited
Company Secretary
9 December 2013
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the Group
financial statements in accordance with applicable United Kingdom law and those
IFRS as adopted by the European Union. Under Company Law the Directors must not
approve the Group financial statements unless they are satisfied that they
present fairly the financial position, financial performance and cash flows of
the Group for that period. In preparing the Group financial statements the
directors are required to:
• select suitable accounting policies in accordance with IAS 8: Accounting
Policies, Changes in Accounting Estimates and Errors and then apply them
consistently;
• present information, including accounting policies, in a manner that provides
relevant, reliable,
comparable and understandable information;
• provide additional disclosures when compliance with the specific requirements
in IFRSs is insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the Group's financial position and
financial performance;
• state that the Group has complied with IFRSs, subject to any material
departures disclosed and explained in the financial statements;
• make judgements and estimates that are reasonable and prudent; and
• state that the Annual Report, taken as a whole, is fair, balanced and
understandable and provides sufficient information to allow shareholders to
assess the Group's performance.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's transactions and disclose with
reasonable accuracy at any time the financial position of the Group and enable
them to ensure that the Group financial statements comply with the Companies
Act 2006 and Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, a Corporate Governance Statement, A Director's
Remuneration Report and a Directors' Report that comply with that law and those
regulations.
The Directors of the Company, whose names are shown in the Annual Report, each
confirm to the best of their knowledge that:
• the financial statements, which have been prepared in accordance with
applicable accounting standards, give a true and fair view of the assets,
liabilities, financial position and net return of the Group;
• the Annual Report includes a fair review of the development and performance
of the business and the position of the Group, together with a description of
the principal risks and uncertainties that it faces; and
• they consider that the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the Company's performance, business model and strategy.
By order of the Board
Andrew J Adcock Chairman
9 December 2013
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's
statutory accounts for the years ended 30 September 2013 and 2012 but is
derived from those accounts. Statutory accounts for 2012 have been delivered to
the Registrar of Companies, and those for 2013 will be delivered in due course.
The Auditors have reported on those accounts; their report was (i) unqualified,
(ii) did not include a reference to any matters to which the Auditors drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The
text of the Auditors' report can be found in the Company's full Annual Report
and Accounts at www.majedie.co.uk.
Consolidated Statement of Comprehensive Income for the year ended 30 September
2013
2013 2012
Revenue Capital Revenue Capital
return return Total return return Total
Notes £000 £000 £000 £000 £000 £000
Investments
Gains on 13 18,046 18,046 7,832 7,832
investments at
fair value
through profit or
loss
Exchange loss on (840) (840)
disposal of
foreign
subsidiary
Net investment 18,046 18,046 6,992 6,992
result
Income
Income from 3 5,120 5,120 5,100 5,100
investments
Other income 3 118 118 63 63
Total income 5,238 5,238 5,163 5,163
Expenses
Administrative 5 (880) (1,109) (1,989) (1,777) (1,442) (3,219)
expenses
Return before 4,358 16,937 21,295 3,386 5,550 8,936
finance cost and
taxation
Finance costs 8 (702) (2,105) (2,807) (705) (2,115) (2,820)
Net return before 3,656 14,832 18,488 2,681 3,435 6,116
taxation
Taxation 9 (115) (115) (132) (132)
Net return after 3,541 14,832 18,373 2,549 3,435 5,984
taxation for the
year
Other
comprehensive
income
- exchange 37 37
differences on
translation of
foreign
operations
Attributable to:
Equity holders of 37 37
the company
Non-controlling
interest
37 37
Total 3,541 14,832 18,373 2,549 3,472 6,021
comprehensive
income for the
year
Net return after
taxation
attributable to:
Equity holders of 3,541 14,832 18,373 2,552 3,445 5,997
the Company
Non-controlling 14 (3) (10) (13)
interest
3,541 14,832 18,373 2,549 3,435 5,984
Return per pence pence pence pence pence pence
ordinary share
Basic and diluted 11 6.8 28.5 35.3 4.9 6.6 11.5
The total column of this statement is the Consolidated Statement of
Comprehensive Income of the Group prepared in accordance with IFRSs 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).
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 2013
2013 2012
Revenue Capital Revenue Capital
return return Total return return Total
Notes £000 £000 £000 £000 £000 £000
Investments
Gains on 13 17,679 17,679 6,258 6,258
investments at
fair value
through profit
or loss
Net investment 17,679 17,679 6,258 6,258
result
Income
Income from 3 5,120 5,120 5,132 5,132
investments
Other income 3 112 112 34 34
Total income 5,232 5,232 5,166 5,166
Expenses
Management 4 (404) (415) (819) (402) (412) (814)
fees
Administrative 5 (516) (197) (713) (548) (237) (785)
expenses
Return before 4,312 17,067 21,379 4,216 5,609 9,825
finance costs
and taxation
Finance costs 8 (702) (2,105) (2,807) (701) (2,104) (2,805)
Net return 3,610 14,962 18,572 3,515 3,505 7,020
before
taxation
Taxation 9 (115) (115) (113) (113)
Net return 3,495 14,962 18,457 3,402 3,505 6,907
after taxation
for the year
Return per pence pence pence pence pence pence
ordinary share
Basic and 11 6.7 28.8 35.5 6.6 6.7 13.3
diluted
The total column of this statement is the Statement of Comprehensive Income of
the Company prepared under IFRSs as adopted by the European Union. 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 below form part of these accounts.
Capital Share Own Currency Non-
Share Share redemption options Capital Revenue shares translation controlling
capita premium reserve reserve reserve reserve reserve reserve interest Total
Notes £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Year ended 30
September 2013
As at 1 October 5,253 785 56 (147) 87,822 20,093 (1,628) 112,234
2012
Net gain for 14,832 3,541 18,373
the year
Share options 24 24 24
expense
Dividends 10 (5,465) (5,465)
declared and
paid in year
As at 30 5,253 785 56 (123) 102,654 18,169 (1,628) 125,166
September 2013
Year ended 30
September 2012
As at 1 October 5,253 785 56 (178) 84,377 23,006 (1,628) (37) 248 111,882
2011
Net gain for 3,445 2,552 (13) 5,984
the year
Other 37 37
comprehensive
income -
exchange
differences on
translation of
foreign
subsidiary
Share options 24 31 31
expense
Dividends 10 (5,465) (5,465)
declared and
paid in year
Cessation of (235) (235)
non-controlling
interest
As at 30 5,253 785 56 (147) 87,822 20,093 112,234
September 2012
Consolidated Statement of Changes in Equity for the year ended 30 September
2013
The notes below form part of these accounts.
Company Statement of Changes in Equity for the year ended 30 September 2013
Capital Share Own
Share Share redemption options Capital Revenue shares
capital premium reserve reserve reserve reserve reserve Total
Notes £000 £000 £000 £000 £000 £000 £000 £000
Year
ended 30
September
2013
As at 1 5,253 785 56 (147) 89,572 23,748 (1,628) 117,639
October
2012
Net gain 14,962 3,495 18,457
for the
year
Share 24 24 24
options
expense
Dividends 10 (5,465) (5,465)
declared
and paid
in year
As at 30 5,253 785 56 (123) 104,534 21,778 (1,628) 130,655
September
2013
Year
ended 30
September
2012
As at 1 5,253 785 56 (178) 86,067 25,811 (1,628) 116,166
October
2011
Net gain 3,505 3,402 6,907
for the
year
Share 24 31 31
options
expense
Dividends 10 (5,465) (5,465)
declared
and paid
in year
As at 30 5,253 785 56 (147) 89,572 23,748 (1,628) 117,639
September
2012
The notes below form part of these accounts.
Consolidated Balance Sheet as at 30 September 2013
2012
as
2013 restated
*
Notes £000 £000
Non-current assets
Property and equipment 12 105 247
Investments held at fair 13 151,939 122,361
value through profit or
loss
152,044 122,608
Current assets
Trade and other receivables 15 2,690 1,418
Cash and cash equivalents 16 5,523 23,287
8,213 24,705
Total assets 160,257 147,313
Current liabilities
Trade and other payables 17 (1,244) (1,256)
Total assets less current 159,013 146,057
liabilities
Non-current liabilities
Debentures 17 (33,847) (33,823)
Total liabilities (35,091) (35,079)
Net assets 125,166 112,234
Represented by:
Ordinary share capital 18 5,253 5,253
Share premium 785 785
Capital redemption reserve 56 56
Share options reserve (123) (147)
Capital reserve 102,654 87,822
Revenue reserve 18,169 20,093
Own shares reserve 19 (1,628) (1,628)
Equity Shareholders' Funds 125,166 112,234
Net asset value per share pence pence
Basic and fully diluted 20 240.5 215.6
* Comparative figures have been restated for the review of the treatment of the
investment in JCEMAF as disclosed in note 1 below. Approved by the Board of
Majedie Investments PLC (Company no. 109305) and authorised for issue on
9 December 2013.
Andrew J Adcock
J William M Barlow
Directors
The notes below form part of these accounts.
Company Balance Sheet as at 30 September 2013
2013 2012
Notes £000 £000
Non-current assets
Property and equipment 12 98 133
Investments held at fair 13 151,939 122,361
value through profit
or loss
Investments in subsidiaries 13 8,193 8,192
held at fair value through
profit or loss
130,686
Current assets
Trade and other receivables 15 1,313 855
Cash and cash equivalents 16 3,991 20,922
5,304 21,777
Total assets 165,534 152,463
Current liabilities
Trade and other payables 17 (1,032) (1,001)
Total assets less current 164,502 151,462
liabilities
Non-current liabilities
Debentures 17 (33,847) (33,823)
Total liabilities (34,879) (34,824)
Net assets 130,655 117,639
Represented by:
Ordinary share capital 18 5,253 5,253
Share premium 785 785
Capital redemption reserve 56 56
Share options reserve (123) (147)
Capital reserve 104,534 89,572
Revenue reserve 21,778 23,748
Own shares reserve 19 (1,628) (1,628)
Equity Shareholders' Funds 130,655 117,639
Approved by the Board of Majedie Investments PLC (Company no. 109305) and
authorised for issue on 9 December 2013.
Andrew J Adcock
J William M Barlow
Directors
The notes below form part of these accounts.
Consolidated Cash Flow Statement for the year ended 30 September 2013
2012
as
2013 restated*
Notes £000 £000
Net cash flow from operating
activities
Consolidated net return before 18,488 6,116
taxation
Adjustments for:
Gains on investments 13 (18,046) (7,962)
Consolidated adjustment on Javelin 13 368 130
Capital fee income
Share based remuneration 24 31
Depreciation 142 166
Purchases of investments (31,862) (131,121)
Sales of investments 19,724 125,175
Proceeds from derivative contracts (911)
(11,162) (8,376)
Finance costs 2,807 2,820
Operating cashflows before movements (8,355) (5,556)
in working capital
Decrease in trade and other payables (137) (528)
(Increase)/decrease in trade and (916) 204
other receivables
Net cash outflow from operating (9,408) (5,880)
activities
before tax
Tax recovered 28 37
Tax on unfranked income (136) (158)
Net cashoutflow from operating (9,516) (6,001)
activities
Investing activities
Purchases of tangible assets (3)
Net cash outflow from investing (3)
activities
Financing activities
Interest paid (2,783) (2,797)
Dividends paid (5,465) (5,465)
Net cash outflow from financing (8,248) (8,262)
activities
Decreasein cash and cash 21 (17,764) (14,266)
equivalents for year
Cash and cash equivalents at startof 23,287 37,553
year
Cash and cash equivalents at end of 5,523 23,287
year
* Comparative figures have been restated for the review of the treatment of the
investment in JCEMAF as disclosed in note 1 below.
The notes below form part of these accounts.
Company Cash Flow Statement for the year ended 30 September 2013
2013 2012
Notes £'000 £000
Net cash flow from operating
activities
Company net return before 18,572 7,020
taxation
Adjustments for:
Gains on investments 13 (17,679) (6,258)
Share based remuneration 24 31
Depreciation 35 45
Purchases of investments (31,862) (32,901)
Sales of investments 19,724 43,944
Proceeds from derivative 183
contracts
(11,186) 12,064
Finance costs 2,807 2,805
Operating cashflows before (8,379) 14,869
movements in working capital
(Decrease)/increase in trade and (94) 18
other payables
(Increase)/decrease in trade and (102) 135
other receivables
Net cash(outflow)/inflow from (8,575) 15,022
operating activities before tax
Tax recovered 28 37
Tax on unfranked income (136) (134)
Net cash (outflow)/inflow from (8,683) 14,925
operating activities
Investing activities
Investment in subsidiaries (1,000)
Net cash outflow from investing (1,000)
activities
Financing activities
Interest paid (2,783) (2,783)
Dividends paid (5,465) (5,465)
Net cash outflow from financing (8,248) (8,248)
activities
(Decrease)/Increasein cash and 21 (16,931) 5,677
cash equivalents for year
Cash and cash equivalents at 20,922 15,245
start of year
Cash and cash equivalents at end 3,991 20,922
of year
The notes below form part of these 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 given below. The nature of the Group's
operations and its principal activities are set out in the Strategic Report
below.
Critical Accounting Assumptions and Judgements
The preparation of financial statements in conformity with IFRSs requires the
use of certain critical accounting assumptions. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies. The areas requiring a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated
financial statements are set out below.
Assessment as investment entity
Entities that meet the definition of an investment entity within IFRS 10 are
required to measure their subsidiaries at fair value through profit or loss
rather than consolidate them. The criteria which define an investment entity
are, as follows:
• obtains funds from one or more investors for the purpose of providing those
investors with investment services;
• commits to its investors that its business purpose is to invest funds solely
for returns from capital appreciation, investment income or both; and
• measures and evaluates the performance of substantially all of its
investments on a fair value basis.
The Board has agreed with the recommendation of the Audit Committee that the
Company meets the definition of an investment entity. These conclusions will be
reassessed on an annual basis, if any of these criteria or characteristics
change.
As an investment trust, the Company's stated investment policy (see above),
details its objective of providing investment management services to investors
which includes investing in UK and global equities, fixed income securities and
certain derivative instruments for the purpose of returns in the form of
investment income and capital appreciation.
The Group reports regularly to its shareholders via monthly and quarterly
investor information, and to its management, via internal management reports,
on a fair value basis. All investments are reported at fair value to the extent
allowed by IFRSs in the Group's Half-Yearly and Annual Reports.
The Board has also concluded that the Company meets the additional
characteristics of an investment entity, in that it has more than one
investment; it has ownership interests in the form of equity and similar
interests; it has more than one investor and its investors are not related
parties.
Unquoted Investments
Unquoted investments are valued at management's best estimate of fair value in
accordance with IFRSs having regard to International Private Equity and Venture
Capital Valuation Guidelines as recommended by the British Venture Capital
Association. The principles which the Group applies are set out below. The
inputs into the valuation methodologies adopted include observable historical
data such as earnings or cash flow as well as more subjective data such as
earnings forecasts or discount rates. As a result of this, the determination of
fair value requires significant management judgement. At the year end, unquoted
investments (including Majedie Asset Management (MAM)) represent 37.4% of
consolidated shareholders' funds.
Share-based payments
The Group measures the cost of equity-settled transactions with employees by
reference to the fair value of the equity instruments at the date at which they
are granted. Estimating fair value for share-based payment transactions
requires determination of the most appropriate valuation model, which is
dependent on the terms and conditions of the grant. This estimate also requires
determination of the most appropriate inputs to the valuation model including
the expected life of the share option, volatility and dividend yield and making
assumptions about them. The assumptions and models used for estimating fair
value for share-based payment transactions are disclosed in note 24 and below.
1 Significant Accounting Policies
The principal accounting policies adopted are set out as follows:
The accounts comprise the audited results of the Company and its subsidiaries
for the year ended
30 September 2013, and are presented in pounds sterling rounded to the nearest
thousand, as this is the functional currency in which the Group and Company
transactions are undertaken.
Going Concern
The Directors have a reasonable expectation that the Company has sufficient
resources to continue in operational existence for the foreseeable future.
Accordingly the Financial Statements have been prepared on a going concern
basis.
Presentation of Statement of Comprehensive Income
In order to reflect better the activities of an investment trust company and in
accordance with guidance issued by the AIC, supplementary information which
analyses the Statement of Comprehensive Income between items of a revenue and
capital nature has been presented alongside the Statement of Comprehensive
Income. Up until 6 April 2012, in accordance with the Company's status as a UK
investment company under section 833 of the Companies Act 2006, net capital
returns were not able to 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.
Basis of Accounting
The accounts of the Group and the Company have been prepared in accordance with
IFRSs. They comprise standards and interpretations approved by the
International Accounting Standards Board and International Financial Reporting
Committee, interpretations approved by the International Accounting Standards
Committee that remain in effect, to the extent they have been adopted by the
European Union.
Where presentational guidance set out in the SORP regarding the Financial
Statements of Investment Trust Companies and Venture Capital Trusts issued by
the 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 Group's activities are continuing.
Basis of Consolidation
The Company is an investment entity and, as such, does not consolidate the
entities it controls which do not provide investment related services to the
Company. Instead, interests in such entities are classified as fair value
through profit or loss, and measured at fair value. This represents a change in
accounting policy in the current year, more details of which are provided
below.
The Consolidated Accounts incorporate the accounts of the Company and entities
controlled by the Company which themselves provide investment related services
(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 are included in the
Consolidated Statement of Comprehensive Income from the effective date of
acquisition or disposal as appropriate. When the Group ceases to have control
any retained interest in the entity is re-measured to its fair value at the
date when control is lost, with the change in carrying amount recognised in
profit or loss. The fair value is the initial carrying amount for the purposes
of subsequently accounting for the retained interest as an associate, joint
venture or financial asset. In addition, any amounts previously recognised in
other comprehensive income in respect of that entity are accounted for as if
the group had directly disposed of the related assets or liabilities. This may
mean that amounts previously recognised in other comprehensive income are
reclassified to profit or loss. All Group entities have the same year end date.
Non-controlling interests in the net assets of consolidated subsidiaries are
identified separately from the Group's equity therein. Non-controlling
interests consist of the amount of those interests at the date of the original
business combination and the non-controlling interest's share of changes in
equity since the date of combination. Losses applicable to the non-controlling
interest in excess of the non-controlling's interest in the subsidiary's equity
are allocated against the interest of the Group except to the extent that the
non-controlling interest 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.
Standards Issued But Not Yet Effective
At the date of authorisation of these financial statements, the following
relevant Standards and Interpretations have not been applied in these financial
statements since they were in issue but not yet effective:
International Accounting Standards (IAS/ Effective date
IFRSs)
IFRS 9 Financial Instruments: 1 January 2015
Classification & Measurement
IFRS Fair Value Measurement 1 January 2013
13
Management anticipates that all of the relevant pronouncements will be adopted
in the next accounting period. Information on new standards, amendments and
interpretations that are expected to be relevant to the Group's financial
statements is provided below. Certain other new standards and interpretations
have been issued but are not expected to have a material impact on the Group's
financial statements.
The Directors do not anticipate that the adoption of these standards and
interpretations will have a material impact on the financial statements in the
period of initial application.
Changes in accounting policies and disclosures
New and amended standards and interpretations
The Group has early adopted IFRS 10, `Consolidated Financial Statements', IFRS
11 `Joint Arrangements', IFRS 12, `Disclosure of Interests in Other Entities',
IAS 27 (revised 2011, `Separate Financial Statements' and IAS 28, `Investments
in Associates and Joint Ventures', and has applied the transition guidance of
IFRS 10, 11 and 12, and the Investment Entities amendments to IFRS 10, IFRS 12
and IAS 27 (the "Amendments") all of which are effective 1 January 2014.
IFRS10 Consolidated Financial Statements and Investment Entities Amendments
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial
Statements that addresses the accounting for consolidated financial statements.
It also addresses the issues raised in SIC12 Consolidation - Special Purpose
Entities. IFRS 10 establishes a single control model that applies to all
entities including special purpose entities.
In addition, IFRS 10 includes an exemption from consolidation for entities,
which meet the definition of an investment entity, and requires such entities
to recognise all investments at fair value through profit or loss.
Notwithstanding the exemption to consolidation explained above, the standard
requires an investment entity to consolidate a subsidiary that provides
services that relate to the investment entity's investment activities.
The Company meets the definition of an investment entity (see above), and,
therefore, all investments are recognised at fair value through profit or loss
other than those subsidiaries which provide investment related services to the
Company. This has changed the treatment for the Company's investment in JCEMAF
from the acquisition date of 16 January 2012. The adoption of IFRS 10 has
resulted in the Group treating its investment in JCEMAF as an investment in
subsidiary at fair value through profit or loss (see note 14). Previously this
investment was treated as a subsidiary classified as an `asset held for sale'
under IFRS 5.
The change does not affect the measurement of this investment as previously
under IFRS 5 JCEMAF was an asset valued at the lower of its carrying amount and
fair value less costs to sell (which as a listed entity, are negligible), and
because its carrying amount was to be recovered principally through a sale
transaction rather than through continuing use. By adopting IFRS 10, the
investment is now being measured at fair value through profit or loss.
Under the transitional provisions of IFRS 10 this change in accounting policy
is required to be accounted for retrospectively and therefore the relevant
comparative figures have been restated. However, as the adoption date is from
the acquisition date of JCEMAF of 16 January 2012, the resultant change only
affects balance sheet reclassification of the Group's assets and liabilities,
and a third balance sheet as at the beginning of the preceding period is not
considered necessary.
On initial application of a new standard, IAS 8.28(i) requires the disclosure
of the effect on each financial statement line-item and on return per share.
These disclosures are required for the current period and for each prior period
presented, to the extent practicable. IFRS 10 C2A partly relaxes this general
requirement. It states that an entity may only present the quantitative
information required under IAS 8.28(i) for the annual period immediately
preceding the first annual period for which IFRS 10 is applied. In view of this
relief, an entity is not required to disclose the impact
of transition to IFRS 10 for the current period or for an earlier period than
the immediately preceding period. There is no impact on reserves as at 1
October 2012.
The following shows the adjustments made to each financial statement line-item
for the comparative period:
Extracts 2012 Adjustment 2012
(Group) (Group
£000 restated)
£000
Assets
Non-current assets
Investments held at fair 108,217 14,144 122,361
value through profit or
loss
Current assets
Asset classified as held 14,199 (14,199)
for sale
Liabilities
Current liabilities
Liabilities directly
associated with the
assets classified
as held for sale (55) 55
Group net assets 112,234 112,234
The transition did not have any impact for the period on the Statement of
Comprehensive Income or the Group's basic and diluted return per ordinary
share.
IFRS12 Disclosures of Interests in Other Entities
IFRS 12 requires entities to disclose significant judgements and assumptions
made in determining whether the entity controls, jointly controls,
significantly influences or has some other interests in other entities.
Entities are also required to provide more disclosures around certain
`structured entities'. Adoption of the standard has impacted the Group's level
of disclosures in certain of the above noted areas, but has not impacted the
Group's position of results of operations. There are no structured entities.
IFRS 12 disclosures are provided in note 14.
IAS27 Revised Separate Financial Statements
As a consequence of the new IFRS 10 and IFRS 12, what remains in IAS 27 is
limited to accounting for subsidiaries, jointly controlled entities, and
associates in separate financial statements. This standard has not impacted the
financial statements of the Group.
IFRS11 Joint Arrangements and IAS28 Revised Investments in Associates and Joint Ventures
As a consequence of the new IFRS 11 and IFRS 12, IAS 28 describes the
application of the equity method to investments in joint ventures in addition
to associates. These standards have also been early adopted but have not
impacted the financial statements of the Group.
Foreign Currencies
The individual financial statements of each Group entity are presented in the
currency of the primary economic environment in which the entity operates, i.e.
its functional currency. For the purpose of the consolidated financial
statements, the results and financial position of each entity are expressed in
Pounds Sterling (Sterling) which is the functional currency of the Company, and
the presentational currency of the Group. Transactions in currencies other than
Sterling are recorded at the rate of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary items and non-monetary
assets and liabilities that are fair valued and are denominated in foreign
currencies are re-translated at the rates prevailing on the balance sheet date.
Gains and losses arising on retranslation are included in net profit or loss
for the year in respect of those investments and all other assets/ liabilities
which are classified and held at fair value through profit or loss. All foreign
exchange gains and losses, except those arising from the translation of foreign
subsidiaries, are recognised in the Consolidated Statement of Comprehensive
Income. On disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation is
recognised in profit or loss.
Segmental Reporting
A segment is a distinguishable component of the Group that is engaged in
business activities from which it may earn revenues and incur expenses
(including intra-group revenues and expenses), for which discrete financial
information is available and whose operating results are regularly reviewed by
the entity's chief decision maker who can make decisions on resource allocation
and performance assessment. An operating segment could engage in business
activities in order to earn potential future revenues.
Income
Dividend income from investments is taken to the revenue account on an
ex-dividend basis. Dividend expense relating to equity securities sold short is
recognised when the Shareholders' right to receive payment is established. 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.
Special dividends are taken to the revenue or capital account depending on
their nature.
Expenses
All administrative expenses are accounted for on an accruals basis. In respect
of the analysis between revenue and capital items presented within the
Statement of Comprehensive Income, all expenses have been presented as revenue
items except as follows:
• Expenses which are incidental to the acquisition or disposal of an investment
are treated as capital costs and separately identified and disclosed (see note
13).
• Expenses are split and presented partly as capital items where a connection
with the maintenance or enhancement of the value of the investments held can be
demonstrated, and accordingly the investment management expenses have been
allocated 75% to capital, in order to reflect the directors' expected long-term
view of the nature of the investment returns of the Company.
• The investment management performance fee, which is based on capital
out-performance, is charged wholly to capital.
Pension Costs
Payments made to the Group's defined contribution group personal pension plan
are charged as an expense as they fall due on an accruals basis.
Finance Costs
75% of finance costs arising from the debenture stocks are allocated to
capital; 25% of the finance costs are charged on the same basis to the revenue
account. Premiums payable on early repurchase of debenture stock are charged
100% to capital. In addition, other interest payable is allocated 75% to
capital and 25% to the revenue account. Finance costs are debited on an
accruals basis using the effective interest method.
Share Based Payments
The Group 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
The Group classifies its investments in debt and equity securities, and
derivatives, as financial assets or financial liabilities at fair value through
profit or loss.
When a purchase or sale is made under a contract, the terms of which require
delivery within the timeframe of the relevant market, the investments concerned
are recognised or derecognised on the trade date.
All investments are classified as fair value through profit or loss as defined
by IAS 39.
All investments are designated upon initial recognition as held at fair value
through profit or loss, and are measured at subsequent reporting dates at fair
value, which is either the bid price or the last traded price for listed
securities, depending on the convention of the exchange on which the investment
is quoted. Investments in unit trusts or open ended investment companies are
valued at the closing price, the bid price or the single price as appropriate,
released by the relevant investment manager.
Fair values for unquoted investments, or investments for which the market is
inactive, are established by using various valuation techniques in accordance
with the International Private Equity and Venture Capital Valuation Guidelines.
These may include recent arm's length market transactions, the current fair
value of another instrument which has substantially the same earnings
multiples, discounted cash flow analysis and option pricing models. Where there
is a valuation technique commonly used by market participants to price the
instrument and that technique has been demonstrated to provide reliable
estimates of prices obtained in actual market transactions, that technique is
utilised.
Changes in the fair value of investments and gains on the sale of investments
are recognised as they arise in the Statement of Comprehensive Income.
Investment in Subsidiaries
In its separate financial statements the Company recognises its investment in
subsidiaries at fair value.
Financial Instruments
Financial assets and financial liabilities are recognised on the Group's
Balance Sheet when the Group becomes a party to the contractual provisions of
the instrument. Financial assets and financial liabilities are initially
measured at fair value.
Trade Receivables
Trade receivables do not carry any interest and are stated at carrying value
which equates to their fair value as reduced by appropriate allowances for
estimated irrecoverable amounts.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash deposited with banks, cash balances at
brokers and short-term highly liquid investments with maturities of three
months or less from the date of acquisition. Prime broker cash balances are
held with Goldman Sachs International and Morgan Stanley & Co International.
Short and long cash positions held with these brokers can be netted off as per
the prime broker agreements.
Collateral Cash held at brokers
Collateral cash consists of margin cash held as collateral for open derivative
positions with the prime brokers, Goldman Sachs International and Morgan
Stanley & Co International. Short and long cash positions held with these
brokers can be netted off as per the prime broker agreements.
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.
Financial liabilities are either classified as financial liabilities at fair
value through profit or loss and are recognised initially at fair value or
'other financial liabilities' (including borrowings and trade and other
payables that are classified and subsequently measured at amortised cost).
Financial liabilities are subsequently measured at fair value and changes in
fair value are recognised in the Statement of Comprehensive Income.
Non current liabilities
The debentures are initially recognised at cost, being the fair value of the
consideration received less issue costs where applicable. After initial
recognition, all interest-bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest method, with the
interest expense recognised on an effective yield basis. The effective interest
method is a method of calculating the amortised cost of a financial liability
and of allocating interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future payments over
the expected life of the financial liabilities to the net carrying amount on
initial recognition.
Trade Payables
Trade payables are not interest bearing and are stated at carrying value which
equates to their fair value.
Reserves
Gains and losses on the sale of investments and investment holding gains and
losses are accounted for in the Statement of Comprehensive Income and
subsequently in the capital reserve. The translation reserve is used to record
exchange differences arising from the translation of the financial statements
of the Group's foreign subsidiary.
Share options reserve represents the expense of share based payments. The fair
value of share options is measured at grant date and spread over the vesting
period. The deemed expense is transferred to the share options reserve.
Share premium account represents the excess over nominal value of consideration
received for equity shares, net of expenses of the share issue.
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.
Dividends payable to shareholders
Dividends to shareholders are accounted for in the period in which they are
paid or approved in general meetings. Dividends payable to shareholders are
recognised in the Statement of Changes in Equity when they are paid, or have
been approved by shareholders in the case of a final dividend and become a
liability of the Company.
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 total shareholder return
whilst increasing dividends by more than the rate of inflation over the long
term.
The Company operates as an investment trust company and its portfolio contains
investments in companies listed in a number of countries. Geographical
information about the portfolio is provided above and exposure to different
currencies is disclosed in note 25 below.
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.
2 Business Segments continued
Group Group
2013 2012
Investment Investment
management management
Investing and Investing and
advisory advisory
activities services Eliminations Total activities services Eliminations Total
£000 £000 £000 £000 £000 £000 £000 £000
External income
from investment 31 31 18 18
management
services
Intra-group income
from investment
management 1,187 (1,187) 1,241 (1,241)
services
Other operating
and
investment income 5,232 (6) (19) 5,207 5,142 3 5,145
5,232 1,212 (1,206) 5,238 1,262 (1,241) 5,163
Share based (24) (24) (31) (31)
payments charge
Other (688) (1,162) 19 (1,831) (1,194) (1,716) (2,910)
administrative
costs
Intra-group
investment
management (819) (368) 1,187 (1,181) (60) 1,241
services
expenses
Other operating (134) (134) (78) (200) (278)
expenses
(1,531) (1,664) 1,206 (1,989) (2,484) (1,976) 1,241 (3,219)
Operating 3,701 (452) 3,249 2,658 (714) 1,944
profit/(loss)
Finance costs (2,807) (2,807) (2,820) (2,820)
Gains on fair 17,678 368 18,046 7,832 7,832
value
through profit and
loss
Foregin exchange (840) (840)
loss on disposal
of subsidiary
Profit/(loss) 18,572 (84) 18,488 6,830 (714) 6,116
before
tax
Total assets 157,026 3,231 160,257 144,094 3,274 147,368
Total liabilities (34,945) (146) (35,091) (34,911) (223) (35,134)
Intra-group 8,542 (542) (8,000) 8,426 (426) (8,000)
assets/
(liabilities)
Net assets 130,623 2,543 (8,000) 125,166 117,609 2,625 (8,000) 112,234
3 Income
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Income from
investments
Franked investment 4,114 4,113 4,114 4,113
incomeâ€
UK unfranked 63 135 63 135
investment income
Overseas dividends 943 835 943 867
Fixed interest and 17 17
convertible bonds
5,120 5,100 5,120 5,132
†Includes MAM ordinary dividend income of £2,260,000 (2012: £2,215,000).
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Other income
Deposit interest 22 32 19 21
Sundry income 96 31 93 13
118 63 112 34
Total income 5,238 5,163 5,232 5,166
Total income
comprises:
Dividends 5,120 5,083 5,120 5,115
Interest 22 49 19 38
Other income 96 31 93 13
5,238 5,163 5,232 5,166
Income from
investments
Listed UK 1,917 2,033 1,917 2,033
Listed overseas 943 852 943 884
Unlisted 2,260 2,215 2,260 2,215
5,120 5,100 5,120 5.132
4 Management Fees
Company Company
2013 2012
Revenue Capital Total l Revenue Capital Total l
return return return return
£000 £000 £000 £000 £000 £000
Investment 139 415 554 137 412 549
management
Administration 265 265 265 265
404 415 819 402 412 814
A summary of the terms of the Management Agreement for the Company with Javelin
Capital LLP is given in the Directors' Report above. At 30 September 2013, an
amount of £47,000 was outstanding for payment of investment management fees
when due (2012: £52,000) and outstanding administration fees of £22,000 (2012:
£22,000).
The Manager is also entitled to a performance fee from the Company in
accordance with the provisions of the Management Agreement, the calculation of
which is also described in the Directors' Report above. No performance fee is
due in respect of the year ended 30 September 2013 (2012: £nil).
5 Administrative Expenses
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Staff costs - 328 720 24 31
note 7
Other staff costs 206 304 206 233
and directors'
fees
Advisers' costs 411 569 261 302
Information costs 335 454 33 44
Establishment 122 121
costs
Operating lease 123 124
rentals -
premises
Depreciation on 142 166 35 45
tangible assets
Auditor's 75 73 57 55
remuneration
(see below)
Other expenses 247 688 97 75
1,989 3,219 713 785
A charge of £1,109,000 (2012: £1,442,000) to capital and an equivalent credit
to revenue has been made in the Group and a charge of £197,000 (2012: £237,000)
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 Auditor for the year, all of which were charged to
revenue, comprised:
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Audit 68 66 50 48
Services
- statutory
audit
Other audit 7 7 7 7
related
services
75 73 57 55
All fees incurred during the year were to Ernst & Young LLP
6 Directors' Emoluments
Company Company
2013 2012
£000 £000
Fees 185 209
Salary 45 135
Other benefits 5 4
Partnership 66
profit shares
301 348
The Report on Directors' Remuneration above, 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
2013 2012 2013 2012
£000 £000 £000 £000
Salaries and 253 591
other
payments
Social 29 69
security
costs
Pension 22 29
contributions
Share based
remuneration
-note 24 24 31 24 31
328 720 24 31
Group Group
2013 2012
number number
Average number of
employees:
Management and office 5 8
staff
8 Finance Costs
Company Company
2013 2012
Revenue Capital Revenue Capital
return return Total return return Total
£000 £000 £000 £000 £000 £000
Interest on 9.5% debenture 321 962 1,283 321 962 1,283
stock 2020
Interest on 7.25% debenture 375 1,125 1,500 375 1,125 1,500
stock 2025
Amortisation of expenses 6 18 24 5 17 22
associated with debenture
issue
Other interest payable 4 11 15
702 2,105 2,807 705 2,115 2,820
Company Company
2013 2012
Revenue Capital Revenue Capital
return return Total return return Total
£000 £000 £000 £000 £000 £000
Interest on 9.5% debenture 321 962 1,283 321 962 1,283
stock 2020
Interest on 7.25% debenture 375 1,125 1,500 375 1,125 1,500
stock 2025
Amortisation of expenses 6 18 24 5 17 22
associated with debenture
issue
702 2,105 2,807 701 2,104 2,805
Further details of the debenture stocks in issue are provided in note 17.
9 Taxation
Analysis of tax charge
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Tax on overseas 115 132 115 113
dividends
Reconciliation of tax charge:
The current taxation for the year is higher (2012: lower) than the standard
rate of corporation tax in the UK of 23%, (2012: 24%). The differences are
explained below:
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Net return before taxation 18,488 6,116 18,572 7,020
Taxation at UK Corporation Tax 4,345 1,529 4,364 1,755
rate of 23.5% (2012: 25%)
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Effects of:
- UK dividends (985) (1,054) (985) (1,054)
which are not
taxable
- foreign (213) (213) (213) (213)
dividends which
are not taxable
- gains on (4,241) (1,748) (4,155) (1,564)
investments which
are not taxable
- expenses not 22 28 22 33
deductible for
tax purposes
- excess expenses 1,072 1,458 967 1,043
for current year
- overseas 115 132 115 113
taxation which is
not recoverable
Actual current 115 132 115 113
tax charge
Group
After claiming relief against accrued income taxable on receipt, the Group has
unrelieved excess expenses of
£72,126,000 (2012: £67,564,000). 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
£64,796,000 (2012: £60,681,000). 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
The following table summarises the amounts recognised as distributions to
equity shareholders in the period:
Group and Group and
Company Company
2013 2012
£000 £000
2011 Final dividend of 6.30p paid 3,279
on 25 January 2012
2012 Interim dividend of 4.20p paid 2,186
on 27 June 2012
2012 Final dividend of 6.30p paid 3,279
on 23 January 2013
2013 Interim dividend of 4.20p paid 2,186
on 26 June 2013
5,465 5,465
2013 2012
£000 £000
Proposed final dividend for the
year ended
30 September 2013 of 6.30p (2012:
final
dividend of 6.30p) per ordinary 3,279 3,279
share
3,279 3,279
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.
2013 2012
£000 £000
Interim dividend for the year ended 2,186 2,186
30 September 2013 of 4.20p (2012:
4.20p) per ordinary share
Proposed final dividend for the year 3,279 3,279
ended 30 September 2013 of 6.30p
(2012: 6.30p) per ordinary share
5,465 5,465
11 Return per Ordinary Share
Basic return per ordinary share is based on 52,044,613 (2012: 52,044,613)
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
2013 and 2012 since the share options referred to in note 19 would, if
exercised, be satisfied by the shares already held by the Employee Incentive
Trust (EIT).
Group Group
2013 2012
£000 £000
Basic and diluted revenue returns are
based on net
revenue after taxation of: 3,541 2,552
Basic and diluted capital returns are
based on net
capital return of: 14,832 3,445
Basic and diluted total returns are 18,373 5,997
based on return of:
Company Company
2013 2012
£000 £000
Basic and diluted revenue returns are
based on net
revenue after taxation of: 3,495 3,402
Basic and diluted capital returns are
based on net
capital return of: 14,962 3,505
Basic and diluted total returns are 18,457 6,907
based on return of:
12 Property and Equipment
Group Group Group
Leasehold Office
Improvements Equipment Total
£000 £000 £000
Cost:
At 1 October 171 583 754
2012
Additions
Disposals
At 30 September 171 583 754
2013
Depreciation:
At 1 October 57 450 507
2012
Charge for year 18 124 142
Disposals
At 30 September 75 574 649
2013
Net book
value:
At 30 96 9 105
September
2013
At 30 114 133 247
September
2012
Company Company Company
Leasehold Office Total
Improvements Equipment
£000 £000 £000
Cost:
At 1 October 171 168 339
2012
Additions
Disposals
At 30 171 168 339
September
2013
Depreciation:
At 1 October 57 149 206
2012
Charge for 18 17 35
year
Disposals
At 30 75 166 241
September
2013
Net book
value:
At 30 96 2 98
September
2013
At 30 114 19 133
September
2012
13 Investments at Fair Value Through Profit or Loss
Group Group*
2013 2012
Listed Unlisted Total Listed Unlisted Total
£000 £000 £000 £000 £000 £000
Opening cost at 75,563 10,331 85,894 69,262 12,862 82,124
beginning of year
Gains/(losses) at 4,863 31,604 36,467 69,262 12,862 27,387
beginning of year
Opening fair value at 80,426 41,935 122,361 67,067 42,444 109,511
beginning of
year
Purchases at cost 31,987 31,987 125,270 125,270
Sales - proceeds (14,189) (5,898) (20,087) (120,422) (574) (120,996)
Gains/(losses) on 994 121 1,115 1,490 (1,957) (467)
sales
Increase in 5,878 10,685 16,563 7,058 2,022 9,080
investment
holding gains
Transfer on (21) 21
de-listing of shares
Foreign exchange (37) (37)
gains on
retranslation of
Foreign investment
Closing fair value at 105,075 46,864 151,939 80,426 41,935 122,361
end of year
Closing cost at end 94,334 4,575 98,909 75,563 10,331 85,894
of year
Gains at end of year 10,741 42,289 53,030 4,863 31,604 36,467
Closing fair value at 105,075 46,864 151,939 80,426 41,935 122,361
end of year
* Comparative figures have been restated for the review of the treatment of the
investment in JCEMAF as disclosed in note 1 above.
Company
2013
Related
And
Subsidiary
Listed Unlisted Companies Total
Company £000 £000 £000 £000
Opening cost at 75,562 10,283 9,010 94,855
beginning of year
Gains/(losses) at 4,864 31,652 (818) 35,698
beginning of year
Opening fair value at 80,426 41,935 8,192 130,553
beginning of year
Purchases at cost 31,987 31,987
Sales - proceeds (14,189) (5,898) (20,087)
Gains on sales 994 128 1,122
Increase in investment 5,878 10,678 1 16,557
holding gains
Transfer on de-listing (21) 21
of shares
Closing fair value at 105,075 46,864 8,193 160,132
end of year
Closing cost at end of 94,333 4,534 9,010 107,877
year
Gains/(losses) at end 10,742 42,330 (817) 52,255
of year
Closing fair value at 105,075 46,864 8,193 160,132
end of year
Company
2012
Related
and
subsidiary
Listed Unlisted Companies Total
£000 £000 £000 £000
Opening cost at 88,830 12,814 8,010 107,654
beginning of year
(Losses)/gains at (2,098) 29,630 (839) 26,693
beginning of year
Opening fair value at 84,732 42,444 7,171 134,347
beginning of year
Purchases at cost 32,901 1,000 33,901
Sales - proceeds (43,196) (574) (43,770)
Losses on sales (973) (1,957) (2,930)
Increase in investment (6,962) 2,022 21 9,005
holding gains
Closing fair value at 80,426 41,935 8,192 130,553
end of year
Closing cost at end of 75,562 10,283 9,010 94,855
year
Gains/(losses) at end of 4,864 31,652 (818) 35,698
year
Closing fair value at 80, 426 41,935 8,192 130,553
end of year
All operating subsidiaries are held at fair value.
Unlisted investments include an amount of £864,000 in 5 various companies
(2012: £2,935,000 in 18 companies) and £46,000,000 (2012: £39,000,000) for our
investment in MAM as detailed below. The valuation of investments above
includes 4 unlisted investments of over £100,000 (including MAM).
During the year the Company incurred transaction costs amounting to £105,000
(2012: £113,000) of which
£78,000 (2012: £59,000) related to the purchases of investments and £27,000
(2012: £54,000) related to the sales of investments. These amounts are included
in gains on investments at fair value through profit or loss, as disclosed in
the Consolidated and Company Statement of Comprehensive Income.
The composition of the investment return is analysed below:
Group Group Company Company
2013 2012 2013 2012
as
restated*
£000 £000 £000 £000
Net gains/(losses) on 1,115 (467) 1,122 (2,930)
sales of equity
investments
Increase in holding 16,563 9,080 16,557 9,005
gains
on equity investments
Consolidation adjustment 368 130
on Javelin Capital fee
income
Proceeds on sale of (911) 183
derivative contracts
Net return on 18,046 7,832 17,679 6,258
investments
* Comparative figures have been restated for the review of the treatment of the
investment in JCEMAF as disclosed in note 1 above
Fair value hierarchy disclosures
The Group is required to classify fair value measurements using a fair value
hierarchy that reflects the significance of the inputs used in making the
measurements. The fair value hierarchy consists of the following three levels:
• Level 1 - Quoted prices (unadjusted) in active markets for identical assets
or liabilities.
An active market is a market in which transactions for the asset or liability
occur with sufficient frequency and volume on an ongoing basis such that quoted
prices reflect prices at which an orderly transaction would take place between
market participants at the measurement date. Quoted prices provided by external
pricing services, brokers and vendors are included in Level 1, if they reflect
actual and regularly occurring market transactions on an 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 (ie 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 an asset or liability is categorised is determined on the basis of the
lowest level input that is significant to the fair value measurement of the
asset. For this purpose, the significance of
an input is assessed against the fair value measurement of an asset or
liability in its entirety. If a fair value measurement uses observable inputs
that require significant adjustment based on unobservable inputs, that
measurement is a Level 3 measurement. Assessing the significance of a
particular input to the fair value measurement requires judgement, considering
factors specific to the asset or liability.
The determination of what constitutes `observable' requires significant
judgement by the Group. The Group considers observable data to be investments
actively traded in organised financial markets, fair value is generally
determined by reference to Stock Exchange quoted market bid prices at the close
of business on the balance sheet date, without adjustment for transaction costs
necessary to realise the asset.
The table below sets out fair value measurements of financial assets in
accordance with the IFRS fair value hierarchy system:
Group Group as restated*
2013 2012
Level 1 Level Level Total Level Level Level Total
2 3 1 2 3
Financial assets £000 £000 £000 £000 £000 £000 £000 £000
Financial assets
designated at fair
value through profit
or loss
Equities and managed
funds
Listed equity 104,893 104,893 80,233 80,233
securities
Unlisted equity 46,864 46,864 41,935 41,935
securities
Listed exchange 182 182 193 193
traded funds
104,893 182 46,864 151,939 80,233 193 41,935 122,361
* Comparative figures have been restated for the review of the treatment of the
investment in JCEMAF as disclosed in note 1 above
Company Company
2013 2012
Level 1 Level Level Total Level Level Level Total
2 3 1 2 3
Financial assets £000 £000 £000 £000 £000 £000 £000 £000
Financial assets
designated at fair
value through profit
or loss
Equities and managed
funds
Listed equity 104,893 104,893 80,233 80,233
securities
Unlisted equity 55,057 55,057 50,127 50,127
securities
Listed exchange 182 182 193 193
traded funds
104,893 182 55,057 160,132 80,233 193 50,127 130,553
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. During the year there were transfers of
£193,000 from Level 2 to Level 1 for Listed exchange traded funds.
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 year
ended 30 September 2013:
Group
2013
Equity Convertible Preference
Total investments bonds shares
£000 £000 £000 £000
Opening balance 41,935 41,935
Transfers from 21 21
Level 1
Sales - proceeds (5,898) (5,898)
Total gains for 10,806 10,806
the
year included in
the Statement of
Comprehensive
Income
46,864 46,864
Group
2012
Opening balance 42,444 42,182 258 4
Transfers from
Level 1
Sales - proceeds (574) (324) (243) (7)
Total gains for 65 77 (15) 3
the
year included in
the
Statement of
Comprehensive
Income
41,935 41,935
Company
2013
Equity Convertible Preference
Total investments bonds shares
£000 £000 £000 £000
Opening balance 50,127 50,127
Transfers from 21 21
Level 1
Sales - proceeds (5,898) (5,898)
Total gains for 10,807 10,807
the
year included in
the Statement of
Comprehensive
Income
55,057 55,057
Company
2013
Equity Convertible Preference
Total investments bonds shares
£000 £000 £000 £000
Opening balance 1,000 1,000
Purchases
Transfers from
Level 1
Sales - proceeds (574) (324) (243) (7)
Total gains/ 86 98 (15) 3
(losses) for the
year included in
the Statement of
Comprehensive
Income
50,127 50,127
Substantial Share Interests
The Group 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 and JCEMAF which are disclosed separately
below) in the context of these accounts are shown below:
Fair
Value % of
£000 Class Held
AOI Medical 152 4.76
The Group does not exercise significant influence over the operating and
financial policies of the above companies which are therefore not considered to
be associated companies.
Javelin Capital Emerging Markets Alpha Fund (JCEMAF)
The Company invested £15m and £18.15m of seed capital into the JCEMAF on 16
January and 2 November 2012 respectively and as at 30 September 2013 had an
89.5% controlling interest. This investment is shown in the Company and Group
accounts as an investment held at fair value through profit or loss rather than
being consolidated which is in accordance with the Investment Entities
amendment to IFRS 10, which the Group has early adopted (see note 1 above for
further information).
Majedie Asset Management (MAM)
MAM is a UK based asset management firm, which provides investment management
and advisory services primarily 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:
2013 2012
£000 £000
Deemed cost of investment 1,038 1,197
Holding gains 44,962 37,803
Fair value at 30 September 46,000 39,000
The carrying value of MAM in the 30 September 2013 Consolidated Financial
Statements is its fair value as assessed at 30 September 2013. Details of the
determination of the fair value of MAM are included in the Report of the Audit
Committee in the Annual Report.
Due to the nature and operation of the Company's Shareholder agreement, it is
considered by the Board that the Company does not exercise significant
influence over the operating and financial policies of MAM and as such it is
not considered to be an associate, and their results are not consolidated in
the Group's results.
In accordance with the revised shareholders' agreement, the founding
shareholders (including the Company) will sell a certain number of shares to
the MAM Employee Benefit Trust (EBT), usually annually, and at the relevant
prescribed price (as calculated in accordance with the revised shareholders'
agreement).
During the year the Company sold 1,975 shares and 15,000 shares on the 20
December 2012 and 14 June 2013 respectively for a total consideration of £
5,899,000 resulting in a realised gain of £5,739,000.
After these transactions the Company holds 110,575 ordinary 0.1p shares which
represents a 26.7% shareholding in MAM.
14 Investment in Subsidiaries
a) Subsidiary undertakings at 30 September 2013
Company
Country of Profit
after
Registration Number and Capital tax for
the
Incorporation class of Group Reserves year
shares at ended
Company and and Operation held by Holding 30.09.13 30.09.13
business group
£000 £000
Majedie UK 1,000,000 100% £162
Portfolio
Management
Limited
- Majedie share Ordinary
plan shares
manager,
authorised
and regulated by
the FSA
Majedie Unit UK 10,000
Trust
- Unauthorised Units 100% (£3,521) (£63)
unit trust
to receive
Javelin Capital UK 75% 75% £2,543 (£84)
LLP
- Asset interest
Management,
authorised and
regulated by the
FCA
Javelin Capital UK 100 75%
Services
Limited
- Administration Ordinary
Services shares
Javelin Capital Ireland 2 75%
Fund
Management
Limited
- Not trading Ordinary
shares
Javelin Capital Ireland 2 100% £21
Strategies Plc
- in liquidation Subscriber
shares
Serviced Lux 140,000 89.5% $56,665 $565
Platformâ€
(subfund: Class D
Javelin Capital
Emerging
Markets Alpha GBP shares
Fund)
- Undertakings 5,000
for Collective
Investment in Class D
Transferable
Securities
(UCITS), USD shares
supervised by
the
Commission de 10,407
Surveillance du
Secteur Class E
Financier (CSSF)
USD Shares
†The Javelin Capital Emerging Markets Alpha Fund is a sub-fund of the Services
Platform SICAV. The SICAV has a financial year end of December. The figures
stated above are as at 31 December 2012 (its year end).
Javelin Capital Services Limited (JCS) and Javelin Capital Fund Management
Limited (JCFM) are all wholly owned subsidiaries of Javelin Capital LLP.
b) Non-Controlling Interest
In respect of the consolidation of the Javelin Capital entities into the Group
accounts, in accordance with the Company's accounting policies and the income
and loss recognition provisions of the Limited Liability Partnership Agreement
for Javelin Capital LLP there is no Non-controlling Interest to be recognised
in the Consolidated Statement of Comprehensive Income or Balance Sheet.
Following the closure of the QIF on 21 September 2012, the Non-controlling
interest previously reflected in the Consolidated Statement of Comprehensive
Income and Balance Sheet, and including its proportion of results for the
period of the QIF up to the date of closure, representing the other investors
in the QIF was derecognised in accordance with IFRS.
15 Trade and Other Receivables
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Sales for future 363 363
settlement
Prepayments 2,044 1,111 30 27
Dividends receivable 240 254 240 254
Accrued income 3 3
Taxation recoverable 43 50 43 50
Amounts due from 637 521
subsidiary
undertakings
2,690 1,418 1,313 855
The Directors consider that the carrying amounts of trade and other receivables
approximates to their fair value.
16 Cash and Cash Equivalents
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Deposits at banks 4,641 22,129 3,466 20,431
Collateral cash held with 91 91
brokers
Other balances 791 1,067 525 491
5,523 23,287 2,991 20,922
Cash used as collateral is restricted.
17 Trade and Other Payables
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Purchases for future 125 125
settlement
Accrued expenses 313 313 178 249
Other creditors 806 943 729 752
1,244 1,256 1,032 1,001
The Directors consider that the carrying amounts of trade and other receivables
approximates to their fair value.
Amounts falling due after more than one year:
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
£13.5m (2012: £13.5m)
9.5%
debenture stock 2020 13,410 13,401 13,401 13,401
£20.7m (2012: £20.7m)
7.25%
debenture stock 2025 20,437 20,422 20,437 20,422
33,847 33,823 33,847 33,823
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 amortised 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
Company Company
2013 2012
£000 £000
Allotted and fully paid at 30
September:
52,528,000 (2012: 52,528,000) 5,253 5,253
ordinary shares of 10p each
There are 483,387 (2012: 483,387) ordinary shares of 10p each held by the
Employee Incentive Trust. See note 19.
Ordinary shares carry one vote each on a poll. The Companies Act 2006 abolished
the requirement for the
Company to have authorised share capital. The Company adopted new Articles of
Association on 20 January 2010
which, inter alia, reflected the new legislation. Accordingly the Company has
no authorised share capital. The Directors will still be limited as 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.
19 Own Shares
The total number of options outstanding at the date of this report is 214,628
under the Long Term Incentive Plan ("LTIP") and the total shareholding of the
Employee Incentive Trust is 483,387 ordinary shares. The shares will be held by
the Trust until the relevant options are exercised or until they lapse.
Consideration paid on acquisition of these shares is presented on the Balance
Sheet as a deduction from shareholders' funds, in accordance with the policy
detailed in note 1.
Group and
Company
Own Shares
Number of Reserve
Shares £000
As at 1 October 2012 483,387 (1,628)
Options exercised
As at 30 September 483,387 (1,628)
2013
20 Net Asset Value
The consolidated net asset value per share has been calculated based on equity
shareholders' funds of
£125,166,000 (2012: £112,234,000) and on 52,044,613 (2012: 52,044,613) ordinary
shares, being the shares in issue at the year end having deducted the number of
shares held by the Employee Incentive Trust.
21 Analysis of Changes in Net Debt
At 30 Non At 30
September Cash Cash September
2012 Flows Items 2013
Group £000 £000 £000 £000
Cash at bank and 23,287 (17,764) 5,523
with brokers
Debt due after one (33,923) (24) (33,847)
year
(10,536) (17,764) (24) (28,324)
At 30 Non At 30
September Cash Cash September
2012 Flows Items 2013
Company £000 £000 £000 £000
Cash at bank 20,922 (16,931) 3,991
Debt due after one (33,823) (24) (33,847)
year
(12,901) (16,931) (24) (29,856)
22 Operating Lease Commitments
The Group has a 10 year non-cancellable operating lease (with a rent review and
break clause in 5 years) in respect of premises, which included a rent free
period. During the year the Group extended the lease for a further period of 2
years which included an additional rent free period. The rent free elements
have been apportioned over the lease up to the date of the relevant break
clause. The rent due under the lease is subject to a review in December 2013.
The review is upward only in nature and includes a new minimum value. The Group
has a current annual commitment at 30 September 2013 under the lease of £
145,000 (2012: £145,000). This operating lease commitment, as adjusted for the
rent review minimum uplift in December 2013, is disclosed in the table below:
Expiry Date Group Group
2013 2012
£000 £000
Within one year 159 145
Between one and two years 163 34
Between two and three years 41
363 179
23 Financial Commitments
At 30 September 2013 the Group had no financial commitments which had not been
accrued for (2012: none).
24 Share-based Payments
The Group currently operates one share-based payment scheme being the 2006 LTIP
which in turn has two sections relating to Total Shareholder Return ("TSR")
based Awards and Matching Awards. 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.
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. In accordance with the LTIP rules existing awards
increase by any dividends declared by the Company until they vest.
24 Share-based Payments continued
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. In accordance with
the LTIP rules existing awards increase by any dividends declared by the
Company until they vest.
Group
2013
TSR - based Matching
Awards Awards
Weighted Weighted
No. Average No. Average
of Exercise of Exercise
Options Price (p) Options Price (p)
Outstanding at 1
October 2012
During the year: 190,453 0.0 11,148 0.0
Awarded
Forfeited
Exercised
Expired
Increase in awards 12,306 0.0 721 0.0
due to
dividends paid
Outstanding at 30 202,759 0.0 11,869 0.0
September 2013
Exercisable at 30 36,208 0.0 11,869 0.0
September 2013
Group
2012
TSR - based Matching
Awards Awards
Weighted Weighted
No. Average No. Average
of Exercise of Exercise
Options Price (p) Options Price (p)
Outstanding at 1
October 2011
During the year: 178,319 0.0 10,437 0.0
Awarded
Forfeited
Exercised
Expired
Increase in awards 12,134 0.0 711 0.0
due to
dividends paid
Outstanding at 30 190,453 0.0 11,148 0.0
September 2012
Exercisable at 30 0.0 11,148 0.0
September 2012
The awards outstanding at 30 September 2013 had a weighted average remaining
contractual life of 0.6 years and nil in respect of the TSR-based Awards and
Matching Awards respectively (2012: 1.4 years and nil years respectively).
Awards and options are usually forfeited if the employee leaves employment
before vesting.
For the year ended 30 September 2013, the Company recognised a total share
options expense of £24,000 (2012: £31,000) relating to share-based payment
transactions.
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 risk management processes of the Company are
aligned with those of the Group as a whole and it is at the Group level that
the majority of the risk management procedures are performed. Where relevant
and materially different to the Group position, Company specific risk exposures
are explained alongside those of the Group. The following risk and sensitivity
analysis included in this note are based on the ongoing operations of the Group
and Company
Management of market risk
Management of market risk is fundamental to the Group's investment objective
and the investment portfolio is continually monitored to ensure an appropriate
balance of risk and reward.
Exposure to any one entity is monitored by the Board and the Investment
Manager. The Board have complied with the investment policy requirement not to
invest more than 15% of the total value of its gross assets, save that the
Company can invest up to 25% of its gross assets in any single fund managed by
Javelin Capital.
From time to time, the Group may seek to reduce or increase its exposure to
stock markets and currencies by taking positions in currency forward contracts,
index futures and options relating to one or more stock markets. These
instruments are used for the purpose of hedging some or all of the existing
exposure within the Group's investment portfolio to those currencies or
particular markets or to enable increased exposure when deemed appropriate and
with the specific approval of the Board.
The Company's financial instruments comprise its investment portfolio - see
note 13 - cash balances, debtors and creditors that arise directly from its
operations such as sales and purchases awaiting settlement and accrued income,
and the debenture loans used to finance its operations. The Company, (as
distinct from the Group), is unlikely to use derivatives for hedging purposes
and then only in exceptional circumstances with the specific prior approval of
the Board. No hedging was used during the year.
In pursuing its investment objective the Company is exposed to various risks
which could cause short term variation in its net assets and which could result
in both or either a reduction in its net assets or a reduction in the profits
available for distribution by way of dividend. The main risk exposures for the
Company from its financial instruments are market risk (including currency
risk, interest rate risk and other price risk), liquidity risk 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 and Group's exposure to these risks. The risk management policies
identified in this note have not changed materially from the previous
accounting period in respect of the Company:
• a full range of financial instruments in both developed and emerging markets
including equities, equity-related securities, futures, options, warrants and
other access products;
• other financial instruments may be used, including, but not limited to, index
futures, structured products, swaps and contracts for difference ("CFDs");
• commodity futures and commodity-related exchange traded funds ("ETFs");
• spot and forward foreign currency exchange contracts, options and related
instruments; and
• cash on deposit or cash equivalents may be held; these deposits may, or may
not, be held through the Prime Brokers and its Custodian.
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
and Company are denominated in currencies other than sterling, with the effect
that the balance sheet and total return can be materially affected by currency
movements. The Group and Company's exposure to foreign currencies through its
investments in overseas securities as at 30 September 2013 was £26,424,000 and
£26,291,000 respectively (2012: £25,787,000 and £25,653,000 respectively).
In respect of the Company, the Investment Manager monitors the Company's
exposure to foreign currencies and the Board receives reports on a regular
basis. In making investment decisions the Investment Manager is mindful of the
Company's Core Portfolio 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 Company does not normally hedge against foreign
currency movements.
The Group is able, although unlikely, to enter into forward currency contracts
as a means of limiting or increasing its exposure to particular currencies.
Such contracts can be used for the purpose of hedging the existing currency
exposure of elements of the Group's portfolio (as a means of reducing risk) or
to enable increased exposure when this is deemed appropriate.
The currency risk of the Group and Company's non-sterling monetary financial
assets and liabilities at the Balance
Sheet date was:
Group 2013 Group as restated* 2012
Net Total Net Total
Overseas monetary currency Overseas monetary currency
investments assets exposure investments assets exposure
Currency £000 £000 £000 £000 £000 £000
exposure
US Dollar 16,068 91 16,159 16,962 91 17,053
Euro 2,941 2,941 2,729 2,729
Yen 2,241 2,241 1,540 1,540
Other 5,083 5,083 4,465 4,465
non-sterling
26,333 91 26,424 25,696 91 25,787
Company 2013 Company 2012
Net Total Net Total
Overseas monetary currency Overseas monetary currency
investments assets exposure investments assets exposure
Currency £000 £000 £000 £000 £000 £000
exposure
US Dollar 16,026 16,026 16,920 16,920
Euro 2,941 2,941 2,729 2,729
Yen 2,241 2,241 1,540 1,540
Other 5,083 5,083 4,464 4,464
non-sterling
26,291 26,291 25,653 25,653
Sensitivity analysis
If sterling had strengthened by 5% relative to all currencies on the reporting
date, with all the other variables held constant, the income and the net assets
attributable to equity holders of the parent would have decreased by the
amounts shown below. The analysis is performed on the same basis for 2012. The
revenue impact is an estimated figure for 12 months based on the relevant
foreign currency denominated balances at the reporting date.
Group Group Company Company
Income Statement 2013 2012 2013 2012
as
restated*
£000 £000 £000 £000
Revenue return
Capital return (1,321) (1,289) (1,315) (1,283)
Net assets (1,321) (1,289) (1,315) (1,283)
* Comparative figures have been restated for the review of the treatment of the
investment in JCEMAF as disclosed in note 1 above.
A 5% weakening of sterling against the above currencies would have resulted in
an equal and opposite effect on the above amounts, on the basis that all other
variables remain constant. The Company's exposure has been calculated as at the
year end and may not be representative of the year as a whole.
Interest Rate Risk
The Company's direct interest rate risk exposure affects the interest received
on cash balances and the fair value of its 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 Company are equity shares, which
pay dividends, not interest. The Company may however from time to time hold
small investments which pay a fixed rate of interest.
Derivative contracts are not used to hedge against the exposure to interest
rate risk.
The Board sets limits for cash balances and receives regular reports on the
cash balances of the Company. The Company's fixed rate debentures introduce an
element of gearing to the Company 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
Company's investment portfolio and the respective limits.
The interest rate risk profile of the financial assets and liabilities at the
Balance Sheet date was:
Group
Group as restated Company Company
*
2013 2012 2013 2012
£000 £000 £000 £000
Floating rate financial
assets
UK sterling 5,432 23,196 11,991 28,922
US dollars 91 91
Financial assets not 154,734 124,026 153,543 123,541
carrying interest
160,25 147,313 165,534 152,463
Fixed rate financial (33,847) (33,823) (33,847) (33,823)
liabilities UK sterling
Financial liabilities not (1,244) (1,256) (1,032) (1,001)
carrying interest
(35,091) (35,079) (34,879) (34,824)
*Comparative figures have been restated for the review of the treatment of the
investment in JCEMAF as disclosed in note 1 above.
Floating rate financial assets usually comprise collateral cash and also cash
on deposit with banks and prime brokers 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 £8.0m (2012: £8.0m) investment in Javelin
Capital LLP which receives a commercial rate of interest from 31 August 2010
until full repayment occurs in accordance with the Revised LLP Agreement (via
an additional profit share of residual profits from Javelin Capital LLP). Fixed
rate financial assets comprise convertible bonds or loan notes. The fixed rate
financial liabilities comprise the Group and Company's debentures totalling £
34.2m nominal. They pay a weighted average rate of interest of 8.1% per annum
and mature in 2020 (£13.5m) and 2025 (£20.7m).
Sensitivity analysis
Based on closing cash balances held on deposits with banks, a 0.5% decrease
(2012: 0.5%) in base interest rates would have the following effect on net
assets and profit before tax of the Group and Company:
Group Group Company Company
Income Statement 2013 2012 2013 2012
£000 £000 £000 £000
Revenue return (16) (106) (14) (95)
Net assets (16) (106) (14) (95)
A 0.5% increase (2012: 0.5%) in interest rates would have resulted in a
proportionate equal and opposite effect on the above amounts on the basis that
all other variables remain constant. The above analysis is based on closing
balances only and is not representative of the year as a whole.
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 above. The Company 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. The Board
receives reports on the investment portfolio, performance and volatility on a
regular basis in order to ensure that the investment portfolio is in accordance
with the investment policy.
The Investment Manager's policy is to manage risk through a combination of
monitoring the exposure to individual securities, industry and geographic
sectors, whilst maintaining a constant awareness in real time of the portfolio
exposures in accordance with the investment strategy. Derivative positions are
marked to market and exposure to counterparties is also monitored on a daily
basis by the investment manager; the Board review it on a quarterly basis.
As mentioned earlier, the Investment Manager may use derivative instruments in
order to `hedge' the market risk inherent in the portfolio. The Investment
Manager reviews the risk associated with individual investments and where they
believe it appropriate may use derivatives to mitigate the risk of adverse
market or currency movements. The Investment Manager discusses the hedging
strategy with the Board at its quarterly meetings.
Concentration of exposure to other price risks
An analysis of the Group's investment portfolio is shown in the Annual Report.
This shows that the largest amount of equity investments by value is in UK
companies (31.4%), with 35.2% of total investments listed or exposed to
overseas countries (including listed the JCEMAF). It also shows the
concentration of investments in various sectors.
The following table details the exposure to market price risk on the quoted and
unquoted equity investments:
Group
as
Group restated* Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Non-current Asset
Investments at
Fair Value through
Profit and Loss
Listed equity 105,075 80,426 105,075 80,426
investments
Unlisted 46,864 41,935 46,864 41,935
Related and 8,193 8,192
Subsidiary
Companies
151,939 122,361 160,132 130,553
* Comparative figures have been restated for the review of the treatment of the
investment in JCEMAF as disclosed in note 1 above.
Sensitivity analysis
If share prices on listed equity investments had decreased by 10% at the
reporting date with all other variables remaining constant, the profit before
tax and the net assets attributable to the equity holders of the Group would
have decreased by the amounts shown below.
Group
as
Group restated* Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Income Statement
Capital return (10,508) (8,043) (10,508) (8,043)
Net assets (10,508) (8,043) (10,508) (8,043)
* Comparative figures have been restated for the review of the treatment of the
investment in JCEMAF as disclosed in note 1 on above.
A 10% increase (2012: 10%) in share prices would have resulted in a
proportionate equal and opposite effect on the above amounts on the basis that
all other variables remain constant. The analyses has been calculated on the
investments held at the year end and this may not be representative of the year
as a whole.
Credit Risk
Credit risk is the risk of other parties failing to discharge an obligation
causing the 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 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 the Investment Manager and reported to the
Audit Committee.
• 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 Manager. The Board receives regular
reports on the composition of the investment portfolio.
• A credit exposure could arise in respect of derivatives contracts entered
into by the Group if the counterparty were unable to fulfill its contractual
obligations.
Credit Risk Exposure
At the reporting date, the financial assets exposed to credit risk amounted to
the following:
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Cash on deposit 5,432 22,129 3,991 20,922
and at banks
Collateral cash 91 91
held with brokers
Cash held with 1,067
brokers
Sales for future 363 363
settlement
Interest, 2,327 1,418 950 848
dividends and
other receivables
8,213 24,705 5,304 21,770
Minimum exposure 7,758 24,705 4,953 3,118
during the year
Maximum exposure 10,098 44,524 7,263 21,777
during the year
All amounts included in the analysis above are based on their carrying values.
None of the financial assets were past due or impaired at the reporting date
(2012: none).
Liquidity Risk
Liquidity risk is the risk that the Group or Company will encounter
difficulties meeting its obligations as they fall due.
The Company may periodically invest in derivatives contracts and debt
securities that are traded over the counter. The Company is exposed to the
daily settlement of margin calls on derivatives.
Liquidity risk is monitored although it is recognised that the majority of the
Group'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 does have
exposure to concentration risk due to its two investments in MAM and Javelin
Capital, primarily in relation to MAM at 29.2% (2012: 26.8%) of the Company's
investment portfolio. The Company closely monitors these investments and
receives regular financial reports and believes that the current concentration
risk is in-line with the Company's objective of diversifying its investment
portfolio into the investment groups as per its investment policy.
The Group maintains an appropriate level of cash balances in order to finance
its operations and the Investment Manager regularly monitors the Group's cash
balances to ensure all known or forecasted liabilities can be met. The Board
receives regular reports on the level of the Group's cash balances. The Group
does not have any overdraft or other borrowing facilities to provide liquidity.
Collateral
Collateral is posted by the Group in relation to derivative transactions. These
are transacted under auspices of the International Swaps and Derivatives
Association and may require collateral to be posted from time to time. The
Group does not hold collateral from other counterparties.
At the year end there were no financial assets pledged as collateral (2012:
Nil).
A maturity analysis of financial liabilities showing the remaining contractual
maturities is detailed below:
Group
2013
Undiscounted cash flows Due Due Due Due 3 Total
within between between years £000
1 year 1 and 2 2 and 3 and
£000 years years beyond
£000 £000 £000
9.5% debenture stock 2020 13,500 13,500
7.25% debenture stock 2025 20,700 20,700
Interest on financial 2,783 2,783 2,783 17,246 25,595
liabilities
Trade payables and other 1,244 1,244
liabilities
4,027 2,783 2,783 51,446 61,039
Group
2012
Undiscounted cash flows Due Due Due Due 3 Total
within between between years £000
1 year 1 and 2 2 and 3 and
£000 years years beyond
£000 £000 £000
9.5% debenture stock 2020 13,500 13,500
7.25% debenture stock 20,700 20,700
2025
Interest on financial 2,783 2,783 2,783 20,029 28,378
liabilities
Trade payables and other 1,256 1,256
liabilities
4,039 2,783 2,783 54,229 63,834
Company
2013
Undiscounted cash flows Due Due Due Due 3 Total
within between between years £000
1 year 1 and 2 2 and 3 and
£000 years years beyond
£000 £000 £000
9.5% debenture stock 2020 13,500 13,500
7.25% debenture stock 20,700 20,700
2025
Interest on financial 2,783 2,783 2,783 17,246 25,595
liabilities
Trade payables and other 1,032 1,032
liabilities
3,815 2,783 2,783 51,446 60,827
Company
2012
Undiscounted cash flows Due Due Due Due 3 Total
within between between years £000
1 year 1 and 2 2 and 3 and
£000 years years beyond
£000 £000 £000
9.5% debenture stock 2020 13,500 13,500
7.25% debenture stock 20,700 20,700
2025
Interest on financial 2,783 2,783 2,783 20,029 28,378
liabilities
Trade payables and other 1,001 1,001
liabilities
3,784 2,783 2,783 54,229 63,579
Categories of financial assets and liabilities
The following table analyses the carrying amounts of the financial assets and
liabilities by categories as defined in IAS 39:
Group
as
restated
Group * Company Company
2013 2012 2013 2012
Financial £000 £000 £000 £000
assets
Financial
assets at
fair value
through
profit or
loss
Equity 151,939 122,361 160,132 130,553
securities
151,939 122,361 160,132 130,553
Other 8,213 24,705 21,777
financial
assets1
160,152 147,066 5,304 152,330
165,436
Financial 35,091 35,079 34,879 34,824
liabilities
measured at
amortised
cost2
35,091 35,079 34,879 34,824
* Comparative figures have been restated for the review of the treatment of the
investment in JCEMAF as disclosed in note 1 above.
1 Other financial assets include: cash and cash equivalents, due from brokers,
cash collateral on securities borrowed, dividend and interest receivables,
other receivables and prepayments.
2 Financial liabilities measured at amortised cost include: debenture stock
issued, due to brokers, fees and other payables and accrued expenses.
The investment portfolio has been valued in accordance with the accounting
policy in note 1 to the accounts, i.e. at fair value. The fair value of the
debenture stock is calculated using Discounted Cash Flow analysis and by
reference to the redemption yields of a similar companies' debt instrument,
with an appropriate margin spread added.
Book Book Fair Fair
Value Value Value Value
2013 2012 2013 2012
£000 £000 £000 £000
Group and Company
Financial
liabilities
£13.5m (2012: £ 13,410 13,401 17,768 18,895
13.5m) 9.5%
debenture stock
2020
£20.7m (2012: £ 20,437 0,422 24,995 25,815
20.7m) 7.25%
debenture stock
2025
33,847 33,823 42,763 44,710
Capital Management Policies and Procedures
The Company's capital management objectives are:
• to ensure that it is able to continue as a going concern; and
• to maximise the revenue and capital returns to its equity shareholders
through an appropriate mix of equity capital and debt. The Board sets a range
for the Company's debt (comprised of debentures less cash) at any one time
which is maintained by management of the Company's cash balances.
Capital at 30 September comprises:
Group Group Company Company
2013 2012 2013 2012
£000 £000 £000 £000
Net Debt
Adjusted cash (6,969) (23,449) (4,272) (20,776)
and cash
equivalents
Debentures 33,847 33,823 33,847 33,823
Sub total 26,878 10,374 29,575 13,047
Equity
Equity share 5,253 5,253 5,253 5,253
capital
Retained 119,913 106,981 125,402 112,386
earnings and
other
reserves
Shareholders' 125,166 112,234 130,655 117,639
funds
Gearing
Net Debt as a 21.5% 9.2% 22.6% 11.1%
percentage of
shareholders'
funds
Maximum potentinal gearing represents the highest gearing percentage on the
assumption that the Group or
Company held no cash. As at 30 September 2013, in respect of the Group and the
Company, this was 27.0% and 25.9% respectively (2012: Group and Company; 30.1%
and 28.8% respectively).
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 Manager'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; and
• the extent to which revenue in excess of that required to be distributed
should be retained.
These objectives, policies and processes for managing capital are unchanged
from the prior period.
The Company is 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; and
• 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 Related Party Transactions
Javelin Capital LLP
Javelin Capital LLP (Javelin Capital) is the Investment Manager and General
Administrator to the Company and is also the parent entity of Javelin Capital
Fund Management Limited (JCFM) and Javelin Capital Services Limited (JCS) all
of which are consolidated into the Group accounts. JCFM is in the process of
being wound up.
Javelin Capital Strategies Plc was an Irish Stock Exchange listed Qualifying
Investment Fund (QIF). Its one sub-fund, the Javelin Capital Global Equity
Strategies Fund was closed in September 2010 with all participating redeemable
preference share funds being returned to investors. The QIF is in the process
of being liquidated and any surplus on liquidation will be returned to the
Company.
JCEMAF is a sub-fund of the Serviced Platform SICAV, a Luxembourg Undertakings
for Collective Investment Scheme (UCITS), as established by Goldman Sachs
International. Javelin Capital acts as investment manager to JCEMAF and is
entitled to receive management and performance fees.
In addition to any fees received from JCEMAF, Javelin Capital is also entitled
to receive management, performance and administration fees from the Company
itself in accordance with the relevant agreements. These agreements take
account of any fees charged at the JCEMAF level so that no double charging
occurs.
JCS provides administrative services to the Group and in performing these
services it incurs expenses. Additionally for administrative reasons the
Company pays certain expenses on behalf of the Group. In both cases recharges
and/or management fees are used such that each group entity bears its
appropriate relevant portion of the Group expenses incurred. The Company allows
Javelin Capital group entities use of various assets to perform their
respective functions for which it receives a lease fee, however this can be
waived by the Company at its discretion.
Javelin Capital, as investment manager is required to, or chooses to do so,
under certain circumstances make payments to reimburse JCEMAF or account for
expense rebates or compensation payments.
During the year, Mr JWM Barlow became a partner of Javelin Capital. Further
details are contained in the Directors' Remuneration Report on pages above.
The Company has an investment in the JCEMAF which is valued at £30.5m as at 30
September 2013 (2012: £14.1m), and which is subject to management and
performance fees in accordance with its prospectus.
The Company pays certain costs on behalf of Majedie Portfolio Management
Limited (MPM) for operating the Majedie Investments PLC Share Plan and
additionally is charged a management fee by MPM. Any such costs paid by the
Company are recharged to MPM, net of any management fees due.
The table below discloses the transactions and balances between those entities:
2013 2012
Transactions during the period: £000 £000
QIF fee revenue due to JCFM 179
Advisory fee revenue due to Javelin 145
Capital from JCFM
JCEMAF advisory fee revenue due to Javelin 368 130
Capital (from the Company)
Company management fee revenue due to 554 549
Javelin Capital
Company administration fee revenue due to 265 265
Javelin Capital
Company lease charge to JCS 19
JCS management fee income from Javelin 1,292 1,878
Capital
Javelin Capital payments made to funds 1
MPM costs recharged by the Company 35 35
Balances outstanding at the end of the
period:
Between JCS and the Company 542 426
Between JCS and Javelin Capital 377 131
Between JCS and JCFM 1
Between the Company and MPM 95 95
Between JCFM and Javelin Capital 9 18
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 £2,260,000 and proceeds of £5,899,000, as a
result of the sale of shares to the MAM Employee Benefit Trust and to MAM for
cancellation, of which none was outstanding at year end (2012: £2,215,000 of
dividends, £324,000 of proceeds with nil outstanding). The Company has no
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
IAS 24: Related Party Disclosures. Further information about the remuneration
of individual directors is provided in the audited part of the Report on
Directors Remuneration above.
2013 2012
£000 £000
Short term employee 235 348
benefits
Partnership profit 66
shares
301 348
Shareholder Information
Registered Office Registrars
Tower 42 Computershare Investor Services PLC
25 Old Broad Street The Pavilions
London EC2N 1HQ Bridgwater Road
Telephone: 020 7626 1243 Bristol BS99 6ZZ
Fax: 020 7374 4854 Telephone: 0870 707 1159
E-mail: majedie@majedie.co.uk Shareholders should notify all
changes of name and
Registered Number: 109305 address in writing to the
England Registrars. Shareholders may
check details of their holdings,
historical dividends,
Company Secretary & Fund graphs and other data by accessing
Administrator
Capita Sinclair Henderson www.computershare.com.
Limited
Trading as Capita Asset
Services
Beaufort House Shareholders wishing to receive
communications from
51 New North Road the Registrars by email (including
notification of the
Exeter EX4 4EP publication of the annual and
interim reports) should
Telephone: 01392 412122 register on-line at http://
www-uk.computershare.com/
Fax: 01392 253282 investor. Shareholders will need
their shareholder
number, shown on their share
certificate and dividend
Investment Manager & General vouchers, in order to access both
Administrator of the above
Javelin Capital LLP services.
Tower 42
25 Old Broad Street Auditors
London EC2N 1HQ Ernst & Young LLP
Telephone: 020 7382 8170 1 More London Place
Fax: 020 7374 4854 London SE1 2AF
Email: info@javelincapital.com
Stockbrokers
Custodian Cenkos Securities plc
RBC Investor Services Trust 6.7.8 Tokenhouse Yard
Riverbank House London EC2R 7AS
2 Swan Lane
London EC4R 3AF
National Storage Mechanism
A copy of the Annual Report and Financial Statements will be submitted shortly
to the National Storage Mechanism ("NSM") and will be available for inspection
at the NSM, which is situated at: http://www.morningstar.co.uk/uk/NSM.
A copy of the Annual Report and Accounts and Notice of Annual General Meeting
will be delivered to shareholders shortly and can also be found at
www.majedie.co.uk.
Annual General Meeting
The Company's Annual General Meeting will be held on 15 January 2014 at 12.00
pm at City of London Club, 19 Old Broad Street, London EC2N 1DS.
ENQUIRIES
If you have any enquiries regarding this announcement please contact Mr William
Barlow on 020 7382 8185.
END
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on this announcement (or any other website) is
incorporated into, or forms part of, this announcement.
Latest directors dealings
- 49 minutes ago ASOS
- 58 minutes ago Coca-Cola Europacific Partners (DI)
- 1 hour ago Liontrust Asset Management
- 1 hour ago Liontrust Asset Management
- 1 hour ago Luceco