Annual Financial Report

MAJEDIE INVESTMENTS PLC FINAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2009 The full Annual Report and Accounts can be accessed via the Company's website at www.majedie.co.uk or by contacting the Company Secretary on telephone 01392 412122. The Directors present the results of the Company for the year ended 30 September 2009 Overview Majedie Investment PLC is a self-managed investment trust with total portfolio assets under management of over Â£157 million as at 30 September 2009. Our Objective is to maximise total shareholder return over the long term whilst increasing dividends by more than the rate of inflation. Our Benchmark is 70% FTSE All-Share Index and 30% FTSE World ex UK Index (Sterling) on a total return basis. Investment Objective The Company's objective is to maximise total shareholder return over the long term whilst increasing dividends by more than the rate of inflation. Investment Policy The Company invests principally in securities of publicly quoted companies worldwide, though it may invest in unquoted securities up to levels set periodically by the Board. The overall approach is based on analysis of global economies and sector trends with a focus on companies and sectors judged likely to deliver strong growth over the long term. The number of investments held, together with the geographic and sector diversity of the portfolio, enable the Company to spread its risks with regard to liquidity, market volatility, currency movements and revenue streams. The Company's benchmark comprises 70% FTSE All-Share Index and 30% FTSE World ex UK Index (Sterling) on a total return basis. It is used to assess the performance and risk of the Company and investment portfolio. Whilst performance is measured against the benchmark, investment decisions and portfolio construction are made on an independent basis. The Board however sets various specific portfolio limits for stocks and sectors in order to restrict risk levels. Although, exceptionally, derivative instruments may be employed, usually for hedging purposes and with specific prior approval of the Board, generally the Company is a long-only investor and would be unlikely to use such instruments. The Company will not invest in any holding that would, at the time of investment, represent more than 15% of the value of its gross assets. The Company uses gearing to enhance the long term returns to shareholders. The Articles of Association give the Board the ability to borrow up to 100% of adjusted capital and reserves. The Board also reviews the level of net gearing (borrowings less cash) on an ongoing basis and sets a range at its discretion as appropriate. The Company's current debenture borrowings are limited by covenant to 662/3%, and any additional indebtedness is not to exceed 20%, of adjusted capital and reserves. Highlights for 2009 Total shareholder return: (18.3%) Net asset value total return: (14.9%) Benchmark total return: 11.3% Final dividend (per share): 6.3p Total dividends (per share): 10.5p Directors' valuation of investment in Majedie Asset Management Limited: Â£30.0m Performance year ended 30 September 2009 2008 Investment portfolio return (total assets)â€ (7.9%) (31.1%) Net asset value total return (14.9%) (36.2%) Total shareholder return (18.3%) (36.9%) Benchmark total returnâ€ 11.3% (19.9%) â€ Source: The WM Company Chairman's Statement The Chairman's Statement forms part of the Director's Report In the year to 30 September 2009 the Company's Net Asset Value and Share Price, both on a total return basis fell by 14.9% and 18.3% respectively, which compares to an increase in the benchmark total return of 11.3%. This result is of course disappointing with the Company continuing to suffer from its exposure at last year end to small cap equities and sterling assets over what has been a most unusual and volatile period in world equity markets. The Board however has acted promptly to restructure the portfolio so that it is properly positioned for the long term in the current economic environment. On a much more positive note we have been making substantial progress on the launch of a new asset management business which we believe will have the potential to bring significant benefits to the Company in the future. Results and dividends The Group's net profit before tax for the year was Â£4.3m which is a decrease of Â£2.2m or 33.8% compared to the prior year of Â£6.5m. This is primarily the result of a fall in Group income of Â£2.4m to Â£6.5m this year reflecting reductions in both dividend and interest income. Group income includes Â£1.9m in dividend income from Majedie Asset Management (MAM) compared to Â£2.5m in 2008. Group total costs for the year were Â£2.9m, falling Â£0.4m or 12.1% from the Â£3.3m in 2008. The considerable reduction in costs in 2009, while expected, was adversely impacted by non-recurring costs associated with the office relocation and the departure of the former Investment Director. As I indicated in my previous statements, we have undertaken a review of the Company's dividend policy to determine if it remains appropriate. Consideration was given to a range of factors and was given impetus by the current year's substantial decrease in dividend income due to the economic environment. The Board is mindful of the importance of the Company's dividends to its shareholders and has concluded that the dividend policy should remain unchanged. The Board has therefore decided to recommend a final dividend of 6.3p per share, which when combined with the interim dividend of 4.2p per share, results in a total dividend of 10.5p per share which is the same as 2008, excluding the 2.25p per share special dividend paid last year. This is above the rate of inflation for the year with the Retail Prices Index (RPI) at -1.4% reflecting the weak economy. A diagram in the Annual Report & Accounts will illustrate the Majedie dividend history over the last ten years in comparison with the RPI. This shows that Majedie dividends have been increasing by more than the rate of inflation. Investment Portfolio and Performance The year began in the immediate aftermath of the Lehman Brothers bankruptcy which resulted in the liquidity crisis turning into a full global economic recession. Developed World GDP fell at the fastest rate since the Great Depression of the 1930s, consumer and business confidence evaporated and unemployment rates soared. Not surprisingly values across all major asset classes fell, including equities, corporate bonds, property and commodities. Equity investors shunned any company considered to be risky, particularly those with significant borrowings, unproven management or business models dependent on the economic cycle. Global equity markets collapsed, with our benchmark down by over 27% at its lowest point in early March. The remainder of the year was a period of economic stabilisation. Evidence began to show that the pace of GDP declines was abating and that signs of growth were beginning to emerge, albeit from highly depressed levels. This was strongly influenced by government stimulus spending packages, tax cuts, record low interest rates and continued economic strength from China and India. Equity markets have experienced a sharp and swift bounce, pricing in an expectation of continued economic recovery rather than reflecting continuing high levels of unemployment and low consumer spending. From the trough levels of mid-March, our benchmark rebounded by over 50% to close the year up 10.4% in capital terms. There were two main factors that negatively impacted the investment performance during the period. Firstly, the Company entered the year with large exposure to certain early stage small cap positions that had previously contributed positively to performance, but which significantly underperformed during the first half of the year. Secondly, the portfolio was heavily weighted in favour of sterling denominated assets whilst sterling severely weakened against all major currencies during the period. These issues were addressed following the change in the management of the portfolio that took place on 1 January 2009. The revised strategy focused on enhancing the quality of securities. This was facilitated by the cash held at the end of 2008 and by switching out of lower quality smaller companies as deemed appropriate. The illiquidity of many of these investments made this exercise difficult, although it was largely complete by the year end. The underweight position in overseas stocks has been dealt with through the construction of a portfolio of assets in the major markets of USA, Europe and Japan. These are predominantly highly regarded companies that fit within the overall investment strategy now being adopted. Implementing these changes has been far from painless, although the Board believes that the action taken to enhance the quality of investments is in the long term interests of the Company. The majority of the listed equity positions now held are in well financed, large cap companies with proven track records of delivering profit and dividend growth. Investment risk and volatility relative to the benchmark have been materially reduced. Importantly, a base level of investment income has been secured that should provide solid foundations for the business over the longer term. The Board is required to review the valuation of all unlisted investments and during the year we have felt it prudent to reduce the holding value of certain positions where the situation has deteriorated. In contrast the performance of MAM continues to exceed expectations both financially by again increasing profitability year on year, and reputationally where a number of high profile industry awards have been deservedly received. The Board has considered it appropriate to increase our valuation to Â£30m which it believes more accurately reflects the fair value of our stake in this business. Board & Management Changes There have been a number of changes to the Board which aim to position the Company for the future. Firstly, Mr Paul Gadd has been appointed as a non-executive director from 1 October 2009. Paul has spent 20 years as a solicitor in the City of London working in corporate finance. He retired as a partner of Ashurst in April 2009, prior to which he was head of Ashurst's investment company practice. I am confident that the Company will benefit from Paul's experience and that he will make a valuable contribution to our deliberations. Secondly due to the development of our new asset management business Mr Gerry Aherne became an executive director from 24 November 2009 and stood down as Chairman of the Remuneration Committee with effect from 1 October 2009. He was replaced by Mr Hubert Reid. Thirdly, Chris Arnheim will join the Board from 1 January 2010. He has spent 25 years working as a solicitor in private practice, and for over 10 years was the Company's primary external corporate legal adviser, for example advising on the establishment and development of MAM. He stepped down from this role following last year's AGM. The Board will benefit greatly from his general experience and his personal knowledge of the Company and its affairs. Finally after 10 years as Chairman and in light of the increased demands which will be made of this role, I have decided to retire with effect from the 2010 AGM. The Board has invited Mr Andrew Adcock to succeed me who will work closely with Gerry Aherne on the development of the Group. Andrew will stand down as Chairman of the Audit Committee at that time and be replaced by Mr Hubert Reid. The development of a new asset management business which will, inter alia, manage the Company's investment portfolio led to the departure of Mr Bill Baker by mutual agreement. I would like to thank Bill for his stewardship and restructuring of the portfolio in what were very turbulent times. Mr Nick Rundle has been appointed Investment Director. Nick is an experienced investment manager with an excellent track record, who has worked in the City of London for over 20 years in a variety of institutions and positions including Barclays, Morley Fund Management, Gerrard and National and recently Taylor Young Investment Management. Business Development As outlined at last year's AGM the Company has been seeking an expansion of its activities. We have made good progress and anticipate being able to launch a substantial new venture, Javelin Capital LLP, with a group of highly experienced and talented individuals. Last year Gerry Aherne explained that we would focus on an investment management business which would concentrate on offering investment management expertise in Global Equities and Global Emerging Markets. We have been fortunate to recruit senior investment individuals as well as marketing and operational staff who are experienced in growing investment management companies and handling the associated operational risks. We have applied to the FSA and other regulatory authorities and are hopeful that we shall commence trading early in 2010, subject to the necessary consents. The Company will initially hold 70% of the equity of Javelin Capital LLP and under the partnership agreement this will fall to 51% provided certain profit related benchmarks are successfully met. Gerry Aherne will become Managing Partner of the enterprise but will remain a member of the Board. This venture is intended to be a genuine partnership between the operational team of Javelin and the Board of Majedie. It is to be hoped that it will be as highly successful as our previous investment in MAM. Annual General Meeting The AGM will be held on 20 January 2010 at 11:30am at the Fishmongers Company, Fishmongers Hall London Bridge. Details are set out in the Annual Report & Accounts. As in prior years there will be presentations and an opportunity to ask questions. I do hope you will be able to attend. Companies Act 2006 and New Articles of Association The implementation of the final provisions of the Companies Act 2006 came into force on 1 October 2009. At this year's AGM and as included in the notice of meeting included in the Annual Report & Accounts, the Company proposes to adopt new Articles which reflect these changes, including the abolition of authorised share capital, the deletion of the enabling provision of authority to purchase our own shares and reduce share capital and notice periods of general meetings. Strategy & Outlook Markets have experienced a sharp and swift recovery from the lows suffered in March 2009 and now appear to be pricing in an economic recovery into 2010 which is by no means certain. The global economy has clearly passed its worst, but the strength and speed of the continued rebound may be more prolonged and drawn out than envisaged. Economic recoveries are typically punctuated with negative surprises, so an important indicator of equity market sustainability is whether setbacks are seen as investment opportunities or triggers that precipitate sell-offs. Longer term there continues to be upside to equity markets as record low interest rates have reduced credible alternatives for the generation of meaningful investment returns from bank deposits and government securities. Entering the new financial year, the portfolio is positioned to be underweight in stocks that are reliant on the overstretched consumers and governments of the developed world. It is overweight in companies that are exposed to the faster growing emerging markets and overweight in oil and mining companies that supply industries that are fundamentally undersupplied on a long term basis. My over-riding message is that the portfolio is more appropriately balanced and invested in higher quality stocks than twelve months ago, and so the relative investment risk and volatility has been significantly reduced. As the growth in equity markets slows, dividend income should become an important source of total return. In this context, the positioning of the investment portfolio to give exposure to high quality companies with dividend growth potential is likely to be increasingly attractive over the medium term. In what has been another challenging and demanding year I would like to express my appreciation of the hard work and commitment shown by the Company's staff and fellow directors which has certainly eased the burden. In my final year as Chairman and indeed with the Company's 100 year anniversary falling in April 2010 I am excited by the opportunities ahead and confident that the Company is in good hands. Henry S Barlow Chairman 24 November 2009 Twenty Largest UK Investments at 30 September 2009 2009 2008 Market Value Market Value Company Â£000 % of Fund Â£000 % of Fund Majedie Asset Management 30,000 19.0 22,500 12.0 HSBC 8,926 5.6 7,929 4.2 BP 7,189 4.5 2,431 1.3 Royal Dutch Shell 'B' 5,208 3.3 2,905 1.6 Vodafone 4,557 2.9 6,272 3.3 GlaxoSmithKline 4,303 2.7 2,537 1.4 BHP Billiton 3,775 2.4 2,682 1.4 Vostok Energy 2,863 1.8 2,569 1.4 Rio Tinto 2,645 1.7 3,232 1.7 Rolls Royce 2,505 1.6 1,790 1.0 Unilever* 2,400 1.5 Aviva 2,241 1.4 1,070 0.6 BG Group 2,163 1.4 1,481 0.8 Prudential 2,015 1.3 1,700 0.9 BAE Systems 1,851 1.2 2,413 1.3 Majedie Asset Management Tortoise Fund 'B'* 1,645 1.0 Capital Lease Aviation 1,500 0.9 2,344 1.3 Hydrodec 1,440 0.9 3,477 1.9 KSK Power Venture 1,406 0.9 1,355 0.7 Accsys Technologies 1,367 0.9 5,348 2.9 89,999 56.9 74,035 39.7 *There is no comparative for the investments listed they all represent new holdings. Ten Largest Overseas Investments at 30 September 2009 2009 Market Value Company Â£000 % of Fund Wells Fargo (USA)* 1,318 0.8 Telefonica (Spain)* 1,292 0.8 China Construction Bank (China)* 1,248 0.8 ENI (Italy)* 1,244 0.8 Toyota (Japan)* 1,240 0.8 Microsoft Corp (USA)* 1,049 0.7 Roche (Switzerland)* 1,009 0.6 Coca-Cola Co (USA)* 1,006 0.6 Johnson & Johnson (USA)* 951 0.6 Schlumberger (USA)* 931 0.6 11,288 7.1 *There is no comparative for the investments listed as they all represent new holdings. Extracts from the Directors' Report Introduction A review of developments during the year and of future prospects is contained in the Chairman's Statement above. Principal Activity The Company operates as an investment trust company engaged primarily in investment in listed securities. Results and Dividend Consolidated net revenue return before taxation amounted to Â£4,325,000 (2008: Â£6,462,000). The directors recommend a final ordinary dividend of 6.3p per ordinary share, payable on 27 January 2010 to shareholders on the register at the close of business on 8 January 2010. Together with the interim dividend of 4.2p per share paid on 30 June 2009, this makes a total distribution of 10.5p per share in respect of the financial year (2008: 12.75p per share). Business Review Introduction The purpose of the Business Review is to provide a review of the business of the Company by: - analysing development and performance using appropriate Key Performance Indicators ("KPIs"); - outlining the principal risks and uncertainties affecting the Company; - setting out the Company's environmental, social and ethical policy; - providing information about persons with whom the Company has contractual or other arrangements which are essential to the business of the Company; - outlining the main trends and factors likely to affect the future development, performance and position of the Company's business; - describing how the Company manages these risks; and - explaining the future business plans of the Company. Regulatory and Competitive Environment The Company is a self-managed investment trust and is listed on the London Stock Exchange. It is subject to UK company law, International Financial Reporting Standards, Listing, Prospectus and Disclosure and Transparency Rules, taxation law and the Company's own Articles of Association. The appointment of the Board is approved by shareholders and the directors are charged with ensuring that the Company complies with its objectives as well as these regulations. The majority of investment trusts outsource the management of their investment portfolios to external fund management companies. Majedie Investments PLC is a self-managed investment trust where the investment portfolio is managed by an internal investment team led by the Investment Director. The directors remain committed to seeking new business development opportunities which can contribute to the strategic objective of generating superior returns for shareholders. Under the Companies Act 2006, Section 833, the Company is defined as an investment company. As such, it analyses its Income Statement between profits available for distribution by way of dividends, revenue profits and capital profits. The financial statements, starting on page -, report on these profits, the changes in equity, the balance sheet position and the cash flows in the current and prior financial period. This is in compliance with current International Financial Reporting Standards, supplemented by the Revised Statement of Recommended Practice for Investment Trust Companies (SORP) issued by the Association of Investment Companies in January 2009. The principal accounting policies of the Company are set out in note 1 to the accounts. The Auditors' opinion on the financial statements, which is unqualified, appears in the Annual Report & Accounts which are available at www.majedie.co.uk. In addition to the annual and half-yearly results and Interim Management Statements, the Company makes weekly net asset value (NAV) announcements via an authorised Stock Exchange regulatory information service. The Company also reports to shareholders on performance against benchmark, corporate governance and investment activities. At least one shareholders' meeting is held in each year in January to allow shareholders to vote on the appointment of directors and the Auditors, the payment of dividends, authority for share buybacks and any other special business. The business of the next such shareholders' meeting, being the Annual General Meeting, scheduled for 20 January 2010 is set out in the Notice of Meeting enclosed in the Annual Report & Accounts. The Company is subject to corporation tax on its net revenue profits but is exempt from corporation tax on capital gains, provided it complies at all times with Section 842 of the Income and Corporation Taxes Act 1988. Section 842 requires, broadly, that: - the Company's revenue (including dividend and interest receipts but excluding profits on sale of shares and securities) should be derived wholly or mainly from shares and securities; - the Company must not retain in respect of any accounting period more than 15% of its income from shares and securities; - no holding in a company should represent more than 15% by value of the Company's investments in shares and securities unless the holding was acquired previously and the value has risen to exceed the 15% limit without any action having been taken; and - realised profits on sale of shares and securities may not be distributed by way of dividend. Compliance with these rules is proved annually in retrospect to HM Revenue and Customs (HMRC). HMRC approval of the Company as an investment trust is granted `subject to there being no subsequent enquiry under corporation tax self-assessment'. Such approval has been received in respect of all relevant years up to and including the year ended 30 September 2008, since when the Company has continued to comply with these rules. Governance The Company's Board of directors is responsible for the overall stewardship of the Company, including corporate strategy, corporate governance, risk and controls assessment, overall investment policy, asset allocation and gearing limits. There are six members of the Board, of which five are non-executive. Three members of the Board are considered to be independent. This Board structure satisfies the Combined Code recommendations. Nonetheless the Board considers that all its directors exercise their judgement in an independent manner. Investment performance is measured primarily against a benchmark comprising 70% FTSE All-Share Index and 30% FTSE World ex UK Index (Sterling) on a total return basis. In the process of its governance of the Company, the Board regularly reviews internally generated reports and reports from other independent sources such as The WM Company to assess the on going investment performance of the Company. Income and cost forecasts are reviewed to enable costs to be controlled within budget and to ensure that the Company is able to pursue a progressive dividend policy while remaining in compliance with the relevant tax rules. Other regularly reviewed reports include those covering the list of investments, the level of gearing, the discount to net asset value and the shareholder register. The Board's assessment of the major risks faced by the Company, together with the principal controls in place to mitigate the risks, is set out later in this review. Capital Structure As part of its corporate governance the Board keeps under review the capital structure of the Company. At 30 September 2009 the Company had an issued share capital of Â£5,252,800, comprising 52,528,000 ordinary shares of 10p each, carrying one vote each. The Board seeks each year to renew the authority of the Company to make market purchases of its own shares. However, the Board is only likely to use such authority in special circumstances. In general the directors believe that the discount to net assets will be reduced sustainably over the long term by the creation of value through the development of the business. In 1994 and 2000 the Company issued two long term debentures: Â£15m 9.5% debenture stock 2020 and Â£25m 7.25% debenture stock 2025 respectively. In 2004 the Company redeemed Â£1.5m of the 2020 issue and Â£4.3m of the 2025 issue as an opportunity arose to redeem at an attractive price. The Board is responsible for setting the overall gearing range within which the Investment Director may operate. Principal Risks The principal risks and the Company's policies for managing these risks and the policy and practices with regard to financial instruments are summarised below and in note 25 to the accounts. The Company's assets consist mainly of quoted equity securities and its principal risks are therefore market related. 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. The portfolio has various specific limits for individual stocks and market sectors which are employed to restrict risk levels. The level of portfolio risk is assessed in relation to the benchmark utilising various portfolio risk management tools. It should be noted that whilst we have a benchmark, the portfolio is constructed independently and can be significantly different. Therefore the 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. 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 in relation to a range of issues including the allocation of assets between geographic regions and industrial sectors, and level and effect of gearing; ii. 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 Section 842; iii. inadequate financial controls could result in misappropriation of assets, loss of income and debtor receipts and mis-reporting of NAVs. The Board regularly reviews statements on internal controls and procedures and subjects the books and records of the Company to an external annual audit. The financial risks are set out in more detail in note 25 below; and iv. loss of key staff could affect investment returns. The quality of the management team and contingency planning is a crucial factor in delivering good performance. The Company develops its recruitment and remuneration packages in order to retain key staff and undertakes succession planning. The systems in place to manage the Company's internal controls are described further in the Annual Report & Accounts. Management of Assets and Shareholder Value The Company invests around the world in markets, sectors and companies that the Board and Investment Director believe will generate long term growth in capital and income for shareholders. Many potential investments are considered each year. The Investment Director meets a number of management teams from potential corporate investments. Assessing the quality of management is a key input into the investment process. Extensive work is also done on analysing potential investments for their market positioning/competitive advantage, financial strength and cashflow characteristics. Various valuation parameters are used to provide an indication of the potential attractiveness of the investment opportunity in relation to other potential investments in the area/sector and in relation to similar investments within the portfolio. The Board measures the overall investment performance of the Company against the benchmark. Investment risks are spread through holding a range of securities in different industrial sectors. The directors meet with larger shareholders outside the Annual General Meeting as appropriate. Meetings are also held with investment trust analysts and stockbroking firms. The Company has three investor savings schemes which provide shareholders with cost effective and convenient ways of investing. Communication of up-to-date information is provided through the website at www.majedie.co.uk. Performance Highlights The Board uses the following Key Performance Indicators (KPIs) to help assess progress against the Company's objectives: - NAV total return; and - total shareholder return; both measured against the benchmark total return. The above KPIs are commented on and displayed in graphical form within the Chairman's Statement above. The following KPIs are commented on in this Business Review: - investment portfolio return (total assets): see Investment Performance below.. - share price discount: the level of the discount at the end of the financial year calculated with debt at par was 20.5% and was higher than at the start of the year. - total expense ratio: see Costs below. - annual dividend growth: See Total Return Philosophy & Dividend Policy below. Investment Performance The following table summarises the relative investment performance comparing the returns from total assets with those of the benchmark: Arithmetic Period ended Return from Return from Outperformance/ 30 September Total Assets Benchmark (Underperformance) 1 year (7.87%) 11.27% (19.14%) 3 years (21.80%) 0.27% (22.07%) 5 years 17.30% 41.19% (23.89%) 10 years 14.48% 29.45% (14.97%) The Company's investment in Majedie Asset Management Limited (MAM) is included in the investment performance table on the basis that it is treated the same as the Company's other unlisted investments being held at fair value with gains or losses included in the income statement. As at 30 September 2009 the Total Assets portfolio totalled Â£157.9m and included investments of Â£147.3m (inclusive of MAM at Â£30.0m) and cash balances of Â£12.4m. At the Net Asset Value level, the Attribution Analysis table below shows the composition of difference between the NAV total return and the benchmark (on a total return basis) for the year ended 30 September 2009. The investment portfolio relative performance shown, as calculated by The WM Company and excluding MAM, is split between asset allocation and stock selection and includes the impact of our change to an income inclusive NAV during the year. The rest of the difference between the NAV total return for the year and the benchmark return arose from the net impact of the gearing effect of the debentures less debenture interest costs, and the total contribution from MAM (being the increase in the value of the investment in the year plus dividend income received). Total shareholder return for the year was -18.3%. The level of net gearing during the year ranged between 13.0% and 28.6%. A detailed Attribution Analysis is included in the full Annual Report. Costs The Company's expense ratio over net assets is 2.1% which compares with the investment trust sector average of 1.7%. The ratio for the year has been negatively impacted by the sharp fall in the Company's assets. The Board pays close attention to cost control and the current situation is referred to further in the Chairman's Statement above. Total Return Philosophy & Dividend Policy The directors believe that investment returns will be maximised if a total return policy is followed whereby the investment team pursues the best opportunities irrespective of the associated dividend yield. The Company has a comparatively high level of revenue reserves for the investment trust sector. 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. During the year the Board reviewed the Company's dividend policy and has decided to retain the current progressive dividend policy. This aims to increase the dividend each year by more than the rate of inflation and this has been achieved in each of the last nineteen years. At Â£26.7m, the revenue reserves represent more than four times the current annual core dividend distribution. Over the last ten years the average annual growth of the dividend has been 4%. Majedie Asset Management Limited In 2002 the Company established a new fund management subsidiary specialising in UK equities: Majedie Asset Management, which was launched in March 2003. Having started with a 70% shareholding, the Company now retains a 30% interest. The relevant developments during the year are referred to in the Chairman's Statement above and further referred to in note 12 to the financial statements. Business Development The Company has made significant progress in respect of business development and is now in a position to launch a substantial new venture being Javelin Capital LLP. Javelin is an asset management entity focusing on equity markets both in the UK and overseas. It is also proposed that Javelin Capital LLP will become the investment manager for the Company's investment portfolio assuming responsibility for the existing staff and relevant fixed assets. We have applied to the FSA and other regulatory authorities and subject to permissions should be able to commence trading in early 2010. Statement of Directors' Responsibilities The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards adopted by the European Union. Company law requires the Directors to prepare financial statements for each financial year which present fairly the financial position of the Company and of the Group and the financial performance and cash flows of the Company and of the Group for that period. In preparing these financial statements, the Directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and estimates that are reasonable and prudent; - present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; - state whether applicable International Financial Reporting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and - provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy, at any time, the financial position of the Company and of the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors, to the best of their knowledge, state that: - the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and results of the Company and the Group; and - the Chairman's Statement and Directors' Report include a fair review of the development and performance of the business and the position of the Company and the Group together with a description of the principal risks and uncertainties that they face. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the Board of Directors Henry S Barlow Chairman 24 November 2009 Consolidated Income Statement for the year ended 30 September 2009 2009 2008 Revenue Capital Revenue Capital return return Total return return Total Notes Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Investments Losses on investments at fair value through profit or loss 12 (23,723) (23,723) (95,341) (95,341) Net investment result (23,723) (23,723) (95,341) (95,341) Income Dividends and interest 2 4,594 4,594 6,306 6,306 MAM dividend income 1,906 1,906 MAM special dividend income 2,484 2,484 Other income 34 34 75 75 Total income 6,534 6,534 8,865 8,865 Expenses Administration expenses 3 (1,507) (1,359) (2,866) (1,702) (1,571) (3,273) Return/(deficit) before finance costs and taxation 5,027 (25,082) (20,055) (7,163) (96,912) (89,749) Finance costs 6 (702) (2,100) (2,802) (701) (2,099) (2,800) Net return/(deficit) before taxation 4,325 (27,182) (22,857) 6,462 (99,011) (92,549) Taxation 7 (92) (92) (51) (51) Net return/(deficit) after taxation for the year 4,233 (27,182) (22,949) 6,411 (99,011) (92,600) Return/(deficit) per ordinary share: pence pence pence pence pence pence Basic and diluted 10 8.1 (52.3) (44.2) 12.5 (192.3) (179.8) The total column of this statement is the Consolidated Profit and Loss Account of the Group prepared under International Financial Reporting Standards (IFRS). The supplementary revenue return and capital return columns are prepared under guidance published by the Association of Investment Companies. 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. These accounts have been prepared in compliance with the recognition and measurement criteria of IFRS. Company Income Statement for the year ended 30 September 2009 2009 2008 Revenue Capital Revenue Capital return return Total return return Total Notes Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Investments Losses on investments at fair value through profit or loss 12 (23,723) (23,723) (95,341) (95,341) Net investment result (23,723) (23,723) (95,341) (95,341) Income Dividends and interest 2 4,594 4,594 6,306 6,306 MAM dividend income 1,906 1,906 MAM special dividend income 2,484 2,484 Other income 34 34 75 75 Total income 6,534 6,534 8,865 8,865 Expenses Administration expenses 3 (1,507) (1,359) (2,866) (1,702) (1,571) (3,273) Return/(deficit) before finance costs and taxation 5,027 (25,082) (20,055) 7,163 (96,912) (89,749) Finance costs 6 (702) (2,100) (2,802) (701) (2,099) (2,800) Net return/(deficit) before taxation 4,325 (27,182) (22,857) 6,462 (99,011) (92,549) Taxation 7 (92) (92) (51) (51) Net return/(deficit) after taxation for the year 4,233 (27,182) (22,949) 6,411 (99,011) (92,600) Return/(deficit) per ordinary share: pence pence pence pence pence pence Basic and diluted 10 8.1 (52.3) (44.2) 12.5 (192.3) (179.8) The total column of this statement is the Profit and Loss Account of the Company prepared under IFRS. The supplementary revenue return and capital return columns are prepared under guidance published by the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year Consolidated Statement of Changes in Equity for the year ended 30 September 2009 Capital Share Own Share Share redemption options Capital Revenue share capital premium reserve reserve reserve reserve reserve Total Notes Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Year ended 30 September 2009 As at 30 September 2008 5,253 785 56 291 120,606 29,047 (2,573) 153,465 Net return after tax for the year 4,233 4,233 Investments at fair value through profit or loss - Increase in investment holding gains 30,345 30,345 - Net loss on realisation of investments (54,068) (54,068) Costs charged to capital (3,459) (3,459) Total recognised income and expenditure (27,182) 4,233 (22,949) Share options expense 24 251 251 Dividends declared and paid in year 9 (6,631) (6,631) Own shares (sold)/purchased by Employee Incentive Trust (EIT) 18 (826) 871 45 As at 30 September 2009 5,253 785 56 (284) 93,424 26,649 (1,702) 124,181 Year ended 30 September 2008 As at 30 September 2007 5,253 785 56 262 219,617 30,296 (3,053) 253,216 Net return after tax for the year 6,411 6,411 Investments at fair value through profit or loss - Decrease in investment holding gains (87,499) (87,499) - Net loss on realisation of investments (7,842) (7,842) Costs charged to capital (3,670) (3,670) Total recognised income and expenditure (99,011) 6,411 (92,600) Share options expense 24 516 Dividends declared and paid in year 9 (7,660) (7,660) Own shares (sold)/purchased by Employee Incentive Trust (EIT) 18 (487) 480 (7) As at 30 September 2008 5,253 785 56 291 120,606 29,047 (2,573) 153,465 Company Statement of Changes in Equity for the year ended 30 September 2009 Capital Share Own Share Share redemption options Capital Revenue share capital premium reserve reserve reserve reserve reserve Total Notes Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Year ended 30 September 2009 As at 30 September 2008 5,253 785 56 291 120,884 28,767 (2,573) 153,463 Net return after tax for the year 4,233 4,233 Investments at fair value through profit or loss - Decrease in investment holding gains 22,815 22,815 - Dormant subsidiaries now struck off 30 30 - Net loss on realisation of investments (54,068) (54,068) Revaluation of investment in Majedie Asset Management 7,500 7,500 Costs charged to capital (3,459) (3,459) Total recognised income and expenditure (27,182) 4,233 (22,949) Share options expense 24 251 251 Dividends declared and paid in year 9 (6,631) (6,631) Own shares (sold)/purchased by Employee Incentive Trust (EIT) 18 (826) 871 45 As at 30 September 2009 5,253 785 56 (284) 93,702 26,369 (1,702) 124,179 Year ended 30 September 2008 As at 30 September 2007 5,253 785 56 262 219,895 30,016 (3,053) 253,214 Net return after tax for the year 6,411 6,411 Investments at fair value through profit or loss - Decrease in investment holding gains (93,814) (93,814) - Net loss on realisation of investments (7,842) (7,842) Revaluation of investment in Majedie Asset Management 6,315 6,315 Costs charged to capital (3,670) (3,670) Total recognised income and expenditure (99,011) 6,411 (92,600) Share options expense 24 516 516 Dividends declared and paid in year 9 (7,660) (7,660) Own shares (sold)/purchased by Employee Incentive Trust (EIT) 18 (487) 480 (7) As at 30 September 2008 5,253 785 56 291 120,884 28,767 (2,573) 153,463 Consolidated Balance Sheet as at 30 September 2009 2009 2008 Notes Â£000 Â£000 Non-current assets Property and equipment 11 224 48 Investments at fair value through profit or loss 12 147,291 178,981 147,515 179,029 Current assets Trade and other receivables 14 1,897 2,340 Cash and cash equivalents 15 12,384 8,135 14,281 10,475 Total assets 161,796 189,504 Current liabilities Trade and other payables 16 (3,853) (2,295) Total assets less current liabilities 157,943 187,209 Non-current liabilities Debentures 16 (33,762) (33,744) Total liabilities (37,615) (36,039) Net assets 124,181 153,465 Represented by: Ordinary share capital 17 5,253 5,253 Share premium 785 785 Capital redemption reserve 56 56 Share options reserve (284) 291 Capital reserve 93,424 120,606 Revenue reserve 26,649 29,047 Own shares reserve 18 (1,702) (2,573) Equity Shareholders' Funds 124,181 153,465 Net asset value per share pence pence Basic and fully diluted 19 238.7 296.5 Approved by the Board of Majedie Investments PLC and authorised for issue on 24 November 2009. Henry S Barlow Andrew J Adcock Directors Company Balance Sheet as at 30 September 2009 Notes 2009 2008 Non-current assets Â£000 Â£000 Property and equipment 11 224 Investments at fair value through profit or loss 12 147,291 178,981 Investment in subsidiaries 13 161 194 147,676 179,175 Current assets Trade and other receivables 14 1,986 2,413 Cash and cash equivalents 15 12,131 7,718 14,117 10,131 Total assets 161,793 189,306 Current liabilities Trade and other payables 16 (3,852) (2,099) Total assets less current liabilities 157,941 187,207 Non-current liabilities Debentures 16 (33,762) (33,744) Total liabilities (37,614) (35,843) Net assets 124,179 153,463 Represented by: Ordinary share capital 17 5,253 5,253 Share premium 785 785 Capital redemption reserve 56 56 Share options reserve (284) 291 Capital reserve 93,702 120,884 Revenue reserve 26,369 28,767 Own shares reserve 18 (1,702) (2,573) Equity Shareholders' Funds 124,179 153,463 Approved by the Board of Majedie Investments PLC and authorised for issue on 24 November 2009. Henry S Barlow Andrew J Adcock Directors Consolidated Cash Flow Statement for the year ended 30 September 2009 2009 2008 Notes Â£000 Â£000 Net cash flow from operating activities Consolidated net return before taxation (22,857) (92,549) Adjustments for: Losses on investments 12 23,723 95,341 Dividends reinvested (132) (171) Share based remuneration 251 516 Depreciation 58 25 Purchases of investments (57,427) (51,830) Sales of investments 67,202 56,133 10,818 7,465 Finance costs 2,802 2,800 Operating cashflows before movements in working capital 13,620 10,265 Increase/(decrease) in trade and other payables 241 (454) Decrease in trade and other receivables 96 2,071 Net cash inflow from operating activities before tax 13,957 11,882 Tax recovered 2 Tax on unfranked income (106) (56) Net cash inflow from operating activities 13,853 11,826 Investing activities Purchases of tangible assets (234) (4) Net cash outflow from investing activities (234) (4) Financing activities Interest paid (2,783) (2,784) Dividends paid (6,631) (7,660) Purchases of own shares into Employee Incentive Trust (914) Exercise of options on own shares 44 907 Net cash outflow from financing activities (9,370) (10,451) Increase in cash and cash equivalents for year 20, 21 4,249 1,371 Cash and cash equivalents at start of year 8,135 6,764 Cash and cash equivalents at end of year 12,384 8,135 Company Cash Flow Statement for the year ended 30 September 2009 2009 2008 Notes Â£000 Â£000 Net cash flow from operating activities Company net return before taxation (22,857) (92,549) Adjustments for: Losses on investments 12 23,723 95,341 Dividends reinvested (132) (171) Share based remuneration 251 516 Depreciation 58 Purchases of investments (57,427) (51,830) Sales of investments 67,202 56,133 10,818 7,440 Finance costs 2,802 2,800 Operating cashflows before movements in working capital 13,620 10,240 Increase in trade and other payables 437 1,869 Decrease/(increase) in trade and other receivables 112 (318) Net cash inflow from operating activities before tax 14,169 11,791 Tax recovered 2 Tax on unfranked income (106) (56) Net cash inflow from operating activities 14,065 11,735 Investing activities Purchases of tangible assets (282) Net cash outflow from investing activities (282) Financing activities Interest paid (2,783) (2,784) Dividends paid (6,631) (7,660) Purchases of own shares into Employee Incentive Trust (914) Exercise of options on own shares 44 907 Net cash outflow from financing activities (9,370) (10,451) Increase in cash and cash equivalents for year 20, 21 4,413 1,284 Cash and cash equivalents at start of year 7,718 6,434 Cash and cash equivalents at end of year 12,131 7,718 Notes to the Accounts General Information Majedie Investments PLC is a company incorporated in England under the Companies (Consolidation) Act 1908. 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 nature of the Group's operations and its principal activities are set out in the Business Review above. At the date of authorisation of these financial statements, the following relevant Standards and Interpretations have not been applied in these financial statements since they were in issue but not yet effective: International Accounting Standards (IAS/IFRSs) Effective date Amendment to IFRS 2 - IFRS 2 Vesting Conditions and Cancellations 1 January 2009 Business Combinations IFRS 3 (revised January 2008) 1 July 2009 IFRS 8 Operating Segments 1 January 2009 IFRS 9 Financial Instruments 1 January 2013 Presentation of Financial Statements IAS 1 (revised September 2007) 1 January 2009 IAS 23 Borrowing Costs (revised March 2007) 1 January 2009 Consolidated and Separate Financial IAS 27 Statements (revised January 2008) 1 July 2009 Amendment - Puttable Financial instruments and obligations existing IAS 32 on liquidation 1 January 2009 IAS 39 Amendment - Eligible hedged items 1 July 2009 International Financial Reporting Interpretations Committee (IFRIC) Effective date Hedges of a Net Investment IFRIC 16 in a Foreign Operation 1 October 2008 Distribution of non-cash assets IFRIC 17 to owners 1 July 2009 IFRIC 18 Transfer of Assets from Customers 1 July 2009 The directors anticipate that the adoption of the above Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. 1 Accounting Policies The accounts above comprise the audited results of the Company and its subsidiaries for the year ended 30 September 2009, and are presented in pounds sterling rounded to the nearest thousand, as this is the principal currency in which the Group and Company transactions are undertaken. Accounting Policies under International Financial Reporting Standards Basis of Accounting The accounts of the Group and the Company have been prepared in accordance with International Financial Reporting Standards (IFRS). They comprise standards and interpretations approved by the International Accounting Standards Board, and International Financial Reporting Committee, interpretations approved by the International Accounting Standards Committee that remain in effect, and to the extent they have been adopted by the European Union. Where presentational guidance set out in the Statement of Recommended Practice (SORP) regarding the Financial Statements of Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies in January 2009 and adopted early is consistent with the requirements of IFRSs, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. The early adoption of this SORP had no effect on the financial statements of the Company other than the recommendation to separately disclose capital reserves that relate to the revaluation of investments held at the balance sheet date. This new requirement replaces the requirement to disclose the value of the capital reserve that is unrealised. All the companies' activities are continuing. The principal accounting policies adopted are set out as follows: Basis of Consolidation The Consolidated Accounts incorporate the accounts of the Company and entities controlled by the Company (its subsidiaries) made up to 30 September each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. 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. Foreign Currencies The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in the foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity. Segmental Reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Investment Income Dividend income from investments is taken to the revenue account on an ex-dividend basis and net of any associated tax credit. 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 is included on an accruals basis. Expenses All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the income statement, 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 12 ). - 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. Pension Costs Payments made to the Company's defined contribution group personal pension plan are charged as an expense as they fall due. Finance Costs 75% of finance costs arising from the debenture stocks are allocated to capital at a constant rate on the carrying amount of the debt; 25% of the finance costs are charged on the same basis to the revenue account. Premiums payable on early repurchase of debenture stock are charged 100% to capital. Share Based Payments The Group has applied the requirements of IFRS 2: Share-based Payments. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 October 2004. The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value determined at the date of grant, which is expensed on a straight-line basis over the vesting period, based on the Group's estimate of 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 income statement 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 income statement 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 income statement, then no tax relief is transferred to the capital return column. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. No provision is made for tax on capital gains since the Company operates as an investment trust for tax purposes. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Leasehold improvements are written off in equal annual instalments over the minimum period of the lease whereas depreciation for other tangible assets is provided for at 25% to 33% per annum using the straight-line method. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Investments Held at Fair Value Through Profit or Loss When a purchase or sale is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date. All investments are accounted at fair value through profit or loss as defined by IAS 39. All investments are designated upon initial recognition as held at fair value through profit or loss, and are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Investments in unit trusts or open ended investment companies are valued at the closing price, the bid price or the single price as appropriate, released by the relevant investment manager. Unlisted investments are normally reviewed on a semi-annual basis by the Board of directors taking into account relevant information as appropriate including market prices, latest dealings, accounting information, professional advice and the guidelines issued by the International Private Equity and Venture Capital Association. Financial Instruments Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Derivative Financial Instruments The Group does not enter into derivative contracts for the purpose of hedging risks on its investment portfolio as it is a long term investor. The Group does, however, receive or purchase warrants on shares which are classified as equity instruments under IAS 32. These equity instrument derivatives are recognised at fair value on the date the contract is entered into and are subsequently re-valued at their fair value. Changes in the fair value of derivative financial instruments are recognised as they arise in the income statement. Trade Receivables Trade receivables do not carry any interest and are stated at their fair value as reduced by appropriate allowances for estimated irrecoverable amounts. Cash and Cash Equivalents Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. Financial Liabilities and Equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Debentures All debentures are recorded at proceeds received, net of direct issue costs and held at amortised cost. Trade Payables Trade payables are not interest bearing and are stated at their fair value. Reserves Gains and losses on the realisation of investments and foreign currency are accounted for in the capital reserve. Increases and decreases in the valuation of investments and currency held at the year end are accounted for in the capital reserve. Own Shares Own shares held under option are accounted for in accordance with IFRS 2: Share-based Payments. This requires that the consideration paid for own shares held be presented as a deduction from shareholders' funds, and not recognised as an asset. Critical Accounting Judgement In the process of applying the Company's accounting policies described above, the directors have made critical accounting judgements regarding the fair value of the unlisted investments (including Majedie Asset Management Limited (MAM)) that may have a significant effect on the financial statements of the Company. Note 12 sets out the relevant details of the MAM valuation including the assumptions on which the valuation is based. 2 Dividends and Interest Group Group Company Company 2009 2008 2009 2008 Â£000 Â£000 Â£000 Â£000 Listed investments - UK dividend income 3,633 5,438 3,633 5,438 - unfranked 811 457 811 457 Unlisted investments - unfranked 59 98 59 98 Interest on deposits 95 315 95 315 Exchange differences on income (4) (2) (4) (2) 4,594 6,306 4,594 6,306 3 Administration Expenses Group Group Company Company 2009 2008 2009 2008 Â£0 Â£0 Â£0 Â£0 Staff costs - note 5 1,165 1,923 1,165 1,923 Other staff costs and directors' fees 314 155 314 155 Advisers' costs 410 399 410 399 Relocation costs 128 128 Information costs 146 127 146 127 Establishment costs 113 130 113 130 Operating lease rentals - premises 139 146 139 146 Depreciation on tangible assets 58 25 58 Auditors' remuneration 59 63 56 55 (see below) Restructuring costs 121 121 Other expenses 334 184 337 217 2,866 3,273 2,866 3,273 A charge of Â£1,359,000 (2008: Â£1,571,000) to capital and an equivalent credit to revenue has been made in both the Group and Company to recognise the accounting policy of charging 75% of investment management expenses to capital. Total fees charged by the Auditors for the year, all of which were charged to revenue, comprised: Group Group Company Company 2009 2008 2009 2008 Â£000 Â£000 Â£000 Â£000 Audit services - statutory audit 59 62 56 54 Other non-audit services - relating to Employee Share Option Scheme 1 1 59 63 56 55 4 Directors' Emoluments - Company 2009 2008 Â£000 Â£000 Salaries and fees 282 607 Bonuses 200 Pension contributions 82 Other benefits 60 282 949 The Report on Directors' Remuneration included in the Company's Annual Report and Accounts explains the Company's policy on remuneration for non-executive directors for the year. It also provides further details of directors' remuneration. 5 Staff Costs including Executive Directors - Group 2009 2008 Â£000 Â£000 Salaries and other payments 724 1,100 Social security costs 126 180 Pension contributions 64 127 Share based remuneration - note 24 251 516 1,165 1,923 2009 2008 Number Number Average number of employees: Management and office staff 5 7 6 Finance Costs - Group and Company 2009 2008 Revenue Capital Revenue Capital return return Total return return Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Interest on 9.5% debenture stock 2020 321 962 1,283 321 962 1,283 Interest on 7.25% debenture stock 2025 375 1,126 1,501 375 1,126 1,501 Amortisation of expenses associated with debenture issue 6 12 18 5 11 16 702 2,100 2,802 701 2,099 2,800 Further details of the debenture stocks in issue are provided in note 16 7 Taxation Analysis of tax charge - Group and Company Group Group Company Company 2009 2008 2009 2008 Â£000 Â£000 Â£000 Â£000 Tax on overseas dividends 92 51 92 51 Reconciliation of tax charge: The current taxation for the year is higher than the standard rate of corporation tax in the UK (28%), (2008: 29%). The differences are explained below: Group Group Company Company 2009 2008 2009 2008 Â£000 Â£000 Â£000 Â£000 Net return before taxation (22,857) (92,549) (22,857) (92,549) Taxation at UK Corporation Tax rate of 28% (2008: 29%) (6,400) (26,839) (6,400) (26,839) Effects of: - UK dividends which are not taxable (1,551) (2,297) (1,551) (2,297) - other income which is not taxable (102) (4) (102) (4) - losses on investments which are not taxable 6,643 27,649 6,643 27,649 - expenses charged to capital reserve (231) (231) - expenses not deductible for tax purposes 107 52 - excess expenses for current year 1,550 1,439 1,550 1,439 - group relief surrendered 107 52 - overseas taxation which is not recoverable 92 51 92 51 - offset relief for foreign WHT (16) (16) Actual current tax charge 92 51 92 51 Group After claiming relief against accrued income taxable on receipt, the Group has unrelieved excess expenses of Â£48,200,000 (2008: Â£43,400,000). It is unlikely that the Group will generate sufficient taxable income in the future to utilise these expenses and therefore no deferred tax asset has been recognised. Company After claiming relief against accrued income taxable on receipt, the Company has unrelieved excess expenses of Â£48,200,000 (2008: Â£43,400,000). It is unlikely 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. 8 Segment Reporting The Group comprises the Company and its wholly owned subsidiaries. The Group's activity as an investment trust represents the sole significant business segment. 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 in the Annual Report & Accounts and exposure to different currencies is disclosed in note 25. 9 Dividends - Group and Company The following table summarises the amounts recognised as distributions to equity shareholders in the period: 2009 2008 Â£000 Â£000 2007 Special dividend of 4.50p paid on 23 January 2008 2,315 2007 Final dividend of 6.20p paid on 23 January 2008 3,189 2008 Interim dividend of 4.20p paid on 30 June 2008 2,156 2008 Special dividend of 2.25p paid on 28 January 2009 1,170 2008 Final dividend of 6.30p paid on 28 January 2009 3,276 2009 Interim dividend of 4.20p paid on 30 June 2009 2,185 6,631 7,660 2009 2008 Â£000 Â£000 Proposed final dividend for the year ended 30 September 2009 of 6.30p (2008: final dividend of 6.30p) per ordinary share 3,277 3,261 Proposed special dividend for the year ended 30 September 2009 of Nil (2008: 2.25p) per ordinary share 1,165 3,277 4,426 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 842 of the Income and Corporation Taxes Act 1988 are considered. 2009 2008 Â£000 Â£000 Interim dividend for the year ended 30 September 2009 of 4.20p (2008: 4.20p) per ordinary share 2,185 2,156 Proposed final dividend for the year ended 30 September 2009 of 6.30p (2008: 6.30p) per ordinary share 3,277 3,261 Proposed special dividend for the year ended 30 September 2009 of Â£nil (2008: 2.25p) per ordinary share 1,165 5,462 6,582 10 Return per Ordinary Share - Group and Company Basic return per ordinary share is based on 51,973,767 (2008: 51,478,751) 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 18. 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 2009 and 2008 since the share options referred to in note 18 would, if exercised, be satisfied by the shares already held by the employee incentive trust. 2009 2008 Â£000 Â£000 Basic and diluted revenue returns are based on net revenue after taxation of: 4,233 6,411 Basic and diluted capital returns are based on net capital return of: (27,182) (99,011) Basic and diluted total returns are based on return of: (22,949) (92,600) 11 Property and Equipment - Group and Company Leasehold Office Improvements Equipment Total Â£000 Â£000 Â£000 Cost: At 1 October 2008 355 266 621 Additions 171 63 234 Disposals (355) (355) At 30 September 2009 171 329 500 Depreciation: At 1 October 2008 319 254 573 Charge for year 42 16 58 Disposals (355) (355) At 30 September 2009 6 270 276 Net book value: At 30 September 2009 165 59 224 At 30 September 2008 36 12 48 12 Investments at Fair Value Through Profit or Loss - Group and Company 2009 2008 Listed Unlisted Total Listed Unlisted Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Opening cost at beginning of year 169,975 9,971 179,946 179,363 12,441 191,804 (Losses)/gains at beginning of year (21,638) 20,673 (965) 70,450 16,084 86,534 Opening fair value at beginning of year 148,337 30,644 178,981 249,813 28,525 278,338 Purchases at cost 58,826 50 58,876 51,910 1,394 53,304 Sales - proceeds (66,843) (66,843) (52,734) (4,584) (57,318) (Losses)/gains on sales (54,068) (54,068) (9,415) 1,571 (7,844) Increase/(decrease) in investment holding gains 28,434 1,911 30,345 (92,088) 4,589 (87,499) Adjustments for listing/delisting during financial year (3,429) 3,429 851 (851) Closing fair value at end of year 111,257 36,034 147,291 148,337 30,644 178,981 Closing cost at end of year 104,461 13,450 117,911 169,975 9,971 179,946 Gains/(losses) at end of year 6,796 22,584 29,380 (21,638) 20,673 (965) Closing fair value at end of year 111,257 36,034 147,291 148,337 30,644 178,981 Unlisted investments include an amount of Â£5,465,000 in 10 various companies and Â£30,000,000 for our investment in MAM as detailed below and Â£569,000 (2008: Â£972,000) of loan or convertible notes that pay a fixed rate of interest. The valuation of investments includes 11 unlisted investments of over Â£100,000 (including MAM). During the year the Company incurred transaction costs amounting to Â£374,000 (2008: Â£345,000) of which Â£243,000 (2008: Â£238,000) related to the purchases of investments and Â£131,000 (2008: Â£107,000) related to the sales of investments. These amounts are included in losses on investments at fair value through profit or loss, as disclosed in the Consolidated and Company income statement. The composition of the investment return is analysed below: 2009 2008 Â£000 Â£000 Net loss on investments (54,068) (7,844) Exchange gains on settlement 2 Increase/(decrease) in holding gains on investments 30,345 (87,499) (23,723) (95,341) Substantial Share Interests The Company has a number of investee company holdings where its investment is greater than 3% of any class of capital in those companies. Those that are considered material (excluding MAM which is disclosed separately below) in the context of these accounts are shown below: Fair Value % of Â£000 Class Held Hydrodec 1,440 4.064 Capital Lease Aviation 1,500 3.195 Majedie Asset Management Majedie Investments PLC owns a 30% equity shareholding in MAM, which provides investment management and advisory services relating to UK equities. The carrying value of the Company's investment in MAM is included in the consolidated balance sheet as part of investments at fair value through profit or loss: 2009 2008 Â£000 Â£000 Deemed cost of investment 1,207 1,207 Holding gains 28,793 21,293 Fair value at 30 September 30,000 22,500 The carrying value of MAM in the 30 September 2009 Consolidated Financial Statements is its fair value as assessed at 30 September 2009. The above valuation exercise was carried out by the Board in accordance with the Company's accounting policy for the valuation of unlisted investments. The approach adopted involved the consideration of earnings for the 2009 and the 2010 financial years, the inclusion of estimated performance fee income on a discounted basis, the application of a relevant market-based multiple to earnings and an overall illiquidity discount. The results of MAM for the year ended 30 September 2009 show a net profit after taxation of Â£14,222,000 (2008: Â£8,101,000) and shareholders' funds of Â£25,945,000 (2008: Â£16,180,000). In accordance with the review of the treatment of the investment in MAM these results are not consolidated in the Group's results but are incorporated into the directors' valuation of the fair value of MAM as detailed above. 13 Investment in Subsidiaries - Company The Company's subsidiaries at 30 September 2009 are as follows: Barlow Service Company Limited - non trading Majedie Portfolio Management Limited - manager of the Majedie Share Plan, authorised and regulated by the Financial Services Authority All the subsidiaries are incorporated in Great Britain and are wholly owned. During the year Majedie Investment Trust Management Limited; Barlow Investments Limited; Majedie Properties Limited; and Majedie Securities Limited were struck off the Register of Companies. Additionally on 8 September 2009, a further application was made to the Register of Companies to voluntarily strike off Barlow Service Company Limited. 2009 2008 Company Â£000 Â£000 Cost: At beginning of year 1,002 1,002 Disposals (2) At end of year 1,000 1,002 Depreciation: At beginning of year (808) (808) Depreciation in year (31) At end of year (839) (808) Valuation at end of year 161 194 14 Trade and Other Receivables Group Group Company Company 2009 2008 2009 2008 Â£000 Â£000 Â£000 Â£000 Sales for future settlement 1,078 1,437 1,078 1,437 Payments in advance 435 225 434 Dividends receivable 343 647 343 647 Other amounts due from MAM 6 6 Accrued income 18 14 18 14 Taxation recoverable 23 11 23 11 Amounts due from subsidiary undertakings 90 298 1,897 2,340 1,986 2,413 15 Cash and Cash Equivalents Group Group Company Company 2009 2008 2009 2008 Â£000 Â£000 Â£000 Â£000 Deposits 11,830 7,484 11,856 7,484 Other balances 554 651 275 234 12,384 8,135 12,131 7,718 16 Trade and Other Payables Amounts falling due within one year: Group Group Company Company 2009 2008 2009 2008 Â£000 Â£000 Â£000 Â£000 Purchases for future settlement 2,618 1,301 2,618 1,301 Accrued expenses 590 377 589 4 Other creditors 645 617 645 617 Amounts owed to subsidiary undertakings 177 3,853 2,295 3,852 2,099 Amounts falling due after more than one year: Group Group Company Company 2009 2008 2009 2008 Â£000 Â£000 Â£000 Â£000 Â£13.5m (2008: Â£13.5m) 9.5% debenture stock 2020 13,376 13,369 13,376 13,369 Â£20.7m (2008: Â£20.7m) 7.25% debenture stock 2025 20,386 20,375 20,386 20,375 33,762 33,744 33,762 33,744 Both debenture stocks are secured by a floating charge over the Company's assets. Expenses associated with the issue of debenture stocks were deducted from the gross proceeds and are being accounted for, at a constant rate, the effect of which is immaterially different to applying the effective interest rate method, over the life of the debentures. Further details on interest and the amortisation of issue expenses are provided in note 6. 17 Called Up Share Capital 2009 2008 Â£000 Â£000 Allotted and fully paid at 30 September: 52,528,000 (2008: 52,528,000) ordinary shares of 10p each 5,253 5,253 Authorised at 30 September: 70,000,000 (2008: 70,000,000) ordinary shares of 10p each 7,000 7,000 There are 505,490 (2008: 763,852) ordinary shares of 10p each held by the Employee Incentive Trust. See note 18 Ordinary shares carry one vote each on a poll. 18 Own Shares - Group and Company Following the exercise of share options under the Long Term Incentive Plan (LTIP) during the year 258,362 shares were sold by the Majedie Investments PLC Employee Incentive Trust (EIT) at a value of Â£44,000 resulting in a loss of Â£826,000. The total number of options outstanding at the date of this report is 106,656 under the Discretionary Share Option Scheme 2000 and nil under the LTIP and the total shareholding of the Trust is 505,490 ordinary shares. The shares will be held by the Trust until the relevant options are exercised or until they lapse. They are presented on the Balance Sheet as a deduction from shareholders' funds, in accordance with the policy detailed in note 1. Own Shares Number of Reserve Shares Â£000 As at 30 September 2008 763,852 (2,573) Net disposals (258,362) 871 As at 30 September 2009 505,490 (1,702) 19 Net Asset Value The consolidated net asset value per share has been calculated based on equity shareholders' funds of Â£124,181,000 (2008: Â£153,465,000) and on 52,022,510 (2008: 51,764,148) ordinary shares, being the shares in issue at the year end having deducted the number of shares held by the EIT. 20 Reconciliation of Net Cash Flow to Movement in Net Debt 2009 2008 Group Â£000 Â£000 Increase in cash in the year 4,249 1,371 Non cash items (18) (16) Change in net debt 4,231 1,355 Net debt beginning of year (25,609) (26,964) Net debt at end of year (21,378) (25,609) 2009 2008 Company Â£000 Â£000 Increase in cash in the year 4,413 1,284 Non cash items (18) (16) Change in net debt 4,395 1,268 Net debt at beginning of year (26,026) (27,294) Net debt at end of year (21,631) (26,026) 21 Analysis of Changes in Net Debt At 30 Non At 30 September Cash Cash September 2008 Flows Items 2009 Group Â£000 Â£000 Â£000 Â£000 Cash at bank 8,135 4,249 12,384 Debt due after one year (33,744) (18) (33,762) (25,609) 4,249 (18) (21,378) At 30 Non At 30 September Cash Cash September 2008 Flows Items 2009 Company Â£000 Â£000 Â£000 Â£000 Cash at bank 7,718 4,413 12,131 Debt due after one year (33,744) (18) (33,762) (26,026) 4,413 (18) (21,631) 22 Operating Lease Commitments During the year the Company entered into a new 10 year non-cancellable operating lease (with a break clause in 5 years) in respect of premises, which included a rent free period. The rent free element has been apportioned over the lease up to the date of the break clause. The Company has an annual commitment at 30 September 2009 under the new lease of Â£145,000 (2008: Â£146,000 under the prior lease). This operating lease commitment is disclosed in the table below: Expiry Date 2009 2008 new lease prior lease Â£000 Â£000 Within one year 121 70 Between one and two years 145 Between two and three years 145 Between three and four years 145 Five years and above 35 589 70 23 Financial Commitments At 30 September 2009 the Group had no financial commitments which had not been accrued for (2008: none). 24 Share-based Payments The Group operates two share-based payment schemes: the Discretionary Share Option Scheme 2000 and the 2006 Long Term Incentive Plan (LTIP) which in turn has two sections relating to TSR-based Awards and Matching Awards. The LTIP replaced the Discretionary Share Option Scheme 2000 for executive directors and senior executives, and the first awards were made in January 2006. Discretionary Share Option Scheme 2000 The Scheme involved the granting of share options, with an exercise price equal to the average quoted market price of the Company's shares on the date of grant, to executives in 2001, 2002, and 2004. Following a review of executive directors' remuneration in 2005, it was decided that no further awards of options would be made under the Scheme. Share options in the Scheme have a performance condition based on a specified annualised hurdle rate applying between the grant date and the exercise date. If the performance condition has been achieved up to the exercise date the share options may be exercised within a seven year period beginning three years after the date of grant. Long Term Incentive Plan: TSR-based Awards Awards of restricted shares up to a maximum value of one year's salary have performance conditions based on total shareholder return in relation to two separate performance conditions over a period of five years. The performance conditions contain higher and lower thresholds that determine the extent of the vesting of the award. Long Term Incentive Plan: Matching Awards Executive directors and senior executives receive a certain percentage of their overall bonus for the year in deferred shares. The shares granted according to these matching awards only vest once the executive has completed three years' further service. There are no other performance conditions. 2009 Discretionary Share Option TSR- based Matching Scheme 2000 Awards Awards Weighted Weighted Weighted No. Average No. Average No. Average Of Exercise Of Exercise Of Exercise Options Price (p) Options Price (p) Options Price (p) Outstanding at 1 October 2008 255,803 330.09 369,394 0.0 213,085 0.0 During the year: Awarded 106,207 0.0 Forfeited Exercised (30,925) 0.0 (197,272) 0.0 Expired (149,147) 330.14 (290,498) 0.0 Increase in awards due to dividends paid 12,249 0.0 1,258 0.0 Outstanding at 30 September 2009 106,656 330.03 166,427 0.0 17,071 0.0 Exercisable at 30 September 2009 2008 Discretionary Share Option TSR-based Matching Scheme 2000 Awards Awards Weighted Weighted Weighted No. Average No. Average No. Average Of Exercise Of Exercise Of Exercise Options Price (p) Options Price (p) Options Price (p) Outstanding at 1 October 2007 655,265 260.80 207,344 0.0 122,424 0.0 During the year: Awarded 147,072 0.0 84,245 0.0 Forfeited Exercised (399,462) 216.35 Expired Increase in awards due to dividends paid 14,978 6,416 Outstanding at 30 September 2008 255,803 330.09 369,394 0.0 213,085 0.0 Exercisable at 30 September 2008 28,270 0.0 101,108 0.0 The aggregate estimated fair value of the 106,207 TSR-based awards on 4 December 2008, being the date on which the awards were granted was Â£51,000 (2008: Â£213,000 relating to the aggregate estimated fair value of 147,072 options granted on 3 December 2007). There were no matching awards granted in 2009. The 84,245 matching awards granted in 2008 were made on 3 December 2007, 10 June and 19 November 2008 and had an aggregate estimated fair value on those dates of Â£179,000. On 5 December 2008, 101,982 share options were exercised at a share price of 155.5p giving a gain to the employee of Â£159,000. Similarly on 12 December 2008, 126,215 share options were exercised at a share price of 148p with a gain to the employee of Â£187,000 (2008: 230,784 share options were exercised at a share price of 304p and a resultant gain to the employee of Â£202,000, and 168,678 share options were exercised at a share price of 296.5p and resultant gain to the employee of Â£136,000). During the year 290,498 share options lapsed in accordance with the leaving agreements for two former directors. The options and awards outstanding at 30 September 2009 had a weighted average remaining contractual life of 0.2 years, 3.9 years and 2.1 years in respect of the Discretionary Share Options Scheme 2000, TSR-based Awards and Matching Awards respectively (2008: 2.7 years, 3.3 years and 1.9 years respectively). Awards and options are usually forfeited if the employee leaves employment before vesting. The following table lists the assumptions and weighted average inputs used in the Black Scholes model for share awards granted in the year: 2009 2008 2008 TSR-based TSR-based Matching Awards Awards Awards Weighted Average share price 162.5p 350.0p 323.1p Weighted Average exercise price 0.0p 0.0p 0.0p Expected Volatility 33.0% 15.0% 19.3% Expected Life 5yrs 5 yrs 3 yrs Risk Free rate 3.0% 4.5% 4.8% Expected dividends 6.5% 2.8% 3.2% Expected volatility was determined by calculating the historical volatility of the Company's share price over the last three years. The expected life used in the model had been adjusted, based on the management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. As a consequence of an employee leaving the Company on 28 November 2008 future period share option charges have been required to be recognised on that date in accordance with the early vesting provisions of IFRS 2. This results in a one-off charge of Â£191,000 (2008: Â£246,000) being included as part of the total expense of Â£251,000 (2008: Â£516,000) relating to share-based payment transactions in the year ended 30 September 2009. 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 Company's financial instruments comprise its investment portfolio - see note 12, cash balances, debtors and creditors that arise directly from its operations such as sales and purchases awaiting settlement and accrued income, and the debenture loans used to finance its operations. The Company is unlikely to use derivatives for hedging purposes and then only in exceptional circumstances with the specific prior approval of the Board. In pursuing its investment objective the Company is exposed to various risks which could cause short term variation in the Company's net assets and which could result in both or either a reduction in the Company's net assets or a reduction in the profits available for distribution by way of dividend. The main risk exposures for the 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 exposure to these risks. The risk management policies identified in this note have not changed materially from the previous accounting period. Market Risk The principal risk in the management of the portfolio is market risk i.e. the risk that values and future cashflows will fluctuate due to changes in market prices. This comprises: - foreign currency risk; - interest rate risk; and - other price risk i.e. movements in the value of investment holdings caused by factors other than interest rate or currency movements. These risks are taken into account when setting investment policy and making investment decisions. Foreign Currency Risk Exposure to foreign currency risk arises through investments in securities listed on overseas stock markets. A proportion of the net assets of the Company are denominated in currencies other than sterling, with the effect that the balance sheet and total return can be materially affected by currency movements. The Company's exposure to foreign currencies through its investments in overseas securities as at 30 September 2009 was Â£37,026,000 (2008: Â£22,400,000). The Investment Director monitors the Company's exposure to foreign currencies and the Board receives reports on a regular basis. In making investment decisions the Investment Director is mindful of the Company's benchmark allocation to foreign currencies but takes independent positions based on a long term view on the relative strengths and weaknesses of currencies. Additionally the currency of investment is not the only relevant factor considered as many portfolio investment companies are global in scope and nature. The Company does not normally hedge against foreign currency movements. The currency risk of the Company's financial assets and liabilities at the Balance Sheet date was: 2009 2008 Â£000 Â£000 Monetary exposures UK sterling 12,131 7,718 Non-monetary exposures US dollar 18,804 9,121 Euro 8,940 8,341 Hong Kong dollar 2,021 855 Indonesian rupiah 113 Swiss franc 1,623 207 Singapore dollar 735 Thai baht 476 Japanese yen 4,376 Canadian dollar 670 Australian dollar 526 2,617 UK sterling 112,637 159,188 149,662 181,588 Total assets 161,793 189,306 Liabilities Monetary exposures UK sterling (33,762) (33,744) Non-monetary exposures UK sterling (3,852) (2,099) (37,614) (35,843) Total net assets 124,179 153,463 Sensitivity analysis A 5% increase in sterling at 30 September 2009 against the relevant foreign currencies, with all other variables held constant, would have had the effect of reducing the Company's net assets and total return by Â£1,851,000 (2008: Â£1,067,000). A 5% decrease in sterling would have had the equal and opposite effect. 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. 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 Company's financial assets and liabilities at the Balance Sheet date was: 2009 2008 Â£000 Â£000 Floating rate financial assets UK sterling 12,131 7,718 Fixed rate financial assets As referred to in note - 569 972 Financial assets not carrying interest 149,093 180,616 Total assets 161,793 189,306 Fixed rate financial liabilities UK sterling (33,762) (33,744) Financial liabilities not carrying interest UK sterling (3,852) (2,099) Total liabilities (37,614) (35,843) Total net assets 124,179 153,463 Floating rate financial assets usually comprise cash on deposit which is repayable on demand and receive a rate of interest based on the base rates in force over the period. Fixed rate financial assets comprise convertible bonds or loan notes. The fixed rate financial liabilities comprise the Company's debentures totaling Â£34.2m nominal. They pay a weighted average rate of interest of 8.1% per annum and mature in 2020 (Â£13.5m) and 2025 (Â£20.7m). Sensitivity analysis Movements in interest rates would not have had a significant direct impact on net assets or total return but could indirectly, have a material, but unquantifiable impact on the investments held. Other Price Risk Exposure to market price risk is significant and comprises mainly movements in the market prices and hence value of the Company's listed equity investments which are disclosed in note 12. 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. Investments are considered independently of the Company's benchmark which may result in volatility in the short term. The Board receives reports on the investment portfolio, performance and volatility on a regular basis in order to ensure that the investment portfolio is in accordance with current strategy. Sensitivity analysis A 5% increase in listed equity valuations at 30 September 2009 would have increased total assets and total return by Â£5,563,000 (2008: Â£7,417,000). A 5% decrease in listed equity valuations would have had the equal but opposite effect. Credit Risk Credit risk is the risk of other parties failing to discharge an obligation causing the Company financial loss. The Company's exposure to credit risk is managed by the following: - The Company's listed investments are held on its behalf by RBC Dexia Investor Services Trust, the Company's custodian which if it became bankrupt or insolvent could cause the Company's rights with respect to securities held to be delayed. The Company receives regular internal control reports from the Custodian which are reviewed by Management and reported to the Board; - Investment transactions are undertaken with a number of approved brokers in the ordinary course of business. All new brokers are reviewed by a Board committee for credit worthiness and added to an approved brokers list if not considered to be a credit risk; - Cash is held at banks that are considered to be reputable and high quality. Cash balances are spread across a range of banks to reduce concentration risk; - Where the Company makes an investment in a loan or other security with credit risk, that credit risk is assessed and considered as part of the investment decision making process by the Investment Director. The Board receives regular reports on the composition of the investment portfolio. Credit Risk Exposure As at 30 September 2009, cash balances total Â£12,131,000 (2008: Â£7,718,000), debtors and prepayments total Â£1,986,000 (2008: Â£2,413,000). Also included within the portfolio are a number of convertible notes or loan notes designated at fair value through profit or loss. The total value of these notes are Â£569,000 (2008: Â£972,000). One loan note with a cost of Â£422,000 is currently impaired and has been written down to Â£nil. The minimum exposure to credit risk during the year was Â£20,069,000 and the maximum exposure was Â£10,404,000. Liquidity Risk Liquidity risk is the risk that the Company will encounter difficulties meeting its obligations as they fall due. Liquidity risk is not significant as the majority of the Company's assets are investments in quoted equities and other quoted securities that are readily realisable. The Board has various limits in respect of how much of the Company'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 increase in the value of unlisted investments primarily reflects the increase in the value of MAM during the year. The Company maintains an appropriate level of cash balances in order to finance its operations and the Investment Director regularly monitors the Company's cash balances to ensure all known or forecasted liabilities can be met. The Board receives regular reports on the level of the Company's cash balances. The Company does not have any overdraft or other borrowing facilities to provide liquidity. A maturity analysis of financial liabilities showing the remaining contractual maturities is detailed below: Undiscounted cash flows Due within Due between Due between Due 3 years 1 year 1 and 2 years 2 and 3 years and beyond Total 2009 Â£000 Â£000 Â£000 Â£000 Â£000 9.5% debenture stock 2020 13,500 13,500 7.25% debenture stock 2025 20,700 20,700 Interest on financial liabilities 2,783 2,783 2,783 29,216 37,565 Trade payable and other liabilities (excluding social security and sundry taxes) 3,852 3,852 At 30 September 2009 6,635 2,783 2,783 63,416 75,617 Undiscounted cash flows Due within Due between Due between Due 3 years 1 year 1 and 2 years 2 and 3 years and beyond Total 2008 Â£000 Â£000 Â£000 Â£000 Â£000 9.5% debenture stock 2020 13,500 13,500 7.25% debenture stock 2025 20,700 20,700 Interest on financial liabilities 2,783 2,783 2,783 31,999 40,348 Trade payable and other liabilities (excluding social security and sundry taxes) 2,098 2,099 At 30 September 2008 4,881 2,783 2,783 66,199 76,647 Fair value of financial assets and liabilities The Company's financial instruments at 30 September comprised the following: Book Value Book Value Fair Value Fair Value 2009 2008 2009 2008 Â£000 Â£000 Â£000 Â£000 Financial assets Investment portfolio 147,291 178,981 147,291 178,981 Cash 12,131 7,718 12,131 7,718 Financial liabilities Â£13.5m (2008: Â£13.5m) 9.5% debenture stock 2020 13,376 13,369 16,462 17,016 Â£20.7m (2008: Â£20.7m) 7.25% debenture stock 2025 20,386 20,375 21,870 22,257 The investment portfolio has been valued in accordance with the accounting policy in note 1 to the accounts. Accordingly, book value equates to fair value. The fair value of the debenture stock is based on a combination of information provided by FT Interactive Data and Discounted cash flow analysis as at 30 September in each year. 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 net debt (comprised of debentures less cash) at any one time which is maintained by management of the Company's cash balances. The Company's capital at 30 September comprises: 2009 2008 Â£000 Â£000 Net debt Cash (12,131) (7,718) Debentures 33,762 33,744 Sub total 21,631 26,026 Equity Equity share capital 5,253 5,253 Retained earnings and other reserves 118,926 148,210 Sub total 124,179 153,463 Net debt as a percentage of net assets 17.4% 17.0% The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. The review includes: - the level of net gearing, taking into account the Investment Director's views on the market; - the level of the Company's free float of shares as the Barlow family owns approximately 55% of the share capital of the Company; 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 Derivative Financial Instruments In the course of its investment activities the Company receives warrants on ordinary shares which provide exposure to companies on favourable terms. At 30 September 2009, the fair value of the Company's warrants, both listed and unlisted was Â£nil (2008: Â£18,000). Changes in the fair value of warrants amounting to Â£18,000 (2008: Â£3,000) have been debited to the income statement in the year ended 30 September 2009. 27 Related Party Transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Majedie Asset Management Limited (MAM) is a related party. It is accounted for as an investment in the portfolio valued at fair value through profit or loss. Amounts Owed Amounts Owed Details of by Related to Related Transactions Parties Parties 2009 2008 2009 2008 2009 2008 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Majedie Asset Management Limited Ordinary dividend due to Group 1,906 Special dividend due to Group 2,484 At 30 September 2009 the Company held investments in funds managed by MAM representing 1.0% (2008: 1.5%) of the Company's investment portfolio as set out in the table below. 2009 2008 Market Value Market Value Fund Â£000 Â£000 Majedie Asset Management UK Opportunities `A' 2,447 Majedie Asset Management UK Focus `B' 248 Majedie Asset Management UK Equity `B' 246 Majedie Asset Management Tortoise Fund `B' 1,645 1,645 2,941 Distributions totalling Â£23,000 (2008: Â£78,000) from these investments were received by the Company during the year. The investment in the Tortoise fund has incurred direct fees of Â£81,000 (2008: Â£nil) during the year. The remuneration of the directors, who are the key management personnel of the Group, 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 which can be found in the Annual Report & Accounts. 2009 2008 Â£000 Â£000 Short-term employee benefits 282 949 Share-based payments 492 282 1,441 DOCUMENTS AVAILABLE FOR INSPECTION At the Annual General Meeting to be held on 20 January 2010, it is proposed that new Articles of Association be adopted, primarily to reflect the provisions of the Companies Act 2006 that are due to come into force on or before 1st October 2009 and the provisions of the Companies (Shareholders' Rights) Regulations 2009 which came into force on 3rd August 2009. An explanation of the principal changes is set out in the Annual Report and Accounts for the year ended 30 September 2009, a copy of which can be found at www.majedie.co.uk. A copy of the proposed New Articles of Association marked up to show the proposed amendments will be available for inspection from the date of this report until the conclusion of the Annual General Meeting during normal business hours on any weekday at the registered office of the Company. The proposed New Articles of Association will be available for inspection at any time until the conclusion of the Annual General Meeting on the Company's website at www.majedie.co.uk and will be available at the venue of the Annual General Meeting from 15 minutes prior and until the conclusion of the meeting. A copy of the proposed New Articles of Association is being lodged with the UK Listing Authority and will shortly be available for inspection through the Document Viewing Facility, which is situated at Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS (Tel no. 020 7676 8224). 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. ENQUIRIES If you have any enquiries regarding this announcement please contact Mr Gerry Aherne on 020 7626 1243.

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