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Company Majedie Investments PLC
TIDM MAJE
Headline

Amendments to investment policy & release of circular

Released 15:50 05-Feb-2014
Number 41546-7D1E

Amendments to investment policy & release of circular
Majedie Investments PLC                            

                         ("Majedie" or the "Company")                          

   Proposed amendments to the Company's investment policyand publication of    
                                   circular                                    

 

Introduction

Further to the announcement on 13 January 2014, Majedie announces that it has
today published a circular, together with a notice of General Meeting, relating
to approval by the Company's Shareholders of proposed amendments to the
Company's Existing Investment Policy. A copy of the Circular will be submitted
to the National Storage Mechanism and will shortly be available at: 
http://www.morningstar.co.uk/uk/NSM

The Chairman's Letter in respect of the Proposals, as contained in the
Circular, is set out below.

Terms used and not defined in this announcement bear the meaning given to them
in the Circular to be published today.

Chairman's Letter

"Dear Shareholder

 Proposed amendments to the Company's investment policy and authority to issue 
                              new Ordinary Shares                              

Introduction

On 13 January 2014, the Company announced the appointment of Majedie Asset
Management Limited with immediate effect to manage the Company's assets. At the
same time, the Board announced proposals to close Javelin Capital LLP, to amend
the Company's Existing Investment Policy and to rebase the Company's annual
dividend with a view to moving to a sustainable and progressive distribution
policy, paying dividends out of current year income rather than from revenue
reserves. The Company's investment objective, to maximise total shareholder
return whilst increasing dividends by more than the rate of inflation over the
long term, will not change.

Under the Listing Rules, the Company is required to seek the approval of
Shareholders for any material change to its investment objective and investment
policy. The purpose of this document is to convene the General Meeting and to
provide you with details of, and the background to, the proposed amendments to
the Company's Existing Investment Policy.

The Directors are also seeking general and unconditional authority to allot up
to 5,200,000 Ordinary Shares (representing approximately 9.99 cent. of the
Company's existing share capital as at 4 February 2014, being the latest
practicable date prior to the date of publication of this Circular) for cash
and to issue such new Ordinary Shares on a non pre-emptive basis.

This Circular explains why the Board believes that the Proposals and the
passing of each of the Resolutions are in the best interests of Shareholders as
a whole and why the Board is seeking Shareholder approval and recommending that
you vote in favour of the Resolutions set out in the Notice of General Meeting
at the end of this document. The Proposals are conditional upon Shareholder
approval.

Background to the Proposals

Javelin was launched by the Company in September 2010 as a new asset management
business, with the aims of both managing the Company's assets and developing
into a profitable business in its own right through managing third party funds.
The market for attracting third party funds and the conditions for achieving
the required performance have, however, proved to be very challenging since
Javelin's launch. Consequently the Board does not now believe that Javelin is
likely to attract material third party assets under management in the
foreseeable future. The Board has therefore decided to wind down Javelin's
operations and the Company is in the process of realising its investment in the
Javelin Capital Emerging Markets Alpha Fund.

At the same time, Majedie Asset Management Limited has grown its business
significantly, through market-leading investment performance, an expansion of
its absolute return fund, the Tortoise Fund, an extension of its flagship UK
Equity Fund into global equities, and the launch of its UK Income Fund.

The Board therefore decided that it would be in the best interests of
Shareholders to appoint MAM to manage the Company's assets and to close
Javelin. In deciding to appoint MAM, the Board had particular regard to:

  * MAM's consistent market-leading performance;
   
  * the suite of funds which MAM manages, including the absolute return
    Tortoise Fund, which will enable the Company to maintain its balanced
    investment portfolio; and
   
  * the ability of both MAM's UK Equity Fund and the UK Income Fund to invest
    up to 20 per cent. of their assets in non-London listed equities.
   
The Company also announced on 13 January 2014 that MAM had agreed to repurchase
10 per cent. of its share capital from the Company. The Company currently holds
a 26.2 per cent interest in MAM and, following the repurchase and cancellation,
its interest will reduce to approximately 18.0 per cent. The repurchase price,
of approximately £18 million, represents £900,000 more than the carrying value
of those shares being sold in the Company's accounts. The repurchase will be
completed by 31 March 2014. Following the completion of this repurchase, the
Company intends to invest the £18 million sale proceeds in MAM's UK Income
Fund. The Company has also agreed progressively to reduce its stake in MAM by
up to 2.5 per cent. per annum over each of the following four years.

Proposed amendments to the investment policy

Under the management of MAM, the Board continues to believe it is in the best
interests of Shareholders to maintain a diversified investment policy, with
similar levels of exposure to equity markets and absolute return funds as the
Company currently has.

As at 31 December 2013, the Group's total assets amounted to £164.5 million
comprised as follows:

                                               £m     %

Core Portfolio                               86.5  52.6

Javelin Capital Emerging Markets Alpha Fund  29.5  17.9

MAM                                          45.0  27.3

Other assets                                  3.5   2.2

Total                                       164.5 100.0

The Core Portfolio comprised holdings in large cap UK and international stocks,
a small number of mid cap companies and cash. Other assets include the
Company's investment in Javelin and the Company's non-core realisation
portfolio, valued at £0.9 million at 31 December 2013; these do not form part
of the assets managed by MAM.

Following the appointment of MAM, the Company has transferred the Core
Portfolio to MAM to be managed as a separate portfolio under a mandate intended
to replicate the performance of MAM's UK Equity Fund.

The Company is realising its investment in the Javelin Capital Emerging Markets
Alpha Fund and intends to use the proceeds by investing approximately £30
million into MAM's Tortoise Fund, so retaining the Company's current absolute
return allocation. At the date of this Circular, the Company has transferred
approximately £23 million from the Javelin Capital Emerging Markets Alpha Fund,
which is the maximum permitted by its Existing Investment Policy. The full
investment requires an amendment to the Company's Existing Investment Policy.

In addition, the Company's Existing Investment Policy provides that the assets
of the Company are split into four major groups, being the Core Portfolio,
funds managed by Javelin, the Company's investments in MAM and the Company's
investment in Javelin. It also restricts the Company's investments in unquoted
securities other than those managed by Javelin to 10 per cent. of its gross
assets, and restricts any single investment, other than in funds managed by
Javelin, to 15 per cent. of Majedie's gross assets. To allow the target
investments in the Tortoise Fund and the UK Income Fund proposed by the Board,
and to reflect the change in investment manager generally, it is necessary to
change the Company's Existing Investment Policy. Accordingly, Resolution 1 will
be proposed at the General Meeting to adopt the New Investment Policy in place
of the Existing Investment Policy.

The proposed changes to the Existing Investment Policy together with the
Company's investment objective (which will not change) are set out in full
below.

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.

Existing Investment Policy

The Company's Existing Investment Policy is as follows:

General

The Company invests principally in securities of publicly quoted companies
worldwide and in funds managed by Javelin Capital LLP, though it may invest in
unquoted securities up to levels set periodically by the Board, including its
investment in Majedie Asset Management Limited. Investments in unquoted
securities, other than those managed by Javelin Capital, (measured by reference
to the Company's cost of investment) will not exceed 10 per cent. 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 per cent. of the value of its gross assets
save that the Company may invest up to 25 per cent. of its gross assets in any
single fund managed by Javelin Capital 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 are split into four major groups. These are the Core
Portfolio, funds managed by Javelin Capital LLP, and the Company's investments
in Majedie Asset Management Limited and Javelin Capital LLP.

Benchmark

The Company does not have one overall benchmark, rather each distinct group of
assets is viewed independently. For the actively managed Core Portfolio the
benchmark comprises 70 per cent. FTSE All-Share Index and 30 per cent. FTSE
World ex-UK Index (Sterling) on a total return basis. Any investments made into
Javelin Capital LLP products are measured against the relevant fund benchmark .
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 per cent. of adjusted capital and reserves. The
Board, also reviews the level of net gearing (borrowings less cash) on an
on-going basis and sets a range at its discretion as appropriate. The Company's
current debenture borrowings are limited by covenant to 66 2/3 per cent., and
any additional indebtedness is not to exceed 20 per cent., of adjusted capital
and reserves.

New Investment Policy

As noted above, the Company proposes to adopt the New Investment Policy and the
full text is set out below. For illustrative purposes, new wording in the New
Investment Policy is underlined. Shareholders should also note that all
references to Javelin Capital LLP in the Existing Investment Policy (as set out
in full above) have been deleted in the New Investment Policy. In addition, the
existing asset allocation paragraph (set out above) has been replaced with new
wording and the references to the benchmark index applicable to the Core
Portfolio in the benchmark paragraph have also been removed.

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 Majedie Asset Management Limited. 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 per cent. 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 per cent. of the value of its gross assets
save that the Company may invest up to 25 per cent. 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 Majedie Asset Management Limited.

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 per cent. of adjusted capital and reserves. The
Board, also reviews the level of net gearing (borrowings less cash) on an
on-going basis and sets a range at its discretion as appropriate. The Company's
current debenture borrowings are limited by covenant to 66 2/3 per cent., and
any additional indebtedness is not to exceed 20 per cent., of adjusted capital
and reserves.

Investment restrictions

For the avoidance of doubt, as a listed investment company, if and for so long
as required by the Listing Rules in relation to closed-ended investment
companies, the Company will also continue to comply with the following
investment and other restrictions:

  * the Company will at all times, invest and manage its assets in a way which
    is consistent with its object of spreading investment risk and in
    accordance with its published investment policy;
   
  * the Company will not conduct any trading activity which is significant in
    the context of the Company (or, if applicable, its Group as a whole); and
   
  * not more than 10 per cent. in aggregate of the value of the total assets of
    the Company at the time the investment is made will be invested in other
    closed-ended investment funds which are listed on Official List (except to
    the extent that those funds have published investment policies to invest no
    more than 15 per cent. of their total assets in other investment companies
    which are listed on the Official List).
   
Change in future dividend policy

In recent years, a significant proportion of the Company's annual dividends has
been funded from revenue reserves rather than from current income. The Board
had hoped that a successful development of Javelin would allow the Company to
maintain and grow its dividend with the benefit of income from Javelin. With
the closure of Javelin, the Board has resolved to rebase the annual dividend
with a view to moving to a sustainable and progressive distribution policy,
paying dividends out of current year income rather than from revenue reserves.

Based on the Company's income projections for the current year, the Board
expects to declare underlying dividends of, in aggregate, 7.5p per Share in
respect of the financial year ending 30 September 2014. This should not be
taken as an indication of the Company's expected future performance or results
over any period and does not constitute a profit forecast.

Benefits of the Proposals

The Board believes that the proposed adoption of the New Investment Policy in
place of the Existing Investment Policy is in the best interests of
Shareholders as a whole for the following reasons:

  * It will permit the Company to make its proposed investments in the Tortoise
    Fund and the UK Income Fund, and give the Company the ability to invest in
    other collective investment funds managed by MAM in the future, which might
    otherwise be prevented under the Existing Investment Policy.
   
  * MAM has a consistent market leading performance which the Board hopes MAM
    will replicate through the management of the Core Portfolio in line with
    the performance of the UK Equity Fund, MAM's flagship long only UK equity
    fund. The fund, which has the flexibility to invest up to 20 per cent. of
    net asset value in shares listed outside London, is managed by James de
    Uphaugh, Chris Field, Matthew Smith and Adam Parker. Since inception in
    March 2003 to 31 December 2013, the UK Equity Fund has achieved an
    annualised return of 16.0 per cent., outperforming the FTSE All-Share index
    by 5.5 per cent. per annum. In cumulative terms, the fund has returned
    394.7 per cent. since inception in March 2003, versus the FTSE All-Share
    index return of 191.7 per cent. The fund is broadly diversified and
    incorporates a dedicated allocation to smaller companies.
   
  * The investment in the Tortoise Fund, a long/short equity fund which has no
    geographic restrictions, will help the Company to maintain its balanced
    investment portfolio. The fund is managed by Matthew Smith and Tom Morris
    and aims to generate steady capital growth, maximising long term total
    returns whilst preserving capital. Since inception in August 2007 to 31
    December 2013, the fund has achieved an annualised return of 14.9 per cent.
    during a period in which the MSCI World (£) index returned 6.5 per cent.
    per annum. In cumulative terms, the fund has returned 140.6 per cent. since
    inception compared to the MSCI World (£) index return of 48.6 per cent. In
    2013, the Tortoise Fund did not pay a dividend.
   
  * The investment in the UK Income Fund, a focused, high conviction UK equity
    income fund which has the flexibility to invest up to 20 per cent. of net
    asset value in shares listed outside London, is expected to provide the
    Company with an attractive yield as the fund aims to outperform the FTSE
    All-Share index over the long term. Since inception in December 2011 to 31
    December 2013, the UK Income Fund has achieved an annualised return of 29.3
    per cent. net of fees, outperforming the FTSE All-Share index by 11.3 per
    cent. per annum while at the same time generating an income well in excess
    of its benchmark. In cumulative terms, the fund has returned 68.7 per cent.
    net of fees since inception, versus the FTSE All-Share Index return of 40.0
    per cent. The 2013 historic yield on the UK Income Fund was approximately
    3.6 per cent.
   
Risks associated with the Proposals

The effect of the proposed amendments to the Company's Existing Investment
Policy, if approved, will result in a significant proportion of the Company's
portfolio being invested in funds managed by MAM. The key risks to which the
Company will be exposed are as follows:

  * The success of MAM and its funds is dependent on its investment management
    personnel. The loss of key personnel from the business may have a material
    adverse effect on its ability to carry out its business because it may
    result in the loss of their technical and management skills, as well as
    their industry knowledge and contacts. As a result, the loss of such highly
    skilled personnel could have a material adverse effect on MAM's operations,
    results of operations and/or financial condition and consequently on the
    value of the Company's investment in MAM and the value of its portfolio.
   
  * The past performance of other investments or funds managed by MAM cannot be
    relied upon as an indicator of the future performance of the Company.
    Investor returns will be dependent upon the Company successfully pursuing
    its investment policy. The success of the Company will depend inter alia on
    MAM's ability to identify, acquire and realise investments in accordance
    with the New Investment Policy. This, in turn, will depend on the ability
    of MAM to apply its investment processes in a way which is capable of
    identifying suitable investments for the Company to invest in. There can be
    no assurance that MAM will be able to do so or that the Company will be
    able to invest its assets on attractive terms or generate any investment
    returns for Shareholders or, indeed, avoid investment losses.
   
  * Should the Proposals not be approved by Shareholders, the Company would
    continue to operate under its Existing Investment Policy and, accordingly,
    could not complete the proposed investments in the Tortoise Fund and the UK
    Income Fund (beyond what is already permissible in accordance with its
    Existing Investment Policy). The remaining proceeds from the realisation of
    the investment in Javelin Capital Emerging Markets Alpha Fund together with
    the funds generated from the repurchase of its share capital by MAM, would
    instead have to be invested in accordance with the Existing Investment
    Policy. The Board do not believe that this would be the optimal asset
    allocation for the Company.
   
In the view of the Board therefore, the performance of the Company's portfolio
is likely to be adversely affected if the Proposals are not approved and both
long term total Shareholder returns and anticipated dividend growth would be
reduced.

Allotment of new Ordinary Shares and disapplication of pre-emption rights

The Directors are also seeking general and unconditional authority to allot up
to 5,200,000 new Ordinary Shares for cash, representing approximately 9.99 per
cent. of the Company's existing share capital as at 4 February 2014, being the
last practicable date prior to the date of publication of this Circular, and to
issue such Ordinary Shares on a non pre-emptive basis. Both authorities are
renewable annually and will expire at the conclusion of the annual general
meeting in 2015 or 15 months after the passing of Resolutions 2 and 3, if
earlier.

Pursuant to the authorities described above, the Directors undertake not to
allot any such new Ordinary Shares unless they are allotted at a price
representing a premium to the Company's then prevailing net asset value per
Ordinary Share valuing debt at market value. In light of the current market
price of the Company's Ordinary Shares, the Directors have no present intention
of exercising this authority. However, in the event that the market price is at
a premium to the net asset value per Ordinary Share valuing debt at market
value, the Company will be prepared to issue new Ordinary Shares to meet
natural market demand.

General Meeting

Under the Listing Rules, the Company is required to seek the approval of
Shareholders for any material change to its investment policy and therefore an
ordinary resolution to approve the changes to the Company's Existing Investment
Policy will be proposed at the General Meeting as Resolution 1.

An ordinary resolution to approve the authority to allot up to 5,200,000
Ordinary Shares and a special resolution to approve the disapplication of
pre-emption rights relating to the issue of such Ordinary Shares will also be
proposed at the General Meeting as Resolutions 2 and 3. The passing of
Resolution 3 to disapply pre-emption rights is conditional upon the passing of
Resolution 2 to grant authority to allot new Ordinary Shares.

The full text of the Resolutions is set out in the Notice of General Meeting at
the end of this Circular.

All persons holding Ordinary Shares at 6.00 p.m. on 24 February 2014, or if the
General Meeting is adjourned, on the register of Shareholders of the Company at
6.00 p.m. on the date which is two business days before the time of any
adjourned General Meeting, shall be entitled to attend, speak and vote at the
General Meeting and shall be entitled on a poll to one vote per Ordinary Share
held.

Documents available for inspection

Copies of the following documents will be available for inspection during
normal business hours on any weekday (Saturdays, Sundays and public holidays
excepted) at the registered office of the Company and at the offices of Ashurst
LLP, Broadwalk House, 5 Appold Street, London EC2A 2HA up to and including the
date of the General Meeting:

  * the Articles of Association of the Company;
   
  * a draft of the Company's proposed New Investment Policy, showing the
    changes made to the Existing Investment Policy; and
   
  * this Circular.
   
Copies of this Circular are available for viewing, free of charge during normal
business hours, at the National Storage Mechanism (which has replaced the UK
Listing Authority's Document Viewing Facility) (www.hemscott.com/nsm.do) and at
the Company's registered office at Tower 42, 25 Old Broad Street, London EC2N
1HQ.

Action to be taken

Appointment of proxy

Whether or not you intend to attend the General Meeting, you should ensure that
your Form of Proxy is returned in hard copy form by post, by courier or by hand
to the Company's registrars, Computershare Investor Services PLC, c/o The
Pavilions, Bridgwater Road, Bristol BS99 6ZY by no later than 12.00 noon on 25
February 2014. To be valid, the relevant Form of Proxy should be completed in
accordance with the instructions accompanying it and lodged with the Company's
registrars by the relevant time.

Completion and return of the Form of Proxy will not affect a Shareholder's
right to attend, speak and vote at the General Meeting.

Recommendation

The Board is of the opinion that the Proposals and the passing of each of the
Resolutions are in the best interests of the Company and its Shareholders as a
whole and unanimously recommends that Shareholders vote in favour of the
Resolutions to be proposed at the General Meeting, as the Directors intend to
do in respect of their own beneficial holdings, representing 1.3 per cent. of
the Company's voting rights.

Yours faithfully

Andrew Adcock

Chairman"

         

            

Enquiries:                                
                                          
Majedie Investments PLC                   
William Barlow                            
020 7626 1243                             
                                          
Westhouse Securities Limited              
Alastair Moreton / Hannah Young / Darren Vickers                                   
020 7601 6118

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Amendments to investment policy & release of circular - RNS