Majedie Investments Plc
Annual Report 2010

Plain-text annual report

2010 Majedie Investments PLC Annual Report 30 September 2010 Majedie Investments PLC is an investment trust with total portfolio assets of over £150 million as at 30 September 2010. Our Objective is to maximise total shareholder return over the long term whilst increasing dividends by more than the rate of inflation. Contents 1 2 3 3 4 5 8 11 12 12 13 15 16 18 24 28 31 32 34 35 36 38 40 41 42 43 44 74 75 80 81 loose Investment Objective and Policy Statement Highlights for 2010 Group Summary Recent Trends Year’s Summary Chairman’s Statement Investment Manager’s Report Asset Distribution Twenty Largest UK Investments Ten Largest Overseas Investments Valuation of Investments Board of Directors Directors’ Report Business Review Corporate Governance Report on Directors’ Remuneration Statement of Directors’ Responsibilities Report of the Independent Auditors Consolidated Statement of Comprehensive Income Company Statement of Comprehensive Income Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Balance Sheet Company Balance Sheet Consolidated Cash Flow Statement Company Cash Flow Statement Notes to the Accounts Ten Year Record Notice of Meeting Majedie Savings Plans Shareholder Information Form of Proxy Investment Objective and Policy Statement Investment Objective The Company’s objective is to maximise total shareholder return over the long term whilst increasing dividends by more than the rate of inflation. Investment Policy The Company invests principally in securities of publicly quoted companies worldwide, though it may invest in unquoted securities up to levels set periodically by the Board. This can include products managed by Javelin Capital, its investment manager. The overall approach is based on analysis of global economies and sector trends with a focus on companies and sectors judged likely to deliver strong growth over the long term. The number of investments held, together with the geographic and sector diversity of the portfolio, enable the Company to spread its risks with regard to liquidity, market volatility, currency movements and revenue streams. The assets of the Company are split into four major groups. These are the Core Portfolio, funds managed by Javelin Capital LLP, and the Company’s investments in Majedie Asset Management (MAM) and Javelin Capital LLP. An analysis and description of these groups is contained in the Investment Managers’ Report. The Company does not have one overall benchmark, rather each distinct group of assets is viewed independently. For the actively managed Core Portfolio the benchmark comprises 70% FTSE All-Share Index and 30% FTSE World ex UK Index (Sterling) on a total return basis. Any investments made into Javelin Capital products are measured against the relevant fund benchmark as contained in the fund’s prospectus. It is important to note that in all cases investment decisions and portfolio construction are made on an independent basis. The Board however sets various specific portfolio limits for stocks and sectors in order to restrict risk levels. Although, exceptionally, derivative instruments may be employed by the Company, usually for hedging purposes and with specific prior approval of the Board, generally the Company is a long-only investor and would be unlikely to use such instruments. The Company will not invest in any holding that would, at the time of investment, represent more than 15% of the value of its gross assets. The Company uses gearing , currently via longer term debentures. The Articles of Association give the Board the ability to borrow up to 100% of adjusted capital and reserves. The Board also reviews the level of net gearing (borrowings less cash) on an ongoing basis and sets a range at its discretion as appropriate. The Company’s current debenture borrowings are limited by covenant to 66 2/3%, and any additional indebtedness is not to exceed 20%, of adjusted capital and reserves. REPORT & ACCOUNTS 2010 1 Highlights for 2010 Total shareholder return: Net asset value total return: Final dividend (per share): Special dividend (per share): Total dividends (per share): Directors’ valuation of investment in Majedie Asset Management Limited: Investment in Javelin Capital LLP of: 7.9% (0.6%) 6.3p 2.5p 13.0p £30.0m £4.5m 2 MAJEDIE INVESTMENTS PLC Group Summary Total assets* Shareholders’ funds Market capitalisation £150.9m £117.2m £99.6m Capital structure 10p ordinary shares 52,528,000 Debt £13.5m 9.5% debenture stock 2020 £20.7m 7.25% debenture stock 2025 ISA status Up to £10,200 2010/11 tax year. * Represents total assets less current liabilities as at 30 September 2010. Recent Trends 491 384 297 239 225 4.50 2.25 2.50 10.50 10.50 10.50 10.00 9.50 413 338 250 190 192 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 Net asset value per share (pence) decreased by 5.7% in the year. Core dividends (pence) have remained at 10.50 pence. Additionally a special dividend of 2.5 pence was paid during the year. Share price (pence) has increased by 0.9% during the year. REPORT & ACCOUNTS 2010 3 Year’s Summary Financial* as at 30 September Total assets less current liabilities 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 Core dividends per share** Total dividends per share** Group costs (administrative expenses) Company costs/average Company net assets Company costs/average Company total assets Maximum potential gearing 2010 2009 £150.9m £117.2m 225.2p 191.50p 15.0% 9.4% £6.3m 11.8p 10.5p 13.0p £5.1m 2.4% 1.8% 28.8% £157.9m £124.2m 238.7p 189.75p 20.5% 17.5% £4.3m 8.1p 10.5p 10.5p £2.9m 2.1% 1.7% 27.2% % (4.4) (5.7) (5.7) 0.9 4 5.3 45. 7 * Financial information is disclosed in respect of the consolidated accounts unless otherwise stated. ** Both core and total dividends per share represent dividends that relate to the Company’s financial year. However under IFRS dividends are not accrued until paid or approved. 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 2010 214.7p 167.5p 256.6p 210.4p 24.7% 15.0% 20.6% 9.9% 2009 256.0p 135.0p 304.2p 177.1p 35.2% 8.8% 30.1% 4.2% 4 MAJEDIE INVESTMENTS PLC Chairman’s Statement The Chairman’s Statement forms part of the Director’s Report The current year has been one of change for the Company. It included the launch of Javelin Capital LLP, its appointment as Investment Manager and the reorganisation of the management of the Company’s assets. For the year to 30 September 2010 the Company’s Net Asset Value and Share Price, both on a total return basis fell by 0.6% and increased by 7.9% respectively. Results and Dividends Group costs of £5.1m include £2.4m of Javelin Capital The results for the year ended 30 September 2010 expenses reflecting the extensive start-up phase of the include Javelin Capital LLP in the Group, whose results business and is in-line with the financial plan. are consolidated as required by accounting rules. Additionally £0.6m in set up costs incurred by the Company have been expensed to capital in The Group’s net profit before tax for the year was accordance with IFRS. Offsetting this has been a £6.3m which is an increase of £2m or 4 5.3% reduction in Company costs of £0.5m primarily compared to the prior year of £4.3m. This reflects an reflecting the non-recurring costs in FY2009 in respect increase of £3.6m in Group income being partially of the office relocation and the departure of a former offset by an increase of £1.6m in Group costs. Investment Director. The Company is in a transitional phase and as noted above has incurred additional Group income of £10.1m includes total dividend costs this year which have negatively impacted the income received from Majedie Asset Management Company’s Total Expense Ratio. However, the Board (MAM) of £6.2m, including a special dividend of £5.4m, believes that underlying ongoing operating costs which is an increase of £4.3m from the prior year. should be expected to reduce in the future. Portfolio dividend and interest income for the year was impacted by market conditions and totalled £3.8m, a A final dividend for the year of 6.3p per share is decrease of £0.7m from FY2009. All Javelin Capital recommended by the Board which is considered income is within the Group for the current year and is appropriate after taking into account the future needs eliminated on consolidation. CONSOLIDATED REVENUE RETURN BEFORE TAXATION £m of the wider Group and forecasted investment outturn over the forthcoming year. This when combined with the interim and special dividends paid during the year of 4.2p and 2.5p per share results in total dividends of 13.0p per share (10.5p per share excluding the special) GROWTH IN CORE MAJEDIE DIVIDENDS COMPARED WITH INCREASE IN RETAIL PRICES INDEX BOTH REBASED TO 1999 (PENCE PER SHARE) 10 9 8 7 6 5 4 3 2 1 0 11 10 9 8 7 2006 2007 2008 2009 2010 00 01 02 03 04 05 06 07 08 09 10 Majedie dividend RPI REPORT & ACCOUNTS 2010 5 Chairman’s Statement which compares to total dividends of 10.5p for last Javelin Capital year. This meets our objective of growing dividends After a longer than anticipated period of development, over the longer term by more than the rate of inflation. primarily due to the provision of a sophisticated trading The Diagram on page 5 shows the Company dividend platform, the various Javelin Capital agreements and history over the last ten years as compared to the RPI. regulatory approvals were completed and the business Investment Portfolio This year for the first time following the appointment of Javelin Capital LLP as the Company’s investment manager, we have a separate Investment Manager’s Report which is on page s 8 to 10. However, I do wish to provide an overview on changes relating to how we manage the Company’s assets now and in the future. The Company has changed significantly over the last few years and our approach to the management of our assets needed to be revised. This does not though change our investment objective to maximise total shareholder return over the long term which remains a prime focus of the Board. In the past the return on the Company’s investment portfolio, which was comprised of quoted and some unquoted equities, under the direct control of the commenced operations on 1 September 2010. On this date Javelin Capital assumed responsibility for the investment management and general administration of the Company, along with all employees and use of the premises and other relevant fixed assets. Further details in respect of Javelin Capital are included in the Business Review and Report on Directors’ Remuneration sections starting on pages 21 and 2 8 respectively. On 20 September, after receipt of the regulatory approvals, Javelin Capital’s first fund, the Javelin Capital Global Equity Strategies Fund, was launched with a £20 million seed investment from the Company. The fund’s objective is to deliver superior absolute returns with low volatility. The Investment Manager’s report on page 9 provides further information and the Board is of the view that this investment should be the start of a new stream of investment returns to the Company. Investment Director, determined the NAV performance . Review of Investment Trust tax Rules Today the Company’s assets are managed in four In June of this year a review of the current rules for distinct major groups, namely: taxation of Investment Trusts was announced. The 1. The Core portfolio which is currently managed by proposals’ intent is to modernise the tax treatment reference to its benchmark; which has remained unchanged since 1965 and are to 2. Majedie Asset Management, an asset management be welcomed. However they also include changes that business in which the Company has a significant if implemented could have adverse consequences for shareholding; the Company. These are the specific proposals in 3. Javelin Capital LLP which is a newly formed asset respect of the close company and income retention management partnership; rules, the former of which exposes the Company to loss 4. Funds managed by Javelin Capital. Currently the of investment trust status by changes to its shareholder Company has an investment in the Javelin Capital base and the latter which reduces the flexibility of the Global Equity Strategies Fund. Company in applying its dividend policy. These issues are of course not unique to the Company and the industry has made various submissions to HMRC. We have also made a submission and I hope that the views of the industry and common sense will prevail but I will report further on this as developments arise. 6 MAJEDIE INVESTMENTS PLC Annual Report This year’s Annual Report is different from prior years and reflects the appointment of an investment manager, the introduction of Javelin Capital and the new approach to how we view our assets. For the most part these changes are required by regulation but we have also reviewed our disclosures to ensure they are appropriate. Annual General Meeting The AGM will be held on 19 January 2011 at 11:30am at the Pewterers’ Hall, Oat Lane, London EC2V 7DE. Details are set out on page 75. As in prior years there will be presentations and an opportunity to ask questions. I do hope you will be able to attend. Outlook Although at current levels equity markets are relatively inexpensive the current economic climate is such that the investment outlook is uncertain. The Board is confident that our range of investment assets with their different risk and return characteristics in conjunction with the performance of the Investment Manager will provide a suitable investment return in these uncertain times. It has been a challenging first year as Chairman and I wish to thank my fellow directors for their help and support during this time. I also would like to thank the former staff of the Company and wish them well in their new roles within Javelin Capital. I am delighted that Javelin Capital is now operational and I am hopeful it will be a successful investment for the Company. Andrew J Adcock Chairman 2 4 November 2010 REPORT & ACCOUNTS 2010 7 Investment Manager’s Report The Company’s assets are managed in four separate major groups which the Board now believes provides the correct balance in order to achieve the Investment Objective of maximising shareholder return in the long term whilst increasing dividends by more than the rate of inflation. Each investment group has distinct characteristics and drivers of performance that in combination determine the direction and value of the Company’s net assets. The chart on page 10 demonstrates the impact that each investment group and other characteristics of the Company has made on the Net Assets Performance during the year. Note that the reports on pages 11 to 14 are based on the aggregate value of the total assets of the Company. Core Portfolio The Core Portfolio comprises holdings in large-cap UK and international stocks and a small number of carefully selected mid-cap companies, managed under an equity income investment mandate. The majority of positions are held in well financed, high quality companies with a proven track record of delivering profit and dividend growth. The portfolio is invested approximately 70% in UK listed companies, and 30% overseas in line with the Core Portfolio investment benchmark. As at 30 September 2010, the value of the Core Portfolio, including cash available for investment, was £90.2m, representing 60% of the Company’s Total Assets. The past eighteen months has been a period of economic stabilisation after the depths that global economies reached, or threatened to reach, in early 2009. In autumn 2009 and spring 2010, evidence continued to emerge that the worst of the recession had passed, global trade had been re-established and GDP growth was appearing to be sustainable. This was no doubt influenced by the magnitude of government stimulus packages throughout the world and further economic strength from China and India, both of which continue to gain in economic influence as power shifts from the traditional base in the West to the East. Equity markets were reasonably buoyant as ample liquidity and record low interest rates encouraged investors to increase exposures in riskier assets. The Core Portfolio benchmark returned +12.7% in the first six months of the year. The second half of the year has been particularly volatile. From mid April to early July, stock markets globally declined by over 15% as investors lost their appetite for riskier asset classes such as equities. There was no individual reason for this but signals of a faltering USA recovery, policy tightening in China, sovereign debt default fears in Europe and political change in the UK all contributed. The FTSE All -Share was further impacted by the experience of BP, one of the largest constituents of the index, in the Gulf of Mexico. In July risk appetite suddenly returned and in the three months to September, markets recovered much of the value lost since the April peak. The Core Portfolio benchmark was down 1% in the six month period to end the full year up 11.6% on a total return basis. Once again there was no individual catalyst but markets were driven by confidence taken from macro economic releases that demonstrated global recovery being sustained, and the acknowledgement that corporate profits and balance sheets remained strong. During the year the Core Portfolio Total Return was +5.9%, a credible performance compared with the wider UK and Global equity income peer groups. The equity income asset class has not performed as strongly as the wider benchmark as investors have shunned more mature, dividend paying companies in preference for higher risk positions. The portfolio remains biased towards income stocks that are, in our judgement, best placed to benefit from the faster growing areas of the global economy, particularly those exposed directly or indirectly to the Far East. Investments in the mining sector, such as Antofagasta, have been increased. New positions have been taken in engineering companies such as Alstom, Illinois Tool Works and IMI, and support service providers Bunzl, Compass and G4S. These companies all earn significant proportions of their revenues in high growth overseas markets. The portfolio remains under exposed to developed market consumers and governments as these areas are likely to remain tough for the foreseeable future. At current levels, equity markets remain relatively inexpensive, especially in comparison to the returns available from other asset classes and against historic profit multiples and dividend growth. Corporate balance sheets are generally strong which should lead to a combination of higher levels of capital spending, M&A activity, share buy backs and increased dividend payouts. In the long term, fundamentals drive the direction of markets but the short term is determined by the on-off nature of risk appetite. This continues to cause significant and rapid shifts in share prices. Volatility 8 MAJEDIE INVESTMENTS PLC in markets is likely to remain a key factor for some time as global economic recovery continues to be sporadic. Investing under an income mandate requires natural patience, as positions are retained in order to collect the dividend. It is important to retain valid convictions in the knowledge that high quality companies may be subject to market volatility temporarily, but will ultimately be correctly valued on fundamentals. Finally, we also manage a small non-core realisation portfolio. This portfolio consists of small-cap and early stage investments that were initiated between 2005 and 2008. The objective is to maximise the amount and speed of capital return by seeking to exit these positions, although by nature the positions are illiquid. A number of partial or full realisations were made during the year. Its market leading investment performance record has been recognised by the loyalty of its clients and the number of high profile industry accolades that it continues to receive. It remains well financed and highly profitable. During the year, £6.2m was received in dividend income from M AM, including a £5.4m special dividend in December 2009. In addition, the Company entered into positive and constructive discussions with MAM, which resulted in a new shareholders agreement which more appropriately reflects the business that MAM has become. Changes include an increase in the minimum dividend payout ratio and a provision for all current shareholders, on a pari passu basis, to provide an incentive for MAM staff to share in the success of that company through an Employee Benefit Trust. As at 30 September 2010 the value of the non-core realisation portfolio was £7.5m. This represents less than 5% of the Company’s Total Assets and is expected to reduce over time as further liquidations are achieved. Notwithstanding the £5.4m special dividend income received during the year, the Board has decided to retain its valuation of the Company’s holding at £30m, representing almost 20% of the Company’s Total Assets. Javelin Capital Global Equity Strategies Fund In late September 2010 a $31m (£20m) investment was made as seed capital into the first flagship product to be launched by Javelin Capital LLP. The fund is managed by an investment team of experienced portfolio managers and will have a range of long-short equity strategies which include Fundamental, Systematic and Tactical approaches. Using proprietary models, the team will analyse and judge which strategy is most appropriate for different regions and sectors. The strategies are expected to be uncorrelated or negatively correlated to each other and hence the combination within the fund should result in lower volatility and reduced risk. By seeding this fund, the Company is not only assisting its new asset management business in gaining traction in a competitive market, but also expects to benefit from lower risk capital growth in otherwise volatile equity markets. As at 30 September 2010, the value of this holding was $31m (£19.7m) representing 13% of the Company’s Total Assets. Majedie Asset Management Majedie Asset Management (MAM) was launched in 2002 using finance provided by the Company, which retains a 30% equity interest. The business has grown to approximately £5bn in assets under management, predominantly long – only UK equity mandates for institutional clients. Javelin Capital LLP The Company launched Javelin Capital LLP, a long- short and long-only equity boutique, on 1 September 2010. £4.5m has been invested by the Company to finance the start-up, initial operating costs and regulatory capital. The business plan envisages that this will be substantially repaid over three years. Javelin Capital is now focussed on gaining assets under management upon which Javelin Capital’s business plan is predicated. The Company holds an initial equity participation of 70% whilst a 30% interest is held by partners and staff. Full details were disclosed in the announcement made on 1 September 2010 that can be read on the Company’s website. Launching Javelin Capital LLP should enable the Company’s annual cost base to reduce as all staff have transferred to Javelin Capital LLP. The assets of the Company continue to be managed by the same team, albeit as members of Javelin Capital LLP under an arms-length management agreement. As Javelin Capital LLP attracts external assets, an additional source of return should be generated for Majedie. As mentioned previously the first product, the Javelin Capital Global Equity Strategies Fund, was launched in September 2010 and seed capital was invested by the Company. We are encouraged by the initial performance of the fund which is a key requirement for success. Further long-short and long-only products are planned to be launched in due course. REPORT & ACCOUNTS 2010 9 Investment Manager’s Report As at 30 September 2010 the net assets in Javelin Capital LLP ha ve been included in the Consolidated Report & Accounts at £2.1m, representing 2% of the Company’s Total Assets. This represents the original investment less start-up costs and losses incurred to date and is in accordance with consolidation accounting rules. In the Company accounts the value of the investment in Javelin Capital LLP has been valued by the Board at cost, being £4.5m. Development of Net Asset Value The chart below demonstrates the Net Asset Value development of the Company during the year to 30 September 2010. In aggregate, the NAV has fallen by £7.0m having generated an investment return of £7.6m, incurred total expenses of £7.9m and distributed £6.7m in dividends. The Core Portfolio contributed £5.8m through a combination of dividend income and capital appreciation, dividends worth £6.2m were received from our holding in Majedie Asset Management, whilst the Non-Core Realisation Portfolio lost £4.2m in value. The Javelin Capital Global Equity Strategies Fund (JCGESF) retained its value in its base currency but was impacted by £0.2m due to the translation effect of adverse currency movements. Total expenses during the period were £7.9m of which Administration Costs were £5.1m and Finance Costs were £2.8m. Administration Costs include the recognition of £2.4m incurred by Javelin Capital LLP during its start-up phase. Total dividends of £6. 7m (13.00p per share) were paid during the year including a special dividend of 2.50p that was paid in March 2010. +£6.2m (£4.2m) +£5.8m (£0.2m) (£5.1m) £124.2m (£2.8m) (£6.7m) £117.2m NAV 30.09.09 Core Portfolio MAM Non-Core Portfolio JCGESF Admin Costs Finance Costs Dividends NAV 30.09.10 Nick Rundle Investment Director Javelin Capital LLP 24 November 2010 10 MAJEDIE INVESTMENTS PLC Asset Distribution at 30 September 2010 Pacific Basin % United Kingdom % 8.1 America % 0.4 0.6 1.0 North Continental Europe % 0.6 Total 2010 % 9.1 0.6 9.7 0.5 5.2 5.7 1.2 1.4 0.5 2.5 0.3 0.3 2.3 8.5 0.6 1.1 1.4 0.4 0.9 4.4 0.1 4.9 5.0 0.8 2.0 1.1 1.8 Total 2009 % 12.0 1.0 13.0 0.9 4.2 5.1 0.9 4.4 0.9 0.4 0.4 1.0 0.9 8.9 0.8 0.6 2.9 0.2 0.5 5.0 0.2 5.0 5.2 0.3 0.6 0.5 1.8 1.2 4.4 1.7 4.0 5.7 2.5 1.4 3.9 8.9 0.6 0.4 1.3 1.0 8.1 1.3 0.5 0.6 0.5 0.4 0.6 0.3 0.4 0.5 1.1 0.7 0.3 0.5 1.1 1.0 1.0 0.4 0.3 0.6 0.3 2.3 5.8 5.2 5.2 0.8 1.0 0.2 1.2 0.4 2.0 0.1 2.7 2.8 0.8 1.1 0.7 1.8 Classification of Assets Oil & Gas Producers Oil Equipment & Services Oil & Gas Chemicals Mining Basic Materials Construction & Materials Aerospace & Defence General Industrials Industrial Engineering Industrial Metals & Mining Industrial Transportation Support Services Industrials Automobiles & Parts Beverages Food Producers Leisure Goods Tobacco Consumer Goods Health Care, Equipment & Services Pharmaceuticals & Biotechnology Health Care Food & Drug Retailers General Retailers Leisure Goods Media Travel & Leisure Consumer Services Fixed Line Telecommunications Mobile Telecommunications Telecommunications Electricity Gas, Water & Multi Utilities Utilities Banks Non Life Insurance/Assurance Life Insurance/Assurance Real Estate General Financial Equity Investment Instruments Debt Investment Instruments Financials Software & Computer Services Technology & Hardware Equipment Technology Unlisted/Fixed Interest Total Equities Total Non-current Assets Cash % Total at 30 September 2010 The fund analys is on pages 13 and 14 comprises the fixed asset investments of £145,423,000 and cash (as adjusted for amounts due to/from brokers for settlement) of £234,000. 2.8 1.0 1.2 0.5 1.0 15.4 1.3 2.5 3.8 22.8 93.2 93.2 6.8 100.0 5.7 0.6 4.3 4.9 1.2 0.9 2.1 6.7 0.3 2.2 0.8 0.3 13.8 24.1 1.0 2.1 3.1 23.2 96.4 96.4 3.6 100.0 2.9 2.9 1.2 0.5 1.7 4.8 0.3 2.2 0.8 0.3 0.4 0.9 0.9 22.7 65.3 65.3 3.6 68.9 1.0 1.0 0.6 1.6 0.3 8.8 8.8 0.2 17.6 17.6 0.4 0.4 0.9 0.6 0.6 0.8 0.8 0.6 0.6 1.2 1.2 4.7 4.7 0.9 0.6 13.1 17.6 13.1 4.4 8.8 0.4 1.2 0.9 0.4 8.8 0.6 1.0 0.3 4.7 Unlisted/Fixed Interest investments comprise an amount of £30,000,000 in respect of the investment in Majedie Asset Management, £558,000 in unlisted fixed interest investments and £4,330,000 in respect of equity investments in various companies. Suspended stocks have been analysed in their listed sectors. REPORT & ACCOUNTS 2010 11 Twenty Largest UK Investments at 30 September 2010 Company Majedie Asset Management HSBC Royal Dutch Shell ‘B’ GlaxoSmithKline Vodafone BP Rio Tinto Vostok Energy BHP Billiton Aviva BG Group Antofagasta* Unilever Barclays Legal & General * British Land Charter International* Inchcape* Sainsbury (J)* BAE Systems 2010 2009 Market Value £000 30,000 % of Fund 19.9 Market Value £000 30,000 % of Fund 19.0 5,644 5,385 4,014 4,006 3,850 3,163 2,906 2,835 1,855 1,846 1,792 1,657 1,648 1,501 1,279 1,249 1,247 1,172 1,095 3.7 3.6 2.7 2.7 2.6 2.1 1.9 1.9 1.2 1.2 1.2 1.1 1.1 1.0 0.8 0.8 0.8 0.8 0.7 8,926 5,208 4,303 4,557 7,189 2,645 2,863 3,775 2,241 2,163 2,400 1,110 1,069 5.6 3.3 2.7 2.9 4.5 1.7 1.8 2.4 1.4 1.4 1.5 0.7 0.7 1,851 80, 300 1.2 50.8 *There is no comparative for the investments listed as they represent new holdings. 78,144 51.8 Ten Largest Overseas Investments at 30 September 2010 Company Javelin Global Equity Strategies (Ireland)* Sanofi-Aventis (France) Telefonica (Spain) Alstom (France)* Toyota (Japan) Canon Inc. (Japan) AT&T (USA) Illinois Tools (USA)* Johnson & Johnson (USA) Schlumberger (USA) 2010 2009 Market Value £000 19,738 1,006 975 972 932 929 907 895 884 860 % of Fund 13.1 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 28,098 18.6 Market Value £000 % of Fund 687 1,292 1,240 880 843 951 931 6,824 0.4 0.8 0.8 0.6 0.5 0.6 0.6 4.3 *There is no comparative for the investments listed as they represent new holdings. 12 MAJEDIE INVESTMENTS PLC Valuation of Investments Holdings valued over £100,000 at 30 September 2010 Company Market Value % of Fund £000 Company Market Value % of Fund £000 Company Market Value % of Fund £000 932 0.6% Industrial Transportation Capital Lease Aviation 422 0.3% Oil & Gas Oil & Gas Producers BG Group BP ENI (Italy) Exxon Mobil (USA) Great Eastern Hydrodec Group Royal Dutch Shell ‘B’ 1,846 1.2% 3,850 2.6% 850 0.6% 588 0.4% 652 0.4% 516 0.3% 5,385 3.6% Oil Equipment, Services & Distribution Schlumberger (USA) 860 0.6% Automobiles Automobiles & Parts Toyota (Japan) Basic Materials Chemicals Bayer (Germany) 795 0.5% Industrial Metals & Mining Arcelormittal (Netherlands) 523 0.3% Mining Antofagasta BHP Billiton Rio Tinto 1,792 1.2% 2,835 1.9% 3,163 2.1% Industrial Goods & Services Construction & Materials Ashley House Balfour Beatty China Railway Construction (Asia) 143 0.1% 1,070 0.7% 555 0.4% Aerospace & Defence 1,095 0.7% BAE Systems Lockheed Martin (USA) 678 0.4% QED Occtech (Australia) 425 0.3% 453 0.3% Rolls Royce General Industrials Accsys Technologies Packaging Corporation (USA) 370 0.2% 470 0.3% Industrial Engineering Alstom (France) Charter International Illinois Tools (USA) IMI 972 0.6% 1,249 0.8% 895 0.6% 576 0.4% Support Services Babcock Bunzl De La Rue G4S Healthcare Locums Consumer Goods Beverages Britvic Coca-Cola (USA) Food Producers Chaoda Modern Agriculture (Asia) Unilever 826 0.5% 759 0.5% 528 0.3% 891 0.6% 512 0.3% 728 0.5% 836 0.6% 394 0.3% 1,657 1.1% Real Estate Investment Trusts British Land 1,279 0.8% Leisure Goods Nintendo (Japan) Tobacco Altria (USA) Imperial Tobacco 600 0.4% 800 0.5% 664 0.4% Health Care Pharmaceuticals & Biotechnology Bristol-Myers Squib (USA) GlaxoSmithKline Johnson & Johnson 884 0.6% (USA) Roche (Switzerland) 828 0.5% Sanofi-Aventis (France) 1,006 0.7% 688 0.5% 4,014 2.7% Consumer Services Food & Drug Retailers Sainsbury (J) General Retailers Best Buy Co (USA) HMV Home Depot (USA) Inchcape Media United Business Media Vivendi (France) Travel & Leisure Compass Enterprise Inns Thomas Cook Whitbread 1,172 0.8% 700 0.5% 384 0.3% 643 0.4% 1,247 0.8% 944 0.6% 590 0.4% 928 0.6% 268 0.2% 773 0.5% 731 0.5% Telecommunications Fixed Line Telecommunications AT&T (USA) Telefonica (Spain) 907 0.6% 975 0.6% REPORT & ACCOUNTS 2010 13 Valuation of Investments Company Market Value % of Fund £000 Company Market Value % of Fund £000 Company Market Value % of Fund £000 Equity Investment Instruments Javelin Global Equity Strategies (Ireland) Juridica Investments 19,738 13.1% 469 0.3% Non-Equity Investment Instruments 412 0.3% Ishares Asia Trust (Asia) Technology Software & Computer Services BMC Software (USA) Microsoft Corp (USA) 745 0.5% 815 0.5% Technology & Hardware Equipment 662 0.4% Acer 929 0.6% Canon Inc (Japan) 801 0.5% Hewlett Packard (USA) 522 0.3% Pace 244 0.2% Toumaz Unlisted Investments AOI Medical 152 0.1% Buried Hill Energy (USA) 216 0.1% 175 0.1% Celadon Mining 231 0.2% Diamond Wood China Majedie Asset Management Microsaic Systems Mitra Energy Vostok Energy 30,000 19.9% 122 0.1% 400 0.3% 2,906 1.9% Unlisted Fixed Interest Investments Providence Resources 12% (Ireland) Stratic Energy 8.75% (USA) 260 0.2% 238 0.2% Mobile Telecommunications 2 Ergo China Mobile (Asia) Phillipine Long Distance (Asia) Vodafone 327 0.2% 688 0.5% 491 0.3% 4,006 2.7% Utilities Electricity International Power KSK Power Venture Scottish & Southern Energy 582 0.4% 530 0.4% 749 0.5% Gas, Water & Multi Utilities Guangdong Investments (Asia) National Grid 395 0.3% 594 0.4% 1,648 1.1% Financials Banks Barclays China Construction Bank (Asia) DBS Group Holdings 577 0.4% (Asia) HSBC 5,644 3.7% JP Morgan Chase (USA) 785 0.5% 796 0.5% Wells Fargo (USA) 723 0.5% Non Life Insurance Beazley 520 0.3% Life Insurance Aviva Legal & General General Financial London Capital 1,855 1.2% 1,501 1.0% 390 0.3% 14 MAJEDIE INVESTMENTS PLC Board of Directors Andrew J Adcock (57)* MA Chairman Mr Adcock is managing partner of Brompton Asset Management LLP and is also a non-executive director of F&C Global Smaller Companies PLC and a Trustee of the Samuel Courtauld Trust. He was Vice Chairman, Citigroup Corporate Finance until his retirement in 2009. Previously he was a Partner for three years at Lazards LLC which followed ten years at BZW as the Managing Director of De Zoete & Bevan Limited. He was appointed a director of Majedie on 1 April 2008 and is the Chairman of the PLC Board, Management Engagement Committee and Nomination Committee, and a member of the Remuneration and Audit Committees. Hubert V Reid (70)* Deputy Chairman Senior Independent Director Mr Reid is Chairman of Enterprise Inns plc and of Midas Income & Growth Trust PLC and senior independent director of Michael Page International PLC. He was previously Managing Director and then Chairman of the Boddington Group plc and a non-executive director and then Chairman of Ibstock PLC, Bryant Group plc and of Royal London Insurance Group. He was appointed a director of Majedie in January 1999 and is Chairman of the Remuneration and Audit Committees and a member of the Nomination and Management Engagement Committees. J William M Barlow BA (46)* In 1991 he joined Skandia Asset Management Limited as an equity portfolio manager and was also Managing Director of DnB Asset Management (UK) Limited from 2002 until 2004. He currently works for Newedge Group (UK Branch), which is a Prime Broker for Hedge Funds that is a 50/50 joint venture between Societe Generale and Credit Agricole. He is a non-executive director of Aintree Racecourse Company Limited. He was appointed to the Board in July 1999 and is a member of the Nomination and Management Engagement Committees. Gerry P Aherne (64) Gerry Aherne spent 16 years with Schroder Investment Management, as Investment Director up to 2002. He is currently Chief Executive of Javelin Capital LLP and a non-executive director of Henderson Global Investors plc, where he is Chairman of the Remuneration Committee. He is also a non-executive director of Electric & General Investment Trust plc and Mecom Group plc. He was appointed a non executive director of Majedie in May 2006 and became an executive director from November 2009. He is also a director of Majedie Portfolio Management Limited. Paul D Gadd (45)* Paul Gadd was appointed as a director of Majedie Investments plc on 1 October 2009. He is a solicitor and has spent 17 years with Ashurst, retiring in 2009 after 10 years as a partner, latterly as head of Ashurst’s investment company practice. He is currently a consultant to Ashurst. He is a member of the Audit, Nomination, Remuneration and Management Engagement Committees. Chris Arnheim (50)* CJ Arnheim was appointed as a director of the Company on 1 January 2010. Mr Arnheim has worked as a solicitor in private practice for 25 years, and during the period 1998-2009 was the Company’s primary external corporate legal adviser. From 1996, his law firm became associated with Pricewaterhouse (now PricewaterhouseCoopers (“PwC”)), and grew rapidly as part of its global legal network. In 2003, after serving as senior and managing partner of the PwC UK law firm, as well as in various global management positions, he left to establish a new practice, specialising in corporate finance for financial services businesses. He is a member of the Nomination and Management Engagement Committees. * Non-executive. REPORT & ACCOUNTS 2010 15 Directors’ Report The directors submit their report and the accounts for the year ended 30 September 2010. Introduction The Directors’ Report includes the Business Review and Corporate Governance Statement, which can be found on pages 18 to 23 and pages 24 to 27 respectively and the Report on Directors’ Remuneration on pages 28 to 30. A review of the developments during the year and of the changing nature of the Company is contained in the Chairman’s statement and should be read in conjunction with the Directors’ Report. Principal Activity and Status The Company is a public limited company and an investment company under Section 833 of the Companies Act 2006. It operates as an investment trust and is not a close company. The Company has received written confirmation from HM Revenue & Customs that it was an approved investment trust for taxation purposes under Section 1158/9 of the Corporation Tax Act 2010 (formerly Section 842 of the Income and Corporation Taxes Act 1988) in respect of the year ended 30 September 2009. In the opinion of the directors the Company has subsequently directed its affairs so as to enable it to continue to qualify for such approval and the Company will continue to request formally written confirmation of investment trust status each year. Results and Dividend Consolidated net revenue return before taxation amounted to £6,287,000 (2009: £4,325,000). The directors recommend a final ordinary dividend of 6.3p per ordinary share, payable on 26 January 2011 to shareholders on the register at the close of business on 7 January 2011. Together with the interim dividend of 4.2p per share paid on 30 June 2010, and the special interim dividend of 2.5p per share paid on 8 March 2010, this makes a total distribution of 13.0p per share in respect of the financial year (2009: 10.5p per share). Directors The present directors of the Company are listed on page 15. The Combined Code on Corporate Governance requires Directors who are directors/partners of the Company’s Investment Manager to stand for annual re-election. Accordingly Mr GP Aherne, the Chief Executive and a partner of Javelin Capital LLP, will stand for re-election at the forthcoming Annual General Meeting. In accordance with the principles of the UK Corporate Governance Code, Mr HV Reid and Mr JWM Barlow have agreed to submit themselves for annual re-election having served on the Board for over nine years. The Board believes that independence is not compromised by length of service and that experience and continuity can add to the strength of the Board. The Board believes that the performance of Mr GP Aherne, Mr HV Reid and Mr JWM Barlow continues to be effective, that they demonstrate commitment to their roles and have a range of business, financial and asset management skills and experience relevant to the direction and control of the Company. Notwithstanding that Mr HV Reid and Mr JWM Barlow will have served on the Board for over nine years, their fellow directors consider that they continue to make a valuable contribution and to exercise their judgement and express their opinions in an independent manner. The continuing directors recommend that shareholders vote in favour of the re-election of Mr GP Aherne, Mr HV Reid and Mr JWM Barlow. Directors’ Interests Beneficial interests in ordinary shares as at: A J Adcock G P Aherne J W M Barlow H V Reid 30 September 2010 20,000 22,825 676,083 33,214 1 October 2009 20,000 9,335 1,520,137 33,214 P D Gadd and C J Arnheim have no beneficial interest in the shares of the Company. Non-beneficial interests in ordinary shares as trustees for various settlements as at: 30 September 2010 1 October 2009 HS Barlow retired as a director at the conclusion of the Annual General Meeting held on 20 January 2010. P D Gadd and C J Arnheim were appointed directors of the Company on 1 October 2009 and 1 January 2010, respectively. J W M Barlow 1,897,165 2,166,990 There have been no changes to any of the above holdings between 30 September 2010 and the date of this report. 16 MAJEDIE INVESTMENTS PLC The authority will be used where the Directors consider it to be in the best interest of shareholders. Disclosure of Information to Auditors As far as each of the directors are aware: (cid:129) there is no relevant audit information of which the Company’s Auditors are unaware; and (cid:129) they have taken all steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Company’s Auditors are aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006. Auditors Ernst & Young LLP were re-appointed as Auditors on 20 January 20 10. Ernst & Young LLP have indicated their willingness to continue in office and a resolution will be proposed at the Annual General Meeting to re-appoint them as Auditors. Going Concern The directors believe, after review and due consideration of future forecast and cashflow projections, that the Company has adequate financial resources to continue in operational existence for the foreseeable future. For this reason and taking account of the Company’s low expense ratio and the large number of readily realisable investments held within its portfolio, the Board continues to adopt the going concern basis in preparing the financial statements. By Order of the Board Capita Sinclair Henderson Limited Company Secretary 2 4 November 2010 With the exception of Mr GP Aherne, Chief Executive and a partner of Javelin Capital LLP, which provides services under the Management and Administration Services agreements, no director had an interest at any time during the year or since in any material contract, being a contract of significance with the Company or any subsidiary of the Company. Substantial Shareholdings At the date of this report the Company has been notified of the following substantial holdings in shares carrying voting rights: 15,017,619 H S Barlow – beneficial 613,084 H S Barlow – non-beneficial The AXA Group 7,103,119 M H D Barlow – beneficial 2,714,078 M H D Barlow – non-beneficial 1,367,750 Sir J K Barlow – beneficial 2,499,642 869,086 Sir J K Barlow – non-beneficial 1,860,270 G B Barlow 1,784,948 Miss A E Barlow 676,083 J W M Barlow – beneficial – non-beneficial 1,897,165 28.59% 1.17% 13.5 2% 5.17% 2.60% 4.76% 1.65% 3.54% 3.40% 1.29% 3.61% The substantial voting rights disclosed above include the total holdings of shares within certain trusts where there are other beneficiaries. Annual General Meeting The Annual General Meeting will be held on 19 January 2011 at 11.30am. The notice convening the Annual General Meeting is set out on pages 75 to 7 9. Purchase of own shares During the year ended 30 September 2010 the Company did not make any purchases of its own shares for cancellation (2009: nil). However, the directors consider it desirable that the Company be authorised to make such purchases and accordingly shareholder approval is sought at the Annual General Meeting to renew the authority of the Company to exercise the power contained in its Articles of Association to make market purchases of its own shares. The maximum number of shares which may be purchased under this authority is 7,873,947 being 14.99% of the issued share capital. Any shares so purchased will be cancelled. The restrictions on such purchases, (including minimum and maximum prices), are outlined in the Notice of Meeting on page 75. REPORT & ACCOUNTS 2010 17 Business Review The Business Review forms part of the Directors’ Report. Introduction The purpose of the Business Review is to provide a review of the business of the Company by: (cid:129) analysing development and performance using appropriate Key Performance Indicators (“KPIs”); (cid:129) outlining the principal risks and uncertainties affecting the Company; (cid:129) describing how the Company manages these risks; (cid:129) setting out the Company’s environmental, social and ethical policy; (cid:129) providing information about persons with whom the Company has contractual or other arrangements which are essential to the business of the Company; (cid:129) outlining the main trends and factors likely to affect the future development, performance and position of the Company’s business; and (cid:129) explaining the future business plans of the Company. The current year has seen the Company change from a self managed investment trust to an externally managed trust with the appointment of a manager, in common with most other investment trusts. This occurred on 31 August 2010 when Javelin Capital LLP, a related party, was appointed as investment manager and general administrator. The Board has elected to treat Javelin Capital on an arms length basis, even though it is a subsidiary, for reporting and disclosure purposes. Regulatory and Competitive Environment The Company is an investment trust and is listed on the London Stock Exchange. It is subject to United Kingdom and European legislation and regulations including UK company law, International Financial Reporting Standards, Listing, Prospectus and Disclosure and Transparency Rules, taxation law and the Company’s own Articles of Association. The directors are charged with ensuring that the Company complies with its objectives as well as these regulations. Under the Companies Act 2006, Section 833, the Company is defined as an investment company. As such, it analyses its Statement of Comprehensive Income between profits available for distribution by way of dividends and capital profits. The financial statements, starting on page 34, report on these profits, the changes in equity, the balance sheet position and the cash flows in the current and prior financial period. This is in compliance with current International Financial Reporting Standards, supplemented by the Revised Statement of Recommended Practice for Investment Trust Companies and Venture Capital Trusts (SORP) issued in January 2009. The principal accounting policies of the Company are set out in note 1 to the accounts on pages 44 to 48. The Auditors’ opinion on the financial statements, which is unqualified, appears on pages 32 and 33. In addition to the annual and half-yearly results and Interim Management Statements, the Company makes weekly net asset value (NAV) announcements via an authorised Stock Exchange regulatory information service. The Company also reports to shareholders on performance against benchmark, corporate governance and investment activities. The directors meet with larger shareholders outside the Annual General Meeting as appropriate. Meetings are also held with investment trust analysts and stockbroking firms. The Company has three investor savings schemes which provide shareholders with cost effective and convenient ways of investing. Communication of up-to-date information is provided through the website at www.majedie.co.uk. At least one shareholders’ meeting is held in each year in January to allow shareholders to vote on the appointment of directors and the Auditors, the payment of dividends, authority for share buybacks and any other special business. The business of the next such shareholders’ meeting, being the Annual General Meeting, scheduled for 19 January 2011 is set out on page 75. 18 MAJEDIE INVESTMENTS PLC The Company is subject to corporation tax on its net revenue profits but is exempt from corporation tax on capital gains, provided it complies at all times with Sections 1158 to 1162 of the Corporation Tax Act 2010 (previously, Section 842 of the Income and Corporation Taxes Act 1988). These sections broadly require that: (cid:129) the Company’s revenue (including dividend and interest receipts but excluding profits on the sale of shares and securities) should be derived wholly or mainly from shares and securities; (cid:129) the Company must not retain in respect of any accounting period more than 15% of its income from shares and securities; (cid:129) no holding in a company should represent more than 15% by value of the Company’s investments in shares and securities unless the holding was acquired previously and the value has risen to exceed the 15% limit; and (cid:129) realised profits on the sale of shares and securities may not be distributed by way of dividend. Compliance with these rules is proved annually in retrospect to HM Revenue and Customs (HMRC). HMRC approval of the Company as an investment trust is granted ‘subject to there being no subsequent enquiry under corporation tax self-assessment’. Such approval has been received in respect of all relevant years up to and including the year ended 30 September 2009, since when the Company has continued to comply with these rules. Capital Structure As part of its corporate governance the Board keeps under review the capital structure of the Company. At 30 September 2010 the Company had a nominal issued share capital of £5,252,800, comprising 52,528,000 ordinary shares of 10p each, carrying one vote each. The Board seeks each year to renew the authority of the Company to make market purchases of its own shares. However, the Board is only likely to use such authority in special circumstances. In general the directors believe that the discount to net assets will be reduced sustainably over the long term by the creation of value through the development of the business. In 1994 and 2000 the Company issued two long term debentures: £15m 9.5% debenture stock 2020 and £25m 7.25% debenture stock 2025 respectively. In 2004 the Company redeemed £1.5m of the 2020 issue and £4.3m of the 2025 issue as an opportunity arose to redeem at an attractive price. The Board is responsible for setting the overall gearing range within which the Investment Manager may operate. There are: no restrictions on voting rights; no restrictions concerning the transfer of securities in the Company; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; and no agreements which the Company is party to that might affect its control following a takeover bid. Principal Risks The principal risks and the Company’s policies for managing these risks and the policy and practices with regard to financial instruments are summarised below and in note 25 to the accounts. The Company has a range of equity investments including substantial investments in two unlisted asset management businesses, large cap global equities and a new investment in a global equities absolute return fund. The major risk for the Company remains, investment risk, primarily market risk. The number of investments held, together with the geographic and sector diversity of the portfolio, enables the Company to spread its risks with regard to liquidity, market volatility, currency movements and revenue streams. Under the terms of the Management Agreement the Investment Manager manages the Company’s assets. The core portfolio is managed with various specific limits for individual stocks and market sectors which are employed to restrict risk levels. The level of portfolio risk in the core portfolio is assessed in relation to the benchmark utilising various portfolio risk management tools. It should be noted that whilst we have a benchmark in the core portfolio, the portfolio is constructed independently and can be significantly different. Therefore the core portfolio can experience periods of volatility over the short term. Also the level of risk at a net asset value level increases with gearing. In certain circumstances cash balances may be raised to reduce the effective level of gearing. This would result in a lower level of risk in absolute terms. REPORT & ACCOUNTS 2010 19 Business Review Other risks faced by the Company include the following: i. Strategy Risk: an inappropriate investment strategy could result in poor returns for shareholders and a widening of the discount of the share price to the NAV per share. The Board regularly reviews strategy with the Investment Manager in relation to a range of issues including the allocation of assets between geographic regions and industrial sectors, level and effect of gearing and currency exposure; ii. Business Risk: inappropriate management or controls in either Majedie Asset Management and/or Javelin Capital LLP could result in financial loss, reputational risk and regulatory censure. The Group has representation on both entities’ governing boards to monitor business, financial performance and operations; iii. Compliance Risk: failure to comply with regulations could result in the Company losing its listing and/or being subjected to corporation tax on its capital gains. The Board receives and reviews regular reports from the fund administrator on its controls in place to prevent non- compliance of the Company with rules and regulations. The Board also receives regular investment listings and income forecasts as part of its monitoring of compliance with Sections 1158 to 1162 of the Corporation Tax Act 2010; iv. Operational Risk: Inadequate financial controls and failure by an outsourced supplier to perform to the required standard could result in misappropriation of assets, loss of income and debtor receipts and mis-reporting of NAVs. The Board regularly reviews statements on internal controls and procedures and subjects the books and records of the Company to an external annual audit. The Board has representation on the governing board of Javelin Capital LLP who will also monitor the performance of other outsourced service providers. The financial risks are set out in more detail in note 25 on pages 63 to 70; and The systems in place to manage the Company’s internal controls are described further in the Corporate Governance Statement on page 24. Management of Assets and Shareholder Value The Company invests around the world in markets, sectors and companies that the Board and Investment Manager believe will generate long term growth in capital and income for shareholders. The Company now manages its assets by allocating resources to the following major groups: (cid:129) Core portfolio; (cid:129) Funds managed by Javelin Capital LLP; (cid:129) MAM; and (cid:129) Javelin Capital LLP. The Board believe that the groups will enable a spread of risk and deliver a higher quality of earnings. The Investment Manager manages the core portfolio by analysing potential and current investments against a range of parameters. Many potential investments are considered each year. Investment risks are spread through holding a range of securities across a range of sectors and countries. In respect of funds managed by Javelin Capital LLP, the Company currently invests in the Javelin Capital Global Equity Strategies Fund which employs an approach that involves a range of strategies, analysis and algorithms. Investment risks are managed by having a spread of investments, a range of strategies and sophisticated risk management techniques. Finally the Company has significant investments in Majedie Asset Management Limited and Javelin Capital LLP, both asset management businesses. The Board believes that these investments provide or will provide a valuable source of future return. The Board has representation on both entities’ governing boards in order to monitor and control strategy and financial performance. The Board reviews the investment performance of the Company against a range of measures relevant to each group. 20 MAJEDIE INVESTMENTS PLC Performance Highlights The Board uses the following Key Performance Indicators (KPIs) to help assess progress against the Company’s objectives. The KPIs are commented on and displayed in graphical form within the Chairman’s Statement on pages 5 to 7 and Investment Manager’s Report on pages 8 to 10. (cid:129) NAV total return and total shareholder return. (cid:129) Investment group portfolio return: see the chart on page 10. (cid:129) Share price discount: The level of the discount at the end of the financial year calculated with debt at par was 15.0% and was lower than at the start of the year. (cid:129) Net Asset Value performance The Company’s Net Asset Value has decreased by 5.7% in the year to 30 September 2010, compared with a decrease of 1 9.5% over the same period to 30 September 2009. The net assets decreased by £7 million to £117.2 million. The performance of the Net Asset Value is expanded within the Chairman’s statement. (cid:129) Total expense ratio The total expense ratio of the Company for the year ended 30 September 2010 was 2.4% (2009: 2.1%). (cid:129) Annual dividend growth Annual dividend growth has seen an increase in the total distribution of 23.8% in respect of the financial year ended 30 September 2010 (2009: Nil%) . Further details regarding the results and dividends can be found in the Chairman’s Statement on page 5. Total Return Philosophy & Dividend Policy The directors believe that investment returns will be maximised if a total return policy is followed whereby the Investment Manager pursues the best opportunities. The Company has a comparatively high level of revenue reserves for the investment trust sector. At £26m, the revenue reserves represent more than four times the current annual core dividend distribution. The strength of these reserves will from time to time assist in underpinning our progressive dividend policy in years when the income from the portfolio is insufficient to cover completely the annual distribution. The policy aims to increase the dividend over the longer term by more than the rate of inflation and this has been achieved over the last nineteen years. Over the last ten years the average annual growth of the core dividend (excluding special dividends) has been 3.2%. Corporate Social Responsibility In common with many investment trust companies, the Company has no direct impact on the environment. When considering its day-to-day operations, the Company aims to conduct itself responsibly, ethically and fairly. The Company has appointed Javelin Capital LLP to manage its portfolio of investments. Javelin has been tasked with managing the portfolio, and its operations, with a view to achieving the Company’s investment objective and in doing so takes account of social, environmental and ethical factors, where appropriate. Costs The Company’s expense ratio over net assets is 2.4% which compares with the investment trust sector average of 1.6% The Company operating costs have decreased from £2.9m to £2.2m (excluding £ 0.6m of Javelin Capital setup costs) this year but the ratio has been negatively impacted by the lower average asset base in the current period. The Board pays close attention to cost control and the current situation is referred to further in the Chairman’s Statement on page 5. Material Contracts (cid:129) Javelin Capital LLP i. LLP Agreement The investment in Javelin Capital LLP is in accordance with the terms of a Limited Liability Partnership Agreement dated 31 August 2010. The terms include: (cid:129) The Company will provide up to a £4.5 million partners’ capital contribution. This will attract interest at a commercial rate, until it is repaid from future Javelin Capital LLP profits. This repayment has priority over other distributions from residual profits. Further capital can be provided at the Company’s discretion. (cid:129) The Company initially has a 70% interest in Javelin Capital LLP with the other partners and employees holding the remaining 30%. On achieving certain pre-set financial targets the Company will reduce its interest to ultimately 51%. REPORT & ACCOUNTS 2010 21 Business Review (cid:129) The agreement provides for bonuses which are determined in a formulaic manner. Performance fees are shared between the Company, partners and employees on a time dependent sliding scale based on the fund. Annual bonuses depend on Javelin Capital profitability but the bonus pool will be determined on the basis that total staff costs equal 55% of revenues. (cid:129) The agreement is not for a fixed term and can be terminated by members resolution. (cid:129) The Board has representation on the Javelin Capital Management Board (Javelin governance is outlined in the Corporate Governance Statement on page 26), including the appointment of the Chairman. This includes certain control, meeting and voting rights. The agreement also provides for the requirement to obtain Majedie approval in a variety of areas including anything considered a restricted matter. The Board can appoint or remove the Managing Partner/Chief Executive who has day to day operational control and also must approve his remuneration. (cid:129) In the event of a sale proposed by the Company the agreement includes drag along provisions including certain pre-emption rights to the other partners. There are also two side letters that relate to the LLP Agreement which provide for a possible change in control rights and provide for the liability of partners in respect of their capital and current account balances. ii. Management and Administration Services Agreements The Board has appointed Javelin Capital LLP as its investment manager and general administrator. The terms of the appointment are defined under a Management Agreement and Administration Services Agreement dated 31 August 2010. The agreement divides the Company’s investments into distinct portfolios which are the core portfolio, non- core portfolio, MAM, Javelin Capital Funds and the Treasury account. The fees payable under the Management Agreement are detailed below: Fund/Portfolio Management* Performance† Fee Fee Core Portfolio*** Treasury Account MAM Javelin Capital Global Equity Strategies Fund# 1.25% p.a. 0.70% p.a. 0.70% p.a. NIL 10% NIL NIL** 20%‡ * The management fee is on a sliding scale ranging from 0.7% p.a. to 0.4% p.a. based on the combined value of the core and non-core realisation portfolios. † The performance fee is based on outperformance against the benchmark on a rolling three year basis. # The Javelin Capital Global Equity Strategies Fund is a sub-fund of Javelin Capital Strategies plc, which is an Irish Qualifying Investment Fund listed on the Irish Stock Exchange. This is the first fund managed by Javelin Capital LLP and further sub- funds can be launched in due course. ** The agreements provide for a fee of £60,000 per annum in respect of MAM duties. ‡ The fees are as set in the supplement to the fund prospectus for the Javelin Capital Global Equity Strategies Fund. The performance fee entitlement only occurs once the hurdle has been exceeded and is calculated on a high water mark basis using an equalisation method. *** The non-core realisation portfolio attracts a management fee of 0.70% p.a. and no performance fee. 22 MAJEDIE INVESTMENTS PLC Majedie Asset Management Limited In 2002 the Company established a new fund management subsidiary specialising in UK equities: Majedie Asset Management, which was launched in March 2003. Having started with a 70% shareholding, the Company now retains a 30% interest. The relevant developments during the year are referred to in the Investment Manager’s Report on page 9 and further referred to in note 13 on pages 56 and 57. Javelin Capital LLP After a substantial start-up process to ensure that the appropriate systems, processes and controls were in place and following regulatory approval and the completion of the relevant legal agreements, Javelin Capital LLP commenced operations on 1 September 2010. On that date Javelin Capital assumed responsibility for managing the Company’s investments and provide general administration services. All previous Majedie employees transferred to Javelin Capital under the new arrangements. On 20 September 2010 the Company also invested £20m into the Javelin Capital Global Equity Strategies fund, the first fund launch by Javelin Capital LLP. The characteristics of this investment are detailed in the Investment Manager’s Report section. The Company has provided £4.5m in operational and regulatory capital for Javelin Capital LLP and has an initial 70% ownership. This will fall to 51% if the partnership achieves certain preset financial targets. The Chairman’s Statement on page 6 and additionally note 14 to the accounts on page 58 provides further information. The Management Agreement entitles either party to terminate the arrangement with six months’ notice after an initial period of three years. Additionally the Company can terminate the Manager’s appointment in respect of a distinct portfolio if the performance of that portfolio falls below a nominated benchmark. The Administration Services Agreement delegated, to Javelin Capital LLP, various rights to enable it to act as general administrator. Fees payable under the Administration Services Agreement are capped at £265,000 per annum with fees agreed on a cost only basis. The Administration Services Agreement may be terminated on three months’ notice. iii. Contribution and Transfer Agreement Under this agreement the Company agreed to transfer to Javelin Capital LLP the majority of its business and the use of certain assets. However some assets will remain with the Company. iv. Intra Group Asset Lease Agreement The asset lease agreement with Javelin Capital Services Limited identifies certain assets to be leased to and used by Javelin. Javelin will pay a lease charge equal to the depreciation suffered by the Company on those assets. The agreement provides for these assets to be transferred to Javelin at a future date at net book value. (cid:129) Capita Sinclair Henderson Ltd The Board has appointed Capita Sinclair Henderson Ltd (trading as Capita Financial Group – Specialist Fund Services) to act as Company Secretary and undertake certain administration services. The terms of Capita Sinclair Henderson Ltd’s appointment are defined under a secretarial and administration services agreement dated 17 November 2000. The agreement entitles either party to terminate the arrangement with twelve months’ notice. Policy on Payment of Suppliers It is the Company’s policy to settle all investment transactions in accordance with the terms and conditions of the relevant market in which it operates. All other expenses are paid on a timely basis in the ordinary course of business. At 30 September 2010 the Company had four days of suppliers’ invoices outstanding in respect of trade creditors (2009: four days). REPORT & ACCOUNTS 2010 23 Corporate Governance Statement The Corporate Governance Statement forms part of the Directors’ Report. This section of the annual report describes how Majedie Investments has applied the principles of section 1 of the UK Corporate Governance Code (the “Code”), as required by the Financial Services Authority (FSA). A copy of the Code can be found at www.frc.org.uk. The Board considers that the Company has complied with the provisions of the Code throughout the year ended 30 September 2010 except as set out below. The Company It is first relevant to consider the special nature of Majedie Investments compared with other listed investment trust companies in relation to matters of corporate governance. The Company has until 31 August 2010 been self managed. From that date it has appointed Javelin Capital LLP to manage its investments and administration. In complying with the more detailed aspects of best corporate governance practice, the Board takes into account that the Company is a listed investment trust and the Barlow family as a whole owns about 55% of the shares in issue. Although the family shareholding in total is significant, 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. Board and Directors The Company’s Board of directors is responsible for the overall stewardship of the Company, including corporate strategy, corporate governance, risk and controls assessment, overall investment policy, asset allocation and gearing limits. Its composition satisfies the requirements of the Code and is composed of an independent Chairman, four non-executive directors and Mr G P Aherne who became an executive director on 24 November 2009. Biographical details of the directors are shown on page 15. Messrs Adcock, Gadd and Reid are considered to be independent as defined by the Code but the Board considers that all directors exercise their judgements in an independent manner. Mr H V Reid is the Senior Independent Director and chairs the Audit and Remuneration Committees. The Board meets at least six times in each calendar year and its principal focus is the strategic development of the Group, investment policy and the control of the business. Key matters relating to these areas including the monitoring of financial performance are reserved for the Board and set out in a formal statement. During the year ended 30 September 2010 seven Board meetings were held and additionally two Audit Committee meetings, one Nomination Committee meeting and three Remuneration Committee meetings. Attendance at these Board and Committee meetings was as follows: Director Board Audit Nomination Remuneration A J Adcock G P Aherne C J Arnheim J W M Barlow P D Gadd H V Reid H S Barlow 7 7 5 7 6 7 3 2 n/a n/a n/a 2 2 n/a 1 1 n/a 1 n/a 1 1 3 n/a n/a n/a 2 3 n/a The Board has undertaken a formal and rigorous evaluation of its own performance through the circulation of a comprehensive questionnaire. Having discussed the results it concluded that the Board and its Committees continue to function effectively and that the Chairman’s and directors’ other commitments are such that all directors are capable of devoting sufficient time to the Company. The Board has agreed and established a procedure for directors in furtherance of their duties to take independent professional advice if necessary, at the Company’s expense. The Company has arranged Directors’ and Officers’ Liability Insurance which provides cover for legal expenses under certain circumstances. The Company’s Articles of Association take advantage of statutory provisions to indemnify the Directors against certain liabilities owed to third parties even where such liability arises from conduct amounting to negligence or breach of duty or of trust. In addition, under the terms of appointment of each Director, the Company has agreed, subject to the restrictions and limitations imposed by statute and by the Company’s Articles of Association, to indemnify each Director against all costs, expenses, losses and liabilities incurred in execution of his office as Director or otherwise in relation to such office. Save for such indemnity provisions in the Company’s Articles of Association and in the Directors’ terms of appointment, there are no qualifying third party indemnity provisions in force. 24 MAJEDIE INVESTMENTS PLC Committees The Board has established the following Committees: (cid:129) The Audit Committee comprises: Hubert Reid (Chairman), Paul Gadd and Andrew Adcock. Gerry Aherne, Chris Arnheim and William Barlow and representatives of the Auditors are invited to attend meetings of the Committee. The Board has agreed the terms of reference for the Audit Committee which meets at least twice a year. In particular during the year the Committee has reviewed the Group’s financial statements to ensure they are prepared to a high standard and comply with all the relevant legislation and guidelines where appropriate. The Audit Committee is responsible for monitoring the integrity of the financial statements of the Company, reviewing the Company’s internal financial controls and risk management systems, making recommendations to the Board, for it to put to the shareholders for their approval in general meeting, in relation to the appointment and terms of engagement of the external auditor, monitoring the external auditor’s independence and developing and implementing a policy on the engagement of the external auditor to supply non-audit services. The Audit Committee has considered the independence and objectivity of the Auditors. It has informed the Board that it is satisfied in these respects and considers that Ernst & Young LLP has fulfilled its obligations to the Company and its Shareholders. (cid:129) The Nomination Committee comprises Andrew Adcock (Chairman) and the non-executive directors. It considers appointments to the Board of directors in the context of the requirements of the business, its need to have a balanced and effective Board and succession planning. The Committee may use external search consultants to assist with recruitment to the Board. The Company’s Articles of Association require a director appointed during the year to retire and seek election by shareholders at the next Annual General Meeting and all directors must seek re-election at least every three years. All directors are appointed for a fixed term of three years after election or re-election by shareholders at a general meeting. Towards the end of each fixed term the Nomination Committee and the Board will consider whether to renew a particular appointment. The Nomination Committee met three times during the year to consider the appointment of Mr Chris Arnheim, the Board’s succession plan and the reappointment of Directors due to stand for re-election at the Company’s Annual General Meeting. It decided to recommend the re-appointment of Messrs Aherne, Barlow and Reid on the basis that they continue to make valuable contributions and to exercise their judgement and express their opinions in an independent manner. Having considered the Board’s succession plan and the balance of skills, knowledge and experience of existing Directors the Committee has engaged an external consultant to identify potential external candidates one of whom will join the Board in a non-executive capacity. At the date of this Statement, no appointment to the Board had been agreed. (cid:129) The Remuneration Committee comprises: Hubert Reid (Chairman), Andrew Adcock and Paul Gadd. Gerry Aherne, Chris Arnheim and William Barlow are invited to attend and participate in the relevant meetings. Further details on the work of the Remuneration Committee is included in the Report on Directors’ Remuneration on pages 28 to 30. (cid:129) Management Engagement Committee. The Management Engagement Committee was established on 14 October 2010 and comprises; Andrew Adcock (Chairman), Chris Arnheim, William Barlow, Paul Gadd and Hubert Reid. The Board has agreed terms of reference of the Committee which will meet at least once a year to consider the performance of the Investment Manager, the terms of the Investment Manager’s engagement and to consider annually the continued appointment of the Investment Manager. As Javelin Capital LLP was only appointed on 31 August 2010, the Board believe it is too early for the Committee to meet to consider its performance. The terms of reference of the Company’s Committees are available on request or from the Company’s website. Conflicts of Interest On 1 October 2008 it became a statutory requirement that a director must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the Company’s interests (a situational conflict). The Company’s Articles of Association were amended at the last Annual General Meeting to give the directors authority to approve such situations, where appropriate. REPORT & ACCOUNTS 2010 25 Corporate Governance Statement It is the responsibility of each individual director to avoid an unauthorised conflict situation arising. He must request authorisation from the Board as soon as he becomes aware of the possibility of a situational conflict arising. The Company has three investor savings schemes which provide shareholders with cost effective and convenient ways of investing. Communication of up-to-date information is provided through the website at www.majedie.co.uk. The Board is responsible for considering directors’ requests for authorisation of situational conflicts and for deciding whether or not the situational conflict should be authorised. The factors to be considered will include whether the situational conflict could prevent the director from properly performing his duties, whether it has, or could have, any impact on the Company and whether it could be regarded as likely to affect the judgement and/or actions of the director in question. When the Board is deciding whether to authorise a conflict or potential conflict, only directors who have no interest in the matter being considered are able to take the relevant decision, and in taking the decision the directors must act in a way they consider, in good faith, will be most likely to promote the Company’s success. The directors are able to impose limits or conditions when giving authorisation if they think this is appropriate in the circumstances. A register of conflicts is maintained by the Secretary and is reviewed at each Board meeting, to ensure that any authorised conflicts remain appropriate. Directors are required to confirm at these meetings whether there has been any change to their position. The directors must also comply with the statutory rules requiring company directors to declare any interest in an actual or proposed transaction or arrangement with the Company. Relations with Shareholders Members of the Board and the Investment Manager hold meetings with the Company’s principal shareholders and prospective investors to develop an understanding of the views of shareholders and to discuss the Company’s strategy and financial and investment performance. Any issues raised by shareholders are reported to the full Board. Shareholders are encouraged to attend the Annual General Meeting and to participate in proceedings. Shareholders wishing to contact the directors to raise specific issues can do so directly or by writing to the Company Secretary. In the annual report each year the directors seek to provide shareholders with information in sufficient detail to allow them to obtain a reasonable understanding of recent developments affecting the business and the prospects for the Company in the year ahead. The Business Review on pages 18 to 23 provides additional further information. Institutional Voting – Use of Voting Rights The Investment Manager, in the absence of explicit instructions from the Board, is empowered to exercise discretion in the use of the Company’s voting rights. Policy for non-audit services The Board monitors the Company’s relationship with its external auditor with a view to ensuring that the external auditor does not provide non-audit services that have the potential to impair or appear to impair the independence of their audit role. The Board has agreed that, from time to time it may be appropriate and cost effective for the external auditor to provide services relating to tax compliance and tax planning but other services should only be provided where alternative providers do not exist or where it is cost effective or in the Group’s interest for the external auditors to provide such services. The Management Board of Javelin Capital LLP, upon which the Company has representation, provides a similar oversight in respect of non-audit services provided by the external auditor to the Javelin Group. Any areas of concern are raised with the Board of the Company. Controls of third party providers The Board regularly reviews the performance of the companies providing services to the Company and considers regular reports providing assurances from those companies that appropriate controls are in place to mitigate risks relating to services undertaken on behalf of the Company. The Board also seeks assurances that service providers have ‘whistle blowing’ procedures in place to enable their staff to raise concerns about possible improprieties in a confidential manner. Javelin Capital LLP In respect of the arrangements involving Javelin Capital LLP, as detailed on pages 6, 9, 21 to 23, 27 and 29, Mr GP Aherne, who by virtue of being a director of the Company and a partner of Javelin Capital LLP, is considered to be a related party under the UKLA’s Listing Rules. The Board has representation on the Manag ement Board of Javelin Capital and under the terms of the LLP Agreement is able to require amendments to systems and controls if required , and the ability to change the Managing Partner/Chief Executive and also must approve his remuneration. 26 MAJEDIE INVESTMENTS PLC  Javelin Capital LLP governance is comprised of: (cid:129) Management Board The Management Board meets monthly and is comprised of Company representatives and other partners. Other employees and partners are invited to attend meetings as required. (cid:129) Risk Committee The Risk Committee will meet at least twice a year under terms of reference agreed by the Management Board. The Committee will control risk guidelines, product approval and the firms’ control environment, and undertake audit committee responsibilities. (cid:129) Investment Committee The investment Committee will provide an independent review to investment processes and products in light of the external environment. It will include external investment professionals and will meet on an ad-hoc basis. Internal Control Review The directors acknowledge that they are responsible for the systems of internal control relating to the Company and its subsidiaries and for reviewing the effectiveness of those systems. An ongoing process has been in existence for some time to identify, evaluate and manage risks faced by Group companies. Key procedures are also in place to provide effective financial control over the Group’s operations. The risk management process and systems of internal control are designed to manage rather than eliminate the risk of failure to achieve the Company’s objectives. It should be recognised that such systems can only provide reasonable, not absolute, assurance against material misstatement or loss. Risk assessment and the review of internal controls are undertaken by the Board in the context of the Company’s overall investment objective. The review covers business strategy, investment management, operational, compliance and financial risks facing the Company and its subsidiaries. In arriving at its judgement of the nature of the risks facing Group companies, the Board has considered the Group’s operations in the light of the following factors: – the nature and extent of risks which it regards as acceptable to bear within the overall business objective; – the likelihood of such risks becoming a reality; and – the Investment Manager’s ability to reduce the incidence and impact of risk on performance and the relevant controls. Given the nature of the activities of the Company and the fact that certain key functions are sub-contracted to third party service provider organisations, the directors have reviewed the controls operating and have obtained information from key third party suppliers regarding the relevant controls operated by them. The Company does not have an internal audit function, as required under provision C.3.5. of the UK Corporate Governance Code. Having recently considered this matter the directors are of the opinion that there is no need at the present time for the Company to have an internal audit function since there are considered to be adequate checks and balances. In particular the Investment Management and certain administrative functions are undertaken by Javelin Capital LLP. Fund administration, accounting and company secretarial functions of the Company are performed by Capita Sinclair Henderson Limited trading as Capita Financial Group – Specialist Fund Services. Custody is outsourced to RBC Dexia Investor Services Trust. In accordance with the guidance of the Financial Reporting Council: “Internal Control: Revised Guidance for Directors on the Combined Code”, the directors have carried out a review of the effectiveness of the system of internal control as it has operated over the year and up to the date of approval of the report and accounts. Ernst & Young LLP are the Auditors of the Company, the Group and subsidiary companies. The Board believes that auditor objectivity is safeguarded, for two main reasons. First the extent of non-audit work carried out by Ernst & Young LLP is limited and flows naturally from the firm’s role as Auditor to the Group. Capita Sinclair Henderson Limited advises the Company on corporation tax computations and submissions to HM Revenue & Customs. Ernst & Young LLP may provide taxation advice to the Group from time to time on various issues and in particular each year reviews the work carried out by Capita Sinclair Henderson Limited and reviews the relevant taxation issues at the time of the audit of the annual report. Secondly, Ernst & Young LLP has provided information on its independence policy and the safeguards and procedures it has developed to counter perceived threats to its objectivity. It also confirms that it is independent within the meaning of all regulatory and professional requirements and that the objectivity of the audit is not impaired. REPORT & ACCOUNTS 2010 27 Report on Directors’ Remuneration This report has been prepared in accordance with the Companies Act 2006. The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority and describes how the Board has applied the principles relating to the directors’ remuneration. As required by the Act, a resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the financial statements will be approved. The Act requires the auditors to report to the Company’s members on certain parts of the report on directors’ remuneration and to state whether in their opinion those parts of the report have been properly prepared in accordance with the Companies Act 2006. The report has therefore been divided into separate sections for audited and unaudited information. UNAUDITED SECTION Remuneration Committee During the year to 30 September 2010, the Committee comprised solely non-executive directors – being Hubert Reid, Andrew Adcock and Paul Gadd. Gerry Aherne stood down from the Committee on 15 October 2009 and was replaced as Chairman by Hubert Reid on 1 October 2009. Paul Gadd was appointed to the Committee on 15 October 2009 and William Barlow and Chris Arnheim are invited to attend meetings. The Company Secretary, Capita Sinclair Henderson Limited, act as Secretary to the Committee and its terms of reference are available on request or may be obtained from the Company website. The Role of the Committee and Policies on Directors’ Remuneration The role of the Committee is to establish Board policy in respect of terms of appointment and the remuneration of the Chairman and each director. Additionally during the year before the launch of Javelin Capital LLP, the Committee was responsible for the terms of employment including remuneration packages for employees. The process and procedures adopted are aligned with those followed for the directors. The Committee seeks to encourage the enhancement of the Company’s performance and to ensure that remuneration packages offered are competitive and designed to attract, retain and motivate directors of the right calibre. In setting both the policy related to, and levels of, remuneration and benefits for directors, the Committee takes account of market data and independent professional advice. Following the launch of Javelin Capital LLP and in accordance with the terms of the LLP agreement the Committee has certain responsibilities in respect of the remuneration of Javelin Capital Chief Executive, Mr GP Aherne. These are outlined in the separate section for Javelin Capital LLP. Remuneration Policy The Board’s policy is that the remuneration of non-executive directors should reflect the responsibilities and time commitment of individual directors, and is determined with reference to other organisations and appointments. The Committee reviewed directors’ remuneration in November 2010 and agreed to retain the Chairman’s fee at £75,000 per annum, basic non-executive directors’ fees at £27,000 per annum with additional fees of £3,000 per annum applying to each of the Chairman of the Audit and Remuneration Committees and the Senior Independent Director. A further supplement of £6,000 per annum, as detailed in the Javelin Capital section is payable to directors who represent the Company on the Javelin Capital Management Board. Mr GP Aherne was appointed to an executive role from 24 November 2009 with his remuneration unchanged at £160,000 per annum. On 31 August 2010, upon execution of the Javelin Capital LLP agreement, Mr GP Aherne became Chief Executive and a partner of Javelin Capital LLP. The Committee agreed to award Mr GP Aherne a one-off payment of £100,000 upon the launch of Javelin Capital LLP, which was to be paid by Javelin Capital LLP. As a partner of Javelin Capital LLP, Mr GP Aherne received no fees as Executive Director of the Company but receives remuneration as detailed in the separate section on Javelin Capital. 28 MAJEDIE INVESTMENTS PLC Directors’ fees (excluding any special duties fees) are, under the Company’s articles of association, subject to a limit of £250,000 per annum. Non-executive directors are entitled to claim out of pocket expenses, if any, incurred in carrying out their duties but are not eligible for bonuses, pension benefits, share options or long term incentive schemes. No director has a service contract, rather there is a memoranda of terms, with Mr GP Aherne being subject to the terms of the Javelin Capital LLP agreement. The terms of the directors appointment include an initial 3 year duration period, a one month notice period by either party and no termination or loss of office payments. The Committee has given full consideration to the principles of good governance of the UK Corporate Governance Code and the Board has accepted the Committee’s recommendations without amendment. Javelin Capital LLP (“Javelin Capital”) Javelin Capital , a Limited Liability Partnership of which the Company is a partner, was incorporated on 12 October 2009 and after regulatory and legal aspects were finalised commenced operations on 1 September 2010. As a partner, the Board can appoint representatives to attend the monthly Javelin Capital Management Board meetings. Directors attending the management board meetings, with the exception of the Chairman of the Board, will be paid an additional £6,000 per annum, based upon a fee of £500 per meeting. The Limited Liability Partnership (‘LLP’) Agreement provides for up to three directors to represent the Company on the Management Board and requires at least one director to be present at each meeting. Additionally the Chairman of the Management Board shall be a Company representative. As a partner of Javelin, Mr GP Aherne is eligible to receive remuneration in accordance with the terms of the LLP Agreement. This comprises a monthly drawing entitlement, currently £160,000 per annum, and performance related remuneration dependent on the future profitability and performance of Javelin Capital. The LLP Agreement provides that certain aspects of the remuneration of the Javelin Capital partners is subject to the approval of the Company representatives on the Management Board. The LLP agreement also provides that Mr GP Aherne’s remuneration is subject to approval of the Committee. Performance The graph below compares the total shareholder return on a hypothetical portfolio constructed according to the following benchmark equity index over the last five years. The benchmark is 70% FTSE All-Share Index and 30% FTSE World ex UK Index (Sterling) and has been chosen has a comparator for the purpose of this graph since it is the Company’s formal benchmark. 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.70 0.60 0.50 9/05 9/06 9/07 9/08 9/09 9/10 Majedie k Benchmar TOTAL SHAREHOLDER RETURN V BENCHMARK 5 YEARS TO 30 SEPTEMBER 2010 (REBASED) REPORT & ACCOUNTS 2010 29 Report on Directors’ Remuneration AUDITED SECTION Directors’ Remuneration The remuneration of the directors for the year ended 30 September 2010 was as follows: Non-executive directors H S Barlow† A J Adcock H V Reid J W M Barlow P D Gadd C J Arnheim* G P Aherne# Executive director G P Aherne# Salary £000 Basic fees £000 Additional Special fees Duties fees £000 £000 Total 2010 £000 – – – – – – – 123 123 15 60 27 27 27 20 – – 176 – 1 8 – – – – – 9 – – – – – – 24 – 24 15 61 35 27 27 20 24 123 332 Total 2009 £000 48 30 30 27 – – 147 – 282 † Mr H S Barlow retired as Chairman on 20 January 2010 and was succeeded by Mr A J Adcock . * Mr C J Arnheim was appointed to the Board on 1 January 2010. # Mr G P Aherne was appointed Executive Director on 24 November 2009. In addition to the amounts shown above, as a partner of Javelin Capital LLP he receives a drawing entitlement of £1 60,000 per annum, paid monthly, which commenced from 1 September 2010 and received a one-off payment of £100,000 upon the launch of Javelin Capital LLP. From 1 September 2010 he remains an executive director of the Company but receives no remuneration for this role. Approval The Report on Directors’ Remuneration on pages 28 to 30 was approved by the Board on 2 4 November 2010. On behalf of the Board H V Reid Chairman of the Remuneration Committee 30 MAJEDIE INVESTMENTS PLC Statement of Directors’ Responsibilities The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards adopted by the European Union. Company law requires the Directors to prepare financial statements for each financial year which present fairly the financial position of the Company and of the Group and the financial performance and cash flows of the Company and of the Group for that period. In preparing these financial statements, the Directors are required to: The Directors, to the best of their knowledge, state that: – the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and results of the Company and the Group; and – the Chairman’s Statement and Directors’ Report include a fair review of the development and performance of the business and the position of the Company and the Group together with a description of the principal risks and uncertainties that they face. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the Board of Directors Andrew J Adcock Chairman 24 November 2010 – select suitable accounting policies and then apply them consistently; – make judgements and estimates that are reasonable and prudent; – present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; – state whether applicable International Financial Reporting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and – provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy, at any time, the financial position of the Company and of the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. REPORT & ACCOUNTS 2010 31 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 2010 which comprise the Consolidated and Company Statements of Comprehensive Income, the Consolidated and Company Statement of Changes in Equity, the Consolidated and Company Balance Sheets, the Consolidated and Company Cash Flow Statements and the related notes 1 to 27. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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 auditor’s 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 explained more fully in the Statement of Directors’ Responsibilities set out on page 31, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. Opinion on financial statements In our opinion: (cid:129) the financial statements give a true and fair view of the state of the Group’s and of the Company’s affairs as at 30 September 2010 and of the Group’s loss for the year then ended; (cid:129) the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; (cid:129) the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and (cid:129) the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. Opinion on other matters prescribed by the Companies Act 2006 In our opinion: (cid:129) the part of the Report on Directors’ Remuneration to be audited has been properly prepared in accordance with the Companies Act 2006; and (cid:129) the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: (cid:129) adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or (cid:129) the Parent Company financial statements and the part of the Report on Directors’ Remuneration to be audited are not in agreement with the accounting records and returns; or 32 MAJEDIE INVESTMENTS PLC (cid:129) certain disclosures of directors’ remuneration specified by law are not made; or (cid:129) we have not received all the information and explanations we require for our audit. Under the Listing Rules we are required to review: (cid:129) the directors’ statement, set out on page 17, in relation to going concern; and (cid:129) the part of the Corporate Governance Statement relating to the company’s compliance with the nine provisions of the June 2008 Combined Code specified for our review. Ratan Engineer (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 2 4 November 2010 Notes: 1. The maintenance and integrity of the Majedie Investments PLC web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site. 2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. REPORT & ACCOUNTS 2010 33 Consolidated Statement of Comprehensive Income for the year ended 30 September 2010 Revenue return £000 2010 Capital return £000 Total £000 Revenue return £000 2009 Capital return £000 Total £000 Notes Investments Losses on investments at fair value through profit or loss 13 (2,361) (2,361) (23,723) (23,723) Net investment result Income Income from investments Other income Total income Expenses (2,361) (2,361) (23,723) (23,723) 3 3 10,011 82 10,093 10,011 82 10,093 6, 409 125 6,534 6, 409 125 6,534 Administration expenses 5 (3,105) (2,017) (5,122) (1,507) (1,359) (2,866) Return before finance costs and taxation Finance costs Net return before taxation Taxation Net return after taxation for the year 6,988 (4,378) 2,610 5,027 (25,082) (20,055) (701) (2,101) (2,802) (702) (2,100) (2,802) 6,287 (6,479) (131) (192) (131) 4,325 (27,182) (22,857) (92) (92) 8 9 6,156 (6,479) (323) 4,233 (27,182) (22,949) Return per ordinary share: pence pence pence pence pence pence Basic and diluted 11 11.8 (12.4) (0.6) 8.1 (52.3) (44.2) The total column of this statement is the Consolidated Statement of Comprehensive Income of the Group prepared in accordance with International Financial Reporting Standards (IFRS). The supplementary revenue return and capital return columns are prepared under guidance published by the Association of Investment Companies (AIC). All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The notes on pages 44 to 73 form part of these accounts. 34 MAJEDIE INVESTMENTS PLC Company Statement of Comprehensive Income for the year ended 30 September 2010 Revenue return £000 2010 Capital return £000 Total £000 Revenue return £000 2009 Capital return £000 Total £000 Notes Investments Losses on investments at fair value through profit or loss 13 (2,361) (2,361) (23,723) (23,723) Net investment result Income Income from investments Other income Total income Expenses Investment Management fees Administration expenses Return before finance costs and taxation Finance costs Net return before taxation Taxation Net return after taxation for the year 3 3 4 5 8 9 (2,361) (2,361) (23,723) (23,723) 10,011 130 10,141 10,011 130 10,141 6,409 125 6,534 6,409 125 6,534 (34) (44) (78) (1,038) (1,735) (2,773) (1,507) (1,359) (2,866) 9,069 (4,140) 4,929 5,027 (25,082) (20,055) (701) (2,101) (2,802) (702) (2,100) (2,802) 8,368 (6,241) 2,127 4,325 (27,182) (22,857) (131) (131) (92) (92) 8,237 (6,241) 1,996 4,233 (27,182) (22,949) Return per ordinary share: pence pence pence pence pence pence Basic and diluted 11 15.8 (12.0) 3.8 8.1 (52.3) (44.2) The total column of this statement is the Statement of Comprehensive Income of the Company prepared under IFRS. The supplementary revenue return and capital return columns are prepared under guidance published by the AIC. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The notes on pages 44 to 73 form part of these accounts. REPORT & ACCOUNTS 2010 35 Consolidated Statement of Changes in Equity for the year ended 30 September 2010 Year ended 30 September 2010 As at 30 September 2009 Net loss for the year Share options expense Dividends declared and paid in year As at 30 September 2010 Year ended 30 September 2009 As at 30 September 2008 Net loss for the year Share options expense Dividends declared and paid in year Own shares (sold)/purchased by Employee Incentive Trust (EIT) Share capital £000 Share premium £000 Notes Capital redemption reserve £000 Share options reserve £000 5,253 785 56 (284) 24 10 24 10 5,253 785 5,253 785 56 56 64 (220) 291 251 (826) (284) As at 30 September 2009 5,253 785 56 The notes on pages 44 to 73 form part of these accounts. 36 MAJEDIE INVESTMENTS PLC Capital reserve £000 93,424 (6,479) Own shares reserve £000 (1,702) Revenue reserve £000 26,649 6,156 (6,763) Total £000 124,181 (323) 64 (6,763) 86,945 26,042 (1,702) 117,159 120,606 (27,182) 29,047 4,233 (6,631) (2,573) 153,465 (22,949) 251 (6,631) 871 45 93,424 26,649 (1,702) 124,181 REPORT & ACCOUNTS 2010 37 Company Statement of Changes in Equity for the year ended 30 September 2010 Year ended 30 September 2010 As at 30 September 2009 Net profit for the year Share options expense Dividends declared and paid in year As at 30 September 2010 Year ended 30 September 2009 As at 30 September 2008 Net loss for the year Share options expense Dividends declared and paid in year Own shares (sold)/purchased by Employee Incentive Trust (EIT) Notes Share capital £000 Share premium £000 Capital redemption reserve £000 5,253 785 56 24 10 24 10 5,253 785 5,253 785 56 56 As at 30 September 2009 5,253 785 56 The notes on pages 44 to 73 form part of these accounts. 38 MAJEDIE INVESTMENTS PLC Share options reserve £000 Capital reserve £000 Revenue reserve £000 Own shares reserve £000 Total £000 (284) 93,702 26,369 (1,702) 124,179 (6,241) 8,237 64 (6,763) 1,996 64 (6,763) (220) 87,461 27,843 (1,702) 119,476 291 120,884 28,767 (2,573) 153,463 251 (826) (284) (27,182) 4,233 (6,631) (22,949) 251 (6,631) 871 45 93,702 26,369 (1,702) 124,179 REPORT & ACCOUNTS 2010 39 Consolidated Balance Sheet as at 30 September 2010 Non-current assets Property and equipment Investments at fair value through profit or loss Current assets Trade and other receivables Cash and cash equivalents Total assets Current liabilities Trade and other payables Total assets less current liabilities Non-current liabilities Debentures Total liabilities Net assets Represented by: Ordinary share capital Share premium Capital redemption reserve Share options reserve Capital reserve Revenue reserve Own shares reserve Equity Shareholders’ Funds Net asset value per share Basic and fully diluted Notes 12 13 15 16 17 17 18 19 20 2010 £000 531 145,423 145,954 1,691 5,538 7,229 2009 £000 224 147,291 147,515 1,897 12,384 14,281 153,183 161,796 (2,243) (3,853) 150,940 157,943 (33,781) (36,024) (33,762) (37,615) 117,159 124,181 5,253 785 56 (220) 86,945 26,042 (1,702) 5,253 785 56 (284) 93,424 26,649 (1,702) 117,159 124,181 pence 225.2 pence 238.7 Approved by the Board of Majedie Investments PLC and authorised for issue on 24 November 2010. Andrew J Adcock Hubert V Reid Directors The notes on pages 44 to 73 form part of these accounts. 40 MAJEDIE INVESTMENTS PLC Company Balance Sheet as at 30 September 2010 Non-current assets Property and equipment Investments at fair value through profit or loss Investment in subsidiaries Current assets Trade and other receivables Cash and cash equivalents Total assets Current liabilities Trade and other payables Total assets less current liabilities Non-current liabilities Debentures Total liabilities Net assets Represented by: Ordinary share capital Share premium Capital redemption reserve Share options reserve Capital reserve Revenue reserve Own shares reserve Notes 12 13 14 15 16 17 17 18 19 2010 £000 221 145,423 4,671 150,315 1,676 3,057 4,733 2009 £000 224 147,291 161 147,676 1,986 12,131 14,117 155,048 161,793 (1,791) (3,852) 153,257 157,941 (33,781) (35,572) (33,762) (37,614) 119,476 124,179 5,253 785 56 (220) 87,461 27,843 (1,702) 5,253 785 56 (284) 93,702 26,369 (1,702) Equity Shareholders’ Funds 119,476 124,179 Approved by the Board of Majedie Investments PLC and authorised for issue on 24 November 2010. Andrew J Adcock Hubert V Reid Directors The notes on pages 44 to 73 form part of these accounts. REPORT & ACCOUNTS 2010 41 Consolidated Cash Flow Statement for the year ended 30 September 2010 Net cash flow from operating activities Consolidated net return before taxation Adjustments for: Losses on investments Dividends reinvested Share based remuneration Depreciation Purchases of investments Sales of investments Finance costs Operating cashflows before movements in working capital Increase in trade and other payables (Increase)/decrease in trade and other receivables Net cash inflow from operating activities before tax Tax recovered Tax on unfranked income Net cash inflow from operating activities Investing activities Purchases of tangible assets Disposals of tangible assets Net cash outflow from investing activities Financing activities Interest paid Dividends paid Exercise of options on own shares Net cash outflow from financing activities Notes 2010 £000 2009 £000 (192) (22,857) 13 2,361 23,723 (45) 64 84 (57,963) 55,741 50 2,802 2,852 410 (18) 3,244 10 (163) 3,091 (420) 29 (391) (2,783) (6,763) (9,546) (6,846) 12,384 (132) 251 58 (57,427) 67,202 10,818 2,802 13,620 241 96 13,957 2 (106) 13,853 (234) (234) (2,783) (6,631) 44 (9,370) 4,249 8,135 (Decrease)/increase in cash and cash equivalents for year 21 Cash and cash equivalents at start of year Cash and cash equivalents at end of year 5,538 12,384 The notes on pages 44 to 73 form part of these accounts. 42 MAJEDIE INVESTMENTS PLC Company Cash Flow Statement for the year ended 30 September 2010 Net cash flow from operating activities Company net return before taxation Adjustments for: Losses on investments Dividends reinvested Share based remuneration Depreciation Purchases of investments Sales of investments Finance costs Operating cashflows before movements in working capital (Decrease)/increase in trade and other payables Decrease in trade and other receivables Net cash inflow from operating activities before tax Tax recovered Tax on unfranked income Net cash inflow from operating activities Investing activities Purchases of tangible assets Disposals of tangible assets Purchases of subsidiaries Net cash outflow from investing activities Financing activities Interest paid Dividends paid Exercise of options on own shares Net cash outflow from financing activities Notes 2010 £000 2009 £000 2,127 (22,857) 13 2,361 23,723 (45) 64 64 (57,963) 55,74 1 2,34 9 2,802 5,15 1 (41) 8 6 5,19 6 10 (163) 5,04 3 (9 0) 29 (4,510) (4,57 1) (2,783) (6,763) (9,546) (9,074) 12,131 (132) 251 58 (57,427) 67,202 10,818 2,802 13,620 437 112 14,169 2 (106) 14,065 (282) (282) (2,783) (6,631) 44 (9,370) 4,413 7,718 (Decrease)/increase in cash and cash equivalents for year 21 Cash and cash equivalents at start of year Cash and cash equivalents at end of year 3,057 12,131 The notes on pages 44 to 73 form part of these accounts. REPORT & ACCOUNTS 2010 43 Notes to the Accounts General Information Majedie Investments PLC is a company incorporated in England under the Companies Act 2006. The Company is registered as a public limited company and is an investment company as defined by Section 833 of the Companies Act 2006. The address of the registered office is given on page 8 1. The nature of the Group’s operations and its principal activities are set out in the Business Review on pages 18 to 23 and in note 2 on page 48. At the date of authorisation of these financial statements, the following relevant Standards and Interpretations have not been applied in these financial statements since they were in issue but not yet effective: International Accounting Standards (IAS/IFRSs) IFRS 1 IFRS 1 IFRS 2 IFRS 9 IAS 24 Amendments to IFRS 1 – Additional Exemptions for First-time Adopters Amendments to IFRS 1 – Limited Exemption from Comparative IFRS 7 disclosures Amendments to IFRS 2 – Group Cash settled Share-based Payment Transactions Financial Instruments: Classification & Measurement Related Party Disclosures (revised) Effective date 1 January 2010 1 July 2010 1 January 2010 1 January 2013 1 January 2011 The directors anticipate that the adoption of the above Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. 1 Accounting Policies The accounts on pages 34 to 73 comprise the audited results of the Company and its subsidiaries for the year ended 30 September 2010, and are presented in pounds sterling rounded to the nearest thousand, as this is the functional currency in which the Group and Company transactions are undertaken. Accounting Policies under International Financial Reporting Standards Basis of Accounting The accounts of the Group and the Company have been prepared in accordance with International Financial Reporting Standards (IFRS). They comprise standards and interpretations approved by the International Accounting Standards Board and International Financial Reporting Committee, interpretations approved by the International Accounting Standards Committee that remain in effect, to the extent they have been adopted by the European Union. Where presentational guidance set out in the Statement of Recommended Practice (SORP) regarding the Financial Statements of Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies in January 2009 is not inconsistent with the requirements of IFRSs, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. All the companies’ activities are continuing. The principal accounting policies adopted are set out as follows: Basis of Consolidation The Consolidated Accounts incorporate the accounts of the Company and entities controlled by the Company (its subsidiaries) made up to 30 September each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during this year are included in the Consolidated Statement of Comprehensive Income from the effective date of acquisition or disposal as appropriate. All Group entities have the same year end date. Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interest of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover losses. 44 MAJEDIE INVESTMENTS PLC  1 Accounting Policies continued Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Presentation of Statement of Comprehensive Income In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. In accordance with the Company’s status as a UK investment company under section 833 of the Companies Act 2006, net capital returns may not be distributed by way of dividend. Additionally the net revenue is the measure that the directors believe to be appropriate in assessing the Company’s compliance with certain requirements set out in section 1158 of the Corporation Tax Act 2010. Foreign Currencies The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in the foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity. Segmental Reporting A segment is a distinguishable component of the Group that is engaged in business activities from which it may earn revenues and incur expenses (including intra-group revenues and expenses), for which discrete financial information is available and whose operating results are regularly renewed by the entity’s chief decision maker who can make decisions on resource allocation and performance assessment. An operating segment could engage in business activities for what it has yet to earn revenues. Income Dividend income from investments is taken to the revenue account on an ex-dividend basis . UK dividends are included net of tax credits. Overseas dividends are included gross of any withholding tax. Where the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital column. The fixed return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Deposit interest and other interest receivable is included on an accruals basis. REPORT & ACCOUNTS 2010 45 Notes to the Accounts 1 Accounting Policies continued Expenses All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Statement of Comprehensive Income, all expenses have been presented as revenue items except as follows: (cid:129) (cid:129) Expenses which are incidental to the acquisition or disposal of an investment are treated as capital costs and separately identified and disclosed (see note 1 3). Expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated, and accordingly the investment management expenses have been allocated 75% to capital, in order to reflect the directors’ expected long-term view of the nature of the investment returns of the Company. (cid:129) The investment management performance fee, which is based on capital out-performance, is charged wholly to capital. Pension Costs Payments made to the Company’s defined contribution group personal pension plan are charged as an expense as they fall due. Finance Costs 75% of finance costs arising from the debenture stocks are allocated to capital at a constant rate on the carrying amount of the debt; 25% of the finance costs are charged on the same basis to the revenue account. Premiums payable on early repurchase of debenture stock are charged 100% to capital. Share Based Payments The Group has applied the requirements of IFRS 2: Share-based Payments. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 October 2004. The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value determined at the date of grant, which is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the number of shares that will eventually vest. Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Taxation The tax charge represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive Income is the marginal basis. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital return column. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. No provision is made for tax on capital gains since the Company operates as an investment trust for tax purposes. 46 MAJEDIE INVESTMENTS PLC 1 Accounting Policies continued Property and Equipment Property and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Leasehold improvements are written off in equal annual instalments over the minimum period of the lease whereas depreciation for other tangible assets is provided for at 25% to 33% per annum using the straight-line method. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Investments Held at Fair Value Through Profit or Loss When a purchase or sale is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date. All investments are accounted at fair value through profit or loss as defined by IAS 39. All investments are designated upon initial recognition as held at fair value through profit or loss, and are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Investments in unit trusts or open ended investment companies are valued at the closing price, the bid price or the single price as appropriate, released by the relevant investment manager. Fair values for unquoted investments, or investments for which the market is inactive, are established by using various valuation techniques in accordance with the International Private Equity and Venture Capital Valuation Guidelines. These may include recent arm’s length market transactions, the current fair value of another instrument which is substantially the same, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised. Where no reliable fair value can be estimated for such instruments, they are carried at cost subject to any provision for impairment. Investment in Subsidiaries In its separate financial statements the Company recognises its investment in subsidiaries at cost, less any permanent diminution or if they are investment vehicles they are valued at fair value. Financial Instruments Financial assets and financial liabilities are recognised on the Group’s Balance Sheet when the Group becomes a party to the contractual provisions of the instrument. Derivative Financial Instruments The Group does not enter into derivative contracts for the purpose of hedging risks on its investment portfolio as it is a long term investor. The Group does, however, receive or purchase warrants on shares which are classified as equity instruments under IAS 32. These equity instrument derivatives are recognised at fair value on the date the contract is entered into and are subsequently re-valued at their fair value. Changes in the fair value of derivative financial instruments are recognised as they arise in the Statement of Comprehensive Income. Trade Receivables Trade receivables do not carry any interest and are stated at their fair value as reduced by appropriate allowances for estimated irrecoverable amounts. REPORT & ACCOUNTS 2010 47 Notes to the Accounts 1 Accounting Policies continued Cash and Cash Equivalents Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. Financial Liabilities and Equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Debentures All debentures are recorded at proceeds received, net of direct issue costs and held at amortised cost with the interest expense being recognised on an effective yield basis. Trade Payables Trade payables are not interest bearing and are stated at their fair value. Reserves Gains and losses on the sale of investments and investment holding gains and losses are accounted for in the capital reserve. Own Shares Own shares held under option are accounted for in accordance with IFRS 2: Share-based Payments. This requires that the consideration paid for own shares held be presented as a deduction from shareholders’ funds, and not recognised as an asset. Use of estimates The preparation of financial statements requires the Group to make estimates and assumptions that affect items reported in the Balance Sheets and Statement of Comprehensive Income and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management’s best knowledge of current facts, circumstances and to, some extent, future events and actions, actual results ultimately may differ from those estimates, possibly significantly. The only estimates and assumptions that may cause material adjustment to the carrying value of assets and liabilities relate to the valuation of unquoted investments. These are valued in accordance with the policies as set out on page 47. At the year end, unquoted investments represent 29.8% of net assets. 2 Business segments For management purposes, the Group is currently organised into the following two principal activities: Investing activities The Company’s investment objective is to maximise shareholder return over the long term whilst increasing dividends by more than the rate of inflation. The Company operates as an investment trust company and its portfolio contains investments in companies listed in a number of countries. Geographical information about the portfolio is provided on pages 11 to 14 and exposure to different currencies is disclosed in note 25 on pages 63 and 64. Investment management services To complement this investment objective and create income and capital for the Group, Javelin Capital LLP has been launched to market a range of funds to third party investors and provide investment management and advisory services. 48 MAJEDIE INVESTMENTS PLC 2 Business Segments continued For the year ended 30 September 2010 For the year ended 30 September 2009 Group Income from investment management services Other operating and investment income Intra-group income Performance shares and options fair value charge Other administrative costs Intra-group expenses Other operating expenses Investment management Investing and advisory activities £000 services Eliminations £000 £000 Total £000 Investment management Investing and advisory activities £000 services Eliminations £000 £000 10,091 50 10,141 (64) (2,054) (85) (648) 2 92 94 10,093 6,534 (142) (142) 10,093 6,534 (2,356) (25) 110 (64) (4,410) (251) (2,538) (648) (77) (2,851) (2,381) 110 (5,122) (2,866) Operating profit/(loss) Finance costs Intra-group finance costs Gains/(losses) on fair value through profit and loss 7,290 (2,802) (2,361) (2,287) (32) 4,971 (2,802) 3,668 (2,802) (25) 25 (2,361) (23,723) Profit/(loss) before tax 2,127 (2,312) (7) (192) (22,857) Dividends (6,763) (6,763) (5,462) Total £000 6,534 6,534 (251) (2,538) (77) (2,866) 3,668 (2,802) (23,723) (22,857) (5,462) Total assets Total liabilities Intra-group assets/(liabilities) 150,241 (35,571) 4,801 2,942 (453) (4,801) 153,183 161,796 (37,615) (36,024) 161,796 (37,615) Net assets 119,471 (2,312) 117,159 124,181 124,181 3 Income Income from investments Franked investment income† UK unfranked investment income Overseas dividends Fixed interest and convertible bonds Group 2010 £000 8,778 21 1,156 56 Group 2009 £000 5,539 11 800 59 Company 2010 £000 Company 2009 £000 8,778 21 1,156 56 5,539 11 800 59 † Includes MAM special dividend income of £5,400,000 (2009: £1,359,000). 1,011 6,409 10,011 6,409 REPORT & ACCOUNTS 2010 49 Notes to the Accounts 3 Income continued Other income Deposit interest Other interest Sundry income Group 2010 £000 44 38 82 Group 2009 £000 95 30 125 Company 2010 £000 Company 2009 £000 43 25 62 130 95 30 125 Total income 10,093 6,534 10,141 6,534 Total income comprises: Dividends Fixed interest Interest Other income Income from investments Listed UK Listed overseas Unlisted 4 Management Fees – Company Investment management Administration 9,955 56 44 38 6,350 59 95 30 9,955 56 68 62 6,350 59 95 30 10,093 6,534 10,141 6,534 2,618 1,156 6,237 3,644 800 1,965 2,618 1,156 6,237 3,644 800 1,965 10,011 6,409 10,011 6,409 Revenue return £000 14 20 34 2010 Capital return £000 44 44 Total £000 58 20 78 A summary of the terms of the management agreement with Javelin Capital LLP is given in the Directors’ Report on pages 21 and 22. At 30 September 2010, an amount of £58,000 was outstanding for payment of investment management fees when due (2009: £nil) and outstanding administration fees of £20,000 (2009: £nil). The Manager is also entitled to a performance fee in accordance with the provisions of the management agreement, the calculation of which is also described in the Directors’ Report on page 22 . No performance fee is due in respect of the year ended 30 September 2010 (2009: £nil). 50 MAJEDIE INVESTMENTS PLC 5 Administration Expenses Staff costs – note 7 Other staff costs and directors’ fees Advisers’ costs Relocation costs Information costs Establishment costs Operating lease rentals – premises Depreciation on tangible assets Auditors’ remuneration (see below) Pre start-up costs Other expenses Group 2010 £000 851 232 498 129 132 132 84 66 2,516 482 Group 2009 £000 1,165 314 410 128 146 113 139 58 59 334 Company 2010 £000 768 232 444 82 113 132 64 52 627 259 Company 2009 £000 1,165 314 410 128 146 113 139 58 56 337 5,122 2,866 2,773 2,866 Pre start-up costs of £2,516,000 relate to costs incurred by Javelin Capital LLP prior to 1 September 2010. These costs comprise staff costs of £1,085,000; IT costs of £320,000; Advisors costs of £400,000, other costs of £ 84,000 and set up costs of £627,000. A charge of £1,390,000 (2009: £nil) to capital and an equivalent credit to revenue has been made in the Group and a charge of £1,167,000 (2009: £1,359,000) in the Company has been made to recognise the accounting policy of charging 75% of direct investment management expenses to capital. Total fees charged by the Auditors for the year, all of which were charged to revenue, comprised: Audit services – statutory audit Other non-audit services Group 2010 £000 60 6 Group 2009 £000 53 6 Company 2010 £000 Company 2009 £000 46 6 50 6 66 59 52 56 6 Directors’ Emoluments – Company Salaries and fees Bonuses Pension contributions Other benefits 2010 £000 332 2009 £000 282 The Report on Directors’ Remuneration on pages 28 to 30 explains the Company’s policy on remuneration for directors for the year. It also provides further details of directors’ remuneration. 332 282 REPORT & ACCOUNTS 2010 51 Notes to the Accoun ts 7 Staff Costs including Executive Directors Salaries and other payments Social security costs Pension contributions Share based remuneration – note 24 Group 2010 £000 684 73 30 64 Group 2009 £000 724 126 64 251 Company 2010 £000 607 67 30 Company 2009 £000 724 126 64 64 251 851 1,165 768 1,165 Group 2010 Number Group 2009 N umber Company 2010 Number Company 2009 N umber Average number of employees: Management and office staff 8 Finance Costs – Group and Company 17 5 7 5 Interest on 9.5% debenture stock 2020 Interest on 7.25% debenture stock 2025 Amortisation of expenses associated with debenture issue 2010 Revenue Capital return return Total £000 £000 £000 962 1,283 321 3 75 1,12 5 1,50 0 1 9 1 4 5 2009 Revenue Capital return return Total £000 £000 £000 321 962 1,283 375 1,126 1,501 18 12 6 701 2,101 2,802 702 2,100 2,802 Further details of the debenture stocks in issue are provided in note 17. 9 Taxation Analysis of tax charge – Group and Company Tax on overseas dividends Group 2010 £000 131 Group 2009 £000 92 Company 2010 £000 Company 2009 £000 131 92 Reconciliation of tax charge: The current taxation for the year is higher than the standard rate of corporation tax in the UK (28%), (2009: 28%). The differences are explained below: Net return before taxation Taxation at UK Corporation Tax rate of 28% (2009: 28%) Group 2010 £000 (192) Group 2009 £000 (22,857) Company 2010 £000 2,127 Company 2009 £000 (22,857) (54) (6,400) 595 (6,400) 52 MAJEDIE INVESTMENTS PLC  9 Taxation continued Effects of: – UK dividends which are not taxable – foreign dividends which are not taxable – losses on investments which are not taxable – expenses charged to capital reserve – expenses not deductible for tax purposes – excess expenses for current year – group relief surrendered – overseas taxation which is not recoverable – offset relief for foreign WHT Group 2010 £000 (2,455) (302) 661 221 1,929 131 Group 2009 £000 Company 2010 £000 Company 2009 £000 (1,551) (102) 6,643 (231) 107 1,550 92 (16) (2,455) (1,551) (302) 661 227 1,274 131 (102) 6,643 (231) 1,550 107 92 (16) Actual current tax charge 131 92 131 92 Group After claiming relief against accrued income taxable on receipt, the Group has unrelieved excess expenses of £54,432,000 (2009: £47,543,000). It is not yet certain that the Group will generate sufficient taxable income in the future to utilise these expenses and therefore no deferred tax asset has been recognised. Company After claiming relief against accrued income taxable on receipt, the Company has unrelieved excess expenses of £52,093,000 (2009: £47,543,000). It is not yet certain that the Company will generate sufficient taxable income in the future to utilise these expenses and therefore no deferred tax asset has been recognised. The allocation of expenses to capital does not result in any tax effect. Due to the Company’s status as an investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. 10 Dividends – Group and Company The following table summarises the amounts recognised as distributions to equity shareholders in the period: 2008 Special dividend of 2.25p paid on 28 January 2009 2008 Final dividend of 6.30p paid on 28 January 2009 2009 Interim dividend of 4.20p paid on 30 June 2009 2009 Final dividend of 6.30p paid on 27 January 2010 2010 Special dividend of 2.50p paid on 8 March 2010 2010 Interim dividend of 4.20p paid on 30 June 2010 2010 £000 3,277 1,301 2,185 2009 £000 1,170 3,276 2,185 6,763 6,631 REPORT & ACCOUNTS 2010 53 Notes to the Accounts 10 Dividends – Group and Company continued Proposed final dividend for the year ended 30 September 2010 of 6.30p (2009: final dividend of 6.30p) per ordinary share 2010 £000 3,277 2009 £000 3,277 3,277 3,277 The proposed final dividend has not been included as a liability in these accounts in accordance with IAS 10: Events after the Balance Sheet date. Set out below is the total dividend to be paid in respect of the financial year. This is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered. Interim dividend for the year ended 30 September 2010 of 4.20p (2009: 4.20p) per ordinary share Proposed final dividend for the year ended 30 September 2010 of 6.30p (2009: 6.30p) per ordinary share Special dividend for the year ended 30 September 2010 of 2.50p (2009: nil p) per ordinary share 11 Return per Ordinary Share – Group and Company 2010 £000 2,185 3,277 1,301 2009 £000 2,185 3,277 6,763 5,462 Basic return per ordinary share is based on 52,022,510 (2009: 51,973,767) ordinary shares, being the weighted average number of shares in issue having adjusted for the shares held by the Employee Incentive Trust referred to in note 19. Basic returns per ordinary share are based on the net return after taxation attributable to equity shareholders. There is no dilution to the basic return per ordinary share shown for the years ended 30 September 2010 and 2009 since the share options referred to in note 19 would, if exercised, be satisfied by the shares already held by the Employee Incentive Trust. Group Basic and diluted revenue returns are based on net revenue after taxation of: Basic and diluted capital returns are based on net capital return of: Basic and diluted total returns are based on return of: Company Basic and diluted revenue returns are based on net revenue after taxation of: Basic and diluted capital returns are based on net capital return of: Basic and diluted total returns are based on return of: 2010 £000 6,156 (6,479) 2010 £000 8,237 (6,241) 2009 £000 4,233 (27,182) (323) (22,949) 2009 £000 4,233 (27,182) 1,996 (22,949) 54 MAJEDIE INVESTMENTS PLC 12 Property and Equipment – Group Cost: At 30 September 2009 Additions Disposals At 30 September 2010 Depreciation: At 30 September 2009 Charge for year Disposals At 30 September 2010 Net book value: At 30 September 2010 At 30 September 2009 12 Property and Equipment continued – Company Cost: At 30 September 2009 Additions Disposals At 30 September 2010 Depreciation: At 30 September 2009 Charge for year Disposals At 30 September 2010 Net book value: At 30 September 2010 At 30 September 2009 Leasehold Improvements £000 171 Office Equipment £000 329 420 (255) Total £000 500 420 (255) 171 494 665 6 17 270 67 (226) 276 84 (226) 23 148 165 111 383 59 134 531 224 Leasehold Improvements £000 171 Office Equipment £000 329 90 (255) Total £000 500 90 (255) 171 164 335 6 17 270 47 (226) 276 64 (226) 23 148 165 91 73 59 114 221 224 REPORT & ACCOUNTS 2010 55 Notes to the Accounts 13 Investments at Fair Value Through Profit or Loss – Group and Company Listed £000 2010 Unlisted £000 Total £000 Listed £000 2009 Unlisted £000 Total £000 Opening cost at beginning of year Gains/(losses) at beginning of year 104,461 6,796 13, 450 117,911 29,380 22,584 169,975 (21,638) 9,971 179,946 (965) 20,673 Opening fair value at beginning of year 111,257 36,034 147,291 148,337 30,644 178,981 Purchases at cost Sales – proceeds Gains/(losses) on sales (Decrease)/increase in investment holding gains Adjustments for listing/delisting during financial year 55,988 (55,401) 5,903 55,988 (55,495) 5,796 (94) (107) 58,826 (66,843) (54,068) 50 58,876 (66,843) (54,068) (6,427) (1,730) (8,157) 28,434 1,911 30,345 (785) 785 (3,429) 3,429 Closing fair value at end of year 110,535 34,888 145,423 111,257 36,034 147,291 Closing cost at end of year Gains at end of year 110,166 369 14,03 4 124,20 0 21,22 3 20,85 4 104,461 6,796 13,450 117,911 29,380 22,584 Closing fair value at end of year 110,535 34,888 145,423 111,257 36,034 147,291 Unlisted investments include an amount of £4,330,000 in 22 various companies, £30,000,000 for our investment in MAM as detailed on page 57 and £558,000 (2009: £569,000) of loan or convertible notes that pay a fixed rate of interest. The valuation of investments on pages 13 and 14 includes 10 unlisted investments of over £100,000 (including MAM). During the year the Company incurred transaction costs amounting to £296,000 (2009: £374,000) of which £186,000 (2009: £243,000) related to the purchases of investments and £110,000 (2009: £131,000) related to the sales of investments. These amounts are included in losses on investments at fair value through profit or loss, as disclosed in the Consolidated and Company Statement of Comprehensive Income. The composition of the investment return is analysed below: Net gains/(loss) on investments (Decrease)/increase in holding gains on investments 2010 £000 5,796 (8,157) 2009 £000 (54,068) 30,345 (2,361) (23,723) Substantial Share Interests The Company has a number of investee company holdings where its investment is greater than 3% of any class of capital in those companies. Those that are considered material (excluding MAM which is disclosed separately below) in the context of these accounts are shown below: Javelin Global Equity Strategies Fund Capital Lease Aviation Fair Value £000 19,738 422 % of Class Held 100.000 3.195 56 MAJEDIE INVESTMENTS PLC  13 Investments at Fair Value Through Profit or Loss – Group and Company continued The Company has provided seed capital to the Javelin Capital Global Equity Strategies Fund. The fund is being actively marketed to potential external investors and it is forecast that the Company’s interest will reduce significantly in the future. The Company does not exercise significant influence over the operating and financial policies of the above companies which are therefore not considered to be associated companies. Majedie Asset Management The Company has maintained a 30% equity shareholding in MAM, which provides investment management and advisory services relating to UK equities. The carrying value of the Company’s investment in MAM is included in the Consolidated Balance Sheet as part of investments at fair value through profit or loss: Deemed cost of investment Holding gains Fair value at 30 September 2010 £000 1,207 28,793 2009 £000 1,207 28,793 30,000 30,000 The carrying value of MAM in the 30 September 2010 Consolidated Financial Statements is its fair value as assessed at 30 September 2010. The above valuation exercise was carried out by the Board in accordance with the Company’s accounting policy for the valuation of unlisted investments. The approach adopted involved the consideration of earnings for the 2010 and the 2011 financial years, the inclusion of estimated performance fee income on a discounted basis, the application of a relevant market-based multiple to earnings and an overall illiquidity discount. The results of MAM for the year ended 30 September 2010 show a net profit after taxation of £14,399,000 (2009: £14,222,000) and shareholders’ funds of £18,192,000 (2009: £25,945,000). In accordance with the review of the treatment of the investment in MAM these results are not consolidated in the Group’s results but are incorporated into the directors’ valuation of the fair value of MAM as detailed above. 14 Investment in Subsidiaries – Company Company Cost: At beginning of year Additions Disposals At end of year Impairment: At beginning of year Impairment in year At end of year Valuation at end of year 2010 £000 1,000 4,510 (839) 2009 £000 1,002 (2) 5,510 1,000 (808) (31) (839) 4,671 (839) 161 All operating subsidiaries are held at cost, less any permanent diminution, unless considered to be an investment and then held at fair value. REPORT & ACCOUNTS 2010 57 Notes to the Accounts 14 Investment in Subsidiaries – Company a) Subsidiary undertakings at 30 September 2010 Company and business Majedie Portfolio Management Limited – Majedie share plan manager, authorised and regulated by the FSA Majedie Unit Trust – Unauthorised unit trust to receive Javelin Capital income Javelin Capital LLP – Asset Management Javelin Capital Services Limited – Administration Services Javelin Capital Fund Management Limited – Asset Management Ireland Javelin Capital EBT – E mployee Benefit Trust Guernsey Country of Registration Incorporation and Operation Number and class of shares held by group Group Holding Capital Reserves at 30.09.10 £000 Profit after tax for the year ended 30.09.10 £000 UK UK UK UK 100% 162 100% 10 70% 2,120 (2,308) 70% 70% 118 ( 7) 70% 1,000,000 Ordinary shares 10,000 Units 70% interest 100 Ordinary shares 125,000 Ordinary shares £200 Trust capital Javelin Capital Services Limited, Javelin Capital Fund Management Limited and the Javelin Capital EBT are all wholly owned subsidiaries of Javelin Capital LLP. b) Minority Interest In accordance with the Company’s accounting policies and the income and loss recognition provisions of the Limited Liability Partner Agreement for Javelin Capital LLP there is no minority interest to be recognised in the Consolidated Statement of Comprehensive Income or Balance Sheet. 15 Trade and Other Receivables Sales for future settlement Payments in advance Dividends receivable Accrued income Taxation recoverable Amounts due from subsidiary undertakings Group 2010 £000 832 451 346 17 45 Group 2009 £000 1,078 435 343 18 23 Company 2010 £000 832 36 346 17 45 Company 2009 £000 1,078 43 4 343 18 23 1,691 1,897 1,676 1,986 400 90 58 MAJEDIE INVESTMENTS PLC 16 Cash and Cash Equivalents Deposits Other balances Group 2010 £000 4,903 635 Group 2009 £000 11,830 554 Company 2010 £000 2,686 371 Company 2009 £000 11,856 275 5,538 12,384 3,057 12,131 17 Trade and Other Payables Amounts falling due within one year: Purchases for future settlement Accrued expenses Other creditors Group 2010 £000 598 449 1,196 Group 2009 £000 2,618 590 645 Company 2010 £000 598 522 671 Company 2009 £000 2,618 589 645 2,243 3,853 1,791 3,852 Amounts falling due after more than one year: £13.5m (2009: £13.5m) 9.5% debenture stock 2020 £20.7m (2009: £20.7m) 7.25% debenture stock 2025 Group 2010 £000 13,384 20,397 Group 2009 £000 13,376 20,386 Company 2010 £000 Company 2009 £000 13,384 20,397 13,376 20,386 33,781 33,762 33,781 33,762 Both debenture stocks are secured by a floating charge over the Company’s assets. Expenses associated with the issue of debenture stocks were deducted from the gross proceeds and are being accounted for, at a constant rate, the effect of which is immaterially different to applying the effective interest rate method, over the life of the debentures. Further details on interest and the amortisation of issue expenses are provided in note 8. 18 Called Up Share Capital Allotted and fully paid at 30 September: 52,528,000 (2009: 52,528,000) ordinary shares of 10p each 2010 £000 5,253 2009 £000 5,253 There are 505,490 (2009: 505,490) ordinary shares of 10p each held by the Employee Incentive Trust. See note 19. Ordinary shares carry one vote each on a poll. REPORT & ACCOUNTS 2010 59 Notes to the Accounts 19 Own Shares – Group and Company The total number of options outstanding at the date of this report is 309,080 under the LTIP and the total shareholding of the Trust is 505,490 ordinary shares. The shares will be held by the Trust until the relevant options are exercised or until they lapse. They are presented on the Balance Sheet as a deduction from shareholders’ funds, in accordance with the policy detailed in note 1. As at 30 September 2009 Net movements As at 30 September 2010 20 Net Asset Value Number of Shares 505,490 Own Shares Reserve £000 (1,702) 505,490 (1,702) The consolidated net asset value per share has been calculated based on equity shareholders’ funds of £117,159,000 (2009: £124,181,000) and on 52,022,510 (2009: 52,022,510) ordinary shares, being the shares in issue at the year end having deducted the number of shares held by the EIT. 21 Analysis of Changes in Net Debt Group Cash at bank Debt due after one year At 30 September 2009 £000 12,384 (33,762) Cash Flows £000 (6,846) Non Cash Items £000 (19) At 30 September 2010 £000 5,538 (33,781) (21,378) (6,846) (19) (28,243) Company Cash at bank Debt due after one year At 30 September 2009 £000 12,131 (33,762) Cash Flows £000 (9,074) Non Cash Items £000 (19) At 30 September 2010 £000 3,057 (33,781) (21,631) (9,074) (19) (30,724) 22 Operating Lease Commitments The Group has a 10 year non-cancellable operating lease (with a break clause in 5 years) in respect of premises, including a rent free period. The rent free element has been apportioned over the lease up to the date of the break clause. The Group has an annual commitment at 30 September 2010 under the new lease of £145,000 (2009: £145,000). This operating lease commitment is disclosed in the table below: Expiry Date Within one year Between one and two years Between two and three years Between three and four years Five years and above 2010 £000 145 145 145 35 470 2009 £000 121 145 145 145 35 591 60 MAJEDIE INVESTMENTS PLC 23 Financial Commitments At 30 September 2010 the Group had no financial commitments which had not been accrued for (2009: none). 24 Share-based Payments The Group currently operates one share-based payment scheme being the 2006 Long Term Incentive Plan (LTIP) which in turn has two sections relating to TSR-based Awards and Matching Awards. The previous scheme, the Discretionary Share Option Scheme 2000, closed during the year . With the introduction of Javelin Capital LLP and resultant employee transfers from the Company no further awards will be made under the LTIP. Javelin Capital LLP does not operate any share-based payment schemes. Discretionary Share Option Scheme 2000 The remaining options under the scheme lapsed during the year and the scheme was closed. Long Term Incentive Plan: TSR-based Awards Awards of restricted shares up to a maximum value of one year’s salary have performance conditions based on total shareholder return in relation to two separate performance conditions over a period of five years. The performance conditions contain higher and lower thresholds that determine the extent of the vesting of the award. Long Term Incentive Plan: Matching Awards Executive directors and senior executives receive a certain percentage of their overall bonus for the year in deferred shares. The shares granted according to these matching awards only vest once the executive has completed three years’ further service. There are no other performance conditions. Outstanding at 1 October 2009 During the year: Awarded Forfeited Exercised Expired Increase in awards due to dividends paid Outstanding at 30 September 2010 Exercisable at 30 September 2010 Discretionary Share Option Scheme 2000 Weighted No. Average of Exercise Options Price (p) 2010 TSR-based Awards Weighted No. Average of Exercise Options Price (p) 0.0 Matching Awards Weighted No. Average of Exercise Options Price (p) 0.0 17,071 106,656 330.03 166,427 112,721 0.0 (106,656) 330.03 12,120 291,268 0.0 0.0 741 17,812 0.0 0.0 REPORT & ACCOUNTS 2010 61 Notes to the Accounts 24 Share-based Payments continued Discretionary Share Option Scheme 2000 2009 TSR-based Awards Matching Awards Outstanding at 1 October 2008 During the year: Awarded Forfeited Exercised Expired Increase in awards due to dividends paid Weighted No. Average of Exercise Price (p) Weighted No. Average of Exercise Price (p) Options Options 255,803 330.09 369,394 Options 0.0 213,085 Weighted No. Average of Exercise Price (p) 0.0 106,207 (149,147) 330.14 (30,925) (290,498) 12,249 0.0 0.0 0.0 0.0 0.0 (197,272) 1,258 17,071 0.0 0.0 0.0 Outstanding at 30 September 2009 106,656 330.03 166,427 Exercisable at 30 September 2009 The aggregate estimated fair value of the 112,721 TSR-based awards on 8 December 2009, being the date on which the awards were granted was £154,000 (2009: £51,000 relating to the aggregate estimated fair value of 106,207 options granted on 4 December 2008). There were no matching awards granted in 2010 or in 2009. During the year 106,656 share options lapsed in accordance with the leaving agreement for a former director. The awards outstanding at 30 September 2010 had a weighted average remaining contractual life of 3.4 years and 0.13 years in respect of the TSR-based Awards and Matching Awards respectively (200 9: 0.2 years for the Discretionary Share Options Scheme 2000 and then 3. 9 years and 2.1 years respectively). Awards and options are usually forfeited if the employee leaves employment before vesting. The following table lists the assumptions and weighted average inputs used in the Black Scholes model for share awards granted in the year: Weighted Average share price Weighted Average exercise price Expected Volatility Expected Life Risk Free rate Expected dividends 2010 TSR-based Awards 200.0p 0.0p 34.0% 5 yrs 2.5% 5.25% 2009 TSR-based Awards 162.5p 0.0p 33.0% 5 yrs 3.0% 6.5% Expected volatility was determined by calculating the historical volatility of the Company’s share price over the last three years. The expected life used in the model had been adjusted, based on the management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. For the year ended 30 September 2010, the Company recognised a total share options expense of £64,000 (2009: £251,000 including a one-off vesting charge of £191,000) relating to share-based payment transactions in the year ended 30 September 2010. 62 MAJEDIE INVESTMENTS PLC 25 Financial Instruments and Risk Profile As an investment trust, the Company invests in securities for the long term in order to achieve its investment objective as stated on page 1. Accordingly it is the Board’s policy that no trading in investments or other financial instruments be undertaken. The Group’s financial instruments comprise its investment portfolio – see note 1 3, cash balances, debtors and creditors that arise directly from its operations such as sales and purchases awaiting settlement and accrued income, and the debenture loans used to finance its operations. The Company is unlikely to use derivatives for hedging purposes and then only in exceptional circumstances with the specific prior approval of the Board. In pursuing its investment objective the Company is exposed to various risks which could cause short term variation in the Group’s net assets and which could result in both or either a reduction in the Group’s net assets or a reduction in the profits available for distribution by way of dividend. The main risk exposures for the Group from its financial instruments are market risk (including currency risk, interest rate risk and other price risk), liquidity risk and credit risk. The Board sets the overall investment strategy and has in place various controls and limits and receives various reports in order to monitor the Group’s exposure to these risks. The risk management policies identified in this note have not changed materially from the previous accounting period. Market Risk The principal risk in the management of the portfolio is market risk i.e. the risk that values and future cashflows will fluctuate due to changes in market prices. This comprises: (cid:129) (cid:129) (cid:129) foreign currency risk; interest rate risk; and other price risk i.e. movements in the value of investment holdings caused by factors other than interest rate or currency movements. These risks are taken into account when setting investment policy and making investment decisions. Foreign Currency Risk Exposure to foreign currency risk arises through investments in securities listed on overseas stock markets. A proportion of the net assets of the Group are denominated in currencies other than sterling, with the effect that the balance sheet and total return can be materially affected by currency movements. The Group’s exposure to foreign currencies through its investments in overseas securities as at 30 September 2010 was £51,717,000 (2009: £37,02 6,000). The Investment Manager monitors the Group’s exposure to foreign currencies and the Board receives reports on a regular basis. In making investment decisions the Investment Manager is mindful of the Group’s benchmark allocation to foreign currencies but takes independent positions based on a long term view on the relative strengths and weaknesses of currencies. Additionally the currency of investment is not the only relevant factor considered as many portfolio investment companies are global in scope and nature. The Group does not normally hedge against foreign currency movements. REPORT & ACCOUNTS 2010 63 Notes to the Accounts 25 Financial Instruments and Risk Profile continued The currency risk of the Group and Company’s financial assets and liabilities at the Balance Sheet date was: Monetary exposures UK sterling Non-monetary exposures US dollar Euro Hong Kong dollar Swiss franc Singapore dollar Phillipine peso Japanese yen Australian dollar UK sterling Group 2010 £000 37,173 6,579 3,167 828 578 491 2,476 425 95,928 Group 2009 £000 Company 2010 £000 Company 2009 £000 5,538 12,384 3,057 12,131 18,804 8,940 2,021 1,623 735 4,376 526 112,387 37,173 6,579 3,167 828 578 491 2,476 425 100,274 18,804 8,940 2,021 1,623 735 4,376 526 112,637 Total assets 153,183 161,796 155,048 161,793 147,645 149,412 151,991 149,662 Liabilities Monetary exposures UK sterling Non-monetary exposures UK sterling (33,781) (33,762) (33,781) (33,762) (2,243) (3,853) (1,791) (3,852) (36,024) (37,615) (35,572) (37,614) Net assets 117,159 124,181 119,476 124,179 Sensitivity analysis A 5% increase in sterling at 30 September 2010 against the relevant foreign currencies, with all other variables held constant, would have had the effect of reducing the Group and Company’s net assets and total return by £2,586,000 (2009: £1,851,000). A 5% decrease in sterling would have had the equal and opposite effect. Interest Rate Risk The Group’s direct interest rate risk exposure affects the interest received on cash balances and the fair value of its fixed rate portfolio investments and debentures. Indirect exposure to interest rate risk arises through the effect of interest rate changes on the valuation of the investment portfolio. The vast majority of the financial assets held by the Group are equity shares, which pay dividends, not interest. The Group may however from time to time hold small investments which pay a fixed rate of interest. The Board sets limits for cash balances and receives regular reports on the cash balances of the Group. The Group’s fixed rate debentures introduce an element of gearing to the Group which is monitored within limits and reported to the Board. Cash balances are used to manage the level of gearing within a range set by the Board. The Board sets an overall investment strategy and also has various limits on the investment portfolio which aim to spread the portfolio investments to reduce the impact of interest rate risk on company valuations. Regular reports are received by the Board in respect of the Group’s investment portfolio and the respective limits. 64 MAJEDIE INVESTMENTS PLC  25 Financial Instruments and Risk Profile continued The interest rate risk profile of the Group’s financial assets and liabilities at the Balance Sheet date was: Floating rate financial assets UK sterling Fixed rate financial assets As referred to in note 13 Financial assets not carrying interest Group 2010 £000 5,538 558 Group 2009 £000 12,384 569 Company 2010 £000 Company 2009 £000 7,557 558 12,131 569 147,087 148,843 146,933 149,093 Total assets 153,183 161,796 155,048 161,793 Fixed rate financial liabilities UK sterling Financial liabilities not carrying interest UK sterling (33,781) (33,762) (33,781) (33,762) (2,243) (3,853) (1,791) (3,852) Total liabilities Net assets (36,024) (37,615) (35,572) (37,614) 117,159 124,181 119,476 124,179 Floating rate financial assets usually comprise cash on deposit which is repayable on demand and receive a rate of interest based on the base rates in force over the period. The Company balance includes the £4 .5 m investment in Javelin Capital LLP which receives a commercial rate of interest from 31 August 2010 until full repayment occurs in accordance with the terms of the LLP Agreement. Fixed rate financial assets comprise convertible bonds or loan notes. The fixed rate financial liabilities comprise the Group and Company’s debentures totalling £34.2m nominal. They pay a weighted average rate of interest of 8.1% per annum and mature in 2020 (£13.5m) and 2025 (£20.7m). Sensitivity analysis Movements in interest rates would not have had a significant direct impact on net assets or total return but could indirectly, have a material, but unquantifiable impact on the investments held. Other Price Risk Exposure to market price risk is significant and comprises mainly movements in the market prices and hence value of the Company’s listed equity investments which are disclosed in note 13 on page 56. The Group also has unlisted investments which are indirectly impacted by movements in listed equity prices and related variables. The Board sets an overall investment strategy to achieve a spread of investments across sectors and regions in order to reduce risk. Investments are considered independently of the Company’s benchmark which may result in volatility in the short term. The Board receives reports on the investment portfolio, performance and volatility on a regular basis in order to ensure that the investment portfolio is in accordance with current strategy. Sensitivity analysis A 5% increase in listed equity valuations at 30 September 2010 would have increased total assets and total return by £5,527,000 (2009: £5,563,000). A 5% decrease in listed equity valuations would have had the equal but opposite effect. REPORT & ACCOUNTS 2010 65 Notes to the Accounts 25 Financial Instruments and Risk Profile continued Credit Risk Credit risk is the risk of other parties failing to discharge an obligation causing the Group financial loss. The Group’s exposure to credit risk is managed by the following: (cid:129) (cid:129) (cid:129) (cid:129) The Company’s listed investments are held on its behalf by RBC Dexia Investor Services Trust, the Company’s custodian which if it became bankrupt or insolvent could cause the Company’s rights with respect to securities held to be delayed. The Company receives regular internal control reports from the Custodian which are reviewed by Management and reported to the Board; Investment transactions are undertaken by the Investment Manager with a number of approved brokers in the ordinary course of business. All new brokers are reviewed by the Investment Manager for credit worthiness and added to an approved brokers list if not considered to be a credit risk; Cash is held at banks that are considered to be reputable and high quality. Cash balances are spread across a range of banks to reduce concentration risk; and Where the Company makes an investment in a loan or other security with credit risk, that credit risk is assessed and considered as part of the investment decision making process by the Investment Manager. The Board receives regular reports on the composition of the investment portfolio. Credit Risk Exposure At 30 September 2010, Group cash balances total £5,538,000 (2009: £12,384,000), Group debtors and prepayments total £1,691,000 (2009: £1,897,000). Company cash balances total £3,057,000 (2009: £12,131,000), Company debtors and prepayments total £1,676,000 (2009: £1,986,000). Also included within the Company’s investment portfolio are a number of convertible notes or loan notes designated at fair value through profit or loss. The total value of these notes are £558,000 (2009: £569,000). One loan note with a cost of £422,000 is currently impaired and has been written down to £nil. The minimum exposure to credit risk during the year was £16,373,000 (Company: £16,210,000) and the maximum exposure was £7,787,000 (Company: £5,290,000). Liquidity Risk Liquidity risk is the risk that the Group will encounter difficulties meeting its obligations as they fall due. Liquidity risk is not significant as the majority of the Company’s assets are investments in quoted equities and other quoted securities that are readily realisable. The Board has various limits in respect of how much of the Company’s resources can be invested in any one company. The unlisted investments in the portfolio are subject to liquidity risk but such investments are subject to limits set by the Board and liquidity risk is taken into account by the directors when arriving at their valuation. The Company maintains an appropriate level of cash balances in order to finance its operations and the Investment Manager regularly monitors the Company’s cash balances to ensure all known or forecasted liabilities can be met. The Board receives regular reports on the level of the Company’s cash balances. The Company does not have any overdraft or other borrowing facilities to provide liquidity. A maturity analysis of financial liabilities showing the remaining contractual maturities is detailed below: Undiscounted cash flows Group 2010 9.5% debenture stock 2020 7.25% debenture stock 2025 Interest on financial liabilities Trade payable and other liabilities (excluding social security and sundry taxes) Due within 1 year £000 2,783 2,243 5,026 66 MAJEDIE INVESTMENTS PLC Due between Due between Due 3 years and beyond 2 and 3 years 1 and 2 years £000 £000 £000 13,500 20,700 26,433 2,783 2,783 Total £000 13,500 20,700 34,782 2,243 2,783 2,783 60,633 71,225 Due between Due 3 years and beyond 2 and 3 years £000 £000 13,500 20,700 29,216 2,783 Total £000 13,500 20,700 37,565 3,853 2,783 2,783 2,783 63,416 75,618 Due between Due between Due 3 years and beyond 2 and 3 years 1 and 2 years £000 £000 £000 13,500 20,700 26,433 2,783 2,783 Total £000 13,500 20,700 34,782 1,791 2,783 2,783 60,633 70,773 25 Financial Instruments and Risk Profile continued Due within 1 year £000 Due between 1 and 2 years £000 Undiscounted cash flows Group 2009 9.5% debenture stock 2020 7.25% debenture stock 2025 Interest on financial liabilities Trade payable and other liabilities (excluding social security and sundry taxes) Undiscounted cash flows Company 2010 9.5% debenture stock 2020 7.25% debenture stock 2025 Interest on financial liabilities Trade payable and other liabilities (excluding social security and sundry taxes) Undiscounted cash flows Company 2009 9.5% debenture stock 2020 7.25% debenture stock 2025 Interest on financial liabilities Trade payable and other liabilities (excluding social security and sundry taxes) 2,783 3,853 6,636 Due within 1 year £000 2,783 1,791 4,574 2,783 3,852 6,635 Due within 1 year £000 Due between 1 and 2 years £000 Due between Due 3 years and beyond 2 and 3 years £000 £000 13,500 20,700 29,216 2,783 Total £000 13,500 20,700 37,565 3,852 2,783 2,783 2,783 63,416 75,617 Fair value of financial assets and liabilities The Group’s financial instruments at 30 September comprised the following: Group Financial assets Investment portfolio Cash Financial liabilities £13.5m (2009: £13.5m) 9.5% debenture stock 2020 £20.7m (2009: £20.7m) 7.25% debenture stock 2025 Book Value 2010 £000 145,423 5,538 13,384 20,397 Book Value 2009 £000 147,291 12,384 13,376 20,386 Fair Value 2010 £000 145,423 5,538 17,532 23,473 Fair Value 2009 £000 147,291 12,384 16,462 21,870 REPORT & ACCOUNTS 2010 67 Notes to the Accounts 25 Financial Instruments and Risk Profile continued Company Financial assets Investment portfolio Cash Financial liabilities £13.5m (2009: £13.5m) 9.5% debenture stock 2020 £20.7m (2009: £20.7m) 7.25% debenture stock 2025 Book Value 2010 £000 145,423 3,057 13,384 20,397 Book Value 2009 £000 147,291 12,131 13,376 20,386 Fair Value 2010 £000 145,423 3,057 17,532 23,473 Fair Value 2009 £000 147,291 12,131 16,462 21,870 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 calculated using Discounted Cash Flow analysis and by reference to the redemption yields of a similar company’s debt instrument, with an appropriate margin spread added. Fair value hierarchy disclosures The Group has adopted the amendment to IFRS 7, effective 1 January 2009. This requires the Group to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following three levels: (cid:129) Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date. Quoted prices provided by external pricing services, brokers and vendors are included in Level 1, if they reflect actual and regularly occurring market transactions on an arms length basis. (cid:129) Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 2 inputs include the following: (cid:129) quoted prices for similar (ie not identical) assets in active markets. (cid:129) quoted prices for identical or similar assets or liabilities in markets that are not active. Characteristics of an inactive market include a significant decline in the volume and level of trading activity, the available prices vary significantly over time or among market participants or the prices are not current. (cid:129) inputs other than quoted prices that are observable for the asset (for example, interest rates and yield curves observable at commonly quoted intervals). (cid:129) inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (market-corroborated inputs). (cid:129) Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs). The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. 68 MAJEDIE INVESTMENTS PLC  25 Financial Instruments and Risk Profile continued The determination of what constitutes ‘observable’ requires significant judgement by the Group. The Group considers observable data to investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the Balance sheet date, without adjustment for transaction costs necessary to realise the asset. The table below sets out fair value measurements of financial assets in accordance with the IFRS fair value hierarchy system: Financial Assets at fair value through profit or loss at 30 September 2010 Group Equity investments Convertible bonds Convertible loan notes Preference shares Financial Assets at fair value through profit or loss at 30 September 2010 Company Equity investments Convertible bonds Convertible loan notes Preference shares Total £000 144,789 260 298 76 145,423 Total £000 149,46 0 260 298 76 150,09 4 Level 1 £000 110,464 71 110,535 Level 1 £000 110,464 71 110,535 Level 2 £000 Level 2 £000 Level 3 £000 34,325 260 298 5 34,888 Level 3 £000 38,99 6 260 298 5 39,5 59 Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1, include active listed equities. The Group does not adjust the quoted price for these instruments. Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. As level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. Investments classified within level 3 have significant unobservable inputs. Level 3 instruments include private equity and corporate debt securities. As observable prices are not available for these securities, the Group has used valuation techniques to derive the fair value. In respect of unquoted instruments, or where the market for a financial instrument is not active, fair value is established by using recognised valuation methodologies, in accordance with International Private Equity and Venture Capital (“IPEVC”) Valuation Guidelines. New investments are initially carried at cost, for a limited period, being the price of the most recent investment in the investee. This is in accordance with IPEVC Guidelines as the cost of recent investments will generally provide a good indication of fair value. Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. REPORT & ACCOUNTS 2010 69 Notes to the Accounts 25 Financial Instruments and Risk Profile continued The following table presents the movement in level 3 instruments for the period ended 30 September 2010: Group Opening balance Purchases Transfers from Level 1 Sales – proceeds Total (losses)/gains for the year included in the income statement Company Opening balance Purchases Transfers from Level 1 Sales – proceeds Total (losses)/gains for the year included in the income statement Capital Management Policies and Procedures The Group’s capital management objectives are: Total £000 36,034 785 (94) Equity investments £000 35,465 Convertible bonds £000 274 Convertible loan notes £000 294 Preference shares £000 1 785 (94) (1,837) (1,831) 34,888 34,325 (14) 260 4 298 4 5 Total £000 36,19 5 4,510 785 (94) Equity investments £000 35,62 6 4,510 785 (94) Convertible bonds £000 274 Convertible loan notes £000 294 Preference shares £000 1 (1,837) (1,831) 39,5 59 38,99 6 (14) 260 4 298 4 5 (cid:129) (cid:129) to ensure that it is able to continue as a going concern; and to maximise the revenue and capital returns to its equity shareholders through an appropriate mix of equity capital and debt. The Board sets a range for the Company’s net debt (comprised of debentures less cash) at any one time which is maintained by management of the Company’s cash balances. The Company’s capital at 30 September comprises: Net debt Cash Debentures Sub total Equity Equity share capital Retained earnings and other reserves Sub total Net debt as a percentage of net assets 2010 £000 (3,057) 33,781 2009 £000 (12,131) 33,762 30,724 21,631 5,253 114,223 5,253 118,926 119,476 25.7% 124,179 17.4% 70 MAJEDIE INVESTMENTS PLC  25 Financial Instruments and Risk Profile continued The Board monitors and reviews the broad structure of the Company’s capital on an ongoing basis. The review includes: (cid:129) (cid:129) the level of net gearing, taking into account the Investment Manager’s views on the market; the level of the Company’s free float of shares as the Barlow family owns approximately 55% of the share capital of the Company; and (cid:129) the extent to which revenue in excess of that required to be distributed should be retained. These objectives, policies and processes for managing capital are unchanged from the prior period. The Company is subject to various externally imposed capital requirements: (cid:129) (cid:129) the debentures are not to exceed in aggregate 66 2/3% of adjusted share capital and reserves in accordance with the respective Trust Deeds; and the Company has to comply with statutory requirements regarding minimum share capital and restriction tests relating to dividend distributions. These requirements are unchanged since last year and the Company has complied with them. 26 Derivative Financial Instruments In the course of its investment activities the Company receives warrants on ordinary shares which provide exposure to companies on favourable terms. At 30 September 2010, the fair value of the Company’s warrants, both listed and unlisted was £nil (2009: £nil). Changes in the fair value of warrants amounting to £nil (2009: £18,000) have been debited to the Statement of Comprehensive Income in the year ended 30 September 2010. 27 Related Party Transactions Javelin Capital Javelin Capital LLP is a subsidiary of the Company and is consolidated into the Group accounts. On 31 August 2010 various agreements were signed in relation to the introduction of Javelin Capital LLP. Additionally and not on the same date certain other agreements were signed to give effect to the operational structure of the Javelin Capital group. The table below provides a summary of each respective agreement: Agreement LLP Agreement Management Agreement Administration Services Agreement Contribution and transfer Agreement Signatories/Parties Majedie Investment PLC; Majedie Unit Trust; Javelin Capital UK Limited; Javelin Capital EBT; Mr GP Aherne; Mr V Pina; Mr CJ Edge; Mr RJ Mace; Mr SP Asprey; Mr NR Rundle Majedie Investments PLC; Javelin Capital LLP Majedie Investments PLC; Javelin Capital LLP Majedie Investments PLC; Javelin Capital LLP Nature of Agreement As described in the directors’ report As described in the directors’ report As described in the directors’ report As described in the directors’ report REPORT & ACCOUNTS 2010 71 Notes to the Accounts 27 Related Party Transactions continued Agreement Intra Group Asset Lease Agreement International Prime Brokerage Agreement Signatories/Parties Majedie Investments PLC; Javelin Capital Services Limited Javelin Capital Strategies plc; Morgan Stanley & Co International plc; BNP Paribas Securities Services, Dublin Branch Prime Brokerage Agreement Javelin Capital Strategies plc; Goldman Sachs International; Javelin Capital LLP; BNP Paribas Securities Services, Dublin Branch Administration Agreement Management Agreement Investment Management and Distribution Agreement Javelin Capital Strategies plc; Javelin Capital Fund Management Limited; BNP Paribas Fund Services Dublin Limited Javelin Capital Strategies plc; Javelin Capital Fund Management Limited Javelin Capital LLP; Javelin Capital Fund Management Limited Nature of Agreement As described in the directors’ report Appointment of Prime Broker to Javelin Capital Strategies plc “the fund company” (which is the Irish listed fund vehicle for the current fund managed by Javelin Capital LLP) Appointment of Prime Broker to Javelin Capital Strategies plc “the fund company” (which is the Irish listed fund vehicle for the current fund managed by Javelin Capital LLP) Appointment of administrator to the fund company Appointment of manager to the fund company Appointment of investment manager and distributor to the fund company Javelin Capital Strategies plc is an Irish Stock Exchange listed Qualifying Investment Fund “the fund company”. It currently has one sub-fund called the Javelin Capital Global Equity Strategies Fund whose investment manager is Javelin Capital LLP. Javelin Capital Fund Management Limited (JCFM), a wholly owned subsidiary of Javelin Capital LLP, acts as manager for the fund company. For the year ended 30 September 2010 management and performance fees due to the manager amounted to £7,000 of which all was outstanding at year end (2009: £nil). On 23 September 2010 the Company made an investment of £20m into the Javelin Capital Global Equity Strategies Fund for an initial period of two years, subject to performance. This investment is subject to management and performance fees which totalled £7,000 and nil respectively for the period to 30 September 2010. At that time the full balance was outstanding (2009: £nil). Before Javelin Capital LLP was operational the Company paid certain expenses or assets on its behalf. These were charged to JCS and amounted to £1,889,000 and as at year end £283,000 was outstanding (2009: £nil). As investment manager and general administrator for the Company, Javelin Capital LLP receives fees in accordance with the relevant agreements. As these only came into effect from 1 September when the agreements took effect, the total income accrued by Javelin Capital was £58,000 and £25,000 respectively, all of which was outstanding at year end (2009: £nil). The Company receives interest at a commercial rate on its investment in Javelin Capital LLP. Under the terms of the LLP Agreement this starts from 31 August 2010 and continues until it is fully repaid. During the period this was accrued as £25,000 all of which was outstanding at the year end (2009: £nil). 72 MAJEDIE INVESTMENTS PLC  27 Related Party Transactions continued Mr Aherne is a partner in Javelin Capital LLP and a director of Javelin Capital Strategies plc and Javelin Capital Investments plc, which are both Irish listed fund companies (although Javelin Capital Investments plc is not yet trading) for funds that are or would be managed by Javelin Capital LLP. His only source of remuneration from the Group, as from 31 August 2010 is as a partner of Javelin Capital LLP, details of which are provided in the Report on Directors’ Remuneration . Mr Aherne has also made an investment of £50,000 in the Javelin Capital Global Equity Strategies Fund on terms available to staff, which are no more favourable than those received by the Company. In addition to the LLP Agreement detailed above there are two side letters that relate to Javelin Capital LLP between the Company and the individual partners. The first relates to the potential ability to make changes to the relevant control rights under the LLP Agreement if the business is successful. The second is in respect of circumstances in which individual partner capital and current account balances are repaid. The Company has paid certain start-up costs on behalf of the individual partners and as such the LLP Agreement provides for an additional profit share element of £385,000 to be awarded to the Company to recoup such costs in full. The Company incurs certain costs on behalf of Majedie Portfolio Management Limited (MPM) for operating the Majedie Investments PLC Share Plan. These costs, net of any income in MPM, are recharged to MPM and for the year ended 30 September 2010 these totalled £35,000 (2009: £35,000) and as at year end a balance of £92,000 was outstanding at year end (2009: £91,000). Transactions between group companies during the year were made on terms equivalent to those that occur in arm’s length transactions. Majedie Asset Management (MAM) MAM is accounted for as an investment in both the Company and Group accounts and is valued at fair value through profit or loss. During the year the Company received dividends from MAM of £6,181,000 of which none was outstanding at year end (2009: £1,906,000 and £nil). On 4 February 2010 the Company redeemed in full its B share investment in the Majedie Asset Management Tortoise Fund for proceeds totalling £1,646,000 and a gain over cost of £375,000. During the year no distributions were received and fees of £2,800 were incurred (2009: £23,000 and £81,000 respectively). There were no balances outstanding at year end (2009: £nil). The Company has no other investments in any MAM funds. Remuneration The remuneration of the directors, who are the key management personnel of the Company, is set out below in aggregate for each of the categories specified in IAS24: Related Party Disclosures. Further information about the remuneration of individual directors is provided in the audited part of the Report on Directors Remuneration on pages 28 to 30. Short term employee benefits Share-based payments 2010 £000 332 2009 £000 282 332 282 REPORT & ACCOUNTS 2010 73 Ten Year Record to 30 September 2010 Share- Total† holders’ Assets £000 NAV Funds Per Share Pence £000 Share Price Discount Earnings Dividend Pence Pence Pence % Total Actual Potential Company Costs Ratio % Net Gearing Gearing Ratio Ratio % % 203,067 163,709 310.7* 242.5 21.95 7.73 7.90 19.40 24.10 164,344 124,893 238.1* 187.5 21.25 9.97 8.15 18.30 31.70 168,001 128,810 246.6* 198.0 19.71 7.52 8.45 17.09 30.57 172,144 138,893 266.5* 227.5 14.63 5.25 8.75 14.51 24.25 212,600 178,845 343.0* 303.5 11.52 8.94 9.05*** 16.18 18.65 242,903 209,189 403.2* 338.3 16.09 12.45 9.50*** 13.94 16.12 286,944 253,216 490.7* 413.3 15.77 13.60 14.50*** 10.65 13.32 187,209 153,465 296.5* 250.0 15.68 12.45 12.75*** 16.69 21.99 157,943 124,181 238.7* 189.8 20.51 8.14 10.50*** 17.22 27.19 0.96 1.56 1.67 1.36 1.19 1.28 1.24 1.61 2.06 150,940 117,159 225.2* 191.5 15.00 11.83 13.00*** 18.26 28.83 2.36# Year End 2001 2002 2003 2004 2005 2006** 2007** 2008 2009 2010 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 2001 onwards NAV Per Share figures have been calculated as described in note 20 on page 60. ** Restated to reflect the review of the treatment of the investment in Majedie Asset Management. *** Net dividends represent dividends that relate to the Company’s financial year. Under IFRS dividends are not accrued until paid or approved. † Represents total assets less current liabilities. # Excludes non-operating setup costs expensed in relation to Javelin Capital LLP. 74 MAJEDIE INVESTMENTS PLC Notice of Meeting Notice is hereby given that the one hundredth Annual General Meeting of Majedie Investments PLC will be held at Pewterers ’ Hall, Oat Lane, London EC 2V 7DE on Wednesday, 1 9 January 2011 at 11.30am for the purpose of transacting the following: Ordinary Business 1. To receive and adopt the Directors’ Report and Accounts for the year ended 30 September 2010. 2. To receive the Report on Directors’ Remuneration. 3. To declare a final dividend of 6.3p per share in respect of the year ended 30 September 2010. 4. To re-elect H V Reid as a director. 5. To re-elect J W M Barlow as a director. 6. To re-elect G P Aherne as a director. 7. To appoint Ernst & Young LLP as auditors and to authorise the directors to fix their remuneration. Special Business To consider and, if thought fit, pass the following resolution which will be proposed as a special resolution: 8. THAT the Company be and is hereby generally and unconditionally authorised in accordance with Section 701 of the Companies Act 2006 (the “Act”) to make market purchases (within the meaning of Section 693 of the Act) of ordinary shares of 10p each in the capital of the Company (“Ordinary Shares”), provided that: (a) the maximum number of Ordinary Shares hereby authorised to be purchased shall be 7,873,947, or if less, 14.99% of the number of shares in circulation immediately following the passing of this resolution; (b) the minimum price which may be paid for each Ordinary Share is 10p; (c) the maximum price payable by the Company for each Ordinary Share is the higher of: (i) 105% of the average of the middle market quotations of the Ordinary Shares in the Company for the five business days prior to the date of the market purchase; and (ii) the higher of the price of the last independent trade and the highest current independent bid as stipulated by Article 5(1) of Commission Regulation (EC) 22 December 2003 implementing the Market Abuse Directive as regards exemptions for buyback programmes and stabilisation of financial instruments (No.2233/2003); (d) the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company in 2012 or, if earlier, on the expiry of 18 months from the passing of this Resolution, unless such authority is renewed prior to such time; and (e) the Company may make a contract to purchase Ordinary Shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiration of such authority and may make a purchase of Ordinary Shares pursuant to any such contract. By order of the Board Capita Sinclair Henderson Limited Company Secretary 24 November 2010 REPORT & ACCOUNTS 2010 75 Notice of Meeting Note 1 To be entitled to attend and vote at the meeting (and for the purpose of the determination by the Company of the number of votes they may cast) members must be entered on the Company’s register of members at 6.00 pm on 17 January 201 1 (or, in the event of any adjournment, 6.00 pm on the date which is two days (excluding weekends and bank holidays) before the time of the adjourned meeting). Changes to the register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting. Note 2 A member entitled to attend and vote at this meeting may appoint one or more persons as his/her proxy to attend, speak and vote on his/her behalf at the meeting. A proxy need not be a member of the Company. If multiple proxies are appointed they must not be appointed in respect of the same shares. To be effective, a copy of the enclosed personalised form of proxy, together with any power of attorney or other authority under which it is signed or a certified copy thereof, should be lodged at the office of the Company’s Registrar, not later than 48 hours before (excluding weekends and bank holidays) the time of the meeting or any adjustment thereof. The appointment of a proxy will not prevent a member from attending the meeting and voting in person if he/she so wishes. A member present in person or by proxy shall have one vote on a show of hands. On a vote by poll every member present in person or by proxy shall have one vote for every ordinary share of which he/she is the holder. The termination of the authority of a person to act as proxy must be notified to the Company in writing. To appoint more than one proxy, shareholders will need to complete a separate proxy form in relation to each appointment (you may photocopy the proxy form), stating clearly on each proxy form how many shares the proxy is appointed in relation to. A failure to specify the number of shares each proxy appointment relates to or specifying an aggregate number of shares in excess of those held by the member will result in the proxy appointment being invalid. Please indicate if the proxy instruction is one of multiple instructions being given. All proxy forms must be signed and should be returned together in the same envelope. Shareholders may cast a vote electronically rather than completing a hard copy proxy form. To do so, go to Computershare’s URL: www.eproxyappointment.com where the following details, which can be found on your proxy card or in an email received from Computershare, will be required: (cid:129) the meeting control number; (cid:129) your shareholder reference number; and (cid:129) your unique pin code. For the electronic proxy to be valid it must be received by Computershare no later than 11.30am on 17 January 2011. Note 3 In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the register of members in respect of the joint holding (the first-named being the most senior). Note 4 Any person to whom this notice is sent who is a person nominated under Section 146 of the Companies Act 2006 to enjoy information rights (a “Nominated Person”) may, under an agreement between him/her and the member by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the member as to the exercise of voting rights. The statements of the rights of members in relation to the appointment of proxies in Note 2 above does not apply to a Nominated Person. The rights described in that Note can only be exercised by registered members of the Company. 76 MAJEDIE INVESTMENTS PLC Note 5 Pursuant to regulation 41(1) of the Uncertificated Securities Regulations 2001, only those shareholders registered in the register of members of the Company as at 6.00 pm on 17 January 201 1 shall be entitled to attend and vote at the aforesaid Annual General Meeting in respect of the number of shares registered in their name at the that time. Changes to entries on the relevant register of members after 6.00 pm on 17 January 201 1 (“the specified time”) shall be disregarded in determining the rights of any person to attend or vote at the meeting. If the meeting is adjourned to a time not more than 48 hours after the specified time applicable to the original meeting, that time will also apply for the purpose of determining the entitlement of members to attend and vote (and for the purpose of determining the number of votes they may cast) at the adjourned Meeting. If, however, the Meeting is adjourned for a longer period then, to be so entitled, members must be entered on the Company’s register of members at the time which is 48 hours before the time fixed for the adjourned Meeting or, if the Company gives notice of the adjourned Meeting, at the time specified in that notice. Note 6 CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for this meeting and any adjournment(s) thereof by using the procedures described in the CREST Manual, which is available to download from the Euroclear website (www.euroclear.com/CREST). CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a ‘‘CREST Proxy Instruction’’) must be properly authenticated in accordance with Euroclear’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or to an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID 3RA50) by the latest time(s) for receipt of proxy appointments specified in the notice of meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5) (a) of the Uncertificated Securities Regulations 2001. Note 7 As at the date of this Notice, the Company’s issued share capital and total voting rights amounted to 52,528,000 ordinary shares carrying one vote each. REPORT & ACCOUNTS 2010 77 Notice of Meeting Note 8 In accordance with Section 319A of the Companies Act 2006, the Company must cause any question relating to the business being dealt with at the meeting put by a member attending the meeting to be answered. No such answer need be given if: a) to do so would: (ii) interfere unduly with the preparation for the meeting, or (ii) involve the disclosure of confidential information; b) the answer has already been given on a website in the form of an answer to a question; or c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered. Not e 9 A person authorised by a corporation is entitled to exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual member of the Company. On a vote on a resolution on a show of hands, each authorised person has the same voting rights as the corporation would be entitled to. On a vote on a resolution on a poll, if more than one authorised person purports to exercise a power in respect of the same shares: a) if they purport to exercise the power in the same way as each other, the power is treated as exercised in that way; b) if they do not purport to exercise the power in the same way as each other, the power is treated as not exercised. Note 10 Shareholders should note that it is possible that, pursuant to requests made by shareholders of the Company under section 527 of the Companies Act 2006, the Company may be required to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s accounts (including the Auditors’ Report and the conduct of the audit) that are to be laid before the Annual General Meeting; or (ii) any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with section 437 of the Companies Act 2006. The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a website under section 527 of the Companies Act 2006, it must forward the statement to the Company’s auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the Annual General Meeting includes any statement that the Company has been required under section 527 of the Companies Act 2006 to publish on a website. Note 11 Members satisfying the thresholds in section 338 of the Companies Act 2006 may require the Company to give, to members of the Company entitled to receive notice of the AGM, notice of a resolution which those members intend to move (and which may properly be moved) at the AGM. A resolution may properly be moved at the AGM unless (i) it would, if passed, be ineffective (whether by reason of any inconsistency with any enactment or the Company’s constitution or otherwise); (ii) it is defamatory of any person; or (iii) it is frivolous or vexatious. The business which may be dealt with at the AGM includes a resolution circulated pursuant to this right. A request made pursuant to this right may be in hard copy or electronic form, must identify the resolution of which notice is to be given, must be authenticated by the person(s) making it and must be received by the Company not later than 6 weeks before the date of the AGM. 78 MAJEDIE INVESTMENTS PLC Note 12 Members satisfying the thresholds in section 338A of the Companies Act 2006 may request the Company to include in the business to be dealt with at the AGM any matter (other than a proposed resolution) which may properly be included in the business at the AGM. A matter may properly be included in the business at the AGM unless (i) it is defamatory of any person or (ii) it is frivolous or vexatious. A request made pursuant to this right may be in hard copy or electronic form, must identify the matter to be included in the business, must be accompanied by a statement setting out the grounds for the request, must be authenticated by the person(s) making it and must be received by the Company not later than 6 weeks before the date of the AGM. Note 13 A copy of this notice of Annual General Meeting is available on the Company’s website: www.majedie.co.uk Note 14 The terms and conditions of appointment of Directors will be available for inspection at the registered office of the Company during usual business hours on any weekday (except Saturdays and public holidays) until the date of the Meeting and at the place of the Meeting for a period of fifteen minutes prior to and during the Meeting . None of the Directors has a contract of service with the Company. Note 15 You may not use any electronic address provided either in this Notice of Meeting or any related documents (including the form of proxy) to communicate with the Company for any purposes other than these expressly stated. REPORT & ACCOUNTS 2010 79 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*, Tower 42, 25 Old Broad Street, London, EC2N 1HQ (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 HM Revenue & Customs; and – 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. The maximum investment permitted is now £ 10,200 for the 20 10/1 1 tax year. Investments can be split between a cash ISA (up to a limit of £ 5, 100) and a stocks and shares ISA (up to a limit of £ 10,200). The Majedie Corporate ISA is provided in conjunction with Halifax Share Dealing (HSDL) who act as an HM Revenue & Customs 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 PEP Manager, The Share Centre, PO BOX 2000, Aylesbury, Buckinghamshire HP21 8ZB (telephone: 0800 800 008). 80 MAJEDIE INVESTMENTS PLC Shareholder Information Registered Office Tower 42 25 Old Broad Street London EC2N 1HQ Telephone: 020 7626 1243 Fax: 020 7374 4854 E-mail: majedie@majedie.co.uk Registered Number: 109305 England Company Secretary Capita Sinclair Henderson Limited Trading as Capita Financial Group – Specialist Fund Services Beaufort House 51 New North Road Exeter EX4 4EP Telephone: 01392 412122 Fax: 01392 253282 Investment Manager Javelin Capital LLP Tower 42 25 Old Broad Street London EC2N 1HQ Telephone: 020 7382 8170 Fax: 020 7374 4854 Email: info@javelincapital.com Registrars Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ Telephone: 0870 707 1159 Auditors Ernst & Young LLP 1 More London Place London SE1 2AF Stockbrokers Cenkos Securities plc 6.7.8 Tokenhouse Yard London EC2R 7AS Key Dates in 2011 Ex-dividend date Record date Annual General Meeting 2009/10 final dividend paid Interim results announcement 2010/11 interim dividend paid Financial year end Final results announcement Annual report mailed to shareholders Website www.majedie.co.uk 5 January 2011 7 January 2011 1 9 January 2011 26 January 2011 May 29 June 2011 30 September November December 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 80). You may transfer an existing PEP to the Majedie General PEP (page 80). You may also purchase shares through an on-line dealing facility or via your stockbroker or bank. Shareholders should notify all changes of name and address in writing to the Registrars. Shareholders may check details of their holdings, historical dividends, graphs and other data by accessing www.computershare.com. 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 wishing to receive communications from the Registrars by email (including notification of the publication of the annual and interim reports) should register on-line at http://www-uk.computershare.com/ investor. Shareholders will need their shareholder number, shown on their share certificate and dividend vouchers, in order to access both of the above services. 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. REPORT & ACCOUNTS 2010 81  Notes 82 MAJEDIE INVESTMENTS PLC  Notes REPORT & ACCOUNTS 2010 83  Notes 84 MAJEDIE INVESTMENTS PLC WARNING TO SHAREHOLDERS - BOILER ROOM SCAMS In recent years, many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas based ‘brokers’ who target UK shareholders, offering to sell them what often turn out to be worthless or high risk shares in US or UK investments. These operations are commonly known as ‘boiler rooms’. These ‘brokers’ can be very persistent and extremely persuasive, and a 2006 survey by the Financial Services Authority (FSA) has reported that the average amount lost by investors is around £20,000. It is not just the novice investor that has been duped in this way; many of the victims had been successfully investing for several years. Shareholders are advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports. If you receive any unsolicited investment advice: (cid:129) (cid:129) (cid:129) (cid:129) Make sure you get the correct name of the person and organisation Check that they are properly authorised by the FSA before getting involved by visiting and contacting the firm using the details on the register Report the matter to the FSA either by calling If the calls persist, hang up. 0845 606 1234 or visiting www.moneymadeclear.fsa.gov.uk www.fsa.gov.uk/register/ If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation Scheme. The FSA can be contacted by completing an online form at www.fsa.gov.uk/pages/doing/regulated/law/alerts/overseas.shtml Details of any share dealing facilities that the company endorses will be included in company mailings. More detailed information on this or similar activity can be found on the CFEB website www.moneymadeclear.fsa.gov.uk May 2010 Majedie Investments PLC Tower 42 25 Old Broad Street London EC2N 1HQ Telephone 020 7626 1243 Facsimile 020 7374 4854 E-mail majedie@majedie.co.uk www.majedie.co.uk 

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