TIDMBSRT
RNS Number : 5582F
Baker Steel Resources Trust Ltd
27 April 2011
BAKER STEEL RESOURCES TRUST LTD
(the "Company")
www.bakersteelresourcestrust.com
Annual Report and Audited Financial Statements
For the period from 9 March 2010 (date of incorporation) to 31
December 2010
The Company has today, in accordance with DTR 6.3.5, released
its Annual Audited Financial Report for the year ended 31 December
2010. The Report is available via www.bakersteelresourcestrust.com
and will shortly be submitted to the National Storage Mechanism and
will also shortly be available for inspection at
www.hemscott.com/nsm.do
HIGHLIGHTS
-- Audited 31 December 2010 NAV per share increased to 103.4p
per share from previously announced unaudited figure of 96.9p per
share, largely due to increased valuation of Ivanhoe Nickel &
Platinum (already accounted for in January 2011 NAV)
-- The Company was 79.7% invested at year end and since that
time has achieved its target of being fully invested, with small
cash holding for working capital
Enquiries:
Baker Steel Resources Trust Limited +44 20 7389 8237
Francis Johnstone Trevor Steel
Winterflood Investment Trusts +44 20 3100 0291/0250
Robert Peel
James Moseley
RBC Capital Markets +44 20 7653 4000
Martin Eales
Pelham Bell Pottinger
Damian Beeley +44 20 7861 3139
Charles Vivian +44 20 7861 3126
HSBC Securities Services (Guernsey) Limited + 44 (0)1481 707
000
Company Secretary
Chairman's Statement
I am pleased to present the Company's first annual report and
would like to thank all our shareholders for their support at the
time of listing the Company and subsequently.
The Company was admitted to listing on 28 April 2010. Its
structure as an investment company listed on the London Stock
Exchange gives investors an almost unique opportunity to invest in
private developing mining companies. We are therefore
well-positioned to capture value as these companies move up the
steepest part of the development curve and move on to a listing or
other form of monetisation.
As with most investment companies at launch, the main focus of
the Company has been concentrated on making suitable investments
with sufficient potential at the right price. We had the
significant benefit of acquiring an existing investment portfolio
from Genus Capital Fund so that the Company was already half
invested at the outset. When making investments in private
companies, the level of due diligence required to be undertaken is
much greater than for public companies which have been through a
listing process and are required to provide regular information to
their shareholders. It has therefore taken time to invest, but at
year end the Company was 79.7% invested and since that time we have
achieved our target of being fully invested with a small cash
holding to allow for working capital.
Following listing, the markets for commodities and listed mining
shares were initially weak but the second half of 2010 saw a strong
recovery. The initial weakness was reflected in the disappointing
postponement of the IPO of our largest position, Ferrous Resources
Limited in June 2010. Fortunately, Ferrous is well-funded for its
immediate needs, with cash of US$430 million at the end of
September 2010, which has meant it has been able to continue its
preparations towards commencing development of its first mine in
mid-2011. We expect further news on the corporate front from
Ferrous in the second quarter of 2011.
The strength of public markets for both commodities and
associated companies is not necessarily immediately recognised in
our net asset value because when we assess "fair value" to
determine carrying value for our unlisted holdings, we require
compelling evidence to support an adjustment, such as "grey market"
transactions conducted at arm's length. I am confident that further
developments in the assets which the Company holds will in time add
to the value of the portfolio. Two of our investments achieved
listings during the year, South American Ferro Metals and Forbes
& Manhattan Coal, and by year end had risen by 31% and 48%
respectively on our carrying value prior to listing.
Howard Myles
Chairman
DIRECTORS' REPORT
For the period from 9 March 2010 (date of incorporation) to 31
December 2010
The Directors of the Company present their first annual report
and the audited financial statements for the period ended 31
December 2010.
Principal activity and business review
Baker Steel Resources Trust Limited (the "Company") is a
closed-ended investment company with limited liability incorporated
on 9 March 2010 in Guernsey under The Companies (Guernsey) Law 2008
with registration number 51576. The Company is a registered
closed-ended investment scheme registered pursuant to the
Protection of Investors (Bailiwick of Guernsey) Law, 1987, as
amended ("POI Law") and the Registered Collective Investment Scheme
Rules 2008 issued by the Guernsey Financial Services Commission
(GFSC). On 28 April 2010 the Ordinary Shares and Subscription
Shares of the Company were admitted to the Official List of the UK
Listing Authority and to trading on the Main Market of the London
Stock Exchange
The Company's investment objective is to seek capital growth
over the long-term through a focused, global portfolio consisting
principally of the equities, or related instruments, of natural
resources companies. The Company will invest predominantly in
unlisted companies (i.e. those companies that have not yet made an
initial public offering or "IPO") but also in listed securities
(including special situations opportunities and less liquid
securities) with a view to exploiting value inherent in market
inefficiencies and pricing anomalies.
The Company's investment policy is detailed in the Investment
Objectives and Policies.
Portfolio analysis
A detailed analysis of the Portfolio has been provided in the
Portfolio Statement.
Performance
In the period to 31 December 2010, the Company's Ordinary NAV
per share increased by 5.6%. This compares with a rise in the HSBC
World Mining Index (capital return in sterling terms) of 25.1%.
The Investment Manager's report includes a review of the main
developments during the year together with information on
investment activity within the Company's Portfolio and on the
market outlook.
Results and dividends
The results for the year are shown in the Statement of
Comprehensive Income and the Company's financial position at the
end of the year is shown in the Statement of Financial
Position.
Dividend policy
It is not currently envisaged that any income or gains will be
distributed by the Company by way of dividend. This does not
preclude the Directors from declaring a dividend at any time in the
future if they consider it appropriate to do so. To the extent that
any dividends are paid they will be paid in accordance with any
applicable laws and the regulations of the UK Listing
Authority.
Directors
The Directors of the Company who served during the period
were:
Edward Flood
Charles Hansard
Howard Myles
Clive Newall
Christopher Sherwell
The Directors are remunerated for their services at such rate as
the Directors determine provided that the aggregate amount of such
fees may not exceed GBP200,000 per annum (or such sum as the
Company in general meeting shall from time to time determine).
The Directors' interests in the share capital of the Company at
31 December 2010 were:
Number of Number of
Ordinary Shares Subscription Shares
Edward Flood 65,000 13,000
Christopher Sherwell 25,000 5,000
Clive Newall 25,000 5,000
Significant shareholdings
Number of % of Total
Ordinary Shareholder Ordinary Shares Shares in issue
The Bank of New York (Nominees)
Limited* 26,105,199 39.53
HSBC Global Custody Nominee Limited* 6,622,800 10.03
Lynchwood Nominees Limited* 2,840,397 4.30
Nortrust Nominees Limited* 3,963,412 6.00
Roy Nominees Limited* 2,248,036 3.40
Royal Bank of Canada Europe Limited 4,001,864 6.06
State Street Nominees Limited* 2,811,608 4.26
* Custodian accounts held on behalf of individual
shareholder(s). These holdings are aggregated holdings.
The Manager
Baker Steel Capital Managers (Cayman) Limited has been appointed
as the Manager of the Company.
Auditors
Ernst & Young LLP have been appointed as auditors to the
Company and have expressed their willingness to continue in
office.
Administrator
HSBC Securities Services (Guernsey) Limited has been appointed
as the Administrator and Company Secretary while HSBC Securities
Services (Ireland) Limited has been appointed as Sub-Administrator
to the Company.
Listing
On 28 April 2010 the Ordinary Shares and Subscription Shares of
the Company were admitted to the Official List of the UK Listing
Authority and to trading on the Main Market of the London Stock
Exchange.
Authorised and Issued Share Capital
The authorised share capital of the Company on incorporation was
represented by an unlimited number of Ordinary Shares of no par
value. The Company raised GBP30,468,865 through the issue of
30,468,865 Ordinary Shares and 6,093,772 Subscription Shares via a
Placing and Offer. In addition, the Company issued 35,554,224
Ordinary Shares and 7,110,822 Subscription Shares to the holders of
shares in Genus Capital Fund pursuant to a scheme of reorganisation
of Genus Capital Fund, in exchange for substantially all the
non-cash assets of Genus Capital Fund. With effect from 30
September 2010, 7,543 Ordinary Shares were issued as a result of
the exercise of Subscription Shares.
Going Concern
The Directors consider that the Company has adequate resources
to continue in operational existence for the foreseeable future
and, after due consideration, believe it is appropriate to adopt
the going concern basis in preparing the financial statements.
Corporate Governance
The Company is committed to maintaining high standards of
corporate governance. The Board has put in place a framework for
corporate governance which it believes is suitable for an overseas
investment company and which will enable the Company to comply with
the relevant provisions of the Combined Code issued by the
Financial Reporting Council in June 2008.
Compliance
The Board has made the appropriate disclosures in this report to
ensure that the Company meets its continuing obligations. The
Company considers that it has complied with the provisions of the
Combined Code throughout the accounting period, except where
disclosed below.
Information and training
The Board receives full details of the Company's assets,
liabilities and other relevant information in advance of Board
meetings. Typically, the Board meets formally four times a year;
however, the Investment Manager and Company Secretary stay in more
regular, less formal contact with the Directors. Individual
Directors have direct access to the Company Secretary and may, at
the expense of the Company, seek independent professional advice on
any matter that concerns them in the furtherance of their duties.
New Directors will receive an induction from the Investment Manager
and Company Secretary on joining the Board, and all Directors
receive other relevant training as necessary.
Independence
The Board consists solely of non-executive Directors of whom
Howard Myles is Chairman. The Board considers all of the Directors
as independent of the Manager, Investment Manager and the
Investment Advisers and free from any business or other
relationship that could materially interfere with the exercise of
their independent judgement.
Senior Independent Director
In view of its non-executive nature, the Board considers that it
is not appropriate for a Senior Independent Director to be
appointed.
Appointment and re-election
Directors are selected and appointed by the Board as a whole
functioning as a nomination committee. There is no separate
nomination committee as the Board is wholly independent and is
considered small relative to listed trading companies. All the
Directors are therefore responsible for reviewing the size,
structure and skills of the Board and considering whether any
changes are required or new appointments are necessary to meet the
requirements of the Company's business or to maintain a balanced
Board. The Directors are not required to retire by rotation at each
annual general meeting of the Company. The Board's policy on tenure
is that continuity and experience are considered to add
significantly to the strength of the Board and, as such, no limit
on the overall length of service of any of the Company's Directors,
including the Chairman, has been imposed.
Performance appraisal
The performance of the Board and the Audit Committee will be
evaluated through an assessment process led by the Chairman. The
performance of the Chairman will be evaluated by the other
Directors.
Audit committee
The Board has established an Audit Committee. The Audit
Committee meets at least twice a year and is responsible for
ensuring that the financial performance of the Company is properly
reported on and monitored and will provide a forum through which
the Company's external auditors may report to the Board. The Audit
Committee reviews the annual and interim accounts, results,
announcements, internal control systems and procedures and
accounting policies of the Company. The Audit Committee is composed
of Charles Hansard (Chairman of the Audit Committee), Howard Myles
and Chris Sherwell.
Remuneration, nomination and management engagement
committees
Given the size and nature of the Company, it is not deemed
necessary to form separate remuneration, nomination and management
engagement committees. The Board, as a whole, will consider new
Board appointments, remuneration and the engagement of service
providers.
Board Meetings
The Board generally meets at least four times a year, at which
time the Directors review the management of the Company's assets
and all other significant matters so as to ensure that the
Directors maintain overall control and supervision of the Company's
affairs. The Board is responsible for the appointment and
monitoring of all service providers to the Company. Between these
quarterly meetings there is regular contact with the Investment
Manager. The Directors are kept fully informed of investment and
financial controls and other matters which are relevant to the
business of the Company and which should be brought to the
attention of the Directors. The Directors also have access to the
Company Secretary (through its appointed representatives who are
responsible for ensuring that Board procedures are followed and
that applicable rules and regulations are complied with) and, where
necessary in the furtherance of their duties, to independent
professional advice at the expense of the Company.
Internal Controls
The Board recognises the need for effective high-level internal
controls. The principal controls to address financial, operational
and compliance risks are embedded in the operational procedures of
the Investment Manager, the Administrator and the Custodian.
High-level controls in operation in relation to the Company
include segregation of duties between relevant functions and
departments within the Administrator and the Investment Manager. At
every quarterly meeting, the Board considers the compliance
reports, administration reports, and portfolio valuations provided
by the Administrator, and the Investment Manager's reports and
analyses.
The Administrator has a number of internal control functions
including a dedicated Compliance Officer who is appointed as a
statutory requirement and whose role is determined by the Guernsey
Financial Services Commission which includes the maintenance of a
log of errors and breaches which are reported to the Board at each
quarterly Board meeting.
The Board reviews the effectiveness of the Company's internal
control systems on an ongoing basis. Procedures are in place to
ensure that necessary action is taken to address any significant
weaknesses identified in the control framework. The Board is not
aware of any significant failings or weaknesses in the Company's
internal controls in the period under review. The Board recognises
that the internal controls framework is designed to manage rather
than to eliminate relevant risks. The key risks faced by the
Company are set out below. The Board reviews the policies for
managing each of these principal risks as summarised below. Please
also refer to note 5.
Investment Manager Assessment
The Investment Manager prepares regular reports to the Board to
allow it to review and assess the Company's activities and
performance on an ongoing basis. The Board and the Investment
Manager have agreed clearly defined investment criteria, exposure
limits and specified levels of authority. Regular reports on these
issues, including performance information and portfolio valuations,
are submitted to the Board at each meeting.
Relations with Shareholders
The Board believes that the maintenance of good relations with
shareholders is vital for the long-term prospects of the Company.
The Board receives feedback on the views of shareholders from the
Company's brokers, RBC Capital Markets and Winterflood Securities
Limited, and from the Investment Manager.
General Meetings
All general meetings of the Company will be held in Guernsey.
The Company will hold an Annual General Meeting each year.
Principal risks & uncertainties
Performance risk
The Board is responsible for determining the investment strategy
to allow the Company to fulfil its objectives and also for
monitoring the performance of the Investment Manager who has been
delegated day to day management of the Company's Portfolio. An
inappropriate strategy may lead to poor performance. To manage this
risk the Investment Manager provides to the Board, on an ongoing
basis, an explanation of the significant stock selection
recommendations and the rationale for the composition and the
investment portfolio. The Board monitors and mandates an adequate
diversification of investments, both geographically and sectorally,
in order to minimise the risks associated with particular sectors,
based on the diversification requirements inherent in the Company's
investment policy.
Market risk
Market risk arises from volatility in the prices of the
Company's underlying investments which, in view of the Company's
investment objectives, in turn are particularly sensitive to
commodity prices. Market Risk represents the potential loss the
Company might suffer through holding investments in the face of
negative market movements. The Board has set investment
restrictions and guidelines which are monitored and reported on by
the Investment Manager on a regular basis.
Financial risk
The Company's investment activities expose it to a variety of
financial risks that include foreign currency risk and interest
rate risk. Further details are disclosed in note 5.
Operational risk
In common with most other investment vehicles, the Company has
no employees. The Company therefore relies upon the services
provided by third parties and is dependent on the control systems
of the Investment Manager and the Company's other service
providers. For example, the security of the Company's assets,
dealing procedures, accounting records and compliance with
regulatory and legal requirements, depend on the effective
operation of these systems.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the financial
statements in accordance with applicable Guernsey law and generally
accepted accounting principles.
The Guernsey Company Law requires the Directors to prepare
financial statements for each financial year which give a true and
fair view of the state of affairs of the Company and of the profit
or loss of the Company for that period. In preparing these
consolidated financial statements the Directors should:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and
prudent;
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business;
- confirm that there is no relevant audit information of which
the Company's auditor is unaware; and
- confirm that they have taken reasonable steps they ought to
have taken as directors to make themselves aware of any relevant
audit information and to establish that the Company's auditor is
aware of that information.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and which enable the Directors to
ensure that the financial statements comply with the Companies
(Guernsey) Law, 2008. The Directors are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors confirm that to the best of their knowledge:
- The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU);
- The financial statements have been prepared in accordance with
the applicable set of accounting standards, and give a true and
fair view of the assets, liabilities and financial position and
profit or loss of the Company;
- The Chairman's Statement, Directors Report and Investment
Manager's Report include a fair review of the development and
performance of the business and position of the Company together
with the description of the principal risks and uncertainties that
the Company faces, as required by the Disclosure and Transparency
Rules of the UK Listing Authority; and
- So far as each of the Directors is aware, there is no relevant
audit information of which the Company's auditors are unaware and
each Director has taken all reasonable steps he ought to have taken
as a director to make himself aware of any relevant audit
information and to establish that the Company's auditors are aware
of that information.
Signed on behalf of the Board of Directors by:
Howard Myles Christopher Sherwell
Director Director
Date: 21 April 2011
INVESTMENT MANAGER'S REPORT
For the period from 9 March 2010 (date of incorporation) to 31
December 2010
The objective of the Company is to seek capital growth over the
long-term by investing through a focused global portfolio
consisting principally of the equities, or related instruments, of
natural resources companies. These investments are predominantly in
private companies with strong development projects and focused
management, but also in listed securities to exploit value inherent
in market inefficiencies.
Financial Performance
The audited net asset value per ordinary share as at 31 December
2010 was 103.4p per share, up 5.6% from the Company's first net
asset value ("NAV") calculated on 30 April 2010. During this period
the HSBC World Mining Index was up 25.1% in sterling terms.
On 10 January 2011, the Company announced an unaudited NAV for
31 December 2010 of 96.9p per share. During December 2010, Ivanhoe
Nickel & Platinum ("Ivanplats") undertook a placing of stock
equivalent to around 1% of the shares in issue of Ivanplats. At the
time the year end NAV was being finalised, it was unclear whether
this placing represented a change in fair value and the carrying
value was, therefore, not changed. However, during January, a
further larger placing and significant trading on the "grey" market
demonstrated that the December placing had indeed indicated an
upward revaluation was necessary. This increase has been included
in these financial statements and was also reflected in the 31
January 2011 NAV statement announced on 4(th) February 2011.
Accordingly, the audited NAV at 31 December 2010 has been restated
to 103.4p to reflect this uplift to the carrying value of Ivanplats
together with a change in the valuation methodology for unlisted
warrants which contributed 0.3p to this increase.
For the purpose of calculating the net asset value per share,
unquoted investments are carried at fair value as at 31 December
2010 as determined by the Directors and quoted investments are
carried at fair value as at 31 December 2010.
Net assets at 31 December 2010 comprised the following:
GBPm % net assets
Unquoted investments 47.4 69.4
Quoted investments 7.0 10.3
Net cash and fixed income instruments 13.9 20.3
------ ------
68.3 100.0
Issue of Shares
The Company was admitted to trading on the London Stock Exchange
on 28 April 2010. On that date, 30,468,865 Ordinary Shares and
6,093,772 Subscription Shares were issued pursuant to a placing and
offer for subscription and 35,554,224 Ordinary Shares and 7,110,822
Subscription Shares were issued pursuant to a scheme of
reorganisation of Genus Capital Fund.
In addition 10,000 Management Ordinary Shares were issued.
Following the exercise of Subscription Shares at the end of
September 2010, 7,543 Ordinary Shares were issued and as a result,
the Company had 66,030,632 Ordinary Shares and 13,197,051
Subscription Shares in issue at 31 December 2010.
Investment Update
Largest Investments
Ivanhoe Nickel and Platinum Limited 22.0%
Ferrous Resources Limited 17.2%
Gobi Coal & Energy Limited 9.7%
Ironstone Resources Limited 7.6%
South American Ferro Metals Limited 5.4%
Copperbelt Minerals Limited 5.0%
Forbes & Manhattan Coal Corporation 4.3%
First Coal Corporation 4.0%
Other Investments 4.5%
Net Cash and fixed income instruments 20.3%
During the period, the emphasis has been on identifying
investments with the requisite potential and by 31 December 2010,
the Company was 79.7% invested. There has also been corporate
activity in the Company's portfolio.
-- In May 2010 Ferrous Resources announced its decision to float
on the London Stock Exchange, which might have seen it enter the
FTSE 100 Index. However, due to "volatile markets" the Company
postponed its listing in June 2010. Following this postponement,
the major shareholders of Ferrous moved to achieve a greater
influence over the direction of the company. As a result seven
directors have departed and eight shareholder representative
directors were appointed representing over 75% of the shareholder
base. In August 2010, the new Board appointed Deutsche Bank as
exclusive financial advisor with a remit to examine all options for
the financing of the company including a revived IPO, sale of a
strategic stake and a sale of non-core assets. We expect more news
on developments in Q2 2011.
-- In May 2010 Copperbelt Minerals agreed an offer from a
consortium of Chinese investors, subject to approval by the
government of the Democratic Republic of Congo ("DRC"). Following
delays in receiving the requisite approval, one of the two parties
which had agreed jointly to acquire Copperbelt, decided not to
extend the date of completion and effectively pulled out of the
acquisition. Following this withdrawal, Copperbelt and the other
party to the original acquisition agreement, China Africa
Development Fund ("CAD Fund"), entered into a new sale deed. At 31
March 2011, DRC Government approval for the transaction is still
pending.
-- During July the Company invested in a pre-IPO fundraising in
Forbes Coal, a South African coal producer at C$2.80 per share.
Forbes Coal listed on the Toronto Stock Exchange at the end of
September 2010 and was quoted at C$4.14 per share at 31 December
2010. In February 2011, Forbes Coal raised C$36.4 million at C$4.55
per share.
-- During November 2010, South American Ferro Metals ("SAFM")
listed on the Australian Stock Exchange at a price 31% above the
Company's previous carrying value. A significant portion of the
Company's holding in SAFM is in the form of unlisted Performance
Shares which are held at a discount to the Ordinary Shares pending
conversion to Ordinary Shares upon SAFM meeting various project
milestones at its Ponto Verde iron ore project in Brazil. At the
end of October the mining of ore commenced at Ponto Verde and was
trucked to a nearby third party processing plant for beneficiation
prior to sale, whilst SAFM commissioned its own plant at Ponto
Verde. This is a key step towards meeting two of the project
milestones for the conversion of the Performance Shares which would
unlock further value for the Company.
We have added precious metals exposure to the Fund's commodity
mix given the positive outlook for precious metals and a wish to
diversify. New investments in silver and gold have been made in
2011 adding to the platinum exposure provided by Ivanhoe Nickel and
Platinum, our largest holding.
Description of Largest Investments
Ivanhoe Nickel and Platinum Limited ("IvanPlats")
IvanPlats is a private company which owns the Kamoa copper
project in the Democratic Republic of Congo and the Turfspruit
nickel, platinum, palladium, copper and gold project in South
Africa.
IvanPlats holds exploration licences covering 9000km(2) of the
Congolese copperbelt. Primary amongst these is the Kamoa copper
project, situated less than 20km from Kolwezi, the DRC's copper
mining hub. A Canadian National Instrument 43-101 ("NI 43-101")(1)
compliant report was completed on Kamoa in January 2011 by
independent technical consultants AMEC.
The Turfspruit project is situated on the northern limb of the
Bushveld Igneous Complex in South Africa. Drilling during 2010
intersected high-grade mineralisation over substantial widths and
demonstrated a flattening of the Platreef mineralisation at depth.
A NI 43-101 compliant resource and technical report has been
produced by independent consultants, AMEC.
Ferrous Resources Limited ("Ferrous")
Ferrous is a private company with five iron-ore projects in the
iron quadrilateral region in Minas Gerais state and one in Bahia
state in Brazil. It has Joint Ore Resource Committee ("JORC")(2)
resources of 4.5 billion tonnes of iron ore and exploration
potential of a further 2.4 billion tonnes.
Production of iron ore has commenced with an initial output
planned to reach 2.5 million tonnes by the end of 2011 and is
targeting a rate of 25 million tonnes per annum from 2014,
potentially expanding to 62 million tonnes per annum by 2016.
Ferrous is developing its own infrastructure system which is
expected to encompass a port terminal in Presidente Kennedy,
Espirito Santo state and a 400km slurry pipeline connecting the
port terminal to Ferrous' Viga Mine.
As at September 2010 Ferrous held over US$430 million in
cash.
Gobi Coal & Energy Limited ("Gobi")
Gobi is a private company with three coking coal projects in
Mongolia with a JORC compliant resource of 322 million tonnes.
The company is examining the feasibility of commencing
production and hauling coal by road to its target markets in China
with a plan to commence production in the second half of 2011. The
company is considering a listing on the Hong Kong Stock Exchange in
2012.
Ironstone Resources Limited ("Ironstone")
Ironstone is a private Canadian company which owns the Clear
Hills Iron Ore/Vanadium Project ("Clear Hills") in Alberta, Canada.
Clear Hills currently has a resource of 203 million tonnes of iron
ore at a grade of 33% designated under NI 43-101. Historic work
(pre NI 43-101) in the 1950's estimated a resource of over 1
billion tonnes of iron ore at Clear Hills so there is a good
opportunity for Ironstone to increase its NI 43-101 resource
significantly. The project has also demonstrated significant
vanadium by-product and gold assays in recent core samples
suggesting the potential for further credits from those
commodities.
South American Ferro Metals Limited ("SAFM")
SAFM is a company listed on the Australian Stock Exchange whose
main asset is the Ponto Verde iron ore project in Minas Gerais in
Brazil. The property has been drilled and the geology is well
understood. While sufficient work is yet to be completed to secure
a JORC or similar resource, the property/asset is believed to
contain the potential for 140-150 million tonnes of iron ore.
Mining started at Ponto Verde in the fourth quarter of 2010 and
commissioning of the beneficiation plant commenced in the first
quarter 2011 following the completion of its refurbishment.
Production is increasing steadily towards its design rate of
700,000 tonnes of iron ore per annum.
Copperbelt Minerals Limited ("Copperbelt")
Copperbelt is a private company with a copper-cobalt project in
the Democratic Republic of Congo ("DRC"). Copperbelt has a 68%
interest in the Deziwa Copper Project one of the largest copper
oxide deposits in the DRC. Gecamines, a state owned mining and
exploration enterprise that holds most of the DRC's state mining
activities, holds the remaining 32%. Copperbelt completed a
positive Definitive Feasibility Study on the project in January
2009.
In September 2010 Copperbelt signed an agreement with Chinese
investment company, CAD Fund, for an all cash offer valuing
Copperbelt at US$282 million. The transaction was due to have been
completed by the end of 2010. However, the requisite approvals from
the Chinese and Congolese authorities were still to be received by
that date and it was agreed to extend the deadline as sufficient
progress had already been made.
Forbes and Manhattan Coal Corporation ("Forbes Coal")
Forbes Coal is a coal producer listed on the Toronto Stock
Exchange with two mines in the Kwa-Zulu Province of South Africa.
The Magdalena Mine has a NI 43-101 compliant resource of 54.2
million tonnes of bituminous coal and produced 449,000 tonnes of
coal in 2009. The Aviemore Mine has a NI 43-101 compliant resource
of 52.8 million tonnes of anthracite coal and resumed operations in
June 2010, following the company's refinancing.
First Coal Corporation ("First Coal")
First Coal is a private company with a coking and Pulverised
Coal Injection coal(3) project in British Columbia, Canada. First
Coal has announced NI 43-101 compliant resources of 78 million
tonnes of coal.
Market Outlook
We anticipate that a major theme for 2011 will be the increase
in new IPOs in the gold and mining sectors. The strong performance
of listed issues in 2010 (HSBC Global Mining Index +27.9%) and
continuing strength in commodity prices means that the market is
increasingly receptive to new opportunities, particularly if they
are relatively attractively priced.
Commodity markets should continue to benefit from rising demand
for industrial metals and energy, both in the US, where recovery is
slowly taking place in the manufacturing sector, and in Asia, as
the economies of China and India continue to generate growth and
increase output. Manufacturing sector recovery and a growing demand
for construction materials in Asia will continue to support
industrial metal prices in 2011. However, the recent natural
disaster in Japan is likely to depress demand for industrial raw
materials, in particular iron ore and coal, in the short-term.
Japan is the second largest consumer of copper ore and Asia's
biggest importer of aluminium. Inflation is set to be one of the
most significant challenges for governments and investors in 2011,
especially as commodity and energy prices rise on growing demand
from emerging markets. For instance, China's inflation rate
accelerated to 4.9% during January, the highest rate for over two
years. The potential for fears over inflation to prompt increases
in interest rates presents a threat to industrial metals
prices.
Recent volatility in energy markets is likely to continue in
2011, as the unclear outcome of the North African uprisings
promotes uncertainty regarding the future of one of the world's key
oil producing regions. Surging oil prices will potentially restrict
output growth and increase headline inflation. These factors are a
risk to global economic recovery. Higher oil prices are also likely
to feed through to higher operating costs for producing mines
increasing the cost curve of the mining industry and putting upward
pressure on metal prices.
The outlook for precious metals in 2011 remains strong. There
appear to have been no major structural economic changes in the
past twelve months that might undermine the case for gold. In the
short-term we anticipate the gold price will be driven upwards by
sustained political instability, financial imbalances and global
inflation concerns. In the long-term the case for gold appears
robust. In particular, Central Banks have been net buyers of gold
since late 2009 and remain underweight gold relative to FX
reserves. This signals fundamental concerns that the world's money
supply is strongly out-growing gold mine production, raising the
incentive to increase gold reserves as fiat currencies debase. Gold
production has remained relatively static since 2001 (GFMS)(4) yet
discovery rates have, at best, replaced production which compounds
issues of supply tightness. Collectively, these trends are steadily
re-establishing gold's status as a currency that cannot be
printed.
With regard to the principal risks which the Company faces,
please refer to the Directors' Report and note 5.
BOARD OF DIRECTORS
Howard Myles (aged 61): Howard Myles currently acts as a
non-executive director of a number of investment companies. Howard
was a partner in Ernst & Young from 2001 until 2007 and was
responsible for the Investment Funds Corporate Advisory team. He
was previously with UBS Warburg from 1987 to 2001. Howard began his
career in stock broking in 1971 as an equity salesman and joined
Touche Ross in 1975 where he qualified as a chartered accountant.
In 1978 he joined W. Greenwell & Co. in the corporate broking
team and in 1987 moved to SG Warburg Securities where he was
involved in a wide range of commercial and industrial transactions
in addition to leading UBS Warburg's corporate finance function for
investment funds. He is a fellow of the Institute of Chartered
Accountants and of The Chartered Institute for Securities and
Investments.
R. Edward Flood (aged 65): In March 2007, Edward Flood was
appointed Managing Director, Investment Banking, Haywood Securities
(UK) Limited. Following graduation from university Edward enjoyed a
career as an economic geologist with several different companies in
the mining industry over a 20-year period. At Nerco Minerals he was
head of the company's acquisition team during a period of rapid
growth fuelled by the purchase of a number of operating precious
metal mines. This experience enabled him to make a transition to
the financial community as a principal at Robertson Stephens
investment bank in San Francisco in 1992. He initially worked as a
securities analyst following the gold mining industry before
becoming a member of the firm's investment management team for the
Contrarian Fund, a public mutual fund concentrated on natural
resource opportunities in emerging markets around the world and the
Orphan Fund, a similarly structured hedge fund. The funds managed a
portfolio of approximately US$2 billion. Edward became Ivanhoe
Mines' founding President in 1995 and served in that capacity until
1999. He has been a member of the board of directors since Ivanhoe
was formed. Between 1999 and 2001, Edward held the position of
senior mining analyst with Haywood Securities in Vancouver before
returning to Ivanhoe Mines as deputy chairman, a position held
until joining Haywood Securities (UK) Limited in March 2007. He is
also the Chairman of Western Uranium Corporation and director of
several mineral exploration and development companies. Edward holds
a Masters of Science (Geology) degree from the University of
Montana and is a member of the Geological Society of London.
Charles Hansard (aged 63): Charles Hansard has over 30 years'
experience in the investment industry as a professional and in a
non-executive capacity. He currently serves as a non-executive
director on a number of boards which include the Moore Capital
group of funds, AAA- rated Deutsche Bank Global Liquidity Fund, and
Electrum Ltd., a privately owned gold exploration company. He
formerly served as a director of Apex Silver Mines Ltd., where he
chaired the finance committee during its capital raising phase and
as chairman of the board of African Platinum Plc, which he led
through reorganisation and feasibility prior to its sale to Impala
Platinum. He commenced his career in South Africa with Anglo
American Corporation and Fleming Martin as a mining analyst. He
subsequently worked in New York as an investment banker for Hambros
before returning to the UK to co-found IFM Ltd., one of the
earliest European hedge fund managers. Charles holds a B.B.S. from
Trinity College Dublin.
Clive Newall (aged 61): Clive Newall graduated from the Royal
School of Mines, University of London, England in 1971 with an
honours degree in Mining Geology, and was awarded an MBA from the
Scottish Business School at Strathclyde University. He has worked
in mining and exploration throughout his career, having held senior
management positions with Amax Exploration Inc. and the Robertson
Group plc. Clive has been a director of a number of public
companies in the United Kingdom and Canada.
Christopher Sherwell (aged 63): Christopher Sherwell has worked
since 2004 as a Senior Non-Executive Director based in Guernsey
with roles in the offshore finance industry. Christopher has served
as director with a variety of listed funds managed by institutions
such as Goldman Sachs, Hermes and Dexion. Christopher also acts as
a non-executive director of a number of locally incorporated
operational companies including Raven Russia Limited. Prior to
January 2004, Christopher was a Managing Director of Schroders'
offshore investment and private banking operations in the Channel
Islands. Christopher was previously Investment Director from
1993-2000 and also served on boards of various Schroder group
companies and funds during his period there. Prior to Schroders he
worked at Smith New Court as a research analyst specialising in
asset allocation for Asian markets. Christopher is a Rhodes Scholar
with degrees in science and in economics and politics. He has
worked as a university lecturer and was for sixteen years a
journalist, most of them working for the Financial Times.
PORTFOLIO STATEMENT
AT 31 DECEMBER 2010
Shares Investments Fair value % of Net
/Warrants GBP equivalent assets
Listed equity shares
Australian Dollars
7,223,364 South American Ferro Metals 1,704,599 2.50
Australian Dollars Total 1,704,599 2.50
--------------- ---------
Canadian Dollars
3,383,333 BacTech Environmental Corporation 217,865 0.32
1,100,000 Forbes & Manhattan 2,932,489 4.29
358,333 MBAC Fertilizer Corporation 563,015 0.82
16,916,667 REBgold Corporation 1,034,860 1.52
Canadian Dollars Total 4,748,229 6.95
--------------- ---------
Great Britain Pounds
2,400,000 European Nickel 552,000 0.81
Great Britain Pounds Total 552,000 0.81
--------------- ---------
Total investments in listed equity
shares 7,004,828 10.26
Fixed Income Instruments
Great Britain Pounds
12,500,000 UK Treasury Bills 4.25% 07/03/2011 12,753,510 18.68
Great Britain Pounds Total 12,753,510 18.68
--------------- ---------
Total investments in fixed income
instruments 12,753,510 18.68
--------------- ---------
Unlisted equity shares and warrants
Australian Dollars
4,445,586 South American Ferro Metals Class A 744,852 1.09
4,445,586 South American Ferro Metals Class B 734,362 1.08
4,445,586 South American Ferro Metals Class C 472,089 0.69
Australian Dollars Total 1,951,303 2.86
--------------- ---------
Canadian Dollars
BacTech Mining Corporation Warrants
10,250,000 06/17/2015 247,513 0.36
BacTech Mining Corporation Warrants
6,666,667 08/06/2013 123,078 0.18
5,000,000 First Coal Corporation 2,221,583 3.25
First Coal Corporation Warrants
2,428,571 05/20/2011 531,708 0.78
6,073,209 Ironstone Resources 5,041,991 7.39
Ironstone Resources Limited Warrants
3,036,605 03/31/2012 109,502 0.16
Canadian Dollars Total 8,275,375 12.12
--------------- ---------
Great Britain Pounds
1,594,646 Celadon Mining Limited 297,720 0.44
Great Britain Pounds Total 297,720 0.44
United States Dollars
268,889 Copperbelt Minerals 3,444,425 5.05
6,123,642 Ferrous Resources 11,766,429 17.23
5,169,550 Gobi Coal and Energy 6,622,110 9.70
500,000 Ivanhoe Nickel and Platinum 3,842,951 5.63
Ivanhoe Nickel Platinum Warrants 1
791,666 for 1.2 ordinary 7,301,601 10.69
Ivanhoe Nickel Platinum Warrants 1
507,500 for 1 ordinary 3,900,596 5.71
United States Dollars Total 36,878,112 54.01
--------------- ---------
Total unlisted equity shares 47,402,510 69.43
--------------- ---------
Financial Assets held at fair value
through profit or loss 67,160,848 98.37
Other Assets & Liabilities 1,113,450 1.63
Total Equity 68,274,298 100.00
--------------- ---------
INDEPENDENT AUDITOR'S REPORT
For the period from 9 March 2010 (date of incorporation) to 31
December 2010
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF BAKER STEEL
RESOURCES TRUST LIMITED
We have audited the financial statements of Baker Steel
Resources Trust Limited for the period ended 31 December 2010 which
comprise the Statement of Financial Position, Statement of
Comprehensive Income, Statement of Changes in Equity, Statement of
Cash Flows, and the related notes 1 to 14. The financial reporting
framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards as adopted by
the European Union.
This report is made solely to the company's members, as a body,
in accordance with Section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Statement of Directors'
Responsibilities set out in the Directors Report, the directors are
responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view. Our
responsibility is to audit the financial statements in accordance
with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing
Practices Board's 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 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. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Opinion on financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the company's
affairs as at 31 December 2010, and of its net comprehensive income
for the period then ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European Union;
and
-- have been prepared in accordance with the requirements of the
Companies (Guernsey) Law, 2008.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies (Guernsey) Law, 2008, we are required to
report to you, if in our opinion:
-- proper accounting records have not been kept; or
-- the financial statements are not in agreement with the
accounting records; 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 part of
the Corporate Governance Statement relating to the company's
compliance with the nine provisions of the June 2008 Combined Code
specified for our review.
Michael Bane
For and behalf of Ernst & Young LLP
Guernsey, Channel Islands
Date: 26 April 2011
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2010
31 December
2010
====================================================== ===== ===========
Notes GBP
====================================================== ===== ===========
Assets
====================================================== ===== ===========
Cash and cash equivalents 10 1,013,506
====================================================== ===== ===========
Other receivables 330,561
====================================================== ===== ===========
Financial assets held at fair value through profit
or loss (Cost: GBP63,126,417) 3 67,160,848
====================================================== ===== ===========
Total assets 68,504,915
====================================================== ===== -----------
Equity and Liabilities
====================================================== ===== ===========
Liabilities
====================================================== ===== ===========
Management fees payable 8 79,513
====================================================== ===== ===========
Formation expenses payable 26,529
====================================================== ===== ===========
Directors' fees payable 36,000
====================================================== ===== ===========
Audit fees payable 40,000
====================================================== ===== ===========
Administration fees payable 7 10,193
====================================================== ===== ===========
Other payables 38,382
====================================================== ===== ===========
Total liabilities 230,617
====================================================== ===== -----------
Equity
====================================================== ===== ===========
Management Ordinary Shares 11 10,000
====================================================== ===== ===========
Ordinary Shares 11 64,655,155
====================================================== ===== ===========
P&L account 3,609,143
====================================================== ===== ===========
Total equity 68,274,298
====================================================== ===== -----------
Total equity and liabilities 68,504,915
====================================================== ===== -----------
Ordinary shares in issue 66,040,632
====================================================== ===== ===========
Net asset value per Ordinary Share (in Pence) - Basic 4 103.38
====================================================== ===== ===========
These financial statements were approved by the Board of Directors
on 21 April 2011 and signed on its behalf by:
Howard Myles Christopher Sherwell
Director Director
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31
DECEMBER 2010
Period ended Period ended Period ended
31 December 31 December 31 December
2010 2010 2010
============================= ===== ============ ============ ============
Revenue Capital Total
============================= ===== ============ ============ ============
Notes GBP GBP GBP
============================= ===== ============ ============ ============
Income
============================= ===== ============ ============ ============
Interest income 132,564 - 132,564
============================= ===== ============ ============ ============
Net gain on financial assets
and liabilities at fair
value through profit or
loss 3 - 3,950,281 3,950,281
============================= ===== ============ ============ ============
Net foreign exchange gain - 494,905 494,905
============================= ===== ============ ============ ============
Other income 335,021 - 335,021
============================= ===== ============ ============ ============
Net income 467,585 4,445,186 4,912,771
============================= ===== ------------ ------------ ------------
Expenses
============================= ===== ============ ============ ============
Formation expenses 152,870 - 152,870
============================= ===== ============ ============ ============
Management fees 8 724,147 - 724,147
============================= ===== ============ ============ ============
Directors' fees and expenses 116,000 - 116,000
============================= ===== ============ ============ ============
Administration fees 7 74,773 - 74,773
============================= ===== ============ ============ ============
Audit fees 40,000 - 40,000
============================= ===== ============ ============ ============
Custody fees 27,220 - 27,220
============================= ===== ============ ============ ============
Other expenses 9 168,618 - 168,618
============================= ===== ============ ============ ============
Total expenses 1,303,628 - 1,303,628
============================= ===== ------------ ------------ ------------
Net comprehensive
(loss)/income for the
period (836,043) 4,445,186 3,609,143
============================= ===== ------------ ------------ ------------
Net (loss)/earnings for the
period per Ordinary Share:
============================= ===== ============ ============ ============
Basic and diluted (in pence) 4 (1.26) 6.73 5.47
============================= ===== ============ ============ ============
Weighted Average Number of
Ordinary Shares Outstanding:
============================= ===== ============ ============ ============
Basic and diluted 4 66,035,918
============================= ===== ============ ============ ============
In the current period there were no gains or losses
other than those recognised above.
The Directors consider all results to derive from
continuing activities.
STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31
DECEMBER 2010
Management Period ended
Ordinary Ordinary Total 31 December
Shares Shares gain 2010
GBP GBP GBP GBP
Proceeds on issue of
Ordinary Shares 10,000 66,030,632 - 66,040,632
Share issue costs - (1,375,477) - (1,375,477)
Net gain for the period - - 3,609,143 3,609,143
Balance as at 31
December 2010 10,000 64,655,155 3,609,143 68,274,298
=========== ============ ========== =============
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31
DECEMBER 2010
Period ended
31 December
2010
Notes GBP
Cash flows from operating activities
Net income for the period 3,609,143
Adjustments to reconcile income for the period
to net cash used in operating activities:
Net change in fair value of financial assets at
fair value through profit or loss (3,780,046)
Net increase in other receivables (330,561)
Net increase in other payables 230,617
-------------
Net cash used in operating activities (270,847)
-------------
Cash flows from investing activities
Purchase of financial assets at fair value through
profit or loss (33,367,828)
Sale of financial assets at fair value through
profit or loss 5,541,250
-------------
Net cash used in investing activities (27,826,578)
-------------
Cash flows from financing activities
Proceeds from shares issued 11 30,486,408
Share issue costs (1,375,477)
-------------
Net cash provided from financing activities 29,110,931
-------------
Net increase in cash and cash equivalents 1,013,506
Cash and cash equivalents at the beginning of the
period -
Cash and cash equivalents at the end of the period 10 1,013,506
=============
Represented by:
Cash and cash equivalents 1,013,506
Bank overdraft -
Cash and cash equivalents at the end of the period 10 1,013,506
==========
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31
DECEMBER 2010
1. GENERAL INFORMATION
Baker Steel Resources Trust Limited (the "Company") is a
closed-ended investment company with limited liability incorporated
on 9 March 2010 in Guernsey under the Companies (Guernsey) Law 2008
with registration number 51576. The Company is a registered
closed-ended investment scheme registered pursuant to the POI Law
and the Registered Collective Investment Scheme Rules 2008 issued
by the Guernsey Financial Services Commission (GFSC). On 28 April
2010 the Ordinary Shares and Subscription Shares of the Company
were admitted to the Official List of the UK Listing Authority and
to trading on the Main Market of the London Stock Exchange.
The Company is managed by Baker Steel Capital Managers (Cayman)
Limited (the "Manager"). The Manager has appointed Baker Steel
Capital Managers LLP (the "Investment Manager") as the Investment
Manager to carry out certain duties. The Company's investment
objective is to seek capital growth over the long-term through a
focused, global portfolio consisting principally of the equities,
or related instruments, of natural resources companies. The Company
invests predominantly in unlisted companies (i.e. those companies
which have not yet made an initial public offering or "IPO") and
also in listed securities (including special situations
opportunities and less liquid securities) with a view to exploiting
value inherent in market inefficiencies and pricing anomalies.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation
The financial statements have been prepared on an historic cost
basis except for financial assets and financial liabilities at fair
value through profit or loss, which are designated at fair value
through profit or loss.
The Company has adopted the Great Britain pound sterling ("GBP")
as its presentation currency, being the currency in which its
Ordinary Shares and Subscription Shares are issued. The
presentation currency is the same as the functional currency.
The statement of comprehensive income is presented in accordance
with the Statement of Recommended Practice 'Financial Statements of
Investment Trust Companies and Venture Capital Trusts' issued in
January 2009 by the Association of Investment Companies, to the
extent that it does not conflict with International Financial
Reporting Standards (IFRS).
Statement of Compliance
These financial statements of the Company have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union.
b) Significant accounting judgements and estimates
The preparation of the Company's financial statements requires
Directors to make judgements, estimates and assumptions that affect
the amounts recognised in the financial statements. However,
uncertainty about these assumptions and estimates could result in
outcomes that could require a material adjustment to the carrying
amount of the asset or liability affected in the future. The most
significant judgement relates to the valuation of the Company's
unlisted investments which are valued by the Board at fair value in
accordance with IFRS having regard to such factors as they deem
relevant. This may include information received from market sources
as to trading on unofficial or "grey" markets requiring a judgement
on whether a particular transaction represents fair value. It may
also include using industry specific models which require judgement
about the investee company's resources, reserve estimates and
associated operating and cost projections. Judgement is also
required regarding the long term market prices for relevant
commodities produced and comparison with comparable transactions
and listed company multiples.
c) Financial assets and liabilities at fair value through profit
or loss
The Company designates its investments, other than derivatives,
as at fair value through profit or loss, at initial recognition.
All derivatives are classified as held for trading and included in
financial assets at fair value through profit or loss.
Recognition and derecognition
The Company recognises financial assets and financial
liabilities on the date it becomes a party to the contractual
provisions of the instruments. Routine purchases and sales of
investments are accounted for on the trade date.
Financial assets and financial liabilities at fair value through
profit or loss are initially recognised at fair value. Transaction
costs are expensed in the Statement of Comprehensive Income.
Subsequent to initial recognition, all financial assets and
financial liabilities at fair value through profit or loss are
re-measured at fair value. Gains and losses arising from changes in
fair value are recognised in the Statement of Comprehensive Income
in the period in which they arise.
A financial asset is derecognised when the Company no longer has
control over the contractual rights that comprise that asset. This
occurs when the rights are realised, expired or are surrendered. A
financial liability is derecognised when it is extinguished or when
the obligation specified in the contract is discharged, cancelled
or expired.
Basis of Designation of Fair value
Designation of the investments in this way is consistent with
the company's documented risk management policy and investment
strategy, and information about the investments is provided to the
Board on this basis.
After initial recognition, investments are measured at fair
value, with unrealised gains and losses on investments recognised
in the Statement of Comprehensive Income. Investments are
derecognised on sale. Gains and losses on sale of investments will
be recognised in the Statement of Comprehensive Income.
Determination of fair value
Fair value is the amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing parties in
an arm's length transaction.
The fair value for financial instruments traded in active
markets at the reporting date is based on their quoted price or
binding dealer price quotations (bid price for long positions and
ask price for short positions), without any deduction for
transaction costs.
For all other financial instruments not traded in an active
market, fair value is determined by using appropriate valuation
techniques. Valuation techniques include: using recent arm's length
market transactions; reference to the current market value of
another instrument that is substantially the same; discounted cash
flow analysis and option pricing models making as much use of
available and supportable market data as possible. An analysis of
fair values of financial instruments and further details as to how
they are measured are provided in note 3.
d) Interest income and expense
Bank interest income, fixed income instruments interest and
interest expense is recognised on an accruals basis based on the
effective interest method.
e) Cash and cash equivalents, margin accounts with brokers and
cash overdrawn
Cash and cash equivalents comprise cash balances held at
banks.
f) Expenses
All expenses are recognised on an accruals basis.
g) Translation of foreign currencies
Foreign currency transactions during the period are translated
into GBP at the rate of exchange ruling at the dates of the
transaction. Assets and liabilities denominated in foreign
currencies are translated into GBP at the rate of exchange ruling
at the Statement of Financial Position date. Exchange differences
including those arising from adjustment to fair value of financial
instruments during the period, are included in the Statement of
Comprehensive Income.
h) Segment information
IFRS 8 'Operating Segments' was issued by the IASB in November
2006 and is effective for annual periods beginning on or after 1
January 2009, with early application permitted. This standard
requires disclosures on the financial performance of the operating
segments of the entity. The Directors are of the opinion that the
Company is engaged in a single segment of business, being investing
in natural resources companies.
i) Net asset value per share
Net Asset Value per share disclosed on the face of the Statement
of Financial Position is calculated in accordance with the
Company's Prospectus by dividing the net assets of the Company on
the Statement of Financial Position date by the number of Ordinary
Shares outstanding at that date.
j) New accounting pronouncements
The following standards, amendments and interpretations are
effective for the current period:
IFRS 1: First-time Adoption of International Financial Reporting
Standards - New Structure
IFRS 1: First-time Adoption of International Financial Reporting
Standards - Additional exemptions (Amendments)
IFRS 2: Group Cash-Settled Share - Based Payment Arrangements
(Amendments) - for accounting periods commencing on or after 1
January 2010
IFRS 3: Business combinations (Revised) - for accounting periods
commencing on or after 1 July 2009
IAS 27: Consolidation and Separate Financial Statements
(Amendment) - for accounting periods commencing on or after 1 July
2009
IAS 39: Financial Instruments: Recognition and Measurement -
Eligible Hedged Items effective 1 July 2009
IFRS 12 Service Concessions - for accounting periods commencing
on or after 28 March 2009
IFRS 15: Agreements for the Construction of Real Estate - for
accounting periods commencing on or after 31 December 2009
IFRIC 17: Distribution to non - cash assets to owners - for
accounting periods commencing on or after 1 July 2009
IFRIC 18: Transfers of Assets from Customers - effective from 1
July 2009
These standards have been adopted in the Company's accounting
policies.
k) New accounting pronouncements not yet effective
At the date of authorisation of these financial statements, the
following standards and interpretations, which have not been
applied, were in issue but not yet effective:
IAS 24: Related party disclosures - for accounting periods
commencing on or after 1 January 2011
IFRS 9: Financial Instruments - for accounting periods
commencing on or after 1 January 2013
IFRIC 19: Extinguishing Financial Liabilities with Equity
Instruments - for accounting periods commencing on or after 1 July
2010
IFRIC 14: Prepayments of a minimum funding requirement - for
accounting periods commencing on or after 1 January 2011
IAS 32 amendments: Classification of rights issue-for accounting
periods commencing on or after 1 February 2010
IFRS 1 amendments: Limited exemption from comparative IFRS 7
disclosures - for accounting periods commencing on or after 1 July
2010
IFRS 7: Disclosures - Transfer of financial assets- for
accounting periods commencing on or after 1 July 2011
IAS 12: Income Taxes -Tax recovery of underlying assets
(Amendment)
IAS 39: Financial Instruments: Recognition and Measurement -
Classification of rights issues 2010 improvements to IFRS
The Directors have not yet assessed the impact that the adoption
of these standards and interpretations in future periods will have
on the financial statements of the Company. These standards and
interpretations will be adopted when they become effective.
3. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT
OR LOSS
Listed Unlisted
equity equity Fixed income
31 December 2010 shares shares instruments Warrants Total
GBP GBP GBP GBP GBP
Financial assets at fair
value through profit or
loss
Cost 5,021,326 36,930,304 12,766,600 8,408,187 63,126,417
Unrealised (loss)/gain 1,983,502 (1,741,792) (13,090)* 3,805,811 4,034,431
Market value at 31
December 2010 7,004,828 35,188,512 12,753,510 12,213,998 67,160,848
========= =========== ============== ========== ==========
* includes interest income of GBP170,235.
The following table analyses net gain on financial assets and
liabilities at fair value through profit or loss for the period
ended 31 December 2010.
2010
GBP
Financial assets and liabilities at fair value
through profit or loss
Realised (losses)/gains on:
- Fixed income instruments (84,150)
------------
(84,150)
Unrealised gains/(losses) on:
- Listed equity shares 1,983,502
- Unlisted equity shares (1,741,792)
- Fixed income instruments (13,090)
- Warrants 3,805,811
------------
4,034,431
Net gain on financial assets and liabilities
at fair value through profit or loss 3,950,281
============
The following table analyses investments by type and by level
within the fair valuation hierarchy at 31 December 2010.
Quoted market
Quoted prices in based Unobservable
active markets observables inputs
================ ================ ================ ============ ==========
Level 1 Level 2 Level 3 Total
================ ================ ================ ============ ==========
GBP GBP GBP GBP
================ ================ ================ ============ ==========
Financial assets
at fair value
through profit
or loss
================ ================ ================ ============ ==========
Listed equity
shares 7,004,828 - - 7,004,828
================ ================ ================ ============ ==========
Unlisted equity
shares - - 35,188,512 35,188,512
================ ================ ================ ============ ==========
Warrants - - 12,213,998 12,213,998
================ ================ ================ ============ ==========
Fixed income
instruments 12,753,510 - - 12,753,510
================ ---------------- ---------------- ------------ ----------
19,758,338 - 47,402,510 67,160,848
================ ---------------- ---------------- ------------ ----------
In determining an investment's placement within the fair value
hierarchy, the Directors take into consideration the following.
Investments whose values are based on quoted market prices in
active markets are classified within level 1. These include listed
equities and fixed income instruments with observable market price.
The Directors do not adjust the quoted price for such instruments,
even in situations where the Company holds a large position and a
sale could reasonably impact the quoted price.
Investments 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. These include certain less
liquid listed equities. 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. The Company did not hold any such
investments at 31 December 2010.
Investments classified within level 3 have significant
unobservable inputs. They include unlisted equity shares and
warrants. Level 3 investments are valued using valuation techniques
explained in the Company's accounting policies. The inputs used by
the Directors in estimating the value of level 3 investments
include the original transaction price, recent transactions in the
same or similar instruments, completed or pending third-party
transactions in the underlying investment of comparable issuers,
subsequent rounds of financing, recapitalisations and other
transactions across the capital structure, offerings in the equity
or debt capital markets, and changes in financial ratios or cash
flows. Level 3 investments may also be adjusted to reflect
illiquidity and/or non-transferability, with the amount of such
discount estimated by the Directors in the absence of market
information.
4. NET ASSET VALUE PER SHARE AND EARNING PER SHARE
Basic net asset value per share is based on the net assets of
GBP68,274,298 and 66,040,632 Ordinary Shares, being the number of
shares in issue at the period end. The subscription shares are
entitled to be converted to ordinary shares at 100p per share.
The calculation for basic net asset value is as below:-
Ordinary Subscription
31 December 2010 Shares Shares
Net assets at the period end (GBP) 68,274,298 13,197,051
Number of shares 66,040,632 13,197,051
Basic net asset value per share (in pence) 103.38
The basic and diluted earnings per share is based on the net
gain for the period of the Company of GBP3,609,143 and on
66,035,918 Ordinary Shares, being the weighted average number of
shares in issue during the period. This calculation is done in
accordance with IFRS.
5. RISK MANAGEMENT POLICIES AND DISCLOSURES
The Company's principal financial instruments comprise financial
assets, primarily unlisted equity investments in natural resources
companies. These investments reflect the core of the Company's
investment strategy.
The Company's financial liabilities principally comprise fees
payable to various parties and arise directly from its
operations.
Risk exposures and responses
The Company manages its exposure to key financial risks in
accordance with the Company's financial risk management policy. The
objective of the policy is to support the delivery of the Company's
core investment objective whilst maintaining future financial
security. The main risks that could adversely affect the Company's
financial assets, or future cash flows are market risk (comprising,
market price risk, currency risk and interest rate risk), commodity
price risk, liquidity risk and credit risk.
The Company's Board of Directors oversees the management of
financial risks, each of which is summarised below.
a) Market risk
Market risk is the risk that the fair value of a financial
instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk: market price risk,
currency risk and interest rate risk.
i. Market Price risk
Market price risk is the risk that the fair value or future cash
flows will fluctuate because of changes in the market prices of the
Company's investment portfolio.
The following illustrates the sensitivity of the income to an
increase or decrease of 10% in the fair value of the Company's
investment portfolio. The level of change is considered to be
reasonably possible based on observations of current market
conditions in 2011. The sensitivity analysis assumes all other
variables are held constant.
The impact of a 10% increase in the value of investments on the
net assets and revenue of the Company as at 31 December 2010 would
have been an increase of GBP6,716,084. A decrease of 10% would have
had an equal but opposite effect on both the net assets and
revenue.
ii. Currency risk
The majority of the Company's financial assets and liabilities
are denominated in US dollars. The functional currency of the
Company is GBP sterling. Currency risk is the risk that the value
of non-GBP financial instruments will fluctuate due to changes in
foreign exchange rates. The table below shows the currencies and
amounts the Company was exposed to, at 31 December 2010.
31 December 2010
Currency Amount Conversion rate Value % of net assets
(based on GBP) GBP
GBP 14,403,704 1.0000 14,403,704 21.10
AUD 5,577,272 0.6555 3,655,902 5.35
USD 57,577,068 0.6405 36,878,112 54.01
EURO (10,469) 0.8589 (8,992) (0.01)
CAD 20,726,156 0.6439 13,345,572 19.55
---------- ---------------
68,274,298 100
---------- ---------------
At 31 December 2010, had any foreign currencies strengthened by
5% relative to sterling, with all other variables held constant,
total equity would have increased by the amounts shown below.
Currency Value
GBP
AUD 182,795
USD 1,843,906
EURO (450)
CAD 667,279
---------
2,693,530
---------
A 5% decrease in foreign currencies relative to sterling, with
all other variables held constant, would lead to a corresponding
decrease in the total equity by the exact amounts as shown in the
above tables. The estimated movement is based on management's
determination of a reasonably possible change in foreign exchange
rates. In practice, the actual results may differ from the
sensitivity analysis above and the difference could be
material.
iii. Interest rate risk
Although the Company's interest-bearing financial assets and
liabilities expose it to risks associated with the effects of
fluctuations in the prevailing levels of market interest rates on
its financial position and cash flows, it is subject to little
direct exposure to interest rate fluctuations as the majority of
the financial assets are equity investments which do not pay
interest. Any excess cash and cash equivalents are invested at
short-term market interest rates which exposes the Company to a
limited extent to interest rate risk and corresponding gains/losses
from a change in the fair value of these financial instruments.
The table below summarises the Company's exposure to interest
rate risk. It includes the Company's assets and liabilities at fair
values, categorised by the earlier of contractual re-pricing or
maturity dates.
At 31 December 2010 Up to 1 - 3 Non-interest Total
1 month months bearing
Assets GBP GBP GBP GBP
Cash and cash
equivalents 1,013,506 - - 1,013,506
Financial assets held at
fair value through
profit or loss - 12,753,510 54,407,338 67,160,848
Other receivables - - - 330,561 330,561
Total Assets 1,013,506 12,753,510 54,737,899 68,504,915
========= ========== ============ ==========
Up to More than Non-interest Total
1 month 6 months bearing
Liabilities GBP GBP GBP GBP
Investment management
fees payable - - 79,513 79,513
Formation expenses
payable - - 26,529 26,529
Director fees payable - - 36,000 36,000
Audit fees payable - - 40,000 40,000
Administration fees
payable - - 10,193 10,193
Other payables - - 38,382 38,382
Total Liabilities - - 230,617 230,617
========= ========== ============ ==========
Interest rate
sensitivity gap 1,013,506 12,753,510
========= ==========
Interest rate sensitivity
At 31 December 2010, should interest rates have fallen between
10 and 25 basis points with all other variables remaining constant,
the decrease in net assets attributable to holders of Ordinary
Shares for the period would amount to approximately GBP1,014 and
GBP2,534 for assets up to 1 month respectively and GBP12,753 and
GBP31,884 for assets more than 6 months respectively. If interest
rates had risen by between 10 and 25 basis points, the increase in
net assets attributable to holders of Ordinary Shares would amount
to approximately GBP1,014 and GBP2,534 for assets up to 1 month
respectively and GBP12,753 and GBP31,884 for assets more than 6
months respectively.
The income on the Company's cash assets is positively correlated
to interest rates. As interest rates rise, the interest earned
would follow (rise) thus increasing the value of the Company.
The Board reviews and agrees policies for managing these risks.
The Investment Manager assesses the exposure to market risk when
making investment decisions and monitors the overall level of
market risk on the investment portfolio on an ongoing basis.
b) Commodity price risk
The Company is exposed to the risk of fluctuations in prevailing
market commodity prices through its investment portfolio. Commodity
price risk is beyond the Company's control but will be mitigated to
a certain extent as a result of the Company's diversified portfolio
as long as commodity prices remain uncorrelated. It is not possible
to quantify within reasonable ranges the impact of commodity price
changes on the valuation of the company's investments. However in
general, long term commodity price increases should give rise to an
increase in fair value.
c) Liquidity risk
Liquidity risk is defined as the risk that the Company may not
be able to settle or meet its obligations on time or at a
reasonable price. The Company manages overall liquidity by
investing through reputable brokers who trade in global markets. In
addition, the Company is fully funded.
The Company has the ability to incur borrowings of up to 10
percent of its Net Asset Value but the Company's policy is to
restrict any such borrowings for temporary purposes only such as
settlement mis-matches.
The table below analyses the Company's financial assets and
liabilities into relevant maturity groupings based on the remaining
period at the Statement of Financial Position date to the
contractual maturity date. The amounts in the table are the
contractual undiscounted cash flows.
At 31 December More No
2010 Less than than contractual
3-12 12
1 month 1-3 months months months maturity Total
Assets GBP GBP GBP GBP GBP GBP
Cash and cash
equivalents 1,013,506 - - - - 1,013,506
Financial assets
held at fair value
through profit or
loss - 23,955,707 531,708 480,093 42,193,340 67,160,848
Other receivables 330,561 - - - - 330,561
--------- ---------- -------- -------- ----------- ----------
1,344,067 23,955,707 531,708 480,093 42,193,340 68,504,915
========= ========== ======== ======== =========== ==========
More No
Less than than contractual
3-12 12
1 month 1-3 months months months maturity Total
Liabilities GBP GBP GBP GBP GBP GBP
Other payables and
accrued expenses 151,935 38,382 40,000 - - 230,617
Total liabilities 151,935 38,382 40,000 - - 230,617
========= ========== ======== ======== =========== ==========
Net assets attributable to shareholders 68,274,298
==========
d) Credit risk
Credit risk is the risk that a counterparty will be unable to
pay amounts in full as they fall due. The Company has exposure to
credit risk in relation to its cash balances, fixed income
instruments and trade receivables as stated in the Statement of
Financial Position.
As at 31 December 2010, the Company's financial assets were held
with the following weight:
Financial Assets Counterparty Credit 2010
Rating % of net assets
Fixed income instruments
- Short dated gilts UK Government AAA 18.68
Cash and cash equivalents HSBC Bank plc AA- 1.58
Total 20.26
===============
6. TAXATION
The Company is a Guernsey Exempt Company and is therefore not
subject to taxation on its income under the Income Tax (Exempt
Bodies) (Guernsey) Ordinance, 1989. An annual exempt fee of GBP600
has been paid.
7. ADMINISTRATION FEES
The Administrator, HSBC Securities Services (Guernsey) Limited,
is paid fees for acting as administrator of the Company at the rate
of 7 basis points of gross asset value up to US$250 million; the
rate reduces to 5 basis points of gross asset value above US$250
million. The Administrator is also reimbursed by the Company for
reasonable out-of-pocket expenses. These fees accrue and are
calculated as at the last Business Day of each month and paid
monthly in arrears.
The Administrator is also entitled to a fee for its provision of
corporate secretarial services provided to the Company on a time
spent basis and subject to a minimum annual fee of GBP40,000. The
Company is also responsible for any sub-administration fees as
agreed in writing from time to time, and reasonable out-of-pocket
expenses. The Administrator is also entitled to fees of EUR5,000
for preparation of the financial statements of the Company.
The administration fees paid for the period from 9 March 2010
(date of incorporation) to 31 December 2010 were GBP74,773 of which
GBP10,193 was payable at 31 December 2010.
8. MANAGEMENT AND PERFORMANCE FEES
The Manager was appointed pursuant to a management agreement
with the Company dated 31 March 2010 (the "Management Agreement").
The Company pays to the Manager a management fee which is equal to
1/12th of 1.75% of the total market capitalisation of the Company
per month. The management fee is calculated and accrued as at the
last Business Day of each month and is paid monthly in arrears.
The Manager may in certain circumstances also be entitled to be
paid a performance fee if the Net Asset Value at the end of any
Performance Period exceeds the Hurdle as at the end of the
Performance Period. For this purpose the "Hurdle" means an amount
equal to the Issue Price of GBP1 multiplied by the number of shares
in issue as at Admission, as increased at a rate of 8% per annum
compounded to the end of the relevant Performance Period. In
respect of the first Performance Period and any other Performance
Period which is less than a full 12 months, the Hurdle will be
applied pro rata. The performance fee is subject to adjustments for
any issue and/or repurchase of Ordinary Shares.
The amount of the performance fee (if any) will be 15 per cent
of the total increase in the Net Asset Value at the end of the
relevant Performance Period over the highest previously recorded
Net Asset Value as at the end of a Performance Period in respect of
which a performance fee was last accrued, (or the Issue Price
multiplied by the number of shares in issue as at Admission, if no
performance fee has been so accrued) having made adjustments for
numbers of Ordinary Shares issued and/or repurchased as described
above.
The first performance period commenced on the date of Admission
and ended on 31 December 2010 and thereafter, is each 12 month
period ending on 31 December in each year (the "Performance
Period"). The last Performance Period will end on the date on which
the Management Agreement is terminated or the Company is wound up.
No performance fees were accrued or paid in respect of the period
ended 31 December 2010
If the Company wishes to terminate the Management Agreement
without cause it is required to give the Manager 12 months' prior
notice or pay to the Manager an amount equal to: (a) the aggregate
investment management fee which would otherwise have been payable
during the 12 months following the date of such notice (such amount
to be calculated for the whole of such period by reference to the
Market Capitalisation prevailing on the Valuation Day on or
immediately prior to the date of such notice); and (b) any
performance fee accrued at the end of any Performance Period which
ended on or prior to termination and which remains unpaid at the
date of termination which shall be payable as soon as, and to the
extent that, sufficient cash or other liquid assets are available
to the Company (as determined in good faith by the Directors),
provided that such accrued performance fee shall be paid prior to
the Company making any new investment or settling any other
liabilities; and (c) where termination does not occur at 31
December in any year, any performance fee accrued at the date of
termination shall be payable as soon as and to the extent that
sufficient cash or other liquid assets are available to the Company
(as determined in good faith by the Directors), provided that such
accrued performance fee shall be paid prior to the Company making
any new investment or settling any other liabilities. The
management fees paid for the period ended 31 December 2010 were
GBP724,147 of which GBP79,513 was outstanding at the period
end.
9. OTHER EXPENSES
For the period ended 31 December 2010 TOTAL
GBP
Legal and professional fees 27,749
Agents fees 25,000
Consulting fees 19,859
Board meeting expenses 12,860
Marketing costs 11,044
Listing fees 10,891
Compliance fees 10,000
Insurance fees 12,000
Investor servicing fee 3,596
Guernsey Financial Services fee 2,250
Website expenses 2,040
Miscellaneous expenses 31,329
168,618
========
10. CASH AND CASH EQUIVALENTS
31 December
2010
GBP
Cash and cash equivalents 1,013,506
Total 1,013,506
============
Represented by:
Deposits at HSBC Bank plc 1,013,506
============
11. SHARE CAPITAL
The authorised share capital of the Company on incorporation was
represented by an unlimited number of Ordinary Shares of no par
value. The Company raised GBP30,468,865 through the issue of
30,468,865 Ordinary Shares and 6,093,772 Subscription Shares via a
Placing and Offer. In addition, the Company issued 35,554,224
Ordinary Shares and 7,110,822 Subscription Shares to the holders of
shares in Genus Capital Fund pursuant to a scheme of reorganisation
of Genus Capital Fund, in exchange for substantially all the
non-cash assets of Genus Capital Fund which are detailed as
follows:
Transfer
Quantity Investments value
GBP
Listed equity shares
358,333 MBAC Fertilizer Corporation 567,717
567,717
------------
Unlisted equity shares and warrants
500 BacTech Mining 328,699
1,594,646 Celadon Mining 297,720
268,889 Copperbelt Minerals 3,545,594
6,123,642 Ferrous Resources 14,130,705
2,571,429 First Coal Corporation 2,315,920
3,350,285 Gobi Coal and Energy 4,417,716
500,000 Ivanhoe Nickel and Platinum 2,884,457
791,666 Ivanhoe Nickel Platinum warrants 1 for 1.2 ordinary 5,480,463
306,980 Ivanhoe Nickel Platinum warrants 1 for 1 ordinary 1,770,941
6,500,000 South American Ferro Metals 2,024,889
37,197,104
------------
Total assets transferred 37,764,821
Less Cash (2,210,597)
Value of shares issued 35,554,224
------------
With effect from 30 September 2010, 7,543 Ordinary Shares were
issued as a result of the exercise of Subscription Shares. The
Company has in issue 66,030,632 Ordinary Shares and 13,197,051
Subscription Shares denominated in sterling.
The subscription rights conferred by the Subscription Shares are
exercisable every six months from 30 September 2010 until 31 March
2013 (inclusive). Each Subscription Share carries the right to
subscribe for one Ordinary Share at a price of 100 pence.
On 28 April 2010 the Ordinary Shares and Subscription Shares
were admitted to the Official List of the UK Listing Authority and
to trading on the Main Market of the London Stock Exchange.
In addition, the Company has 10,000 Management Ordinary Shares
in issue, which are held by the Investment Manager. No application
has been or will be made to have the Management Ordinary Shares
admitted to listing on the Official List or to trading on the
London Stock Exchange's Main Market for listed securities.
Holders of Ordinary Shares have the right to receive notice of
and to attend and vote at general meetings of the Company. Each
holder of Ordinary Shares being present in person or by proxy at a
meeting will, upon a show of hands, have one vote and upon a poll
each such holder of Ordinary Shares present in person or by proxy
will have one vote for each Ordinary Share held by him.
Holders of Management Ordinary Shares have the right to receive
notice of and to attend and vote at general meetings of the
Company, except that the holders of Management Ordinary Shares are
not entitled to vote on any resolution relating to certain specific
matters including a material change to the Company's investment
objective, investment policy or borrowing policy. Each holder of
Management Ordinary Shares being present in person or by proxy at a
meeting will, upon a show of hands, have one vote and upon a poll
each such holder of Management Ordinary Shares present in person or
by proxy will have one vote for each Management Ordinary Share held
by him.
Holders of Subscription Shares are not entitled to attend or
vote at meetings of Shareholders.
Holders of Ordinary Shares and Management Ordinary Shares are
entitled to receive, and participate in, any dividends or other
distributions out of the profits of the Company available for
dividend and resolved to be distributed in respect of any
accounting period or other income or right to participate therein.
The Subscription Shares carry no right to any dividend or other
distribution by the Company.
The details of issued share capital of the Company are as
follows:
31 December
2010
Issued and fully paid share capital
Ordinary Shares of no par value* 66,030,632
Subscription Shares of no par value 13,197,051
============
The issue of Ordinary Shares during the period ended 31 December
2010 took place as follows:
Subscription
Ordinary Shares* Shares
Issued during the period via Placing
and Offer 30,468,865 6,093,772
Conversion of Subscription Shares 7,543 (7,543)
Issued during the period to holders
of Genus Capital Fund 35,554,224 7,110,822
Balance at 31 December 2010 66,030,632 13,197,051
================= =============
* In addition 10,000 Management Ordinary Shares were issued. On
9 March 2010, 1 Management Ordinary Share was issued and on 26
March 2010, 9,999 Management Ordinary Shares were issued.
Capital Management
The Company's investment objective is to seek capital growth
over the long-term through a focused, global portfolio consisting
principally of the equities or related instruments of natural
resources companies.
The Company's investment strategy is to invest in natural
resources companies, predominantly unlisted. Whilst there are no
fixed limits on the allocation of investments between unlisted
securities and listed equities, equity-related securities and cash,
typically the Investment Manager will aim for the Company over the
long term to be between 40% and 100% invested by value of gross
assets and up to 10% by value of gross assets to be held in cash
and cash like holdings. The Company will aim to hold sufficient
cash to meet ongoing operational expenses. Where deemed
appropriate, the Company may borrow up to 10% of NAV for temporary
purposes such as settlement mismatched.
At 31 December 2010 the Company was 79.7% invested. Of the
Company's total assets, 18.6% was held in short term UK Government
gilts maturing in less than 3 months.
It is not currently envisaged that any income or gains will be
distributed by the way of dividend, although this does not preclude
the Directors from declaring a dividend at any time in the future
if they consider it appropriate to do so.
The Board monitors the extent to which capital has been deployed
and the manner in which capital has been invested, using inter
alia, sectoral and geographic analyses.
The Company is not subject to any externally imposed capital
requirements.
12. RELATED PARTY TRANSACTIONS
Transactions with related parties are based on terms equivalent
to those that prevail in an arm's length transaction. The following
transactions with related parties took place for the period ended
31 December 2010.
On 30 March 2010 the Company agreed to acquire the majority of
the non-cash assets of Genus Capital Fund as set out in the
Prospectus issued by the Company dated 31 March 2010. Charles
Hansard and Edward Flood were also directors of Genus Capital Fund.
Edward Flood and Charles Hansard resigned from Genus Capital Fund's
Board of Directors on 12 July 2010 and on 26 July 2010
respectively.
Genus Dynamic Gold Fund (GDGF) is a related party by virtue of
common Manager and Investment Manager with the Company. GDGF had an
interest in 3,000,000 Ordinary Shares and 600,000 Subscription
Shares in the Company at 31 December 2010.
CF Ruffer Baker Steel Gold Fund (CFRBSG) is a related party by
virtue of common Investment Manager with the Company. CFRBSG had an
interest in 7,100,000 Ordinary Shares and 1,420,000 Subscription
Shares in the Company at 31 December 2010.
Baker Steel Gold Fund (BSGF) is a related party by virtue of
common Investment Manager with the Company. BSGF had an interest in
1,472,070 Ordinary Shares and 294,414 Subscription Shares in the
Company at 31 December 2010.
Genus Natural Resources Fund (GNRF) is a related party by virtue
of common Manager and an Investment Manager with the company. GNRF
had an interest in 1,727,308 Ordinary Shares and 441,513
Subscription Shares in the Company at 31 December 2010.
Ironman Investment Company Limited, which is wholly owned by the
Investment Manager, had an interest of 82,557 Ordinary Shares and
16,451 Subscription Shares in the Company at 31 December 2010.
The Manager, Baker Steel Capital Managers (Cayman) Limited had
an interest in 430,348 Ordinary Shares and 86,069 Subscription
Shares in the Company at 31 December 2010.
The Investment Manager, Baker Steel Capital Managers LLP, had an
interest in 10,000 Management Ordinary shares in the Company at 31
December 2010.
Directors' remuneration
For the period from 9 March 2010 to 31 December 2010 the total
remuneration of the Directors was GBP116,000, with GBP36,000
payable at year end.
13. SUBSEQUENT EVENTS
AWR Lloyd was appointed by the Investment Manager to provide it
with investment advice in relation to the Company since launch.
With effect from 1 January 2011, AWR Lloyd has been replaced with a
new investment advisor entity AWR Capital ("AWRC"). The Investment
Manager and AWRC have entered into a new investment advisor
agreement on identical terms to the previous agreement in place
with AWR Lloyd (which has now been terminated). There has been no
impact on the duties provided or the personnel involved.
On 10 January 2011, the Company announced an unaudited NAV for
31 December 2010 of 96.9p per share. During December 2010,
Ivanplats undertook a placing of stock equivalent to around 1% of
the shares in issue of Ivanplats. At the time the year end NAV was
being finalised, it was unclear whether this placing represented a
change in fair value and the carrying value was, therefore, not
changed. However, during January, a further larger placing and
significant trading on the "grey" market demonstrated that the
December placing had indeed indicated an upward revaluation was
necessary. This increase has been included in these financial
statements and was also reflected in the 31 January 2011 NAV
statement announced on 4(th) February 2011.
There were no other significant subsequent events since the
period end.
14. APPROVAL OF ANNUAL REPORT AND AUDITED FINANCIAL
STATEMENTS
The Annual Report and Audited Financial Statements for the
period from 9 March 2010 to 31 December 2010 were approved by the
Board of Directors on 21 April 2011.
Footnotes
1 Canadian National Instrument 43-101 is a mineral resource
classification instrument which dictates reporting and public
disclosure of information in Canada relating to mineral
properties.
2 The Code for Reporting of Mineral Resources and Ore Reserves
(the JORC Code) of the Australasian Joint Ore Reserves Committee
(JORC) is widely accepted as a standard for professional reporting
of mineral resources and ore reserves. Mineral resources are
classified as 'inferred', 'indicated' or 'measured', while ore
reserves are either 'probable' or 'proven'.
3 Pulverised Coal Injection coal is crushed (pulverised) into a
fine powder and injected into blast furnaces as a replacement for
coke in the production of pig iron.
4 Gold Fields Mineral Services (GFMS) is a leading precious
metals consultancy, specialising in research into the global gold,
silver, platinum and palladium markets.
These are not full statutory accounts. The full audited accounts
for 31 December 2010 will be sent to Shareholders and will be
available for inspection at the registered office of the Company,
Arnold House, St. Julian's Avenue, St Peter Port, Guernsey and at
www.bakersteelresourcestrust.com
The Company's ticker is BSRT
This information is provided by RNS
The company news service from the London Stock Exchange
END
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