2015 Majedie Investments PLC Annual Report 30 September 2015 Contents Overview 1 to 3 1 1 2 3 Investment Objective Highlights for 2015 Year’s Summary Ten Year Record Strategic Report 4 to 15 4 6 9 10 Chairman’s Statement Chief Executive’s Report Fund Analysis Twenty Largest MAM UK Equity Segregated Fund Holdings Business Review 11 Governance 16 to 37 16 17 24 29 32 36 37 Board of Directors Directors’ Report Corporate Governance Statement Report of the Audit Committee Report on Directors’ Remuneration Statement of Directors’ Responsibilities Report of the Depositary Financial Statements 38 to 88 38 42 43 44 46 48 49 50 51 52 Report of the Independent Auditor 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 Information 89 to 100 89 97 99 Loose Notice of Meeting Majedie Savings Plans Shareholder Information Form of Proxy Cautionary statement regarding forward-looking statements This Annual Report has been prepared for the members of Majedie Investments PLC (the Company) and no one else. The Company, its Directors or agents do not accept or assume responsibility to any other person in connection with this document and any such responsibility or liability is expressly disclaimed. This Annual Report contains certain forward-looking statements with respect to the principal risks and uncertainties facing the Company. By their nature, these statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. The forward looking statements reflect the knowledge and information available at the date of preparation of this Annual Report and will not be updated during the year. Nothing in this Annual Report should be construed as a profit forecast. Investment Objective The Company’s investment objective is to maximise total shareholder return whilst increasing dividends by more than the rate of inflation over the long term. Highlights 2015 Total shareholder return (including dividends): 15.7% Net asset value total return (debt at par including dividends): Total dividends (per share): Directors’ valuation of investment in Majedie Asset Management Limited: 12.9% 8.0p £52.3m REPORT & ACCOUNTS 2015 1 Year’s Summary Group Capital Structure as at 30 September Total Assets Which are attributable to: Debenture holders (Debt at par value) Equity Shareholders Gearing Potential Gearing Group total returns (capital growth plus dividends) Net asset value per share (debt at par value) Net asset value per share (debt at fair value) Share price Group capital returns Net asset value per share (debt at par value) Net asset value per share (debt at fair value) Share price Discount of share price to net asset value per share Debt at par value Debt at fair value Group revenue and dividends Net Revenue available to Equity Shareholders Net revenue return per share Total dividends per share Total administrative expenses Ongoing charges: Group (including costs of running subsidiary entities) Company (costs of operating the Company) Notes Definitions of terms used in the above summary are as follows: 1. Total Assets Total assets are defined as total assets less current liabilities. Note 2015 2014 1 2 4 4 5 3 3 3 6 £183.7m £167.9m £33.9m £149.8m 21.3% 22.6% +12.9% +13.0% +15.7% 281.9p 265.5p 257.3p 8.7% 3.1% £4.9m 9.4p 8.0p £2.1m 1.9% 1.9% £33.9m £134.0m 23.4% 25.3% +10.8% +12.4% +49.7% 256.7p 241.8p 229.0p 10.8% 5.3% £4.9m* 9.4p* 7.5p £1.9m* 1.8%* 1.7% % +9.4 +11.8 +9.8 +9.8 +12.4 +0.0 +6.7 2. Debt at par or fair value Par value is the nominal or face value attaching to the debentures which will be paid by the Company to the debenture holders on maturity. Fair value is the estimated market price the Company would pay (on the relevant year end date), as a willing buyer, to a debenture holder, as a willing seller, in an arms-length transaction. 3. Net Asset Value The Net Asset Value (NAV) is the value of all the Company’s assets less any liabilities. The NAV is usually expressed as an amount per share. 4. Gearing and Potential Gearing Gearing represents the amount of borrowings that a company has and is calculated using Association of Investment Companies (AIC) guidance. It is usually expressed as a percentage of Equity Shareholders Funds and a positive percentage or ratio above one shows the extent of the borrowings. Gearing is calculated as borrowings less net current assets to arrive at a net borrowings figure. Potential Gearing excludes cash from the calculation. Details of the calculation for the Company are in note 27 on page 86. 5. Total Return Total returns include any dividends paid as well as capital returns as a result of an increase or decrease in a company’s share price or net asset value. 6. Ongoing charges Ongoing charges are a measure of the normal ongoing costs of running a company. Further information is contained in the Business Review section of the Strategic Report on page 14. * Includes both continuing and discontinued operations. Year’s high/low Share price Net asset value – debt at par Discount – debt at par (Premium)/Discount – debt at fair value high low high low high low high low 2015 281.0p 213.3p 294.2p 229.2p 14.2% 1.4% 8.4% (5.5%) 2014 240.0p 160.0p 256.7p 228.6p 33.5% 1.4% 28.4% (4.6%) 2 MAJEDIE INVESTMENTS PLC Ten Year Record to 30 September 2015 Year End Total† Assets £000 Equity share- holders’ Funds £000 NAV Per Share (Debt at par value) Pence 2006* 242,903 209,189 2007* 286,944 253,216 187,209 153,465 157,943 124,181 150,940 117,159 145,683 111,634 146,057 112,234 159,013 125,166 167,934 134,061 183,708 149,807 2008 2009 2010 2011 2012 2013 2014 2015 Notes: 403.2 490.7 296.5 238.7 225.2 214.5 215.6 240.5 256.7 281.9 Share Price Pence 338.3 413.3 250.0 189.8 191.5 139.5 155.8 160.0 229.0 257.3 Discount % Earningsˆ Pence Dividend Pence Gearing† % Potential Gearing† % Company Ongoing Charges# % 16.09 15.77 15.68 20.51 15.00 34.96 27.74 33.47 10.79 8.73 12.45 13.60 12.45 8.14 11.83 4.66 4.90 6.80 9.36 9.42 9.50** 14.50** 12.75** 10.50** 13.00** 13.94 10.65 16.69 17.22 24.11 16.12 13.32 21.99 27.19 28.83 10.50** (1.72) 30.28 10.50** 10.50** 7.50** 8.00** 9.24 21.47 23.39 21.25 30.14 27.04 25.27 22.63 1.28 1.24 1.61 2.06 2.36 1.92 1.83 1.73 1.66 1.88 † Calculated in accordance with AIC guidance. ˆ Includes both continuing and discontinued operations. # As from May 2012, Ongoing Charges replace previous cost ratios. * Restated to reflect the review of the treatment of the investment in Majedie Asset Management. ** Net dividends represent dividends that relate to the Company’s financial year. Under International Financial Reporting Standards (IFRSs) dividends are not accrued until paid or approved. REPORT & ACCOUNTS 2015 3 Strategic Report Chairman’s Statement The year ended 30 September 2015 represents the first full year of the Company’s assets being managed by Majedie Asset Management (MAM). In the 12 months to 30 September 2015 the NAV (Net asset value with debt at par) rose by 12.9% on a total return basis and the share price by 15.7% on a total return basis. In general stock markets were weak in the second half of the year having risen in the first half of the year. Over the year to 30 September 2015 the FTSE All Share Index and the MSCI World Index fell by 2.3% and 0.1% respectively on a total return basis. Results and Dividends The Group had a capital return for the year of £12.5m compared to the capital return of £11.0m from continuing operations in 2014. There were no discontinued operations in 2015, whereas in 2014 there was a £2.6m capital loss. Total income for the Group was £6.6m compared to £6.6m in 2014. The composition of total income has altered due to the sale of 10% of MAM in March 2014 and 2.5% in December 2014. Subsequently the dividend received from MAM fell from £3.6m in the year to 30 September 2014 to £3.3m in the year to 30 September 2015. The maintenance of the overall income level was accounted for by increased income from the MAM Funds. Total Group administrative expenses and management fees have fallen from £2.3m to £2.1m. On a continuing basis, the total Group administrative expenses and management fees have risen from £1.6m to £2.1m. The increase reflects the first full year of investment management fees paid to MAM, the Company paying a full year of administrative expenses that previously were borne by Javelin Capital and bearing the full annual costs of a depositary following the implementation of The Alternative Investment Fund Managers Directive (AIFMD). The Investment Management arrangements with MAM came into effect in January 2014. The future reduction of administration costs remain a key area of focus for the Board and costs will fall over time, due to actions that have already been taken, most notably, on property. Some benefits will be evident in the year to September 2016, but the full impact will be seen in the year to September 2017. The Company has also undertaken a review of its Fund Administration and has decided it is more appropriate for its current structure to in-source Fund Administration. This will reduce overall costs in future years. Notwithstanding these actions the self-managed nature of the Company and its size mean costs will remain somewhat higher than the average. However shareholders will hopefully benefit from a dedicated resource particularly as regards marketing the investment attractions to the widest possible audience. The net revenue return after taxation from continuing operations for the year to 30 September 2015 was £4.9m compared to £5.1m in the year to September 2014. The Board rebased the full year dividend to 7.5p in 2014 and having paid an interim dividend of 3.0p the final dividend will be 5.0p per share. This represents an increase of 6.7% from the full year dividend in 2014. The final dividend will be paid on 27 January 2016 to shareholders on the register on 15 January 2016. I am pleased that the Company’s share price has maintained a premium to its NAV with debt at fair value (as released weekly to the market). This is against a background of weak stock markets in the second half of the year and reflects a growing recognition of the unique nature of the Company’s assets which are managed across a variety of strategies by a leading boutique manager. The Company retains a significant investment in MAM. 4 MAJEDIE INVESTMENTS PLC In the second half of the year the Company has issued stock from its EBT at a premium to NAV. The EBT has now been closed, with all shares in it having been sold. The Company has permission from shareholders to issue up to 10% of its equity at a premium to the prevailing NAV (debt at fair value). The Company was granted a blocklisting exemption from the United Kingdom Listing Authority in June and since then has issued 605,000 shares at a premium to NAV. It is intended to renew this permission from shareholders at the AGM. Such share issuance will increase the size of the Company which will benefit all shareholders as the cost of debentures are diluted, the ongoing charges ratio is reduced and the liquidity of the Company’s shares is likely to increase. Annual General Meeting The AGM will be held on 20 January 2016 at 12.00 noon at the City of London Club, 19 Old Broad Street, London EC2N 1DS. Details are set out in the notice of the meeting on page 89. There will be presentations from MAM and the Board and an opportunity to ask questions. I hope you will be able to attend. The Company will move in December 2015 to new and more appropriate premises at 1, Kings Arms Yard, London EC2R 7AF. Finally I would like to thank my fellow directors and particularly the staff that have contributed to a successful year for the Company with a total return of 12.9% whilst stock markets were generally flat. I look forward to further progress being made on reducing the Company’s costs in the current year. Andrew J Adcock Chairman 4 December 2015 REPORT & ACCOUNTS 2015 5 Strategic Report Chief Executive’s Report Introduction The Company’s assets, apart from the direct stake in MAM, are allocated at the discretion of the Board between investment strategies managed by MAM. The Company has no overall benchmark; rather each fund has its own benchmark. The Company’s total assets were £183.7m at 30 September 2015. In the year there were two main changes in the Company’s asset allocation. First, the Company sold 2.5% of MAM in December 2014 for £5.7m; of the proceeds £2.0m was allocated to the MAM UK Equity Segregated Fund, £2.0m to the MAM UK Income Fund and £1m to the MAM Tortoise Fund. Secondly there was a reallocation in August 2015 of £10m from the MAM UK Equity Segregated Fund to the MAM Global Equity Fund. MAM Funds and Investment Performance The MAM UK Equity Fund is the flagship product of MAM having started in March 2003 and since inception to September 2015 has returned 12.8% per annum net of fees with a relative outperformance against its benchmark FTSE All Share Index of 4.0% per annum. The Company‘s assets are invested in a segregated fund that is managed in parallel to the MAM UK Equity Fund. The funds are predominantly invested in UK equities with overseas equities limited to 20% and the strategy incorporates a dedicated allocation to UK smaller companies. The sum invested in the segregated fund at 30 September 2015 was £56.3m which represents 30.6% of the Company’s total assets. In the year to 30 September 2015 the fund returned 0% net of fees, which is an outperformance of 2.3% against its benchmark. Details of the principal investments held within the UK segregated fund are set out on page 10. The MAM Tortoise Fund is a global equity absolute return product which started in August 2007 and since inception has returned 8.7% per annum net of fees. The fund has an allocation of £27.5m which represents 15.0% of the Company’s total assets. The fund returned -3.5% net of fees in the year to 30 September. As an absolute return fund it has no relevant benchmark. The MAM UK Income Fund started in December 2011. Its objective is to maintain an attractive yield whilst outperforming the FTSE All Share Index over the longer term. Since inception the fund has returned 19.4% per annum net of fees which is an outperformance of 10.6% per annum. In the year to 30 September 2015 the fund returned 11.0% net of fees, which is an outperformance of 13.3% against its benchmark. The Company has an allocation of £20.5m to the fund which represents 11.1% of the Company’s total assets. The MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund were launched in June 2014. Since inception the funds have returned 4.3%, 8.0% and 19.3% net of fees which represent an outperformance against their benchmarks of 1.6%, 5.3% and 7.1% respectively. In the year to September the funds returned 2.5%, 8.2% and 11.0% net of fees, which is a relative outperformance of 2.6%, 8.3% and 5.3% compared to the sterling benchmarks of the MSCI ACWI (Developed and Emerging Markets) and the S&P 500. The absolute returns for the Company have benefitted from the strength of the dollar though this has had no effect on relative returns. At 30 September 2015, the Company’s allocations to these funds were £14.6m, £5.4 and £6.0m respectively which represent 7.9%, 2.9% and 3.2% of the Company’s total assets. The aggregate geographic and sector exposures of the MAM UK Equity Segregated Fund, MAM UK Income Fund, MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund are shown on page 9. To enhance the transparency for shareholders of the individual MAM funds we intend that the fund factsheets for each of the MAM funds which the Company invests in will be available on the Company’s website in due course. Majedie Asset Management The Company sold 2.5% of MAM in December 2014 and, following the cancellation by MAM of some shares, now owns 16.7% of MAM. The Board has increased the value of its holding in MAM to £52.3m as at 30 September 2015. The valuation of MAM is formulaic and the Board believe reflects fair value. The holding in MAM represents 28.6% of the Company’s total assets. During the year to September the Company received dividends of £3.3m from its holding in MAM. 6 MAJEDIE INVESTMENTS PLC MAM’s AUM increased to £11.2bn during the year from £10.2bn, predominantly as a result of strong inflows into the MAM UK Income Fund that were balanced by negative stock market movements in the second half of the year. The relative performances of all the long only funds were ahead of their respective benchmarks over the year. The MAM Global Fund, MAM Global Focus Fund and MAM US Equity Fund have each performed well since their launch in June 2014. The third party assets invested in these funds are now growing and the level of enquiries from potential investors is encouraging for the future. Realisation Portfolio The realisation portfolio is now immaterial for the Company though the remaining holdings are monitored in case further value can be achieved. It is now less than 0.2% and net cash is 0.5% of total assets. The net cash figure excludes cash held within the segregated fund. Summary The year represented a difficult one for stock markets globally so it is encouraging that the Company’s NAV increased by 12.9%. Investments in a variety of MAM funds give the Company access to a variety of style and coverage. The result is a diversified portfolio in terms of geography and sectors. The increased allocation to the MAM Global Equity Fund and consequent reduction in the MAM UK Equity Segregated Fund should further diversify the return profile. The MAM Tortoise Fund did not meet our return expectations in the last year, but it remains an important tool to manage the volatility of returns in periods of turbulent markets and therefore should enhance the risk return characteristics of the total portfolio over time. The holding in MAM remains a key differentiator for the Company’s shareholders and it is pleasing that the new Global and US Funds have had such a strong track record since their inception. Development of Net Asset Value The chart below outlines the change in the Group’s Net Asset Value (with debt at par) over the year ended 30 September 2015. In aggregate, the NAV has increased by £15.7m, being comprised of net investment gains of £22.3m, inflows from the issue of new shares and EBT shares of £2.2m, being offset by expenses and interest of £4.9m and lastly dividends paid to shareholders of £3.9m. +£1.3m +£2.2m +£20.0m (£0.2m) (£2.1m) (£2.8m) (£3.9m) £149.8m £134.1m +£1.2m NAV 30.09.14 MAM UKES Portfolio MAM MAM Funds Realisation Portfolio Issue of new shares (Incl. EBT shares) Admin Costs Finance Costs Dividend Paid NAV 30.09.15 REPORT & ACCOUNTS 2015 7 Strategic Report Chief Executive’s Report Allocation of Total Assets as at 30 September 2015 MAM UK Equity Segregated Fund MAM UK Income Fund MAM Global Equity Fund MAM Global Focus Fund MAM US Equity Fund MAM Tortoise Fund MAM Net cash/realisation fund* Value £000 56,280 20,470 14,564 5,397 5,970 27,547 52,300 1,180 % of Total Assets 30.6 11.1 7.9 2.9 3.2 15.0 28.6 0.7 183,708 100.0 *Net cash and realisation fund does not include cash held in the MAM UK Equity Segregated Fund or MAM funds. MAM Fund Performance MAM UK Equity Segregated Fund MAM UK Income Fund MAM Global Equity Fund MAM Global Focus Fund MAM US Equity Fund Tortoise Fund Notes: All Fund returns are shown net of fees. 12 months to 30 September 2015 % Fund return % Benchmark return % Relative performance Since MI invested % Fund return % benchmark return % Relative Performance 0.0 11.0 2.5 8.2 11.0 (3.5) (2.3) (2.3) (0.1) (0.1) 5.7 2.3 13.3 2.6 8.3 5.3 (2.0) 15.9 4.3 8.0 19.3 (8.2) (3.0) 0.4 2.7 2.7 12.2 1.0 15.5 1.6 5.3 7.1 The MAM UK Equity Segregated Fund commenced on 22 January 2014. On 18 December 2014 the allocation was increased by £2.0m and on 19 August 2015 the allocation was reduced by £10m. The initial investment in the MAM UK Income Fund was made on 29 January 2014. On 18 December 2014 the allocation was increased by £2m. The initial investments in the MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund were made on 30 June 2014 and 27 June 2014 respectively. The allocation to the MAM Global Equity Fund was increased by £10m on 19 August 2015. The initial investment in the MAM Tortoise Fund was made on 29 January 2014 and the allocation was increased by £1.0m on 18 December 2014. William Barlow CEO 4 December 2015 8 MAJEDIE INVESTMENTS PLC Strategic Report Fund Analysis at 30 September 2015 Geographical Analysis UK Europe US Asia Pacific Emerging Markets Cash Sector Analysis Basic Materials Consumer Goods Consumer Services Financials Healthcare Industrials Oil & Gas Technology Telecommunications Utilities Cash Notes: % of Total 62.5 13.4 18.4 1.3 2.4 2.0 100.0 % of Total 6.2 3.0 23.9 25.7 5.6 8.8 7.2 4.5 12.1 1.0 2.0 100.0 The assets analysed above are the aggregate exposure of MAM UK Equity Segregated Fund, MAM UK Income Fund, MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund. The aggregate represents a total of 65.7% of the Company's total assets. Exposures are classified on the stock exchange on which the underlying equity is listed and FTSE sector classification. REPORT & ACCOUNTS 2015 9 Strategic Report Twenty Largest MAM UK Equity Segregated Fund Holdings at 30 September 2015 Company MAM UK Smaller Companies Fund* HSBC Holdings plc Royal Dutch Shell plc Vodafone Group Plc BP plc Barclays Bank PLC Orange SA Tesco Plc Royal Bank of Scotland Group plc GlaxoSmithKline plc BT Group plc Telecom Italia SpA Marks & Spencer Group PLC Royal KPN NV Rentokil Initial plc Rio Tinto plc Lloyds Banking Group plc Wm Morrison Supermarkets plc AstraZeneca PLC Travis Perkins plc * Previously MAM Special Situations Fund. Market Value £000 % of UK Equity Segregated Fund 5,202 3,664 2,771 2,740 2,739 2,181 1,752 1,686 1,649 1,594 1,548 1,419 1,307 1,213 1,135 1,090 1,035 997 966 935 9.4 6.6 5.0 5.0 5.0 3.9 3.2 3.1 3.0 2.9 2.8 2.6 2.4 2.2 2.1 2.0 1.9 1.8 1.7 1.7 37,623 68.3 10 MAJEDIE INVESTMENTS PLC Strategic Report Business Review Introduction and Strategy Majedie Investments PLC (the Company) is an investment trust company and an Alternative Investment Fund (AIF), with an investment objective to maximise total shareholder return, whilst increasing dividends by more than the rate of inflation over the long term. In seeking to achieve this objective, the Board has determined an investment policy and related guidelines or limits. The investment objective and policy (as detailed below and on page 12) were both last approved by shareholders at a General Meeting of the Company on 27 February 2014. The Company has been subject to the Alternative Investment Fund Managers Directive (AIFMD) from 22 July 2014. The AIFMD regulates the Alternative Investment Fund Managers (AIFMs) of AIF’s. The Company’s status under the AIFMD is that it is a self- managed AIF (meaning that it is also an AIFM as well as an AIF), which requires the Company to be authorised and regulated by the Financial Conduct Authority (FCA). The AIFMD also requires the appointment of a depositary and the Company has appointed Bank of New York Mellon UK (BNYM (UK)) to be its depositary. Further details concerning the Company’s regulatory environment are set out below. Since January 2014, the Company has been a member of the AIC (the trade body for closed-ended investment companies). The purpose of the Strategic Report (which is the Strategic Report for the Group) is to inform the shareholders of the Company and help them assess how the directors have performed their duty to promote the success of the Company in accordance with section 172 of the Companies Act 2006 by: • analysing development and performance using appropriate Key Performance Indicators (KPIs); • providing a fair and balanced review of the Company’s business; • outlining the principal risks and uncertainties affecting the Company; • describing how the Company manages these risks; • setting out the Company’s environmental, social and ethical policy; • outlining the main trends and factors likely to affect the future development, performance and position of the Company’s business; and • explaining the future business plans of the Company. Business Model In pursuing its investment objective, the Company’s business model includes other entities which together form the Group. Active companies in the Group currently consist of the Company (as a global equity investment trust and FCA regulated self-managed AIF) and Majedie Portfolio Management Limited (which is the FCA regulated Majedie Investments PLC Share Plan Manager). Further details about the subsidiary company can be found in note 14 to the Accounts on page 72. The business model currently used by the Company delegates certain arrangements to other service providers. These delegations are in accordance with the AIFMD (the details of the material delegations can be found on pages 21 and 22 of the Company’s Annual Report and Accounts), but the Board, as an AIFM and in accordance with the Company’s investment objective and policy, directs, controls and monitors the overall performance, operations and direction of the Company. The Company’s Employees, Social, Environmental, Ethical and Human Rights policy is contained in the Directors’ Report on page 20. Investment Objective The Company’s investment objective is to maximise total shareholder return whilst increasing dividends by more than the rate of inflation over the long term. REPORT & ACCOUNTS 2015 11 Strategic Report Business Review Investment Policy • General The Company invests principally in securities of publicly quoted companies worldwide and in funds managed by its investment manager, though it may invest in unquoted securities up to levels set periodically by the Board, including its investment in MAM. Investments in unquoted securities, other than those managed by its investment manager or made prior to the date of adoption of this investment policy, (measured by reference to the Company’s cost of investment) will not exceed 10% of the Company’s gross assets. • Risk Diversification Whilst the Company will at all times invest and manage its assets in a manner that is consistent with spreading investment risk, there will be no rigid industry, sector, region or country restrictions. The overall approach is based on an analysis of global economies sector trends with a focus on companies and sectors judged likely to deliver strong growth over the long term. The number of investments held, together with the geographic and sector diversity of the portfolio, enable the Company to spread its risks with regard to liquidity, market volatility, currency movements and revenue streams. The Company will not invest in any holding that would, at the time of investment, represent more than 15% of the value of its gross assets save that the Company may invest up to 25% of its gross assets in any single fund managed by its Investment Manager where the Board believes that the investment policy of such funds is consistent with the Company’s objective of spreading investment risk. The Company may utilise derivative instruments including index-linked notes, contracts for difference, covered options and other equity-related derivative instruments for efficient portfolio management and investment purposes. Any use of derivatives for investment purposes will be made on the basis of the same principles of risk spreading and diversification that apply to the Company’s direct investments, as described above. • Asset Allocation The assets of the Company will be allocated principally between investments in publicly quoted companies worldwide and in investments intended to provide an absolute return (in each case either directly or through other funds or collective investment schemes managed by the Company’s investment manager) and the Company’s investment in MAM itself. • Benchmark The Company does not have one overall benchmark, rather each distinct group of assets is viewed independently. Any investments made into funds managed by the Company’s investment manager will be measured against the benchmark or benchmarks, if any, whose constituent investments appear to the Company to correspond most closely to those investments. It is important to note that in all cases investment decisions and portfolio construction are made on an independent basis. The Board however sets various specific portfolio limits for stocks and sectors in order to restrict risk levels from time to time, which remain subject to the investment restrictions set out in this section. • Gearing The Company uses gearing currently via long term debentures. The Board has the ability to borrow up to 100% of adjusted capital and reserves. The Board also reviews the level of gearing (borrowings less cash) on an ongoing basis and sets a range at its discretion as appropriate. The Company’s current debenture borrowings are limited by covenant to 66 2/3% and any additional indebtedness is not to exceed 20% of adjusted capital and reserves. Regulatory and Competitive Environment The Company is an investment trust and has a premium listing on the London Stock Exchange. It is subject to United Kingdom and European legislation and regulations including UK company law, IFRS, Listing, Prospectus and Disclosure and Transparency Rules, taxation law and the Company’s own Articles of Association. The directors are charged with ensuring that the Company complies with its objectives as well as these regulations. 12 MAJEDIE INVESTMENTS PLC Under the Companies Act 2006, section 833, the Company is defined as an investment company. As outlined previously the Company is subject to the AIFMD. The AIFMD requires that all AIFs are managed by a regulated AIFM in accordance with the requirements of the Directive. These requirements are in respect of risk management, conflicts of interest, leverage, liquidity management, delegation, the requirement to appoint a depositary, regulatory capital, valuations, disclosure of information to investors or potential investors, remuneration and marketing. The financial statements report on profits, the changes in equity, the balance sheet position and the cash flows in the current and prior financial period. This is in compliance with current IFRS as adopted by the EU, supplemented by the Statement of Recommended Practice for Investment Trust Companies and Venture Capital Trusts (SORP) issued in November 2014 (which applies to accounting periods starting on or after 1 January 2015, but which has been early adopted by the Company). The principal accounting policies of the Company are set out in note 1 to the accounts on pages 53 to 58. Total Return Philosophy & Dividend Policy The Directors believe that investment returns will be maximised if a total return policy is followed whereby the Investment Manager pursues the best opportunities. The policy aim is to increase dividends by more than inflation over the long term. Further details are under the Dividend Growth section on page 14. The Company has a comparatively high level of revenue reserves for the investment trust sector. At £22.9m, the revenue reserves represent over five times the current annual dividend distribution. The strength of these reserves will assist in underpinning the Company’s progressive dividend policy in years when the income from the portfolio is insufficient to cover completely the annual distribution, although it is not currently anticipated. Performance Management The Board uses the following KPIs to help assess progress against the Company’s objectives. Further comments on these KPIs are contained in the Chairman’s Statement and Chief Executive’s Report sections of the Strategic Report respectively. • NAV and Total Shareholder Return: The Board believes that asset return is fundamental to delivering value over the long term and is a key determinant of shareholder return. The Board further believes that, in accordance with the Company’s objective, the total return basis (which includes dividends paid out to shareholders) is the best measure of how to measure long term shareholder return. The Board, at each meeting, receives reports detailing the Company’s NAV and shareholder total return performance, asset allocation and related analyses. Details of the NAV and share price total return performance for the year are shown in the Year’s Summary on page 2. • Investment Group performance: The Board believes that after asset allocation, the performance of each of the investment groups is the key driver of NAV return and hence shareholder return. The Board receives, at each meeting, detailed reports showing the performance of the investment groups which also includes relevant attribution analysis. The Chief Executive’s Report provides further detail on each investment group’s performance for the year. • Share price premium/discount: As a closed ended listed investment company, the share price of the Company can and does differ from that of the NAV. This can give rise to either a premium or discount and as such is another component of Total Shareholder Return. During the year a slight narrowing of the discount (with the NAV with Debt at par) resulted in the Company’s share price gain outperforming the gain in the Company’s NAV (with Debt at par). REPORT & ACCOUNTS 2015 13 Strategic Report Business Review The Board continually monitors the Company’s premium or discount, and has received approval (and is seeking to renew such approval for another year) to issue new shares, at a premium to the relevant NAV (with debt at fair value), in order to meet natural market demand. Additionally for maximum flexibility the Board does have the ability to buy back shares if thought appropriate, although it must be noted that this ability is limited by the majority shareholding held by members of the Barlow family. Details of movements in the Company’s share price discount or premium over the year are shown in the Year’s Summary on page 2. • Expenses: The Board is aware of the impact of costs on returns and is conscious of seeking to minimise these (taking into account the Company’s self managed status). The industry wide measure for investment trusts is ongoing charges, which seeks to quantify the ongoing costs of running the Company. This measures the annual normal ongoing costs of an investment trust, excluding performance fees, one off expenses and investment dealing costs, as a percentage of average equity shareholders’ funds. Any investments made into pooled funds are included using the Company’s share of estimated ongoing fund running costs. The Chairman’s Statement on page 4 provides further details on the expenses during the year. Details of ongoing charges for the year are shown in the Year’s Summary on page 2. • Dividend Growth: Dividends paid to shareholders are an important component of Total Shareholder Return and this has been included in the Company’s investment objective. The Board is aware of the importance of this objective to the Company’s shareholders and in recent years has maintained the dividend by using some of the Company’s large revenue reserves. Following the restructuring of the Company in 2014, the Board resolved to rebase the annual dividend with a view to moving to a sustainable and progressive dividend policy, paying dividends out of current year income rather than from revenue reserves. The Board receives detailed management accounts and forecasts which show the actual and forecast financial outturns for the Company and the Group. For the year to 30 September 2015, being after the rebasing, dividend growth has been 6.7% which again is ahead of inflation over that year. Principal Risks The principal risks and the Company’s policies for managing these risks and the policy and practices with regard to financial instruments are summarised below and in note 27 to the accounts. i Investment Risk: The Company has a range of equity investments, including a substantial investment in an unlisted asset management business, UK and global equities (both on a direct basis (via the MAM UK Equity Segregated Fund (UKESF)) and via collective investment vehicles (the MAM Funds), and an investment in an absolute return fund, the MAM Tortoise Fund. The major risk for the Company remains investment risk, primarily market risk; however it is recognised that the investment in MAM continues to represent concentration risk for the Company. The number of investments held, together with the geographic and sector diversity of the portfolio, enables the Company to spread its risks with regard to liquidity, market volatility, currency movements and revenue streams. Under the terms of the Investment Agreement the Investment Manager manages the majority of the Company’s investment assets. The portfolios of UKESF and the MAM Funds are actively managed by MAM against benchmarks and each have specific limits for individual stocks and market sectors that are monitored in real time. It should be noted that UKESF and the MAM Funds’ returns will differ from the benchmark returns. The MAM Tortoise Fund is an absolute return fund whose returns are not correlated to equity markets. The principal risks are moderated by strict control of 14 MAJEDIE INVESTMENTS PLC v. Operational Risk: Inadequate financial controls and failure by an outsourced supplier to perform to the required standard could result in misappropriation of assets, loss of income and debtor receipts and mis- reporting of NAVs. The Board and Audit Committee regularly review statements on internal controls and procedures and subject the books and records of the Company to an annual external audit. The Corporate Governance statement and the Report of the Audit Committee in the Company’s Annual Report and Accounts provide further information in respect of internal control systems and risk management procedures. On behalf of the Board Andrew J Adcock Chairman 4 December 2015 position sizing, low use of leverage and investing in liquid stocks. Also the level of risk at a net asset value level increases with gearing. In certain circumstances cash balances may be raised to reduce the effective level of gearing. This would result in a lower level of risk in absolute terms. Other risks faced by the Company include the following: ii. Strategy Risk: An inappropriate investment strategy could result in poor returns for shareholders and the introduction of or a widening of the discount of the share price to the NAV per share. The Board regularly reviews strategy in relation to a range of issues including investment policy and objective, the allocation of assets between investment groups, the level and effect of gearing and currency or geographic exposure; iii. Business Risk: Inappropriate management or controls in the Company or at MAM could result in financial loss, reputational risk and regulatory censure. The Board has representation on the MAM governing board to monitor business financial performance and operations and receives detailed reports from Company management on financial and non- financial performance; iv. Compliance Risk: Failure to comply with regulations could result in the Company losing its listing, losing its FCA authorisation as a self managed AIF or being subjected to corporation tax on its capital gains. The Board receives and reviews regular reports from its service providers and Company management on the controls in place to prevent non-compliance of the Company with rules and regulations. The Board also receives regular investment listings and income forecasts as part of its monitoring of compliance with sections 1158 to 1162 of the Corporation Tax Act 2010; and REPORT & ACCOUNTS 2015 15 Board of Directors This page forms part of the Director’s Report Andrew J Adcock* MA Chairman Mr Adcock was the managing partner of Brompton Asset Management LLP until he retired in July 2011. He is a non-executive director of Majedie Portfolio Management Limited, F&C Global Smaller Companies PLC and Kleinwort Benson Bank Limited. In July 2015, he was appointed as chairman of JP Morgan European Investment Trust plc and was appointed as chairman of VPC Specialty Lending Investments PLC in February 2015. He is also a non-executive director of Foxtons Group plc, and is chairman of their Remuneration Committee. He is chairman of the Samuel Courtauld Trust and a director of The Courtauld Institute of Art, and is acting chairman of the Institute’s Audit Committee. 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 the Company on 1 April 2008 and is the Chairman of the Board and Nomination Committee and a member of the Remuneration, Management Engagement and Audit Committees. J William M Barlow Mr Barlow was appointed Chief Executive Officer of the Company from 1 April 2014, before which he was a member and chief operating officer at Javelin Capital LLP. Prior to Javelin Capital LLP, he was at Newedge Group. He was managing director of DnB Asset Management (UK) Limited having been appointed in 2002. He joined Skandia Asset Management Limited as an equity portfolio manager in 1991. Mr Barlow was appointed a director of the Company in July 1999 and is a director of Majedie Portfolio Management Limited and a non-executive director of MAM. He is also a Trustee of Racing Welfare. Paul D Gadd* Mr Gadd was appointed a director of the Company on 1 October 2009. He was a solicitor and had 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 Chairman of the Remuneration and Management Engagement Committees and is a member of the Nomination and Audit Committees. R David C Henderson* FCA Mr Henderson, a Chartered Accountant, is currently special advisor to Kleinwort Benson, chairman of Alder Asset Management, and is also a non-executive director of Novae Group plc, MM&K Limited and EdenTree Investment Management, a subsidiary of Ecclesiastical Insurance Group. Previously he was chairman of Kleinwort Benson Private Bank from 2004 to 2008 having held various senior roles in the Kleinwort Benson Group since 1995. Prior to that he spent 11 years at Russell Reynolds Associates which followed 10 years at Morgan Grenfell & Co and 6 years at what is now Baker Tilly. He was appointed a director of the Company on 22 September 2011, is Chairman of the Audit Committee and a member of the Remuneration, Nomination and Management Engagement Committees. * Independent non-executive. 16 MAJEDIE INVESTMENTS PLC Directors’ Report The directors submit their report and the accounts for the year ended 30 September 2015. Introduction The Directors’ Report includes the Corporate Governance statement, the Report of the Audit Committee, and the Directors’ Remuneration Report. A review of the Company’s business is contained in the Strategic Report (which includes the Chairman’s statement) and should be read in conjunction with the Directors’ Report. Principal Activity and Status The Company is a public limited company and an investment company under section 833 of the Companies Act 2006. It operates as an investment trust and is not a close company. The Company has been a member of the AIC since 20 January 2014. The Company has received historic written confirmation from HM Revenue & Customs that it meets the eligibility conditions and is an approved investment trust for taxation purposes under sections 1158/59 of the Corporation Tax Act 2010, with effect from 1 October 2012, subject to it continuing to meet the eligibility conditions and on-going requirements. In the opinion of the directors, the Company continues to direct its affairs so as to enable it to continue to qualify as an approved investment trust. Results and Dividend The consolidated net revenue return before taxation arising from continuing operations amounted to £4,966,000 (2014: £5,148,000), and the net loss before taxation arising from discontinued operations was nil (2014: £232,000). The directors recommend a final ordinary dividend of 5.0p per ordinary share, payable on 27 January 2016 to shareholders on the register at the close of business on 15 January 2016. Together with the interim dividend of 3.0p per share paid on 26 June 2015, this makes a total distribution of 8.0p per share in respect of the financial year (2014: 7.5p per share). Risk Management and Objectives The Company as an investment trust, and the Group, are subject to various risks in pursuing their objectives. The nature of these risks and the controls and policies in place across the Group that are used to minimise these risks are further detailed in the Strategic Report and in note 27 of the Accounts. Directors The directors in office at the date of this report are listed on page 16 of the Company’s Annual Report and Accounts. Directors’ retirement by rotation and appointment is subject to the Company’s Articles of Association and the AIC Code of Corporate Governance. The Company’s Articles of Association require that at every Annual General Meeting any director who has not retired from office at the preceding two Annual General Meetings shall stand for re-appointment by the Company. Therefore in accordance with the Company’s Articles of Association, Mr PD Gadd, having been last re-appointed at the Annual General Meeting in 2013, will retire at the forthcoming Annual General Meeting and, being eligible, will offer himself for re-appointment. In accordance with Listing Rule 15.2.13A, Mr JWM Barlow, being a non-executive director of Majedie Asset Management Limited, the Investment Manager, must submit himself for annual re-appointment. The Board has considered the continued appointment of Mr JWM Barlow who has served for over 15 years. The Board’s view is that length of tenure does not compromise independence and that experience and continuity can add strength to a Board. The Board believes that the performance of Mr JWM Barlow, and Mr PD Gadd, continues to be effective, that they demonstrate commitment to their roles and have a range of business, financial and asset management skills and experience relevant to the direction and control of the Company. The Board, having considered the retiring directors’ performance within the annual Board performance evaluation, hereby recommends that shareholders vote in favour of the proposed re-appointments. REPORT & ACCOUNTS 2015 17 Directors’ Report Qualifying Third Party Indemnity Provisions There are no qualifying third party indemnity provisions or qualifying pension scheme indemnity provisions which would require disclosure under section 236 of the Companies Act 2006. Directors’ Interests Beneficial interests in ordinary shares as at: Mr AJ Adcock Mr JWM Barlow Mr PD Gadd Mr RDC Henderson 30 September 2015 50,000 692,083 40,448 4,700 1 October 2014 50,000 676,083 30,000 4,700 Non-beneficial interests in ordinary shares as trustees for various settlements as at: 30 September 2015 1 October 2014 Mr JWM Barlow 1,959,165 1,897,165 There have been no changes to any of the above holdings between 30 September 2015 and the date of this report. Substantial Shareholdings At 30 November 2015, the Company has been notified of the following substantial holdings in shares carrying voting rights: Mr HS Barlow Aviva plc Mr MHD Barlow Beneficial Sir JK Barlow Mr GB Barlow Miss AE Barlow Mr JWM Barlow Beneficial 613,084 Beneficial Non-beneficial Non-beneficial Beneficial Non-beneficial 15,017,619 28.26% 1.15% 7,007,994 13.19% 3.34% 1,776,241 2.56% 1,360,750 2.94% 1,561,805 1.64% 869,086 1.65% 877,433 3.83% 2,034,948 1.30% 692,083 3.68% Non-beneficial 1,959,165 The substantial voting rights disclosed above include the total holdings of shares within certain trusts where there are other beneficiaries. 18 MAJEDIE INVESTMENTS PLC There have been no changes to any of the above holdings between 30 November 2015 and the date of this report. Annual General Meeting The Annual General Meeting will be held at City of London Club, 19 Old Broad Street, London EC2N 1DS on Wednesday, 20 January 2016 at 12 noon. The notice convening the Annual General Meeting is available on the Company’s website. The Board considers that Resolutions 1 to 11 are likely to promote the success of the Company and are in the best interests of the Company and its shareholders as a whole. The Directors unanimously recommend that you vote in favour of the Resolutions as they intend to do in respect of their own beneficial holdings. Issue and Buyback of Shares The Board is of the view that an increase of the Company’s stock in issue provides benefits to shareholders including a dilution of the Company’s gearing and cost of its debentures, a reduction in the Company’s administrative expenses on a per share basis and increased liquidity in the Company’s shares. As such the Board sought and received approval, at the Annual General Meeting on 14 January 2015, to allot new shares for cash, and without first offering them to existing shareholders in proportion to their holdings, up to a maximum of 5,200,000 shares (being approximately 9.99% of the Company’s existing share capital at that time). These two existing authorities will expire at the 2016 Annual General Meeting. The directors undertake not to allot any such new shares unless they are allotted at a price representing a premium to the Company’s then prevailing NAV per share, with debt at fair value. During the year a total of 605,000 shares have been allotted from the date of the General Meeting to 30 September 2015, or subsequently to the date of this report. Additionally during the year, 235,476 shares were sold by the Company’s EBT with a further 72,911 shares being exercised. Following these transactions the EBT holds no shares and has been closed. The Board continues to be prepared to issue new shares in order to meet natural market demand, subject to the restriction that any new shares will be issued at a premium, and as such shareholder approval is sought at the Annual General Meeting to renew the authority to issue new shares, without first offering them to existing shareholders in proportion to their holdings, up to a maximum of 5,300,000 shares (being approximately 9.99% of the Company’s existing share capital). Since 1 October 2014, and up to the date of this report, the Company has made no buybacks for cancellation of its ordinary shares. At the Annual General Meeting in 2015 the directors were given power to buy back 7,813,947 ordinary shares (being 14.99% of the Company’s existing share capital). Since the Annual General Meeting the directors have not bought any shares under this authority. This authority will expire at the 2016 Annual General Meeting. In order to provide maximum flexibility, the directors consider it appropriate that the Company be authorised to make such purchases and accordingly shareholder approval is sought at the Annual General Meeting to renew the authority of the Company to exercise the power contained in its Articles of Association to make buybacks of its own shares. The maximum number of shares which may be purchased is 14.99% of the issued share capital. Any shares so purchased will be cancelled. The restrictions on such purchases (including minimum and maximum prices) are outlined in the Notice of Meeting. The Authority will be used where the directors consider it to be in the best interests of the shareholders. Capital Structure As part of its corporate governance the Board keeps under review the capital structure of the Company. At 30 September 2015, the Company had a nominal issued share capital of £5,313,300, comprising 53,133,000 ordinary shares of 10p each, carrying one vote each. All of the shares of the Company are listed on the London Stock Exchange, which is a regulated market. The directors consider that new shares should be issued to meet natural market demand, so long as any such shares are issued at a premium to the Company’s NAV (as measured with debt at fair value). During the year and following demand for the Company’s shares, a total of 605,000 10p shares were allotted. Additionally the Board has each year renewed the authority of the Company to make market buybacks of its own shares. However, the Board is only likely to use such authority in special circumstances. In general the directors believe that a discount to net assets will be reduced sustainably over the long term by the creation of value through the development of the business. The Company deploys gearing through two long term debentures: £15m 9.5% debenture stock 2020 and £25m 7.25% debenture stock 2025, which were issued in 1994 and 2000 respectively. In 2004 the Company redeemed £1.5m of the 2020 issue and £4.3m of the 2025 issue as an opportunity arose to redeem at an attractive price. The limits on the ability to borrow are described in the investment policy on page 12. The Board is responsible for managing the overall gearing of the Company. Details of gearing levels are contained in the Year’s Summary on page 2, and in note 27 to the Accounts. There was one employee share scheme operated by the Group. The last awards issued under the scheme were made in 2009, and following the exercise of the last remaining awards during the year it and the related EBT have been closed. Further details are in note 26 to the accounts. There are: no restrictions on voting rights; no restrictions concerning the transfer of securities in the Company; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; and no agreements which the Company is party to that might affect its control or trigger any compensatory payments for directors, following a takeover bid. REPORT & ACCOUNTS 2015 19 Directors’ Report Notice period for general meetings The Board believes that it is in the best interests of shareholders of the Company to have the ability to call meetings on 14 days’ clear notice should a matter require urgency. The Board will therefore, as last year, propose a resolution at the Annual General Meeting to approve the reduction in the minimum notice period from 21 clear days to 14 clear days for all general meetings other than annual general meetings. The directors do not intend to use the authority unless immediate action is required. Future Developments The Chairman’s Statement and the Chief Executive’s report above provide details as concerning relevant future developments of the Company and the Group in the forthcoming year. Employees, Social, Environmental, Ethical and Human Rights policy The Company, as an investment trust, has a limited direct impact upon the environment. In carrying out its activities and relationships with its employees, suppliers and the community, the Company aims to conduct itself responsibly, ethically and fairly. The Company has appointed MAM to manage the majority of its investment assets. In doing so it takes account of social, environmental, ethical and human rights factors, where appropriate. Carbon Reporting In accordance with the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013, the Company is required to report on its greenhouse gas emissions. In accordance with the regulations, the Company has determined that its organisational boundary, to which entities the regulations apply, is consistent with its consolidated accounts. The Company operates in the financial services sector and in common with many organisations employs outsourcing such that most of its activities are performed by other outside organisations which do not give rise to any reportable emissions by the Group. However the Company, as a self managed investment trust, does undertake activities at its leased premises. In accordance with the provision of the centrally provided building services (including heating, light, cooling etc) to all lessees in the building by the landlord it is considered that the Company does not have emissions responsibility in respect of these services, which rather rest with the landlord. The Company does however have responsibility for various other emissions in the usage of electricity by its office equipment in the course of undertaking its duties but it is not able to determine their amounts as compared to those provided by the landlord. Additionally, the Company has many investments in companies around the world, however the Company does not have the ability to control the activities of these investee companies and as such has no responsibility for their emissions. Therefore, the directors believe that the Group has no reportable emissions for the year ended 30 September 2015 (2014: nil). Donations The Company made no political or charitable donations during the year (2014: nil) to organisations either within or outside of the EU. Gender Diversity The Board are aware of the recommendations made in the Lord Davies Review in 2011 in respect to Board diversity. The Company’s policy on diversity is included in the section on the Nomination Committee on pages 25 and 26 of the Company’s Annual Report and Accounts and this is applied when a new appointment to the Board is required. There has been no change in the Board and at the year end the composition of the Board was that all the directors were male. The composition of the Company’s employees is 66.6% male and 33.3% female. Post Balance Sheet Events There have been no significant post balance sheet events of the Company or its subsidiary, other than those already disclosed in the Report and Accounts. 20 MAJEDIE INVESTMENTS PLC Material Contracts • Majedie Asset Management Limited (MAM) The Board has appointed MAM, as its investment manager, the terms of which are defined under an Investment Agreement dated 13 January 2014. The agreement divides the Company’s investment assets into a combination of a segregated portfolio and the MAM in-house funds, with the Board having the ability, subject to certain capacity constraints in respect of the MAM funds, for the determination of the asset allocation of its investment assets, both initially and on an on-going basis. The Investment Agreement provides that the segregated portfolio is to be managed within MAM’s UK Equity Fund, with other investments being made into the various MAM Funds, as decided by the Board as part of their asset allocation requirements. Further details on the allocation of the investments managed by MAM are included in the Chief Executive’s Report on pages 6 to 8. The fees payable under the Investment Agreement are detailed below: Portfolio/Fund* MAM UK Equity Management Feeˆ Performance Feeˆ Segregated Fund MAM Tortoise Fund MAM UK Income Fund MAM Global Equity Fund 0–0.75% p.a.** MAM Global Focus Fund 0–1.00% p.a.** MAM US Equity Fund 0.75% p.a. 1.50% p.a. 0.75% p.a. 0.75% p.a. Nil 20%† Nil Nil Nil Nil† * The fees are calculated under the terms of the Investment Agreement or the relevant fund prospectus. ˆ The fees charged to the MAM UK Equity Segregated Fund are charged directly to the Company’s Statement of Comprehensive Income. All other fund fees are charged within the relevant fund. † The performance fee entitlement only occurs once the 5% p.a. hurdle has been exceeded and is calculated on a high water mark basis. ** The management fee range reflects the investments made into different share classes. The Investment Agreement entitles either party to terminate the arrangement with six months’ notice after an initial period ending on 31 December 2015. • BNY Mellon Trust & Depositary (UK) Limited The Company has appointed BNYM (UK) Limited (BNYM (UK)) to provide depositary services as required by the AIFMD and certain other associated services under the terms of a depositary agreement dated 19 June 2014. The services provided by BNYM (UK) as Depositary for the Company include: • general oversight responsibilities over the issue and cancellation of the Company’s share capital, the carrying out of net asset value calculations, the application of income, and the ex-post review of investment transactions; • monitoring of the Company’s cash flows and ensuring that all cash is booked in appropriate accounts in the name of the Company or BNYM (UK) acting on behalf of the Company; and • ensuring that the Bank of New York Mellon SA/ NV, London Branch (BNYM) (to whom BNYM (UK) has delegated the safekeeping of all assets held within the Company’s investment portfolio, including those classed as financial instruments for the purpose of the AIFMD), in accordance with the terms of a Global Custody Agreement, retains custody of the Company’s financial instruments in segregated accounts so that they can be clearly identified as belonging to the Company and maintains records sufficient for verification of the Company’s ownership rights in relation to assets other than financial instruments. No specific conflicts have been identified as arising as a result of the delegation of the provision of custody and safekeeping services by BNYM (UK) to BNYM. The terms of the depositary agreement provide that, where certain assets of the Company are invested in a country whose laws require certain financial instruments to be held in custody by a local entity and no such entity is able to satisfy the requirements under the AIFMD in relation to use of delegates by depositaries, BNYM (UK) may still delegate its functions to such a local entity and be fully discharged of all liability for loss of financial instruments of the Company by such local entity. REPORT & ACCOUNTS 2015 21 Directors’ Report The Depositary receives an annual fee for its services on a sliding scale of 0.04% up to total gross portfolio assets of £100 million and 0.035% between £100 million and £250 million and 0.03% above £250 million, payable monthly in arrears. The depositary agreement in place with BNYM (UK) and the related custody agreement in place with BNYM continues unless and until terminated: without cause upon the Company and BNYM (UK) giving not less than 90 days’ notice and upon BNYM (UK) giving notice expiring not less than 18 months after the date of the agreement, in each case such notice to be effective only if a new Depositary has been appointed. • Capita Sinclair Henderson Limited The Board has appointed Capita Sinclair Henderson Limited (trading as Capita Asset Services) in November 2000 to act as Company Secretary and undertake fund administration services. The terms of Capita Sinclair Henderson Limited’s appointment are defined under a Secretarial and Administration Services Agreement dated 6 February 2012. The agreement entitles either party to terminate the arrangement with twelve months’ notice. Following a review of its business operations, the Company provided the requisite notice under the agreement to terminate the agreement as from 31 March 2016 (but which can be extended, if necessary, and as agreed by the parties). The Company has contemporaneously agreed to continue with Company Secretarial services from Capita Asset Services under a new agreement, on terms to be agreed, as from 1 April 2016. The review determined that following a change to its business model following the appointment of MAM as its investment manager, it was more efficient if fund administration services were undertaken in-house. Listing Rule Disclosure The Company is listed on the London Stock Exchange and is subject to the UKLA listing rules. These require, inter alia, various disclosures, which are included in this report, and now also include the requirement, under Listing Rule 9.8.4R, to disclose, where applicable, certain specific items separately. These, as they apply to the Company, in respect of the year ended 30 September 2015, are: • that the Company has not capitalised any interest during the year (all interest charged has been included in the Group and Company’s respective Statement of Comprehensive Income); • that no director waived or has agreed to waive any entitlements during the year, nor for any future periods; • that the Company had no contracts of significance; and • that the Company’s Employee Benefit Trust (EBT) has, in accordance with its Trust Deed dated 19 January 1998, agreed to waive its entitlement to dividends in respect of its holdings of Company shares, to the extent that they exceed 0.001p per share. Further details in respect of the EBT are contained in note 21 to the accounts. AIFMD The Company is subject to the AIFMD, which requires certain financial and non-financial disclosures in respect of Annual Reports. These disclosures are met by the Company in its Annual Report. In addition certain specific disclosures are required which are: • Remuneration Total remuneration details for the directors (who are considered to be code staff under the Directive) are shown in the Report on Directors’ Remuneration. Remuneration details for staff are included in Note 7 to the accounts. There was £40,000 of variable remuneration paid during the year. • Leverage Under the AIFMD, the Company is required to disclose its actual leverage (calculated in accordance with the Directive under the Gross & Commitment methods) and it must also set a limit in respect of leverage it can use. The Company has set a limit of 1.5 times (1 being defined as no leverage) and as at 30 September 2015 had leverage of 1.21 under the Gross method and 1.23 under the Commitment method. Note 27 to the accounts provides further details. 22 MAJEDIE INVESTMENTS PLC • Investor Pre-investment information The AIFMD requires that potential investors are provided with certain information. The Company provides this information on its website at www.majedieinvestments.com and there have been no material changes since 22 July 2014 to the date of this report. Disclosure of Information to Auditors As far as each of the directors are aware: • there is no relevant audit information of which the Company’s Auditors are unaware; and • they have taken all steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Company’s Auditors are aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006. Auditors Ernst & Young LLP were re-appointed as Auditors on 14 January 2015. Ernst & Young LLP have indicated their willingness to continue in office and a resolution will be proposed at the Annual General Meeting to re-appoint them as Auditors. Viability The Directors have assessed the prospects of the Company over the three year period to September 2018. The Directors believe that this period is appropriate as the Company is a long term investor in equity markets. In their assessment of the viability of the Company, the Directors have considered each of the Company’s principal risks and uncertainties. The Directors have also considered the Company’s income and expenditure projections, the level of borrowings (leverage of 1.21 (Gross method) and 1.23 (Commitment method) is well below the 1.5 limit and the current borrowings of £33.9m are over 5 times covered by the current total assets) and the fact that the Company’s investments primarily (being 70.7% of total assets as at 30 September 2015), comprise readily realisable securities which can be sold to meet funding requirements as necessary. Based on the Company’s processes for monitoring expenses, share price discounts or premium, the allocation in its investment portfolio to an absolute return fund, the Investment Manager’s compliance with the investment restrictions and objective, concentration and liquidity risk, the current large margin of safety over the covenants on its debentures and financial controls, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to September 2018. Going Concern The Directors believe, after review and due consideration of future forecast and cashflow projections, that the Company has adequate financial resources to continue in operational existence for the foreseeable future. For this reason and taking account of the large number of readily realisable investments held within its portfolio, the Board continues to adopt the going concern basis in preparing the financial statements. By Order of the Board Capita Sinclair Henderson Limited Company Secretary 4 December 2015 REPORT & ACCOUNTS 2015 23 Corporate Governance Statement The Corporate Governance Statement forms part of the Directors’ Report. This section of the Annual Report describes how the Company, as a member of the AIC, has applied the principles of the UK Corporate Governance Code as published by the Financial Reporting Council (FRC) in September 2014, as required by the FCA. A copy of the UK Corporate Governance Code can be found at www.frc.org.uk. The Board has considered the principles and recommendations of the AIC Code of Corporate Governance (AIC Code) by reference to the AIC Corporate Governance Guide for investment companies (AIC Guide). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company. A copy of the AIC Code can be found at www.theaic.co.uk. The Board considers that reporting against the principles and recommendations of the AIC Code, by reference to the AIC Guide (which incorporates the UK Corporate Governance Code), will provide information to shareholders. The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Corporate Governance Code throughout the year ended 30 September 2015 except as set out below: Senior Independent Director – The directors have determined that the size of the Company’s Board does not warrant the appointment of a senior independent director. Internal Audit function – The Company does not have an internal audit function due to its accounting, administration, company secretarial and custody arrangements being outsourced to the parties detailed on pages 21 to 22. Shareholder information – The Company does not provide, although relevant information is disclosed, a complete portfolio listing. Certain small legacy realisation holdings are no longer material or relevant, and the provision of fuller information would be contrary to public information provided by MAM. The Board has considered the FRC guidance on risk management, internal control and related financial and business reporting dated September 2014 that applies from 1 October 2014. Further details are contained on page 31 in the Report of the Audit Committee. The Company The Company has a long history of self management which includes the Company being a self managed AIF under the AIFMD. 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 53% 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 of Directors The Company’s Board of directors is responsible for the overall stewardship of the Company, including corporate strategy, corporate governance, risk management and compliance with regulations (including its responsibilities as AIFM under the AIFMD), overall investment policy, asset allocation and gearing. The Chairman is responsible for leadership of the Board and ensuring its effectiveness on all aspects of its role, and that all Directors receive accurate, timely and clear information. Its composition satisfies the requirements of the AIC Code and is composed of an independent Chairman, two non-executive directors and Mr JWM Barlow who is the CEO. Biographical details of the directors are shown on page 16. Messrs AJ Adcock, PD Gadd and RDC Henderson are considered to be independent as defined by the AIC Code as, in the opinion of the Board, each is independent in character and judgment and there are no relationships or circumstances relating to the Company that are likely to affect their judgment. However, the Board considers that all directors exercise their judgements in an independent manner. The Chairman’s other commitments are in his biography on page 16. 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. 24 MAJEDIE INVESTMENTS PLC During the year ended 30 September 2015, the Company held six Board meetings, three Audit Committee meetings, one Management Engagement Committee meeting, one Nomination Committee meeting and two Remuneration Committee meetings. Attendance at these Board and Committee meetings is detailed below. Number of meetings Board Audit Management Engagement Remuneration Nomination Directors AJ Adcock JWM Barlow RDC Henderson PD Gadd 6 6 6 6 6 3 3 n/a 3 3 1 1 n/a 1 1 2 2 n/a 2 2 1 1 n/a 1 1 Since the Company’s financial year end the Company held two Board meetings, one Audit Committee, one Management engagement, one Nomination Committee and one Remuneration Committee meeting. All Board and Committee members attended their respective meetings. The Board has undertaken a formal and rigorous evaluation of its own performance and of its Committees 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 Board recognises the need for new directors to receive an appropriate induction. Existing directors receive regular updates, including in respect of regulatory and governance matters and development, and training needs were discussed as part of the Board evaluation process. Directors’ and Officers’ Liability Insurance and Indemnities 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. Committees The Board has established the following Committees: • The Audit Committee comprises: Mr RDC Henderson (Chairman), Mr PD Gadd and Mr AJ Adcock. Mr JWM Barlow and representatives of the Auditors are invited to attend meetings of the Committee. It is considered that Mr RDC Henderson, who is a Chartered Accountant, has recent relevant financial experience. The Board has agreed the terms of reference for the Audit Committee which meets at least twice a year. Further details on the work of the Audit Committee are detailed in the Report of the Audit Committee on pages 29 to 31. • The Nomination Committee comprises: Mr AJ Adcock (Chairman) and all of the non- executive directors. Mr JWM Barlow attends meetings at the request of the Committee, from time to time. The policy of the Committee is to consider 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. Gender and diversity are considered by the Committee and are taken into account when evaluating the skills, knowledge and experience desirable to fill each vacancy but all appointments to the Board are made on merit. The Committee has not set any measurable objectives in respect of this policy. The Company’s Articles of Association require a director appointed during the year to retire and seek appointment by shareholders at the next Annual General Meeting and all directors must seek REPORT & ACCOUNTS 2015 25 Corporate Governance Statement re-appointment at least every three years. All directors are appointed for a term of three years after appointment or re-appointment by shareholders at a general meeting. A director’s appointment may be terminated by the Company or the director by providing one month’s notice. The Articles of Association can be amended 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. Directors’ terms and conditions for appointment are set out in letters of appointment, which are available for inspection at the registered office of the Company and will be available 15 minutes before the start of and during the Company’s Annual General Meeting. Details of the CEO’s employment contract can be found in the Remuneration Report on pages 32 to 35. The Nomination Committee met on 15 October 2015 to consider the re-appointment of directors at the Company’s Annual General Meeting. Based on the outcome of the Board performance evaluation process and on the basis that they continued to make valuable contributions and exercise judgement and express opinions in an independent manner, the Committee has decided to recommend the re-appointment of Messrs PD Gadd and JWM Barlow. The Committee believes the directors provide the necessary breadth of skills and experience to run the Company. • The Remuneration Committee comprises: Mr PD Gadd (Chairman), Mr AJ Adcock and Mr RDC Henderson. Mr JWM Barlow is invited to attend and participate as appropriate. Further details on the work of the Remuneration Committee are included in the Report on Directors’ Remuneration on pages 32 to 35. • The Management Engagement Committee (MEC) comprises: Mr PD Gadd (Chairman), and all of the non- executive directors. Mr JWM Barlow attends meetings at the request of the Committee, from time to time. The Board has agreed terms of reference for the Committee, which meets at least once a year to consider the performance of the Investment Manager, the terms of the Investment Manager’s engagement and to consider the continued appointment of the Investment Manager. The MEC met on 15 October 2015 and recommended that MAM be retained as Investment Manager. In determining their recommendation, the MEC concluded that MAM have an excellent track record and offer a broad range of products to meet the Company’s investment policy. Following the recommendation from the MEC, the Board has concluded that it is in the best interests of shareholders that MAM should continue to be the Investment Manager of the Company under its existing terms. In addition to the Investment Management role, the Board has delegated to external third parties the depositary and custodial services, the day to day accounting, company secretarial services, administration and registration services. The MEC annually reviews their performance and their contracts. The terms of reference of the Company’s Committees are available on request from the Company Secretary or from the Company’s website. Conflicts of Interest The Directors have declared any conflicts or potential conflict of interest to the Board of directors which has the authority to approve such situations. The Company Secretary maintains the Register of Directors’ Conflicts of Interests which is reviewed quarterly by the Board and when changes are notified. The directors advise the Company Secretary and Board as soon as they become aware of any conflicts of interest. Directors who have conflicts of interest do not take part in discussions which relate to any of their conflicts. 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. 26 MAJEDIE INVESTMENTS PLC 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. 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 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 at the Annual General Meeting 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 various sections of the Strategic Report provide further information. 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.majedieinvestments.com. Voting policy The exercise of voting rights attached to the Company’s investment portfolio has been delegated to MAM in the absence of explicit instructions from the Board. MAM subscribe to the NAPF Voting Issues Service (ISS) which forms part of their voting process. MAM provides a quarterly report detailing the voting activity on the Company’s investment portfolio which includes details of the votes made as well as the reasons explaining the rationale for the voting decision. MAM are required to include on their website a disclosure about the nature of their commitment to the FRC’s Stewardship Code and details may be found at www.majedie.com. Internal Control Review The Directors acknowledge that they are responsible for the systems of internal control relating to the Company and its subsidiary 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. This has been refined further following the introduction of the AIFMD, which requires the Board, as AIFM, to implement effective risk management policies and procedures. 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. REPORT & ACCOUNTS 2015 27 Corporate Governance Statement A review of internal control and risk management systems are undertaken by the Board or the Audit Committee 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 subsidiary. In arriving at its judgement of the nature of the risks facing Group companies, the Board or the Audit Committee 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. Further details relating to risk management, risk assessments, and internal controls are contained in the Report of the Audit Committee on pages 29 to 31. In accordance with the AIC and the UK Corporate Governance 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. By Order of the Board Capita Sinclair Henderson Limited Company Secretary 4 December 2015 28 MAJEDIE INVESTMENTS PLC Report of the Audit Committee The Report of the Audit Committee forms part of the Corporate Governance Statement. During the year ended 30 September 2015 the Audit Committee comprised independent non-executive directors, being Mr RDC Henderson (Chairman), Mr AJ Adcock and Mr PD Gadd. Mr JWM Barlow was also invited to attend meetings. The Committee usually meets twice a year in which it reviews the Half-Yearly Financial Report and the Annual Report. The Company Secretary, Capita Sinclair Henderson Limited (trading as Capita Asset Services), acts as Secretary to the Committee and its terms of reference are available on request or may be obtained from the Company’s website. Responsibilities The Committee’s responsibilities include: • monitoring the integrity of the financial statements of the Company (including that they are considered, as a whole, to be fair, balanced and understandable); • 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 of the external auditor, monitoring the external auditor’s effectiveness, independence and developing and implementing a policy on the engagement of the external auditor to supply non-audit services. In respect of the year under review the Committee met three times, in May, July and November 2015. The purpose of the meetings was to review the Group’s Half-Yearly Financial Report and Annual Report respectively, and to review the internal control environments of outsourced service providers, to oversee the relationship with the Auditor (which includes recommendations on fees, approval of their terms of engagement and assessing their independence and effectiveness). Significant issues related to the Financial Statements In respect of the year ended 30 September 2015, and following robust assessment of the risks facing the Company, the Committee considered the following issues to be significant to the financial statements: Valuation of Investments The Company is a global equity investment trust which invests in many companies around the world, the majority of which are quoted and traded on a recognised stock exchange. However, some of the Company’s investments are held in companies that are not quoted or traded on a recognised stock exchange and for which price discovery requires careful analysis and judgement. Although these are small in number (and also usually by value) they do include the investment in MAM and, as such, they are significant to the determination of the Company and Group’s net asset value. Investments in quoted companies are valued by the Company’s external Fund Administrator using prices from third party pricing sources. The Fund Administrator reviews all prices and those that exceed a pre-determined movement threshold are subject to further verification checks using additional pricing sources. For unquoted investments, the CEO recommends a fair value for the relevant investment to the Committee using the Company’s policy as set out in note 1 to the Accounts on pages 53 to 58. The unquoted investments are subject to review by the Committee and the Auditor (at the year end and subject to audit materiality). The fair value of MAM is usually assessed twice a year by the directors and is approved by the Audit Committee. The fair value calculation is formulaic, with the significant input in assessing the price being the earnings of MAM. A 5% increase/decrease in MAM’s earnings would result in an increase/decrease of 4.3% in the carrying value of MAM. Ownership of Investments The Company’s investments are held in safe custody by BNYM (UK) as depositary. The Committee receives regular reports on BNYM (UK)’s internal controls. The Chairman of the Committee will be available at the Annual General Meeting to answer any questions relating to the Annual Report. REPORT & ACCOUNTS 2015 29 Report of the Audit Committee External Audit The Company’s external auditor is Ernst & Young LLP, who were appointed on 18 January 2008, replacing Deloitte & Touche LLP following an open tender process (there are no restrictions or impediments to the external audit tendering process). Given its relative size and nature of operations the Company has no formal tendering policy in place. The Company engages Ernst & Young LLP to undertake the annual year end audit. It was agreed, following a review of market practice and audit costs and the Company’s nature and scope of activities, that a review of the Half Yearly Financial Report was no longer necessary. Ernst & Young LLP attend the annual accounts Audit Committee meeting in November. In determining the effectiveness of the external audit the Committee takes account of the following factors: Factor The Audit Partner The Audit Team The Audit approach The role of management Assessment Extent to which the partner demonstrates a strong understanding of the business and industry and the challenges that the Company faces. Additionally is committed to audit quality, whose opinion is valued and sought after. Extent to which the audit team understand the business and industry, are properly resourced and experienced. The Audit approach is discussed with management and targets the significant issues early (and any new requirements as a result of new regulations etc), is communicated properly, is appropriate for the Company’s business and industry and includes an appropriate level of materiality. Information provided by management is timely and correct with proper work papers. Accounting systems and internal controls work properly to enable proper information and an audit trail to be provided. The communications and formal reporting by the Auditor Management and the Committee kept appropriately informed as the audit progresses – a no surprises basis is adopted. The formal report is appropriate and contains all the relevant material matters. The support, insights and added value provided to the Committee Guidance given to the Committee for best practice with provision of updates and or briefings or training between Committee meetings. The independence and objectivity of the Auditor Complies with the FRC ethical standards and has the required degree of objectivity. In assessing the effectiveness of the audit, the Committee receives management assessments and reports from the Auditor and additionally does, from time to time, receive assessments on the auditor from the FRC. As a result of its review, the Committee is satisfied that, in respect of the year ended 30 September 2015 the external audit process is effective and it recommends the appointment of Ernst & Young LLP as Auditors at the forthcoming Annual General Meeting. 30 MAJEDIE INVESTMENTS PLC For the year ended 30 September 2015 the Group’s risk management and internal controls were subject to review by the Committee and as such the Committee considers that they have been, and are, adequate and effective. Risk Assessment The Audit Committee considered the revisions to the UK Code which required a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The principal risks facing the Company and how they are being managed are detailed on pages 14 to 15 in the Business Review section of the Strategic Report. The Committee robustly reviews these risks and mitigating controls in its meetings in May and November (and additionally the Board, at each meeting, reviews a Key Risks Summary which outlines the key risks, and changes thereto). Compliance, Whistleblowing and Fraud The Company operates using an outsourced business model, in common with other investment trusts. As such the Committee and the Board receive reports regarding the compliance function of the Investment Manager and Fund Administrator including procedures for whistleblowing and for detecting fraud and bribery. The Committee also seeks assurances from service providers that appropriate whistleblowing procedures are in place which enable their staff to raise concerns about possible improprieties in a confidential manner. On behalf of the Board RDC Henderson Chairman of the Audit Committee 4 December 2015 Policy for non-audit services From time to time it may be appropriate and cost effective for the external auditor to provide services 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 auditor to provide such services. In the year under review, the auditor provided a review of the Company’s debenture covenant reporting (to the trustee for the debenture holders), which is separately disclosed as Other Assurance Services in the Accounts. Any areas of concern are raised with the Board of the Company. In determining auditor independence the Committee assesses all relationships with the auditor and receives from the auditor information on its independence policy along with safeguards and procedures it has developed to counter perceived threats to its objectivity. The auditor also provides confirmation that it is independent within the meaning of all regulatory and professional requirements and that the objectivity of the audit is not impaired. Following its review, the Committee is satisfied that they are independent having fulfilled their obligations to both the Company and its shareholders. Risk Management and Internal Control The Group operates risk management and internal control systems appropriate for entities operating in the financial services sector and additionally as appropriate to its size and the scope of its activities. In reviewing these systems, the Committee, and or the Board, receive regular reports. The Committee also receives control reports from its key third party outsourced service providers on the effectiveness of their own internal control systems and procedures. Any particular issues identified are documented and followed up by the Committee or the Board in following meetings. The Company does not have an internal audit function as required under the UK Corporate Governance Code. The Committee has considered this matter and is 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 operation. In particular the Company operates with Investment Management services being undertaken by MAM, Fund Administration and Company Secretarial functions by Capita Asset Services and Depositary services by BNYM (UK) Limited (with custody being delegated to BNYM). REPORT & ACCOUNTS 2015 31 Report on Directors’ Remuneration The Remuneration Committee has decided that, following a review of market conditions, Mr Barlow’s basic salary will increase by 2.5% as from 1 October 2015. There is no change to his other benefits nor to the bonus scheme. P D Gadd Chairman of the Remuneration Committee 4 December 2015 Directors’ Remuneration Policy In accordance with the requirements of Schedule 8 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended (the Regulations), an ordinary resolution to approve the directors’ remuneration policy was approved at the Company’s Annual General Meeting on 14 January 2015. It is proposed that the approved policy remain in force until the annual general meeting of the Company in 2018, at which time a further resolution will be proposed. The approved policy is available for inspection by shareholders on the Company’s website at www.majedieinvestments.com. Annual Statement In respect of the financial year ended 30 September 2015, the Company received shareholder permission to issue up to 9.99 percent of its then issued share capital, amounting to 5,200,000 shares, and FCA permission to operate a block listing programme. In the financial year 605,000 new shares were issued, with an additional 235,476 shares sold by the Company’s EBT, and it is proposed that the authority to issue shares is renewed at the 2016 Annual General Meeting. There were no changes to the composition of the Board during the year. From 1 October 2014, and as approved at the 2015 Annual General Meeting, directors’ fees increased by 5%. At its meeting in October 2015, the Remuneration Committee has decided that there should be no change to the remuneration of the non-executive directors in respect of the financial year ended 30 September 2015. This decision was made in the context of the previous increase in directors’ fees and prevailing market conditions. In respect of the remuneration of the CEO, Mr JWM Barlow, under the new bonus scheme approved at the 2015 Annual General Meeting, he will be entitled to a bonus of £25,000 in any financial year in which the Company’s issued share capital is increased by at least 5%, rising to £50,000 on a straight line basis if it increases by 10%. No bonus would be paid in the absence of any such increase, and no other bonus arrangements have been proposed. During the financial year ended 30 September 2015 a total of 840,476 shares were issued (comprised of 605,000 new shares issued and 235,476 shares sold by the Company’s EBT), representing 1.6% of the Company’s share capital at 1 October 2014 (excluding any shares held in the Company’s EBT). Mr Barlow did not therefore qualify for a performance bonus under this bonus scheme; in the financial year, he did however receive a £40,000 bonus in respect of the year ended 30 September 2014, which was approved at the 2015 Annual General Meeting, for his additional work in connection with the restructuring of the Company and the appointment of MAM. 32 MAJEDIE INVESTMENTS PLC AUDITED SECTION Annual Report The remuneration of the directors for the year ended 30 September 2015 was as follows: Directors Interests The Company does not have any requirement or guidelines for any director to own shares in the Company. Salary & Fees Bonus/Fixed Profit Share Taxable Benefits Total Remuneration 2015 £000 2014 £000 2015 £000 2014 £000 2015 £000 2014 £000 2015 £000 2014 £000 The interests of the directors of the Company, (including their connected persons), in securities of the Company as at 30 September 2015, and as at 4 December 2015 are as follows: Non-executive Directors AJ Adcock PD Gadd RDC Henderson CEO JWM Barlow (fees only) Fees sub-total JWM Barlow (other remuneration) 79 32 32 143 169 75 56 31 14 176 84 Total 312 260 Director Type of holding Mr AJ Adcock Mr RDC Henderson Mr PD Gadd Mr JWM Barlow Beneficial Beneficial Beneficial Beneficial No of fully paid ordinary 0.1p shares 30 September 2015 4 December 2015 50,000 4,700 40,448 50,000 4,700 40,448 692,083 692,083 Non-beneficial 1,959,165 1,959,165 79 32 32 143 216 75 56 31 14 176 140 359 316 40 40 50 50 7 7 6 6 Mr JWM Barlow’s taxable benefits relate to healthcare costs (he receives no pension contributions). His bonus of £40,000 was in respect of the year ended 30 September 2014 for his additional work in connection with the restructuring of the Company and the appointment of MAM. This bonus was paid following approval at the 2015 Annual General Meeting. Directors’ fees are set at £78,750 per annum for the Chairman and £28,350 basic, per annum, for each of the other non- executive directors. In addition there is a £3,150 per annum supplement for each of the Chairman of the Audit and Remuneration Committees. The CEO does not receive any fees from 1 April 2014. NON AUDITED SECTION Performance Set out below is a graph showing the total shareholder return attributable to the ordinary shares in the Company in respect of the seven financial years ended 30 September 2015 and to a hypothetical portfolio constructed according to a benchmark equity index, calculated as 70% FTSE All-Share Index and 30% FTSE World ex UK Index (Sterling). Although the Company abandoned this as an overall benchmark in 2010 it remains as the comparator for the purpose of this graph as it was the benchmark at the start of the period and it includes a weighting to overseas assets suitable in respect of the Company’s assets. There have been no payments to past directors during the financial year ended 30 September 2015, whether for loss of office or otherwise. Total Shareholder Return v Benchmark 7 years ended 30 September 2015 Scheme interests awarded during the financial year No awards were made to directors during the year under the Company’s Long Term Incentive Plan, and this plan has now expired, and the Company’s EBT has been wound up. 200% 180% 160% 140% 120% 100% 80% 60% 2008 2009 2010 2011 2012 2013 2014 2015 Total Shareholder Return k Benchmar REPORT & ACCOUNTS 2015 33 Report on Directors’ Remuneration Relative importance of spend on pay The table below sets out, in respect of the financial year ended 30 September 2015 and the preceding financial year: a) the actual administration expenses expenditure of the Group; b) the remuneration paid to or receivable by all members of the Group (including for this purpose partnership distributions to the partners of Javelin Capital); c) the distributions made to shareholders by way of dividend or share buyback. £m 6 5 4 3 2 1 0 Note 2014 2015 Admin expenses Total staff remuneration Dividends The items listed in the table above are as required by the Regulations with the exception of administrative expenses for the Group which has been included as the Directors believe that it will help aid the understanding of the relative importance of the spend on staff pay. Remuneration of the director undertaking the role of Chief Executive Officer The table below sets out the remuneration of the director of the Company who fulfils a role most closely corresponding to that of chief executive officer (CEO) over the preceding seven financial years: Director undertaking role of CEO Total remuneration Year ended Current year variable remuneration awarded vrs maximum potential value Prior year or future year awards vested vrs maximum potential value 30 Sep 2015 Mr JWM Barlow £215,649 44%* 30 Sep 2014 Mr JWM Barlow £153,358 30 Sep 2013 Mr JWM Barlow £143,531 30 Sep 2012 Mr JWM Barlow £166,640 30 Sep 2011 Mr GP Aherne 30 Sep 2010 Mr GP Aherne 30 Sep 2009 Mr GP Aherne 30 Sep 2008 Mr RE Clarke £185,040 £260,000 £147,000 £902,994 0% 0% 0% 0% 100% 0% 95% 0% 0% 0% 0% 0% 0% 0% 63% * Reflects the £40,000 bonus (as detailed in the Annual Statement) as against the maximum bonus potential of £90,000. The table below sets out the changes in the disclosed elements of the director undertaking the role of CEO as compared to employees of the Group: Year ended Fixed remuneration Benefits Variable remuneration CEO Staff CEO Staff CEO Staff 30 September 2015 +14.5% +27.9% +16.0% -15.8% +100.0% 0.0% Notes 1. The change in the CEO fixed remuneration reflects the full year impact of reverting to a salary as compared to his previous lower priority profit share as a partner of Javelin Capital LLP. Average staff fixed remuneration has increased, reflecting the full year impact of the change in composition of staff numbers after the restructuring, cost of living increases and as above, the full year impact of reverting to a salary from a priority profit share as above. 2. The percentage increase in benefits shown includes the increased costs by the relevant providers and the full year impact of the change in the staff composition following the restructuring; however given the small staff numbers involved the actual change in monetary terms is quite small. 3. The change represents the bonus paid to Mr JWM Barlow in the year as explained above. There were no staff bonuses in the year. 34 MAJEDIE INVESTMENTS PLC Basis of preparation This report has been prepared in accordance with the requirements of Schedule 8 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended, as required by the Companies Act 2006. The report also meets the relevant requirements of the Listing Rules of the Financial Conduct Authority and describes how the Board has applied the principles relating to the directors’ remuneration. The Report on Directors’ Remuneration on pages 32 to 35 was approved by the Board on 4 December 2015. On behalf of the Board PD Gadd Chairman of the Remuneration Committee 4 December 2015 Statement of implementation of Remuneration Policy in respect of the financial year ending 30 September 2016 Non-Executive Directors The Remuneration Committee will review directors’ fees during the financial year, and may recommend an inflation related increase, but does not expect to recommend any other change in the absence of unforeseen circumstances. CEO The Remuneration Committee intends to review the salary of the CEO in light of prevailing market conditions. It intends to operate Mr JWM Barlow’s bonus scheme in accordance with its terms as set out in the Remuneration Policy. Consideration by the directors of remuneration During the financial year, the members of the remuneration committee were PD Gadd (chair), AJ Adcock and RDC Henderson. No person provided services or advice to the Remuneration Committee which materially assisted the committee. Statement of voting at General Meeting At the annual general meeting of the Company held on 15 January 2015, resolutions were proposed by the Company to approve the Report on Directors’ Remuneration for the year ended 30 September 2014 and to approve the revised Directors’ Remuneration Policy. For both resolutions 97.7% of the votes cast were in favour with 2.3% against and 0.0% of the votes being withheld. REPORT & ACCOUNTS 2015 35 Statement of Directors’ Responsibilities The Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable United Kingdom law and those IFRSs as adopted by the European Union. Under Company Law the Directors must not approve the Group financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Group for that period. In preparing the Group financial statements the Directors are required to: • select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s financial position and financial performance; Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, a Corporate Governance Statement, Directors' Remuneration Report and a Directors’ Report that comply with that law and those regulations. The Directors of the Company, whose names are shown on page 16 of this Report, each confirm to the best of their knowledge that: • the financial statements, which have been prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; • the Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces; and • they consider that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy. • state that the Group has complied with IFRSs, subject to any material departures disclosed and explained in the financial statements; By order of the Board • make judgements and estimates that are reasonable and prudent; and • state that the Annual Report, taken as a whole, is fair, balanced and understandable and provides sufficient information to allow shareholders to assess the Group’s performance. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Group financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Andrew J Adcock Chairman 4 December 2015 36 MAJEDIE INVESTMENTS PLC Report of the Depositary Report of the Depositary to the shareholders of Majedie Investments PLC Depositary’s responsibilities The Depositary is responsible for the safekeeping of all custodial assets of the Company, for verifying and maintaining a record of all other assets of the Company and for the collection of income that arises from those assets. It is the duty of the Depositary to take reasonable care to ensure that the Company is managed in accordance with the Alternative Investment Fund Managers Directive (AIFMD), the FUND Sourcebook and the Company’s Instrument of Incorporation, in relation to the calculation of the net asset value per share and the application of income of the Company. The Depositary also has a duty to monitor the Company’s compliance with investment restrictions and leverage limits set in its offering documents. Report of the Depositary to the shareholders of Majedie Investments PLC for the year ended 30 September 2015 Having carried out such procedures as we consider necessary to discharge our responsibilities as Depositary of the Company, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Company, acting through the AIFM has been managed in accordance with AIFMD, the FUND sourcebook, the Instrument of Incorporation of the Company in relation to the calculation of the net asset value per share, the application of income of the Company; and with investment restrictions and leverage limits set in its offering documents. For and on behalf of BNY Mellon Trust & Depositary (UK) Limited 160 Queen Victoria Street London EC4V 4LA REPORT & ACCOUNTS 2015 37 Report of the Independent Auditor Independent Auditor’s Report to the Members of Majedie Investments PLC Opinion on financial statements In our opinion the financial statements: • give a true and fair view of the state of the Group and of the Parent Company’s affairs as at 30 September 2015 and of its profit for the year then ended 30 September 2015; • have been properly prepared in accordance with IFRSs as adopted by the European Union; and • have been prepared in accordance with the requirements of the Companies Act 2006. What we have audited We have audited the financial statements of Majedie Investments PLC for the year ended 30 September 2015 which comprise the Consolidated and Company Statements of Comprehensive Income, the Consolidated and Company Statements of Changes in Equity, the Consolidated and Company Balance Sheets, the Consolidated and Company Cash Flow Statements and the related notes 1 to 28. 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. This report is made solely to the Group’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 auditor As explained more fully in the Directors’ Responsibilities Statement set out on page 36, 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 and express an opinion on 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 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 and 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. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Our assessment of risk of material misstatement We identified the following risks of material misstatement that had the greatest effect on the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. The Audit Committee have set out their assessment of the significant issues in relation to the financial statements on page 29. The table below includes our responses to the risks: 38 MAJEDIE INVESTMENTS PLC Risk Identified Valuation and existence of Majedie Asset Management Limited (MAM) Incorrect valuation of, or incorrect title to, the Company’s unquoted investment in Majedie Asset Management Limited (MAM). Income recognition Income is predominantly comprised of dividends receivable from quoted investments. There is a risk of incomplete or inaccurate income recognition through failure to recognise proper income entitlements or apply appropriate accounting treatment. Valuation and existence of the investment portfolio (excluding MAM). Our Response We reviewed the basis for determining the fair value of the investment in MAM and considered the appropriateness of the valuation methodology. We consulted with our specialist valuations team in respect of this. With reference to the shareholder agreement we checked any restrictions on the sale of the Company’s stake in MAM and considered the impact of these restrictions on the fair value as defined by IFRS 13. We agreed inputs into the valuation model to source documentation and re-performed the calculations prepared by management in order to confirm their arithmetical accuracy. We confirmed that the valuation had been calculated in accordance with the methodology set out in the shareholder agreement. We obtained independent confirmation from the custodian of the Group’s investment in MAM. We performed the following procedures: • We agreed a sample of dividends received to an independent source and bank statements. • We agreed the dividends from MAM to meeting minutes at a MAM level and agreed the receipt to bank statements. • We reviewed the dividends received for any special distributions and ensured that these have been accounted for correctly. • We reviewed the treatment of the income received and determined whether the treatment was in line with the policy. We performed the following procedures: • We agreed year end prices for all listed investments to an independent source. • We reviewed the portfolio of investments and note that, with the exception of the investment in MAM, the remaining unquoted investments are individually and cumulatively below our materiality threshold. From review of the investment holdings and performance of these investments we have not identified circumstances to suggest that a material write up in the valuation of these investments would be appropriate. • We obtained independent confirmation from the custodian of the Group’s investments and agreed this to the Group’s books and records. REPORT & ACCOUNTS 2015 39 Report of the Independent Auditor Independent Auditor’s Report to the Members of Majedie Investments PLC Our application of materiality We determined planning materiality for the Group to be £1,498k (2014: £1,340k), which is 1% of total equity. This provided a basis for determining the nature, timing and extent of our risk assessment procedures, identifying and assessing the risks of material misstatement and determining the nature, timing and extent of further audit procedures. We have derived our materiality calculation based on a proportion of total equity as we consider it to be the most important financial metric on which shareholders would judge the performance of the Group and Company. On the basis of our risk assessments, together with our assessment of the Group and Company’s overall control environment, our judgment was that overall performance materiality (i.e. our tolerance for misstatement in an individual account or balance) for the Group should be 75% of planning materiality, being £1,124k (2014: 75% of planning materiality, £1,010k). Our objective in adopting this approach was to ensure that total undetected and uncorrected audit differences in all accounts did not exceed our planning materiality level. Given the importance of the distinction between revenue and capital for the Group and Company we have also applied a separate testing materiality of £248k (2014: £260k) for the revenue column of the Income Statement, being 5% of the return on ordinary activities before taxation. We agreed with the Audit Committee that we would report all audit differences in excess of £75k (2014: £70k) as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in the light of other relevant qualitative considerations. Opinion on other matter prescribed by the Companies Act 2006 In our opinion: • the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and • the information given in the Strategic Report and 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 ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is: • materially inconsistent with the information in the audited financial statements; or • apparently materially incorrect based on, or materially inconsistent with, our knowledge of the company acquired in the course of performing our audit; or • is otherwise misleading. In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed. 40 MAJEDIE INVESTMENTS PLC We have nothing material to add or draw attention to in relation to: Under the Companies Act 2006 we are required to report to you if, in our opinion: (a) the directors’ confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the entity, including those that would threaten its business model, future performance, solvency or liquidity; (b) the disclosures in the annual report that describe those risks and explain how they are being managed or mitigated; (c) the directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the entity’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; and (d) the directors’ explanation in the annual report as to how they have assessed the prospects of the entity, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or • the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Under the Listing Rules we are required to review: • the directors’ statement, set out on page 23, in relation to going concern and longer-term viability; and • the part of the Corporate Governance Statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Sarah Williams (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 4 December 2015 REPORT & ACCOUNTS 2015 41 Consolidated Statement of Comprehensive Income for the year ended 30 September 2015 Investments Gains on investments at fair value through profit or loss Net investment result Income Income from investments Other income Total income Expenses Management fees Administrative expenses Return before finance cost and taxation Finance costs Net return before taxation Taxation Net return after taxation for the Notes 13 3 3 4 5 8 9 Revenue return £000 2015 Capital return £000 Total £000 Revenue return £000 2014 Capital return £000 Total £000 15,854 15,854 15,854 15,854 13,933 13,933 13,933 13,933 6,534 38 6,572 2 2 6,536 38 6,574 6,549 47 6,596 6,549 47 6,596 (123) (780) (369) (844) (492) (1,624) (93) (653) (280) (528) (373) (1,181) 14,643 (2,108) 12,535 5,669 (703) 4,966 (32) 20,312 (2,811) 17,501 (32) 5,850 (702) 5,148 (45) 13,125 (2,107) 11,018 18,975 (2,809) 16,166 (45) year from continuing operations 4,934 12,535 17,469 5,103 11,018 16,121 Discontinued operations Net return after taxation for the year from discontinued operations Total comprehensive income for the year Return per ordinary share: Basic and diluted for continuing operations Basic and diluted for discontinued operations Basic and diluted total 15 11 11 11 (232) (2,584) (2,816) 4,934 12,535 17,469 4,871 8,434 13,305 pence pence pence pence pence pence 9.4 24.0 33.4 9.8 21.2 31.0 9.4 24.0 33.4 (0.4) 9.4 (5.0) 16.2 (5.4) 25.6 The total column of this statement is the Consolidated Statement of Comprehensive Income of the Group prepared in accordance with IFRSs as adopted by the European Union. The supplementary revenue return and capital return columns are prepared under guidance published by the AIC. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The notes on pages 52 to 88 form part of these accounts. 42 MAJEDIE INVESTMENTS PLC Company Statement of Comprehensive Income for the year ended 30 September 2015 Revenue return £000 Notes 2015 Capital return £000 Total £000 Revenue return £000 2014 Capital return £000 Total £000 Investments Gains on investments at fair value through profit or loss 13 Net investment result Income Income from investments Other income Total income Expenses Management fees Administrative 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 15,853 15,853 15,853 15,853 6,008 6,008 6,008 6,008 6,534 38 6,572 2 2 6,536 38 6,574 6,549 56 6,605 6,549 56 6,605 (123) (779) (369) (844) (492) (1,623) (207) (691) (404) (641) (611) (1,332) 5,670 14,642 20,312 5,707 4,963 10,670 (703) 4,967 (32) 4,935 (2,108) 12,534 12,534 (2,811) 17,501 (32) 17,469 (702) 5,005 (45) 4,960 pence 9.5 (2,107) 2,856 2,856 pence 5.5 (2,809) 7,861 (45) 7,816 pence 15.0 Return per ordinary share: Basic and diluted 11 pence 9.4 pence 24.0 pence 33.4 The total column of this statement is the Statement of Comprehensive Income of the Company prepared under IFRSs as adopted by the European Union. The supplementary revenue return and capital return columns are prepared under guidance published by the AIC. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The notes on pages 52 to 88 form part of these accounts. REPORT & ACCOUNTS 2015 43 Consolidated Statement of Changes in Equity for the year ended 30 September 2015 Share capital £000 Share premium £000 Notes Capital redemption reserve £000 Share options reserve £000 Capital reserve £000 Revenue reserve £000 Own shares reserve £000 Total £000 Year ended 30 September 2015 As at 1 October 2014 Net return for the year from continuing operations Share options expense Sale of own shares by Employee Benefit Trust (EBT) Share options exercised Transfer between reserves New shares issued Share issue expenses 26 21 5,253 785 56 (104) 110,910 18,200 (1,039) 134,061 3 (246) 347 60 1,497 (2) Dividends declared and paid in year 10 As at 30 September 2015 5,313 2,280 56 Year ended 30 September 2014 As at 1 October 2013 Net return for the year from continuing operations Net return for the year from discontinued operations Share options expense Sale of own shares by Employee Benefit Trust (EBT) Dividends declared and paid in year 15 26 21 10 5,253 785 56 (123) 102,654 18,169 (1,628) 125,166 19 As at 30 September 2014 5,253 785 56 (104) 110,910 18,200 (1,039) 134,061 12,535 4,934 (8) (147) (347) (3,919) 122,943 19,215 793 246 11,018 5,103 (2,584) (232) (178) 589 (4,840) 17,469 (5) 646 1,557 (2) (3,919) 149,807 16,121 (2,816) 19 411 (4,840) The notes on pages 52 to 88 form part of these accounts. 44 MAJEDIE INVESTMENTS PLC Share capital £000 Share premium £000 Notes Capital redemption reserve £000 Share options reserve £000 Capital reserve £000 Revenue reserve £000 Own shares reserve £000 Total £000 5,253 785 56 (104) 110,910 18,200 (1,039) 134,061 12,535 4,934 (8) (147) (347) (3,919) 122,943 19,215 793 246 17,469 (5) 646 1,557 (2) (3,919) 149,807 5,253 785 56 (123) 102,654 18,169 (1,628) 125,166 11,018 5,103 (2,584) (232) (178) 589 (4,840) 16,121 (2,816) 19 411 (4,840) As at 30 September 2014 5,253 785 56 (104) 110,910 18,200 (1,039) 134,061 Dividends declared and paid in year 10 As at 30 September 2015 5,313 2,280 56 60 1,497 (2) Year ended 30 September 2015 As at 1 October 2014 Net return for the year from continuing operations Share options expense Sale of own shares by Employee Benefit Trust (EBT) Share options exercised Transfer between reserves New shares issued Share issue expenses Year ended 30 September 2014 As at 1 October 2013 Net return for the year from continuing operations operations Net return for the year from discontinued Share options expense Sale of own shares by Employee Benefit Trust (EBT) Dividends declared and paid in year 26 21 15 26 21 10 3 (246) 347 19 REPORT & ACCOUNTS 2015 45 Company Statement of Changes in Equity for the year ended 30 September 2015 Share capital £000 Share premium £000 Notes Capital redemption reserve £000 Share options reserve £000 Capital reserve £000 Revenue reserve £000 Own shares reserve £000 Total £000 Year ended 30 September 2015 As at 1 October 2014 Net return for the year Share options expense Sale of own shares by Employee Benefit Trust (EBT) Share options exercised Transfer between reserves New shares issued Share issue expenses 26 21 Dividends declared and paid in year 10 5,253 785 56 (104) 107,212 21,898 (1,039) 134,061 3 (246) 347 60 1,497 (2) As at 30 September 2015 5,313 2,280 56 Year ended 30 September 2014 As at 1 October 2013 Net return for the year Share options expense Sale of own shares by Employee Benefit Trust (EBT) Dividends declared and paid in year 26 21 10 5,253 785 56 (123) 104,534 21,778 (1,628) 130,655 19 2,856 4,960 (178) 589 (4,840) As at 30 September 2014 5,253 785 56 (104) 107,212 21,898 (1,039) 134,061 12,534 4,935 (8) (147) (347) (3,919) 119,244 22,914 793 246 17,469 (5) 646 1,557 (2) (3,919) 149,807 7,816 19 411 (4,840) The notes on pages 52 to 88 form part of these accounts. 46 MAJEDIE INVESTMENTS PLC Share capital £000 Share premium £000 Notes Capital redemption reserve £000 Share options reserve £000 Capital reserve £000 Revenue reserve £000 Own shares reserve £000 Total £000 5,253 785 56 (104) 107,212 21,898 (1,039) 134,061 12,534 4,935 (8) (147) (347) (3,919) 119,244 22,914 793 246 17,469 (5) 646 1,557 (2) (3,919) 149,807 5,253 785 56 (123) 104,534 21,778 (1,628) 130,655 2,856 4,960 (178) 589 (4,840) 7,816 19 411 (4,840) As at 30 September 2014 5,253 785 56 (104) 107,212 21,898 (1,039) 134,061 Dividends declared and paid in year 10 As at 30 September 2015 5,313 2,280 56 60 1,497 (2) Sale of own shares by Employee Benefit Year ended 30 September 2015 As at 1 October 2014 Net return for the year Share options expense Trust (EBT) Share options exercised Transfer between reserves New shares issued Share issue expenses Year ended 30 September 2014 As at 1 October 2013 Net return for the year Share options expense Sale of own shares by Employee Benefit Trust (EBT) Dividends declared and paid in year 26 21 26 21 10 3 (246) 347 19 REPORT & ACCOUNTS 2015 47 Consolidated Balance Sheet as at 30 September 2015 Non-current assets Property and equipment Investments held 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 Notes 12 13 16 17 2015 £000 64 181,644 181,708 799 2,537 3,336 2014 £000 80 165,342 165,422 338 3,512 3,850 185,044 169,272 18 (1,336) (1,338) Total assets less current liabilities 183,708 167,934 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 18 19 20 26 21 22 (33,901) (35,237) (33,873) (35,211) 149,807 134,061 5,313 2,280 56 122,943 19,215 149,807 pence 281.9 5,253 785 56 (104) 110,910 18,200 (1,039) 134,061 pence 256.7 Approved by the Board of Majedie Investments PLC (Company no. 109305) and authorised for issue on 4 December 2015. Andrew J Adcock Chairman The notes on pages 52 to 88 form part of these accounts. 48 MAJEDIE INVESTMENTS PLC Company Balance Sheet as at 30 September 2015 Non-current assets Property and equipment Investments held at fair value through profit or loss Investments 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 Equity Shareholders’ Funds Notes 12 13 13 16 17 18 18 19 20 26 21 2015 £000 64 181,644 162 181,870 894 2,280 3,174 185,044 (1,336) 183,708 (33,901) (35,237) 149,807 5,313 2,280 56 119,244 22,914 149,807 2014 £000 80 165,342 172 165,594 432 3,246 3,678 169,272 (1,338) 167,934 (33,873) (35,211) 134,061 5,253 785 56 (104) 107,212 21,898 (1,039) 134,061 Approved by the Board of Majedie Investments PLC (Company no. 109305) and authorised for issue on 4 December 2015. Andrew J Adcock Chairman The notes on pages 52 to 88 form part of these accounts. REPORT & ACCOUNTS 2015 49 Consolidated Cash Flow Statement for the year ended 30 September 2015 Notes 13 15 13 Net cash flow from operating activities Consolidated net return before taxation from continuing operations* Consolidated net return before taxation from discontinued operations Adjustments for: Gains on investments relating to continuing operations Losses on investments relating to discontinued operations Consolidation adjustment for Javelin Capital fee income Accumulation dividends Share based remuneration Depreciation Purchases of investments Sales of investments Finance costs Operating cashflows before movements in working capital Decrease in trade and other payables Increase in trade and other receivables Net cash outflow from operating activities before tax Tax recovered Tax on unfranked income Net cash inflow from operating activities Attributable to: Net cash inflow from operating activities from continuing operations Net cash outflow from operating activities from discontinued operations Investing activities Purchase of tangible assets Net cash outflow from investing activities Financing activities Interest paid Dividends paid Net proceeds from share issues Proceeds from sale of own shares by EBT Net cash outflow from financing activities Decrease in cash and cash equivalents for year Cash and cash equivalents at start of year Cash and cash equivalents at end of year 23 2015 £000 17,501 (15,854) (183) 3 17 (44,053) 43,806 1,237 2,811 4,048 (108) 20 3,960 11 (57) 3,914 3,914 (1) (1) (2,783) (3,919) 1,168 646 (4,888) (975) 3,512 2,537 * Includes dividends received in the year of £6,583,000 (2014: £6,655,000) and interest received of Nil (2014: £13,000). The notes on pages 52 to 88 form part of these accounts. 2014 £000 16,166 (2,816) (13,933) 2,084 118 19 25 (145,143) 145,976 2,496 2,809 5,305 (9) (54) 5,242 26 (67) 5,201 7,907 (2,706) (2,783) (4,840) 411 (7,212) (2,011) 5,523 3,512 50 MAJEDIE INVESTMENTS PLC Notes 13 Company Cash Flow Statement for the year ended 30 September 2015 Net cash flow from operating activities Company net return before taxation* Adjustments for: Gains on investments Accumulation dividends 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 Proceeds from liquidation of subsidiaries Purchase of tangible assets Net cash inflow from investing activities Financing activities Interest paid Dividends paid Net proceeds from share issues Proceeds from sale of own shares by EBT Net cash outflow from financing activities Decrease in cash and cash equivalents for year Cash and cash equivalents at start of year Cash and cash equivalents at end of year 23 2015 £000 17,501 (15,853) (183) 3 17 (44,053) 43,806 1,238 2,811 4,049 (108) 19 3,960 11 (57) 3,914 9 (1) 8 (2,783) (3,919) 1,168 646 (4,888) (966) 3,246 2,280 2014 £000 7,861 (6,008) 19 18 (145,143) 145,983 2,730 2,809 5,539 203 559 6,301 26 (67) 6,260 207 207 (2,783) (4,840) 411 (7,212) (745) 3,991 3,246 * Includes dividends received in the year of £6,583,000 (2014: £6,655,000) and interest received of Nil (2014: £13,000). The notes on pages 52 to 88 form part of these accounts. REPORT & ACCOUNTS 2015 51 Notes to the Accounts General Information Majedie Investments PLC is a company incorporated and domiciled in England under the Companies Act 2006. The Company is registered as a public limited company and is an investment company as defined by Section 833 of the Companies Act 2006. The address of the registered office is given on page 99. The nature of the Group’s operations and its principal activities are set out in the Business Review section of the Strategic Report on pages 11 to 15. Critical Accounting Assumptions and Judgements The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting assumptions. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas requiring a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are set out below. Assessment as investment entity Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair value through profit or loss rather than consolidate them. The criteria which define an investment entity are, as follows: • obtains funds from one or more investors for the purpose of providing those investors with investment services; • commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and • measures and evaluates the performance of substantially all of its investments on a fair value basis. The Board has agreed with the recommendation of the Audit Committee that the Company meets the definition of an investment entity. This conclusion will be reassessed on an annual basis, if any of these criteria or characteristics change. The Company’s subsidiary Majedie Portfolio Management Limited provides investment management services and is not itself an investment entity and as such is consolidated into the Group accounts. Unquoted Investments Unquoted investments are valued at management’s best estimate of fair value in accordance with IFRSs having regard to International Private Equity and Venture Capital Valuation Guidelines as recommended by the British Venture Capital Association. The principles which the Group applies are set out on page 57. The inputs into the valuation methodologies adopted include historical data such as earnings or cash flow as well as more subjective data such as earnings forecasts or discount rates. As a result of this, the determination of fair value requires significant management judgement. At the year end, unquoted investments (including MAM) represent 35.0% (2014: 31.1%) of consolidated shareholders’ funds. 52 MAJEDIE INVESTMENTS PLC 1 Significant Accounting Policies The principal accounting policies adopted are set out as follows: The accounts on pages 42 to 51 comprise the audited results of the Company and its subsidiary for the year ended 30 September 2015, and are presented in pounds sterling rounded to the nearest thousand, as this is the functional currency in which the Group and Company transactions are undertaken. Going Concern The directors have a reasonable expectation that the Company has sufficient resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis. Presentation of Statement of Comprehensive Income In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. Additionally the net revenue is the measure that the directors believe to be appropriate in assessing the Company’s compliance with certain requirements set out in section 1158 of the Corporation Tax Act 2010. Basis of Accounting The accounts of the Group and the Company have been prepared in accordance with IFRSs. They comprise standards and interpretations approved by the International Accounting Standards Board and International Financial Reporting Committee, interpretations approved by the International Accounting Standards Committee that remain in effect, to the extent they have been adopted by the European Union. Where presentational guidance set out in the SORP regarding the financial statements of investment trust companies and venture capital trusts issued by the AIC in November 2014 is not inconsistent with the requirements of IFRSs, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. Discontinued operations On 13 January 2014, the Company publicly announced the decision of the Board to close Javelin Capital LLP, including its two wholly owned subsidiaries – Javelin Capital Services Limited and Javelin Capital Fund Management Limited – following the appointment of MAM to become the Investment Manager for the Company. The Company also decided to wind down its wholly owned subsidiary, Majedie Unit Trust. Accordingly these had been classified as discontinued operations of the Group. As these entities ceased operations in the prior financial year and have been wound-up, there are no discontinued operations in the year ended 30 September 2015. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the Consolidated Statement of Comprehensive Income. Additional disclosures are provided in note 15. All other notes to the financial statements include amounts for continuing operations, unless otherwise mentioned. REPORT & ACCOUNTS 2015 53 Notes to the Accounts 1 Significant Accounting Policies continued Basis of Consolidation The Company is an investment entity as defined by IFRS 10 and, as such, does not consolidate the entities it controls which do not provide investment related services to the Company. Instead, interests in such entities are classified as fair value through profit or loss, and measured at fair value. The Consolidated Accounts incorporate the accounts of the Company and entities controlled by the Company which provide investment related services made up to 30 September each year. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The results of subsidiaries acquired or disposed of are included in the Consolidated Statement of Comprehensive Income from the effective date of acquisition or disposal as appropriate. When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. All Group entities have the same year end date. Where necessary, adjustments are made to the financial statements of subsidiary to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Standards Issued But Not Yet Effective At the date of authorisation of these financial statements, the following relevant Standards and Interpretations have not been applied in these financial statements since they were in issue but not yet effective and/or adopted: International Accounting Standards and Interpretations (IAS/IFRS/IFRICs) Financial Instruments: Classification & Measurement IFRS 9 Revenue from Contracts with Customers IFRS 15 Effective date 1 January 2018 1 January 2018 The Directors do not anticipate that the adoption of the above Standards and Interpretations would have a material impact on the financial statements in the period of initial application. Management anticipates that all of the relevant pronouncements will be adopted in the relevant accounting period in which the standard is effective. 54 MAJEDIE INVESTMENTS PLC 1 Significant Accounting Policies continued Changes in accounting policies and disclosures Foreign Currencies The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates, i.e. its functional currency. For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Pounds Sterling (Sterling) which is the functional currency of the Company, and the presentational currency of the Group. Transactions in currencies other than Sterling are recorded at the rate of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items and non-monetary assets and liabilities that are fair valued and are denominated in foreign currencies are re-translated at the rates prevailing on the balance sheet date. Segmental Reporting A segment is a distinguishable component of the Group that is engaged in business activities from which it may earn revenues and incur expenses (including intra-group revenues and expenses), for which discrete financial information is available and whose operating results are regularly reviewed by the entity’s chief decision maker who can make decisions on resource allocation and performance assessment. An operating segment could engage in business activities in order to earn potential future revenues. Income Dividend income from investments is taken to the revenue account on an ex-dividend basis. UK dividends are included net of tax credits. Overseas dividends are included gross of any withholding tax. Where the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital column. The fixed return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Deposit interest and other interest receivable is included on an accruals basis. Special dividends are taken to the revenue or capital account depending on their nature. Expenses All administrative expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Statement of Comprehensive Income, all expenses have been presented as revenue items except as follows: • • Expenses which are incidental to the acquisition or disposal of an investment are treated as capital costs and separately identified and disclosed (see note 13). Expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated, and accordingly the investment management expenses have been allocated 75% to capital, in order to reflect the directors’ expected long-term view of the nature of the investment returns of the Company. • The investment management performance fee, which is based on capital out-performance, is charged wholly to capital. REPORT & ACCOUNTS 2015 55 Notes to the Accounts 1 Significant Accounting Policies continued Pension Costs Payments made to the Group’s defined contribution group personal pension plan are charged as an expense as they fall due on an accruals basis. Finance Costs 75% of finance costs arising from the debenture stocks are allocated to capital; 25% of the finance costs are charged on the same basis to the revenue account. Premiums payable on early repurchase of debenture stock are charged 100% to capital. In addition, other interest payable is allocated 75% to capital and 25% to the revenue account. Finance costs are debited on an accruals basis using the effective interest method. Share Based Payments The Group has issued equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value determined at the date of grant, which is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the number of shares that will eventually vest. Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Taxation The tax charge represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive Income is the marginal basis. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital return column. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. No provision is made for tax on capital gains since the Company operates as an investment trust for tax purposes. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Leasehold improvements are written off in equal annual instalments over the minimum period of the lease whereas depreciation for other tangible assets is provided for at 25% to 33% per annum using the straight-line method. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. 56 MAJEDIE INVESTMENTS PLC 1 Significant Accounting Policies continued Investments Held at Fair Value Through Profit or Loss The Group classifies its investments in debt and equity securities, as financial assets or financial liabilities at fair value through profit or loss. When a purchase or sale is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date. All investments are classified as fair value through profit or loss as defined by IAS 39. All investments are designated upon initial recognition as held at fair value through profit or loss, and are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price for listed securities, depending on the convention of the exchange on which the investment is quoted. Investments in unit trusts or open ended investment companies are valued at the closing price, the bid price or the single price as appropriate, released by the relevant investment manager. Fair values for unquoted investments, or investments for which the market is inactive, are established by using various valuation techniques in accordance with the International Private Equity and Venture Capital Valuation (IPEV) Guidelines. These may include recent arm’s length market transactions, the current fair value of another instrument which has substantially the same earnings multiples, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised. The fair value of an investment at the beginning of the year is used when an investment is transferred between hierarchy levels. Changes in the fair value of investments and gains on the sale of investments are recognised as they arise in the Statement of Comprehensive Income. Investment in Subsidiary In its separate financial statements the Company recognises its investment in subsidiary at fair value. Financial Instruments Financial assets and financial liabilities are recognised on the Group’s Balance Sheet when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Trade Receivables Trade receivables do not carry any interest and are stated at carrying value which equates to their fair value as reduced by appropriate allowances for estimated irrecoverable amounts. Cash and Cash Equivalents Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. Non current liabilities The debentures are initially recognised at cost, being the fair value of the consideration received less issue costs where applicable. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate. The effective interest rate is the rate that exactly discounts estimated future payments over the expected life of the financial liabilities to the net carrying amount on initial recognition. REPORT & ACCOUNTS 2015 57 Notes to the Accounts 1 Significant Accounting Policies continued Trade Payables Trade payables are not interest bearing and are stated at carrying value which equates to their fair value. Reserves Gains and losses on the sale of investments and investment holding gains and losses are accounted for in the Statement of Comprehensive Income and subsequently in the capital reserve. Share options reserve represents the expense of share based payments. The deemed expense is transferred to the share options reserve. Share premium account represents the excess over nominal value of consideration received for equity shares, net of expenses of the share issue. Own Shares The consideration paid for own shares is treated as a deduction from shareholders’ funds, and not recognised as an asset. Dividends payable to shareholders Dividends to shareholders are accounted for in the period in which they are paid or approved in general meetings. Dividends payable to shareholders are recognised in the Statement of Changes in Equity. 2 Business segments For management purposes for the year ended 30 September 2015, the Group was organised into one principal activity, being investing activities (see below). In the prior year the Group was comprised of two principal activities – investing activities and investment management services. Investing activities The Company’s investment objective is to maximise total shareholder return whilst increasing dividends by more than the rate of inflation over the long term. The Company operates as an investment trust company and its portfolio contains investments in companies listed in a number of countries. Geographical information about the portfolio is provided on page 9 and exposure to different currencies is disclosed in note 27 on pages 80 and 81. Investment management services To complement this investment objective and create income and capital for the Group, Javelin Capital LLP was launched to market a range of funds to third party investors and provide investment management and advisory services. Javelin Capital LLP was discontinued in the prior year. See note 15 on page 73 for further information. 58 MAJEDIE INVESTMENTS PLC 2 Business Segments continued Group 2015 Group 2014 Investment management and advisory services £000 Investing activities £000 Eliminations £000 Total £000 Investment management and advisory services £000 Investing activities £000 Eliminations £000 Total £000 External income from investment management services Intra-group income from investment management services Other operating and investment income Share based payments charge Other administrative costs Intra-group investment management services expenses Other operating expenses Operating profit/(loss) Finance costs Gains on fair value 6,574 6,574 (3) (2,113) (2,116) 4,458 (2,811) 4 4 356 (356) 6,574 6,574 6,605 6,605 (10) 350 (9) 6,586 (365) 6,590 (3) (2,113) (19) (1,686) (525) 9 (19) (2,202) (238) (2,116) (1,943) 4,458 (2,811) 4,662 (2,809) (118) (45) (688) (338) 356 (45) 365 (2,266) 4,324 (2,809) 11,835 13,350 (45) 13,305 through profit and loss 15,854 15,854 13,801 (1,966) Profit/(loss) before tax 17,501 17,501 15,654 (2,304) Taxation (32) Profit/(loss) after tax 17,469 (32) (45) 17,469 15,609 Attributable to: Continuing operations Discontinued operations Total assets Total liabilities Net assets 17,501 185,044 (35,237) 149,807 17,501 15,805 (151) (2,304) 361 (361) 16,166 (2,816) 185,044 (35,237) 169,272 (35,211) 149,807 134,061 169,272 (35,211) 134,061 REPORT & ACCOUNTS 2015 59 Notes to the Accounts 3 Income Income from investments Franked investment income† UK unfranked investment income Accumulation income Overseas dividends Other income Deposit interest Sundry income Total income Total income comprises: Dividends Interest Other income Income from investments Listed UK Listed overseas Unlisted Group 2015 £000 6,086 183 267 1 37 6,536 1 37 2,996 267 3,273 Group 2014 £000 6,165 30 354 Company 2015 £000 6,086 183 267 Company 2014 £000 6,165 30 354 6,536 6,549 6,536 6,549 13 34 1 37 12 44 38 6,574 47 6,596 38 6,574 56 6,605 6,549 13 34 6,536 1 37 6,549 12 44 6,574 6,596 6,574 6,605 2,576 354 3,619 2,996 267 3,273 2,576 354 3,619 6,536 6,549 6,536 6,549 † Includes MAM ordinary dividend income of £3,273,000 (2014: £3,619,000). 60 MAJEDIE INVESTMENTS PLC 4 Management Fees Investment management Investment management Administration Group 2015 Capital return £000 369 369 Revenue return £000 123 123 Company 2015 Capital return £000 369 Revenue return £000 123 Total £000 492 492 Total £000 492 Group 2014 Capital return £000 280 280 Company 2014 Capital return £000 404 Revenue return £000 93 93 Revenue return £000 134 73 123 369 492 207 404 Total £000 373 373 Total £000 538 73 611 The Group’s accounts now include an investment management fee expense following the appointment of an external investment manager (MAM). Investment management fees of £nil (2014: £165,000) were paid to Javelin Capital LLP under the terms of the agreement which has now been terminated. Under this agreement an administration fee was also due. The Company’s investment management fee was higher than the Group in 2014 due to Javelin Capital LLP management fee being consolidated out of the Group. A summary of the terms of the Investment Agreement for the Company with MAM is given in the Directors’ Report on page 21. At 30 September 2015, an amount of £106,000 was outstanding for payment of investment management fees when due to MAM (2014: £132,000). There were no performance fees during the year (2014: nil). 5 Administrative Expenses Staff costs – note 7 Other staff costs and directors’ fees Advisers’ costs Information costs Establishment costs Operating lease rentals – premises Depreciation on tangible assets Auditor’s remuneration (see below) Other expenses Group 2015 £000 485 172 348 83 164 133 17 40 182 Group 2014 £000 225 220 327 54 61 65 18 53 158 Company 2015 £000 Company 2014 £000 485 172 348 83 164 133 17 40 181 225 220 327 54 61 65 18 53 309 1,624 1,181 1,623 1,332 A charge of £844,000 (2014: £528,000) to capital and an equivalent credit to revenue has been made in the Group and a charge of £844,000 (2014: £641,000) in the Company has been made to recognise the accounting policy of 75% of direct investment administration expenses to capital. REPORT & ACCOUNTS 2015 61 Notes to the Accounts 5 Administrative Expenses continued Administration expense disclosures are in respect of continuing operations only. Further details on discontinued operations are in note 15 on page 73. Total fees charged by the Auditor for the year, all of which were charged to revenue, comprised: Audit services – statutory audit Other audit related services Group 2015 £000 38 2 Group 2014 £000 44 9 Company 2015 £000 38 2 Company 2014 £000 44 9 40 53 40 53 Other audit related services relate to a review of the debenture covenant in 2015 and an interim review and debenture covenant in 2014. 6 Directors’ Emoluments Fees Salary Other benefits Bonuses/Partnership profit shares Group and Company 2015 £000 143 169 7 40 Group and Company 2014 £000 176 84 6 50 359 316 The Report on Directors’ Remuneration on pages 32 to 35 explains the Company’s policy on remuneration for directors for the year. It also provides further details of directors’ remuneration. 7 Staff Costs including CEO Salaries and other payments Social security costs Pension contributions Share based remuneration – note 25 Group 2015 £000 376 77 29 3 Group 2014 £000 171 21 14 19 Company 2015 £000 376 77 29 3 Company 2014 £000 171 21 14 19 485 225 485 225 Average number of employees: Management and office staff Group 2015 Number Group 2014 Number 3 2 62 MAJEDIE INVESTMENTS PLC 8 Finance Costs Interest on 9.5% debenture stock 2020 Interest on 7.25% debenture stock 2025 Amortisation of expenses associated with debenture issue Group and Company 2015 Group and Company 2014 Revenue return £000 Capital return £000 Total £000 Revenue return £000 Capital return £000 Total £000 321 375 7 703 961 1,282 1,126 1,501 21 28 2,108 2,811 321 375 6 702 961 1,282 1,126 1,501 20 26 2,107 2,809 Further details of the debenture stocks in issue are provided in note 18. 9 Taxation Analysis of tax charge Tax on overseas dividends Group 2015 £000 32 Group 2014 £000 45 Company 2015 £000 32 Company 2014 £000 45 Reconciliation of tax charge: The current taxation rate for the year is lower (2014: lower) than the standard rate of corporation tax in the UK of 20.5%, (2014: 22%). The differences are explained below: Net return before taxation for the year from continuing operations Net return before taxation for the year from discontinued operations Group 2015 £000 Group 2014 £000 Company 2015 £000 Company 2014 £000 17,501 16,166 17,501 7,861 (2,816) Net return before taxation 17,501 13,350 17,501 7,861 Taxation at UK Corporation Tax rate of 20.5% (2014: 22%) Effects of: – UK dividends which are not taxable – foreign dividends which are not taxable – gains on investments which are 3,588 2,937 3,588 1,729 (1,293) (1,365) (1,293) (1,365) (55) (76) (55) (76) not taxable (3,250) (2,607) (3,250) (1,321) – expenses not deductible for tax purposes – excess expenses for current year – overseas taxation which is not recoverable 12 998 32 52 1,059 45 18 992 32 54 979 45 Actual current tax charge 32 45 32 45 REPORT & ACCOUNTS 2015 63 Notes to the Accounts 9 Taxation continued Group After claiming relief against accrued income taxable on receipt, the Group has unrelieved excess expenses of £73,914,000 (2014: £76,940,000). It is not yet certain that the Group will generate sufficient taxable income in the future to utilise these expenses and therefore no deferred tax asset has been recognised. Company After claiming relief against accrued income taxable on receipt, the Company has unrelieved excess expenses of £73,886,000 (2014: £69,688,000). It is not yet certain that the Company will generate sufficient taxable income in the future to utilise these expenses and therefore no deferred tax asset has been recognised. The allocation of expenses to capital does not result in any tax effect. Due to the Company’s status as an investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. 10 Dividends The following table summarises the amounts recognised as distributions to equity shareholders in the period: 2013 Final dividend of 6.30p paid on 22 January 2014 2014 Interim dividend of 3.00p paid on 27 June 2014 2014 Final dividend of 4.50p paid on 21 January 2015 2015 Interim dividend of 3.00p paid on 27 June 2015 Proposed final dividend for the year ended 30 September 2015 of 5.00p (2014: final dividend of 4.50p) per ordinary share Group and Company 2015 £000 2,350 1,569 2015 £000 2,657 Group and Company 2014 £000 3,279 1,561 3,919 4,840 2014 £000 2,350 2,657 2,350 The proposed final dividend has not been included as a liability in these accounts in accordance with IAS 10: Events after the Balance Sheet date. 64 MAJEDIE INVESTMENTS PLC 10 Dividends continued 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 2015 of 3.00p (2014: 3.00p) per ordinary share Proposed final dividend for the year ended 30 September 2015 of 5.00p (2014: 4.50p) per ordinary share 2015 £000 1,569 2,657 2014 £000 1,561 2,350 4,226 3,911 Distributable reserves of the Company comprise the Capital & Revenue Reserves. Dividends for the year (and for 2014) have been solely made from the Revenue Reserve. 11 Return per Ordinary Share Basic return per ordinary share from continuing and discontinued operations is based on 52,355,999 (2014: 52,055,573) ordinary shares, being the weighted average number of shares in issue having adjusted for the shares held by the EBT referred to in note 21. Basic returns per ordinary share from continuing and discontinued operations are based on the net return after taxation attributable to equity shareholders. There are nil potentially dilutive shares arising from the share options referred to in note 26. These do not give rise to a material dilution to the return per ordinary share and therefore no diluted return per ordinary share has been calculated. Basic and diluted revenue returns from continuing operations are based on net revenue after taxation of: Basic and diluted revenue returns from discontinued operations are based on net revenue after taxation of: Basic and diluted capital returns from continuing operations Group 2015 £000 4,934 are based on net capital return of: 12,535 Basic and diluted capital returns from discontinued operations are based on net capital return of: Group 2014 £000 5,103 (232) 11,018 (2,584) Basic and diluted total returns are based on return of: 17,469 13,305 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: Company 2015 £000 4,935 12,534 Company 2014 £000 4,960 2,856 Basic and diluted total returns are based on return of: 17,469 7,816 REPORT & ACCOUNTS 2015 65 Notes to the Accounts 12 Property and Equipment Cost: At 1 October 2014 Additions Disposals At 30 September 2015 Depreciation: At 1 October 2014 Charge for year Disposals At 30 September 2015 Net book value: At 30 September 2015 At 30 September 2014 Cost: At 1 October 2014 Additions Disposals At 30 September 2015 Depreciation: At 1 October 2014 Charge for year Disposals At 30 September 2015 Net book value: At 30 September 2015 At 30 September 2014 Group Leasehold Improvements £000 171 Group Office Equipment £000 580 1 (412) Total £000 751 1 (412) 171 169 340 91 17 580 (412) 108 63 80 168 1 Company Leasehold Improvements £000 171 Company Office Equipment £000 168 1 276 64 80 671 17 (412) Total £000 339 1 171 169 340 91 17 168 259 17 108 63 80 168 1 276 64 80 66 MAJEDIE INVESTMENTS PLC 13 Investments at Fair Value Through Profit or Loss Opening cost at beginning of year (Losses)/gains at beginning of year Listed £000 124,723 (1,036) Group 2015 Unlisted £000 4,083 37,572 Total £000 128,806 36,536 Listed £000 94,334 10,741 Group 2014 Unlisted £000 4,575 42,289 Total £000 98,909 53,030 Opening fair value at beginning of year 123,687 41,655 165,342 105,075 46,864 151,939 Purchases at cost Sales – proceeds Gains on sales (Decrease)/increase in investment holding gains Transfer on listing of shares 44,333 (38,114) 2,323 (5,771) 4,518 44,333 (43,885) 6,841 145,246 (126,419) 11,562 (19,239) 18,747 145,246 (145,658) 30,309 (3,312) 300 12,325 (300) 9,013 (11,777) (4,717) (16,494) Closing fair value at end of year 129,217 52,427 181,644 123,687 41,655 165,342 Closing cost at end of year (Losses)/gains at end of year 133,565 (4,348) 2,530 49,897 136,095 45,549 124,723 (1,036) 4,083 37,572 128,806 36,536 Closing fair value at end of year 129,217 52,427 181,644 123,687 41,655 165,342 Opening cost at beginning of year (Losses)/gains at beginning of year Company 2015 Listed £000 124,723 (1,036) Unlisted £000 4,059 37,596 Subsidiary company £000 Total £000 1,010 (838) 129,792 35,722 Opening fair value at beginning of year 123,687 41,655 172 165,514 Purchases at cost Sales – proceeds Gains/(losses) on sales (Decrease)/increase in investment holding gains Transfer on listing of shares 44,333 (38,114) 2,323 (3,312) 300 (5,771) 4,520 12,323 (300) (9) (1) 44,333 (43,894) 6,842 9,011 Closing fair value at end of year 129,217 52,427 162 181,806 Closing cost at end of year (Losses)/gains at end of year 133,565 (4,348) 2,508 49,919 1,000 (838) 137,073 44,733 Closing fair value at end of year 129,217 52,427 162 181,806 REPORT & ACCOUNTS 2015 67 Notes to the Accounts 13 Investments at Fair Value Through Profit or Loss continued Opening cost at beginning of year Gains/(losses) at beginning of year Company 2014 Listed £000 94,333 10,742 Unlisted £000 4,534 42,330 Subsidiary entities £000 Total £000 9,010 (817) 107,877 52,255 Opening fair value at beginning of year 105,075 46,864 8,193 160,132 Purchases at cost Sales – proceeds Gains/(losses) on sales* Decrease in investment holding gains 145,246 (126,426) 11,570 (11,778) (19,239) 18,764 (4,734) (207) (7,793) (21) 145,246 (145,872) 22,541 (16,533) Closing fair value at end of year 123,687 41,655 172 165,514 Closing cost at end of year (Losses)/gains at end of year 124,723 (1,036) 4,059 37,596 1,010 (838) 129,792 35,722 Closing fair value at end of year 123,687 41,655 172 165,514 * The loss of £7,793,000 represents the write off of the investment in Javelin Capital LLP, net of recoverable capital. Unlisted investments include an amount of £127,000 in 3 various companies (2014: £355,000 in 4 companies) and £52,300,000 (2014: £41,300,000) for the Company’s investment in MAM as detailed on page 72. During the year the Company incurred transaction costs amounting to £186,000 (2014: £396,000) of which £160,000 (2014: £56,000) related to the purchases of investments and £26,000 (2014: £340,000) related to the sales of investments. These amounts are included in gains on investments at fair value through profit or loss, as disclosed in the Consolidated and Company Statement of Comprehensive Income. The composition of the investment return is analysed below: Net gains on sales of equity investments Increase/(decrease) in holding gains on equity investments Consolidation adjustment on Javelin Capital fee income Group 2015 £000 6,841 9,013 Group 2014 £000 30,309 (16,494) 118 Company 2015 £000 6,842 9,011 Company 2014 £000 22,541 (16,533) Net return on investments 15,854 13,933 15,853 6,008 68 MAJEDIE INVESTMENTS PLC 13 Investments at Fair Value Through Profit or Loss continued Fair value hierarchy disclosures The Group is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following three levels: • Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date. Quoted prices provided by external pricing services, brokers and vendors are included in Level 1, if they reflect actual and regularly occurring market transactions on an arm’s length basis. • Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 2 inputs include the following: • quoted prices for similar (i.e. not identical) assets in active markets. • inputs other than quoted prices that are observable for the asset (for example, interest rates and yield curves observable at commonly quoted intervals). • inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (market-corroborated inputs). • Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs). The level in the fair value hierarchy within which an asset or liability is categorised is determined on the basis of the lowest level input that is significant to the fair value measurement of the asset. For this purpose, the significance of an input is assessed against the fair value measurement of an asset or liability in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement requires judgement, considering factors specific to the asset or liability. The determination of what constitutes ‘observable’ requires significant judgement by the Group. The Group considers observable data to be investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date, without adjustment for transaction costs necessary to realise the asset. REPORT & ACCOUNTS 2015 69 Notes to the Accounts 13 Investments at Fair Value Through Profit or Loss continued The table below sets out fair value measurements of financial assets in accordance with the IFRS fair value hierarchy system: Group 2015 Group 2014 Level 1 £000 Level 2 £000 Level 3 £000 Total £000 Level 1 £000 Level 2 £000 Level 3 £000 Total £000 Financial assets held at fair value through profit or loss Equities and managed funds Listed equity securities Unlisted equity securities Financial assets held at fair value through profit or loss Equities and managed funds Listed equity securities Unlisted equity securities 129,217 129,217 52,427 52,427 123,687 123,687 41,655 41,655 129,217 52,427 181,644 123,687 41,655 165,342 Company 2015 Company 2014 Level 1 £000 Level 2 £000 Level 3 £000 Total £000 Level 1 £000 Level 2 £000 Level 3 £000 Total £000 129,217 129,217 52,589 52,589 123,687 123,687 41,827 41,827 129,217 52,589 181,806 123,687 41,827 165,514 Investments whose values are based on quoted market prices in active markets, and therefore classified within Level 1, include active listed equities. The Group does not adjust the quoted price for these instruments. Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. As Level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. During the year there were transfers of £nil (2014: £nil) from Level 2 to Level 1 for Listed exchange traded funds. Investments classified within Level 3 have significant unobservable inputs. As observable prices are not available for these securities, the Group has used valuation techniques to derive the fair value. In respect of unquoted instruments, or where the market for a financial instrument is not active, fair value is established by using recognised valuation methodologies, in accordance with IPEV Valuation Guidelines. New investments are initially carried at cost, for a limited period, being the price of the most recent investment in the investee. This is in accordance with IPEV Guidelines as the cost of recent investments will generally provide a good indication of fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 70 MAJEDIE INVESTMENTS PLC 13 Investments at Fair Value Through Profit or Loss continued The following table presents the movement in Level 3 instruments for the year ended 30 September 2015: Opening balance Transfers to Level 1 Sales – proceeds Total gains for the year included in the Statement of Comprehensive Income Opening balance Transfers to Level 1 Sales – proceeds Total gains for the year included in the Statement of Comprehensive Income Group 2015 Total £000 41,655 (300) (5,771) 16,843 52,427 Equity investments £000 41,655 (300) (5,771) 16,843 52,427 Company 2015 Total £000 41,827 (300) (5,780) 16,842 52,589 Equity investments £000 41,827 (300) (5,780) 16,842 52,589 Group 2014 Total £000 Equity investments £000 46,864 46,864 (19,239) (19,239) 14,030 41,655 14,030 41,655 Company 2014 Total £000 Equity investments £000 55,057 55,057 (19,446) (19,446) 6,216 6,216 41,827 41,827 Investments in Investment Funds The Company has a number of investments in investment funds managed by MAM. Details of these investments are: MAM Tortoise Fund MAM Income Fund MAM Global Equity Fund MAM Global Focus Fund MAM US Equity Fund MAM UK Smaller Companies Fund** 2015 2014 Investment Value £000 Proportion Held % Investment Value £000 Proportion Held % 27,547 20,470 14,564 5,397 5,970 5,202 2.8 2.0 45.2 33.8 6.1 1.0 27,579 17,481 5,099 4,997 5,375 5,722 2.9 3.1 37.4 47.1 49.8 1.1 ** The MAM UK Smaller Companies Fund forms part of the MAM UK Equity Segregated Fund. The fees charged on these investments are as disclosed in the material contracts section of the Directors Report on page 21. In addition the total value of all investments managed by MAM at 30 September 2015 was £130.2 million (2014: £126.0 million). Further details on the investments in the MAM investment funds are contained in the Chief Executive's Report on pages 6 to 8. REPORT & ACCOUNTS 2015 71 Notes to the Accounts 13 Investments at Fair Value Through Profit or Loss continued Substantial Share Interests MAM Global Equity Fund and MAM Global Focus Fund The Company has invested £15m and £5m the MAM Global Equity Fund and MAM Global Focus Fund which are a substantial interest in these funds as at 30 September 2015. These holdings are not subsidiaries or associates, and are accounted for as an investment held at fair value through profit and loss. Further details of investments held in the MAM funds are detailed in the Investments held in the Investment Funds section on page 71. Majedie Asset Management (MAM) MAM is a UK based asset management firm providing investment management and advisory services across a range of UK and global equity strategies. The carrying value of the investment in MAM is included in the Consolidated Balance Sheet as part of investments at fair value through profit or loss: Deemed cost of investment Holding gains Fair value at 30 September 2015 £000 540 51,760 2014 £000 627 40,673 52,300 41,300 The carrying value is usually assessed twice a year by the directors and is approved by the Audit Committee. The fair value calculation is formulaic, with the significant input in assessing the price being the earnings of MAM. A 5% increase/decrease in MAM’s earnings would result in an increase/decrease of 4.3% in the carrying value of MAM. In accordance with the revised shareholders’ agreement, the Company may sell a certain number of shares to the MAM Employee Benefit Trust and at the relevant prescribed price (as calculated in accordance with the revised shareholders’ agreement). During the year the Company sold 9,305 (2014: 43,747) for a total consideration of £5,746,000 (2014: £19,177,000) resulting in a realised gain of £5,659,000 (2014: £18,766,000). After these and other party transactions the Company holds 57,523 (2014: 66,828) ordinary 0.1p shares which represents a 16.7% (2014: 18.0%) shareholding in MAM. 14 Investment in Subsidiary Subsidiary undertakings at 30 September 2015 Company and business Country of Registration Incorporation and Operation Number and class of shares held by Group Company Group Holding Capital & Reserves at 30.09.15 thousand Profit after tax for the year ended 30.09.15 thousand Majedie Portfolio Management Limited UK – Majedie share plan manager, authorised and regulated by the FCA 1,000,000 Ordinary shares 100% £162 72 MAJEDIE INVESTMENTS PLC 15 Discontinued operations On 13 January 2014, the Board announced that it would close Javelin Capital LLP, including its two wholly owned subsidiaries – Javelin Capital Services Limited and Javelin Capital Fund Management Limited – following the appointment of MAM to become the Investment Manager for the Company. The Company also decided to wind down its wholly owned subsidiary, Majedie Unit Trust. All of these entities have now been liquidated or closed down. As such there are no discontinued operations for the year ended 30 September 2015. Accordingly these were classified as a disposal group, and during the year ended 30 September 2014, a net loss after tax of £2,816,000 was recorded in respect of these subsidiaries as disclosed within the Consolidated Statement of Comprehensive Income. Revenue £’000 2015 Capital £’000 2014 Total £’000 Revenue £’000 Capital £’000 Total £’000 Discontinued operations Income Other income Total income Expenses Administration expenses Write off on disposal Net return before taxation for the year from discontinued operations Taxation Net return after taxation for the year from discontinued operations 16 Trade and Other Receivables Sales for future settlement Prepayments Dividends receivable Amounts due from share issues Taxation recoverable Amounts due from subsidiary undertakings 4 4 4 4 (236) (500) (2,084) (736) (2,084) (232) (2,584) (2,816) (232) (2,584) (2,816) Group 2015 £000 124 131 104 387 53 Group 2014 £000 45 127 127 39 Company 2015 £000 Company 2014 £000 124 131 104 387 53 95 45 127 127 39 94 799 338 894 432 The directors consider that the carrying amounts of trade and other receivables approximates to their fair value. REPORT & ACCOUNTS 2015 73 Notes to the Accounts 17 Cash and Cash Equivalents Deposits at banks Cash attributable to discontinued operations Other cash balances 18 Trade and Other Payables Amounts falling due within one year: Purchases for future settlement Accrued expenses Other creditors Group 2015 £000 1,674 863 Group 2015 £000 325 211 800 Group 2014 £000 2,684 9 819 Company 2015 £000 1,674 Company 2014 £000 2,684 606 562 2,537 3,512 2,280 3,246 Group 2014 £000 228 314 796 Company 2015 £000 325 211 800 Company 2014 £000 228 314 796 1,336 1,338 1,336 1,338 The directors consider that the carrying amounts of trade and other payables approximates to their fair value. Amounts falling due after more than one year: £13.5m (2014: £13.5m) 9.5% debenture stock 2020 £20.7m (2014: £20.7m) 7.25% debenture stock 2025 Group 2015 £000 13,433 20,468 Group 2014 £000 13,421 20,452 Company 2015 £000 13,433 20,468 Company 2014 £000 13,421 20,452 33,901 33,873 33,901 33,873 Both debenture stocks are secured by a floating charge over the Company’s assets. Expenses associated with the issue of debenture stocks were deducted from the gross proceeds and are being amortised over the life of the debentures. Further details on interest and the amortisation of issue expenses are provided in note 8. 74 MAJEDIE INVESTMENTS PLC 19 Ordinary Share Capital As at 1 October Ordinary 10p shares issued As at 30 September Number 52,528,000 605,000 Company 2015 £000 5,253 60 Number 52,528,000 Company 2014 £000 5,253 53,133,000 5,313 52,528,000 5,253 All shares are allotted fully paid up, and are of one class only Ordinary 10p. New ordinary shares can only be issued at a premium to the relevant NAV (with debt at fair value). There are nil (2014: 308,387) ordinary shares of 10p each held by the Employee Benefit Trust (EBT). See note 21 below. Ordinary shares carry one vote each on a poll. The Companies Act 2006 abolished the requirement for the Company to have authorised share capital. The Company adopted new Articles of Association on 20 January 2010 which, inter alia, reflected the new legislation. Accordingly the Company has no authorised share capital. The directors will still be limited as the number of shares they can allot at any one time as the Companies Act 2006 requires that directors seek authority from the shareholders for the allotment of new shares. 20 Share Premium As at 1 October Ordinary 10p shares issued Issue costs As at 30 September 21 Own Shares Group and Company 2015 £000 785 1,497 (2) Group and Company 2014 £000 785 2,280 785 The total number of options outstanding at the date of this report is nil (2014: 214,628) under the Long Term Incentive Plan (LTIP) and the total shareholding of the EBT is nil (2014: 308,387) ordinary shares. The shares were held by the EBT until the relevant options were exercised, until they lapse or until they are sold back to the market. They were presented on the Balance Sheet as a deduction from shareholders’ funds, in accordance with the policy detailed in note 1. The EBT sold 235,476 ordinary shares back to the market as shown below. The own shares reserve has been reduced to reflect the cost of the shares sold and the resultant loss of £147,000 has been taken to capital reserve. Date of sale 2 June 2015 3 June 2015 11 June 2015 19 June 2015 8 July 2015 Number of shares 50,000 50,000 50,000 75,000 10,476 235,476 Price shares sold at 280 pence 279 pence 276 pence 272 pence 266 pence Loss on sale £000 29 29 31 50 8 147 REPORT & ACCOUNTS 2015 75 Notes to the Accounts 21 Own Shares continued As at 1 October 2014 Options exercised Shares sold As at 30 September 2015 22 Net Asset Value Number of shares 308,387 (72,911) (235,476) Group and Company Own Shares Reserve £000 (1,039) 246 793 The consolidated net asset value per share has been calculated based on equity shareholders’ funds of £149,807,000 (2014: £134,061,000) and on 53,133,000 (2014: 52,219,613) ordinary shares, being the shares in issue at the year end having deducted the number of shares held by the EBT. 23 Analysis of Changes in Net Debt Group Cash at bank and with brokers Debt due after one year Company Cash at bank Debt due after one year At 30 September 2014 £000 3,512 (33,873) At 30 September 2014 £000 3,246 (33,873) Cash Flows £000 (975) Non Cash Items £000 (28) At 30 September 2015 £000 2,537 (33,901) (30,361) (975) (28) (31,364) Cash Flows £000 (966) Non Cash Items £000 (28) At 30 September 2015 £000 2,280 (33,901) (30,627) (966) (28) (31,621) 76 MAJEDIE INVESTMENTS PLC 24 Operating Lease Commitments The Group has served notice to the landlord on its existing premises and has arranged more suitable accommodation. The new arrangements are for five years and involve a sub-lease of an existing leasehold interest, and which include the right to participate in sharing of rent free periods and rent reviews as they occur. Currently the head lessee is in the process of a rent review and as such it is not possible to determine actual future lease commitments. However for the purposes of this note, an estimated future rent commitment has been used. Therefore, the Group has an annual commitment as at 30 September 2015 under sub-lease of £69,000 (2014: £163,000 under the prior lease). This operating lease commitment is disclosed in the table below: Expiry Date Within one year Between one and two years Between two and three years Between three and four years Between four and five years 25 Financial Commitments Group 2014 £000 163 38 Group 2015 £000 86 69 69 69 69 362 201 At 30 September 2015 the Group had no financial commitments which had not been accrued for (2014: none). 26 Share-based Payments The Group did operate one share-based (equity settled) payment scheme being the 2006 LTIP which in turn has two sections relating to Total Shareholder Return (TSR) based Awards and Matching Awards. During the year the last historical awards under the 2006 LTIP vested and the remaining shares in the Company’s EBT sold and the EBT closed. The 2006 LTIP was closed previously with the last awards being granted in 2009. Long Term Incentive Plan: TSR-based Awards Awards of restricted shares up to a maximum value of one year’s salary have performance conditions based on total shareholder return in relation to two separate performance conditions over a period of five years. The performance conditions contain higher and lower thresholds that determine the extent of the vesting of the award. In accordance with the LTIP rules existing awards increase by any dividends declared by the Company until they are exercised. Long Term Incentive Plan: Matching Awards Executive directors and senior executives receive a certain percentage of their overall bonus for the year in deferred shares. The shares granted according to these matching awards only vest once the executive has completed three years’ further service. There are no other performance conditions. In accordance with the LTIP rules existing awards increase by any dividends declared by the Company until they are exercised. REPORT & ACCOUNTS 2015 77 Notes to the Accounts 26 Share-based Payments continued Outstanding at 1 October 2014 During the year: Awarded Forfeited Exercised Expired Increase in awards due to dividends paid Outstanding at 30 September 2015 Exercisable at 30 September 2015 Outstanding at 1 October 2013 During the year: Awarded Forfeited Exercised Expired Increase in awards due to dividends paid Outstanding at 30 September 2014 Exercisable at 30 September 2014 Group 2015 TSR-based Awards Matching Awards No. of Options Weighted Average Exercise Price (p) No. of Options Weighted Average Exercise Price (p) 211,991 0.0 12,423 0.0 (60,113) (158,279) 6,401 0.0 0.0 0.0 0.0 (12,798) 375 0.0 0.0 0.0 0.0 0.0 Group 2014 TSR-based Awards Matching Awards No. of Options Weighted Average Exercise Price (p) No. of Options Weighted Average Exercise Price (p) 202,759 0.0 11,869 0.0 9,232 211,991 125,664 0.0 0.0 0.0 554 12,423 12,423 0.0 0.0 0.0 There were no awards outstanding at 30 September 2015. The awards outstanding at 30 September 2014 had a weighted average remaining contractual life of 0.08 years and nil years in respect of the TSR-based Awards and Matching Awards respectively. Awards and options are usually forfeited if the employee leaves employment before vesting. On 8 July 2015, 72,911 options were exercised by an employee. The weighted average share price on that date was £2.655 per share. All other options expired and the scheme has terminated. For the year ended 30 September 2015, the Company recognised a total share options expense of £3,000 (2014: £19,000) relating to share-based payment transactions. 78 MAJEDIE INVESTMENTS PLC 27 Financial Instruments and Risk Profile As an investment trust, the Company invests in securities for the long term in order to achieve its investment objective as stated on page 1. Accordingly, it is the Board’s policy that no trading in investments or other financial instruments be undertaken. The risk management processes of the Company are aligned with those of the Group as a whole and it is at the Group level that the majority of the risk management procedures are performed. Where relevant and materially different to the Group position, Company specific risk exposures are explained alongside those of the Group. The following risk and sensitivity analysis included in this note are based on the ongoing operations of the Group and Company. Management of market risk Management of market risk is fundamental to the Group’s investment objective and the investment portfolio is continually monitored to ensure an appropriate balance of risk and reward. Exposure to any one entity is monitored by the Board and the Investment Manager. The Board have complied with the investment policy requirement not to invest more than 15% of the total value of its gross assets, save that the Company can invest up to 25% of its gross assets in any single fund managed by MAM where the Board believes that the investment policy of such funds is consistent with the Company’s objective of spreading investment risk. From time to time, the Group may seek to reduce or increase its exposure to stock markets and currencies by taking positions in currency forward contracts, index futures and options relating to one or more stock markets. There are no such positions as at 30 September 2015. These instruments are used for the purpose of hedging some or all of the existing exposure within the Group’s investment portfolio to those currencies or particular markets or to enable increased exposure when deemed appropriate and with the specific approval of the Board. The Company’s financial instruments comprise its investment portfolio – see note 13 – cash balances, debtors and creditors that arise directly from its operations such as sales and purchases awaiting settlement and accrued income, and the debenture loans used to finance its operations. The Company, (as distinct from the Group), is unlikely to use derivatives for hedging purposes and then only in exceptional circumstances with the specific prior approval of the Board. No hedging was used during the year. In pursuing its investment objective the Company is exposed to various risks which could cause short term variation in its net assets and which could result in both or either a reduction in its net assets or a reduction in the profits available for distribution by way of dividend. The main risk exposures for the Company from its financial instruments are market risk (including currency risk, interest rate risk and other price risk), liquidity risk and credit risk. The Board sets the overall investment strategy and has in place various controls and limits and receives various reports in order to monitor the Company’s and Group’s exposure to these risks. The risk management policies identified in this note have not changed materially from the previous accounting period in respect of the Company. Market Risk The principal risk in the management of the portfolio is market risk i.e. the risk that values and future cashflows will fluctuate due to changes in market prices. This comprises: • • • foreign currency risk; interest rate risk; and other price risk i.e. movements in the value of investment holdings caused by factors other than interest rate or currency movements. These risks are taken into account when setting investment policy and making investment decisions. REPORT & ACCOUNTS 2015 79 Notes to the Accounts 27 Financial Instruments and Risk Profile continued Foreign Currency Risk Exposure to foreign currency risk arises through investments in securities listed on overseas stock markets. A proportion of the net assets of the Group and Company are denominated in currencies other than sterling, with the effect that the balance sheet and total return can be materially affected by currency movements. The Group and Company’s exposure to foreign currencies through its investments in overseas securities as at 30 September 2015 was £9,154,000 and £9,154,000 respectively (2014: £10,190,000 and £10,190,000 respectively). The Company’s investments in the MAM Funds are in sterling denominated share classes. Within the MAM Funds the foreign exchange exposure is not hedged. In respect of the Company, the Investment Manager monitors the Company’s exposure to foreign currencies and the Board receives reports on a regular basis. The Group is able, although unlikely, to enter into forward currency contracts as a means of limiting or increasing its exposure to particular currencies. Such contracts can be used for the purpose of hedging the existing currency exposure of elements of the Group’s portfolio (as a means of reducing risk) or to enable increased exposure when this is deemed appropriate. The currency risk of the Group and Company’s non-sterling monetary financial assets and liabilities at the Balance Sheet date was: Currency exposure US Dollar Euro Yen Other non-sterling Currency exposure US Dollar Euro Yen Other non-sterling Group 2015 Group 2014 Overseas investments £000 589 8,020 478 67 9,154 Total currency exposure £000 589 8,020 478 67 9,154 Overseas investments £000 1,771 8,028 275 116 Total currency exposure £000 1,771 8,028 275 116 10,190 10,190 Company 2015 Company 2014 Overseas investments £000 589 8,020 478 67 9,154 Total currency exposure £000 589 8,020 478 67 9,154 Overseas investments £000 1,771 8,028 275 116 Total currency exposure £000 1,771 8,028 275 116 10,190 10,190 Sensitivity analysis If sterling had strengthened by 5% relative to all currencies on the reporting date, with all the other variables held constant, the income and the net assets attributable to equity holders of the parent would have decreased by the amounts shown below. The analysis is performed on the same basis for 2014. The revenue impact is an estimated figure for 12 months based on the relevant foreign currency denominated balances at the reporting date. 80 MAJEDIE INVESTMENTS PLC 27 Financial Instruments and Risk Profile continued Income Statement Revenue return Capital return Net assets Group 2015 £000 (458) Group 2014 £000 (510) Company 2015 £000 Company 2014 £000 (458) (510) (458) (510) (458) (510) A 5% weakening of sterling against the above currencies would have resulted in an equal and opposite effect on the above amounts, on the basis that all other variables remain constant. The Company’s exposure has been calculated as at the year end and may not be representative of the year as a whole. Interest Rate Risk The Company’s direct interest rate risk exposure affects the interest received on cash balances and the fair value of its fixed rate portfolio investments and debentures. Indirect exposure to interest rate risk arises through the effect of interest rate changes on the valuation of the investment portfolio. The vast majority of the financial assets held by the Company are equity shares, which pay dividends, not interest. The Company may however from time to time hold small investments which pay a fixed rate of interest. The Board sets limits for cash balances and receives regular reports on the cash balances of the Company. The Company’s fixed rate debentures introduce an element of gearing to the Company which is monitored within limits and reported to the Board. Cash balances are used to manage the level of gearing within a range set by the Board. The Board sets an overall investment strategy and also has various limits on the investment portfolio which aim to spread the portfolio investments to reduce the impact of interest rate risk on company valuations. Regular reports are received by the Board in respect of the Company’s investment portfolio and the respective limits. The interest rate risk profile of the financial assets and liabilities at the Balance Sheet date was: Floating rate financial assets UK sterling Financial assets not carrying Group 2015 £000 2,537 Group 2014 £000 3,512 Company 2015 £000 Company 2014 £000 2,280 3,246 interest 182,443 165,680 182,700 165,946 184,980 169,192 184,980 169,192 Fixed rate financial liabilities UK sterling (33,901) (33,873) (33,901) (33,873) Financial liabilities not carrying interest (1,336) (1,338) (1,336) (1,338) (35,237) (35,211) (35,237) (35,211) Floating rate financial assets usually comprise cash on deposit with banks which is repayable on demand and receive a rate of interest based on the base rates in force over the period. The fixed rate financial liabilities comprise the Group and Company’s debentures totalling £34.2m nominal. They pay a weighted average rate of interest of 8.1% per annum and mature in 2020 (£13.5m) and 2025 (£20.7m). REPORT & ACCOUNTS 2015 81 Notes to the Accounts 27 Financial Instruments and Risk Profile continued Sensitivity analysis Based on closing cash balances held on deposits with banks, a 0.5% decrease (2014: 0.5%) in base interest rates would have the following effect on net assets and profit before tax of the Group and Company: Income Statement Revenue return Net assets Group 2015 £000 (8) Group 2014 £000 (13) Company 2015 £000 (8) Company 2014 £000 (13) (8) (13) (8) (13) A 0.5% increase (2014: 0.5%) in interest rates would have resulted in a proportionate equal and opposite effect on the above amounts on the basis that all other variables remain constant. The above analysis is based on closing balances only and is not representative of the year as a whole. Other Price Risk Exposure to market price risk is significant and comprises mainly movements in the market prices and hence value of the Company’s listed equity investments which are disclosed in note 13 on pages 67 to 72. The Company also has unlisted investments which are indirectly impacted by movements in listed equity prices and related variables. The Board sets an overall investment strategy to achieve a spread of investments across sectors and regions in order to reduce risk. The Board receives reports on the investment portfolio, performance and volatility on a regular basis in order to ensure that the investment portfolio is in accordance with the investment policy. The Investment Manager’s policy is to manage risk through a combination of monitoring the exposure to individual securities, industry and geographic sectors, whilst maintaining a constant awareness in real time of the portfolio exposures in accordance with the investment strategy. Derivative positions are marked to market and exposure to counterparties is also monitored on a daily basis by the Investment Manager; the Board review it on a quarterly basis. As mentioned earlier, the Investment Manager may use derivative instruments in order to ‘hedge’ the market risk inherent in the portfolio. The Investment Manager reviews the risk associated with individual investments and where they believe it appropriate may use derivatives to mitigate the risk of adverse market or currency movements. The Investment Manager discusses the hedging strategy with the Board at its quarterly meetings. The following table details the exposure to market price risk on the quoted and unquoted equity investments: Non-current Asset Investments at Fair Value through Profit or Loss Listed equity investments Unlisted Subsidiary Company Group 2015 £000 Group 2014 £000 129,217 52,427 123,687 41,655 Company 2015 £000 129,217 52,427 162 Company 2014 £000 123,687 41,655 172 181,644 165,342 181,806 165,514 Sensitivity analysis If share prices on listed equity investments had decreased by 10% at the reporting date with all other variables remaining constant, the profit before tax and the net assets attributable to the equity holders of the Group would have decreased by the amounts shown below. Details of the sensitivity analysis on the investment in MAM is contained in note 13 on page 72. 82 MAJEDIE INVESTMENTS PLC 27 Financial Instruments and Risk Profile continued Income Statement Capital return Net assets Group 2015 £000 Group 2014 £000 (12,922) (12,369) Company 2015 £000 (12,922) Company 2014 £000 (12,369) (12,922) (12,369) (12,922) (12,369) A 10% increase (2014: 10%) in share prices would have resulted in a proportionate equal and opposite effect on the above amounts on the basis that all other variables remain constant. The analysis has been calculated on the investments held at the year end and this may not be representative of the year as a whole. Credit Risk Credit risk is the risk of other parties failing to discharge an obligation causing the Group financial loss. The Group’s exposure to credit risk is managed by the following: • • • • • • The Company’s listed investments are held on its behalf by Bank of New York Mellon SA/NV, London Branch, the Company’s custodian which if it became bankrupt or insolvent could cause the Company’s rights with respect to securities held to be delayed. However under the AIFMD, the Company’s Depositary provides certain indemnities in respect of the Company’s investments. The Company receives regular internal control reports from the Custodian which are reviewed by the Investment Manager and reported to the Audit Committee. Investment transactions are undertaken by the Investment Manager with a number of approved brokers in the ordinary course of business on a delivery versus payment basis. All new brokers are reviewed by the Investment Manager for credit worthiness and added to an approved brokers list if not considered to be a credit risk. Credit risk is mitigated by diversifying the counterparties through whom the Investment Manager conducts investment transactions. The credit standing of all counterparties is reviewed periodically with limits set on amounts due from any one counterparty. Cash is held at banks that are considered to be reputable and high quality. Cash balances are spread across a range of banks to reduce concentration risk. Where the Company makes an investment in a loan or other security with credit risk, that credit risk is assessed and considered as part of the investment decision making process by the Investment Manager. The Board receives regular reports on the composition of the investment portfolio. A credit exposure could arise in respect of derivatives contracts entered into by the Group if the counterparty were unable to fulfill its contractual obligations. Credit Risk Exposure At the reporting date, the financial assets exposed to credit risk amounted to the following: Cash on deposit and at banks Sales for future settlement Interest, dividends and other receivables Group 2015 £000 2,537 124 675 Group 2014 £000 3,512 45 293 Company 2015 £000 2,280 124 770 Company 2014 £000 3,246 45 387 3,336 3,850 3,174 3,678 Minimum exposure during the year 2,733 Maximum exposure during the year 5,548 3,850 20,331 2,562 5,377 3,678 19,814 All amounts included in the analysis above are based on their carrying values. None of the financial assets were past due or impaired at the reporting date (2014: none). REPORT & ACCOUNTS 2015 83 Notes to the Accounts 27 Financial Instruments and Risk Profile continued Liquidity Risk Liquidity risk is the risk that the Group or Company will encounter difficulties meeting its obligations as they fall due. The Company may periodically invest in derivatives contracts and debt securities that are traded over the counter. The Company is exposed to the daily settlement of margin calls on derivatives. Liquidity risk is monitored although it is recognised that the majority of the Group’s assets are investments in quoted equities and other quoted securities that are readily realisable. The Board has various limits in respect of how much of the Group’s resources can be invested in any one company. The unlisted investments in the portfolio are subject to liquidity risk but such investments are subject to limits set by the Board and liquidity risk is taken into account by the directors when arriving at their valuation. The Company does have exposure to concentration risk due to its investment in MAM at 28.8% (2014: 24.9% in relation to MAM) of the Company’s investment portfolio. The Company closely monitors this investment and receives regular financial reports and believes that the current concentration risk is in-line with the Company’s objective of diversifying its investment portfolio into the investment groups as per its investment policy. The Group maintains an appropriate level of cash balances in order to finance its operations and the Investment Manager regularly monitors the Group’s cash balances to ensure all known or forecasted liabilities can be met. The Board receives regular reports on the level of the Group’s cash balances. The Group does not have any overdraft or other borrowing facilities to provide liquidity. A maturity analysis of financial liabilities showing the remaining contractual maturities is detailed below: Total £000 13,500 20,700 20,029 1,336 Group and Company 2015 Due within 1 year £000 Due between 1 and 2 years £000 Due between 2 and 3 years £000 Due 3 years and beyond £000 2,783 2,783 13,500 20,700 11,680 2,783 1,336 4,119 2,783 1,338 4,121 2,783 2,783 45,880 55,565 Group and Company 2014 Due between 2 and 3 years £000 Due between 1 and 2 years £000 Due within 1 year £000 Due 3 years and beyond £000 13,500 20,700 14,463 Total £000 13,500 20,700 22,812 1,338 2,783 2,783 2,783 2,783 48,663 58,350 Undiscounted cash flows 9.5% debenture stock 2020 7.25% debenture stock 2025 Interest on financial liabilities Trade payables and other liabilities Undiscounted cash flows 9.5% debenture stock 2020 7.25% debenture stock 2025 Interest on financial liabilities Trade payables and other liabilities 84 MAJEDIE INVESTMENTS PLC 27 Financial Instruments and Risk Profile continued Categories of financial assets and liabilities The following table analyses the carrying amounts of the financial assets and liabilities by categories as defined in IAS 39: Financial assets Financial assets at fair value through profit or loss Group 2015 £000 Group 2014 £000 Company 2015 £000 Company 2014 £000 Equity securities 181,644 165,342 181,806 165,514 181,644 165,342 181,806 165,514 Other financial assets1 3,336 184,980 3,850 169,192 3,174 184,980 3,678 169,192 Financial liabilities Financial liabilities measured at amortised cost2 35,237 35,211 35,237 35,211 35,237 35,211 35,237 35,211 1 Other financial assets include: cash and cash equivalents, due from brokers, cash collateral on securities borrowed, dividend and interest receivables, other receivables and prepayments. 2 Financial liabilities measured at amortised cost include: debenture stock issued, due to brokers, fees and other payables and accrued expenses. The investment portfolio has been valued in accordance with the accounting policy in note 1 to the accounts, i.e. at fair value. The debenture stocks are classified as level 3 under the fair value hierarchy. The fair value of the debenture stock is calculated using Discounted Cash Flow analysis and by reference to the redemption yields of a similar companies’ debt instrument, with an appropriate margin spread added. Group and Company Financial liabilities £13.5m (2014: £13.5m) 9.5% debenture stock 2020 £20.7m (2014: £20.7m) 7.25% debenture stock 2025 Book Value 2015 £000 13,433 20,468 Book Value 2014 £000 13,421 20,452 Fair Value 2015 £000 16,839 25,805 Fair Value 2014 £000 16,916 24,737 33,901 33,873 42,644 41,653 Capital Management Policies and Procedures The Company’s capital management objectives are: • • to ensure that it is able to continue as a going concern; and to maximise the revenue and capital returns to its equity shareholders through an appropriate mix of equity capital and debt. The Board sets a range for the Company’s debt (comprised of debentures less cash) at any one time which is maintained by management of the Company’s cash balances. REPORT & ACCOUNTS 2015 85 Notes to the Accounts 27 Financial Instruments and Risk Profile continued Capital at 30 September comprises: Net Debt Adjusted cash and cash equivalents Debentures Sub total Equity Equity share capital Retained earnings and other Group 2015 £000 (2,000) 33,901 Group 2014 £000 (2,512) 33,873 Company 2015 £000 (1,838) 33,901 Company 2014 £000 (2,340) 33,873 31,901 31,361 32,063 31,533 5,313 5,253 5,313 5,253 reserves 144,494 128,808 144,494 128,808 Shareholders’ funds 149,807 134,061 149,807 134,061 Gearing Net Debt as a percentage of shareholders’ funds 21.3% 23.4% 21.4% 23.5% Maximum potential gearing represents the highest gearing percentage on the assumption that the Group or Company had no net current assets. As at 30 September 2015, in respect of the Group and the Company, this was 22.6% and 22.6% respectively (2014: Group and Company; 25.3% and 25.3% respectively). The Board monitors and reviews the broad structure of the Company’s capital on an ongoing basis. The review includes: • • the level of gearing, taking into account the Investment Manager’s views on the market; the level of the Company’s free float of shares as the Barlow family owns approximately 53% of the share capital of the Company; and • the extent to which revenue in excess of that required to be distributed should be retained. These objectives, policies and processes for managing capital are unchanged from the prior period. The Company is subject to various externally imposed capital requirements: • • • the debentures are not to exceed in aggregate 662/3% of adjusted share capital and reserves in accordance with the respective Trust Deeds; the Company has to comply with statutory requirements relating to dividend distributions; and the AIFMD imposes a requirement for all AIFs to have in place a limit on the amount of leverage that they may hold. It is then the responsibility of the relevant AIFM to ensure that this limit is not exceeded, which in this case is the Company (being an internally managed AIF). 86 MAJEDIE INVESTMENTS PLC 27 Financial Instruments and Risk Profile continued Leverage is similar to gearing (as calculated in accordance with AIC guidelines above) but the AIFMD mandates a certain calculation methodology which must be applied. Leverage as calculated under the AIFMD methodology in respect of the Company is: Gross method Investments held at fair value through profit or loss Investments in subsidiaries held at fair value through profit or loss Total investments at exposure value as defined under AIFMD Equity Shareholders Funds Leverage Commitment method Investments held at fair value through profit or loss Investments in subsidiaries held at fair value through profit or loss Cash and cash equivalents Total investments at exposure value as defined under AIFMD Equity Shareholders Funds Leverage Group 2015 £000 181,644 181,644 Company 2015 £000 181,644 162 181,806 149,807 149,807 1.21 1.21 Group 2015 £000 181,644 2,537 184,181 Company 2015 £000 181,644 162 2,280 184,085 149,807 149,807 1.23 1.23 The leverage figures above represent leverage as calculated under the gross and commitment methods as defined under the AIFMD (a figure of 1 represents no leverage or borrowings). The two methods differ in their treatment of amounts outstanding under derivative contracts with the same counterparty, which are not applicable to the Company and their treatment of cash balances. In both methods the Company has included debentures by including the value of investments purchased by those borrowings, rather than their balance sheet value. The Company’s leverage limit under the AIFMD is 1.5 which equates to a borrowing level of 50% (the Company has not exceeded this limit as any time during the past year). These requirements (except for the AIFMD leverage requirement), are unchanged since last year and the Company has complied with them. 28 Related Party Transactions Majedie Asset Management (MAM) MAM became Investment Manager to the Company from 13 January 2014 under the terms of an Investment Agreement. The agreement provides for MAM to manage the Company’s investment assets on both a segregated account basis and also by investments into various MAM collective investment vehicles or funds. Details of the Investment Agreement are contained in the material contracts section of the Directors’ Report on pages 21 and 22. As Investment Manager MAM is entitled to receive investment management fees. In respect of segregated account investment these are charged directly to the Company and are shown as an expense in its accounts. Any fees due in respect of investments made into any MAM funds are charged to the fund and are therefore included as part of the investment value of the relevant holdings. Details concerning the Company’s investments in the year in the MAM funds are shown in the Chairman’s & Chief Executive’s Reports on pages 4 to 8. REPORT & ACCOUNTS 2015 87 Notes to the Accounts 28 Related Party Transactions continued In addition, the Company retains an investment in MAM itself. Mr JWM Barlow is a non-executive director of MAM, but receives no remuneration for this role. MAM is accounted for as an investment in both the Company and Group accounts and is valued at fair value through profit or loss. Details concerning the Company’s investment in MAM is included in the Chairman’s & Chief Executive’s Reports on pages 4 to 8 and on note 13 on page 72. Majedie Portfolio Management (MPM) The Company pays certain costs on behalf of Majedie Portfolio Management Limited (MPM) for operating the Majedie Investments PLC Share Plan and additionally is charged a management fee by MPM. Any such costs paid by the Company are recharged to MPM, net of any management fees due. Javelin Capital Javelin Capital LLP (Javelin Capital) was the Investment Manager and General Administrator to the Company until 13 January 2014, when MAM was appointed as Investment Manager, and was also the parent entity of Javelin Capital Fund Management Limited (JCFM) and Javelin Capital Services Limited (JCS). All Javelin Capital entities have ceased trading and have been liquidated. As such there were no transactions in the period. The table below discloses the transactions and balances between those entities: Transactions during the year: Dividend income received from MAM MAM share sale realised gains JCEMAF advisory fee revenue due to Javelin Capital (from the Company) Company management fee revenue due to Javelin Capital Company administration fee revenue due to Javelin Capital Company lease charge to JCS JCS management fee income from Javelin Capital MPM costs recharged by the Company Management fee income due to MAM (segregated account only) Balances outstanding at the end of the year: Between the Company and MAM (investment management fees) Value of the Company’s investment in MAM Between the Company and MPM 2015 £000 3,273 5,659 36 492 106 52,300 96 2014 £000 3,619 18,766 122 165 73 9 571 35 373 132 41,300 95 Transactions between group companies during the year were made on terms equivalent to those that occur in arm’s length transactions. Remuneration The remuneration of the directors, who are the key management personnel of the Company, are set out below in aggregate for each of the categories specified in IAS 24: Related Party Disclosures. There are no amounts outstanding at 30 September 2015 for directors fees (2014: nil). Further information about the remuneration of individual directors is provided in the audited section of the Report on Directors’ Remuneration on page 33. Short term employee benefit Partnership profit shares 88 MAJEDIE INVESTMENTS PLC 2015 £000 359 359 2014 £000 266 50 316 Notice of Meeting This Notice of Meeting is an important document, if shareholders are in any doubt as to what action to take, they should consult an appropriate independent advisor. Notice is hereby given that the one hundred and fifth Annual General Meeting of Majedie Investments PLC will be held at City of London Club, 19 Old Broad Street, London EC2N 1DS on Wednesday, 20 January 2016 at 12 noon for the purpose of transacting the following: To consider and, if thought fit, pass the following Resolutions of which Resolutions 1 to 8 will be proposed as Ordinary Resolutions and Resolutions 9 to 11 shall be proposed as Special Resolutions. All business to be transacted at the AGM is Ordinary Business for the purpose of the Listing Rules. Ordinary Resolutions 1. To receive the Directors’ Report and Accounts for the year ended 30 September 2015. 2. To approve the Directors’ Remuneration Report for the year ended 30 September 2015, which can be found on pages 32 to 35. 3. To declare a final dividend of 5.0p per share in respect of the year ended 30 September 2015. 4. To re-appoint PD Gadd as a director. 5. To re-appoint JWM Barlow as a director. 6. To appoint Ernst & Young LLP as auditors. 7. To authorise the directors to fix the auditor’s remuneration. 8. That for the purposes of section 551 of the Companies Act 2006 the Directors be generally and unconditionally authorised to exercise all the powers of the Company to allot shares and grant rights to subscribe for, or convert any securities into, Ordinary Shares up to a maximum number of 5,300,000 Ordinary Shares, provided that: a) The authority granted shall (unless previously revoked or renewed) expire at the conclusion of the next annual general meeting of the Company in 2017, or if earlier, on the expiry of 15 months from the passing of this Resolution; and b) The authority shall allow and enable the Directors to make an offer or agreement before the expiry of that authority which would or might require relevant securities to be allotted after such expiry and the Directors may allot relevant securities in pursuance of any such offer or agreement as if that authority had not expired. Special Resolutions 9. That, subject to the passing of resolution 8 above, the Directors be empowered in accordance with section 570 and 573 of the Companies Act 2006 (the Act) to allot equity securities (within the meaning of section 560 if the Act) of the Company for cash pursuant to the authority conferred by resolution 8 as if section 561 of the Act did not apply to any such allotment, provided that: a) The power granted shall be limited to the allotment of equity securities wholly for cash up to a maximum number of 5,300,000 Ordinary Shares; b) The authority granted shall (unless previously revoked) expire at the conclusion of the next Annual General Meeting of the Company in 2017 or, if earlier, 15 months after the passing of this resolution; c) The said power shall allow the enable the Directors to make an offer or agreement before the expiry of that power which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if that power had not expired. REPORT & ACCOUNTS 2015 89 Notice of Meeting 10. 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 7,964,636, 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 2017 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. 11. THAT the Company be and is hereby generally and unconditionally authorised to hold general meetings (other than annual general meetings) on 14 clear days’ notice. Registered Office Tower 42 25 Old Broad Street London EC2N 1HQ By order of the Board Capita Sinclair Henderson Limited Company Secretary 4 December 2015 Registered in England Number: 109305 90 MAJEDIE INVESTMENTS PLC Explanation of Notice of Annual General Meeting Resolution 1 – To receive the Directors’ Report and Accounts The Directors are required to present the financial statements, Directors’ report and Auditor’s report to the meeting. These are contained in the Company’s Annual Report and Financial Statements 2015. A resolution to receive the financial statements, together with the Directors’ reports and the Auditor’s report on those accounts for the financial period ended 31 December 2015 is included as an ordinary resolution. Resolution 2 – Directors’ Remuneration Report Reflecting the remuneration reporting regime which came into effect on 1 October 2013, shareholders have an annual advisory vote on the report on Directors’ remuneration. Accordingly, shareholders are being asked to vote on the receipt and approval of the Directors’ Remuneration Report as set out on pages 32 to 35 of the 2015 Annual Report. Resolution 3 – Final Dividend The Board proposes a final dividend of 5.0 pence per share in respect of the year ended 30 September 2015. If approved, the recommended final dividend will be paid on 27 January 2016 to all ordinary shareholders who are on the register of members on 15 January 2016. The shares will be marked ex-dividend on 14 January 2016. Resolutions 4 and 5 – Re-election of Directors The Company’s Articles of Association require that at every Annual General Meeting any director who has not retired from office at the preceding two Annual General Meetings shall stand for re-appointment by the Company. Mr PD Gadd, having been last re-appointed at the Annual General Meeting in 2013, will retire at the forthcoming Annual General Meeting, and, being eligible, will offer himself for re-appointment. Mr Barlow, having served for over nine years and being a non-executive director of Majedie Asset Management, the Investment Manager, must submit himself for annual re-appointment. Full biographies of all the directors are set out in the Company’s 2015 Annual Report and are also available for viewing on the Company’s website http://www.majedieinvestments.com. Resolutions 6 and 7 – Appointment and Remuneration of Auditor At each meeting at which the Company’s financial statements are presented to its members, the Company is required to appoint an auditor to serve until the next such meeting. The Board, on the recommendation of the Audit Committee, recommends the appointment of Ernst & Young LLP. Resolution 8 – Authority to allot ordinary shares Resolution 8 authorises the Board to allot ordinary shares generally and unconditionally in accordance with Section 551 of the Companies Act 2006 up to a maximum number of 5,300,000 Ordinary Shares, representing approximately 9.99% of the issued ordinary share capital at the date of the Notice. No ordinary shares will be issued at a price less than the prevailing net asset value per Ordinary Share at the time of issue. This authority shall expire at the Annual General Meeting to be held in 2017. Resolution 9 – Authority to dis-apply pre-emption rights Resolution 9 is a special resolution which is being proposed to authorise the Directors to disapply the pre-emption rights of existing shareholders in relation to issues of ordinary shares under Resolution 8 (being a maximum number of 5,300,000 Ordinary Shares, representing approximately 9.99% of the issued ordinary share capital at the date of the Notice). This authority shall expire at the Annual General Meeting to be held in 2017. REPORT & ACCOUNTS 2015 91 Notice of Meeting Resolution 10 – Purchase of Own Shares Resolution 10 is a special resolution that will grant the Company authority to make market purchases of up to 7,964,636 Ordinary Shares, representing 14.99% of the ordinary shares in issue as at the date of the Notice. Any shares bought back will be cancelled. The maximum price which may be paid for each Ordinary Share must not be more than the higher of (i) 105% of the average of the mid-market values of the Ordinary Shares for the five business days before the purchase is made or (ii) the higher of the price of the last independent trade and the highest current independent bid for the Ordinary Shares. The minimum price which may be paid for each ordinary share is £0.10. The Directors would not exercise the authority granted under this resolution unless they consider it to be in the best interests of shareholders. Purchases would be made in accordance with the provisions of the Companies Act 2006 and the Listing Rules. This authority shall expire at the Annual General Meeting to be held in 2017 when a resolution to renew the authority will be proposed. Resolution 11 – Notice Period for General Meetings Resolution 11 is a special resolution that will give the Directors the ability to convene general meetings, other than annual general meetings, on a minimum of 14 clear days’ notice. The minimum notice period for annual general meetings will remain at 21 clear days. This authority would provide the Company with flexibility where action needs to be taken quickly but will only be used where the Directors consider it in the best interests of shareholders to do so and the matter is required to be dealt with expediently. The approval will be effective until the Company’s Annual General Meeting to be held in 2017, at which it is intended that renewal will be sought. Recommendation Full details of the above resolutions are contained in the Notice. The Directors consider that all the resolutions to be proposed at the Annual General Meeting are in the best interests of the Company and its members as a whole. The Directors unanimously recommend that shareholders vote in favour of all the resolutions, as they intend to do in respect of their own beneficial holdings. 92 MAJEDIE INVESTMENTS PLC 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 18 January 2016 (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: • the meeting control number; • your shareholder reference number; and • your unique pin code. For the electronic proxy to be valid it must be received by Computershare no later than 12.00 noon on Monday, 18 January 2016. 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. REPORT & ACCOUNTS 2015 93 Notice of Meeting 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 18 January 2016 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 18 January 2016 (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 53,133,000 ordinary shares carrying one vote each. 94 MAJEDIE INVESTMENTS PLC 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: (i) 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. Note 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. 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. REPORT & ACCOUNTS 2015 95 Notice of Meeting Note 13 A copy of this notice and any subsequent notices in respect of section 388A and any information required under section 311A of the Companies Act 2006 will be available on the Company’s website www.majedieinvestments.com. 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. Note 16 If a shareholder receiving this notice has sold or transferred all shares in the Trust, this notice and any other relevant documents (e.g. form of proxy) should be passed to the person through whom the sale or transfer was effected, for transmission to the purchaser. 96 MAJEDIE INVESTMENTS PLC 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 Conduct 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 is no initial charge and no annual management charge for the ISA. Furthermore there is no brokerage charge on purchases 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 £20. The maximum investment permitted is currently £15,240 for the 2015/16 tax year. Investments can be split between a cash ISA and a stocks and shares ISA). The Majedie Corporate ISA is provided in conjunction with Halifax Share Dealing (HSDL) who act as an HM Revenue & Customs Approved ISA Manager. To apply for an account please contact Halifax Share Dealing on 0345 850 0181. Halifax Share Dealing Limited. Registered in England and Wales no. 3195646. Registered Office: Trinity Road, Halifax, West Yorkshire, HX1 2RG. Authorised and regulated by the Financial Conduct Authority, 25 The North Colonnade, Canary Wharf, London, E14 5HS under registration number 183332. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager. * Please call 0345 850 0181 for further information REPORT & ACCOUNTS 2015 97 Majedie Savings Plans Majedie General ISA (formerly a PEP) You are no longer able to put new money into a PEP. However, your existing PEP investments remain sheltered from tax and can continue to grow. You may transfer an existing PEP or ISA from another manager to the Majedie General ISA and, if you have not already subscribed to another Stocks & Shares ISA in this tax year, you can apply to pay in to your Majedie General ISA. Please note that ISA limits apply and taxation levels and bases are subject to change. Past performance of investments is not a guide to future performance as their value can go down as well as up. Further details may be obtained from the Company’s ISA Manager, The Share Centre, PO Box 2000, Aylesbury, Buckinghamshire HP21 8ZB (telephone: 0800 800 008). 98 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@majedieinvestments.com Registered Number: 109305 England Company Secretary & Fund Administrator Capita Sinclair Henderson Limited Trading as Capita Asset Services Beaufort House 51 New North Road Exeter EX4 4EP Telephone: 01392 412122 Fax: 01392 253282 Investment Manager Majedie Asset Management Limited 10 Old Bailey London EC4M 7NG Telephone: 020 7618 3900 Email: info@majedie.com Depositary BNY Mellon Trust & Depositary (UK) Limited BNY Mellon Centre 160 Queen Victoria Street London EC4V 4LA The Depositary has delegated the safe keeping of the Company’s assets to the Custodian, The Bank of New York Mellon SA/NV, London Branch. AIFM Majedie Investments PLC Registrars Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ Telephone: 0370 707 1159 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. 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. Auditors Ernst & Young LLP 25 Churchill Place Canary Wharf London E14 5EY Stockbrokers Westhouse Securities Limited Heron Tower 110 Bishopsgate London EC2N 4AY ISIN Ordinary: GB0005555221 Debenture 9.5% 2020: GB0005583389 Debenture 7.25% 31/03/2025: GB0006733058 Ticker Ordinary: MAJE Debenture 9.5% 2020: 86HK Debenture 7.25% 31/03/2025: BD22 Sedol Ordinary: 0555522 Debenture 9.5% 2020: 0558338 Debenture 7.25% 31/03/2025: 0673305 REPORT & ACCOUNTS 2015 99 Shareholder Information Key Dates in 2016 Ex-dividend date Record date Annual General Meeting 2014/15 final dividend payable Interim results announcement 2015/16 interim dividend payable Financial year end Final results announcement Annual Report mailed to shareholders Website www.majedieinvestments.com 14 January 2016 15 January 2016 20 January 2016 27 January 2016 May 2016 June 2016 30 September 2016 December 2016 December 2016 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 97). You may transfer an existing PEP or ISA to the Majedie General ISA (page 98). You may also purchase shares through an on-line dealing facility or via your stockbroker or bank. Net Asset Value The Company announces its net asset value weekly through the London Stock Exchange and on its website. The Financial Times publishes daily estimates of the net asset value and discount. 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. Warning to shareholders Many companies are aware that their shareholders have received unsolicited calls or correspondence concerning investment matters. These are typically from overseas based brokers who target UK shareholders offering to sell them what often turns out to be worthless or high risk shares based in US or UK investments. They can be very persistent and extremely persuasive. Shareholders are therefore advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers for free company reports. Please note that it is very unlikely that either the Company or the Company’s Registrar, Computershare, would make unsolicited telephone calls to shareholders and that any such calls would relate only to official documentation already circulated to shareholders and never in respect of investment advice. If you are in any doubt about the veracity of an unsolicited telephone call, please either call the Company or the Registrar. 100 MAJEDIE INVESTMENTS PLC Majedie Investments PLC Tower 42 25 Old Broad Street London EC2N 1HQ Telephone 020 7626 1243 Facsimile 020 7374 4854 E-mail majedie@majedieinvestments.com www.majedieinvestments.com