Majedie Investments PLC Annual Report 30 September 2005 Contents 2 2 3 4 7 10 11 11 12 14 17 18 20 24 30 31 32 33 34 35 36 37 57 58 60 61 63 Company Summary Recent Trends Year’s Summary Chairman’s Statement Investment Report Asset Distribution Twenty Largest UK Investments Ten Largest Overseas Investments Valuation of Investments Financial Review Board of Directors Directors’ Report Corporate Governance Report on Directors’ Remuneration Statement of Directors’ Responsibilities Report of the Independent Auditors Consolidated Statement of Total Return Consolidated Balance Sheet Company Statement of Total Return Company Balance Sheet Consolidated Cash Flow Statement Notes to the Accounts Ten Year Record Notice of Meeting Majedie Savings Plans Shareholder Information Form of Proxy ifc MAJEDIE INVESTMENTS PLC Majedie Investments PLC is a self managed investment trust with total portfolio assets under management of £210 million. Our specialist fund management subsidiary has client assets under management of £2.3 billion. Our Objective is to maximise total shareholder return over the long term whilst increasing dividends by more than the rate of inflation. Our Benchmark is 70% FTSE All-Share Index and 30% FTSE World ex UK Index (Sterling) on a total return basis. REPORT & ACCOUNTS 2005 1 Company Summary Total assets* Shareholders’ funds Market capitalisation £210.4m £176.2m £159.4m Capital structure 10p ordinary shares 52,528,000 Management fee ISA status PEP status * Represents total assets less current liabilities. Recent Trends 339 311 267 247 238 Debt £13.5m 9.5% debenture stock 2020 £20.7m 7.25% debenture stock 2025 The trust is self-managed and accordingly does not pay a fee to third party fund managers. Up to £7,000 in each tax year until 2010. The Company’s policy is to hold at least one half of its investments by value in the ordinary shares of UK and other EU companies thus qualifying fully as an investment trust for Personal Equity Plan purposes. 9.05 8.75 8.45 8.15 7.9 304 243 228 198 188 01 02 03 04 05 01 02 03 04 05 01 02 03 04 05 Net asset value per share (pence) increased by 27.1% in the year Dividends (pence) have increased for the sixteenth year, this year by 3.4% Share price (pence) has increased by 33.4% during the year 2 MAJEDIE INVESTMENTS PLC Year’s Summary Financial* as at 30 September Total assets Shareholders’ funds Net asset value per share Share price Discount to net assets (debt at par value) Discount to net assets (debt at fair value) Revenue return before tax Earnings per share Dividends per share Group costs (administrative expenses) Group costs/average net assets Group costs/average total assets Company costs (administrative expenses) Company costs/average Company net assets Company costs/average Company total assets Maximum potential gearing Year’s high/low Share price Net asset value Discount (debt at par) high low high low high low Discount (debt at fair value) high low Performance year ended 30 September Investment portfolio return (total assets)† Net asset value total return Share price total return Benchmark total return† † Source: The WM Company * Financial information is disclosed in respect of the consolidated accounts unless otherwise stated. 2005 2004 % £210.4m £176.2m 338.7p 303.5p 10.4% 6.0% £5.5m 8.97p 9.05p £6.2m 3.9% 3.2% £1.9m 1.2% 1.0% 19.1% 2005 303.5p 222.5p 339.1p 272.2p 19.9% 5.3% 16.4% 0.5% +22.3 +26.9 +27.1 +33.4 +111.5 +70.9 +3.4 +59.0 +5.6 £172.1m £138.9m 266.5p 227.5p 14.6% 11.2% £2.6m 5.25p 8.75p £3.9m 2.9% 2.3% £1.8m 1.3% 1.1% 24.3% 2004 234.5p 198.5p 274.6p 250.4p 22.5% 11.6% 20.1% 8.6% 2005 2004 +26.5% +31.2% +38.2% +24.4% +13.6% +11.6% +19.3% +13.3% REPORT & ACCOUNTS 2005 3 Chairman’s Statement I am delighted to report that over the last twelve months the consolidated net revenue before taxation amounted to £5.5m – increasing from the previous year’s figure of £2.6m. Furthermore the total return to shareholders was 38.2% exceeding our benchmark return of 24.4% by 13.8%. The underlying net asset value total return was 31.2%: an outperformance of 6.8%. Our policy of actively using the gearing of our long term debentures throughout the year has materially assisted these results. During the financial year the Company achieved a portfolio while allowing the investment management capital return on investments of £47.9m. After adding team sufficient scope and flexibility to generate income and deducting costs, interest, tax and superior performance. This is referred to further in the dividends there is an overall surplus in the combined Financial Review on page 14. revenue and capital account of £43.2m which has been transferred to reserves. In order to maximise total investment return the executives pay attention to both short term and longer This year the consolidated revenue account has been term considerations. At the outset of a specific boosted by Majedie Asset Management’s net profit for investment decision Gill Leates and her colleagues the year of £2.1m – helping to almost eliminate the identify the potential for the share price of an individual revenue account deficit which was present last year. stock to increase by more than the rest of the market I refer later to the progress of this business in over time. It will take some stocks longer than others greater detail. for this special additional value to be reflected and realised. One of the many challenges of investment We are continuing with our policy of seeking to management is to plan ahead so that the portfolio maximise the total return for shareholders including a holds investments which are likely to reach maturity at progressive dividend policy. A final dividend of 5.85 different times. It is also important that we are not pence per share is proposed. This gives a total for the distracted by short term volatility in stock markets from year of 9.05 pence per share representing an above our objective of maximising investment return over the inflation increase of 3.4% on last year. This is the long term. sixteenth consecutive year in which the dividend has increased by more than the rate of inflation. Our business development strategy has been evolving over several years. Majedie Asset Management Limited At the beginning of the year the portfolio started with is the first implemented stage of that strategy and the an overweighting in the global resources sector business, specialising in UK equity fund management, including mining and oil & gas. Gill Leates explains in is continuing to grow profitably as referred to in further the Investment Report on page 7 her rationale for detail below. We are looking at ways of developing a increasing this further throughout the year and her new equity fund management business in another area thoughts as to the outlook for resources and the of specialisation. Much has been learned from our markets in general. The Board has considered in some experience and success with the Majedie Asset depth the appropriate level of risk to be borne in the Management business and we believe that there is a portfolio with regard to the level of potential investment valuable opportunity to build a new fund management returns. The Board sets reasonable risk limits for the operation over the next few years. 4 MAJEDIE INVESTMENTS PLC As a self-managed investment trust Majedie is As profitability has increased so your Company’s different from other investment trusts. The shareholding has reduced in line with pre-agreed development of a specialist boutique fund targets – this year from 65% to 55%. The Board has management business and the establishment of a assessed the value of the Company’s investment as at separate new operation further distinguishes us from 30 September 2005 as £10.1m and this is included in our peers. This differentiated strategy is already the Company Balance Sheet. However, as Madjedie contributing positively to the revenue account and Asset Management Limited is a consolidated subsidiary, share price. Over the coming years we believe it will this value is not reflected in the Group Balance Sheet. yield significant further benefits for shareholders. This issue is referred to further in the Financial Review on page 15 and in Note 14 on page 48. The Majedie Asset Management business has had another strong year with assets under management The results for the 2005 financial year, to which I have increasing from £884 million at the start of the year to referred, are very encouraging. However it is £2.3 billion by the end. As already reported, during the particularly pleasing that total shareholder return (TSR) year the business generated a net profit of £2.1m – over three years is well ahead of the benchmark – see this compares with a loss of £0.6m in 2004. Majedie graph below. The Report on Directors’ Remuneration Asset Management now has 15 employees and this on page 26 includes a graph showing that five year August moved into new offices at One Carey Lane. TSR is also now just ahead of the benchmark. GROWTH IN MAJEDIE DIVIDENDS COMPARED WITH INCREASES IN RETAIL PRICES INDEX BOTH REBASED TO 100 TOTAL SHAREHOLDER RETURN V BENCHMARK – 3 YEARS TO 30 SEPTEMBER 2005 160 145 130 115 100 190 180 170 160 150 140 130 120 110 100 90 95 96 97 98 99 00 01 02 03 04 05 9/02 9/03 9/04 9/05 Majedie dividend RPI Benchmark REPORT & ACCOUNTS 2005 5 Chairman’s Statement During the year the Remuneration Committee disclosure, I question whether our accounts will be commissioned an independent review of executive more comprehensible to the non-professional than they directors’ remuneration. As a result of that review and were 25 or 30 years ago. I believe the professional the subsequent consultation with institutional bodies concerned would do well to consider this. shareholders and shareholder representative groups, a new Long Term Incentive Plan and bonus structure is In last year’s annual report I paid tribute to the being tabled for approval at the Annual General contributions of Sir John Barlow and David Ritchie who Meeting. Further details of the review and the new retired during the current year at the Annual General arrangements are provided in the Report on Directors’ Meeting in January 2005. I would like to reiterate to Remuneration on pages 26 to 28 and in a special each of them our best wishes for the future. circular for shareholders (copy enclosed). Careful consideration has been given to the structure. The Much has been achieved this year including strong objective is to provide financial incentives which will investment performance in the portfolio. I would like to encourage the executive directors to manage the thank all employees for their hard work and for their portfolio effectively and to grow the business for the contributions to these achievements. I am also very benefit of all shareholders over the coming years – grateful to my fellow directors for their diligence and building on the progress which has recently been made. dedication in carrying out their duties over the course of a busy year. Over the coming year we will be implementing new compulsory changes to disclosures in the annual report. This time they take the form of conversion to International Financial Reporting Standards as a result of a directive from the European Commission. Further Henry S Barlow Chairman details are provided in the Financial Review on page 24 November 2005 16. Although in theory there may be benefits associated with international standardisation and more TOTAL SHAREHOLDER RETURN V BENCHMARK YEAR TO 30 SEPTEMBER 2005 NAV TOTAL RETURN V BENCHMARK YEAR TO 30 SEPTEMBER 2005 140 135 130 125 120 110 105 100 95 135 130 125 120 115 110 105 100 95 9/04 12/04 3/05 6/05 9/05 9/04 12/04 3/05 6/05 9/05 Benchmark Benchmark 6 MAJEDIE INVESTMENTS PLC Investment Report The world economy over the financial year to 30 September 2005 has been characterised by high economic growth in China and India, contrasting with a less uniform pattern in the other major economies. In the UK growth has been steady but slowing, whilst the US has been stronger than expected. Meanwhile, Europe has been operating at below trend, but Japan has been improving. Performance Strategy Against this general background, Majedie’s net asset As set out in last year’s annual report the strategy has value total return outperformed its benchmark by been to focus the portfolio on sectors which have long 6.8%, rising 31.2% compared to the rise of the term macro factors in their favour and on companies benchmark of 24.4% for the year ended 30 September where enhancements are expected to occur in 2005. Majedie’s UK portfolio outperformed its underlying assets. This strategy arose from an overall benchmark by 1.3% and the overseas portfolio concern that the general level of growth in the western outperformed its benchmark by 10.7%. developed markets would start to weaken as the year progressed. This has led to an increase in investment The UK investments represent 75.4% of the portfolio in the resources sectors. The argument for this and rose 26.2% against the FTSE All-Share Index rise increased investment in resources is centred around of 24.9%. A large part of the outperformance was the long term demands from the expanding Chinese driven by the investments in the FTSE 250 and Small and Indian economies within a global economy, which Cap Indices. The main sectors responsible were oil will just grow at trend over the longer term. and gas, mining, chemicals, leisure, speciality finance and utilities, with companies such as BHP Billiton, JKX In May this year the International Energy Agency Oil & Gas, Investec and Urbium all doing well. stated that, even though energy prices were then at near record levels, the world was not investing enough In North America, which represents 14% of the for future demand in oil and gas production, refining, portfolio, the return was 30.2% against 17.5% from the power generation, and transmission. Current oil benchmark, an outperformance of 12.7%. This was consumption is 84m barrels per day and the world mainly produced from large investments in the oil and needs to produce an additional 8.4m barrels per day gas and mining sectors through companies like Ultra just to meet ongoing demand. Studies estimate that Petroleum and Peabody Energy, plus a heavy fundamental demand will be 120m barrels per day by weighting in the general industrial sectors through 2020-2030 i.e. +43%. It is well known that the majors companies like Rockwell. are not replacing their reserves on an ongoing basis. In addition other researchers have stated that, should In Europe the performance was below the benchmark the Chinese and Indian middle classes continue to but this was outweighed by positive returns from grow in line with historical precedents, by increasing Japan, which was 2.2% ahead of the benchmark, and significantly their use of oil in a similar manner to from other international equity markets. In Australia the Korea and Brazil, the current tight world supply will return was well ahead of the benchmark due to a remain over the longer term, despite allowances for strong return from Consolidated Minerals and ROC Oil, significant discoveries. whilst in South Africa the return was also ahead of the benchmark due to a strong performance by Metorex. REPORT & ACCOUNTS 2005 7 Investment Report China is already the world’s second largest consumer The UK market still remains an attractive area for of oil, surpassing Japan in 2003. It has been a net investment due to its generally lower international importer since 1993, and is the largest importer valuation and the sectors which offer high exposure to outside the OECD. China accounted for 4% of world international markets like resources and GDP in 2003, but consumed 7.4% of its crude oil. In pharmaceuticals, and reliable dividend yields like the 2004 China’s demand grew by 15% to 6.3m barrels utilities and banks. per day, about one-third of US demand. Imports now account for about 40% of China’s oil demand and this In the UK two-thirds of the economy is exposed to the is set to climb further. consumer so higher interest rates have hurt certain retail-oriented sectors. The portfolio therefore has a low Obviously, the significant rises seen in many of the exposure to retailers. However, sectors with good and major metal commodities reflect the heavy demands growing asset backing, like property, and resources from these high growth economies. This is in addition represent quite heavy positions. The construction to general growth at trend in the more mature sector through housebuilding companies, like Wilson economies. However, it is important to note that the Bowden and Bovis, also offers good asset backing Chinese government’s stated policy is to spread the and low valuations, despite being exposed to the current economic prosperity enjoyed by the 300 million consumer, and is set to benefit from declining interest middle class on the eastern seaboard across the rates. The Banks sector, which is also a significant part country to the other 1 billion of the population. This is a of the UK portfolio, also offers reasonable value in an structural change, which the world economy has not easing monetary environment. witnessed before and brings with it enormous demands for the commodities needed to enable new The overseas portfolio has a bias towards resources cities to be built. For instance the Chinese government and general industrials, particularly in North America. has said that it will need an extra one billion pounds of Concerns about the twin US deficit position and a copper each year for at least the next decade. weakening of growth has meant that investment in the Obviously, such a goal will not be able to be achieved big three overseas markets of the US, Europe and entirely smoothly, but it is important to recognise that Japan has been kept below the benchmark. This the government is focused on maintaining high growth remains the current position as growth may slow in the of 7-8%. This is necessary, not least to ensure that the US and Europe over the next few months. economy creates sufficient new employment to absorb the 10-15 million workers entering the labour market In Europe, the European Central Bank has kept its each year. This will in turn boost China’s domestic interest rate at 2% for over two years, and yet the economy, which is important for the long term. eurozone continues to grow at its sub-trend level of the last four years. In September the International Monetary With this in mind the resources portfolio gives a broad Fund (IMF) cut its forecasts for the eurozone to 1.2% exposure to oil and gas and base metals, including iron for 2005 and expects only 1.8% in 2006. The recent ore, manganese, copper, zinc, and nickel. This German election result shows reform does not have represents a safer way of gaining exposure to the popular support. However, certain member countries growth of the relevant economies compared with continue to grow well. Greece is a case in point – direct investment. where the Bank of Piraeus and the Bank of Cyprus have been added to the portfolio because of the strong mortgage and lending growth in the Greek economy. 8 MAJEDIE INVESTMENTS PLC The Japanese portfolio benefited from a continued In Japan opinion remains divided on whether deflation steady recovery. In addition, the re-election of Koizumi is defeated. However, the country’s ageing population as president has been taken as a positive move is showing the human tendency of the retired to run towards more restructuring and market reform. down its savings, which is good for the domestic Companies have been repaying debt vigorously since economy. Over the medium term the risk remains that 1997. The corporate debt to output ratio is now back the Japanese state may increase taxes and decrease to the levels of the early 1980s. That is reflected in social security benefits, which will moderate growth. much improved corporate profits; whilst in the financial sector non-performing loans at big banks halved to In the UK weak consumer demand has meant that the below 4%. In March the government underlined its Bank of England has started loosening monetary view that the banking crisis was over by removing its policy. Consensus forecasts for GDP in 2005 are guarantees on deposits. Massive overcapacity has around trend at 2.0% and 2.2% in 2006. Increased been cut, as have labour costs. Of particular government spending, estimated to rise to 38.7% of importance is that the last three quarters of growth GDP this year has been the main reason why were underpinned not by exports but by corporate and government finances have fallen into deficit. It is household spending. therefore important for the Bank of England to avoid a much greater slowdown in activity for the overall health Outlook of the economy. The IMF is forecasting a healthy 4.3% for global growth in 2005 and 2006. The US, UK, European and In 2006 the interest rate cycle is likely to peak in the Japanese economies have so far weathered the rise in US, whilst in the UK it has already turned. However, in oil and other commodities well. In the US corporate the short term the Bank of England is reluctant to capital expenditure has been buoyant as reflected in lower rates too quickly and in the US the Federal General Electric’s recent reference to the positive Reserve is expected to continue to raise interest rates US economy. for some time. Nevertheless an easing monetary environment will eventually result in a boost to The Federal Reserve Board is facing difficult decisions economic activity in both countries. Growth in China about how much further to raise interest rates. In and India is forecast to remain strong. The medium November it raised rates to 4% and indicated that it outlook for stock markets is therefore one of steady would raise them again. Consensus forecasts are for progress as they still offer reasonable value, but may 3.5% GDP growth this year and a little less in 2006. well be subject to short term volatility. Core inflation, excluding food and energy, is just above 2%, helped by the fact that productivity growth has G M Leates Investment Director remained strong. The key challenge for the Federal 24 November 2005 Reserve at this stage of the cycle remains to stop any emergent inflation without misjudging the potential impact on the consumer. In the past its concern with inflation has led it to slow the economy more rapidly than intended and then having to relax monetary policy quickly to boost economic activity. This may happen again, suggesting the prospect of interest rates falling sometime in 2006. REPORT & ACCOUNTS 2005 9 Asset Distribution at 30 September 2005 Classification of Assets Mining Oil & Gas Resources Chemicals Construction & Building Materials Steel & Other Metals Basic Industries Aerospace & Defence Diversified Industrials Electronic & Electrical Equipment Engineering & Machinery General Industrials Automobiles & Parts Household Goods & Textiles Cyclical Consumer Goods Beverages Food Producers & Processors Health Personal Care & Household Products Pharmaceuticals & Biotechnology Tobacco Non-Cyclical Consumer Goods General Retailers Leisure & Hotels Media & Entertainment Support Services Transport Cyclical Services Food & Drug Retailers Telecommunications Services Non-Cyclical Services Electricity Utilities (excluding Electricity) Utilities Information Technology Hardware Software & Computer Services Information Technology Banks Insurance Life Assurance Investment Companies Real Estate Speciality & Other Finance Financials Unit Trusts/OEICs Unlisted Total Equities Convertibles Total Fixed Asset Investments Cash % Total at 30 September 2005 United Kingdom % 5.4 11.0 16.4 North America % 3.8 6.4 10.2 South Continental Europe % – – – America % 0.2 – 0.2 1.2 2.7 – 3.9 1.3 – – 1.7 3.0 0.5 – 0.5 1.3 0.8 0.4 0.2 3.8 0.8 7.3 1.8 3.1 0.7 1.6 1.0 8.2 1.2 4.3 5.5 0.8 3.2 4.0 – – – 13.1 0.4 1.0 – 4.2 2.9 21.6 4.0 0.8 75.2 0.2 75.4 2.2 77.6 – – 0.2 0.2 – 0.6 0.4 1.1 2.1 – – – – – – – – – – 0.4 – 0.1 0.2 – 0.7 0.4 – 0.4 – – – 0.2 – 0.2 – 0.1 – – – 0.1 0.2 – – 14.0 – 14.0 – 14.0 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 0.2 – 0.2 – 0.2 – 0.2 – 0.2 – 0.3 – 0.5 0.8 – 0.1 0.1 – 0.1 0.2 – – – 0.3 – 0.2 – – – 0.2 – – – – 0.3 0.3 – – – 1.0 – – – 0.2 – 1.2 – – 3.1 – 3.1 – 3.1 Pacific Basin % 1.2 0.3 1.5 – – 0.7 0.7 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 0.4 0.1 – 0.5 2.4 – 5.1 – 5.1 – 5.1 Total 2005 % 10.6 17.7 28.3 1.2 2.9 0.9 5.0 1.3 0.9 0.4 3.3 5.9 0.5 0.1 0.6 1.3 0.9 0.6 0.2 3.8 0.8 7.6 2.2 3.3 0.8 1.8 1.0 9.1 1.6 4.3 5.9 0.8 3.5 4.3 0.2 – 0.2 14.1 0.5 1.0 0.4 4.5 3.0 23.5 6.4 0.8 97.6 0.2 97.8 2.2 100.0 Total 2004 % 6.7 18.1 24.8 – 2.3 0.2 2.5 1.5 1.7 0.7 1.1 5.0 0.2 0.4 0.6 0.7 0.7 1.0 1.5 5.0 0.7 9.6 3.3 3.4 1.7 1.7 1.2 11.3 1.3 4.8 6.1 0.5 2.3 2.8 0.1 1.4 1.5 14.3 1.6 1.2 0.9 4.1 2.4 24.5 6.9 0.5 96.1 0.2 96.3 3.7 100.0 The Fund analysed on pages 12 and 13 comprises the fixed asset investments of £207, 236,000 and cash (as adjusted for amounts due to/from brokers for settlement) of £4,270,000. 10 MAJEDIE INVESTMENTS PLC Twenty Largest UK Investments at 30 September 2005 Company BP HSBC Vodafone Royal Bank of Scotland Barclays GlaxoSmithKline Majedie Asset Management UK Opportunities Investec Daejan Holdings Antofagasta United Utilities Lloyds TSB Imperial Energy Northumbrian Water D1 Oils Royal Dutch Shell Tesco Laing (John) JKX Oil & Gas Majedie Asset Management UK Focus Ten Largest Overseas Investments at 30 September 2005 Company Ultra Petroleum (USA) Peabody Energy (USA) Dexia Banque International – Japan Dynamic Fund – B (Japan) Bankers Petroleum (Canada) First Calgary Petroleums (Canada) First Quantum Minerals (Canada) Dexia Banque International – Japan Dynamic Fund – A (Japan) International Ferro Metals (South Africa) Consolidated Minerals (Aus) General Electric (USA) Market Value £000 10,291 9,078 6,893 6,235 5,942 5,004 4,697 4,568 3,498 3,430 3,260 3,199 2,955 2,649 2,534 2,436 2,170 2,159 2,151 2,003 % of Fund 4.9 4.3 3.3 2.9 2.8 2.3 2.2 2.2 1.7 1.6 1.5 1.5 1.4 1.3 1.2 1.2 1.0 1.0 1.0 0.9 85,152 40.2 Market Value £000 4,218 3,728 2,871 2,710 2,576 2,051 1,610 1,491 1,376 1,201 23,832 % of Fund 2.0 1.7 1.4 1.3 1.2 1.0 0.8 0.7 0.7 0.6 11.5 REPORT & ACCOUNTS 2005 11 Valuation of Investments Holdings valued over £100,000 at 30 September 2005 Company Market Value % of £000 Fund Company Market Value % of £000 Fund Company Market Value % of £000 Fund Resources Mining Peabody Energy (USA) 3,728 Antofagasta 3,430 First Quantum Minerals (Canada) Peter Hambro Mining Asia Energy Consolidated Minerals (Aus) BHP Billiton Anglo Asian Mining European Minerals (Canada) Cordillera Resources Zincox Resources Cia Vale Rio Doce Spons (Brazil) Gladstone Pacific (Aus) Lihir Gold (Aus) Firestone Diamonds Toledo Mining Western Canadian Coal 2,051 1,676 1,668 1,376 1,374 1,024 681 616 586 496 468 440 433 349 1.7 1.6 1.0 0.8 0.8 0.7 0.6 0.5 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.2 (Canada) 345 0.2 Fording Canadian Coal Trust (Canada) 0.2 Frontier Mining (USA) 0.2 Ballarat Goldfields (Aus) 0.1 0.1 South China Resources Croesus Resources (USA) 204* 0.1 Santana Diamonds 338 336 306 271 (Canada) 193 0.1 Oil & Gas BP Ultra Petroleum (USA) Imperial Energy Bankers Petroleum 10,291 4,218 2,955 4.9 2.0 1.4 (Canada) 2,710 1.3 First Calgary Petroleums (Canada) Royal Dutch Shell JKX Oil & Gas Melrose Resources Pioneer Natural (USA) Nexen (Canada) Victoria Oil & Gas Ascent Resources Oilexco (Canada) Afren 2,576 2,436 2,151 1,560 1,099 946 848 805 737 725 1.2 1.2 1.0 0.7 0.6 0.4 0.4 0.4 0.3 0.3 Caspian Energy (Canada) ROC Oil (Aus) Global Energy Development Occidental Petroleum (USA) Falkland Oil & Gas Wham Energy Gulfsands Petroleum Empyrean Energy Transeuro (Canada) 648 559 0.3 0.3 493 0.2 396 377 307 269 191 182 0.2 0.2 0.1 0.1 0.1 0.1 Basic Industries Chemicals D1 Oils 2,534 1.2 Construction & Building Materials 0.6 Wilson Bowden 0.5 Bovis Homes 0.5 Taylor Woodrow 0.4 Wolseley 0.3 Balfour Beatty 0.3 Hanson Compagnie De 1,353 1,040 1,018 959 655 589 St-Gobain (France) ROK Property Solutions 326 294 0.2 0.1 Steel & Other Metals International Ferro Metals (South Africa) Phelps Dodge (USA) 1,491 441 0.7 0.2 General Industrials Aerospace & Defence Rolls Royce VT Group Meggitt 1,558 785 457 0.7 0.4 0.2 Diversified Industrials General Electric (USA) E.On (Germany) 1,201 783 0.6 0.3 Electronic & Electrical Equipment Rockwell Automation (USA) Eaton (USA) 448 320 0.2 0.2 Engineering & Machinery Hunting Acta S.P.A. 1,024 0.5 1,000* 0.5 * These holdings are placing shares, and included within ‘unlisted investments’ in note 13. 12 MAJEDIE INVESTMENTS PLC 910 0.4 Ceres Power Holdings National Oilwell Varco (USA) Nabors Industries (USA) Subsea Resources Charter Caterpillar (USA) Cookson Group ITT Industries (USA) Stanelco 744 715 629 474 438 363 327 252 Cyclical Consumer Goods Automobiles & Parts Inchcape Lookers 547 413 Household Goods & Textiles 301 Puma (Germany) 0.4 0.3 0.3 0.2 0.2 0.2 0.2 0.1 0.3 0.2 0.1 Non-Cyclical Consumer Goods Beverages Diageo Scottish & Newcastle 1,703 979 0.8 0.5 Food Producers & Processors Unilever Cadbury Schweppes Numico (Netherlands) 1,012 635 263 Health Smith & Nephew Healthcare Enterprises Inion (Finland) 476 428 380 Personal Care & Household Products Mayborn Group 352 0.5 0.3 0.1 0.2 0.2 0.2 0.2 Pharmaceuticals & Biotechnology 2.3 GlaxoSmithKline 0.8 Neutec Pharma 0.3 Ark Therapeutics 0.2 Sinclair Pharma 0.1 Ardana 0.1 Stem Cell Sciences 5,004 1,616 639 333 302 193 Tobacco Gallaher Imperial Tobacco 836 812 0.4 0.4 Company Market Value % of £000 Fund Company Market Value % of £000 Fund Company Market Value % of £000 Fund Cyclical Services General Retailers GUS Boots Kingfisher Findel Moss Bros Peacock House of Fraser Target (USA) Penny (JC) (USA) Nordstrom (USA) Home Depot (USA) Leisure & Hotels Enterprise Inns Urbium Punch Taverns Gaming Corporation Greene King Wolverhampton & Dudley Breweries Restaurant Gaming VC Holdings (Luxemburg) Intercontinental Hotels Carnival 1,236 596 419 390 377 373 303 270 254 194 185 1,914 997 840 697 563 475 441 434 400 328 Media & Entertainment Yell Reed Elsevier 121media (USA) 1,028 456 174 Support Services Laing (John) 2,159 Armorgroup International 532 476 Utek (USA) 388 Erinaceous 300 Thomson Intermedia 0.6 0.3 0.2 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.8 0.5 0.4 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.5 0.2 0.1 1.0 0.3 0.2 0.2 0.1 Transport P&O Steam Navigation Company National Express 1,085 966 0.5 0.5 Non-Cyclical Services Food & Drug Retailers Tesco Sainsbury (J) Sysco (USA) Walgreen (USA) 2,170 523 399 368 1.0 0.2 0.2 0.2 Telecommunication Services 6,893 Vodafone 1,017 O2 829 BT 465 Cable & Wireless Utilities Electricity Scottish & Southern Energy National Grid Transco International Power 792 452 423 Utilities (excluding Electricity) 3,260 United Utilities 2,649 Northumbrian Water 836 Kelda 669 RWE (Germany) 3.3 0.4 0.4 0.2 0.4 0.2 0.2 1.5 1.3 0.4 0.3 Information Technology Information Technology Hardware 0.2 Texas Instruments (USA) 320 Financials Banks HSBC 9,078 Royal Bank of Scotland 6,235 5,942 Barclays 3,199 Lloyds TSB 1,700 Standard Chartered HBOS 1,041 Banco Popular Espanol (Spain) 588 Northern Rock 468 Bank of Piraeus (Greece) 415 411 UBS AG (Switzerland) 410 BNP Paribas (France) Bank of Cyprus (Greece) 306 4.3 2.9 2.8 1.5 0.9 0.5 0.3 0.2 0.2 0.2 0.2 0.1 Insurance Admiral Metlife (USA) Life Assurance Prudential Friends Provident Legal & General 744 292 0.4 0.1 1,147 473 471 0.6 0.2 0.2 Investment Companies Templeton Emerging Markets Investment Trust 894 0.4 Real Estate Daejan Holdings Land Securities British Land Grainger Trust London Merchant Securities Hammerson Dawnay Day Carpath Rodamco Europe (Netherlands) Orchid Development 3,498 1,538 1,307 684 678 624 468 417 316 Speciality & Other Finance Investec NETELLER London Asia Capital American Express (USA) Concateno 4,568 704 667 291 228 Unit Trusts/Open Ended Investment Companies Majedie Asset Management UK 4,697 Opportunities Dexia Banque Int. Japan 1.7 0.8 0.6 0.3 0.3 0.3 0.2 0.2 0.1 2.2 0.3 0.3 0.1 0.1 2.2 Dynamic Fund – B (Japan) 2,871 1.4 Majedie Asset Management UK Focus 2,003 0.9 Majedie Asset Management UK Equity 1,877 0.9 Dexia Banque Int. Japan Dynamic Fund – A (Japan) Lloyd George MGT Eastern Opps B 1,610 0.8 550 0.2 Convertibles BAE Systems 7.75% NCCRP 2007/2010 424 0.2 Unlisted Investments Bridgewell 1,800 0.8 REPORT & ACCOUNTS 2005 13 Financial Review Investment Performance The rest of the difference between NAV total return for The Investment Report on pages 7 to 9 comments on the year and the benchmark return arose from costs, the investment performance of total assets for the year the gearing effect of the debentures less debenture ended 30 September 2005. Gill Leates joined as interest and the net profit contribution from Majedie Investment Director in 1999 and therefore the following Asset Management Limited as shown in the diagram table summarises the relative investment performance for below. Total shareholder return for the year was 38.2% the last six years comparing the returns from total assets as the discount narrowed from 14.6% to 10.4%. The with those of the benchmark: level of gearing during the year ranged between 15.6% +outperformance/–underperformance and 19.5% Year ended 2 yrs to 30 Sep 30.9.05 3 yrs to 30.9.05 4 yrs to 30.9.05 5 yrs to 30.9.05 6 yrs to 30.9.05 Risk 2000 2001 2002 2003 2004 2005 +4.4% +0.3% +8.9% -6.9% +0.3% +1.9% +2.2% -4.8% +3.7% +3.9% +8.5% As at 30 September 2005 the Total Assets portfolio was £211.5m and included investments of £207.2m and cash balances of £4.3m as shown on page 10. For the year ended 30 September 2005 the return from total assets was 26.5%. This relates to the increase in the value of investments plus dividend income received during the year (without deducting costs or debenture interest) as calculated by The WM Company. It exceeded the benchmark by 2.1% which arose through stock selection and asset allocation decisions. Specific portfolio limits for individual stocks and market sectors are employed to restrict risk levels. The level of portfolio risk is assessed in relation to the benchmark using estimates of tracking error and beta. It is however generally recognised that there can be problems with tracking error estimates and these can be exacerbated if individual stocks have a short data history. The level of risk at a net asset value level is increased by gearing. In certain circumstances cash balances may be raised to reduce the effective level of gearing. Although such an approach could increase the tracking error in the portfolio significantly, in volatile stock market conditions it would result in a lower level of risk in absolute terms. ATTRIBUTION ANALYSIS NAV total return 31.2% Return from Benchmark 24.4% 5.5%* Stock selection 2.5% Asset allocation -0.5% Costs -1.0% Net gearing 4.4% Debenture interest -1.5% MAM profit 0.7% Other 0.9% * The acknowledged calculation method for attribution analysis and investment returns over periods greater than one year is the geometric or relative basis: ie. (1 + 31.2%)/(1 + 24.4%) – 1 = 5.5%. Source: The WM Company, Majedie 14 MAJEDIE INVESTMENTS PLC Majedie Asset Management Limited Financial Statements At the start of the year the Company had a 65% equity The Consolidated Statement of Total Return on page shareholding in Majedie Asset Management. On 32 includes Majedie Asset Management Limited’s 31 July 2005 the holding reduced to 55% as the results with those of the Majedie Investments’ business reached a pre-agreed profitability target. The investment portfolio and other Majedie subsidiaries. remaining 45% of the equity is held by the management team. As the business’ profitability continues to grow, The results for the core investment trust portfolio the balance of the shareholdings will continue to business are set out in the Company’s Statement of change with control passing to management once the Total Return and in the Company’s Balance Sheet on preference shares and subordinated loan have been pages 34 and 35 respectively. repaid and the business is self-sustaining. The Company’s investment in the business is expected to During the year Majedie Asset Management Limited grow in value even though concomitantly its percentage generated a net profit of £2.1m. This was derived from ownership is likely to reduce. income of £6.4m and costs of £4.3m. The board of Majedie Asset Management Limited Total costs for all Majedie Group companies of £6.2m meets on a monthly basis and comprises: include £1.9m relating to the core investment trust portfolio business – which increased slightly from Henry Barlow – Chairman* £1.8m last year. This year’s costs for Majedie Asset James de Uphaugh – Managing Director Management of £4.3m compare with £2.1m last year – Chris Field Robert Clarke Gill Leates – Director – Director* – Director* *non-executive and audit committee member The audit committee of Majedie Asset Management Limited meets at least twice a year. Further details regarding the approach taken with regard to risk management and internal control are provided in the Report on Corporate Governance on pages 20 to 23. At the launch of the business in 2003 the Company invested £4m in three of Majedie Asset Management’s products. These investments now total £8.6m and are included within the Valuation of Investments on page 13. the increase reflecting the growth in the business and staff remuneration. The Company Balance Sheet shows that the investment in subsidiaries has increased by £6.8m. This results from the revaluation of the investment in Majedie Asset Management Limited. The £10.1m directors’ valuation relates to the equity and preference shares in respect of which the Company originally invested a total of £3.3m. Due to Majedie Asset Management Limited being a 55% subsidiary company, neither the Consolidated Balance Sheet nor the consolidated net asset value include the £10.1m. The group accounts consolidate the balance sheets of subsidiaries and therefore include the net assets of Majedie Asset Management which amount to £3.0m. Note 14 beginning on page 46 sets out further detailed accounting disclosure on this matter. REPORT & ACCOUNTS 2005 15 Financial Review International Financial Reporting Standards The European Commission has directed that all listed companies in the European Union must present their consolidated group results in accordance with International Financial Reporting Standards (IFRS) for accounting periods commencing on or after 1 January 2005. Majedie Investments PLC will, therefore, apply IFRS for the first time for the financial year ending 30 September 2006. The Interim Report for the period ending 31 March 2006 will be the first report to Shareholders presented under IFRS. The application of IFRS will not affect the underlying performance of the Group or its cash flows. The new reporting standards will however, represent a fundamental change in accounting and reporting. The principal area affecting the Company’s results, where IFRS differs from UK Generally Accepted Accounting Principles, is the valuation of portfolio investments at bid-market prices rather than mid-market prices. If the portfolio investments at 30 September 2005 had been valued at bid prices instead of mid-market prices the net asset value would have been reduced as a result of this specific change by 1.54p per ordinary share. Robert E Clarke Chief Executive 24 November 2005 16 MAJEDIE INVESTMENTS PLC Board of Directors Henry S Barlow OBE MA FCA (61) Chairman* He has lived in Malaysia since 1970 returning for frequent visits to the UK to pursue a number of business interests, chiefly involving agriculture. A former joint Managing Director of the Highlands Group, a large plantation company, he was appointed a director of Majedie in 1978. He has served on a number of committees, including that of the British- Malaysian Industry and Trade Association, ultimately as Chairman, and now sits on the boards of Golden Hope Plantations Berhad, HSBC Bank Malaysia Berhad and Guthrie Ropel Berhad, and on the audit committees of the last two. He is a member of the Nomination Committee. He was appointed non-executive Chairman of Majedie Asset Management Limited in May 2002. Hubert V Reid (65) Deputy Chairman* Senior Independent Non-Executive Director Former Managing Director of the Boddington Group plc and Chairman upon its acquisition by Greenalls Group plc, he is Chairman of Enterprise Inns plc, the Royal London Mutual Insurance Society Limited and the Midas Income & Growth Trust PLC and a non-executive director of Michael Page International Plc. He was appointed a director of Majedie in January 1999 and is Chairman of the Audit, Remuneration and Nomination Committees. Robert E Clarke BSc MSc ACA (48) Chief Executive Between 1982 and 1985 he worked in Canada for Clarkson Gordon and the Bank of Montreal. He returned to the UK in 1985 to work for Hoare Govett and was appointed Finance Director of Hoare Govett Securities Limited in 1988. After six years as Finance Director of Alwen Hough Johnson Limited, a Lloyd’s broker specialising in reinsurance, he joined Majedie as Finance Director in 1996. He completed a Masters in Finance degree at London Business School in the same year. He was appointed Managing Director in July 1998 and non- executive director of Majedie Asset Management Limited in May 2002. Gillian M Leates BA FSI (48) Investment Director Between 1981 and 1989 she worked for Schroder Investment Management, initially as an analyst then as the fund manager of the Schroder Special Exempt Smaller Companies Fund. In 1989 she joined Courtaulds Investment Management and in 1997 was given sole responsibility for the £975m UK equity portfolio of the Courtaulds Pension Fund. She joined Majedie and was appointed Investment Director in May 1999 and non- executive Director of Majedie Asset Management Limited in May 2002. Professor Paul Marsh BSc (Econ) PhD (58)* Professor of Finance at London Business School and non- executive director of Aberforth Smaller Companies Trust Plc and Hoare Govett Indices Limited. He joined LBS in 1974 and has held a number of posts including Faculty Dean, Deputy Principal and Associate Dean Finance Programmes. Past directorships include M&G Group PLC and M&G Investment Management Limited. He was appointed a director of Majedie in January 1999 and is a member of the Audit, Remuneration and Nomination Committees. J William M Barlow BA (41)* In 1991 he joined Skandia Asset Management Limited as a portfolio manager. He has been a non-executive director of Majedie Investment Trust Management Limited since 1996. He was appointed to the Board in July 1999. He was Managing Director of DnB Asset Management (UK) Limited until September 2004. *non-executive REPORT & ACCOUNTS 2005 17 Directors’ Report The directors submit their report and the accounts that the performance of Messrs Barlow, Clarke and Reid for the year ended 30 September 2005. continues to be effective, that they demonstrate Introduction A review of developments during the year and of future prospects is contained in the Chairman’s Statement on pages 4 to 6. The section on Corporate Governance on pages 20 to 23 and the Report on Directors’ 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 continuing directors recommend that shareholders vote in favour of the re-election of each director retiring Remuneration on pages 24 to 29 form part of this by rotation. report. The audited financial statements are presented on pages 32 to 56. The Investment Report on pages Directors’ Interests 7 to 9 refers to the progress of markets during the year Beneficial interests in ordinary shares as at and the changes which have been made to the 30 September: portfolio. An analysis of the portfolio is given on pages 10 to 13. Principal Activity The Company operates as an investment trust company engaged primarily in investment in listed securities. Results and Dividend Consolidated net revenue before taxation amounted to £5,523,000 (2004: £2,647,000). The directors recommend a final dividend of 5.85p per ordinary share, payable on 25 January 2006 to shareholders on the register at the close of business on 6 January 2006. Together with the interim dividend of 3.2p per share paid on 1 July 2005, this makes a total distribution of 9.05p per share (2004: 8.75p per share). H S Barlow H V Reid R E Clarke G M Leates 2005 2004 14,605,619 14,605,619 29,693 15,286 2,319 24,091 14,791 2,319 J W M Barlow 1,238,857 1,238,857 The beneficial interests disclosed above include the total holdings of Majedie shares within certain trusts where there are other beneficiaries. Non-beneficial interests in ordinary shares as trustees for various settlements as at 30 September: H S Barlow J W M Barlow 2005 2004 613,084 313,084 2,280,177 2,335,764 Directors Some of the directors’ holdings are duplicated, the total The present directors of the Company, all of whom after elimination of duplicated holdings being 18,485,035 served throughout the year, are listed on page 17. shares at 30 September 2005 (2004: 21,969,843). Sir John Barlow and David Ritchie served as directors from the beginning of the year until the Annual General The beneficial holdings of H V Reid have increased by Meeting on 19 January 2005. 675 shares since the year end as a result of regular purchases through the Majedie Share Plan. The directors retiring by rotation and seeking re-election at the forthcoming Annual General Meeting in accordance with the Articles of Association are With the exception of employment arrangements, no director had an interest at any time during the year or J W M Barlow, R E Clarke and H V Reid. The Board since in any material contract, being a contract of has considered and reviewed their appointment prior to significance with the Company or any subsidiary of the submission for recommendation. The Board believes the Company. 18 MAJEDIE INVESTMENTS PLC Substantial Shareholdings Activities Apart from the directors’ interests above, at the date of At the Annual General Meeting of the Company held this report the Company has also been notified of the on 19 January 2005, shareholders gave approval for following substantial holdings in its issued capital: the directors to make market purchases of up to 7,873,947 ordinary shares of 10p each. During the The AXA Group 8,047,519 15.32% year ended 30 September 2005 the Company did not Sir J K Barlow – beneficial 2,860,642 Sir J K Barlow – non-beneficial 1,231,205 M H D Barlow – beneficial 2,513,798 M H D Barlow – non-beneficial 1,722,869 Miss A E Barlow G B Barlow 1,784,948 1,644,990 5.45% 2.34% 4.79% 3.28% 3.40% 3.13% make any purchases of its own shares for cancellation (2004: nil). Special Business Shareholder approval is sought at the Annual General Meeting for a new long term incentive plan for the executive directors. Details of the new plan are set out The substantial shareholdings disclosed above include in a shareholder circular – a copy of which is enclosed the total holdings of Majedie shares within certain with this annual report. Further reference is made trusts where there are other beneficiaries. within the Report on Directors’ Remuneration on pages Policy on Payment of Suppliers 26 to 28. It is the Company’s policy to settle all investment Shareholder approval is also sought at the Annual transactions in accordance with the terms and General Meeting to renew the authority of the Company conditions of the relevant market in which it operates. to exercise the power contained in its Articles of All other expenses are paid on a timely basis in the Association to make market purchases of its own ordinary course of business. shares. The directors consider it desirable that the At 30 September 2005 the Company had seven days maximum number of shares which may be purchased of suppliers’ invoices outstanding in respect of trade under this authority is 7,873,947 being 14.99% of the Company be authorised to make such purchases. The creditors (2004: eighteen days). Status The Company has received written confirmation from the Inland Revenue that it was an approved investment trust for taxation purposes under Section 842 of the Income and Corporation Taxes Act 1988 in respect of the year ended 30 September 2004. issued share capital. Any shares so purchased will be cancelled. Under the proposed authority the maximum price (exclusive of expenses) which may be paid for such shares shall be 5% above the average of the middle market quotations taken from the London Stock Exchange Daily Official List for the five business days before the purchase is made. In the opinion of the directors the Company has A resolution will be proposed at the Annual General subsequently directed its affairs so as to enable it to Meeting to re-appoint Deloitte & Touche LLP as Auditors continue to qualify for such approval and the Company auditors. will continue to request formally written confirmation of investment trust status each year. By Order of the Board Sinclair Henderson Limited The Company is not a close company. The Company is a public limited company and an investment company Company Secretary 24 November 2005 under Section 266 of the Companies Act 1985. REPORT & ACCOUNTS 2005 19 Corporate Governance This section of the annual report describes how Directors Majedie Investments has applied the principles of The Board usually meets at least six times in each Section 1 of the Combined Code on Corporate calendar year. Its principal focus is the strategic Governance, as required by the Financial Services development of the Group, investment policy and the Authority (FSA). The Board considers that the control of the business. Key matters relating to these Company has complied with the provisions of the areas including the monitoring of operating and Combined Code throughout the year ended financial performance are reserved for the Board and 30 September 2005 with the exception of provision set out in a formal statement. C.3.4 of the Combined Code as explained below. Statement of Compliance Up until the Annual General Meeting on 19 January 2005 there were eight directors. Sir John K Barlow Bt The Company did not comply throughout the year with and David Ritchie retired from the Board on that day provision C.3.4 of the Combined Code, which required and therefore there are currently six members of the the Audit Committee to review arrangements by which Board as set out on page 17. The roles of Chairman, staff of the Company may, in confidence, raise Deputy Chairman and Chief Executive are filled by concerns about possible improprieties in matters of Henry Barlow, Hubert Reid and Robert Clarke financial reporting or other matters. However on respectively. There are two executive directors and four 18 November 2005 formal “whistleblowing” non-executive directors, two of whom – Hubert Reid arrangements approved by the Audit Committee were and Paul Marsh are considered to be independent. circulated to employees within the Group to ensure the This satisfies the Combined Code requirements for Company’s compliance with the relevant provision. smaller listed companies. Nonetheless the Board considers that all its directors exercise their judgement The Company in an independent manner. It is first relevant to consider the special nature of Majedie Investments compared with other listed The Chairman considers that he has sufficient time to companies in relation to matters of corporate commit to the Company’s affairs notwithstanding his governance. In complying with the more detailed other business interests and commitments. The aspects of best corporate governance practice, the Chairman is deemed to have no conflicting interests. Board takes into account the following: – Majedie is a listed investment trust; and the Chief Executive are clearly established and – unlike many investment trusts, the business is self- have been set out in writing and agreed by the Board. managed; and Hubert Reid is the senior independent non-executive – the Barlow family as a whole owns about 55% of director. He chairs each of the Board’s three The division of responsibilities between the Chairman the shares in issue. committees which are referred to in greater detail below. All directors attended the six Board meetings held Although the family shareholding in total is significant, during the financial year ended 30 September 2005. there are a number of individual family members and trusts represented by many separate shareholdings. The principal objective of the Board of directors continues to be to maximise total shareholder return for all shareholders. 20 MAJEDIE INVESTMENTS PLC The Board has undertaken a formal and rigorous Under the Company’s Articles of Association all evaluation of its own performance through the directors are required to be elected by shareholders at circulation of a comprehensive questionnaire. The the first Annual General Meeting after their appointment. results have been discussed and actioned by the Board The directors must seek re-election by the shareholders as appropriate. The Board believes strongly in the at least once every three years. All non-executive development of its directors and employees so that all directors are appointed for a fixed term lasting no more maintain their professional standards. The Chairman than three years after an individual director’s election or has convened a meeting with non-executive directors re-election by shareholders at a general meeting. without the executive directors being present and the Towards the end of each fixed term the Board will Deputy Chairman has chaired a meeting of the non- consider whether to renew a particular appointment. executive directors without the Chairman being present. The Board has agreed and established a procedure for The Nomination Committee comprises solely non- directors in furtherance of their duties to take executive directors: Hubert Reid (Chairman), Henry independent professional advice if necessary, at the Barlow and Paul Marsh. William Barlow is invited to Company’s expense. attend and participate in the meetings. The Committee considers the appointment of candidates before The Company has arranged Directors’ and Officers’ deciding whether to make a recommendation to the Liability Insurance which provides cover for legal Board in respect of both executive and non-executive expenses under certain circumstances. directors. The terms of reference of the Nomination Committee are available on request or from our Directors’ Remuneration website. The ultimate appointment of a director is a The Remuneration Committee comprises: Hubert Reid matter for the whole Board. The Nomination (Chairman), and Paul Marsh – solely non-executive Committee met once during the year and all members directors. Henry Barlow and William Barlow are invited of the Committee were present. to attend and participate in the relevant meetings. The terms of reference of the Remuneration Committee are The role of the Nomination Committee is to review the available on request or from our website. The Report balance and effectiveness of the Board and consider on Directors’ Remuneration on pages 24 to 29 succession planning, identifying the skills and expertise explains the approach taken by the Committee to the required to meet the future challenges and structuring of remuneration for executive directors. The opportunities facing the Company, and the individuals Remuneration Committee met five times during the who might best provide them. The Committee is year and both members of the Committee were responsible for assessing the time commitment required present at each meeting. for each Board appointment and for ensuring that the present incumbents have sufficient time to undertake them. The Committee will consider the need for appointing external search consultants to assist with recruitment to the Board as and when appropriate. REPORT & ACCOUNTS 2005 21 Corporate Governance Relations with Shareholders Internal Control Review Senior executives hold meetings with the Company’s The directors acknowledge that they are responsible principal shareholders to discuss the Company’s for the systems of internal control relating to the strategy, financial and investment performance. From Company and its subsidiaries and for reviewing the time to time, the Chairman and/or Deputy Chairman effectiveness of those systems. An ongoing process attend such meetings. The issues discussed with has been in existence for some time to identify, shareholders are reported in detail to the Board. evaluate and manage risks faced by Group companies. Shareholders are encouraged to attend the Annual Key procedures are also in place to provide effective General Meeting and to participate in the proceedings. financial control over the Group’s operations. Separate resolutions are tabled in respect of each substantial issue. The risk management process and systems of internal control are designed to manage rather than eliminate Corporate Social Responsibility the risk of failure to achieve the Company’s objectives. In carrying out its activities and in relationships with It should be recognised that such systems can only employees, suppliers and the community, the provide reasonable, not absolute, assurance against Company aims to conduct itself responsibly, ethically material misstatement or loss. and fairly. Risk assessment and the review of internal controls are Accountability and Audit undertaken by the Board in the context of the In the annual report each year the directors seek to Company’s overall investment objective. The review provide shareholders with information in sufficient detail covers business strategy, investment management, to allow them to obtain a reasonable understanding of operational, compliance and financial risks facing the recent developments affecting the business and the Company and its subsidiaries. In arriving at its prospects for the Company in the year ahead. judgement of the nature of the risks facing Group companies, the Board has considered the Group’s The Audit Committee comprises: Hubert Reid operations in the light of the following factors: (Chairman) and Paul Marsh: solely non-executive directors. Other Board members and representatives of – the nature and extent of risks which it regards as the auditors are normally invited to attend meetings of acceptable to bear within the overall business the Committee. The Board has agreed the terms of objective; reference for the Audit Committee which meets at least – the likelihood of such risks becoming a reality; and twice a year. The terms of reference are available on – management’s ability to reduce the incidence and request or from our website. A key objective is to impact of risk on performance and the relevant maintain an effective relationship with the auditors controls. allowing for the Committee to consult the auditors without executive management being present, if appropriate. The Audit Committee met twice during the year and both members of the Committee were present for both meetings. 22 MAJEDIE INVESTMENTS PLC There are two main operating businesses within the In accordance with guidance issued to listed Majedie Group: the investment trust portfolio business companies, the directors have carried out a review of within Majedie Investments PLC and the specialist the effectiveness of the system of internal control as it fund management business of Majedie Asset has operated over the year. Management Limited. Further information on the latter company is provided on page 15 which includes Deloitte & Touche LLP are the auditors of the Company, reference to its audit committee which meets at least the Group and subsidiary companies. The Board twice a year. The Majedie Asset Management audit believes that auditor objectivity is safeguarded, for two committee considers an annual report prepared by an main reasons. Firstly the extent of non-audit work independent compliance consultancy which reviews carried out by Deloitte & Touche LLP is limited and the compliance environment operating within the flows naturally from the firm’s role as auditor to the company particularly in relation to the relevant FSA group. Sinclair Henderson Limited advises the Company rules. Having considered the operation of the relevant on corporation tax computations and submissions to internal controls and any changes which have been the Inland Revenue. Deloitte & Touche LLP provides made or which are proposed, the audit committee of taxation advice to the Group from time to time on Majedie Asset Management Limited reports to the various issues and in particular each year reviews the Audit Committee of Majedie Investments PLC each work carried out by Sinclair Henderson and reviews the year on the status of the systems of internal control in relevant taxation issues at the time of the audit of the the subsidiary company. annual report. A summary of fees for audit and non audit work undertaken by the auditors is provided in Given the nature of the activities of the two main note 4 to the accounts on pages 39 and 40. operating Group companies and the fact that certain key functions are sub-contracted to third party service Secondly, Deloitte & Touche LLP has provided provider organisations, the directors have reviewed the information on its independence policy and the controls operating within Group companies and have safeguards and procedures it has developed to obtained information from key third party suppliers counter perceived threats to its objectivity. It also regarding the relevant controls operated by them. confirms that it is independent within the meaning of all regulatory and professional requirements and that the The Company does not have an internal audit function. objectivity of the audit is not impaired. Having recently considered this matter, the directors are of the opinion that there is no need at the present Going Concern time for the Company to have an internal audit function The directors believe that the Company has adequate since there are considered to be adequate checks and financial resources to continue in operational existence balances within the operational structure of each of the for the foreseeable future. For this reason, the Board main businesses. In particular the fund administration, continues to adopt the going concern basis in accounting and company secretarial functions of the preparing the financial statements. investment trust are performed by Sinclair Henderson Limited. Custody is outsourced to RBC Global Services. Within the fund management business of Majedie Asset Management Limited the custody, fund administration and fund accounting functions are carried out by The Bank of New York. REPORT & ACCOUNTS 2005 23 Report on Directors’ Remuneration The Board has prepared this report, in accordance Chairman be increased from £25,000 to £30,000 p.a. with the requirements of the Directors’ Remuneration and that fees for other non-executive directors be Report Regulations 2002, in respect of the year increased from £20,000 to £22,500 p.a. The increased ended 30 September 2005. An ordinary resolution to fees, which became effective from 1 June 2005, were receive and approve this report will be put to the awarded to reflect the time committed to the affairs of members at the forthcoming Annual General Meeting. the Company in the context of current fee levels in the investment trust sector. IRS did not provide any other Company law requires your Company’s auditors to services to the Company. audit certain disclosures provided. The report is therefore split into two sections: unaudited and Michael Buckley of Sinclair Henderson Limited acted audited. The auditors’ opinion is included in their report as Secretary to the Committee. on page 31. UNAUDITED SECTION The terms of reference of the Remuneration Committee are available on request or may be obtained from the Company website. During the year, the Committee also Remuneration Committee conducted a formal review of the Committee’s During the year ended 30 September 2005 the effectiveness and concluded it was effective and able Remuneration Committee comprised solely of to fulfil its terms of reference. The Board agreed with independent non-executive directors – Hubert Reid this conclusion. (Chairman) and Paul Marsh. Henry Barlow (Chairman of the Board), and Robert of the remuneration arrangements, major shareholders Clarke (Chief Executive) were invited to attend and relevant institutions were consulted about meetings, but withdrew when their own remuneration proposed changes. The results of this process are was discussed and did not participate in decisions on referred to in further detail later in this report. Having taken advice with regard to the future structure their own remuneration. William Barlow is also invited to attend meetings. The Role of the Committee and Policies on Directors’ Remuneration During the year, the Committee appointed an external The role of the Committee is to establish Board policy independent remuneration consultancy firm, in respect of terms of employment, including Independent Remuneration Solutions (IRS) to assist with remuneration packages, in detail for the Chairman and a review of the remuneration of the executive directors for each executive director and in general for certain and to provide advice on market practice and trends. senior executives. The Committee seeks to encourage the enhancement of the Company’s performance and The Remuneration Committee and the Board sought to ensure that remuneration packages offered are further advice from IRS on the level of fees paid to the competitive and designed to attract, retain and Chairman and non-executive directors in view of the motivate executive directors and senior executives of fact that such fees had remained unchanged since the right calibre. In setting both the policy related to, 1999. In light of the advice received it was concluded and levels of, remuneration and benefits for executive that the Chairman’s fees should be increased from directors and senior executives, the Committee takes £30,000 to £40,000 p.a.; the fees of the Deputy account of market data and independent professional 24 MAJEDIE INVESTMENTS PLC advice. In particular the Committee is mindful that the On the grant of options under the Scheme, the Board Company operates in the financial services sector in sets performance targets to which the exercise of the City of London where there is competition among options are subject and which relate to the ongoing organisations for well-qualified senior executives. financial performance of the Company. The Scheme Salary rules provide for options to be exercisable after three years and before ten years have elapsed after the date The basic salary for each executive director is of grant and limit the total number of new shares that determined by the Committee after taking into account can be used for options to 5% of the shares in issue. In market data provided by independent consultants, practice it is the Board’s intention, whenever possible, individual performance and the extent and the nature that options will be satisfied by shares acquired in the of an individual’s responsibilities. market, thus avoiding any dilution. Note 21 on page 52 Bonus The discretionary bonus scheme for the year to provides more information regarding the purchase of own shares by the Employee Incentive Trust. 30 September 2005 comprised elements relating to Directors’ interests in share options are disclosed in the investment performance and business development in tables on page 29. The performance targets attaching to developing the business according to the Board’s the share option grants summarised in the table are that strategy. Pre-determined maxima were established by the options are not exercisable unless total shareholder the Remuneration Committee at the start of the year return between the date of grant and the proposed date for each element taking into account the extent to of exercise exceeds the relevant annualised hurdle rate which an individual has the potential to influence the specified at the time of grant as shown in the table. The relevant outcome. Payments under the bonus scheme specific hurdle rates were chosen by the Committee at are not pensionable. Share Option Scheme the time of granting the share options as the best estimate at that time of the expected return from the UK stock market over the following ten years. Before any The Majedie Investments PLC Discretionary Share options are exercised detailed calculations will be carried Option Scheme 2000 (the “Scheme”) is divided into out and reviewed by the Company’s auditors to ensure two parts. Part one is an Inland Revenue approved that the total return from Majedie shares exceeds the scheme while part two allows for the grant of hurdle rate as specified. unapproved options on similar terms. Pension Contributions Grants were made to executives in December 2004. All executive directors and senior executives are eligible Following the recent review of executive directors’ for membership of the Barlow Service Company remuneration, the Committee has decided that no Pension Scheme which is a non-contributory money further awards of options will be made to executive purchase plan administered by Scottish Widows’ Fund directors under the Scheme. & Life Assurance Society. The Company matches additional contributions made by members up to an additional 4% of salary. The scheme also provides members with permanent health insurance and life assurance cover on the basis of a lump sum death in service policy. REPORT & ACCOUNTS 2005 25 Report on Directors’ Remuneration Other Benefits Remuneration Policy Executive directors are also eligible for a range of other The Remuneration Committee of the Board has benefits including a non-pensionable salary undertaken a full review of the executive directors’ supplement in respect of a company car alternative remuneration. As a result of that review, the and membership of a private medical scheme. Remuneration Committee has proposed, and the Board has endorsed, a future remuneration strategy, Service Contracts which includes: The Company’s policy with regard to directors’ service contracts is that no special provision is made for (cid:129) new long term awards based on total shareholder compensation in the event of loss of office. A fair but return (‘TSR-based Awards’); robust principle of mitigation would be applied to the (cid:129) revised annual bonus arrangements with cash and payment of compensation in the context of advice share elements; and received. Robert Clarke has a service contract dated (cid:129) minimum share ownership guidelines. 9 November 1998 requiring twelve months’ notice of termination from either the Company or the individual. The terms of the TSR-based Awards and the share Gill Leates has a service contract dated 23 November element of the bonus awards are set out in a new Long 1999 requiring six months’ notice of termination from Term Incentive Plan (the “Plan”). Shareholders are being either the Company or the individual. None of the other asked to approve the new Plan at the next Annual directors has a service contract with the Company. General Meeting in January 2006. A brief description of Non-executive directors have memoranda of terms. the key components is set out below. A more detailed Performance summary of the principal features of the Plan is set out in the shareholders’ circular, a copy of which is The graph below compares the total shareholder return enclosed. with the total return on a hypothetical portfolio constructed according to the following benchmark The Company wishes its remuneration arrangements equity index over the last five years. The benchmark is for executive directors to reward the creation of added 70% FTSE All-Share Index and 30% FTSE World ex value over the long term and specifically to incentivise UK Index (Sterling) and has been chosen as a directors to: i) achieve a degree of investment comparator for the purpose of this graph since it is the outperformance in keeping with a moderate level of Company’s formal benchmark. risk; ii) develop the business in a profitable manner; TOTAL SHAREHOLDER RETURN VS BENCHMARK 110 100 90 80 70 60 50 40 9/00 9/01 9/02 9/03 9/04 9/05 Benchmark 26 MAJEDIE INVESTMENTS PLC and iii) reduce the level of discount to net assets and its volatility. This will be addressed in three ways: 1. New Long Term TSR-based Awards Performance will be measured over 5 years, which is longer than most plans in UK quoted companies. Normally annual award levels will be for shares with a maximum value of 100% of one year’s salary. Total shareholder return (TSR) is the investment return obtained by a shareholder holding the Company’s shares over a specific period. It takes account of the change in share price during the period, any relevant corporate actions and assumes that all dividends are reinvested in the Company’s shares on the relevant ex-dividend date. There will be two demanding performance conditions: i. TSR v. benchmark return measured over 5 years; ii. TSR v. a specified absolute investment return measured over 5 years. For each of the above two measures there will be a lower and higher threshold after 5 years shown in the following table: Lower Threshold Non vesting if performance is below Extent of vesting of Award at lower threshold (% of salary) Higher Threshold Performance threshold for maximum vesting Extent of maximum vesting of Award at higher threshold (% of salary) TSR v Benchmark Benchmark return 12.5% Benchmark return + 15% 50% TSR v absolute return TSR of 44% after 5 years (being approximately 7.5% p.a. compound) Extent of vesting of total award if both conditions are met 12.5% 25% TSR of 61% after 5 years (being approximately 10% p.a. compound) 50% 100% The Benchmark will be the Company’s stated benchmark of 70% FTSE All-Share Index and 30% FTSE World ex UK Index (Sterling). The lower and higher thresholds have been designed to be as stretching as median and upper quartile targets in a typical UK long term incentive plan. In normal circumstances, an award will vest in full only if the Company’s TSR reaches the higher threshold for both the relative performance condition and for the absolute performance condition. An award will not vest at all if the lower threshold is not met for either condition. Between the lower and higher threshold, a TSR-based Award will vest on a sliding scale basis. Only a single test will be made at the end of the five year period to determine the extent to which the performance criteria have been met. No re-testing will be permitted. In future, executive directors will not be awarded executive share options under the original Scheme referred to above. 2. Amended Bonus Structure The bonus structure comprises two elements relating to investment performance and business development. Investment performance is assessed over both one year and three year periods. The maximum possible annual bonus payment for the Chief Executive for the year ended 30 September 2005 has been increased to 100% of salary (previously it was 70%) and for the Investment Director to 120% of salary (previously 105%). However, the cash element of the bonus will be reduced to 50% and 60% of salary respectively having previously been 70% and 105% respectively. A matching award of shares equal in value to the cash bonus (a “Matching Award”) will be made under the Plan. The Matching Award will only vest once the executive has completed three years’ further service and therefore will have an important retention effect. Since the Matching Award is a deferred bonus for past performance, there will be no other performance conditions applying to it apart from the requirement for three years’ further service. 3. Minimum Share Ownership Guidelines Executive directors will be encouraged to increase their shareholding in the Company’s shares and will be expected to build up a substantial holding. Initially a target of 1 x salary has been set and executive directors will be expected to achieve this within five years. REPORT & ACCOUNTS 2005 27 Report on Directors’ Remuneration The detailed rules for the TSR-based Awards and the Matching Awards are set out in a new long-term incentive plan. Further details of the Plan are set out in the enclosed circular to shareholders seeking their support for the resolution to approve the Plan to be proposed at the Annual General Meeting. For the year ended 30 September 2005 only, the bonus will continue to be paid fully in cash as in previous years. However both executive directors have signalled their intention to purchase shares out of their cash bonus awards for this year. The current policy of paying competitive salaries set around the median level and providing a defined contribution pension plan will continue. The Remuneration Committee believes that this Plan and the new remuneration policy will help to align directors’ interests more effectively with those of shareholders. It will create a powerful incentive for the delivery of shareholder value over the medium/long term as the participating executives will establish a meaningful shareholding. It will also provide a retention-based financial incentive. As a result of these changes a significant proportion of remuneration will be performance related, as illustrated below. The proportion of variable pay at ‘target’ level of performance is: Salary Bonus LTIP Chief Executive 50% 25% 25% Investment Director 48% 28% 24% For ‘exceptional’ level of performance, salary makes up 28% and variable pay 72% of total remuneration for the Chief Executive and 27% and 73% respectively for the Investment Director. AUDITED SECTION Directors’ Remuneration The remuneration of the directors for the year ended 30 September 2005 was as follows: Executive Directors R E Clarke G M Leates Non-Executive Directors H S Barlow H V Reid P Marsh J W M Barlow Sir John K Barlow (retired 19.01.05) D Ritchie (retired 19.01.05) Salary & Fees £000 179 128 33 27 21 21 6 6 Bonus £000 100 49 – – – – – – Pension Contributions £000 Other Benefits £000 26 23 – – – – – – 14 12 – – – – – – Total 2005 £000 319 212 33 27 21 21 6 6 Total 2004 £000 279 191 30 25 20 20 20 20 421 149 49 26 645 605 The number of directors to whom retirement benefits are accruing under the money purchase plan in respect of qualifying service is two (2004: two). 28 MAJEDIE INVESTMENTS PLC Approved Share Options held by Directors The following Inland Revenue approved options were held by directors during the year to 30 September 2005: Date of Grant Exercise Price pence Hurdle Rate (p.a.) Earliest Date of Exercise Latest Date of Exercise R E Clarke 14/02/01 361.5 8.50% 14/02/04 13/02/11 G M Leates 14/02/01 361.5 8.50% 14/02/04 13/02/11 At 1 Oct 2004 8,298 8,298 Granted During the Year Exercised Cancelled During the Year During the Year – – – – Unapproved Share Options held by Directors The following unapproved options were held by directors during the year to 30 September 2005. R E Clarke 14/02/01 361.5 8.50% 14/02/04 13/02/11 80,885 G M Leates 14/02/01 361.5 8.50% 14/02/04 13/02/11 55,325 R E Clarke 23/11/01 283.5 8.50% 23/11/04 22/11/11 59,964 G M Leates 23/11/01 283.5 8.50% 23/11/04 22/11/11 43,033 R E Clarke 22/11/02 196.5 7.50% 22/11/05 21/11/12 86,513 G M Leates 22/11/02 196.5 7.50% 22/11/05 21/11/12 62,086 R E Clarke 18/03/04 221.5 7.50% 18/03/07 17/03/14 76,749 G M Leates 18/03/04 221.5 7.50% 18/03/07 17/03/14 55,079 – – – – – – – – R E Clarke 21/12/04 231.5 7.50% 21/12/07 20/12/14 G M Leates 21/12/04 231.5 7.50% 21/12/07 20/12/14 – – 77,105 55,334 – – – – – – – – – – At 30 Sept 2005 8,298 8,298 80,885 55,325 59,964 43,033 86,513 62,086 76,749 55,079 77,105 55,334 – – – – – – – – – – – – The performance targets attaching to the share option grants summarised in the table above are that the options are not exercisable unless total shareholder return between the date of grant and the proposed date of exercise exceeds the relevant annualised hurdle rate specified at the time of grant as shown above. During the year ended 30 September 2005 the share price traded within a range of 222.5p to 303.5p. The share price on 30 September 2005 was 303.5p. Approval The Report on Directors’ Remuneration on pages 24 to 29 was approved by the Board on 24 November 2005. On behalf of the Board H V Reid Chairman of the Remuneration Committee 24 November 2005 REPORT & ACCOUNTS 2005 29 Statement of Directors’ Responsibilities United Kingdom company law requires the directors to The directors are responsible for ensuring that the prepare financial statements for each financial year Directors’ Report and other information included in the which give a true and fair view of the state of affairs of annual report is prepared in accordance with company the Company and the Group at the end of the financial law in the United Kingdom. They are also responsible year and of the results of the Group for that period. In for ensuring that the annual report includes information preparing those financial statements the directors are required by the Listing Rules of the Financial Services required to: Authority. – select suitable accounting policies and then apply The financial statements are published on them consistently; www.majedie.co.uk, which is a website maintained by – make judgements and estimates that are reasonable the Company. The work carried out by the auditors and prudent; does not involve consideration of the maintenance and – state whether applicable accounting standards have integrity of this website and accordingly, the auditors been followed, subject to any material departures accept no responsibility for any changes that have disclosed and explained in the financial statements; occurred to the financial statements since they were and initially presented on the website. Visitors to the – prepare the financial statements on the going website need to be aware that legislation in the United concern basis unless it is inappropriate to presume Kingdom governing the preparation and dissemination that the Company will continue in business. of the financial statements may differ from legislation in other jurisdictions. The directors are responsible for ensuring that proper accounting records are kept which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for the Group’s system of internal financial control, for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 30 MAJEDIE INVESTMENTS PLC Report of the Independent Auditors Independent Auditors’ Report to the Members of Majedie Investments PLC We have audited the financial statements of Majedie Investments PLC for the year ended 30 September 2005 which comprise the statements of total return, the balance sheets, the cash flow statement and the related notes 1 to 30. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the part of the Report on Directors’ Remuneration that is described as having been audited. This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of Directors and Auditors As described in the Statement of Directors’ Responsibilities, the Company’s directors are responsible for the preparation of the financial statements in accordance with applicable United Kingdom law and accounting standards. They are also responsible for the preparation of the other information contained in the annual report including the Report on Directors’ Remuneration. Our responsibility is to audit the financial statements and the part of the Report on Directors’ Remuneration described as having been audited in accordance with relevant United Kingdom legal and regulatory requirements and auditing standards. We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Report on Directors’ Remuneration described as having been audited have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors’ Report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and transactions with the Company and other members of the Group is not disclosed. We also report to you if, in our opinion, the Company has not complied with any of the four directors’ remuneration disclosure requirements specified for our review by the Listing Rules of the Financial Services Authority. These comprise the amount of each element in the remuneration package and information on share options, details of long term incentive schemes, and money purchase and defined benefit schemes. We give a statement, to the extent possible, of details of any non-compliance. We review whether the corporate governance statement reflects the Company’s compliance with the nine provisions of the July 2003 FRC Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures. We read the Directors’ Report and the other information contained in the annual report for the above year as described in the contents section including the unaudited part of the Report on Directors’ Remuneration and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Basis of Audit Opinion We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Report on Directors’ Remuneration described as having been audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the circumstances of the Company and the Group, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the Report on Directors’ Remuneration described as having been audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Report on Directors’ Remuneration described as having been audited. Opinion In our opinion: – – the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 30 September 2005 and of the return of the Company and the Group for the year then ended; and the financial statements and the part of the Report on Directors’ Remuneration described as having been audited have been properly prepared in accordance with the Companies Act 1985. Deloitte & Touche LLP Chartered Accountants and Registered Auditors London 24 November 2005 REPORT & ACCOUNTS 2005 31 Consolidated Statement of Total Return for the year ended 30 September 2005 Revenue Capital Notes £000 £000 2005 Total £000 Net realised gains on sales Increase in unrealised appreciation 13 13 13,315 13,315 27,607 27,607 Revenue Capital £000 £000 7,479 9,238 2004 Total £000 7,479 9,238 Total capital return on investments 40,922 40,922 16,717 16,717 Dividends and interest Other income Gross revenue and capital return Administrative expenses Return on ordinary activities before finance costs and taxation Finance costs Premium on debenture stock repurchased for cancellation Return on ordinary activities before taxation Taxation on ordinary activities Return on ordinary activities 2 3 4 4 7 7 8 4,669 6,554 4,669 4,783 6,554 1,574 4,783 1,574 11,223 40,922 52,145 6,357 16,717 23,074 (5,000) (1,205) (6,205) (2,874) (1,069) (3,943) 6,223 39,717 45,940 3,483 15,648 19,131 (700) (2,101) (2,801) (836) (2,507) (3,343) (992) (992) 5,523 37,616 43,139 2,647 12,149 14,796 (43) (43) (93) (93) after taxation 5,480 37,616 43,096 2,554 12,149 14,703 Minority interest 14 (808) (808) 184 184 Return attributable to equity shareholders Dividends Transfer (from)/to reserves Basic and diluted return per ordinary share 9 20 10 4,672 37,616 42,288 2,738 12,149 14,887 (4,708) (4,708) (4,562) (4,562) (36) 37,616 37,580 (1,824) 12,149 10,325 8.97p 72.24p 81.21p 5.25p 23.28p 28.53p The revenue column of this statement is the Consolidated Profit and Loss Account of the Group. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The notes on pages 37 to 56 form part of these accounts. 32 MAJEDIE INVESTMENTS PLC Consolidated Balance Sheet at 30 September 2005 Notes 11 12 13 15 16 17 Fixed assets Intangible assets Tangible assets Investments Current assets Debtors Cash at bank and on deposit Creditors Amounts falling due within one year Net current assets Total assets less current liabilities Creditors Amounts falling due after more than one year 18 Net assets Capital and reserves Called up share capital Share premium account Capital redemption reserve Capital reserve – realised Capital reserve – unrealised Revenue reserve Own shares reserve Equity shareholders’ funds Minority interest Net asset value per share Approved by the Board on 24 November 2005. Henry S Barlow Hubert V Reid Directors The notes on pages 37 to 56 form part of these accounts. 19 20 20 20 20 20 21 22 14 23 2005 £000 360 613 2004 £000 425 435 207,236 167,386 208,209 168,246 2,150 210,359 33,755 176,604 4,946 4,421 9,367 7,217 5,253 785 56 89,507 58,303 23,717 (1,422) 3,898 172,144 33,687 138,457 5,159 13,537 18,696 14,798 5,253 785 56 79,498 30,696 23,753 (1,148) 176,199 405 176,604 138,893 (436) 138,457 338.7p 266.5p REPORT & ACCOUNTS 2005 33 Company Statement of Total Return for the year ended 30 September 2005 Revenue Capital Notes £000 £000 2005 Total £000 Net realised gains on sales Increase in unrealised appreciation Revaluation of investment in subsidiary undertaking 13 13 14 13,413 13,413 27,607 27,607 6,842 6,842 Revenue Capital £000 £000 7,451 9,238 2004 Total £000 7,451 9,238 Total capital return on investments 47,862 47,862 16,689 16,689 Dividends and interest Other income Gross revenue and capital return Administrative expenses Return on ordinary activities before finance costs and taxation Finance costs Premium on debenture stock repurchased for cancellation Return on ordinary activities before taxation Taxation on ordinary activities Return attributable to equity shareholders Dividends Transfer (from)/to reserves Basic and diluted return per ordinary share 2 3 4 4 7 7 8 9 20 10 4,664 85 4,664 4,762 85 74 4,762 74 4,749 47,862 52,611 4,836 16,689 21,525 (672) (1,205) (1,877) (745) (1,069) (1,814) 4,077 46,657 50,734 4,091 15,620 19,711 (700) (2,101) (2,801) (836) (2,507) (3,343) (992) (992) 3,377 44,556 47,933 3,255 12,121 15,376 (43) (43) (93) (93) 3,334 44,556 47,890 3,162 12,121 15,283 (4,708) (4,708) (4,562) (4,562) (1,374) 44,556 43,182 (1,400) 12,121 10,721 6.40p 85.57p 91.97p 6.06p 23.22p 29.28p The revenue column of this statement is the Profit and Loss Account of the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The notes on pages 37 to 56 form part of these accounts. 34 MAJEDIE INVESTMENTS PLC Company Balance Sheet at 30 September 2005 Fixed assets Investments Investment in subsidiaries Current assets Debtors Cash at bank and on deposit Creditors Amounts falling due within one year Net current (liabilities)/assets Total assets less current liabilities Notes 13 14 15 16 17 Creditors Amounts falling due after more than one year 18 Net assets Capital and reserves Called up share capital Share premium account Capital redemption reserve Capital reserve – realised Capital reserve – unrealised Revenue reserve Own shares reserve Equity shareholders’ funds Net asset value per share Approved by the Board on 24 November 2005. Henry S Barlow Hubert V Reid Directors The notes on pages 37 to 56 form part of these accounts. 19 20 20 20 20 20 21 22 23 2005 £000 207,236 10,294 2,201 2,202 4,403 4,891 5,253 785 56 89,574 64,339 24,757 (1,422) 2004 £000 167,386 3,452 217,530 170,838 (488) 217,042 33,700 183,342 3,283 174,121 33,687 140,434 4,395 12,982 17,377 14,094 5,253 785 56 79,467 29,890 26,131 (1,148) 183,342 352.4p 140,434 269.5p REPORT & ACCOUNTS 2005 35 Consolidated Cash Flow Statement for the year ended 30 September 2005 Operating activities Cash received from investments Cash received from fee income Interest received Cash payments Notes 2005 £000 3,403 5,296 319 (4,385) 2004 £000 3,839 718 534 (2,769) Net cash inflow from operating activities 24 4,633 2,322 Servicing of finance Interest paid Premium on debenture stock repurchased for cancellation (2,788) (3,238) (992) Net cash outflow from servicing of finance (2,788) (4,230) Taxation Tax recovered Capital expenditure and financial investment Purchases of investments Sales of investments Purchases of tangible assets Net cash (outflow)/inflow from capital expenditure and financial investment Equity dividends paid Cash (outflow)/inflow before financing Financing Purchases of own shares Debenture stock repurchased Net cash outflow from financing Decrease in cash in the year 25 The notes on pages 37 to 56 form part of these accounts. 4 16 (119,611) 113,861 (384) (139,895) 148,546 (140) (6,134) (4,557) (8,842) (274) (9,116) (274) 8,511 (4,412) 2,207 (6,042) (3,835) (242) (5,800) 36 MAJEDIE INVESTMENTS PLC Notes to the Accounts 1 Accounting Policies Basis of Accounting The accounts have been prepared under the historical cost convention, as modified by the revaluation of fixed asset investments, and in accordance with applicable United Kingdom law and accounting standards and the 2003 Statement of Recommended Practice for the Financial Statements of Investment Trust Companies (“the SORP”). Basis of Consolidation The consolidated accounts incorporate the audited accounts of the Company and its subsidiaries made up to 30 September 2005. Investment Income Dividend income from investments is taken to the revenue account on an ex-dividend basis and net of any associated tax credit. The fixed return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Deposit interest is included on an accruals basis. Allocation of Costs to Capital 75% of investment management expenses and finance costs are charged to capital in accordance with the Board’s expectation of the split of total returns over the long term between capital gains and income. Expenses Expenses are accounted for on an accruals basis. Where they relate directly to the acquisition or disposal of an investment, expenses are either added to the cost of the investment or deducted from sale proceeds as appropriate. 75% of investment management expenses are charged to capital as noted above; 25% of investment management expenses and all other expenses are charged through the revenue account. Expenses include pension contributions made to a money purchase scheme. Finance Costs 75% of finance costs arising from the debenture stocks are charged to capital at a constant rate on the carrying amount of the debt; 25% of the finance costs are charged on the same basis to the revenue account. Premiums payable on repurchase of debenture stock are charged 100% to capital. Investments – Fixed Assets Listed investments are valued at closing mid-market value. Unlisted investments are stated at the Board’s estimate of their fair value. Unlisted investments are normally valued on an annual basis by the Board of Directors taking into account relevant information as appropriate including market prices, latest dealings, accounting information, professional advice and the guidelines issued by the British Venture Capital Association (“BVCA”). With the exception of Majedie Asset Management Limited, investments in subsidiary undertakings are included in the Company Balance Sheet at net asset value. Any profits or losses are taken to the capital reserve. Majedie Asset Management Limited is valued in accordance with the policy for unlisted investments described above. Own Shares Own shares held under option (see note 21) are accounted for in accordance with UITF Abstract 38: ‘Accounting for ESOP Trusts’. This requires that the consideration paid for own shares held be presented as a deduction from shareholders’ funds, and not recognised as an asset. REPORT & ACCOUNTS 2005 37 Notes to the Accounts 1 Accounting Policies continued Goodwill and Intangible Fixed Assets Where goodwill arises on consolidation the specific circumstances will be reviewed to assess its useful economic life. Where the relevant goodwill is considered to have an indefinite useful economic life, it will not be amortised. Although this constitutes a departure from the Companies Act 1985 it is considered appropriate in order to give a true and fair view and is permitted by Financial Reporting Standard No. 10: Goodwill and Intangible Assets, in such circumstances. At the end of each reporting period the goodwill is subject to an annual impairment review to reassess the fair value in light of current circumstances. Tangible Assets Tangible assets are stated at cost less depreciation. 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. Operating Lease Rentals Total operating lease rentals up to the date of the next rent review, in respect of premises occupied by the Group, are spread evenly over the term. Foreign Currencies Transactions denominated in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction or, where accrued, at the year end rate. Foreign currency deposits and balances are converted into sterling at the year end rates of exchange. The valuation of investments listed overseas shown in note 13 has been translated into sterling at the year end exchange rates. Profits and losses arising on exchange are taken to capital reserves if they are of a capital nature, otherwise they are taken to the revenue account. Taxation The payment of taxation is deferred or accelerated because of timing differences between the treatment of certain items for accounting and taxation purposes. Full provision for deferred taxation is made under the liability method, without discounting, on all timing differences that have arisen, but not reversed by the Balance Sheet date, unless such provision is not permitted by Financial Reporting Standard No. 19: Deferred Taxation. Any tax relief obtained in respect of investment management expenses and finance costs allocated to capital is reflected in the capital reserve and a corresponding amount is charged against revenue. The tax relief is the amount by which corporation tax payable is reduced as a result of these capital expenses. The Group uses the marginal method of allocation of tax relief on expenses charged to capital reserve in accordance with the SORP. Reserves Gains and losses on the realisation of investments and foreign currency are accounted for in the realised capital reserve. Increases and decreases in the valuation of investments and currency held at the year end are accounted for in the unrealised capital reserve. No provision is made for tax on capital gains since the Company operates as an investment trust for tax purposes. 38 MAJEDIE INVESTMENTS PLC 2 Dividends and Interest Listed investments Group 2005 £000 Group 2004 £000 Company 2005 £000 Company 2004 £000 – UK dividend income 4,001 3,579 4,001 3,579 Listed investments – unfranked Unlisted investments – UK dividend income Interest on deposits Exchange differences on income 3 Other income Client fee income Other income 360 – 311 (3) Group 2005 £000 6,500 54 659 25 536 (16) 360 – 306 (3) 659 25 515 (16) 4,669 4,783 4,664 4,762 Group 2004 £000 1,547 27 Company 2005 £000 – 85 Company 2004 £000 – 74 6,554 1,574 85 74 4 Return on Ordinary Activities before Finance Costs and Taxation Group 2005 £000 Group 2004 £000 Company 2005 £000 Company 2004 £000 After charging: Staff costs – note 6 Other staff costs and directors’ fees Advisers’ costs Information costs Establishment costs Operating lease rentals – premises Depreciation on tangible assets Auditors’ remuneration (also see next page) for: – audit – other services to the Group Other expenses 3,637 1,795 1,028 171 882 477 183 200 171 49 52 383 230 794 375 127 146 153 48 27 248 123 183 124 89 87 – 32 14 197 843 207 286 123 79 82 – 32 1 161 6,205 3,943 1,877 1,814 REPORT & ACCOUNTS 2005 39 Notes to the Accounts 4 Return on Ordinary Activities before Finance Costs and Taxation continued A charge of £1,205,000 (2004: £1,069,000) to capital and an equivalent credit to revenue has been made in both the Group and Company to recognise the accounting policy of charging 75% of investment management expenses to capital. Total fees charged by the auditors for the year, all of which were charged to revenue, comprised: Group 2005 £000 Group 2004 £000 Company 2005 £000 Company 2004 £000 Audit services – statutory audit – audit-related regulatory reporting – audit of funds managed by subsidiary Tax services – advisory Other non-audit services – relating to – Employee Share Option scheme – accounting advice 49 16 17 10 – 9 5 Directors’ Emoluments – Company Salaries and fees Bonuses Pension contributions Other benefits 48 10 20 (5) 2 – 32 – – 6 – 8 32 – – (1) 2 – 101 75 46 33 2005 £000 421 149 49 26 2004 £000 427 109 44 25 645 605 The Report on Directors’ Remuneration on pages 24 to 29 explains the Company’s policy on remuneration for executive directors. It also provides further details of directors’ remuneration and awards under the executive share option scheme. 40 MAJEDIE INVESTMENTS PLC 6 Staff Costs including Executive Directors – Group Salaries and other payments Social security costs Pension contributions 2005 £000 3,032 377 228 2005 Number 2004 £000 1,449 177 169 3,637 1,795 2004 Number Management and office staff 24 21 The increase in salaries and other payments reflects the growth of the Majedie Asset Management business and related staff remuneration. 7 Finance Costs – Group and Company 2005 Revenue Capital £000 £000 Total £000 2004 Revenue Capital £000 £000 Total £000 Interest on 9.5% debenture stock 2020 321 963 1,284 356 1,069 1,425 Interest on 7.25% debenture stock 2025 376 1,128 1,504 454 1,359 1,813 Amortisation of expenses associated with debenture issue 3 10 13 26 79 105 700 2,101 2,801 836 2,507 3,343 On 29 September 2004 £1.5 million of the 9.5% debenture stock 2020 and £4.3 million of the 7.25% debenture stock 2025 were repurchased for cancellation. The premiums paid on repurchase, totalling £992,461, were charged 100% to capital. Issue expenses relating to the debentures repurchased which were deducted from the original gross proceeds and were being accounted for, at a constant rate, over the life of the debentures have been fully expensed on repurchase in accordance with the Company’s policy of charging finance costs 75% to capital and 25% to revenue. Further details of the debenture stocks in issue are provided in note 18. REPORT & ACCOUNTS 2005 41 Notes to the Accounts 8 Taxation Analysis of tax charge – Group and Company Foreign tax 43 93 43 93 Group 2005 £000 Group 2004 £000 Company 2005 £000 Company 2004 £000 Reconciliation of tax charge: The current taxation for the year is lower than the standard rate of corporation tax in the UK (30%). The differences are explained below: Group 2005 £000 Group 2004 £000 Company 2005 £000 Company 2004 £000 Revenue on ordinary activities before taxation 5,523 2,647 3,377 3,255 Theoretical tax at UK CT rate of 30% (2004: 30%) 1,657 793 1,013 976 Effects of: – UK dividends which are not taxable (1,200) (1,081) (1,200) (1,081) – other income which is not taxable – expenses not deductible for tax purposes – excess expenses for current year – utilisation of tax losses – overseas taxation which is not recoverable (9) 42 186 (676) 43 (7) 35 260 – 93 (9) – 196 – 43 (7) – 112 – 93 Actual current tax charge 43 93 43 93 42 MAJEDIE INVESTMENTS PLC 8 Taxation continued Group After claiming relief against accrued income taxable on receipt, the Group has unrelieved excess expenses of £29,167,000 (2004: £27,490,000). It is unlikely that the Group will generate sufficient taxable income in the future to utilise these expenses and therefore no deferred tax asset has been recognised. Company After claiming relief against accrued income taxable on receipt, the Company has unrelieved excess expenses of £29,030,000 (2004: £25,102,000). It is unlikely that the Group will generate sufficient taxable income in the future to utilise these expenses and therefore no deferred tax asset has been recognised. 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. 9 Dividends – Group and Company Interim ordinary 3.2p (2004: 3.2p) Proposed final ordinary 5.85p (2004: 5.55p) 2005 £000 1,665 3,043 2004 £000 1,670 2,892 4,708 4,562 The employee incentive trust referred to in note 21 has waived its rights to receive dividends from the Company and therefore the interim and final dividends for both 2004 and 2005 have been reduced accordingly. 10 Return per Ordinary Share Group and Company Basic return per ordinary share is based on 52,069,819 (2004: 52,188,484) ordinary shares, being the weighted average number of shares in issue having adjusted for the shares held by the employee incentive trust referred to in note 21. Basic returns per ordinary share are based on the return on ordinary activities after taxation attributable to equity shareholders. There is no dilution to the basic return per ordinary share shown for the years ended 30 September 2004 and 2005 since the share options referred to in note 21 would, if exercised, be satisfied by the shares already held by the employee incentive trust. Group 2005 £000 Group 2004 £000 Company 2005 £000 Company 2004 £000 Basic and diluted revenue returns are based on net revenue after taxation of: Basic and diluted capital returns 4,672 2,738 3,334 3,162 are based on net capital return of: 37,616 12,149 44,556 12,121 REPORT & ACCOUNTS 2005 43 Notes to the Accounts 11 Intangible Fixed Assets – Group Cost and value: At beginning of year Deemed partial disposal (see note 14) At end of year 2005 Goodwill £000 425 (65) 2004 Goodwill £000 458 (33) 360 425 As a result of an agreement signed in 2002 to establish the specialist fund management business of Majedie Asset Management Limited, goodwill on consolidation arose as at 30 September 2002 in connection with the carrying value of the investment in that company. The carrying value of the investment originally included relevant acquisition costs relating to the cost of professional advice received directly in connection with the specific transaction. As in previous years the directors consider Majedie Asset Management Limited to have an indefinite useful economic life and as a result goodwill is not being amortised, as set out in the accounting policy in note 1. The directors have carried out an impairment review and have concluded that there has been no impairment of goodwill. See note 14 for further information regarding the investment in Majedie Asset Management Limited. Leasehold Improvements £000 Office Equipment £000 350 10 – 289 8 – Total £000 1,098 389 (113) 748 379 (113) 360 1,014 1,374 374 163 (73) 663 171 (73) 297 63 61 464 550 374 761 613 435 12 Tangible Assets – Group Cost: At 30 September 2004 Additions Disposals At 30 September 2005 Depreciation: At 30 September 2004 Charge for year Disposals At 30 September 2005 Net book value: At 30 September 2005 At 30 September 2004 44 MAJEDIE INVESTMENTS PLC 13 Investments – Group and Company Listed UK £000 104,127 86,742 (77,769) 536 10,088 Listed Overseas £000 31,417 21,258 (33,137) – 2,965 Unlisted Investments £000 1,146 2,706 (970) (536) 360 Total £000 136,690 110,706 (111,876) – 13,413 123,724 22,503 2,706 148,933 26,836 20,517 4,001 6,651 (141) 439 30,696 27,607 47,353 10,652 298 58,303 Cost: At 30 September 2004 Additions Disposal proceeds Adjustment for listing of prior year unlisted Realised gains on disposals At 30 September 2005 Unrealised appreciation/ (depreciation): At 30 September 2004 Movement for the year At 30 September 2005 Valuation at 30 September 2005 171,077 33,155 3,004* 207,236 Valuation at 30 September 2004 130,963 35,418 1,005 167,386 * Includes two holdings of placing shares totalling £1,204,000 which have been included within their relevant industrial classification category rather than ‘unlisted’ within ‘Asset Distribution’ and ‘Valuation of Investments’ on pages 10 and 12 respectively. Group 2005 £000 Group 2004 £000 Company 2005 £000 Company 2004 £000 Capital return comprises: Realised profits on disposals 13,413 7,452 13,413 7,452 Realised exchange losses on settlement – (1) – (1) Increase in unrealised appreciation on investments 27,607 9,238 27,607 9,238 Revaluation of investment in subsidiary undertaking (see note 14) (Loss)/gain on deemed partial disposal (see note 14) – (98) – 28 6,842 – – – 40,922 16,717 47,862 16,689 REPORT & ACCOUNTS 2005 45 Notes to the Accounts 13 Investments – Group and Company continued The investment portfolio is analysed as follows: Listed equities Listed preference shares Unlisted equities 14 Investments in Subsidiaries (a) Subsidiaries – General The Company’s subsidiaries are as follows: 2005 £000 203,808 424 3,004 2004 £000 166,053 328 1,005 207,236 167,386 Majedie Asset Management Limited – specialist fund management company, authorised and regulated by the Financial Services Authority Barlow Service Company Limited – provides administrative services to Group companies Majedie Portfolio Management Limited – manager of the Majedie Share Plan, authorised and regulated by the Financial Services Authority Majedie Investment Trust Management Limited Barlow Investments Limited Majedie Properties Limited Majedie Securities Limited – non trading – non trading – non trading – non trading All the subsidiaries are incorporated in Great Britain and are wholly-owned except Majedie Asset Management Limited, which is 55% owned (2004: 65% owned). Cost: At 30 September 2004 and 30 September 2005 Unrealised (depreciation)/appreciation: At 30 September 2004 Movement for the year (2004: £nil) At 30 September 2005 Valuation at 30 September 2005 Valuation at 30 September 2004 Majedie Asset Management Limited £000 Other subsidiaries £000 3,258 1,002 – 6,842 6,842 10,100 3,258 (808) – (808) 194 194 Total £000 4,260 (808) 6,842 6,034 10,294 3,452 46 MAJEDIE INVESTMENTS PLC 14 Investments in Subsidiaries continued (b) Majedie Asset Management Limited Majedie Asset Management Limited was incorporated on 24 May 2002 and provides investment management and advisory services relating to UK equities. The classes of Majedie Asset Management Limited shares held by Majedie Investments PLC are as follows: A Shares (representing 55% of the equity share capital (2004: 65%)) Ordinary Shares* Total equity share capital Preference Shares Deferred Shares 2005 2004 No. of shares in issue % held No. of shares in issue 366,667 300,000 666,667 2,100,000 333,333 100 – 55 100 100 557,143 300,000 857,143 2,100,000 142,857 % held 100 – 65 100 100 * The Ordinary Shares are all held by employees of Majedie Asset Management Limited and represent 45% of the equity share capital (2004: 35%). The Company’s holding of equity share capital in Majedie Asset Management Limited reduced from 65% to 55% with effect from 31 July 2005 as a result of the business reaching pre-agreed targets by means of the conversion of 190,476 A shares into Deferred Shares. The directors have carried out a review of the fair value of the investment in Majedie Asset Management Limited according to the accounting policy for valuing unlisted investments on page 37. As at 30 September 2005 the investment is valued in the Company Balance Sheet at £10,100,000 (2004: £3,258,000) consisting of £2,100,000 for preference shares and £8,000,000 for equity shares (2004: £2,100,000 for preference shares and £1,158,000 for equity shares). As a result of this review the directors’ valuation of the investment has increased by £6,842,000 compared with last year. In addition the Company has lent Majedie Asset Management Limited £250,000 in the form of a subordinated loan – see note 15. The results of Majedie Asset Management Limited for the year ended 30 September 2005 included in the Consolidated Statement of Total Return amount to a profit of £2,145,000 (2004: loss of £610,000). The net assets of Majedie Asset Management Limited are included within the Consolidated Balance Sheet and amount to £3 million (2004: £0.9 million). The minority interest element is referred to in (d) below. REPORT & ACCOUNTS 2005 47 Notes to the Accounts 14 Investments in Subsidiaries continued (c) Deemed Partial Disposal of Equity Investment in Majedie Asset Management Limited The 10% reduction (2004: 5% reduction) in the equity holding in Majedie Asset Management Limited and the corresponding 10% increase (2004: 5% increase) in the minority interest (described in note 14b) results in a deemed partial disposal in the consolidated accounts as follows: Decrease in share of net (surplus)/deficit attributable to equity shareholders as at 31 July 2005 (2004: 31 March 2004) Write-off of applicable portion of goodwill on consolidation (note 11) (Loss)/gain on deemed disposal (note 13) (d) Minority Interest At beginning of year Share of profit/(loss) for year Increase in share of net surplus as at 31 July 2005 Increase in share of net deficit as at 31 March 2004 Group 2005 £000 (33) (65) Group 2005 £000 (436) 808 33 – Group 2004 £000 61 (33) (98) 28 Group 2004 £000 (191) (184) – (61) At end of year 405 (436) The minority interest disclosed on the Consolidated Statement of Total Return represents 35% of Majedie Asset Management Limited’s profit (2004: loss) from ordinary activities after taxation for the first ten months of the year to 30 September 2005 and 45% of the profit for the last two months (2004: 30% of the loss for the first six months of the year to 30 September 2004 and 35% of the loss for the latter six months). The minority interest disclosed in the Consolidated Balance Sheet relates to 45% of the net surplus (2004: 35% of the net deficit) attributable to Majedie Asset Management Limited’s equity shareholders having taken into account the rights attaching to preference shares and other creditors. Further information regarding the business and the investment in Majedie Asset Management Limited is included in the Financial Review on page 15. 48 MAJEDIE INVESTMENTS PLC 15 Debtors Sales for future settlement Trade debtors Payments in advance Dividends receivable Accrued income Taxation recoverable Amounts due from subsidiary undertakings Group 2005 £000 1,055 2,831 307 685 3 65 – Group 2004 £000 3,374 791 424 504 11 55 – Company 2005 £000 1,055 – – 685 3 65 393 Company 2004 £000 3,374 – 110 504 11 55 341 4,946 5,159 2,201 4,395 Included in amounts due from subsidiary undertakings is an amount of £250,000 due in less than one year, plus interest at a rate of 5% plus six month LIBOR, in respect of a subordinated loan to Majedie Asset Management Limited. 16 Cash at Bank and on Deposit Deposits Other balances Group 2005 £000 2,084 2,337 Group 2004 £000 12,832 705 Company 2005 £000 2,084 118 Company 2004 £000 12,832 150 4,421 13,537 2,202 12,982 17 Creditors Amounts falling due within one year: Purchases for future settlement Proposed final dividend Accrued expenses Other creditors Amounts owed to subsidiary undertakings Group 2005 £000 1,206 3,043 2,431 537 – Group 2004 £000 10,485 2,892 785 636 – Company 2005 £000 1,206 3,043 – 537 105 Company 2004 £000 10,485 2,892 – 636 81 7,217 14,798 4,891 14,094 REPORT & ACCOUNTS 2005 49 Notes to the Accounts 18 Creditors Amounts falling due after more than one year: Group 2005 £000 Group 2004 £000 Company 2005 £000 Company 2004 £000 £13.5m (2004: £13.5m) 9.5% debenture stock 2020 13,352 13,348 13,352 13,348 £20.7m (2004: £20.7m) 7.25% debenture stock 2025 Other 20,348 55 20,339 – 20,348 – 20,339 – 33,755 33,687 33,700 33,687 Both debenture stocks are secured by a floating charge over the Company’s assets. In accordance with Financial Reporting Standard No. 4: Capital Instruments, expenses associated with the issue of debenture stocks were deducted from the gross proceeds and are being accounted for, at a constant rate, over the life of the debentures. Further details on interest and the amortisation of issue expenses are provided in note 7. 19 Called Up Share Capital Allotted and fully paid at 30 September: 52,528,000 (2004: 52,528,000) ordinary shares of 10p each Authorised at 30 September: 70,000,000 (2004: 70,000,000) ordinary shares of 10p each 2005 £000 2004 £000 5,253 7,000 5,253 7,000 Details of directors’ share options are set out in the Report on Directors’ Remuneration on page 29. 50 MAJEDIE INVESTMENTS PLC 20 Reserves Group At 30 September 2004 Increase in unrealised appreciation before transfer on disposal Transfer on disposal of investments Net gain on realisation of investments Loss on deemed disposal (see note 14) Costs charged to capital Retained net deficit for the year Share Premium Account £000 Capital Redemption Reserve £000 Capital Reserve- Realised £000 Capital Reserve- Unrealised £000 Revenue Reserve £000 785 56 79,498 30,696 23,753 – – – – – – – – – – – – – 37,606 9,999 (9,999) 3,414 (98) (3,306) – – – – – – – – – – (36) At 30 September 2005 785 56 89,507 58,303 23,717 Share Premium Account £000 Capital Redemption Reserve £000 Capital Reserve- Realised £000 Capital Reserve- Unrealised £000 Revenue Reserve £000 Company At 30 September 2004 785 56 79,467 29,890 26,131 Increase in unrealised appreciation before transfer on disposal Transfer on disposal of investments Net gain on realisation of investments Revaluation of investment in subsidiary undertaking Costs charged to capital Retained net deficit for the year – – – – – – – – – – – – – 37,606 9,999 (9,999) 3,414 – – 6,842 (3,306) – – – – – – – – (1,374) At 30 September 2005 785 56 89,574 64,339 24,757 REPORT & ACCOUNTS 2005 51 Notes to the Accounts 21 Own Shares – Group and Company Following the granting of further share options to directors and employees on 21 December 2004 under the Discretionary Share Option Scheme, 96,632 own shares costing £274,000 were purchased by the Majedie Investments PLC Employee Incentive Trust during the year ended 30 September 2005. The total number of options outstanding is now 714,156 and the total shareholding of the trust is 505,963 ordinary shares. The shares will be held by the trust until the relevant options are exercised or until they lapse and are presented on the Balance Sheet as a deduction from shareholders’ funds, in accordance with the policy detailed in note 1. Further details of the scheme are given in the Report on Directors’ Remuneration on page 25. At 30 September 2004 Additions At 30 September 2005 Number of Shares 409,331 96,632 Own Shares Reserve £000 (1,148) (274) 505,963 (1,422) 22 Reconciliation of Movements in Shareholders’ Funds Group 2005 £000 Opening shareholders’ funds 138,893 Net revenue for the year Dividends 4,672 (4,708) Net capital return for the year 37,616 Cost of own shares purchased Group 2004 £000 128,810 2,738 (4,562) 12,149 Company 2005 £000 140,434 3,334 (4,708) 44,556 Company 2004 £000 129,955 3,162 (4,562) 12,121 (note 21) (274) (242) (274) (242) Closing shareholders’ funds 176,199 138,893 183,342 140,434 23 Net Asset Value The consolidated net asset value per share has been calculated based on equity shareholders’ funds of £176,199,000 (2004: £138,893,000) and on 52,022,037 (2004: 52,118,669) ordinary shares, being the shares in issue at the year end having deducted the number of shares held by the employee incentive trust. The Company net asset value per share has been calculated based on equity shareholders’ funds of £183,342,000 (2004: £140,434,000) and on the same number of shares as used for the calculation of the consolidated net asset value per share. For more details regarding the employee incentive trust – see note 21 and the Report on Directors’ Remuneration on page 25. 52 MAJEDIE INVESTMENTS PLC 24 Reconciliation of Return on Ordinary Activities before Tax to Net Cash Flow from Operating Activities Group 2005 £000 43,139 (40,922) (41) 171 2,801 – (2,095) 1,597 (57) 40 2005 £000 (9,116) – (13) Return on ordinary activities before taxation Capital return on investments Dividends reinvested Depreciation Interest and debenture expenses Premiums paid on repurchase of debenture stock Increase in debtors, accrued income and payments in advance Increase in other creditors and accrued expenses Tax on unfranked income Loss on sale of tangible fixed asset Net cash inflow from operating activities 25 Reconciliation of Net Cash Flow to Movement in Net Debt Decrease in cash in the year Repurchase of debenture stock for cancellation Other non cash items Change in net debt Net debt at 30 September 2004 Net debt at 30 September 2005 26 Analysis of Changes in Net Debt Cash at bank Debt due after one year At 30 September 2004 £000 13,537 (33,687) Cash Flows £000 (9,116) – Group 2004 £000 14,796 (16,717) (49) 153 3,343 992 (506) 421 (111) – 4,633 2,322 1,860 (22,010) (20,150) 2004 £000 (3,835) 5,800 (105) At 30 September 2005 £000 4,421 (33,700) (9,129) (20,150) (29,279) Non Cash Items £000 – (13) (20,150) (9,116) (13) (29,279) REPORT & ACCOUNTS 2005 53 Notes to the Accounts 27 Operating Lease Commitments A subsidiary company, Barlow Service Company Limited, had an annual commitment of £146,000 at 30 September 2005 (2004: £153,000) under a non-cancellable operating lease in respect of premises. This operating lease commitment will expire in more than five years from the balance sheet date. A subsidiary company, Majedie Asset Management Limited, entered into a ten year operating lease agreement (with a five year break) on 25 April 2005 in respect of premises. The annual commitment under the lease is £165,000, however a rent-free period of twelve months on the initial five year period is being amortised over the five year period, therefore the annual charge during this time is effectively £132,000. 28 Financial Commitments With the exception of the financial commitment detailed in note 27, at 30 September 2005 the Group had no financial commitments which had not been accrued for (2004: £nil). 29 Financial Instruments and Risk Profile The Majedie Group comprises two main businesses: Majedie Investments PLC (Company) – the core investment trust portfolio business and a 55% subsidiary (2004: 65%): Majedie Asset Management Limited – a fund management business specialising in UK equities largely for institutional clients. For this reason the two businesses are dealt with separately below. Majedie Investments PLC The financial instruments of Majedie Investments PLC (“the Company”) 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 the Company’s operations. The Company does not use derivatives. The figures disclosed below exclude short term debtors and creditors. As an investment trust, the Company invests in securities for the long term. Accordingly, it is the Company’s policy that no trading in investments or other financial instruments shall be undertaken. The Company has little exposure to credit and cash flow risk. Unlisted investments in the portfolio are subject to liquidity risk. This risk is taken into account by the directors when arriving at the valuation of these assets. The principal risks the Company faces in its portfolio management activities are: (cid:129) market price risk i.e. movements in the value of investment holdings caused by factors other than interest rate or currency movements; foreign currency risk; and interest rate risk. (cid:129) (cid:129) The Company takes account of these risks when setting investment policy and making investment decisions. 54 MAJEDIE INVESTMENTS PLC 29 Financial Instruments and Risk Profile continued Market Price Risk The Company’s exposure to market price risk comprises mainly movements in the value of its equity investments. A detailed breakdown of the investment portfolio is given on pages 12 and 13. Uncertainty arises as a result of future changes in the market prices of the Company’s equity investments. Economic and market data are monitored by the Investment Director within an overall investment strategy approved by the Board. Foreign Currency Risk The Company is exposed to foreign currency risk through its investment in securities listed on overseas stock markets. The Company does not normally hedge against foreign currency movements but takes account of the relative strengths and weaknesses of currencies in making investment decisions. Interest Rate Risk The Company is exposed indirectly to interest rate risk through the effect of interest rate changes on the valuation of its investment portfolio. The majority of its financial assets are equity shares, which pay dividends, not interest. The Company finances its operations primarily through retained profits, including realised and unrealised capital gains, and equity share capital. In addition there are long term debenture loans which have fixed rates of interest – see note 18. The Company’s financial instruments at 30 September comprised the following: Book Value 2005 £000 207,236 2,202 Book Value 2004 £000 167,386 12,982 Fair Value 2005 £000 207,236 2,202 Fair Value 2004 £000 167,386 12,982 Financial assets Investment portfolio Cash Financial liabilities £13.5m (2004: £13.5m) 9.5% debenture stock 2020 13,352 13,348 18,363 16,976 £20.7m (2004: £20.7m) 7.25% debenture stock 2025 20,348 20,339 23,527 22,131 The investment portfolio has been valued in accordance with the accounting policy in note 1 to the accounts. Accordingly, book value equates to fair value. The fair value of the debenture stock is based on information provided by FT Interactive Data as at 30 September in each year. REPORT & ACCOUNTS 2005 55 Notes to the Accounts 29 Financial Instruments and Risk Profile continued The Company’s exposure to foreign currencies through its investments in overseas securities as at 30 September is shown below: Currency US dollar Euro Japanese yen Swiss franc Canadian dollar Australian dollar Norwegian krone Swedish krone 2005 £000 17,351 7,349 1,610 411 5,201 1,305 – – 2004 £000 22,555 5,821 4,886 1,183 420 – 302 251 33,227 35,418 Majedie Asset Management Limited Majedie Asset Management Limited manages the investment portfolios of its clients and does not hold equity investments or other securities on its own account. In managing the relevant portfolios Majedie Asset Management Limited takes into account, when making decisions, various risk factors including market price risk and indirect interest rate risk. Majedie Asset Management Limited has no direct exposure to foreign currencies and has no financial assets other than cash. The operations of Majedie Asset Management Limited are financed primarily through equity and preference share capital and loans provided by Majedie Investments PLC and equity capital provided by the senior management of Majedie Asset Management Limited. 30 Related Party Transactions At 30 September 2005 the Company held investments in funds managed by Majedie Asset Management Limited representing 4.0% (2004: 4.0%) of the Company’s investment portfolio as set out in the table below. Fund Majedie Asset Management UK Opportunities Majedie Asset Management UK Focus Majedie Asset Management UK Equity 2005 Market Value £000 4,697 2,003 1,877 2004 Market Value £000 3,557 1,591 1,504 8,577 6,652 Distributions totalling £61,000 were received by the Company during the year from these investments (2004: £71,000). The Company makes investments from time to time in companies on the boards of which a non-executive director of the Company serves as a director. The Company’s non-executive directors are not involved in any day-to-day investment decisions relating to the investment portfolio. 56 MAJEDIE INVESTMENTS PLC Ten Year Record to 30 September 2005 Year End 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Total Assets £000 Share- holders’ NAV Funds Per Share Pence £000 Share Price Discount % Pence Earnings Dividend Pence Pence Actual Net Gearing Ratio % 163,176 148,372 196,034 181,228 180,298 165,490 216,519 201,708 274,620 235,269 283.4 345.3 315.3 383.3 446.3 242.0 292.5 296.0 367.0 358.5 203,067 163,709 310.7* 242.5 164,344 124,893 238.1* 187.5 168,001 128,810 246.6* 198.0 172,144 138,893 266.5* 227.5 210,359 176,199 338.7* 303.5 14.62 15.44 6.13 4.24 19.68 21.95 21.25 19.72 14.63 10.39 7.65 6.58 5.48 8.09 7.01 7.73 9.97 7.52 5.25 8.97 6.60 6.90 7.20 7.40 7.65 7.90 8.15 8.45 8.75 9.05 5.7 1.1 –0.6 2.3 15.5 19.4 18.3 17.1 14.5 16.6 Potential Gearing Ratio % 10.0 8.2 8.9 7.3 16.7 24.1 31.7 30.6 24.3 19.1 Total Group Costs % 1.29 1.45 1.36 1.48 0.89 0.92 1.51 2.90† 2.86† 3.93† Earnings for the year ended 30 September 1997 are as originally reported and have not been revised to reflect the current accounting policy of charging 75% of relevant expenses and finance costs to capital. The Actual Gearing Ratio is calculated as total assets less cash, fixed interest assets and minority interest divided by shareholders’ funds less own shares held, up to and including 2002. From 2003 onwards the Actual Gearing Ratio is calculated as total assets less cash, fixed interest assets and minority interest divided by shareholders’ funds. The Potential Gearing Ratio is calculated as total assets less minority interest and own shares held divided by shareholders’ funds less own shares held, up to and including 2002. From 2003 onwards the Potential Gearing Ratio is calculated as total assets less minority interest divided by shareholders’ funds. The change in calculation in 2003 for both the Actual Gearing Ratio and the Potential Gearing Ratio is due to UITF Abstract 38: ‘Accounting for ESOP Trusts’. † From 2003 onwards, the cost of running the trust is calculated by taking the total administrative expenses and dividing by the average quarterly net asset value during the year. For 1996–1999, this was calculated by taking the average monthly net asset value during the year. * From 2001 onwards NAV Per Share figures have been calculated as described in note 23 on page 52. REPORT & ACCOUNTS 2005 57 Notice of Meeting Notice is hereby given that the ninety fifth Annual General Meeting of Majedie Investments PLC will be held on 18 January 2006 at the London Underwriting Centre, 3 Minster Court, Mincing Lane, London EC3R 7DD at 12.15pm for the purpose of transacting the following: Ordinary Business 1. To declare a final dividend of 5.85p per share in respect of the year ended 30 September 2005. 2. To receive and adopt the Directors’ Report and Accounts for the year ended 30 September 2005. 3. To receive and approve the Report on Directors’ Remuneration. 4. To re-elect JWM Barlow as a director. 5. To re-elect RE Clarke as a director. 6. To re-elect HV Reid* as a director. 7. To re-appoint Deloitte & Touche LLP as auditors and to authorise the directors to fix their remuneration. * Chairman of the Audit, Nomination and Remuneration Committees. Special Business To consider and, if thought fit, pass the following resolutions which will be proposed as a special resolutions: 8. THAT the Company’s 2006 Long Term Incentive Plan (the “2006 LTIP”), the main features of which are summarised in the Chairman’s letter to shareholders dated 24 November 2005 and the Rules of which are produced to the Meeting and initialled by the Chairman for the purposes of identification, be approved, and the directors be authorised to do all acts and things which they consider necessary or desirable to carry the 2006 LTIP into effect. 9. THAT the Company generally be and is hereby authorised for the purpose of Section 166 of the Companies Act 1985 to make market purchases (as defined in Section 163 of the said Act) of shares of 10p each in the capital of the Company (shares) provided that: a) the maximum number of shares hereby authorised to be purchased is 7,873,947; being 14.99% of the issued share capital; b) the minimum price which may be paid for such shares is 10p per share; c) the maximum price (exclusive of expenses) which may be paid for such shares shall be 5% above the average of the middle market quotations taken from the London Stock Exchange Daily Official List for the five business days before the purchase is made; d) the authority hereby conferred shall (unless previously renewed or revoked) expire on the earlier of the next Annual General Meeting of the Company and the date which is eighteen months after the date on which this resolution is passed; and e) the Company may make a contract to purchase its own shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiry of such authority and may make a purchase of its own shares in pursuance of any such contract. By order of the Board Sinclair Henderson Limited Company Secretary 24 November 2005 58 MAJEDIE INVESTMENTS PLC Copies of directors’ service contracts, the Articles of Association and the Register of Directors’ Interests in the shares of the Company are available for inspection at the Company’s registered office during normal business hours and from noon on Wednesday 18 January 2006 at the place of the meeting until its conclusion. A member who is entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote instead of him or her. Such proxies need not be members of the Company but are not entitled to vote except on a poll. Pursuant to Regulation 41 of the Uncertified Securities Regulations 2001, the time by which a person must be entered on the register of members in order to have the right to attend or vote at the meeting is 12.15pm on 16 January 2006. Changes to entries on the register of members after that time will be disregarded in determining the rights of any person to attend or vote at the meeting. By attending the Annual General Meeting a holder of ordinary shares expressly agrees he/she is requesting and willing to receive any communications made at the Annual General Meeting. REPORT & ACCOUNTS 2005 59 Majedie Savings Plans Majedie Share Plan The Majedie Share Plan is a straightforward and low cost way to invest or save in the shares of Majedie Investments PLC. Charges are kept low and the Plan is very flexible. Lump sum investments are dealt with on a weekly or daily basis whereas the monthly savings facility is an affordable and effective way of building a substantial shareholding over the longer term. The minimum lump sum investment is £250, while the minimum monthly amount is £25. There are no maximum limits. There are no dealing charges and there is no annual management fee. Your lump sum or monthly payments will be used to buy as many shares as possible after deducting Government Stamp Duty, currently at the rate of 0.5%. On the sale of shares a fixed charge of £15 + VAT is levied. Dividends may either be paid in cash or reinvested in the Plan. Existing Majedie shareholdings may be transferred into the Plan. You may close your plan by selling all your shares at any time. For more information, a Majedie Share Plan booklet and/or an application form please contact the Majedie Share Plan Manager, Majedie Portfolio Management Limited*, 1 Minster Court, Mincing Lane, London EC3R 7ZZ (telephone: 020 7626 1243). * authorised and regulated by the Financial Services Authority Majedie Corporate ISA The Majedie Corporate ISA (Individual Savings Account) provides individuals with a tax efficient way to invest or save in the shares of Majedie Investments PLC. ISAs provide the following benefits: – no extra income tax payable on income generated within the ISA; – no Capital Gains Tax liability on any profits arising from within the ISA; – no need to include the details of your ISA in reports to the Inland Revenue; – no minimum period of investment. The Majedie Corporate ISA provides the additional benefit of extremely low cost. There are no initial charges and no annual management charges. Furthermore there is no brokerage charge on purchases or sales as part of the weekly bulk dealing for the scheme. However there is Government Stamp Duty on purchases, currently at 0.5%, and there is also an additional charge should you wish to make use of the Real Time Dealing Service. Shares may be purchased either by way of a lump sum payment or through regular monthly payments. The minimum lump sum investment is £500, while the minimum direct debit subscription is £50. If you do not want to use the other available components of an ISA then the maximum investment permitted in shares in a MAXI ISA is £7,000 in each tax year until 2010. The maximum which may be invested in shares in a MINI ISA is currently £4,000 in each tax year until 2010. Income may be paid direct to your bank or building society on a half-yearly basis or reinvested. The Majedie Corporate ISA is provided in conjunction with Halifax Share Dealing (HSDL) who act as an Inland Revenue Approved PEP and ISA Manager. For more information, an ISA booklet and/or an application form please contact the Majedie Corporate ISA Manager, Halifax Share Dealing Limited, Trinity Road, Halifax HX1 2RG (telephone: 0870 600 9966). Majedie General PEP Although you are no longer able to put new money into a PEP, your existing PEP investments remain sheltered from tax and can continue to grow. You may transfer an existing PEP from another manager to the Majedie General PEP. Further details may be obtained from the Company’s Registrars, Computershare Investor Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol BS99 7NH (telephone: 0870 702 0000). 60 MAJEDIE INVESTMENTS PLC Shareholder Information Registered Office 1 Minster Court Mincing Lane London EC3R 7ZZ Telephone: 020 7626 1243 Fax: 020 7929 0904 E-mail: majedie@majedie.co.uk Registered Number: 109305 England Company Secretary Sinclair Henderson Limited 23 Cathedral Yard Exeter EX1 1HB Telephone: 01392 412122 Fax: 01392 253282 E-mail: info@sinclairhenderson.co.uk Registrars Computershare Investor Services PLC Lochside House 7 Lochside Avenue Edinburgh Park Edinburgh EH12 9DJ Telephone: 0870 702 0010 Internet Majedie’s website is at www.majedie.co.uk Shareholders may check details of their holdings, historical dividends, graphs and other data by accessing www.computershare.com. Please have your shareholder number, shown on your share certificate and dividend vouchers, to hand in order to access this information. Share Price The share price is quoted daily in The Times, Financial Times, The Daily Telegraph, The Independent and London Evening Standard. Shares may be bought through the Majedie Share Plan or Majedie Corporate ISA (details of which are set out on page 60). You may transfer an existing PEP to the Majedie General PEP (page 60). You may also purchase shares through an on-line dealing facility or via your stockbroker or bank. Net Asset Value The Company announces its net asset value weekly through the London Stock Exchange and on its website. The Financial Times publishes daily estimates of the net asset value and discount. Shareholders should notify all changes of name and address in writing to the Registrars. Capital Gains Tax For capital gains tax purposes the adjusted market price of the Company’s shares at 31 March 1982 was 35.875p per 10p share. Former shareholders of Barlow Holdings PLC are recommended to consult their professional advisers in this regard. Auditors Deloitte & Touche LLP Stockbrokers Bridgewell Key Dates in 2006 Ex-dividend date Record date Annual General Meeting 2004/05 final dividend paid Interim results announcement 2005/06 interim dividend paid Financial year end Final results announcement 4 January 6 January 18 January 25 January 25 May 30 June 30 September 21 November REPORT & ACCOUNTS 2005 61 Notes 62 MAJEDIE INVESTMENTS PLC Majedie Investments PLC Form of Proxy for use at the Annual General Meeting to be held on 18 January 2006 I/We (full registered name(s) in BLOCK CAPITALS PLEASE) of being (a) member(s) of MAJEDIE INVESTMENTS PLC hereby appoint the Chairman of the meeting as my/our proxy to vote on my/our behalf at the Annual General Meeting of the Company to be held on 18 January 2006 and at any adjournment thereof. I/We direct our proxy to vote as indicated below. Ordinary Resolutions For Against 1. To declare a final dividend of 5.85p per share 2. To receive the Directors’ Report and Accounts 3. To receive and approve the Report on Directors’ Remuneration 4. To re-elect J W M Barlow as a director 5. To re-elect R E Clarke as a director 6. To re-elect H V Reid as a director 7. To re-appoint Deloitte & Touche LLP as auditors and to authorise the directors to fix their remuneration Special Resolution 8. To approve the Long Term Incentive Plan 9. To authorise market purchases of the Company’s own shares Date Signature Notes: 1. To be valid this proxy duly signed, together with the power of attorney or other authority (if any) under which it is executed, must be lodged at the office of the Company’s Registrars, Computershare Investor Services PLC, PO Box 1075, Bristol, BS99 3FA, not less than 48 hours before the time fixed for the meeting or any adjourned meeting. If you wish to appoint as your proxy any person other than the Chairman of the meeting, insert the full name and address of the proxy in the space provided, delete the words ‘the Chairman of the meeting’ and initial the amendment. A proxy need not be a member of the Company and may attend the meeting in person but may not vote except on a poll. In the case of joint holders the signature of any one joint holder shall be sufficient, but the names of all joint holders should be stated. The vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders. Seniority is determined by the order in which the names stand in the register of members. 2. 3. 4. A corporation may complete the proxy under its common seal or under the hand of a duly authorised officer. 5. The return of the form of proxy will not preclude a member from attending in person and voting at the meeting. REPORT & ACCOUNTS 2005 63 Do not affix Postage Stamps if posting in Gt. Britain, Channel Islands, or N. Ireland Third fold and tuck in 1 BUSINESS REPLY SERVICE Licence No. SWB 1002 Computershare Investor Services PLC PO Box 1075 Bristol BS99 3FA Second fold d o l f t s r i F Majedie Investments PLC 1 Minster Court Mincing Lane London EC3R 7ZZ Telephone 020 7626 1243 Facsimile 020 7929 0904 E-mail majedie@majedie.co.uk www.majedie.co.uk