Annual Financial Report
MAJEDIE INVESTMENTS PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2015
The full Annual Report and Accounts will shortly be available via the Company's website at www.majedieinvestments.com or by contacting the Company Secretary on telephone number 020 7954 9526.
The Directors present the results of the Company for the year ended 30 September 2015.
Investment Objective
The Company's investment objective is to maximise total shareholder return whilst increasing dividends by more than the rate of inflation over the long term.
|
Highlights |
2015 |
|
Total shareholder return (including dividends): |
15.7% |
|
Net asset value total return (debt at par including dividends): |
12.9% |
|
Total dividends (per share): |
8.0p |
|
Directors' valuation of investment in Majedie Asset Management Limited: |
£52.3m |
Year's Summary
|
Group Capital Structure |
Note |
2015 |
2014 |
% |
|
as at 30 September |
|
|
|
|
|
Total Assets |
1 |
£183.7m |
£167.9m |
+9.4 |
|
Which are attributable to: |
|
|
|
|
|
Debenture holders (Debt at par value) |
2 |
£33.9m |
£33.9m |
|
|
Equity Shareholders |
|
£149.8m |
£134.0m |
+11.8 |
|
Gearing |
4 |
21.3% |
23.4% |
|
|
Potential Gearing |
4 |
22.6% |
25.3% |
|
|
Group total returns (capital growth plus dividends) |
5 |
|
|
|
|
Net asset value per share (debt at par value) |
3 |
+12.9% |
+10.8% |
|
|
Net asset value per share (debt at fair value) |
3 |
+13.0% |
+12.4% |
|
|
Share price |
|
+15.7% |
+49.7% |
|
|
Group capital returns |
|
|
|
|
|
Net asset value per share (debt at par value) |
3 |
281.9p |
256.7p |
+9.8 |
|
Net asset value per share (debt at fair value) |
|
265.5p |
241.8p |
+9.8 |
|
Share price |
|
257.3p |
229.0p |
+12.4 |
|
Discount of share price to net asset value per share |
|
|
|
|
|
Debt at par value |
|
8.7% |
10.8% |
|
|
Debt at fair value |
|
3.1% |
5.3% |
|
|
Group revenue and dividends |
|
|
|
|
|
Net Revenue available to Equity Shareholders |
|
£4.9m |
£4.9m* |
|
|
Net revenue return per share |
|
9.4p |
9.4p* |
+0.0 |
|
Total dividends per share |
|
8.0p |
7.5p |
+6.7 |
|
Total administrative expenses |
|
£2.1m |
£1.9m* |
|
|
Ongoing charges: |
6 |
|
|
|
|
Group (including costs of running subsidiary entities) |
|
1.9% |
1.8%* |
|
|
Company (costs of operating the Company) |
|
1.9% |
1.7% |
|
Notes
Definitions of terms used in the above summary are as follows:
1. Total Assets Total assets are defined as total assets less current liabilities.
2. Debt at par or fair value Par value is the nominal or face value attaching to the debentures which will be paid by the Company to the debenture holders on maturity. Fair value is the estimated market price the Company would pay (on the relevant year end date), as a willing buyer, to a debenture holder, as a willing seller, in an arms-length transaction.
3. Net Asset Value The Net Asset Value (NAV) is the value of all the Company's assets less any liabilities. The NAV is usually expressed as an amount per share.
4. Gearing and Potential Gearing Gearing represents the amount of borrowings that a company has and is calculated using Association of Investment Companies (AIC) guidance. It is usually expressed as a percentage of Equity Shareholders Funds and a positive percentage or ratio above one shows the extent of the borrowings. Gearing is calculated as borrowings less net current assets to arrive at a net borrowings figure. Potential Gearing excludes cash from the calculation. Details of the calculation for the Company are in note 27.
5. Total Return Total returns include any dividends paid as well as capital returns as a result of an increase or decrease in a company's share price or net asset value.
6. Ongoing charges Ongoing charges are a measure of the normal ongoing costs of running a company. Further information is contained in the Business Review section of the Strategic Report.
* Includes both continuing and discontinued operations.
|
Year's high/low |
|
2015 |
2014 |
|
Share price |
high |
281.0p |
240.0p |
|
|
low |
213.3p |
160.0p |
|
Net asset value - debt at par |
high |
294.2p |
256.7p |
|
|
low |
229.2p |
228.6p |
|
Discount - debt at par |
high |
14.2% |
33.5% |
|
|
low |
1.4% |
1.4% |
|
(Premium)/Discount - debt at fair value |
high |
8.4% |
28.4% |
|
|
low |
(5.5%) |
(4.6%) |
Ten Year Record
to 30 September 2015
|
Year |
Total† |
Equity |
NAV |
Share |
Discount |
Earningsˆ |
Dividend |
Gearing† |
Potential |
Company |
|
2006* |
242,903 |
209,189 |
403.2 |
338.3 |
16.09 |
12.45 |
9.50** |
13.94 |
16.12 |
1.28 |
|
2007* |
286,944 |
253,216 |
490.7 |
413.3 |
15.77 |
13.60 |
14.50** |
10.65 |
13.32 |
1.24 |
|
2008 |
187,209 |
153,465 |
296.5 |
250.0 |
15.68 |
12.45 |
12.75** |
16.69 |
21.99 |
1.61 |
|
2009 |
157,943 |
124,181 |
238.7 |
189.8 |
20.51 |
8.14 |
10.50** |
17.22 |
27.19 |
2.06 |
|
2010 |
150,940 |
117,159 |
225.2 |
191.5 |
15.00 |
11.83 |
13.00** |
24.11 |
28.83 |
2.36 |
|
2011 |
145,683 |
111,634 |
214.5 |
139.5 |
34.96 |
4.66 |
10.50** |
(1.72) |
30.28 |
1.92 |
|
2012 |
146,057 |
112,234 |
215.6 |
155.8 |
27.74 |
4.90 |
10.50** |
9.24 |
30.14 |
1.83 |
|
2013 |
159,013 |
125,166 |
240.5 |
160.0 |
33.47 |
6.80 |
10.50** |
21.47 |
27.04 |
1.73 |
|
2014 |
167,934 |
134,061 |
256.7 |
229.0 |
10.79 |
9.36 |
7.50** |
23.39 |
25.27 |
1.66 |
|
2015 |
183,708 |
149,807 |
281.9 |
257.3 |
8.73 |
9.42 |
8.00** |
21.25 |
22.63 |
1.88 |
Notes:
† Calculated in accordance with AIC guidance.
ˆ Includes both continuing and discontinued operations.
# As from May 2012, Ongoing Charges replace previous cost ratios.
* Restated to reflect the review of the treatment of the investment in Majedie Asset Management.
** Net dividends represent dividends that relate to the Company's financial year. Under International Financial Reporting Standards (IFRSs) dividends are not accrued until paid or approved.
Strategic Report
Chairman's Statement
The year ended 30 September 2015 represents the first full year of the Company's assets being managed by Majedie Asset Management (MAM). In the 12 months to 30 September 2015 the NAV (Net asset value with debt at par) rose by 12.9% on a total return basis and the share price by 15.7% on a total return basis. In general stock markets were weak in the second half of the year having risen in the first half of the year. Over the year to 30 September 2015 the FTSE All Share Index and the MSCI World Index fell by 2.3% and 0.1% respectively on a total return basis.
Results and Dividends
The Group had a capital return for the year of £12.5m compared to the capital return of £11.0m from continuing operations in 2014. There were no discontinued operations in 2015, whereas in 2014 there was a £2.6m capital loss. Total income for the Group was £6.6m compared to £6.6m in 2014. The composition of total income has altered due to the sale of 10% of MAM in March 2014 and 2.5% in December 2014. Subsequently the dividend received from MAM fell from £3.6m in the year to 30 September 2014 to £3.3m in the year to 30 September 2015. The maintenance of the overall income level was accounted for by increased income from the MAM Funds.
Total Group administrative expenses and management fees have fallen from £2.3m to £2.1m. On a continuing basis, the total Group administrative expenses and management fees have risen from £1.6m to £2.1m. The increase reflects the first full year of investment management fees paid to MAM, the Company paying a full year of administrative expenses that previously were borne by Javelin Capital and bearing the full annual costs of a depositary following the implementation of The Alternative Investment Fund Managers Directive (AIFMD). The Investment Management arrangements with MAM came into effect in January 2014.
The future reduction of administration costs remain a key area of focus for the Board and costs will fall over time, due to actions that have already been taken, most notably, on property. Some benefits will be evident in the year to September 2016, but the full impact will be seen in the year to September 2017.
The Company has also undertaken a review of its Fund Administration and has decided it is more appropriate for its current structure to in-source Fund Administration. This will reduce overall costs in future years. Notwithstanding these actions the self-managed nature of the Company and its size mean costs will remain somewhat higher than the average. However shareholders will hopefully benefit from a dedicated resource particularly as regards marketing the investment attractions to the widest possible audience.
The net revenue return after taxation from continuing operations for the year to 30 September 2015 was £4.9m compared to £5.1m in the year to September 2014.
The Board rebased the full year dividend to 7.5p in 2014 and having paid an interim dividend of 3.0p the final dividend will be 5.0p per share. This represents an increase of 6.7% from the full year dividend in 2014. The final dividend will be paid on 27 January 2016 to shareholders on the register on 15 January 2016.
I am pleased that the Company's share price has maintained a premium to its NAV with debt at fair value (as released weekly to the market). This is against a background of weak stock markets in the second half of the year and reflects a growing recognition of the unique nature of the Company's assets which are managed across a variety of strategies by a leading boutique manager. The Company retains a significant investment in MAM.
In the second half of the year the Company has issued stock from its EBT at a premium to NAV. The EBT has now been closed, with all shares in it having been sold. The Company has permission from shareholders to issue up to 10% of its equity at a premium to the prevailing NAV (debt at fair value). The Company was granted a blocklisting exemption from the United Kingdom Listing Authority in June and since then has issued 605,000 shares at a premium to NAV. It is intended to renew this permission from shareholders at the AGM. Such share issuance will increase the size of the Company which will benefit all shareholders as the cost of debentures are diluted, the ongoing charges ratio is reduced and the liquidity of the Company's shares is likely to increase.
Annual General Meeting
The AGM will be held on 20 January 2016 at 12.00 noon at the City of London Club, 19 Old Broad Street, London EC2N 1DS. Details are set out in the notice of the meeting on page 89 of the Company's Annual Report and Accounts. There will be presentations from MAM and the Board and an opportunity to ask questions. I hope you will be able to attend.
The Company will move in December 2015 to new and more appropriate premises at 1, Kings Arms Yard, London EC2R 7AF.
Finally I would like to thank my fellow directors and particularly the staff that have contributed to a successful year for the Company with a total return of 12.9% whilst stock markets were generally flat. I look forward to further progress being made on reducing the Company's costs in the current year.
Andrew J Adcock
Chairman
4 December 2015
Extracts from the Strategic Report
Chief Executive's Report
Introduction
The Company's assets, apart from the direct stake in MAM, are allocated at the discretion of the Board between investment strategies managed by MAM. The Company has no overall benchmark; rather each fund has its own benchmark. The Company's total assets were £183.7m at 30 September 2015. In the year there were two main changes in the Company's asset allocation. First, the Company sold 2.5% of MAM in December 2014 for £5.7m; of the proceeds £2.0m was allocated to the MAM UK Equity Segregated Fund, £2.0m to the MAM UK Income Fund and £1m to the MAM Tortoise Fund. Secondly there was a reallocation in August 2015 of £10m from the MAM UK Equity Segregated Fund to the MAM Global Equity Fund.
MAM Funds and Investment Performance
The MAM UK Equity Fund is the flagship product of MAM having started in March 2003 and since inception to September 2015 has returned 12.8% per annum net of fees with a relative outperformance against its benchmark FTSE All Share Index of 4.0% per annum. The Company's assets are invested in a segregated fund that is managed in parallel to the MAM UK Equity Fund. The funds are predominantly invested in UK equities with overseas equities limited to 20% and the strategy incorporates a dedicated allocation to UK smaller companies. The sum invested in the segregated fund at 30 September 2015 was £56.3m which represents 30.6% of the Company's total assets. In the year to 30 September 2015 the fund returned 0% net of fees, which is an outperformance of 2.3% against its benchmark. Details of the principal investments held within the UK segregated fund are set below.
The MAM Tortoise Fund is a global equity absolute return product which started in August 2007 and since inception has returned 8.7% per annum net of fees. The fund has an allocation of £27.5m which represents 15.0% of the Company's total assets. The fund returned -3.5% net of fees in the year to 30 September. As an absolute return fund it has no relevant benchmark.
The MAM UK Income Fund started in December 2011. Its objective is to maintain an attractive yield whilst outperforming the FTSE All Share Index over the longer term. Since inception the fund has returned 19.4% per annum net of fees which is an outperformance of 10.6% per annum. In the year to 30 September 2015 the fund returned 11.0% net of fees, which is an outperformance of 13.3% against its benchmark. The Company has an allocation of £20.5m to the fund which represents 11.1% of the Company's total assets.
The MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund were launched in June 2014. Since inception the funds have returned 4.3%, 8.0% and 19.3% net of fees which represent an outperformance against their benchmarks of 1.6%, 5.3% and 7.1% respectively. In the year to September the funds returned 2.5%, 8.2% and 11.0% net of fees, which is a relative outperformance of 2.6%, 8.3% and 5.3% compared to the sterling benchmarks of the MSCI ACWI (Developed and Emerging Markets) and the S&P 500. The absolute returns for the Company have benefitted from the strength of the dollar though this has had no effect on relative returns. At 30 September 2015, the Company's allocations to these funds were £14.6m, £5.4 and £6.0m respectively which represent 7.9%, 2.9% and 3.2% of the Company's total assets.
The aggregate geographic and sector exposures of the MAM UK Equity Segregated Fund, MAM UK Income Fund, MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund are shown below.
To enhance the transparency for shareholders of the individual MAM funds we intend that the fund factsheets for each of the MAM funds which the Company invests in will be available on the Company's website in due course.
Majedie Asset Management
The Company sold 2.5% of MAM in December 2014 and, following the cancellation by MAM of some shares, now owns 16.7% of MAM. The Board has increased the value of its holding in MAM to £52.3m as at 30 September 2015. The valuation of MAM is formulaic and the Board believe reflects fair value. The holding in MAM represents 28.6% of the Company's total assets. During the year to September the Company received dividends of £3.3m from its holding in MAM.
MAM's AUM increased to £11.2bn during the year from £10.2bn, predominantly as a result of strong inflows into the MAM UK Income Fund that were balanced by negative stock market movements in the second half of the year. The relative performances of all the long only funds were ahead of their respective benchmarks over the year. The MAM Global Fund, MAM Global Focus Fund and MAM US Equity Fund have each performed well since their launch in June 2014. The third party assets invested in these funds are now growing and the level of enquiries from potential investors is encouraging for the future.
Realisation Portfolio
The realisation portfolio is now immaterial for the Company though the remaining holdings are monitored in case further value can be achieved. It is now less than 0.2% and net cash is 0.5% of total assets. The net cash figure excludes cash held within the segregated fund.
Summary
The year represented a difficult one for stock markets globally so it is encouraging that the Company's NAV increased by 12.9%. Investments in a variety of MAM funds give the Company access to a variety of style and coverage. The result is a diversified portfolio in terms of geography and sectors. The increased allocation to the MAM Global Equity Fund and consequent reduction in the MAM UK Equity Segregated Fund should further diversify the return profile. The MAM Tortoise Fund did not meet our return expectations in the last year, but it remains an important tool to manage the volatility of returns in periods of turbulent markets and therefore should enhance the risk return characteristics of the total portfolio over time. The holding in MAM remains a key differentiator for the Company's shareholders and it is pleasing that the new Global and US Funds have had such a strong track record since their inception.
Development of Net Asset Value
The chart below outlines the change in the Group's Net Asset Value (with debt at par) over the year ended 30 September 2015. In aggregate, the NAV has increased by £15.7m, being comprised of net investment gains of £22.3m, inflows from the issue of new shares and EBT shares of £2.2m, being offset by expenses and interest of £4.9m and lastly dividends paid to shareholders of £3.9m.
|
NAV 30.09.2014 |
£134.1m |
|
MAM UKES Portfolio |
+£1.2m |
|
MAM |
+£20.0m |
|
MAM Funds |
+£1.3m |
|
Realisation Portfolio |
(£0.2m) |
|
Issue of new shares (Incl. EBT shares) |
+£2.2m |
|
Admin Costs |
(£2.1m) |
|
Finance Costs |
(£2.8m) |
|
Dividend Paid |
(£3.9m) |
|
NAV 30.09.2015 |
£149.8m |
Allocation of Total Assets as at 30 September 2015
|
|
Value |
|
% of |
|
MAM UK Equity Segregated Fund |
56,280 |
|
30.6 |
|
MAM UK Income Fund |
20,470 |
|
11.1 |
|
MAM Global Equity Fund |
14,564 |
|
7.9 |
|
MAM Global Focus Fund |
5,397 |
|
2.9 |
|
MAM US Equity Fund |
5,970 |
|
3.2 |
|
MAM Tortoise Fund |
27,547 |
|
15.0 |
|
MAM |
52,300 |
|
28.6 |
|
Net cash/realisation fund* |
1,180 |
|
0.7 |
|
|
183,708 |
|
100.0 |
*Net cash and realsation fund does not include cash held in the MAM UK Equity Segregated fund or MAM funds.
MAM Fund Performance
|
|
12 months to |
|
|
Since MI invested |
% benchmark return |
% Relative Performance |
|
MAM UK Equity Segregated Fund |
0.0 |
(2.3) |
2.3 |
(2.0) |
(3.0) |
1.0 |
|
MAM UK Income Fund |
11.0 |
(2.3) |
13.3 |
15.9 |
0.4 |
15.5 |
|
MAM Global Equity Fund |
2.5 |
(0.1) |
2.6 |
4.3 |
2.7 |
1.6 |
|
MAM Global Focus Fund |
8.2 |
(0.1) |
8.3 |
8.0 |
2.7 |
5.3 |
|
MAM US Equity Fund |
11.0 |
5.7 |
5.3 |
19.3 |
12.2 |
7.1 |
|
Tortoise Fund |
(3.5) |
|
|
(8.2) |
|
|
Notes:
All Fund returns are shown net of fees.
The MAM UK Equity Segregated Fund commenced on 22 January 2014. On 18 December 2014 the allocation was increased by £2.0m and on 19 August 2015 the allocation was reduced by £10m.
The initial investment in the MAM UK Income Fund was made on 29 January 2014. On 18 December 2014 the allocation was increased by £2m.
The initial investments in the MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund were made on 30 June 2014 and 27 June 2014 respectively. The allocation to the MAM Global Equity Fund was increased by £10m on 19 August 2015.
The initial investment in the MAM Tortoise Fund was made on 29 January 2014 and the allocation was increased by £1.0m on 18 December 2014.
William Barlow
CEO
4 December 2015
Fund Analysis
at 30 September 2015
Geographical Analysis
|
|
% of Total |
|
UK |
62.5 |
|
Europe |
13.4 |
|
US |
18.4 |
|
Asia Pacific |
1.3 |
|
Emerging Markets |
2.4 |
|
Cash |
2.0 |
|
|
100.0 |
Sector Analysis
|
|
% of Total |
|
Basic Materials |
6.2 |
|
Consumer Goods |
3.0 |
|
Consumer Services |
23.9 |
|
Financials |
25.7 |
|
Healthcare |
5.6 |
|
Industrials |
8.8 |
|
Oil & Gas |
7.2 |
|
Technology |
4.5 |
|
Telecommunications |
12.1 |
|
Utilities |
1.0 |
|
Cash |
2.0 |
|
|
100.0 |
Notes:
The assets analysed above are the aggregate exposure of MAM UK Equity Segregated Fund, MAM UK Income Fund, MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund. The aggregate represents a total of 65.7% of the Company's total assets.
Exposures are classified on the stock exchange on which the underlying equity is listed and FTSE sector classification.
Twenty Largest MAM UK Equity Segregated Fund Holdings
at 30 September 2015
|
Company |
Market Value |
|
% of UK |
|
MAM UK Smaller Companies Fund* |
5,202 |
|
9.4 |
|
HSBC Holdings plc |
3,664 |
|
6.6 |
|
Royal Dutch Shell plc |
2,771 |
|
5.0 |
|
Vodafone Group Plc |
2,740 |
|
5.0 |
|
BP plc |
2,739 |
|
5.0 |
|
Barclays Bank PLC |
2,181 |
|
3.9 |
|
Orange SA |
1,752 |
|
3.2 |
|
Tesco Plc |
1,686 |
|
3.1 |
|
Royal Bank of Scotland Group plc |
1,649 |
|
3.0 |
|
GlaxoSmithKline plc |
1,594 |
|
2.9 |
|
BT Group plc |
1,548 |
|
2.8 |
|
Telecom Italia SpA |
1,419 |
|
2.6 |
|
Marks & Spencer Group PLC |
1,307 |
|
2.4 |
|
Royal KPN NV |
1,213 |
|
2.2 |
|
Rentokil Initial plc |
1,135 |
|
2.1 |
|
Rio Tinto plc |
1,090 |
|
2.0 |
|
Lloyds Banking Group plc |
1,035 |
|
1.9 |
|
Wm Morrison Supermarkets plc |
997 |
|
1.8 |
|
AstraZeneca PLC |
966 |
|
1.7 |
|
Travis Perkins plc |
935 |
|
1.7 |
|
|
37,623 |
|
68.3 |
* Previously MAM Special Situations Fund.
Business Review
Introduction and Strategy
Majedie Investments PLC (the Company) is an investment trust company and an Alternative Investment Fund (AIF), with an investment objective to maximise total shareholder return, whilst increasing dividends by more than the rate of inflation over the long term. In seeking to achieve this objective, the Board has determined an investment policy and related guidelines or limits. The investment objective and policy (as detailed below) were both last approved by shareholders at a General Meeting of the Company on 27 February 2014.
The Company has been subject to the Alternative Investment Fund Managers Directive (AIFMD) from 22 July 2014. The AIFMD regulates the Alternative Investment Fund Managers (AIFMs) of AIF's. The Company's status under the AIFMD is that it is a self-managed AIF (meaning that it is also an AIFM as well as an AIF), which requires the Company to be authorised and regulated by the Financial Conduct Authority (FCA). The AIFMD also requires the appointment of a depositary and the Company has appointed Bank of New York Mellon UK (BNYM (UK)) to be its depositary. Further details concerning the Company's regulatory environment are set out below.
Since January 2014, the Company has been a member of the AIC (the trade body for closed-ended investment companies).
The purpose of the Strategic Report (which is the Strategic Report for the Group) is to inform the shareholders of the Company and help them assess how the directors have performed their duty to promote the success of the Company in accordance with section 172 of the Companies Act 2006 by:
• analysing development and performance using appropriate Key Performance Indicators (KPIs);
• providing a fair and balanced review of the Company's business;
• outlining the principal risks and uncertainties affecting the Company;
• describing how the Company manages these risks;
• setting out the Company's environmental, social and ethical policy;
• outlining the main trends and factors likely to affect the future development, performance and position of the Company's business; and
• explaining the future business plans of the Company.
Business Model
In pursuing its investment objective, the Company's business model includes other entities which together form the Group. Active companies in the Group currently consist of the Company (as a global equity investment trust and FCA regulated self-managed AIF) and Majedie Portfolio Management Limited (which is the FCA regulated Majedie Investments PLC Share Plan Manager). Further details about the subsidiary company can be found in note 14 to the Accounts.
The business model currently used by the Company delegates certain arrangements to other service providers. These delegations are in accordance with the AIFMD (the details of the material delegations can be found below), but the Board, as an AIFM and in accordance with the Company's investment objective and policy, directs, controls and monitors the overall performance, operations and direction of the Company.
The Company's Employees, Social, Environmental, Ethical and Human Rights policy is contained in the Directors' Report.
Investment Objective
The Company's investment objective is to maximise total shareholder return whilst increasing dividends by more than the rate of inflation over the long term.
Investment Policy
• General
The Company invests principally in securities of publicly quoted companies worldwide and in funds managed by its investment manager, though it may invest in unquoted securities up to levels set periodically by the Board, including its investment in MAM. Investments in unquoted securities, other than those managed by its investment manager or made prior to the date of adoption of this investment policy, (measured by reference to the Company's cost of investment) will not exceed 10% of the Company's gross assets.
• Risk Diversification
Whilst the Company will at all times invest and manage its assets in a manner that is consistent with spreading investment risk, there will be no rigid industry, sector, region or country restrictions. The overall approach is based on an analysis of global economies sector trends with a focus on companies and sectors judged likely to deliver strong growth over the long term. The number of investments held, together with the geographic and sector diversity of the portfolio, enable the Company to spread its risks with regard to liquidity, market volatility, currency movements and revenue streams.
The Company will not invest in any holding that would, at the time of investment, represent more than 15% of the value of its gross assets save that the Company may invest up to 25% of its gross assets in any single fund managed by its Investment Manager where the Board believes that the investment policy of such funds is consistent with the Company's objective of spreading investment risk.
The Company may utilise derivative instruments including index-linked notes, contracts for difference, covered options and other equity-related derivative instruments for efficient portfolio management and investment purposes.
Any use of derivatives for investment purposes will be made on the basis of the same principles of risk spreading and diversification that apply to the Company's direct investments, as described above.
• Asset Allocation
The assets of the Company will be allocated principally between investments in publicly quoted companies worldwide and in investments intended to provide an absolute return (in each case either directly or through other funds or collective investment schemes managed by the Company's investment manager) and the Company's investment in MAM itself.
• Benchmark
The Company does not have one overall benchmark, rather each distinct group of assets is viewed independently. Any investments made into funds managed by the Company's investment manager will be measured against the benchmark or benchmarks, if any, whose constituent investments appear to the Company to correspond most closely to those investments. It is important to note that in all cases investment decisions and portfolio construction are made on an independent basis. The Board however sets various specific portfolio limits for stocks and sectors in order to restrict risk levels from time to time, which remain subject to the investment restrictions set out in this section.
• Gearing
The Company uses gearing currently via long term debentures. The Board has the ability to borrow up to 100% of adjusted capital and reserves. The Board also reviews the level of gearing (borrowings less cash) on an ongoing basis and sets a range at its discretion as appropriate. The Company's current debenture borrowings are limited by covenant to 66 2/3% and any additional indebtedness is not to exceed 20% of adjusted capital and reserves.
Regulatory and Competitive Environment
The Company is an investment trust and has a premium listing on the London Stock Exchange. It is subject to United Kingdom and European legislation and regulations including UK company law, IFRS, Listing, Prospectus and Disclosure and Transparency Rules, taxation law and the Company's own Articles of Association. The directors are charged with ensuring that the Company complies with its objectives as well as these regulations.
Under the Companies Act 2006, section 833, the Company is defined as an investment company.
As outlined previously the Company is subject to the AIFMD. The AIFMD requires that all AIFs are managed by a regulated AIFM in accordance with the requirements of the Directive. These requirements are in respect of risk management, conflicts of interest, leverage, liquidity management, delegation, the requirement to appoint a depositary, regulatory capital, valuations, disclosure of information to investors or potential investors, remuneration and marketing.
The financial statements report on profits, the changes in equity, the balance sheet position and the cash flows in the current and prior financial period. This is in compliance with current IFRS as adopted by the EU, supplemented by the Statement of Recommended Practice for Investment Trust Companies and Venture Capital Trusts (SORP) issued in November 2014 (which applies to accounting periods starting on or after 1 January 2015, but which has been early adopted by the Company). The principal accounting policies of the Company are set out in note 1 to the accounts.
Total Return Philosophy & Dividend Policy
The Directors believe that investment returns will be maximised if a total return policy is followed whereby the Investment Manager pursues the best opportunities. The policy aim is to increase dividends by more than inflation over the long term. Further details are under the Dividend Growth section below. The Company has a comparatively high level of revenue reserves for the investment trust sector. At £22.9m, the revenue reserves represent over five times the current annual dividend distribution. The strength of these reserves will assist in underpinning the Company's progressive dividend policy in years when the income from the portfolio is insufficient to cover completely the annual distribution, although it is not currently anticipated.
Performance Management
The Board uses the following KPIs to help assess progress against the Company's objectives. Further comments on these KPIs are contained in the Chairman's Statement and Chief Executive's Report sections of the Strategic Report respectively.
• NAV and Total Shareholder Return:
The Board believes that asset return is fundamental to delivering value over the long term and is a key determinant of shareholder return. The Board further believes that, in accordance with the Company's objective, the total return basis (which includes dividends paid out to shareholders) is the best measure of how to measure long term shareholder return. The Board, at each meeting, receives reports detailing the Company's NAV and shareholder total return performance, asset allocation and related analyses. Details of the NAV and share price total return performance for the year are shown in the Year's Summary above.
• Investment Group performance:
The Board believes that after asset allocation, the performance of each of the investment groups is the key driver of NAV return and hence shareholder return. The Board receives, at each meeting, detailed reports showing the performance of the investment groups which also includes relevant attribution analysis. The Chief Executive's Report provides further detail on each investment group's performance for the year.
• Share price premium/discount:
As a closed ended listed investment company, the share price of the Company can and does differ from that of the NAV. This can give rise to either a premium or discount and as such is another component of Total Shareholder Return. During the year a slight narrowing of the discount (with the NAV with Debt at par) resulted in the Company's share price gain outperforming the gain in the Company's NAV (with Debt at par).
The Board continually monitors the Company's premium or discount, and has received approval (and is seeking to renew such approval for another year) to issue new shares, at a premium to the relevant NAV (with debt at fair value), in order to meet natural market demand. Additionally for maximum flexibility the Board does have the ability to buy back shares if thought appropriate, although it must be noted that this ability is limited by the majority shareholding held by members of the Barlow family. Details of movements in the Company's share price discount or premium over the year are shown in the Year's Summary above.
• Expenses:
The Board is aware of the impact of costs on returns and is conscious of seeking to minimise these (taking into account the Company's self managed status). The industry wide measure for investment trusts is ongoing charges, which seeks to quantify the ongoing costs of running the Company. This measures the annual normal ongoing costs of an investment trust, excluding performance fees, one off expenses and investment dealing costs, as a percentage of average equity shareholders' funds. Any investments made into pooled funds are included using the Company's share of estimated ongoing fund running costs. The Chairman's Statement above provides further details on the expenses during the year. Details of ongoing charges for the year are shown in the Year's Summary above.
• Dividend Growth:
Dividends paid to shareholders are an important component of Total Shareholder Return and this has been included in the Company's investment objective. The Board is aware of the importance of this objective to the Company's shareholders and in recent years has maintained the dividend by using some of the Company's large revenue reserves. Following the restructuring of the Company in 2014, the Board resolved to rebase the annual dividend with a view to moving to a sustainable and progressive dividend policy, paying dividends out of current year income rather than from revenue reserves. The Board receives detailed management accounts and forecasts which show the actual and forecast financial outturns for the Company and the Group. For the year to 30 September 2015, being after the rebasing, dividend growth has been 6.7% which again is ahead of inflation over that year.
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 27 to the accounts.
i. Investment Risk:
The Company has a range of equity investments, including a substantial investment in an unlisted asset management business, UK and global equities (both on a direct basis (via the MAM UK Equity Segregated Fund (UKESF)) and via collective investment vehicles (the MAM Funds), and an investment in an absolute return fund, the MAM Tortoise Fund. The major risk for the Company remains investment risk, primarily market risk; however it is recognised that the investment in MAM continues to represent concentration risk for the Company.
The number of investments held, together with the geographic and sector diversity of the portfolio, enables the Company to spread its risks with regard to liquidity, market volatility, currency movements and revenue streams.
Under the terms of the Investment Agreement the Investment Manager manages the majority of the Company's investment assets. The portfolios of UKESF and the MAM Funds are actively managed by MAM against benchmarks and each have specific limits for individual stocks and market sectors that are monitored in real time. It should be noted that UKESF and the MAM Funds' returns will differ from the benchmark returns. The MAM Tortoise Fund is an absolute return fund whose returns are not correlated to equity markets. The principal risks are moderated by strict control of position sizing, low use of leverage and investing in liquid stocks. 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:
ii. Strategy Risk:
An inappropriate investment strategy could result in poor returns for shareholders and the introduction of or 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 investment policy and objective, the allocation of assets between investment groups, the level and effect of gearing and currency or geographic exposure;
iii. Business Risk:
Inappropriate management or controls in the Company or at MAM could result in financial loss, reputational risk and regulatory censure. The Board has representation on the MAM governing board to monitor business financial performance and operations and receives detailed reports from Company management on financial and non-financial performance;
iv. Compliance Risk:
Failure to comply with regulations could result in the Company losing its listing, losing its FCA authorisation as a self managed AIF or being subjected to corporation tax on its capital gains. The Board receives and reviews regular reports from its service providers and Company management on the controls in place to prevent non-compliance of the Company with rules and regulations. The Board also receives regular investment listings and income forecasts as part of its monitoring of compliance with sections 1158 to 1162 of the Corporation Tax Act 2010; and
v. Operational Risk:
Inadequate financial controls and failure by an outsourced supplier to perform to the required standard could result in misappropriation of assets, loss of income and debtor receipts and mis-reporting of NAVs. The Board and Audit Committee regularly review statements on internal controls and procedures and subject the books and records of the Company to an annual external audit. The Corporate Governance statement and the Report of the Audit Committee in the Company's Annual Report and Accounts provide further information in respect of internal control systems and risk management procedures.
On behalf of the Board
Andrew J Adcock
Chairman
4 December 2015
Directors' Report
The directors submit their report and the accounts for the year ended 30 September 2015.
Introduction
The Directors' Report includes the Corporate Governance statement, the Report of the Audit Committee, and the Directors' Remuneration Report. A review of the Company's business is contained in the Strategic Report (which includes the Chairman's statement) and should be read in conjunction with the Directors' Report.
Principal Activity and Status
The Company is a public limited company and an investment company under section 833 of the Companies Act 2006. It operates as an investment trust and is not a close company. The Company has been a member of the AIC since 20 January 2014.
The Company has received historic written confirmation from HM Revenue & Customs that it meets the eligibility conditions and is an approved investment trust for taxation purposes under sections 1158/59 of the Corporation Tax Act 2010, with effect from 1 October 2012, subject to it continuing to meet the eligibility conditions and on-going requirements. In the opinion of the directors, the Company continues to direct its affairs so as to enable it to continue to qualify as an approved investment trust.
Results and Dividend
The consolidated net revenue return before taxation arising from continuing operations amounted to £4,966,000 (2014: £5,148,000), and the net loss before taxation arising from discontinued operations was nil (2014: £232,000). The directors recommend a final ordinary dividend of 5.0p per ordinary share, payable on 27 January 2016 to shareholders on the register at the close of business on 15 January 2016. Together with the interim dividend of 3.0p per share paid on 26 June 2015, this makes a total distribution of 8.0p per share in respect of the financial year (2014: 7.5p per share).
Risk Management and Objectives
The Company as an investment trust, and the Group, are subject to various risks in pursuing their objectives. The nature of these risks and the controls and policies in place across the Group that are used to minimise these risks are further detailed in the Strategic Report and in note 27 of the Accounts.
Directors
The directors in office at the date of this report are listed on page 16 of the Company's Annual Report and Accounts.
Directors' retirement by rotation and appointment is subject to the Company's Articles of Association and the AIC Code of Corporate Governance.
The Company's Articles of Association require that at every Annual General Meeting any director who has not retired from office at the preceding two Annual General Meetings shall stand for re-appointment by the Company.
Therefore in accordance with the Company's Articles of Association, Mr PD Gadd, having been last re-appointed at the Annual General Meeting in 2013, will retire at the forthcoming Annual General Meeting and, being eligible, will offer himself for re-appointment.
In accordance with Listing Rule 15.2.13A, Mr JWM Barlow, being a non-executive director of Majedie Asset Management Limited, the Investment Manager, must submit himself for annual re-appointment.
The Board has considered the continued appointment of Mr JWM Barlow who has served for over 15 years. The Board's view is that length of tenure does not compromise independence and that experience and continuity can add strength to a Board.
The Board believes that the performance of Mr JWM Barlow, and Mr PD Gadd, continues to be effective, that they demonstrate commitment to their roles and have a range of business, financial and asset management skills and experience relevant to the direction and control of the Company.
The Board, having considered the retiring directors' performance within the annual Board performance evaluation, hereby recommends that shareholders vote in favour of the proposed re-appointments.
Qualifying Third Party Indemnity Provisions
There are no qualifying third party indemnity provisions or qualifying pension scheme indemnity provisions which would require disclosure under section 236 of the Companies Act 2006.
Directors' Interests
Beneficial interests in ordinary shares as at:
|
|
30 September |
|
1 October |
|
Mr AJ Adcock |
50,000 |
|
50,000 |
|
Mr JWM Barlow |
692,083 |
|
676,083 |
|
Mr PD Gadd |
40,448 |
|
30,000 |
|
Mr RDC Henderson |
4,700 |
|
4,700 |
Non-beneficial interests in ordinary shares as trustees for various settlements as at:
|
|
30 September |
|
1 October |
|
Mr JWM Barlow |
1,959,165 |
|
1,897,165 |
There have been no changes to any of the above holdings between 30 September 2015 and the date of this report.
Substantial Shareholdings
At 30 November 2015, the Company has been notified of the following substantial holdings in shares carrying voting rights:
|
Mr HS Barlow |
Beneficial |
15,017,619 |
28.26% |
|
|
Non-beneficial |
613,084 |
1.15% |
|
Aviva plc |
|
7,007,994 |
13.19% |
|
Mr MHD Barlow |
Beneficial |
1,776,241 |
3.34% |
|
|
Non-beneficial |
1,360,750 |
2.56% |
|
Sir JK Barlow |
Beneficial |
1,561,805 |
2.94% |
|
|
Non-beneficial |
869,086 |
1.64% |
|
Mr GB Barlow |
|
877,433 |
1.65% |
|
Miss AE Barlow |
|
2,034,948 |
3.83% |
|
Mr JWM Barlow |
Beneficial |
692,083 |
1.30% |
|
|
Non-beneficial |
1,959,165 |
3.68% |
The substantial voting rights disclosed above include the total holdings of shares within certain trusts where there are other beneficiaries.
There have been no changes to any of the above holdings between 30 November 2015 and the date of this report.
Annual General Meeting
The Annual General Meeting will be held at City of London Club, 19 Old Broad Street, London EC2N 1DS on Wednesday, 20 January 2016 at 12 noon. The notice convening the Annual General Meeting is available on the Company's website.
The Board considers that Resolutions 1 to 11 are likely to promote the success of the Company and are in the best interests of the Company and its shareholders as a whole. The Directors unanimously recommend that you vote in favour of the Resolutions as they intend to do in respect of their own beneficial holdings.
Issue and Buyback of Shares
The Board is of the view that an increase of the Company's stock in issue provides benefits to shareholders including a dilution of the Company's gearing and cost of its debentures, a reduction in the Company's administrative expenses on a per share basis and increased liquidity in the Company's shares. As such the Board sought and received approval, at the Annual General Meeting on 14 January 2015, to allot new shares for cash, and without first offering them to existing shareholders in proportion to their holdings, up to a maximum of 5,200,000 shares (being approximately 9.99% of the Company's existing share capital at that time). These two existing authorities will expire at the 2016 Annual General Meeting. The directors undertake not to allot any such new shares unless they are allotted at a price representing a premium to the Company's then prevailing NAV per share, with debt at fair value.
During the year a total of 605,000 shares have been allotted from the date of the General Meeting to 30 September 2015, or subsequently to the date of this report. Additionally during the year, 235,476 shares were sold by the Company's EBT with a further 72,911 shares being exercised. Following these transactions the EBT holds no shares and has been closed.
The Board continues to be prepared to issue new shares in order to meet natural market demand, subject to the restriction that any new shares will be issued at a premium, and as such shareholder approval is sought at the Annual General Meeting to renew the authority to issue new shares, without first offering them to existing shareholders in proportion to their holdings, up to a maximum of 5,300,000 shares (being approximately 9.99% of the Company's existing share capital).
Since 1 October 2014, and up to the date of this report, the Company has made no buybacks for cancellation of its ordinary shares. At the Annual General Meeting in 2015 the directors were given power to buy back 7,813,947 ordinary shares (being 14.99% of the Company's existing share capital). Since the Annual General Meeting the directors have not bought any shares under this authority. This authority will expire at the 2016 Annual General Meeting.
In order to provide maximum flexibility, the directors consider it appropriate that the Company be authorised to make such purchases and accordingly shareholder approval is sought at the Annual General Meeting to renew the authority of the Company to exercise the power contained in its Articles of Association to make buybacks of its own shares. The maximum number of shares which may be purchased is 14.99% of the issued share capital. Any shares so purchased will be cancelled. The restrictions on such purchases (including minimum and maximum prices) are outlined in the Notice of Meeting. The Authority will be used where the directors consider it to be in the best interests of the shareholders.
Capital Structure
As part of its corporate governance the Board keeps under review the capital structure of the Company. At 30 September 2015, the Company had a nominal issued share capital of £5,313,300, comprising 53,133,000 ordinary shares of 10p each, carrying one vote each. All of the shares of the Company are listed on the London Stock Exchange, which is a regulated market.
The directors consider that new shares should be issued to meet natural market demand, so long as any such shares are issued at a premium to the Company's NAV (as measured with debt at fair value). During the year and following demand for the Company's shares, a total of 605,000 10p shares were allotted.
Additionally the Board has each year renewed the authority of the Company to make market buybacks of its own shares. However, the Board is only likely to use such authority in special circumstances. In general the directors believe that a discount to net assets will be reduced sustainably over the long term by the creation of value through the development of the business.
The Company deploys gearing through two long term debentures: £15m 9.5% debenture stock 2020 and £25m 7.25% debenture stock 2025, which were issued in 1994 and 2000 respectively. In 2004 the Company redeemed £1.5m of the 2020 issue and £4.3m of the 2025 issue as an opportunity arose to redeem at an attractive price.
The limits on the ability to borrow are described in the investment policy above. The Board is responsible for managing the overall gearing of the Company. Details of gearing levels are contained in the Year's Summary above, and in note 27 below.
There was one employee share scheme operated by the Group. The last awards issued under the scheme were made in 2009, and following the exercise of the last remaining awards during the year it and the related EBT have been closed. Further details are in note 26 to the accounts.
There are: no restrictions on voting rights; no restrictions concerning the transfer of securities in the Company; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; and no agreements which the Company is party to that might affect its control or trigger any compensatory payments for directors, following a takeover bid.
Notice period for general meetings
The Board believes that it is in the best interests of shareholders of the Company to have the ability to call meetings on 14 days' clear notice should a matter require urgency. The Board will therefore, as last year, propose a resolution at the Annual General Meeting to approve the reduction in the minimum notice period from 21 clear days to 14 clear days for all general meetings other than annual general meetings. The directors do not intend to use the authority unless immediate action is required.
Future Developments
The Chairman's Statement and the Chief Executive's report above provide details as concerning relevant future developments of the Company and the Group in the forthcoming year.
Employees, Social, Environmental, Ethical and Human Rights policy
The Company, as an investment trust, has a limited direct impact upon the environment. In carrying out its activities and relationships with its employees, suppliers and the community, the Company aims to conduct itself responsibly, ethically and fairly.
The Company has appointed MAM to manage the majority of its investment assets. In doing so it takes account of social, environmental, ethical and human rights factors, where appropriate.
Carbon Reporting
In accordance with the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013, the Company is required to report on its greenhouse gas emissions. In accordance with the regulations, the Company has determined that its organisational boundary, to which entities the regulations apply, is consistent with its consolidated accounts.
The Company operates in the financial services sector and in common with many organisations employs outsourcing such that most of its activities are performed by other outside organisations which do not give rise to any reportable emissions by the Group.
However the Company, as a self managed investment trust, does undertake activities at its leased premises. In accordance with the provision of the centrally provided building services (including heating, light, cooling etc) to all lessees in the building by the landlord it is considered that the Company does not have emissions responsibility in respect of these services, which rather rest with the landlord. The Company does however have responsibility for various other emissions in the usage of electricity by its office equipment in the course of undertaking its duties but it is not able to determine their amounts as compared to those provided by the landlord.
Additionally, the Company has many investments in companies around the world, however the Company does not have the ability to control the activities of these investee companies and as such has no responsibility for their emissions. Therefore, the directors believe that the Group has no reportable emissions for the year ended 30 September 2015 (2014: nil).
Donations
The Company made no political or charitable donations during the year (2014: nil) to organisations either within or outside of the EU.
Gender Diversity
The Board are aware of the recommendations made in the Lord Davies Review in 2011 in respect to Board diversity. The Company's policy on diversity is included in the section on the Nomination Committee on pages 25 and 26 of the Company's Annual Report and Accounts and this is applied when a new appointment to the Board is required. There has been no change in the Board and at the year end the composition of the Board was that all the directors were male. The composition of the Company's employees is 66.6% male and 33.3% female.
Post Balance Sheet Events
There have been no significant post balance sheet events of the Company or its subsidiary, other than those already disclosed in the Report and Accounts.
Material Contracts
• Majedie Asset Management Limited (MAM)
The Board has appointed MAM, as its investment manager, the terms of which are defined under an Investment Agreement dated 13 January 2014. The agreement divides the Company's investment assets into a combination of a segregated portfolio and the MAM in-house funds, with the Board having the ability, subject to certain capacity constraints in respect of the MAM funds, for the determination of the asset allocation of its investment assets, both initially and on an on-going basis.
The Investment Agreement provides that the segregated portfolio is to be managed within MAM's UK Equity Fund, with other investments being made into the various MAM Funds, as decided by the Board as part of their asset allocation requirements. Further details on the allocation of the investments managed by MAM are included in the Chief Executive's Report above.
The fees payable under the Investment Agreement are detailed below:
|
Portfolio/Fund* |
Management |
Performance |
|
MAM UK Equity Segregated Fund |
0.75% p.a. |
Nil |
|
MAM Tortoise Fund |
1.50% p.a. |
20%† |
|
MAM UK Income Fund |
0.75% p.a. |
Nil |
|
MAM Global Equity Fund |
0-0.75% p.a.** |
Nil |
|
MAM Global Focus Fund |
0-1.00% p.a.** |
Nil |
|
MAM US Equity Fund |
0.75% p.a. |
Nil† |
* The fees are calculated under the terms of the Investment Agreement or the relevant fund prospectus.
ˆ The fees charged to the MAM UK Equity Segregated Fund are charged directly to the Company's Statement of Comprehensive Income. All other fund fees are charged within the relevant fund.
† The performance fee entitlement only occurs once the 5% p.a. hurdle has been exceeded and is calculated on a high water mark basis.
** The management fee range reflects the investments made into different share classes.
The Investment Agreement entitles either party to terminate the arrangement with six months' notice after an initial period ending on 31 December 2015.
• BNY Mellon Trust & Depositary (UK) Limited
The Company has appointed BNYM (UK) Limited (BNYM (UK)) to provide depositary services as required by the AIFMD and certain other associated services under the terms of a depositary agreement dated 19 June 2014. The services provided by BNYM (UK) as Depositary for the Company include:
o general oversight responsibilities over the issue and cancellation of the Company's share capital, the carrying out of net asset value calculations, the application of income, and the ex-post review of investment transactions;
o monitoring of the Company's cash flows and ensuring that all cash is booked in appropriate accounts in the name of the Company or BNYM (UK) acting on behalf of the Company; and
o ensuring that the Bank of New York Mellon SA/ NV, London Branch (BNYM) (to whom BNYM (UK) has delegated the safekeeping of all assets held within the Company's investment portfolio, including those classed as financial instruments for the purpose of the AIFMD), in accordance with the terms of a Global Custody Agreement, retains custody of the Company's financial instruments in segregated accounts so that they can be clearly identified as belonging to the Company and maintains records sufficient for verification of the Company's ownership rights in relation to assets other than financial instruments.
No specific conflicts have been identified as arising as a result of the delegation of the provision of custody and safekeeping services by BNYM (UK) to BNYM. The terms of the depositary agreement provide that, where certain assets of the Company are invested in a country whose laws require certain financial instruments to be held in custody by a local entity and no such entity is able to satisfy the requirements under the AIFMD in relation to use of delegates by depositaries, BNYM (UK) may still delegate its functions to such a local entity and be fully discharged of all liability for loss of financial instruments of the Company by such local entity.
The Depositary receives an annual fee for its services on a sliding scale of 0.04% up to total gross portfolio assets of £100 million and 0.035% between £100 million and £250 million and 0.03% above £250 million, payable monthly in arrears. The depositary agreement in place with BNYM (UK) and the related custody agreement in place with BNYM continues unless and until terminated: without cause upon the Company and BNYM (UK) giving not less than 90 days' notice and upon BNYM (UK) giving notice expiring not less than 18 months after the date of the agreement, in each case such notice to be effective only if a new Depositary has been appointed.
• Capita Sinclair Henderson Limited
The Board has appointed Capita Sinclair Henderson Limited (trading as Capita Asset Services) in November 2000 to act as Company Secretary and undertake fund administration services. The terms of Capita Sinclair Henderson Limited's appointment are defined under a Secretarial and Administration Services Agreement dated 6 February 2012. The agreement entitles either party to terminate the arrangement with twelve months' notice. Following a review of its business operations, the Company provided the requisite notice under the agreement to terminate the agreement as from 31 March 2016 (but which can be extended, if necessary, and as agreed by the parties). The Company has contemporaneously agreed to continue with Company Secretarial services from Capita Asset Services under a new agreement, on terms to be agreed, as from 1 April 2016. The review determined that following a change to its business model following the appointment of MAM as its investment manager, it was more efficient if fund administration services were undertaken in-house.
Listing Rule Disclosure
The Company is listed on the London Stock Exchange and is subject to the UKLA listing rules. These require, inter alia, various disclosures, which are included in this report, and now also include the requirement, under Listing Rule 9.8.4R, to disclose, where applicable, certain specific items separately. These, as they apply to the Company, in respect of the year ended 30 September 2015, are:
• that the Company has not capitalised any interest during the year (all interest charged has been included in the Group and Company's respective Statement of Comprehensive Income);
• that no director waived or has agreed to waive any entitlements during the year, nor for any future periods;
• that the Company had no contracts of significance; and
• that the Company's Employee Benefit Trust (EBT) has, in accordance with its Trust Deed dated 19 January 1998, agreed to waive its entitlement to dividends in respect of its holdings of Company shares, to the extent that they exceed 0.001p per share. Further details in respect of the EBT are contained in note 21 to the accounts.
AIFMD
The Company is subject to the AIFMD, which requires certain financial and non-financial disclosures in respect of Annual Reports.
These disclosures are met by the Company in its Annual Report. In addition certain specific disclosures are required which are:
• Remuneration
Total remuneration details for the directors (who are considered to be code staff under the Directive) are shown in the Report on Directors' Remuneration. Remuneration details for staff are included in Note 7 to the accounts. There was £40,000 of variable remuneration paid during the year.
• Leverage
Under the AIFMD, the Company is required to disclose its actual leverage (calculated in accordance with the Directive under the Gross & Commitment methods) and it must also set a limit in respect of leverage it can use. The Company has set a limit of 1.5 times (1 being defined as no leverage) and as at 30 September 2015 had leverage of 1.21 under the Gross method and 1.23 under the Commitment method. Note 27 to the accounts provides further details.
• Investor Pre-investment information
The AIFMD requires that potential investors are provided with certain information. The Company provides this information on its website at www.majedieinvestments.com and there have been no material changes since 22 July 2014 to the date of this report.
Disclosure of Information to Auditors
As far as each of the directors are aware:
• there is no relevant audit information of which the Company's Auditors are unaware; and
• they have taken all steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Company's Auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.
Auditors
Ernst & Young LLP were re-appointed as Auditors on 14 January 2015. Ernst & Young LLP have indicated their willingness to continue in office and a resolution will be proposed at the Annual General Meeting to re-appoint them as Auditors.
Viability
The Directors have assessed the prospects of the Company over the three year period to September 2018. The Directors believe that this period is appropriate as the Company is a long term investor in equity markets.
In their assessment of the viability of the Company, the Directors have considered each of the Company's principal risks and uncertainties. The Directors have also considered the Company's income and expenditure projections, the level of borrowings (leverage of 1.21 (Gross method) and 1.23 (Commitment method) is well below the 1.5 limit and the current borrowings of £33.9m are over 5 times covered by the current total assets) and the fact that the Company's investments primarily (being 70.7% of total assets as at 30 September 2015), comprise readily realisable securities which can be sold to meet funding requirements as necessary.
Based on the Company's processes for monitoring expenses, share price discounts or premium, the allocation in its investment portfolio to an absolute return fund, the Investment Manager's compliance with the investment restrictions and objective, concentration and liquidity risk, the current large margin of safety over the covenants on its debentures and financial controls, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to September 2018.
Going Concern
The Directors believe, after review and due consideration of future forecast and cashflow projections, that the Company has adequate financial resources to continue in operational existence for the foreseeable future. For this reason and taking account of the large number of readily realisable investments held within its portfolio, the Board continues to adopt the going concern basis in preparing the financial statements.
By Order of the Board
Capita Sinclair Henderson Limited
Company Secretary
4 December 2015
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable United Kingdom law and those IFRSs as adopted by the European Union. Under Company Law the Directors must not approve the Group financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Group for that period. In preparing the Group financial statements the Directors are required to:
• select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance;
• state that the Group has complied with IFRSs, subject to any material departures disclosed and explained in the financial statements;
• make judgements and estimates that are reasonable and prudent; and
• state that the Annual Report, taken as a whole, is fair, balanced and understandable and provides sufficient information to allow shareholders to assess the Group's performance.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Group financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, a Corporate Governance Statement, Directors' Remuneration Report and a Directors' Report that comply with that law and those regulations.
The Directors of the Company, whose names are shown on page 16 of the Company's Annual Report and Accounts, each confirm to the best of their knowledge that:
• the financial statements, which have been prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group;
• the Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces; and
• they consider that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
By order of the Board
Andrew J Adcock
Chairman
4 December 2015
Report of the Depositary
Report of the Depositary to the shareholders of Majedie Investments PLC
Depositary's responsibilities
The Depositary is responsible for the safekeeping of all custodial assets of the Company, for verifying and maintaining a record of all other assets of the Company and for the collection of income that arises from those assets.
It is the duty of the Depositary to take reasonable care to ensure that the Company is managed in accordance with the Alternative Investment Fund Managers Directive (AIFMD), the FUND Sourcebook and the Company's Instrument of Incorporation, in relation to the calculation of the net asset value per share and the application of income of the Company. The Depositary also has a duty to monitor the Company's compliance with investment restrictions and leverage limits set in its offering documents.
Report of the Depositary to the shareholders of Majedie Investments PLC for the year ended 30 September 2015
Having carried out such procedures as we consider necessary to discharge our responsibilities as Depositary of the Company, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Company, acting through the AIFM has been managed in accordance with AIFMD, the FUND sourcebook, the Instrument of Incorporation of the Company in relation to the calculation of the net asset value per share, the application of income of the Company; and with investment restrictions and leverage limits set in its offering documents.
For and on behalf of
BNY Mellon Trust & Depositary (UK) Limited
160 Queen Victoria Street
London EC4V 4LA
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's statutory accounts for the years ended 30 September 2015 and 2014 but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies, and those for 2015 will be delivered in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and Accounts at www.majedieinvestments.com.
Consolidated Statement of Comprehensive Income
for the year ended 30 September 2015
|
|
|
|
2015 |
|
|
|
2014 |
|
|
|
Notes |
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
Investments |
|
|
|
|
|
|
|
|
|
Gains on investments at fair value through profit or loss |
13 |
|
15,854 |
15,854 |
|
|
13,933 |
13,933 |
|
Net investment result |
|
|
15,854 |
15,854 |
|
|
13,933 |
13,933 |
|
Income |
|
|
|
|
|
|
|
|
|
Income from investments |
3 |
6,534 |
2 |
6,536 |
|
6,549 |
|
6,549 |
|
Other income |
3 |
38 |
|
38 |
|
47 |
|
47 |
|
Total income |
|
6,572 |
2 |
6,574 |
|
6,596 |
|
6,596 |
|
Expenses |
|
|
|
|
|
|
|
|
|
Management fees |
4 |
(123) |
(369) |
(492) |
|
(93) |
(280) |
(373) |
|
Administrative expenses |
5 |
(780) |
(844) |
(1,624) |
|
(653) |
(528) |
(1,181) |
|
Return before finance cost and taxation |
|
5,669 |
14,643 |
20,312 |
|
5,850 |
13,125 |
18,975 |
|
Finance costs |
8 |
(703) |
(2,108) |
(2,811) |
|
(702) |
(2,107) |
(2,809) |
|
Net return before taxation |
|
4,966 |
12,535 |
17,501 |
|
5,148 |
11,018 |
16,166 |
|
Taxation |
9 |
(32) |
|
(32) |
|
(45) |
|
(45) |
|
Net return after taxation for the year from continuing operations |
|
4,934 |
12,535 |
17,469 |
|
5,103 |
11,018 |
16,121 |
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
Net return after taxation for the year from discontinued operations |
15 |
|
|
|
|
(232) |
(2,584) |
(2,816) |
|
Total comprehensive income for the year |
|
4,934 |
12,535 |
17,469 |
|
4,871 |
8,434 |
13,305 |
|
|
|
|
|
|
|
|
|
|
|
Return per ordinary share: |
|
pence |
pence |
pence |
|
pence |
pence |
pence |
|
Basic and diluted for continuing operations |
11 |
9.4 |
24.0 |
33.4 |
|
9.8 |
21.2 |
31.0 |
|
Basic and diluted for discontinued operations |
11 |
|
|
|
|
(0.4) |
(5.0) |
(5.4) |
|
Basic and diluted total |
11 |
9.4 |
24.0 |
33.4 |
|
9.4 |
16.2 |
25.6 |
The total column of this statement is the Consolidated Statement of Comprehensive Income of the Group prepared in accordance with IFRSs as adopted by the European Union. The supplementary revenue return and capital return columns are prepared under guidance published by the AIC.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.
The notes below form part of these accounts.
Company Statement of Comprehensive Income
for the year ended 30 September 2015
|
|
|
|
2015 |
|
|
|
2014 |
|
|
|
Notes |
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
Investments |
|
|
|
|
|
|
|
|
|
Gains on investments at fair value through profit or loss |
13 |
|
15,853 |
15,853 |
|
|
6,008 |
6,008 |
|
Net investment result |
|
|
15,853 |
15,853 |
|
|
6,008 |
6,008 |
|
Income |
|
|
|
|
|
|
|
|
|
Income from investments |
3 |
6,534 |
2 |
6,536 |
|
6,549 |
|
6,549 |
|
Other income |
3 |
38 |
|
38 |
|
56 |
|
56 |
|
Total income |
|
6,572 |
2 |
6,574 |
|
6,605 |
|
6,605 |
|
Expenses |
|
|
|
|
|
|
|
|
|
Management fees |
4 |
(123) |
(369) |
(492) |
|
(207) |
(404) |
(611) |
|
Administrative expenses |
5 |
(779) |
(844) |
(1,623) |
|
(691) |
(641) |
(1,332) |
|
Return before finance costs and taxation |
|
5,670 |
14,642 |
20,312 |
|
5,707 |
4,963 |
10,670 |
|
Finance costs |
8 |
(703) |
(2,108) |
(2,811) |
|
(702) |
(2,107) |
(2,809) |
|
Net return before taxation |
|
4,967 |
12,534 |
17,501 |
|
5,005 |
2,856 |
7,861 |
|
Taxation |
9 |
(32) |
|
(32) |
|
(45) |
|
(45) |
|
Net return after taxation for the year |
|
4,935 |
12,534 |
17,469 |
|
4,960 |
2,856 |
7,816 |
|
|
|
|
|
|
|
|
|
|
|
Return per ordinary share: |
|
pence |
pence |
pence |
|
pence |
pence |
pence |
|
Basic and diluted |
11 |
9.4 |
24.0 |
33.4 |
|
9.5 |
5.5 |
15.0 |
The total column of this statement is the Statement of Comprehensive Income of the Company prepared under IFRSs as adopted by the European Union. The supplementary revenue return and capital return columns are prepared under guidance published by the AIC.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.
The notes below form part of these accounts.
Consolidated Statement of Changes in Equity
for the year ended 30 September 2015
|
|
Notes |
Share |
|
Share |
|
Capital |
|
Share |
|
Capital |
|
Revenue |
|
Own shares |
|
Total |
|
Year ended 30 September 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 October 2014 |
|
5,253 |
|
785 |
|
56 |
|
(104) |
|
110,910 |
|
18,200 |
|
(1,039) |
|
134,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net return for the year from continuing operations |
|
|
|
|
|
|
|
|
|
12,535 |
|
4,934 |
|
|
|
17,469 |
|
Share options expense |
26 |
|
|
|
|
|
|
3 |
|
(8) |
|
|
|
|
|
(5) |
|
Sale of own shares by Employee Benefit Trust (EBT) |
21 |
|
|
|
|
|
|
|
|
(147) |
|
|
|
793 |
|
646 |
|
Share options exercised |
|
|
|
|
|
|
|
(246) |
|
|
|
|
|
246 |
|
|
|
Transfer between reserves |
|
|
|
|
|
|
|
347 |
|
(347) |
|
|
|
|
|
|
|
New shares issued |
|
60 |
|
1,497 |
|
|
|
|
|
|
|
|
|
|
|
1,557 |
|
Share issue expenses |
|
|
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Dividends declared and paid in year |
10 |
|
|
|
|
|
|
|
|
|
|
(3,919) |
|
|
|
(3,919) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 September 2015 |
|
5,313 |
|
2,280 |
|
56 |
|
|
|
122,943 |
|
19,215 |
|
|
|
149,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 September 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 October 2013 |
|
5,253 |
|
785 |
|
56 |
|
(123) |
|
102,654 |
|
18,169 |
|
(1,628) |
|
125,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net return for the year from continuing operations |
|
|
|
|
|
|
|
|
|
11,018 |
|
5,103 |
|
|
|
16,121 |
|
Net return for the year from discontinued operations |
15 |
|
|
|
|
|
|
|
|
(2,584) |
|
(232) |
|
|
|
(2,816) |
|
Share options expense |
26 |
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
19 |
|
Sale of own shares by Employee Benefit Trust (EBT) |
21 |
|
|
|
|
|
|
|
|
(178) |
|
|
|
589 |
|
411 |
|
Dividends declared and paid in year |
10 |
|
|
|
|
|
|
|
|
|
|
(4,840) |
|
|
|
(4,840) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 September 2014 |
|
5,253 |
|
785 |
|
56 |
|
(104) |
|
110,910 |
|
18,200 |
|
(1,039) |
|
134,061 |
The notes below form part of these accounts.
Company Statement of Changes in Equity
for the year ended 30 September 2015
|
|
Notes |
Share |
|
Share |
|
Capital |
|
Share |
|
Capital |
|
Revenue |
|
Own shares |
|
Total |
|
Year ended 30 September 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 October 2014 |
|
5,253 |
|
785 |
|
56 |
|
(104) |
|
107,212 |
|
21,898 |
|
(1,039) |
|
134,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net return for the year |
|
|
|
|
|
|
|
|
|
12,534 |
|
4,935 |
|
|
|
17,469 |
|
Share options expense |
26 |
|
|
|
|
|
|
3 |
|
(8) |
|
|
|
|
|
(5) |
|
Sale of own shares by Employee Benefit Trust (EBT) |
21 |
|
|
|
|
|
|
|
|
(147) |
|
|
|
793 |
|
646 |
|
Share options exercised |
|
|
|
|
|
|
|
(246) |
|
|
|
|
|
246 |
|
|
|
Transfer between reserves |
|
|
|
|
|
|
|
347 |
|
(347) |
|
|
|
|
|
|
|
New shares issued |
|
60 |
|
1,497 |
|
|
|
|
|
|
|
|
|
|
|
1,557 |
|
Share issue expenses |
|
|
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Dividends declared and paid in year |
10 |
|
|
|
|
|
|
|
|
|
|
(3,919) |
|
|
|
(3,919) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 September 2015 |
|
5,313 |
|
2,280 |
|
56 |
|
|
|
119,244 |
|
22,914 |
|
|
|
149,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 September 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 October 2013 |
|
5,253 |
|
785 |
|
56 |
|
(123) |
|
104,534 |
|
21,778 |
|
(1,628) |
|
130,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net return for the year |
|
|
|
|
|
|
|
|
|
2,856 |
|
4,960 |
|
|
|
7,816 |
|
Share options expense |
26 |
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
19 |
|
Sale of own shares by Employee Benefit Trust (EBT) |
21 |
|
|
|
|
|
|
|
|
(178) |
|
|
|
589 |
|
411 |
|
Dividends declared and paid in year |
10 |
|
|
|
|
|
|
|
|
|
|
(4,840) |
|
|
|
(4,840) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 September 2014 |
|
5,253 |
|
785 |
|
56 |
|
(104) |
|
107,212 |
|
21,898 |
|
(1,039) |
|
134,061 |
The notes below form part of these accounts.
Consolidated Balance Sheet
as at 30 September 2015
|
|
Notes |
2015 |
|
2014 |
|
Non-current assets |
|
|
|
|
|
Property and equipment |
12 |
64 |
|
80 |
|
Investments held at fair value through profit or loss |
13 |
181,644 |
|
165,342 |
|
|
|
181,708 |
|
165,422 |
|
Current assets |
|
|
|
|
|
Trade and other receivables |
16 |
799 |
|
338 |
|
Cash and cash equivalents |
17 |
2,537 |
|
3,512 |
|
|
|
3,336 |
|
3,850 |
|
Total assets |
|
185,044 |
|
169,272 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
18 |
(1,336) |
|
(1,338) |
|
|
|
|
|
|
|
Total assets less current liabilities |
|
183,708 |
|
167,934 |
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Debentures |
18 |
(33,901) |
|
(33,873) |
|
|
|
|
|
|
|
Total liabilities |
|
(35,237) |
|
(35,211) |
|
|
|
|
|
|
|
Net assets |
|
149,807 |
|
134,061 |
|
|
|
|
|
|
|
Represented by: |
|
|
|
|
|
Ordinary share capital |
19 |
5,313 |
|
5,253 |
|
Share premium |
20 |
2,280 |
|
785 |
|
Capital redemption reserve |
|
56 |
|
56 |
|
Share options reserve |
26 |
|
|
(104) |
|
Capital reserve |
|
122,943 |
|
110,910 |
|
Revenue reserve |
|
19,215 |
|
18,200 |
|
Own shares reserve |
21 |
|
|
(1,039) |
|
|
|
|
|
|
|
Equity Shareholders' Funds |
|
149,807 |
|
134,061 |
|
|
|
|
|
|
|
Net asset value per share |
|
pence |
|
pence |
|
Basic and fully diluted |
22 |
281.9 |
|
256.7 |
Approved by the Board of Majedie Investments PLC (Company no. 109305) and authorised for issue on 4 December 2015.
Andrew J Adcock
Chairman
The notes below form part of these accounts.
Company Balance Sheet
as at 30 September 2015
|
|
Notes |
2015 |
|
2014 |
|
Non-current assets |
|
|
|
|
|
Property and equipment |
12 |
64 |
|
80 |
|
Investments held at fair value through profit or loss |
13 |
181,644 |
|
165,342 |
|
Investments in subsidiaries |
13 |
162 |
|
172 |
|
|
|
|
|
|
|
|
|
181,870 |
|
165,594 |
|
Current assets |
|
|
|
|
|
Trade and other receivables |
16 |
894 |
|
432 |
|
Cash and cash equivalents |
17 |
2,280 |
|
3,246 |
|
|
|
3,174 |
|
3,678 |
|
Total assets |
|
185,044 |
|
169,272 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
18 |
(1,336) |
|
(1,338) |
|
|
|
|
|
|
|
Total assets less current liabilities |
|
183,708 |
|
167,934 |
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Debentures |
18 |
(33,901) |
|
(33,873) |
|
|
|
|
|
|
|
Total liabilities |
|
(35,237) |
|
(35,211) |
|
|
|
|
|
|
|
Net assets |
|
149,807 |
|
134,061 |
|
|
|
|
|
|
|
Represented by: |
|
|
|
|
|
Ordinary share capital |
19 |
5,313 |
|
5,253 |
|
Share premium |
20 |
2,280 |
|
785 |
|
Capital redemption reserve |
|
56 |
|
56 |
|
Share options reserve |
26 |
|
|
(104) |
|
Capital reserve |
|
119,244 |
|
107,212 |
|
Revenue reserve |
|
22,914 |
|
21,898 |
|
Own shares reserve |
21 |
|
|
(1,039) |
|
|
|
|
|
|
|
Equity Shareholders' Funds |
|
149,807 |
|
134,061 |
Approved by the Board of Majedie Investments PLC (Company no. 109305) and authorised for issue on 4 December 2015.
Andrew J Adcock
Chairman
The notes below form part of these accounts.
Consolidated Cash Flow Statement
for the year ended 30 September 2015
|
|
Notes |
2015 |
|
2014 |
|
Net cash flow from operating activities |
|
|
|
|
|
Consolidated net return before taxation from continuing operations* |
|
17,501 |
|
16,166 |
|
Consolidated net return before taxation from discontinued operations |
|
|
|
(2,816) |
|
Adjustments for: |
|
|
|
|
|
Gains on investments relating to continuing operations |
13 |
(15,854) |
|
(13,933) |
|
Losses on investments relating to discontinued operations |
15 |
|
|
2,084 |
|
Consolidation adjustment for Javelin Capital fee income |
13 |
|
|
118 |
|
Accumulation dividends |
|
(183) |
|
|
|
Share based remuneration |
|
3 |
|
19 |
|
Depreciation |
|
17 |
|
25 |
|
Purchases of investments |
|
(44,053) |
|
(145,143) |
|
Sales of investments |
|
43,806 |
|
145,976 |
|
|
|
|
|
|
|
|
|
1,237 |
|
2,496 |
|
Finance costs |
|
2,811 |
|
2,809 |
|
|
|
|
|
|
|
Operating cashflows before movements in working capital |
|
4,048 |
|
5,305 |
|
Decrease in trade and other payables |
|
(108) |
|
(9) |
|
Increase in trade and other receivables |
|
20 |
|
(54) |
|
|
|
|
|
|
|
Net cash outflow from operating activities before tax |
|
3,960 |
|
5,242 |
|
Tax recovered |
|
11 |
|
26 |
|
Tax on unfranked income |
|
(57) |
|
(67) |
|
|
|
|
|
|
|
Net cash inflow from operating activities |
|
3,914 |
|
5,201 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Net cash inflow from operating activities from continuing operations |
|
3,914 |
|
7,907 |
|
Net cash outflow from operating activities from discontinued operations |
|
|
|
(2,706) |
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
Purchase of tangible assets |
|
(1) |
|
|
|
|
|
|
|
|
|
Net cash outflow from investing activities |
|
(1) |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Interest paid |
|
(2,783) |
|
(2,783) |
|
Dividends paid |
|
(3,919) |
|
(4,840) |
|
Net proceeds from share issues |
|
1,168 |
|
|
|
Proceeds from sale of own shares by EBT |
|
646 |
|
411 |
|
|
|
|
|
|
|
Net cash outflow from financing activities |
|
(4,888) |
|
(7,212) |
|
|
|
|
|
|
|
Decrease in cash and cash equivalents for year |
23 |
(975) |
|
(2,011) |
|
Cash and cash equivalents at start of year |
|
3,512 |
|
5,523 |
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
2,537 |
|
3,512 |
* Includes dividends received in the year of £6,583,000 (2014: £6,655,000) and interest received of Nil (2014: £13,000).
The notes below form part of these accounts.
Company Cash Flow Statement
for the year ended 30 September 2015
|
|
Notes |
2015 |
|
2014 |
|
Net cash flow from operating activities |
|
|
|
|
|
Company net return before taxation* |
|
17,501 |
|
7,861 |
|
Adjustments for: |
|
|
|
|
|
Gains on investments |
13 |
(15,853) |
|
(6,008) |
|
Accumulation dividends |
|
(183) |
|
|
|
Share based remuneration |
|
3 |
|
19 |
|
Depreciation |
|
17 |
|
18 |
|
Purchases of investments |
|
(44,053) |
|
(145,143) |
|
Sales of investments |
|
43,806 |
|
145,983 |
|
|
|
|
|
|
|
|
|
1,238 |
|
2,730 |
|
|
|
|
|
|
|
Finance costs |
|
2,811 |
|
2,809 |
|
|
|
|
|
|
|
Operating cashflows before movements in working capital |
|
4,049 |
|
5,539 |
|
|
|
|
|
|
|
(Decrease)/increase in trade and other payables |
|
(108) |
|
203 |
|
Decrease in trade and other receivables |
|
19 |
|
559 |
|
|
|
|
|
|
|
Net cash inflow from operating activities before tax |
|
3,960 |
|
6,301 |
|
|
|
|
|
|
|
Tax recovered |
|
11 |
|
26 |
|
Tax on unfranked income |
|
(57) |
|
(67) |
|
|
|
|
|
|
|
Net cash inflow from operating activities |
|
3,914 |
|
6,260 |
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
Proceeds from liquidation of subsidiaries |
|
9 |
|
207 |
|
Purchase of tangible assets |
|
(1) |
|
|
|
|
|
|
|
|
|
Net cash inflow from investing activities |
|
8 |
|
207 |
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Interest paid |
|
(2,783) |
|
(2,783) |
|
Dividends paid |
|
(3,919) |
|
(4,840) |
|
Net proceeds from share issues |
|
1,168 |
|
|
|
Proceeds from sale of own shares by EBT |
|
646 |
|
411 |
|
|
|
|
|
|
|
Net cash outflow from financing activities |
|
(4,888) |
|
(7,212) |
|
|
|
|
|
|
|
Decrease in cash and cash equivalents for year |
23 |
(966) |
|
(745) |
|
Cash and cash equivalents at start of year |
|
3,246 |
|
3,991 |
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
2,280 |
|
3,246 |
* Includes dividends received in the year of £6,583,000 (2014: £6,655,000) and interest received of Nil (2014: £13,000).
The notes below form part of these accounts.
Notes to the Accounts
General Information
Majedie Investments PLC is a company incorporated and domiciled in England under the Companies Act 2006. The Company is registered as a public limited company and is an investment company as defined by Section 833 of the Companies Act 2006. The address of the registered office is given below. The nature of the Group's operations and its principal activities are set out in the Business Review section of the Strategic Report above.
Critical Accounting Assumptions and Judgements
The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting assumptions. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas requiring a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are set out below.
Assessment as investment entity
Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair value through profit or loss rather than consolidate them. The criteria which define an investment entity are, as follows:
• obtains funds from one or more investors for the purpose of providing those investors with investment services;
• commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and
• measures and evaluates the performance of substantially all of its investments on a fair value basis.
The Board has agreed with the recommendation of the Audit Committee that the Company meets the definition of an investment entity. This conclusion will be reassessed on an annual basis, if any of these criteria or characteristics change.
The Company's subsidiary Majedie Portfolio Management Limited provides investment management services and is not itself an investment entity and as such is consolidated into the Group accounts.
Unquoted Investments
Unquoted investments are valued at management's best estimate of fair value in accordance with IFRSs having regard to International Private Equity and Venture Capital Valuation Guidelines as recommended by the British Venture Capital Association. The principles which the Group applies are set out below. The inputs into the valuation methodologies adopted include historical data such as earnings or cash flow as well as more subjective data such as earnings forecasts or discount rates. As a result of this, the determination of fair value requires significant management judgement. At the year end, unquoted investments (including MAM) represent 35.0% (2014: 31.1%) of consolidated shareholders' funds.
1 Significant Accounting Policies
The principal accounting policies adopted are set out as follows:
The accounts above comprise the audited results of the Company and its subsidiary for the year ended 30 September 2015, and are presented in pounds sterling rounded to the nearest thousand, as this is the functional currency in which the Group and Company transactions are undertaken.
Going Concern
The directors have a reasonable expectation that the Company has sufficient resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.
Presentation of Statement of Comprehensive Income
In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. Additionally the net revenue is the measure that the directors believe to be appropriate in assessing the Company's compliance with certain requirements set out in section 1158 of the Corporation Tax Act 2010.
Basis of Accounting
The accounts of the Group and the Company have been prepared in accordance with IFRSs. They comprise standards and interpretations approved by the International Accounting Standards Board and International Financial Reporting Committee, interpretations approved by the International Accounting Standards Committee that remain in effect, to the extent they have been adopted by the European Union.
Where presentational guidance set out in the SORP regarding the financial statements of investment trust companies and venture capital trusts issued by the AIC in November 2014 is not inconsistent with the requirements of IFRSs, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
Discontinued operations
On 13 January 2014, the Company publicly announced the decision of the Board to close Javelin Capital LLP, including its two wholly owned subsidiaries - Javelin Capital Services Limited and Javelin Capital Fund Management Limited - following the appointment of MAM to become the Investment Manager for the Company. The Company also decided to wind down its wholly owned subsidiary, Majedie Unit Trust. Accordingly these had been classified as discontinued operations of the Group. As these entities ceased operations in the prior financial year and have been wound-up, there are no discontinued operations in the year ended 30 September 2015.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the Consolidated Statement of Comprehensive Income.
Additional disclosures are provided in note 15. All other notes to the financial statements include amounts for continuing operations, unless otherwise mentioned.
Basis of Consolidation
The Company is an investment entity as defined by IFRS 10 and, as such, does not consolidate the entities it controls which do not provide investment related services to the Company. Instead, interests in such entities are classified as fair value through profit or loss, and measured at fair value.
The Consolidated Accounts incorporate the accounts of the Company and entities controlled by the Company which provide investment related services made up to 30 September each year. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
The results of subsidiaries acquired or disposed of are included in the Consolidated Statement of Comprehensive Income from the effective date of acquisition or disposal as appropriate. When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. All Group entities have the same year end date.
Where necessary, adjustments are made to the financial statements of subsidiary to bring the accounting policies used into line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Standards Issued But Not Yet Effective
At the date of authorisation of these financial statements, the following relevant Standards and Interpretations have not been applied in these financial statements since they were in issue but not yet effective and/or adopted:
|
International Accounting Standards and Interpretations (IAS/IFRS/IFRICs) |
Effective date |
|
|
IFRS 9 |
Financial Instruments: Classification & Measurement |
1 January 2018 |
|
IFRS 15 |
Revenue from Contracts with Customers |
1 January 2018 |
The Directors do not anticipate that the adoption of the above Standards and Interpretations would have a material impact on the financial statements in the period of initial application.
Management anticipates that all of the relevant pronouncements will be adopted in the relevant accounting period in which the standard is effective.
Changes in accounting policies and disclosures
Foreign Currencies
The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates, i.e. its functional currency. For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Pounds Sterling (Sterling) which is the functional currency of the Company, and the presentational currency of the Group. Transactions in currencies other than Sterling are recorded at the rate of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items and non-monetary assets and liabilities that are fair valued and are denominated in foreign currencies are re-translated at the rates prevailing on the balance sheet date.
Segmental Reporting
A segment is a distinguishable component of the Group that is engaged in business activities from which it may earn revenues and incur expenses (including intra-group revenues and expenses), for which discrete financial information is available and whose operating results are regularly reviewed by the entity's chief decision maker who can make decisions on resource allocation and performance assessment. An operating segment could engage in business activities in order to earn potential future revenues.
Income
Dividend income from investments is taken to the revenue account on an ex-dividend basis. UK dividends are included net of tax credits. Overseas dividends are included gross of any withholding tax. Where the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital column.
The fixed return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Deposit interest and other interest receivable is included on an accruals basis.
Special dividends are taken to the revenue or capital account depending on their nature.
Expenses
All administrative expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Statement of Comprehensive Income, all expenses have been presented as revenue items except as follows:
• Expenses which are incidental to the acquisition or disposal of an investment are treated as capital costs and separately identified and disclosed (see note 13).
• Expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated, and accordingly the investment management expenses have been allocated 75% to capital, in order to reflect the directors' expected long-term view of the nature of the investment returns of the Company.
• The investment management performance fee, which is based on capital out-performance, is charged wholly to capital.
Pension Costs
Payments made to the Group's defined contribution group personal pension plan are charged as an expense as they fall due on an accruals basis.
Finance Costs
75% of finance costs arising from the debenture stocks are allocated to capital; 25% of the finance costs are charged on the same basis to the revenue account. Premiums payable on early repurchase of debenture stock are charged 100% to capital. In addition, other interest payable is allocated 75% to capital and 25% to the revenue account. Finance costs are debited on an accruals basis using the effective interest method.
Share Based Payments
The Group has issued equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value determined at the date of grant, which is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of shares that will eventually vest. Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
Taxation
The tax charge represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive Income is the marginal basis. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
No provision is made for tax on capital gains since the Company operates as an investment trust for tax purposes.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Leasehold improvements are written off in equal annual instalments over the minimum period of the lease whereas depreciation for other tangible assets is provided for at 25% to 33% per annum using the straight-line method.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.
Investments Held at Fair Value Through Profit or Loss
The Group classifies its investments in debt and equity securities, as financial assets or financial liabilities at fair value through profit or loss.
When a purchase or sale is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date.
All investments are classified as fair value through profit or loss as defined by IAS 39.
All investments are designated upon initial recognition as held at fair value through profit or loss, and are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price for listed securities, depending on the convention of the exchange on which the investment is quoted. Investments in unit trusts or open ended investment companies are valued at the closing price, the bid price or the single price as appropriate, released by the relevant investment manager.
Fair values for unquoted investments, or investments for which the market is inactive, are established by using various valuation techniques in accordance with the International Private Equity and Venture Capital Valuation (IPEV) Guidelines. These may include recent arm's length market transactions, the current fair value of another instrument which has substantially the same earnings multiples, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised.
The fair value of an investment at the beginning of the year is used when an investment is transferred between hierarchy levels.
Changes in the fair value of investments and gains on the sale of investments are recognised as they arise in the Statement of Comprehensive Income.
Investment in Subsidiary
In its separate financial statements the Company recognises its investment in subsidiary at fair value.
Financial Instruments
Financial assets and financial liabilities are recognised on the Group's Balance Sheet when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value.
Trade Receivables
Trade receivables do not carry any interest and are stated at carrying value which equates to their fair value as reduced by appropriate allowances for estimated irrecoverable amounts.
Cash and Cash Equivalents
Cash 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.
Non current liabilities
The debentures are initially recognised at cost, being the fair value of the consideration received less issue costs where applicable. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate. The effective interest rate is the rate that exactly discounts estimated future payments over the expected life of the financial liabilities to the net carrying amount on initial recognition.
Trade Payables
Trade payables are not interest bearing and are stated at carrying value which equates to their fair value.
Reserves
Gains and losses on the sale of investments and investment holding gains and losses are accounted for in the Statement of Comprehensive Income and subsequently in the capital reserve.
Share options reserve represents the expense of share based payments. The deemed expense is transferred to the share options reserve.
Share premium account represents the excess over nominal value of consideration received for equity shares, net of expenses of the share issue.
Own Shares
The consideration paid for own shares is treated as a deduction from shareholders' funds, and not recognised as an asset.
Dividends payable to shareholders
Dividends to shareholders are accounted for in the period in which they are paid or approved in general meetings. Dividends payable to shareholders are recognised in the Statement of Changes in Equity.
2 Business segments
For management purposes for the year ended 30 September 2015, the Group was organised into one principal activity, being investing activities (see below). In the prior year the Group was comprised of two principal activities - investing activities and investment management services.
Investing activities
The Company's investment objective is to maximise total shareholder return whilst increasing dividends by more than the rate of inflation over the long term.
The Company operates as an investment trust company and its portfolio contains investments in companies listed in a number of countries. Geographical information about the portfolio is provided above and exposure to different currencies is disclosed in note 27 below.
Investment management services
To complement this investment objective and create income and capital for the Group, Javelin Capital LLP was launched to market a range of funds to third party investors and provide investment management and advisory services.
Javelin Capital LLP was discontinued in the prior year. See note 15 below for further information.
|
|
Group |
|
Group |
||||||
|
|
Investing |
Investment |
Eliminations |
Total |
|
Investing |
Investment |
Eliminations |
Total |
|
External income from investment management services |
|
|
|
|
|
|
4 |
|
4 |
|
Intra-group income from investment management services |
|
|
|
|
|
|
356 |
(356) |
|
|
Other operating and investment income |
6,574 |
|
|
6,574 |
|
6,605 |
(10) |
(9) |
6,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
6,574 |
|
|
6,574 |
|
6,605 |
350 |
(365) |
6,590 |
|
|
|
|
|
|
|
|
|
|
|
|
Share based payments charge |
(3) |
|
|
(3) |
|
(19) |
|
|
(19) |
|
Other administrative costs |
(2,113) |
|
|
(2,113) |
|
(1,686) |
(525) |
9 |
(2,202) |
|
Intra-group investment management services expenses |
|
|
|
|
|
(238) |
(118) |
356 |
|
|
Other operating expenses |
|
|
|
|
|
|
(45) |
|
(45) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,116) |
|
|
(2,116) |
|
(1,943) |
(688) |
365 |
(2,266) |
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss) |
4,458 |
|
|
4,458 |
|
4,662 |
(338) |
|
4,324 |
|
Finance costs |
(2,811) |
|
|
(2,811) |
|
(2,809) |
|
|
(2,809) |
|
Gains on fair value through profit and loss |
15,854 |
|
|
15,854 |
|
13,801 |
(1,966) |
|
11,835 |
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax |
17,501 |
|
|
17,501 |
|
15,654 |
(2,304) |
|
13,350 |
|
|
|
|
|
|
|
|
|
|
|
|
Taxation |
(32) |
|
|
(32) |
|
(45) |
|
|
(45) |
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) after tax |
17,469 |
|
|
17,469 |
|
15,609 |
|
|
13,305 |
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
Continuing operations |
17,501 |
|
|
17,501 |
|
15,805 |
|
361 |
16,166 |
|
Discontinued operations |
|
|
|
|
|
(151) |
(2,304) |
(361) |
(2,816) |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
185,044 |
|
|
185,044 |
|
169,272 |
|
|
169,272 |
|
Total liabilities |
(35,237) |
|
|
(35,237) |
|
(35,211) |
|
|
(35,211) |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
149,807 |
|
|
149,807 |
|
134,061 |
|
|
134,061 |
3 Income
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Income from investments |
|
|
|
|
|
|
|
|
|
|
|
|
Franked investment income† |
6,086 |
|
|
6,165 |
|
|
6,086 |
|
|
6,165 |
|
|
UK unfranked investment income |
|
|
|
30 |
|
|
|
|
|
30 |
|
|
Accumulation income |
183 |
|
|
|
|
|
183 |
|
|
|
|
|
Overseas dividends |
267 |
|
|
354 |
|
|
267 |
|
|
354 |
|
|
|
|
6,536 |
|
|
6,549 |
|
|
6,536 |
|
|
6,549 |
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
Deposit interest |
1 |
|
|
13 |
|
|
1 |
|
|
12 |
|
|
Sundry income |
37 |
|
|
34 |
|
|
37 |
|
|
44 |
|
|
|
|
38 |
|
|
47 |
|
|
38 |
|
|
56 |
|
Total income |
|
6,574 |
|
|
6,596 |
|
|
6,574 |
|
|
6,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income comprises: |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
6,536 |
|
|
6,549 |
|
|
6,536 |
|
|
6,549 |
|
|
Interest |
1 |
|
|
13 |
|
|
1 |
|
|
12 |
|
|
Other income |
37 |
|
|
34 |
|
|
37 |
|
|
44 |
|
|
|
|
6,574 |
|
|
6,596 |
|
|
6,574 |
|
|
6,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from investments |
|
|
|
|
|
|
|
|
|
|
|
|
Listed UK |
2,996 |
|
|
2,576 |
|
|
2,996 |
|
|
2,576 |
|
|
Listed overseas |
267 |
|
|
354 |
|
|
267 |
|
|
354 |
|
|
Unlisted |
3,273 |
|
|
3,619 |
|
|
3,273 |
|
|
3,619 |
|
|
|
|
6,536 |
|
|
6,549 |
|
|
6,536 |
|
|
6,549 |
† Includes MAM ordinary dividend income of £3,273,000 (2014: £3,619,000).
4 Management Fees
|
|
Group |
|
Group |
||||
|
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
Investment management |
123 |
369 |
492 |
|
93 |
280 |
373 |
|
|
123 |
369 |
492 |
|
93 |
280 |
373 |
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Company |
||||
|
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
Investment management |
123 |
369 |
492 |
|
134 |
404 |
538 |
|
Administration |
|
|
|
|
73 |
|
73 |
|
|
123 |
369 |
492 |
|
207 |
404 |
611 |
The Group's accounts now include an investment management fee expense following the appointment of an external investment manager (MAM). Investment management fees of £nil (2014: £165,000) were paid to Javelin Capital LLP under the terms of the agreement which has now been terminated. Under this agreement an administration fee was also due. The Company's investment management fee was higher than the Group in 2014 due to Javelin Capital LLP management fee being consolidated out of the Group.
A summary of the terms of the Investment Agreement for the Company with MAM is given in the Directors' Report above. At 30 September 2015, an amount of £106,000 was outstanding for payment of investment management fees when due to MAM (2014: £132,000).
There were no performance fees during the year (2014: nil).
5 Administrative Expenses
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Staff costs - note 7 |
485 |
|
|
225 |
|
|
485 |
|
|
225 |
|
|
Other staff costs and directors' fees |
172 |
|
|
220 |
|
|
172 |
|
|
220 |
|
|
Advisers' costs |
348 |
|
|
327 |
|
|
348 |
|
|
327 |
|
|
Information costs |
83 |
|
|
54 |
|
|
83 |
|
|
54 |
|
|
Establishment costs |
164 |
|
|
61 |
|
|
164 |
|
|
61 |
|
|
Operating lease rentals - premises |
133 |
|
|
65 |
|
|
133 |
|
|
65 |
|
|
Depreciation on tangible assets |
17 |
|
|
18 |
|
|
17 |
|
|
18 |
|
|
Auditor's remuneration (see below) |
40 |
|
|
53 |
|
|
40 |
|
|
53 |
|
|
Other expenses |
182 |
|
|
158 |
|
|
181 |
|
|
309 |
|
|
|
|
1,624 |
|
|
1,181 |
|
|
1,623 |
|
|
1,332 |
A charge of £844,000 (2014: £528,000) to capital and an equivalent credit to revenue has been made in the Group and a charge of £844,000 (2014: £641,000) in the Company has been made to recognise the accounting policy of 75% of direct investment administration expenses to capital.
Administration expense disclosures are in respect of continuing operations only. Further details on discontinued operations are in note 15 below.
Total fees charged by the Auditor for the year, all of which were charged to revenue, comprised:
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Audit services - statutory audit |
38 |
|
|
44 |
|
|
38 |
|
|
44 |
|
|
Other audit related services |
2 |
|
|
9 |
|
|
2 |
|
|
9 |
|
|
|
|
40 |
|
|
53 |
|
|
40 |
|
|
53 |
Other audit related services relate to a review of the debenture covenant in 2015 and an interim review and debenture covenant in 2014.
6 Directors' Emoluments
|
|
Group and Company |
|
|
Group and Company |
|
|
Fees |
143 |
|
|
176 |
|
|
Salary |
169 |
|
|
84 |
|
|
Other benefits |
7 |
|
|
6 |
|
|
Bonuses/Partnership profit shares |
40 |
|
|
50 |
|
|
|
|
359 |
|
|
316 |
The Report on Directors' Remuneration in the Company's Annual Report and Accounts explains the Company's policy on remuneration for directors for the year. It also provides further details of directors' remuneration.
7 Staff Costs including CEO
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Salaries and other payments |
376 |
|
|
171 |
|
|
376 |
|
|
171 |
|
|
Social security costs |
77 |
|
|
21 |
|
|
77 |
|
|
21 |
|
|
Pension contributions |
29 |
|
|
14 |
|
|
29 |
|
|
14 |
|
|
Share based remuneration - note 25 |
3 |
|
|
19 |
|
|
3 |
|
|
19 |
|
|
|
|
485 |
|
|
225 |
|
|
485 |
|
|
225 |
|
|
Group |
|
|
Group |
|
|
Average number of employees: |
|
|
|
|
|
|
Management and office staff |
|
3 |
|
|
2 |
8 Finance Costs
|
|
Group and Company |
|
Group and Company |
||||
|
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
Interest on 9.5% debenture stock 2020 |
321 |
961 |
1,282 |
|
321 |
961 |
1,282 |
|
Interest on 7.25% debenture stock 2025 |
375 |
1,126 |
1,501 |
|
375 |
1,126 |
1,501 |
|
Amortisation of expenses associated with debenture issue |
7 |
21 |
28 |
|
6 |
20 |
26 |
|
|
703 |
2,108 |
2,811 |
|
702 |
2,107 |
2,809 |
Further details of the debenture stocks in issue are provided in note 18.
9 Taxation
Analysis of tax charge
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Tax on overseas dividends |
32 |
|
|
45 |
|
|
32 |
|
|
45 |
|
Reconciliation of tax charge:
The current taxation rate for the year is lower (2014: lower) than the standard rate of corporation tax in the UK of 20.5%, (2014: 22%). The differences are explained below:
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Net return before taxation for the year from continuing operations |
17,501 |
|
|
16,166 |
|
|
17,501 |
|
|
7,861 |
|
|
Net return before taxation for the year from discontinued operations |
|
|
|
(2,816) |
|
|
|
|
|
|
|
|
Net return before taxation |
|
17,501 |
|
|
13,350 |
|
|
17,501 |
|
|
7,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxation at UK Corporation Tax rate of 20.5% (2014: 22%) |
3,588 |
|
|
2,937 |
|
|
3,588 |
|
|
1,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of: |
|
|
|
|
|
|
|
|
|
|
|
|
- UK dividends which are not taxable |
(1,293) |
|
|
(1,365) |
|
|
(1,293) |
|
|
(1,365) |
|
|
- foreign dividends which are not taxable |
(55) |
|
|
(76) |
|
|
(55) |
|
|
(76) |
|
|
- gains on investments which are not taxable |
(3,250) |
|
|
(2,607) |
|
|
(3,250) |
|
|
(1,321) |
|
|
- expenses not deductible for tax purposes |
12 |
|
|
52 |
|
|
18 |
|
|
54 |
|
|
- excess expenses for current year |
998 |
|
|
1,059 |
|
|
992 |
|
|
979 |
|
|
- overseas taxation which is not recoverable |
32 |
|
|
45 |
|
|
32 |
|
|
45 |
|
|
Actual current tax charge |
|
32 |
|
|
45 |
|
|
32 |
|
|
45 |
Group
After claiming relief against accrued income taxable on receipt, the Group has unrelieved excess expenses of £73,914,000 (2014: £76,940,000). It is not yet certain that the Group will generate sufficient taxable income in the future to utilise these expenses and therefore no deferred tax asset has been recognised.
Company
After claiming relief against accrued income taxable on receipt, the Company has unrelieved excess expenses of £73,886,000 (2014: £69,688,000). It is not yet certain that the Company will generate sufficient taxable income in the future to utilise these expenses and therefore no deferred tax asset has been recognised.
The allocation of expenses to capital does not result in any tax effect. Due to the Company's status as an investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
10 Dividends
The following table summarises the amounts recognised as distributions to equity shareholders in the period:
|
Group and |
Group and |
||||
|
2013 Final dividend of 6.30p paid on 22 January 2014 |
3,279 |
||||
|
2014 Interim dividend of 3.00p paid on 27 June 2014 |
1,561 |
||||
|
2014 Final dividend of 4.50p paid on 21 January 2015 |
2,350 |
||||
|
2015 Interim dividend of 3.00p paid on 27 June 2015 |
1,569 |
||||
|
3,919 |
4,840 |
||||
|
2015 |
2014 |
||||
|
Proposed final dividend for the year ended 30 September 2015 of 5.00p (2014: final dividend of 4.50p) per ordinary share |
2,657 |
2,350 |
|||
|
2,657 |
2,350 |
The proposed final dividend has not been included as a liability in these accounts in accordance with IAS 10: Events after the Balance Sheet date.
Set out below is the total dividend to be paid in respect of the financial year. This is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered.
|
|
2015 |
|
|
2014 |
|
|
Interim dividend for the year ended 30 September 2015 of 3.00p (2014: 3.00p) per ordinary share |
1,569 |
|
|
1,561 |
|
|
Proposed final dividend for the year ended 30 September 2015 of 5.00p (2014: 4.50p) per ordinary share |
2,657 |
|
|
2,350 |
|
|
|
|
4,226 |
|
|
3,911 |
Distributable reserves of the Company comprise the Capital & Revenue Reserves.
Dividends for the year (and for 2014) have been solely made from the Revenue Reserve.
11 Return per Ordinary Share
Basic return per ordinary share from continuing and discontinued operations is based on 52,355,999 (2014: 52,055,573) ordinary shares, being the weighted average number of shares in issue having adjusted for the shares held by the EBT referred to in note 21. Basic returns per ordinary share from continuing and discontinued operations are based on the net return after taxation attributable to equity shareholders. There are nil potentially dilutive shares arising from the share options referred to in note 26. These do not give rise to a material dilution to the return per ordinary share and therefore no diluted return per ordinary share has been calculated.
|
|
Group |
|
|
Group |
|
|
Basic and diluted revenue returns from continuing operations are based on net revenue after taxation of: |
4,934 |
|
|
5,103 |
|
|
Basic and diluted revenue returns from discontinued operations are based on net revenue after taxation of: |
|
|
|
(232) |
|
|
Basic and diluted capital returns from continuing operations are based on net capital return of: |
12,535 |
|
|
11,018 |
|
|
Basic and diluted capital returns from discontinued operations are based on net capital return of: |
|
|
|
(2,584) |
|
|
Basic and diluted total returns are based on return of: |
|
17,469 |
|
|
13,305 |
|
|
|
|
|
|
|
|
|
Company |
|
|
Company |
|
|
Basic and diluted revenue returns are based on net revenue after taxation of: |
4,935 |
|
|
4,960 |
|
|
Basic and diluted capital returns are based on net capital return of: |
12,534 |
|
|
2,856 |
|
|
Basic and diluted total returns are based on return of: |
|
17,469 |
|
|
7,816 |
12 Property and Equipment
|
|
|
Group |
|
|
Group |
|
|
Total |
|
|
Cost: |
|
|
|
|
|
|
|
|
|
|
At 1 October 2014 |
|
171 |
|
|
580 |
|
|
751 |
|
|
Additions |
|
|
|
|
1 |
|
|
1 |
|
|
Disposals |
|
|
|
|
(412) |
|
|
(412) |
|
|
At 30 September 2015 |
|
|
171 |
|
|
169 |
|
|
340 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation: |
|
|
|
|
|
|
|
|
|
|
At 1 October 2014 |
|
91 |
|
|
580 |
|
|
671 |
|
|
Charge for year |
|
17 |
|
|
|
|
|
17 |
|
|
Disposals |
|
|
|
|
(412) |
|
|
(412) |
|
|
At 30 September 2015 |
|
|
108 |
|
|
168 |
|
|
276 |
|
|
|
|
|
|
|
|
|
|
|
|
Net book value: |
|
|
|
|
|
|
|
|
|
|
At 30 September 2015 |
|
|
63 |
|
|
1 |
|
|
64 |
|
At 30 September 2014 |
|
|
80 |
|
|
|
|
|
80 |
|
|
|
Company |
|
|
Company |
|
|
Total |
|
|
Cost: |
|
|
|
|
|
|
|
|
|
|
At 1 October 2014 |
|
171 |
|
|
168 |
|
|
339 |
|
|
Additions |
|
|
|
|
1 |
|
|
1 |
|
|
Disposals |
|
|
|
|
|
|
|
|
|
|
At 30 September 2015 |
|
|
171 |
|
|
169 |
|
|
340 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation: |
|
|
|
|
|
|
|
|
|
|
At 1 October 2014 |
|
91 |
|
|
168 |
|
|
259 |
|
|
Charge for year |
|
17 |
|
|
|
|
|
17 |
|
|
Disposals |
|
|
|
|
|
|
|
|
|
|
At 30 September 2015 |
|
|
108 |
|
|
168 |
|
|
276 |
|
|
|
|
|
|
|
|
|
|
|
|
Net book value: |
|
|
|
|
|
|
|
|
|
|
At 30 September 2015 |
|
|
63 |
|
|
1 |
|
|
64 |
|
At 30 September 2014 |
|
|
80 |
|
|
|
|
|
80 |
13 Investments at Fair Value Through Profit or Loss
|
|
Group 2015 |
|
|
|
Group 2014 |
|
|
||||
|
|
Listed |
|
Unlisted |
|
Total |
|
Listed |
|
Unlisted |
|
Total |
|
Opening cost at beginning of year |
124,723 |
|
4,083 |
|
128,806 |
|
94,334 |
|
4,575 |
|
98,909 |
|
(Losses)/gains at beginning of year |
(1,036) |
|
37,572 |
|
36,536 |
|
10,741 |
|
42,289 |
|
53,030 |
|
Opening fair value at beginning of year |
123,687 |
|
41,655 |
|
165,342 |
|
105,075 |
|
46,864 |
|
151,939 |
|
Purchases at cost |
44,333 |
|
|
|
44,333 |
|
145,246 |
|
|
|
145,246 |
|
Sales - proceeds |
(38,114) |
|
(5,771) |
|
(43,885) |
|
(126,419) |
|
(19,239) |
|
(145,658) |
|
Gains on sales |
2,323 |
|
4,518 |
|
6,841 |
|
11,562 |
|
18,747 |
|
30,309 |
|
(Decrease)/increase in investment holding gains |
(3,312) |
|
12,325 |
|
9,013 |
|
(11,777) |
|
(4,717) |
|
(16,494) |
|
Transfer on listing of shares |
300 |
|
(300) |
|
|
|
|
|
|
|
|
|
Closing fair value at end of year |
129,217 |
|
52,427 |
|
181,644 |
|
123,687 |
|
41,655 |
|
165,342 |
|
Closing cost at end of year |
133,565 |
|
2,530 |
|
136,095 |
|
124,723 |
|
4,083 |
|
128,806 |
|
(Losses)/gains at end of year |
(4,348) |
|
49,897 |
|
45,549 |
|
(1,036) |
|
37,572 |
|
36,536 |
|
Closing fair value at end of year |
129,217 |
|
52,427 |
|
181,644 |
|
123,687 |
|
41,655 |
|
165,342 |
|
|
Company |
||||||
|
|
Listed |
|
Unlisted |
|
Subsidiary |
|
Total |
|
Opening cost at beginning of year |
124,723 |
|
4,059 |
|
1,010 |
|
129,792 |
|
(Losses)/gains at beginning of year |
(1,036) |
|
37,596 |
|
(838) |
|
35,722 |
|
Opening fair value at beginning of year |
123,687 |
|
41,655 |
|
172 |
|
165,514 |
|
Purchases at cost |
44,333 |
|
|
|
|
|
44,333 |
|
Sales - proceeds |
(38,114) |
|
(5,771) |
|
(9) |
|
(43,894) |
|
Gains/(losses) on sales |
2,323 |
|
4,520 |
|
(1) |
|
6,842 |
|
(Decrease)/increase in investment holding gains |
(3,312) |
|
12,323 |
|
|
|
9,011 |
|
Transfer on listing of shares |
300 |
|
(300) |
|
|
|
|
|
Closing fair value at end of year |
129,217 |
|
52,427 |
|
162 |
|
181,806 |
|
Closing cost at end of year |
133,565 |
|
2,508 |
|
1,000 |
|
137,073 |
|
(Losses)/gains at end of year |
(4,348) |
|
49,919 |
|
(838) |
|
44,733 |
|
Closing fair value at end of year |
129,217 |
|
52,427 |
|
162 |
|
181,806 |
|
|
|
|
|
|
|
|
|
|
|
Company |
||||||
|
|
Listed |
|
Unlisted |
|
Subsidiary |
|
Total |
|
Opening cost at beginning of year |
94,333 |
|
4,534 |
|
9,010 |
|
107,877 |
|
Gains/(losses) at beginning of year |
10,742 |
|
42,330 |
|
(817) |
|
52,255 |
|
Opening fair value at beginning of year |
105,075 |
|
46,864 |
|
8,193 |
|
160,132 |
|
Purchases at cost |
145,246 |
|
|
|
|
|
145,246 |
|
Sales - proceeds |
(126,426) |
|
(19,239) |
|
(207) |
|
(145,872) |
|
Gains/(losses) on sales* |
11,570 |
|
18,764 |
|
(7,793) |
|
22,541 |
|
Decrease in investment holding gains |
(11,778) |
|
(4,734) |
|
(21) |
|
(16,533) |
|
Closing fair value at end of year |
123,687 |
|
41,655 |
|
172 |
|
165,514 |
|
Closing cost at end of year |
124,723 |
|
4,059 |
|
1,010 |
|
129,792 |
|
(Losses)/gains at end of year |
(1,036) |
|
37,596 |
|
(838) |
|
35,722 |
|
Closing fair value at end of year |
123,687 |
|
41,655 |
|
172 |
|
165,514 |
* The loss of £7,793,000 represents the write off of the investment in Javelin Capital LLP, net of recoverable capital.
Unlisted investments include an amount of £127,000 in 3 various companies (2014: £355,000 in 4 companies) and £52,300,000 (2014: £41,300,000) for the Company's investment in MAM as detailed below.
During the year the Company incurred transaction costs amounting to £186,000 (2014: £396,000) of which £160,000 (2014: £56,000) related to the purchases of investments and £26,000 (2014: £340,000) related to the sales of investments. These amounts are included in gains on investments at fair value through profit or loss, as disclosed in the Consolidated and Company Statement of Comprehensive Income.
The composition of the investment return is analysed below:
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Net gains on sales of equity investments |
6,841 |
|
|
30,309 |
|
|
6,842 |
|
|
22,541 |
|
|
Increase/(decrease) in holding gains on equity investments |
9,013 |
|
|
(16,494) |
|
|
9,011 |
|
|
(16,533) |
|
|
Consolidation adjustment on Javelin Capital fee income |
|
|
|
118 |
|
|
|
|
|
|
|
|
Net return on investments |
|
15,854 |
|
|
13,933 |
|
|
15,853 |
|
|
6,008 |
Fair value hierarchy disclosures
The Group is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following three levels:
• Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date. Quoted prices provided by external pricing services, brokers and vendors are included in Level 1, if they reflect actual and regularly occurring market transactions on an arm's length basis.
• Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 2 inputs include the following:
o quoted prices for similar (ie not identical) assets in active markets.
o inputs other than quoted prices that are observable for the asset (for example, interest rates and yield curves observable at commonly quoted intervals).
o inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (market-corroborated inputs).
• Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level in the fair value hierarchy within which an asset or liability is categorised is determined on the basis of the lowest level input that is significant to the fair value measurement of the asset. For this purpose, the significance of an input is assessed against the fair value measurement of an asset or liability in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement requires judgement, considering factors specific to the asset or liability.
The determination of what constitutes 'observable' requires significant judgement by the Group. The Group considers observable data to be investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date, without adjustment for transaction costs necessary to realise the asset.
The table below sets out fair value measurements of financial assets in accordance with the IFRS fair value hierarchy system:
|
|
Group |
|
Group |
||||||
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets held at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
|
Equities and managed funds |
|
|
|
|
|
|
|
|
|
|
Listed equity securities |
129,217 |
|
|
129,217 |
|
123,687 |
|
|
123,687 |
|
Unlisted equity securities |
|
|
52,427 |
52,427 |
|
|
|
41,655 |
41,655 |
|
|
129,217 |
|
52,427 |
181,644 |
|
123,687 |
|
41,655 |
165,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Company |
||||||
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets held at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
|
Equities and managed funds |
|
|
|
|
|
|
|
|
|
|
Listed equity securities |
129,217 |
|
|
129,217 |
|
123,687 |
|
|
123,687 |
|
Unlisted equity securities |
|
|
52,589 |
52,589 |
|
|
|
41,827 |
41,827 |
|
|
129,217 |
|
52,589 |
181,806 |
|
123,687 |
|
41,827 |
165,514 |
Investments whose values are based on quoted market prices in active markets, and therefore classified within Level 1, include active listed equities. The Group does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. As Level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. During the year there were transfers of £nil (2014: £nil) from Level 2 to Level 1 for Listed exchange traded funds.
Investments classified within Level 3 have significant unobservable inputs. As observable prices are not available for these securities, the Group has used valuation techniques to derive the fair value. In respect of unquoted instruments, or where the market for a financial instrument is not active, fair value is established by using recognised valuation methodologies, in accordance with IPEV Valuation Guidelines. New investments are initially carried at cost, for a limited period, being the price of the most recent investment in the investee. This is in accordance with IPEV Guidelines as the cost of recent investments will generally provide a good indication of fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The following table presents the movement in Level 3 instruments for the year ended 30 September 2015:
|
|
Group |
|
Group |
||
|
|
Total |
Equity |
|
Total |
Equity |
|
Opening balance |
41,655 |
41,655 |
|
46,864 |
46,864 |
|
Transfers to Level 1 |
(300) |
(300) |
|
|
|
|
Sales - proceeds |
(5,771) |
(5,771) |
|
(19,239) |
(19,239) |
|
Total gains for the year included in the Statement of Comprehensive Income |
16,843 |
16,843 |
|
14,030 |
14,030 |
|
|
52,427 |
52,427 |
|
41,655 |
41,655 |
|
|
|
|
|
|
|
|
|
Company |
|
Company |
||
|
|
Total |
Equity |
|
Total |
Equity |
|
Opening balance |
41,827 |
41,827 |
|
55,057 |
55,057 |
|
Transfers to Level 1 |
(300) |
(300) |
|
|
|
|
Sales - proceeds |
(5,780) |
(5,780) |
|
(19,446) |
(19,446) |
|
Total gains for the year included in the Statement of Comprehensive Income |
16,842 |
16,842 |
|
6,216 |
6,216 |
|
|
52,589 |
52,589 |
|
41,827 |
41,827 |
Investments in Investment Funds
The Company has a number of investments in investment funds managed by MAM. Details of these investments are:
|
|
2015 |
|
2014 |
||
|
|
Investment |
Proportion |
|
Investment |
Proportion |
|
MAM Tortoise Fund |
27,547 |
2.8 |
|
27,579 |
2.9 |
|
MAM Income Fund |
20,470 |
2.0 |
|
17,481 |
3.1 |
|
MAM Global Equity Fund |
14,564 |
45.2 |
|
5,099 |
37.4 |
|
MAM Global Focus Fund |
5,397 |
33.8 |
|
4,997 |
47.1 |
|
MAM US Equity Fund |
5,970 |
6.1 |
|
5,375 |
49.8 |
|
MAM UK Smaller Companies Fund** |
5,202 |
1.0 |
|
5,722 |
1.1 |
** The MAM UK Smaller Companies Fund forms part of the MAM UK Equity Segregated Fund.
The fees charged on these investments are as disclosed in the material contracts section of the Directors' Report above.
In addition the total value of all investments managed by MAM at 30 September 2015 was £130.2 million (2014: £126.0 million). Further details on the investments in the MAM investments funds are contained in the Chief Executive's Report above.
Substantial Share Interests
MAM Global Equity Fund and MAM Global Focus Fund
The Company has invested £15m and £5m the MAM Global Equity Fund and MAM Global Focus Fund which are a substantial interest in these funds as at 30 September 2015. These holdings are not subsidiaries or associates, and are accounted for as an investment held at fair value through profit and loss. Further details of investments held in the MAM funds are detailed in the Investments held in the Investment Funds section above.
Majedie Asset Management (MAM)
MAM is a UK based asset management firm providing investment management and advisory services across a range of UK and global equity strategies.
The carrying value of the investment in MAM is included in the Consolidated Balance Sheet as part of investments at fair value through profit or loss:
|
|
2015 |
|
|
2014 |
|
|
Deemed cost of investment |
540 |
|
|
627 |
|
|
Holding gains |
51,760 |
|
|
40,673 |
|
|
Fair value at 30 September |
|
52,300 |
|
|
41,300 |
The carrying value is usually assessed twice a year by the directors and is approved by the Audit Committee. The fair value calculation is formulaic, with the significant input in assessing the price being the earnings of MAM. A 5% increase/decrease in MAM's earnings would result in an increase/decrease of 4.3% in the carrying value of MAM.
In accordance with the revised shareholders' agreement, the Company may sell a certain number of shares to the MAM Employee Benefit Trust and at the relevant prescribed price (as calculated in accordance with the revised shareholders' agreement).
During the year the Company sold 9,305 (2014: 43,747) for a total consideration of £5,746,000 (2014: £19,177,000) resulting in a realised gain of £5,659,000 (2014: £18,766,000).
After these and other party transactions the Company holds 57,523 (2014: 66,828) ordinary 0.1p shares which represents a 16.7% (2014: 18.0%) shareholding in MAM.
14 Investment in Subsidiary
Subsidiary undertakings at 30 September 2015
|
|
Company |
||||
|
Company and business |
Country of |
Number and |
Group |
Capital & |
Profit after |
|
Majedie Portfolio Management Limited |
UK |
1,000,000 |
100% |
£162 |
|
15 Discontinued operations
On 13 January 2014, the Board announced that it would close Javelin Capital LLP, including its two wholly owned subsidiaries - Javelin Capital Services Limited and Javelin Capital Fund Management Limited - following the appointment of MAM to become the Investment Manager for the Company. The Company also decided to wind down its wholly owned subsidiary, Majedie Unit Trust. All of these entities have now been liquidated or closed down. As such there are no discontinued operations for the year ended 30 September 2015.
Accordingly these were classified as a disposal group, and during the year ended 30 September 2014, a net loss after tax of £2,816,000 was recorded in respect of these subsidiaries as disclosed within the Consolidated Statement of Comprehensive Income.
|
|
2015 |
2014 |
||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Discontinued operations |
|
|
|
|
|
|
|
Income |
|
|
|
|
|
|
|
Other income |
|
|
|
4 |
|
4 |
|
Total income |
|
|
|
4 |
|
4 |
|
Expenses |
|
|
|
|
|
|
|
Administration expenses |
|
|
|
(236) |
(500) |
(736) |
|
Write off on disposal |
|
|
|
|
(2,084) |
(2,084) |
|
Net return before taxation for the year from discontinued operations |
|
|
|
(232) |
(2,584) |
(2,816) |
|
Taxation |
|
|
|
|
|
|
|
Net return after taxation for the year from discontinued operations |
|
|
|
(232) |
(2,584) |
(2,816) |
16 Trade and Other Receivables
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Sales for future settlement |
124 |
|
|
45 |
|
|
124 |
|
|
45 |
|
|
Prepayments |
131 |
|
|
127 |
|
|
131 |
|
|
127 |
|
|
Dividends receivable |
104 |
|
|
127 |
|
|
104 |
|
|
127 |
|
|
Amounts due from share issues |
387 |
|
|
|
|
|
387 |
|
|
|
|
|
Taxation recoverable |
53 |
|
|
39 |
|
|
53 |
|
|
39 |
|
|
Amounts due from subsidiary undertakings |
|
|
|
|
|
|
95 |
|
|
94 |
|
|
|
|
799 |
|
|
338 |
|
|
894 |
|
|
432 |
The directors consider that the carrying amounts of trade and other receivables approximates to their fair value.
17 Cash and Cash Equivalents
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Deposits at banks |
1,674 |
|
|
2,684 |
|
|
1,674 |
|
|
2,684 |
|
|
Cash attributable to discontinued operations |
|
|
|
9 |
|
|
|
|
|
|
|
|
Other cash balances |
863 |
|
|
819 |
|
|
606 |
|
|
562 |
|
|
|
|
2,537 |
|
|
3,512 |
|
|
2,280 |
|
|
3,246 |
18 Trade and Other Payables
Amounts falling due within one year:
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Purchases for future settlement |
325 |
|
|
228 |
|
|
325 |
|
|
228 |
|
|
Accrued expenses |
211 |
|
|
314 |
|
|
211 |
|
|
314 |
|
|
Other creditors |
800 |
|
|
796 |
|
|
800 |
|
|
796 |
|
|
|
|
1,336 |
|
|
1,338 |
|
|
1,336 |
|
|
1,338 |
The directors consider that the carrying amounts of trade and other payables approximates to their fair value.
Amounts falling due after more than one year:
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
£13.5m (2014: £13.5m) 9.5% debenture stock 2020 |
13,433 |
|
|
13,421 |
|
|
13,433 |
|
|
13,421 |
|
|
£13.5m (2014: £13.5m) 9.5% debenture stock 2020 |
20,468 |
|
|
20,452 |
|
|
20,468 |
|
|
20,452 |
|
|
|
|
33,901 |
|
|
33,873 |
|
|
33,901 |
|
|
33,873 |
Both debenture stocks are secured by a floating charge over the Company's assets. Expenses associated with the issue of debenture stocks were deducted from the gross proceeds and are being amortised over the life of the debentures. Further details on interest and the amortisation of issue expenses are provided in note 8.
19 Ordinary Share Capital
|
|
Number |
Company |
|
Number |
Company |
|
As at 1 October |
52,528,000 |
5,253 |
|
52,528,000 |
5,253 |
|
Ordinary 10p shares issued |
605,000 |
60 |
|
|
|
|
As at 30 September |
53,133,000 |
5,313 |
|
52,528,000 |
5,253 |
All shares are allotted fully paid up, and are of one class only Ordinary 10p. New ordinary shares can only be issued at a premium to the relevant NAV (with debt at fair value).
There are nil (2014: 308,387) ordinary shares of 10p each held by the Employee Benefit Trust (EBT). See note 21 below.
Ordinary shares carry one vote each on a poll. The Companies Act 2006 abolished the requirement for the Company to have authorised share capital. The Company adopted new Articles of Association on 20 January 2010 which, inter alia, reflected the new legislation. Accordingly the Company has no authorised share capital. The directors will still be limited as the number of shares they can allot at any one time as the Companies Act 2006 requires that directors seek authority from the shareholders for the allotment of new shares.
20 Share Premium
|
|
Group and |
|
|
Group and |
|
|
As at 1 October |
785 |
|
|
785 |
|
|
Ordinary 10p shares issued |
1,497 |
|
|
|
|
|
Issue costs |
(2) |
|
|
|
|
|
As at 30 September |
|
2,280 |
|
|
785 |
21 Own Shares
The total number of options outstanding at the date of this report is nil (2014: 214,628) under the Long Term Incentive Plan (LTIP) and the total shareholding of the EBT is nil (2014: 308,387) ordinary shares. The shares were held by the EBT until the relevant options were exercised, until they lapse or until they are sold back to the market. They were presented on the Balance Sheet as a deduction from shareholders' funds, in accordance with the policy detailed in note 1.
The EBT sold 235,476 ordinary shares back to the market as shown below. The own shares reserve has been reduced to reflect the cost of the shares sold and the resultant loss of £147,000 has been taken to capital reserve.
|
Date of sale |
Number of |
|
Price shares |
|
Loss on sale |
|
2 June 2015 |
50,000 |
|
280 pence |
|
29 |
|
3 June 2015 |
50,000 |
|
279 pence |
|
29 |
|
11 June 2015 |
50,000 |
|
276 pence |
|
31 |
|
19 June 2015 |
75,000 |
|
272 pence |
|
50 |
|
8 July 2015 |
10,476 |
|
266 pence |
|
8 |
|
|
235,476 |
|
|
|
147 |
|
|
Number of |
|
Group and |
|
As at 1 October 2014 |
308,387 |
|
(1,039) |
|
Options exercised |
(72,911) |
|
246 |
|
Shares sold |
(235,476) |
|
793 |
|
As at 30 September 2015 |
|
|
|
22 Net Asset Value
The consolidated net asset value per share has been calculated based on equity shareholders' funds of £149,807,000 (2014: £134,061,000) and on 53,133,000 (2014: 52,219,613) ordinary shares, being the shares in issue at the year end having deducted the number of shares held by the EBT.
23 Analysis of Changes in Net Debt
|
Group |
|
At 30 |
|
|
Cash |
|
|
Non |
|
|
At 30 |
|
|
Cash at bank and with brokers |
|
3,512 |
|
|
(975) |
|
|
|
|
|
2,537 |
|
|
Debt due after one year |
|
(33,873) |
|
|
|
|
|
(28) |
|
|
(33,901) |
|
|
|
|
|
(30,361) |
|
|
(975) |
|
|
(28) |
|
|
(31,364) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
At 30 |
|
|
Cash |
|
|
Non |
|
|
At 30 |
|
|
Cash at bank |
|
3,246 |
|
|
(966) |
|
|
|
|
|
2,280 |
|
|
Debt due after one year |
|
(33,873) |
|
|
|
|
|
(28) |
|
|
(33,901) |
|
|
|
|
|
(30,627) |
|
|
(966) |
|
|
(28) |
|
|
(31,621) |
24 Operating Lease Commitments
The Group has served notice to the landlord on its existing premises and has arranged more suitable accommodation. The new arrangements are for five years and involve a sub-lease of an existing leasehold interest, and which include the right to participate in sharing of rent free periods and rent reviews as they occur. Currently the head lessee is in the process of a rent review and as such it is not possible to determine actual future lease commitments. However for the purposes of this note, an estimated future rent commitment has been used. Therefore, the Group has an annual commitment as at 30 September 2015 under sub-lease of £69,000 (2014: £163,000 under the prior lease). This operating lease commitment is disclosed in the table below:
|
Expiry Date |
Group |
|
|
Group |
|
|
Within one year |
86 |
|
|
163 |
|
|
Between one and two years |
69 |
|
|
38 |
|
|
Between two and three years |
69 |
|
|
|
|
|
Between three and four years |
69 |
|
|
|
|
|
Between four and five years |
69 |
|
|
|
|
|
|
|
362 |
|
|
201 |
25 Financial Commitments
At 30 September 2015 the Group had no financial commitments which had not been accrued for (2014: none).
26 Share-based Payments
The Group did operate one share-based (equity settled) payment scheme being the 2006 LTIP which in turn has two sections relating to Total Shareholder Return (TSR) based Awards and Matching Awards. During the year the last historical awards under the 2006 LTIP vested and the remaining shares in the Company's EBT sold and the EBT closed. The 2006 LTIP was closed previously with the last awards being granted in 2009.
Long Term Incentive Plan: TSR-based Awards
Awards of restricted shares up to a maximum value of one year's salary have performance conditions based on total shareholder return in relation to two separate performance conditions over a period of five years. The performance conditions contain higher and lower thresholds that determine the extent of the vesting of the award. In accordance with the LTIP rules existing awards increase by any dividends declared by the Company until they are exercised.
Long Term Incentive Plan: Matching Awards
Executive directors and senior executives receive a certain percentage of their overall bonus for the year in deferred shares. The shares granted according to these matching awards only vest once the executive has completed three years' further service. There are no other performance conditions. In accordance with the LTIP rules existing awards increase by any dividends declared by the Company until they are exercised.
|
|
Group |
|||
|
|
TSR-based |
Matching |
||
|
|
No. |
Weighted |
No. |
Weighted |
|
Outstanding at 1 October 2014 |
211,991 |
0.0 |
12,423 |
0.0 |
|
During the year: |
|
|
|
|
|
Awarded |
|
|
|
|
|
Forfeited |
|
|
|
|
|
Exercised |
(60,113) |
0.0 |
(12,798) |
0.0 |
|
Expired |
(158,279) |
0.0 |
|
|
|
Increase in awards due to dividends paid |
6,401 |
0.0 |
375 |
0.0 |
|
Outstanding at 30 September 2015 |
|
0.0 |
|
0.0 |
|
Exercisable at 30 September 2015 |
|
0.0 |
|
0.0 |
|
|
Group |
|||
|
|
TSR-based |
Matching |
||
|
|
No. |
Weighted |
No. |
Weighted |
|
Outstanding at 1 October 2013 |
202,759 |
0.0 |
11,869 |
0.0 |
|
During the year: |
|
|
|
|
|
Awarded |
|
|
|
|
|
Forfeited |
|
|
|
|
|
Exercised |
|
|
|
|
|
Expired |
|
|
|
|
|
Increase in awards due to dividends paid |
9,232 |
0.0 |
554 |
0.0 |
|
Outstanding at 30 September 2014 |
211,991 |
0.0 |
12,423 |
0.0 |
|
Exercisable at 30 September 2014 |
125,664 |
0.0 |
12,423 |
0.0 |
There were no awards outstanding at 30 September 2015. The awards outstanding at 30 September 2014 had a weighted average remaining contractual life of 0.08 years and nil years in respect of the TSR-based Awards and Matching Awards respectively.
Awards and options are usually forfeited if the employee leaves employment before vesting. On 8 July 2015, 72,911 options were exercised by an employee. The weighted average share price on that date was £2.655 per share. All other options expired and the scheme has terminated.
For the year ended 30 September 2015, the Company recognised a total share options expense of £3,000 (2014: £19,000) relating to share-based payment transactions.
27 Financial Instruments and Risk Profile
As an investment trust, the Company invests in securities for the long term in order to achieve its investment objective as stated above. Accordingly, it is the Board's policy that no trading in investments or other financial instruments be undertaken. The risk management processes of the Company are aligned with those of the Group as a whole and it is at the Group level that the majority of the risk management procedures are performed. Where relevant and materially different to the Group position, Company specific risk exposures are explained alongside those of the Group. The following risk and sensitivity analysis included in this note are based on the ongoing operations of the Group and Company.
Management of market risk
Management of market risk is fundamental to the Group's investment objective and the investment portfolio is continually monitored to ensure an appropriate balance of risk and reward.
Exposure to any one entity is monitored by the Board and the Investment Manager. The Board have complied with the investment policy requirement not to invest more than 15% of the total value of its gross assets, save that the Company can invest up to 25% of its gross assets in any single fund managed by MAM where the Board believes that the investment policy of such funds is consistent with the Company's objective of spreading investment risk.
From time to time, the Group may seek to reduce or increase its exposure to stock markets and currencies by taking positions in currency forward contracts, index futures and options relating to one or more stock markets. There are no such positions as at 30 September 2015. These instruments are used for the purpose of hedging some or all of the existing exposure within the Group's investment portfolio to those currencies or particular markets or to enable increased exposure when deemed appropriate and with the specific approval of the Board.
The Company's financial instruments comprise its investment portfolio - see note 13 - cash balances, debtors and creditors that arise directly from its operations such as sales and purchases awaiting settlement and accrued income, and the debenture loans used to finance its operations. The Company, (as distinct from the Group), is unlikely to use derivatives for hedging purposes and then only in exceptional circumstances with the specific prior approval of the Board. No hedging was used during the year.
In pursuing its investment objective the Company is exposed to various risks which could cause short term variation in its net assets and which could result in both or either a reduction in its net assets or a reduction in the profits available for distribution by way of dividend. The main risk exposures for the Company from its financial instruments are market risk (including currency risk, interest rate risk and other price risk), liquidity risk and credit risk.
The Board sets the overall investment strategy and has in place various controls and limits and receives various reports in order to monitor the Company's and Group's exposure to these risks. The risk management policies identified in this note have not changed materially from the previous accounting period in respect of the Company.
Market Risk
The principal risk in the management of the portfolio is market risk i.e. the risk that values and future cashflows will fluctuate due to changes in market prices. This comprises:
• foreign currency risk;
• interest rate risk; and
• other price risk i.e. movements in the value of investment holdings caused by factors other than interest rate or currency movements.
These risks are taken into account when setting investment policy and making investment decisions.
Foreign Currency Risk
Exposure to foreign currency risk arises through investments in securities listed on overseas stock markets. A proportion of the net assets of the Group and Company are denominated in currencies other than sterling, with the effect that the balance sheet and total return can be materially affected by currency movements. The Group and Company's exposure to foreign currencies through its investments in overseas securities as at 30 September 2015 was £9,154,000 and £9,154,000 respectively (2014: £10,190,000 and £10,190,000 respectively).
The Company's investments in the MAM Funds are in sterling denominated share classes. Within the MAM Funds the foreign exchange exposure is not hedged.
In respect of the Company, the Investment Manager monitors the Company's exposure to foreign currencies and the Board receives reports on a regular basis.
The Group is able, although unlikely, to enter into forward currency contracts as a means of limiting or increasing its exposure to particular currencies. Such contracts can be used for the purpose of hedging the existing currency exposure of elements of the Group's portfolio (as a means of reducing risk) or to enable increased exposure when this is deemed appropriate.
The currency risk of the Group and Company's non-sterling monetary financial assets and liabilities at the Balance Sheet date was:
|
|
Group |
|
Group |
||
|
Currency exposure |
Overseas |
Total |
|
Overseas |
Total |
|
US Dollar |
589 |
589 |
|
1,771 |
1,771 |
|
Euro |
8,020 |
8,020 |
|
8,028 |
8,028 |
|
Yen |
478 |
478 |
|
275 |
275 |
|
Other non-sterling |
67 |
67 |
|
116 |
116 |
|
|
9,154 |
9,154 |
|
10,190 |
10,190 |
|
|
|
|
|
|
|
|
|
Company |
|
Company |
||
|
Currency exposure |
Overseas |
Total |
|
Overseas |
Total |
|
US Dollar |
589 |
589 |
|
1,771 |
1,771 |
|
Euro |
8,020 |
8,020 |
|
8,028 |
8,028 |
|
Yen |
478 |
478 |
|
275 |
275 |
|
Other non-sterling |
67 |
67 |
|
116 |
116 |
|
|
9,154 |
9,154 |
|
10,190 |
10,190 |
Sensitivity analysis
If sterling had strengthened by 5% relative to all currencies on the reporting date, with all the other variables held constant, the income and the net assets attributable to equity holders of the parent would have decreased by the amounts shown below. The analysis is performed on the same basis for 2014. The revenue impact is an estimated figure for 12 months based on the relevant foreign currency denominated balances at the reporting date.
|
Income Statement |
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Revenue return |
|
|
|
|
|
|
|
|
|
|
|
|
Capital return |
(458) |
|
|
(510) |
|
|
(458) |
|
|
(510) |
|
|
Net assets |
|
(458) |
|
|
(510) |
|
|
(458) |
|
|
(510) |
A 5% weakening of sterling against the above currencies would have resulted in an equal and opposite effect on the above amounts, on the basis that all other variables remain constant. The Company's exposure has been calculated as at the year end and may not be representative of the year as a whole.
Interest Rate Risk
The Company's direct interest rate risk exposure affects the interest received on cash balances and the fair value of its fixed rate portfolio investments and debentures. Indirect exposure to interest rate risk arises through the effect of interest rate changes on the valuation of the investment portfolio. The vast majority of the financial assets held by the Company are equity shares, which pay dividends, not interest. The Company may however from time to time hold small investments which pay a fixed rate of interest.
The Board sets limits for cash balances and receives regular reports on the cash balances of the Company. The Company's fixed rate debentures introduce an element of gearing to the Company which is monitored within limits and reported to the Board. Cash balances are used to manage the level of gearing within a range set by the Board. The Board sets an overall investment strategy and also has various limits on the investment portfolio which aim to spread the portfolio investments to reduce the impact of interest rate risk on company valuations. Regular reports are received by the Board in respect of the Company's investment portfolio and the respective limits.
The interest rate risk profile of the financial assets and liabilities at the Balance Sheet date was:
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Floating rate financial assets UK sterling |
2,537 |
|
|
3,512 |
|
|
2,280 |
|
|
3,246 |
|
|
Financial assets not carrying interest |
182,443 |
|
|
165,680 |
|
|
182,700 |
|
|
165,946 |
|
|
|
|
184,980 |
|
|
169,192 |
|
|
184,980 |
|
|
169,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
UK sterling |
(33,901) |
|
|
(33,873) |
|
|
(33,901) |
|
|
(33,873) |
|
|
Financial liabilities not carrying interest |
(1,336) |
|
|
(1,338) |
|
|
(1,336) |
|
|
(1,338) |
|
|
|
|
(35,237) |
|
|
(35,211) |
|
|
(35,237) |
|
|
(35,211) |
Floating rate financial assets usually comprise cash on deposit with banks which is repayable on demand and receive a rate of interest based on the base rates in force over the period. The fixed rate financial liabilities comprise the Group and Company's debentures totalling £34.2m nominal. They pay a weighted average rate of interest of 8.1% per annum and mature in 2020 (£13.5m) and 2025 (£20.7m).
Sensitivity analysis
Based on closing cash balances held on deposits with banks, a 0.5% decrease (2014: 0.5%) in base interest rates would have the following effect on net assets and profit before tax of the Group and Company:
|
Income Statement |
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Revenue return |
(8) |
|
|
(13) |
|
|
(8) |
|
|
(13) |
|
|
Net assets |
|
(8) |
|
|
(13) |
|
|
(8) |
|
|
(13) |
A 0.5% increase (2014: 0.5%) in interest rates would have resulted in a proportionate equal and opposite effect on the above amounts on the basis that all other variables remain constant. The above analysis is based on closing balances only and is not representative of the year as a whole.
Other Price Risk
Exposure to market price risk is significant and comprises mainly movements in the market prices and hence value of the Company's listed equity investments which are disclosed in note 13 above. The Company also has unlisted investments which are indirectly impacted by movements in listed equity prices and related variables. The Board sets an overall investment strategy to achieve a spread of investments across sectors and regions in order to reduce risk. The Board receives reports on the investment portfolio, performance and volatility on a regular basis in order to ensure that the investment portfolio is in accordance with the investment policy.
The Investment Manager's policy is to manage risk through a combination of monitoring the exposure to individual securities, industry and geographic sectors, whilst maintaining a constant awareness in real time of the portfolio exposures in accordance with the investment strategy. Derivative positions are marked to market and exposure to counterparties is also monitored on a daily basis by the Investment Manager; the Board review it on a quarterly basis.
As mentioned earlier, the Investment Manager may use derivative instruments in order to 'hedge' the market risk inherent in the portfolio. The Investment Manager reviews the risk associated with individual investments and where they believe it appropriate may use derivatives to mitigate the risk of adverse market or currency movements. The Investment Manager discusses the hedging strategy with the Board at its quarterly meetings.
The following table details the exposure to market price risk on the quoted and unquoted equity investments:
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Non-current Asset Investments at Fair Value through Profit or Loss |
|
|
|
|
|
|
|
|
|
|
|
|
Listed equity investments |
129,217 |
|
|
123,687 |
|
|
129,217 |
|
|
123,687 |
|
|
Unlisted |
52,427 |
|
|
41,655 |
|
|
52,427 |
|
|
41,655 |
|
|
Subsidiary Company |
|
|
|
|
|
|
162 |
|
|
172 |
|
|
|
|
181,644 |
|
|
165,342 |
|
|
181,806 |
|
|
165,514 |
Sensitivity analysis
If share prices on listed equity investments had decreased by 10% at the reporting date with all other variables remaining constant, the profit before tax and the net assets attributable to the equity holders of the Group would have decreased by the amounts shown below. Details of the sensitivity analysis on the investment in MAM is contained in note 13 above.
|
Income Statement |
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Capital return |
(12,922) |
|
|
(12,369) |
|
|
(12,922) |
|
|
(12,369) |
|
|
Net Assets |
|
(12,922) |
|
|
(12,369) |
|
|
(12,922) |
|
|
(12,369) |
A 10% increase (2014: 10%) in share prices would have resulted in a proportionate equal and opposite effect on the above amounts on the basis that all other variables remain constant. The analysis has been calculated on the investments held at the year end and this may not be representative of the year as a whole.
Credit Risk
Credit risk is the risk of other parties failing to discharge an obligation causing the Group financial loss. The Group's exposure to credit risk is managed by the following:
• The Company's listed investments are held on its behalf by Bank of New York Mellon SA/NV, London Branch, 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. However under the AIFMD, the Company's Depositary provides certain indemnities in respect of the Company's investments. The Company receives regular internal control reports from the Custodian which are reviewed by the Investment Manager and reported to the Audit Committee.
• Investment transactions are undertaken by the Investment Manager with a number of approved brokers in the ordinary course of business on a delivery versus payment basis. All new brokers are reviewed by the Investment Manager for credit worthiness and added to an approved brokers list if not considered to be a credit risk.
• Credit risk is mitigated by diversifying the counterparties through whom the Investment Manager conducts investment transactions. The credit standing of all counterparties is reviewed periodically with limits set on amounts due from any one counterparty.
• Cash is held at banks that are considered to be reputable and high quality. Cash balances are spread across a range of banks to reduce concentration risk.
• Where the Company makes an investment in a loan or other security with credit risk, that credit risk is assessed and considered as part of the investment decision making process by the Investment Manager. The Board receives regular reports on the composition of the investment portfolio.
• A credit exposure could arise in respect of derivatives contracts entered into by the Group if the counterparty were unable to fulfill its contractual obligations.
Credit Risk Exposure
At the reporting date, the financial assets exposed to credit risk amounted to the following:
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Cash on deposit and at banks |
2,537 |
|
|
3,512 |
|
|
2,280 |
|
|
3,246 |
|
|
Sales for future settlement |
124 |
|
|
45 |
|
|
124 |
|
|
45 |
|
|
Interest, dividends and other receivables |
675 |
|
|
293 |
|
|
770 |
|
|
387 |
|
|
|
|
3,336 |
|
|
3,850 |
|
|
3,174 |
|
|
3,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum exposure during the year |
2,733 |
|
|
3,850 |
|
|
2,562 |
|
|
3,678 |
|
|
Maximum exposure during the year |
5,548 |
|
|
20,331 |
|
|
5,377 |
|
|
19,814 |
|
All amounts included in the analysis above are based on their carrying values.
None of the financial assets were past due or impaired at the reporting date (2014: none).
Liquidity Risk
Liquidity risk is the risk that the Group or Company will encounter difficulties meeting its obligations as they fall due.
The Company may periodically invest in derivatives contracts and debt securities that are traded over the counter. The Company is exposed to the daily settlement of margin calls on derivatives.
Liquidity risk is monitored although it is recognised that the majority of the Group's assets are investments in quoted equities and other quoted securities that are readily realisable. The Board has various limits in respect of how much of the Group's resources can be invested in any one company. The unlisted investments in the portfolio are subject to liquidity risk but such investments are subject to limits set by the Board and liquidity risk is taken into account by the directors when arriving at their valuation. The Company does have exposure to concentration risk due to its investment in MAM at 28.8% (2014: 24.9% in relation to MAM) of the Company's investment portfolio. The Company closely monitors this investment and receives regular financial reports and believes that the current concentration risk is in-line with the Company's objective of diversifying its investment portfolio into the investment groups as per its investment policy.
The Group maintains an appropriate level of cash balances in order to finance its operations and the Investment Manager regularly monitors the Group's cash balances to ensure all known or forecasted liabilities can be met. The Board receives regular reports on the level of the Group's cash balances. The Group does not have any overdraft or other borrowing facilities to provide liquidity.
A maturity analysis of financial liabilities showing the remaining contractual maturities is detailed below:
|
|
Group and Company |
||||
|
Undiscounted cash flows |
Due within |
Due between |
Due between |
Due 3 years |
Total |
|
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 |
11,680 |
20,029 |
|
Trade payables and other liabilities |
1,336 |
|
|
|
1,336 |
|
|
4,119 |
2,783 |
2,783 |
45,880 |
55,565 |
|
|
|
|
|
|
|
|
|
Group and Company |
||||
|
Undiscounted cash flows |
Due within |
Due between |
Due between |
Due 3 years |
Total |
|
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 |
14,463 |
22,812 |
|
Trade payables and other liabilities |
1,338 |
|
|
|
1,338 |
|
|
4,121 |
2,783 |
2,783 |
48,663 |
58,350 |
Categories of financial assets and liabilities
The following table analyses the carrying amounts of the financial assets and liabilities by categories as defined in IAS 39:
|
Financial assets |
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
181,644 |
|
|
165,342 |
|
|
181,806 |
|
|
165,514 |
|
|
|
|
181,644 |
|
|
165,342 |
|
|
181,806 |
|
|
165,514 |
|
Other financial assets1 |
|
3,336 |
|
|
3,850 |
|
|
3,174 |
|
|
3,678 |
|
|
|
184,980 |
|
|
169,192 |
|
|
184,980 |
|
|
169,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities measured at amortised cost2 |
35,237 |
|
|
35,211 |
|
|
35,237 |
|
|
35,211 |
|
|
|
|
35,237 |
|
|
35,211 |
|
|
35,237 |
|
|
35,211 |
1 Other financial assets include: cash and cash equivalents, due from brokers, cash collateral on securities borrowed, dividend and interest receivables, other receivables and prepayments.
2 Financial liabilities measured at amortised cost include: debenture stock issued, due to brokers, fees and other payables and accrued expenses.
The investment portfolio has been valued in accordance with the accounting policy in note 1 to the accounts, i.e. at fair value. The debenture stocks are classified as level 3 under the fair value hierarchy. The fair value of the debenture stock is calculated using Discounted Cash Flow analysis and by reference to the redemption yields of a similar companies' debt instrument, with an appropriate margin spread added.
|
Group and Company |
Book |
|
|
Book |
|
|
Fair |
|
|
Fair |
|
|
£13.5m (2014: £13.5m) 9.5% |
13,433 |
|
|
13,421 |
|
|
16,839 |
|
|
16,916 |
|
|
£20.7m (2014: £20.7m) 7.25% |
20,468 |
|
|
20,452 |
|
|
25,805 |
|
|
24,737 |
|
|
|
|
33,901 |
|
|
33,873 |
|
|
42,644 |
|
|
41,653 |
Capital Management Policies and Procedures
The Company's capital management objectives are:
• to ensure that it is able to continue as a going concern; and
• to maximise the revenue and capital returns to its equity shareholders through an appropriate mix of equity capital and debt. The Board sets a range for the Company's debt (comprised of debentures less cash) at any one time which is maintained by management of the Company's cash balances.
Capital at 30 September comprises:
|
|
Group |
|
|
Group |
|
|
Company |
|
|
Company |
|
|
Net Debt |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted cash and cash equivalents |
(2,000) |
|
|
(2,512) |
|
|
(1,838) |
|
|
(2,340) |
|
|
Debentures |
33,901 |
|
|
33,873 |
|
|
33,901 |
|
|
33,873 |
|
|
Sub total |
|
31,901 |
|
|
31,361 |
|
|
32,063 |
|
|
31,533 |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Equity share capital |
5,313 |
|
|
5,253 |
|
|
5,313 |
|
|
5,253 |
|
|
Retained earnings and other reserves |
144,494 |
|
|
128,808 |
|
|
144,494 |
|
|
128,808 |
|
|
Shareholders' funds |
|
149,807 |
|
|
134,061 |
|
|
149,807 |
|
|
134,061 |
|
Gearing |
|
|
|
|
|
|
|
|
|
|
|
|
Net Debt as a percentage of shareholders' funds |
|
21.3% |
|
|
23.4% |
|
|
21.4% |
|
|
23.5% |
Maximum potential gearing represents the highest gearing percentage on the assumption that the Group or Company had no net current assets. As at 30 September 2015, in respect of the Group and the Company, this was 22.6% and 22.6% respectively (2014: Group and Company; 25.3% and 25.3% respectively).
The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. The review includes:
• the level of gearing, taking into account the Investment Manager's views on the market;
• the level of the Company's free float of shares as the Barlow family owns approximately 53% 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 66 2/3% of adjusted share capital and reserves in accordance with the respective Trust Deeds;
• the Company has to comply with statutory requirements relating to dividend distributions; and
• the AIFMD imposes a requirement for all AIFs to have in place a limit on the amount of leverage that they may hold. It is then the responsibility of the relevant AIFM to ensure that this limit is not exceeded, which in this case is the Company (being an internally managed AIF).
Leverage is similar to gearing (as calculated in accordance with AIC guidelines above) but the AIFMD mandates a certain calculation methodology which must be applied. Leverage as calculated under the AIFMD methodology in respect of the Company is:
|
Gross method |
Group |
|
Company |
|
Investments held at fair value through profit or loss |
181,644 |
|
181,644 |
|
Investments in subsidiaries held at fair value through profit or loss |
|
|
162 |
|
Total investments at exposure value as defined under AIFMD |
181,644 |
|
181,806 |
|
|
|
|
|
|
Equity Shareholders Funds |
149,807 |
|
149,807 |
|
|
|
|
|
|
Leverage |
1.21 |
|
1.21 |
|
|
|
|
|
|
Commitment method |
Group |
|
Company |
|
Investments held at fair value through profit or loss |
181,644 |
|
181,644 |
|
Investments in subsidiaries held at fair value through profit or loss |
|
|
162 |
|
Cash and cash equivalents |
2,537 |
|
2,280 |
|
Total investments at exposure value as defined under AIFMD |
184,181 |
|
184,085 |
|
|
|
|
|
|
Equity Shareholders Funds |
149,807 |
|
149,807 |
|
|
|
|
|
|
Leverage |
1.23 |
|
1.23 |
The leverage figures above represent leverage as calculated under the gross and commitment methods as defined under the AIFMD (a figure of 1 represents no leverage or borrowings). The two methods differ in their treatment of amounts outstanding under derivative contracts with the same counterparty, which are not applicable to the Company and their treatment of cash balances. In both methods the Company has included debentures by including the value of investments purchased by those borrowings, rather than their balance sheet value. The Company's leverage limit under the AIFMD is 1.5 which equates to a borrowing level of 50% (the Company has not exceeded this limit as any time during the past year).
These requirements (except for the AIFMD leverage requirement), are unchanged since last year and the Company has complied with them.
28 Related Party Transactions
Majedie Asset Management (MAM)
MAM became Investment Manager to the Company from 13 January 2014 under the terms of an Investment Agreement. The agreement provides for MAM to manage the Company's investment assets on both a segregated account basis and also by investments into various MAM collective investment vehicles or funds. Details of the Investment Agreement are contained in the material contracts section of the Directors' Report above. As Investment Manager MAM is entitled to receive investment management fees. In respect of segregated account investment these are charged directly to the Company and are shown as an expense in its accounts. Any fees due in respect of investments made into any MAM funds are charged to the fund and are therefore included as part of the investment value of the relevant holdings. Details concerning the Company's investments in the year in the MAM funds are shown in the Chairman's & Chief Executive's Reports above.
In addition to the above, the Company retains an investment in MAM itself. Mr JWM Barlow is a non-executive director of MAM, but receives no remuneration for this role. MAM is accounted for as an investment in both the Company and Group accounts and is valued at fair value through profit or loss. Details concerning the Company's investment in MAM is included in the Chairman's & Chief Executive's Reports above and on note 13 above.
Majedie Portfolio Management (MPM)
The Company pays certain costs on behalf of Majedie Portfolio Management Limited (MPM) for operating the Majedie Investments PLC Share Plan and additionally is charged a management fee by MPM. Any such costs paid by the Company are recharged to MPM, net of any management fees due.
Javelin Capital
Javelin Capital LLP (Javelin Capital) was the Investment Manager and General Administrator to the Company until 13 January 2014, when MAM was appointed as Investment Manager, and was also the parent entity of Javelin Capital Fund Management Limited (JCFM) and Javelin Capital Services Limited (JCS). All Javelin Capital entities have ceased trading and have been liquidated. As such there were no transactions in the period.
The table below discloses the transactions and balances between those entities:
|
Transactions during the year: |
2015 |
2014 |
|
Dividend income received from MAM |
3,273 |
3,619 |
|
MAM share sale realised gains |
5,659 |
18,766 |
|
JCEMAF advisory fee revenue due to Javelin Capital (from the Company) |
|
122 |
|
Company management fee revenue due to Javelin Capital |
|
165 |
|
Company administration fee revenue due to Javelin Capital |
|
73 |
|
Company lease charge to JCS |
|
9 |
|
JCS management fee income from Javelin Capital |
|
571 |
|
MPM costs recharged by the Company |
36 |
35 |
|
Management fee income due to MAM (segregated account only) |
492 |
373 |
|
|
|
|
|
Balances outstanding at the end of the year: |
|
|
|
Between the Company and MAM (investment management fees) |
106 |
132 |
|
Value of the Company's investment in MAM |
52,300 |
41,300 |
|
Between the Company and MPM |
96 |
95 |
Transactions between group companies during the year were made on terms equivalent to those that occur in arm's length transactions.
Remuneration
The remuneration of the directors, who are the key management personnel of the Company, are set out below in aggregate for each of the categories specified in IAS 24: Related Party Disclosures. There are no amounts outstanding at 30 September 2015 for directors fees (2014: nil). Further information about the remuneration of individual directors is provided in the audited section of the Report on Directors' Remuneration on page 33 of the Company's Annual Report and Accounts.
|
|
2015 |
2014 |
|
Short term employee benefit |
359 |
266 |
|
Partnership profit shares |
|
50 |
|
|
359 |
316 |
Shareholder Information
|
Registered Office |
Registrars |
|
Tower 42 |
Computershare Investor Services PLC |
|
25 Old Broad Street |
The Pavilions |
|
London EC2N 1HQ |
Bridgwater Road |
|
Telephone: 020 7626 1243 |
Bristol BS99 6ZZ |
|
Fax: 020 7374 4854 |
Telephone: 0370 707 1159 |
|
E-mail: majedie@majedieinvestments.com |
|
|
Registered Number: 109305 England |
Shareholders should notify all changes of name |
|
|
and address in writing to the Registrars. |
|
Company Secretary & Fund Administrator |
Shareholders may check details of their holdings, |
|
Capita Sinclair Henderson Limited |
historical dividends, graphs and other data by |
|
Trading as Capita Asset Services |
accessing www.computershare.com. |
|
Beaufort House |
|
|
51 New North Road |
Shareholders wishing to receive communications |
|
Exeter EX4 4EP |
from the Registrars by email (including |
|
Telephone: 01392 412122 |
notification of the publication of the annual and |
|
Fax: 01392 253282 |
interim reports) should register on-line at |
|
|
|
|
Investment Manager |
Shareholders will need their shareholder number, |
|
Majedie Asset Management Limited |
shown on their share certificate and dividend |
|
10 Old Bailey |
vouchers, in order to access both of the above |
|
London EC4M 7NG |
services. |
|
Telephone: 020 7618 3900 |
|
|
Email: info@majedie.com |
Auditors |
|
|
Ernst & Young LLP |
|
Depositary |
25 Churchill Place |
|
BNY Mellon Trust & Depositary (UK) Limited |
Canary Wharf |
|
BNY Mellon Centre |
London E14 5EY |
|
160 Queen Victoria Street |
|
|
London EC4V 4LA |
Stockbrokers |
|
|
Westhouse Securities Limited |
|
The Depositary has delegated the safe keeping |
Heron Tower |
|
of the Company's assets to the Custodian, The |
110 Bishopsgate |
|
Bank of New York Mellon SA/NV, London |
London EC2N 4AY |
|
Branch. |
|
|
|
|
|
AIFM Majedie Investments PLC |
|
National Storage Mechanism
A copy of the Annual Report and Financial Statements will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: http://www.morningstar.co.uk/uk/NSM.
A copy of the Annual Report and Accounts and Notice of Annual General Meeting will be delivered to shareholders shortly and can also be found at www.majedieinvestments.com.
Annual General Meeting
The Company's Annual General Meeting will be held on 20 January 2016 at 12.00 pm at City of London Club, 19 Old Broad Street, London EC2N 1DS.
ENQUIRIES
If you have any enquiries regarding this announcement please contact Mr William Barlow on 020 7382 8185.
END
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.
This information is provided by RNS
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