TIDMBSRT
RNS Number : 2771K
Baker Steel Resources Trust Ltd
15 April 2015
BAKER STEEL RESOURCES TRUST LIMITED
(Incorporated in Guernsey with registered number 51576 under the
provisions of The Companies (Guernsey) Law, 2008 as amended)
15 April 2015
BAKER STEEL RESOURCES TRUST LTD
(the "Company")
Annual Report and Audited Financial Statements
For the year ended 31 December 2014
The Company has today, in accordance with DTR 6.3.5, released
its Annual Audited Financial Report for the year ended 31 December
2014. The Report is available via www.bakersteelresourcestrust.com
and will shortly be submitted to the National Storage
Mechanism.
Further details of the Company and its investments are available
on the Company's website www.bakersteelresourcestrust.com
Enquiries:
Baker Steel Resources Trust Limited +44 20 7389 8237
Francis Johnstone
Trevor Steel
Numis Securities Limited +44 20 7260 1000
David Benda (Corporate)
James Glass (sales)
HSBC Securities Services (Guernsey) Limited
Company Secretary + 44 (0)1481 717 851
DIRECTORS: Howard Myles (Chairman)
Edward Flood
Charles Hansard
Clive Newall
Christopher Sherwell
(all of whom are non-executive and independent)
REGISTERED OFFICE: Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey
Channel Islands
MANAGER: Baker Steel Capital Managers (Cayman) Limited
PO Box 309
George Town
Grand Cayman KY1-1104
Cayman Islands
INVESTMENT MANAGER:* Baker Steel Capital Managers LLP
86 Jermyn Street
London SW1Y 6JD
England
United Kingdom
STOCKBROKERS: Numis Securities Limited
10 Paternoster Square
London EC4M 7LT
United Kingdom
SOLICITORS TO THE COMPANY: Norton Rose Fulbright LLP
(as to English law) 3 More London Riverside
London SE1 2AQ
United Kingdom
ADVOCATES TO THE COMPANY: Ogier
(as to Guernsey law) Ogier House
St. Julian's Avenue
St. Peter Port
Guernsey GY1 1WA
Channel Islands
ADMINISTRATOR & COMPANY SECRETARY: HSBC Securities Services (Guernsey) Limited
Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey GY1 3NF
Channel Islands
*The Investment Manager was authorised as an Alternative
Investment Fund Manager for the purposes of the Alternative
Investment Fund Managers Directive ("AIFMD") on 22 July 2014.
SUB-ADMINISTRATOR TO THE COMPANY: HSBC Securities Services (Ireland) Limited
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
CUSTODIAN TO THE COMPANY: HSBC Institutional Trust Services (Ireland) Limited
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
SAFEKEEPING AND MONITORING AGENT HSBC Institutional Trust Services (Ireland) Limited
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
AUDITOR: Ernst & Young LLP
Royal Chambers
St. Julian's Avenue
St. Peter Port
Guernsey GY1 4AF
Channel Islands
REGISTRAR: Capita Registrars (Guernsey) Limited
Longue Hougue House
St. Sampson
Guernsey GY2 4JN
Channel Islands
UK PAYING AGENT AND TRANSFER AGENT: Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
RECEIVING AGENT Capita Registrars
Corporate Actions
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
PRINCIPAL BANKER: HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
Investment objective
The investment objective of Baker Steel Resources Trust Limited
(the "Company") 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 that have not yet made an initial public offering
("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.
Investment policy
The core of the Company's strategy is to invest in natural
resources companies, predominantly unlisted, that the Investment
Manager considers to be undervalued and have strong fundamentals
and attractive growth prospects. Natural resources companies, for
the purposes of the investment policy, are those involved in the
exploration for and production of base metals, precious metals,
bulk commodities, thermal and metallurgical coals, industrial
minerals, energy and uranium, and include single-asset as well as
diversified natural resources companies.
It is intended that unlisted investments be realised through an
IPO, trade sale, management repurchase or other methods.
The Company focuses primarily on making investments in companies
with producing and/or tangible assets such as resources and
reserves that have been verified under internationally recognised
standards for reporting, such as those of the Australasian Joint
Ore Reserves Committee ("JORC"). The Company may also invest from
time to time in exploration companies whose activities are
speculative by nature.
The Company has flexibility to invest in a wide range of
investments in addition to unlisted and listed equities and
equity-related securities, including but not limited to
commodities, convertible bonds, debt securities, royalties,
options, warrants and futures. Derivatives may be used for
efficient portfolio management, hedging and for the purposes of
obtaining investment exposure. The Company may also have exposure
from time to time to other companies within the wider resources and
materials sector, including services companies, transport and
infrastructure companies, utilities and downstream processing
companies.
The Company may take legal or management control of a company
from time to time. The Company may invest in other investment funds
or vehicles, including any managed by the Manager or Investment
Manager, where such investment would be complementary to the
Company's investment objective and policy.
There are no fixed limits on the allocation between unlisted and
listed equities or equity-related securities and cash although, as
a guideline, typically the Investment Manager will aim for the
Company to be invested over the long-term as follows:
-- between 40 and 100 per cent of the value of its gross assets
in unlisted equities or equity-related securities;
-- up to 50 per cent of the value of its gross assets in listed
equities or equity-related securities;
-- up to 10 per cent of the value of its gross assets in cash or cash-like holdings; and
-- typically in 10 to 15 core positions to provide adequate
diversification whilst retaining a focused core approach. Core
positions will typically be between 5 per cent and 15 per cent of
net asset value ("NAV") as at the date of acquisition.
The actual percentage of the Company's gross assets invested in
listed and unlisted equities and equity-related securities and cash
and cash-like holdings and the number of positions held may fall
outside these ranges from time to time. For example, listed
securities might exceed the above guideline following a significant
number of IPOs or in certain market conditions and likewise cash
balances may exceed the above guideline following the realisation
of one or more investments or following the issue of new equity in
the Company, pending investment of the proceeds.
The investment policy has the following limits:
-- Save in respect of cash and cash-like holdings awaiting
investment, the Company will invest or lend no more than 20 per
cent in aggregate of the value of its gross assets in or to any one
particular company or group of companies, as at the date of the
relevant transaction.
-- No more than 10 per cent in aggregate of the value of the
gross assets of the Company may be invested in other listed
closed-ended investment funds, except for those which themselves
have stated investment strategies to invest no more than 15 per
cent of their gross assets in other listed closed-ended investment
funds.
Where derivatives are used for investment exposure, these limits
will be applied in respect of the investment exposures so
obtained.
The Company will avoid (a) cross-financing between the
businesses forming part of its investment portfolio and (b) the
operation of common treasury functions between it and the investee
companies.
When deemed appropriate, the Company may borrow up to 10 per
cent of NAV for temporary purposes such as settlement mis-matches.
Borrowings will not however be incurred for the purposes of any
Share repurchases.
The Investment Manager will not normally hedge the exposure of
the Company to currency fluctuations.
Any material change in the investment objective, investment
policy or borrowing policy will only be made with the prior
approval of holders of Ordinary Shares by Ordinary Resolution.
CHAIRMAN'S STATEMENT
The bear market in the mining sector of the past few years
continued during 2014, as illustrated by the Euromoney Global
Mining 100 Index which fell 57.1% in Sterling terms during the four
year period to 31 December 2014. The Company's investments were
inevitably affected by this market background, and the Company has
continued its policy of reviewing the valuation of its unlisted
investments in relation to market movements at the half year and
full year stages. As a result the Company's Net Asset Value per
Ordinary Share ("NAV") fell 27.6% during the year.
The hardest hit sector was iron ore shares which fell sharply in
response to an almost halving of the iron ore price during the
year. The Company therefore marked down the value of its interests
in Ferrous Resources and Ironstone Resources to reflect the falls
of comparable iron ore companies. Although Black Pearl is also
involved in producing iron ore it has maintained its value as the
Company holds convertible debt rather than plain equity. Going
forward, the Investment Manager where possible will seek to make
new investments through structured instruments such as convertible
debt which give a measure of downside protection whilst maintaining
the equity exposure.
After the year end the Company successfully acquired a portfolio
of assets which were approximately 90% common to the investments in
the existing portfolio. This acquisition has not only increased the
Company's interests in the majority of its investments at an
attractive point in the mining cycle but should also increase the
Company's influence over the management of the investee companies.
The Investment Manager has identified further stakes in investments
valued at approximately GBP60 million in which the Company already
has an interest which might also be acquired in return for the
issue of equity in the Company. One of the Board's aims in
increasing the Company's net assets is to widen the universe of
potential investors, thereby increasing the liquidity of the shares
and potentially reducing the discount at which the shares might
trade relative to net asset value.
The Board has also decided to introduce a discount management
mechanism. From August 2015, the Company will set aside at least
50% of the aggregate net cash proceeds of realisations over the
immediately preceding six month period and utilise this cash to buy
back shares if they are trading at a discount in excess of 15 per
cent. to NAV. In addition the Board intends to allocate 15 per
cent. of the aggregate net realised cash gains achieved in the year
for distribution to shareholders, which may be done through share
buybacks, tender offers or dividend payments. This returns policy
will commence following completion of the audit of the current
financial year.
I would again like to thank all our shareholders for their
continuing support of the Company, in particular those that
subscribed during the recent Open Offer. The mining industry is
particularly cyclical in its nature and the current downturn has
been as long and as severe as any in recent history. Having
experienced several such downturns, the Investment Manager is
confident that the market is now close to or at the bottom of the
current cycle.
Howard Myles
Chairman
13 April 2015
INVESTMENT MANAGER'S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2014
Financial Performance
The audited undiluted Net Asset Value per Ordinary Share as at
31 December 2014 was 44.9 pence, a decrease of 27.6% in the year
and a decrease of 54.1% from the Company's first net asset value
("NAV") calculated on 30 April 2010. During the year the Euromoney
Global Mining 100 Index was down 15.4% (down 47.6% since 30 April
2010).
For the purpose of calculating the net asset value per share,
unquoted investments are carried at fair value as at 31 December
2014 as determined by the Directors and quoted investments are
carried at last quoted price as at 31 December 2014.
Net assets at 31 December 2014 comprised the following:
GBPm % net assets
Unquoted Investments 24.7 76.6
Quoted Investments 7.7 24.0
Net Cash Equivalents and
Accruals (0.2) (0.6)
------ -------------
32.2 100.0
Investment Update
Largest 10 Investments - 31 December 2014
Black Pearl Limited Partnership* 20.1%
Polar Silver Resources Limited/Argentum 17.2%
Bilboes Gold Limited 14.5%
Ivanhoe Mines Limited 10.1%
Gobi Coal and Energy Limited 8.5%
Metals Exploration Plc 8.1%
Global Oil Shale Group Limited 6.6%
China Polymetallic Mining Company Limited 5.0%
Ironstone Resources Limited 4.7%
Ferrous Resources Limited 3.0%
Other Investments 2.8%
Net Cash, Equivalents and Accruals (0.6%)
Largest 10 Investments - 31 December 2013
Ivanhoe Mines Limited 18.9%
Black Pearl Limited Partnership 13.3%
Ironstone Resources Limited 12.6%
Gobi Coal & Energy Limited 12.5%
Bilboes Gold Limited 10.1%
Polar Silver Resources Limited/Argentum 8.7%
China Polymetallic Mining Company Limited 7.1%
Ferrous Resources Limited 6.3%
Metals Exploration plc 5.9%
South American Ferro Metals Limited 1.5%
Other Investments 2.3%
Net Cash, Equivalents and Accruals 0.8%
* less than 20% of the value of gross assets at the date of the
last relevant acquisition
Investment Update
At the year end, the Company was fully invested, holding 16
investments of which the top 10 holdings comprised 97.7% of the
portfolio by value. The portfolio is well diversified both in terms
of commodity and geographical location of deposits. In terms of
commodity the portfolio is focussed on the large liquid markets of
iron ore, coal, copper, platinum group metals, nickel, silver, gold
and oil. Its projects are located in Australia, Brazil, Canada,
China, Democratic Republic of Congo, Indonesia, Mongolia, Morocco,
the Philippines, Russia, South Africa and Zimbabwe.
The bear market in the mining sector continued during 2014 with
the Euromoney Global Mining 100 Index falling 15.4% in Sterling
terms and the FTSE Gold Mines Index falling 9.84% in Sterling
terms. The Company's valuation policy for its unlisted investments
takes into account the general market movements in comparable
listed mining shares and the Net Asset Value fell 27.6% during the
year largely as a result. The value of iron ore stocks was hit
particularly hard following a sharp fall in the iron ore price
during the year and as a consequence, Ferrous Resources and
Ironstone Resources were marked down 63% and 73% respectively.
During the year, the Company made its first investment in the
energy part of the mining sector through the acquisition of an
interest in Global Oil Shale Group plc ("GOS"), a private oil shale
explorer and developer whose key assets are the Julia Creek oil
shale project in Queensland Australia and the Tarfaya project in
Morocco. Oil shale is a fine-grained sedimentary rock containing
organic matter that yields substantial amounts of oil and
combustible gas upon destructive distillation. There is an
important distinction between the type of projects that GOS has
targeted and the hydraulic fracturing or "fracking", which has
received so much publicity in recent years. Fracking is the process
of drilling and injecting fluid into the ground at a high pressure
in order to fracture shale rocks to release natural gas inside. The
projects that GOS is seeking to develop are close to surface and
are amenable to large scale strip mining methods. The mined shale
is processed to release oil. One of the advantages of the process
that GOS aims to use is that around half of the revenue generated
will be from selling electricity to the local grid. Given that
electricity prices tend to be much less volatile, the revenue
stream will be less exposed to the major movements in the oil price
as seen recently.
Despite the weak backdrop, the majority of the Company's
investments made good operational progress on their projects
although those at an earlier stage of development struggled to
source funding to move their projects forward as fast as they would
have liked. Black Pearl successfully completed the development of
the first phase of its beach placer iron sands project in West
Java, Indonesia but was then delayed by a new requirement for a
permit to export its concentrate product. This permit was received
in December 2014 and the first shipment was despatched that month.
Despite the weakness of the iron ore price during the year, the
Black Pearl project is expected to be one of the lowest cost
operations in the world and its management estimates that it will
be able to operate at around a 50% net margin even at current
prices.
Metals Exploration plc is another investment that made good
progress during the year. Construction of the 100,000 ounce per
year Runruno gold mine has suffered a few months' delay but
importantly the development remains within budget, is fully
financed into production and is on course for commissioning and
first gold production in the middle of 2015. This will mean that 6
of the top 12 investments in the portfolio will soon be in
production and producing cash flow, which is particularly important
for them to sustain activity during a downturn such as the one
experienced recently.
Ivanhoe Mines Limited ("Ivanhoe") continued to move forward
strongly on all three of its main projects during 2014. At its
Platreef project in South Africa it completed a positive
pre-feasibility study into the mine with a first phase of
development envisaging an annual production rate of 433,000 ounces
of platinum, palladium, rhodium and gold, plus 31 million pounds of
nickel and copper. Importantly, Ivanhoe also gained government
approval for its broad based black economic empowerment plan and
received the mining right to put the mine into production. In the
Democratic Republic of Congo, Ivanhoe commenced construction on the
box cut for the initial portal to planned decline ramps. This will
provide underground access to the proposed Kamoa copper mine having
identified a high grade area to give a boost to the first phase of
production. It also commenced definition drilling of its Kipushi
copper-zinc-germanium-lead mine and reported some exceptional
drilling results.
The recent devaluation of many producer currencies against the
US Dollar together with the fall in the oil price has had the
effect of widening margins for operations in those countries. For
example the approximate 60% fall in the Russian Ruble against the
US Dollar and the almost halving of the oil price would be expected
to lead to a significant reduction in costs for Polar Silver's 50%
owned Prognoz project.
In February 2015, the Company completed the acquisition of a
portfolio of assets of which 90% was in investments in which the
Company already had an interest. The two largest investments which
were not common to the existing portfolio were Red 5 Limited, an
Australian Stock Exchange listed gold producer and MagIndustries
Corporation, a Toronto Stock Exchange listed potash development
company.
Further details of each of these investments and the Company's
other significant holdings are provided below.
Description of Largest Investments at 31 December 2014
(representing 97.7% by value of the portfolio)
Black Pearl Limited Partnership ("Black Pearl")
Black Pearl is a special purpose vehicle formed to invest in the
Black Pearl beach placer iron sands project in West Java,
Indonesia. The Company's investment is in the form of a limited
partnership interest in Black Pearl. Black Pearl holds an
exchangeable loan note issued by a holding company of the mine
group, Rui Tong Limited. The loan note is due for repayment in
March 2015 and is expected to be received during the two month
moratorium period thereafter.
The Black Pearl concession area is 15,000 ha of which 1,600 ha
has been drilled. JORC compliant Mineral Resources stand at 572
million tonnes grading 10% Fe. Black Pearl received the export
permit required following changes to the Indonesian mining
regulations at the beginning of December 2014 and made its first
shipment of concentrate later that month. Off-take agreements have
been signed with a number of Chinese steel mills for the full
planned production of 20 million tonnes per annum.
Polar Silver Resources Limited ("Polar Silver")
Polar Silver is a private company which holds a 50% indirect
interest in the Prognoz silver project ("Prognoz"), 444km north of
Yakutsk in Russia. The Company's investments are in the form of
shares in Polar Silver and loan notes in Polar Silver and its 100%
owned subsidiary, Argentum, both of which are convertible into
Polar Silver Shares.
A NI 43-101 compliant report by independent consultant Micon
International Limited ("Micon") in July 2009, estimated an
Indicated Resource of 5.86 million tonnes of ore grading 773 g/t
silver containing 146 million ounces of silver and Inferred
Resources of 9.64 million tonnes of ore grading 473 g/t silver
containing 147 million ounces of silver at Prognoz. A NI 43-101
compliant preliminary economic assessment (PEA) by Micon envisages
a mine producing an average of 13 million ounces of silver per
annum.
Bilboes Gold Limited ("Bilboes")
Bilboes is a private Zimbabwean based gold mining company which
owns four previously producing oxide mines in Zimbabwe. The oxide
mines which were restarted in 2013 produced 7,800 ounces of gold in
2014, and are scheduled to produce approximately 10,000 ounces of
gold in 2015.
In addition Bilboes has JORC compliant Indicated Mineral
Resources of 29.3 million tonnes grading 2.12 g/t gold in the
underlying sulphide mineralisation and an Inferred Mineral
Resources of 30.0 million tonnes grading 2.03 g/t gold. Contained
gold in the combined Indicated and Inferred sulphide resources
totals 3,964,000 ounces. The mineralisation is open along strike
and at depth so there is good potential for these mineral resources
to be increased. A pre-feasibility study is underway to investigate
a mine producing 100,000 to 200,000 ounces per annum, initially
from open pit.
Ivanhoe Mines Limited (formerly Ivanplats Limited) ("Ivanhoe"
)
Ivanhoe is a company listed on the Toronto Stock Exchange which
holds the Kamoa copper project (95% owned) and Kipushi zinc mine
(68% owned) both in the Democratic Republic of Congo ("DRC") and
the Platreef nickel, platinum, palladium, copper and gold project
(64% owned) in South Africa.
The Kamoa Project is located in the Kolwezi District of Katanga
Province, the DRC's copper mining hub. An NI 43-101 compliant
report, using a 1% copper grade cut-off, estimated Indicated
Mineral Resources at 739 million tonnes grading 2.67% copper
containing 19.7 million tonnes of copper. The resource statement
also included 4.4 million tonnes of copper in Inferred Mineral
Resources providing combined contained copper of 24.1 million
tonnes, establishing Kamoa as the largest high-grade copper
discovery in Africa and one of the largest in the world.
The Platreef Project is located on the Northern Limb of the
PGM-bearing Bushveld Complex in South Africa. A revised NI 43-101
compliant report was published in March 2013. Indicated Mineral
Resources were estimated at 214 million tonnes grading 4.1 grams
per tonne (g/t) 4PE (platinum, palladium, gold and rhodium), 0.34%
nickel and 0.17% copper, at a 2.0 g/t 4PE cut-off grade and at a
cumulative, average true thickness of 24 metres. In addition, the
estimate included Inferred Mineral Resources of 415 million tonnes
grading 3.5 g/t 4PE, 0.33% nickel and 0.16% copper, at an average
true thickness of 18.0 metres. The combined Indicated and Inferred
Resources amount to 75.7 million ounces of 4PE. The Mining Right
was issued in November 2014. The results of a positive
pre-feasibility study were published on 8 January 2015 which
envisaged a first phase development to produce 433,000 ounces 4PE
plus 31 million pounds of nickel and copper per annum.
The Kipushi zinc/polymetallic mine in the DRC previously
produced 60 million tonnes of ore at 11% zinc and 6% copper
together with 120 tonnes of germanium from 1925-1993. Ivanhoe
dewatered the existing shaft and is undertaking a drilling
programme to extend the known mineralisation and define the mineral
resources to NI 43-101 standards.
Gobi Coal & Energy Limited ("Gobi")
Gobi is an emerging coking coal producer based in Mongolia,
which owns 100% of three open-cut coal development projects in
south western Mongolia. Gobi's projects contain approximately 322
million tonnes of JORC resources and include more than 500,000
hectares of tenements.
Gobi's first project, Shinejinst, contains approximately 95
million tonnes of JORC reserves and 229 million tonnes of JORC
resources and has completed site works in anticipation of the start
of production which will depend on a recovery of the price of
coking coal delivered to the Mongolian/Chinese border. At full
production, Shinejinst is planned to produce approximately 5
million tonnes per annum of high quality, semi-soft coking coal
product.
Metals Exploration plc ("Metals Exploration")
Metals Exploration is an AIM listed company which owns the
Runruno gold project in the Philippines. A JORC compliant report
estimated mineral resources of 1.39 million ounces of gold, and
25.6 million pounds of molybdenum with 1,050,000 ounces of gold
reporting to the Measured and Indicated categories of which 900,000
ounces of gold fall within the Mining Proven & Probable Reserve
category. Development of the Runruno mine commenced mid-2013 and
once in full production is scheduled to produce approximately
100,000 ounces of gold per annum. The project is fully financed
with commissioning and first production scheduled for mid 2015.
Global Oil Shale Group plc ("GOS")
GOS is a private oil shale explorer and developer whose key
assets are the Julia Creek oil shale project in Queensland
Australia which has a JORC Compliant Indicated Resource of 240
million barrels published in May 2013 and an Inferred Resource of
1.9 billion barrels of shale oil and the Tarfaya project in Morocco
containing JORC compliant Measured resources of 308 million barrels
of shale oil (November 2014). GOS has undertaken a preliminary
economic assessment on Tarfaya for a first phase development
producing 4,100 barrels of oil equivalent per day rising to 26,500
barrels of oil equivalent per day.
China Polymetallic Mining Limited ("CPM")
CPM is an emerging Chinese mining company listed on the Hong
Kong Stock Exchange. The Company's investment is via a special
purpose vehicle F.S.B.S. Limited Partnership. CPM has a number of
development projects in Yunan province of China, the first of
these, the Shizishan lead-zinc-silver mine started production in
2011 and reached its full production rate of 2,000 tonnes per day
in December 2012. The Shizishan Mine has JORC compliant resources
totalling 8.2 million tonnes grading 256g/t silver, 9.4% lead and
6.0% zinc for contained metal of 73 million ounces silver, 814,000
tonnes lead and 512,000 tonnes zinc.
In 2014 it produced 564,000 ounces of silver, 8,541 tonnes lead
and 7,170 tonnes zinc in concentrate. CPM's second project, the
Dakuangshan silver lead-zinc mine, started commercial production in
December 2012 and produced 34,000 ounces of silver, 694 tonnes lead
and 1,421 tonnes zinc in concentrate in 2014.
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 Indicated Resources of 557.7Mt at 33.3%
iron and 0.2% vanadium and an Inferred Resource of 94.7Mt at 34.1%
iron.
In conjunction with pyrotechnology experts Hatch of Toronto,
Ironstone is developing a proprietary metallurgical process to
refine the ore into direct reduced iron. Once demonstrated
commercially, this process could be applied not only to Clear
Hills, but also to other significant iron ore deposits
globally.
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 JORC resources of 5 billion tonnes of iron
ore.
During 2014, Ferrous' Viga Mine produced 3.8 million tonnes and
the Esperança Mine produced 1.8 million tonnes to give a total 5.6
million tonnes of iron ore product for the year, an 8% increase
from 2013. In June 2013 Ferrous completed a positive feasibility to
expand the production at Viga to 15 million tonnes per annum, for
which it has already received the requisite development
permits.
REMUNERATION DETAILS FOR INVESTMENT MANAGER'S STAFF
Pursuant to the FCA's Finalised Guidance on AIFMD reporting
requirements, as Baker Steel Capital Managers LLP has not yet been
authorised as an AIFM for a full performance period, AIFM
remuneration disclosures are not included in this report as the
available partial-year information would not be representative.
Baker Steel Capital Managers LLP will disclose AIFM remuneration
data in line with AIFMD requirements, including ESMA guidance, for
the first full performance year available, which will be the year
ending 31 December 2015.
DIRECTOR'S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2014
The Directors of the Company present their fifth annual report
and the audited financial statements for the year ended 31 December
2014.
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 ("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 on pages 3 and
4.
From 22 July 2014, Baker Steel Capital Managers LLP (the
"Investment Manager") is authorised to act as an Alternative
Investment Fund Manager ("AIFM") of Alternative Investment Funds
("AIFs"). On 14 November 2014, the Investment Manager signed an
amended Investment Manager agreement with the Company, to take into
account AIFMD regulations. AIFMD focuses on regulating the AIFM
rather than the AIFs themselves, so the impact on the Company is
limited.
Portfolio analysis
A detailed analysis of the Portfolio has been provided on pages
22 and 23.
The Investment Manager's report on pages 6 to 9 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.
Performance
In the year to 31 December 2014, the Company's undiluted NAV per
Ordinary Share decreased by 27.6% (2013: decrease of 43.2%). This
compares with a fall in the Euromoney Global Mining 100 Index
(capital return in Sterling terms) of 15.4% (2013: fall of
25.7%).
Results and dividends
The results for the year are shown in the Statement of
Comprehensive Income on page 28 and 29 and the Company's financial
position at the end of the year is shown in the Statement of
Financial Position on page 27.
Dividend policy
It is not envisaged that any income or gains will be distributed
by the Company by way of dividend in respect of the year ended 31
December 2014. Commencing with the year to 31 December 2015, the
Board intends to allocate no less than 15% of the aggregate net
realised cash gains achieved during the year for distribution to
shareholders. The Board will retain discretion for determining the
most appropriate manner to make such distribution which may include
share buybacks, tender offers and dividend payments. 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.
Subsequent Events
On 25 February 2015, the Company issued 3,368,488 New Ordinary
Shares at a price of 36.2p per share pursuant to valid applications
under an Open Offer to shareholders.
On 25 February 2015, the Company issued a total of 38,819,601
New Ordinary Shares in respect of the acquisition of assets as
outlined in a Circular to Shareholders and Prospectus both dated 26
January 2015. This issue comprised 30,468,522 New Ordinary Shares
issued at 42.6p per New Ordinary Share as consideration for the
acquisition of unlisted investments and 8,351,079 New Ordinary
Shares issued at 36.2p per New Ordinary Share as consideration for
the acquisition of listed investments.
Following the year end, Black Pearl Limited Partnership agreed
an extension to its loan note to Rui Tong Limited from 25 November
2014 to 25 March 2015 and repayment is expected to be received
during the two month moratorium period thereafter. As compensation
for this extension, the interest rate on the loan increased
retrospectively from 20% to 25%. This will increase interest
receivable by the Company at 25 March 2015 by approximately
US$854,499 (GBP548,283).
Directors
The Directors of the Company who served during the year and
subsequently to the date of this report were:
Howard Myles (Chairman)
Edward Flood
Charles Hansard
Clive Newall
Christopher Sherwell
Attendance at the Board and Audit Committee meetings during the
year was as follows;
Audit Committee Ad hoc Committee
Board Meetings Meetings Meetings
He Held Attended Held Attended Held Attended
Howard Myles 4 4 4 4 6 5
Christopher
Sherwell 4 4 4 4 6 5
Charles Hansard 4 4 N/A N/A 6 4
Clive Newall 4 4 4 2 6 4
Edward Flood 4 2 N/A N/A 6 4
In addition to formal meetings, all Directors contribute to a
significant ad hoc exchange of views between the Directors and the
Investment Manager on specific matters, in particular in relation
to developments in the portfolio.
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).
For the year ended 31 December 2014 the total remuneration of
the Directors was GBP140,000 (2013: GBP140,000), with GBP35,712
(2013: GBP36,000) payable at year end.
The Directors' interests in the share capital of the Company
were:
Number of Number of
Ordinary Shares Ordinary Shares
2014 2013
Edward Flood 65,000 65,000
Christopher Sherwell 25,000 25,000
Clive Newall 25,000 25,000
Mr Sherwell also had an indirect interest in the shares of the
Company through an investment in another Fund which is also managed
by the Manager.
During February 2015, these shares were compulsorily redeemed
and Mr. Sherwell was issued with 71,821 additional shares as part
of the acquisition of assets referred to in Note 13 on page 50
(Subsequent Events).
Significant Shareholdings
The significant shareholdings in the Company at 31 December 2014
were:
Number of % of Total
Ordinary Shareholder Ordinary Shares Shares in issue
Harewood Nominees Limited* 14,171,300 20.48
The Bank of New York (Nominees) Limited* 11,902,725 17.20
State Street Nominees Limited* 8,944,777 12.93
Nortrust Nominees Limited* 7,808,210 11.29
HSBC GC* 6,593,409 9.53
* Custodian accounts held on behalf of individual shareholders.
These holdings are aggregated.
CF Ruffer Baker Steel Gold Fund ("CFRBSGF") had an interest in
6,080,000 Ordinary Shares in the Company at 31 December 2014. These
shares are held in a custodian account with The Bank of New York
(Nominees) Limited. CFRBSGF shares a common Investment Manager with
the Company.
Genus Dynamic Gold Fund ("GDG") had an interest in 3,000,000
Ordinary Shares in the Company at 31 December 2014. These shares
are held in a custodian account with HSBC GC. GDG shares a common
Manager and Investment Manager with the Company.
Genus Natural Resources Master Fund ("GNRMF") had an interest in
1,727,308 Ordinary Shares in the Company at 31 December 2014. These
shares are held in a custodian account with HSBC GC. GNRMF shares a
common Manager and Investment Manager with the Company.
The Manager, Baker Steel Capital Managers (Cayman) Limited, had
a direct interest in 504,832 Ordinary Shares. The Investment
Manager, Baker Steel Capital Managers LLP had an interest in 10,000
Management Ordinary Shares at 31 December 2014, and an indirect
interest in 150,000 Ordinary Shares at 31 December 2014 through its
wholly owned subsidiary Ironman Investment Company Limited.
Authorised Share Capital
The share capital of the Company on incorporation was
represented by an unlimited number of Ordinary Shares of no par
value. The Company may issue an unlimited number of shares of a
nominal or par value and/or of no par value or a combination of
both.
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 in specie transactions on 28 June 2014 and 1 July
2014, a total of 5,561,243 Ordinary Shares were issued and as a
result, the Company had a total of 71,703,776 Ordinary and 10,000
Management Shares in issue as at 31 December 2014. Of the 5,561,243
Ordinary Shares issued in 2014, 2,259,357 were issued to acquire
US$2.5 million nominal amount of convertible loans in ZAO Argentum,
the wholly owned subsidiary of Polar Silver Resources Limited and
500 shares in Polar Silver Resources Limited for a total
consideration of GBP1.32 million, and 3,301,886 to acquire
5,000,000 Ordinary Shares of Global Oil Shale for a consideration
of GBP1.75 million.
Following the exercise of Subscription Shares at the end of
September 2010, March 2011, March 2012, June 2012 and September
2012, a total of 119,444 Ordinary Shares were issued and as a
result, the Company had a total of 66,142,533 Ordinary and 10,000
Management Shares in issue as at 31 December 2013.
The final exercise date for the Subscription Shares was 2 April
2013. No Subscription Shares were exercised at this time and all
residual Subscription Shares were subsequently cancelled.
Going Concern
The Directors have made an assessment of the Company's ability
to continue as a going concern and are satisfied that it has the
resources to continue in business for the foreseeable future.
Although the Company had net current liabilities at 31 December
2014 of GBP180,272 it held listed securities that could be realised
to meet liabilities as they became due; as at 31 December 2014,
approximately 17.2% of the Company's assets were represented by
cash and unrestricted listed and quoted investments. The Directors
are not aware of any material uncertainties that may cast
significant doubt upon the Company's ability to continue as a going
concern. Therefore, the financial statements have been prepared on
a going concern basis.
Corporate Governance Compliance
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
investment company and which enables the Company to comply with the
relevant provisions of the Finance Sector Code of Corporate
Governance issued by the GFSC and the UK Corporate Governance Code
released in September 2012 which became effective 1 January
2013.
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 respective
corporate governance provisions throughout the accounting year,
except where disclosed below.
Details of the Company's corporate governance arrangements may
be found on its website Bakersteelresourcestrust.com. The UK code
can be found at
http://www.frc.org.uk/our-work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-September-2012.pdf.
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 independent non-executive Directors
among whom Howard Myles is the Chairman.
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
All the Directors are 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 are
evaluated through an assessment process led by the Chairman. The
performance of the Chairman is evaluated by the other
Directors.
Audit committee
The Board has established an Audit Committee. The Audit
Committee meets at least three times a year and is responsible for
ensuring that the financial performance of the Company is properly
reported on and monitored and provides a forum through which the
Company's external auditor may report to the Board. The Audit
Committee operates within established terms of reference. These are
available on the Company's website
www.bakersteelresourcestrust.com. The Directors consider there is
no need for an internal audit function because the Company operates
through service providers and the Directors receive control reports
on service providers.
Christopher Sherwell is Chairman of the Audit Committee.
Nomination, Remuneration and Management Engagement
Committees
Given the size and nature of the Company and the fact that all
the Directors are independent and non-executive it is not deemed
necessary to form separate Nomination, Remuneration, and Management
Engagement Committees. The Board, as a whole, will consider new
Board appointments, remuneration and the engagement of service
providers. The Directors recognise the benefits of diversity in
terms of gender and ethnicity and will take these into account when
considering future appointments to the Board. However their
principal criteria will remain skills and experience with the
objective of maximising shareholder value.
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, the Safekeeping and
Monitoring Agent 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, depository 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 Administrator also undertakes an
independent annual review of its internal control functions in
accordance with International Standard on Assurance Engagements
3402, "Assurance Reports on Controls at a Service Organisation",
issued by the International Auditing and Assurance Standards Board.
The Administrator makes this report available to the Board for
review and assessment of the control objectives and activities in
place.
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 year 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 on pages 41 to 45.
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
matters, including performance information and portfolio
valuations, are submitted to the Board at each meeting. Based on
the information provided to it, it is the view of the Board that
the continuation of the appointment of the Investment Manager is in
the best interests of shareholders of the Company.
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 stockbrokers, Numis Securities Limited, and from the
Investment Manager. The Chairman and the Board are also available
to meet with shareholders at the Company's Annual General Meeting
or otherwise.
General Meetings
All general meetings of the Company are held in Guernsey. The
Company holds 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 which has been
delegated day-to-day discretionary management of the Company's
portfolio. An inappropriate strategy may lead to poor performance.
The investment policy of the Company is for a highly focused
portfolio which can lead to a concentration of risk. 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 of the
investment portfolio. The Board mandates and monitors an adequate
diversification of investments, both geographically and sectorally,
in order to reduce 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. Further details are
disclosed in note 5 on pages 41 to 45.
Financial risk
The Company's investment activities expose it to a variety of
financial risks that include market price risk, foreign currency
risk and interest rate risk. Further details are disclosed in note
5 on pages 41 to 45.
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, the
valuation advice related to those assets, dealing procedures,
accounting records and compliance with regulatory and legal
requirements depend on the effective operation of these third party
control systems.
Business/Other risks
The Company invests in companies whose projects are located in
emerging markets. In such countries governments can exercise
substantial influence over the private sector and political risk
can be a significant factor. In adverse social and political
circumstances, governments have been involved in policies of
expropriation, confiscatory taxation, nationalisation, intervention
in the securities markets and imposition of foreign exchange
controls and investment restrictions. The Investment Manager and
the Board take into account specific political risks when entering
into an investment and seek to mitigate them by diversifying
geographically.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the financial
statements in accordance with applicable Guernsey law, Listing
Rules, Disclosures and Transparency Rules, UK Corporate Governance
Code 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 year. In preparing these
consolidated financial statements the Directors should:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable;
- 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") and give a true and fair view of the
assets, liabilities and financial position and profit or loss of
the Company;
- the Annual Report includes 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;
- the Directors confirm that the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Company's performance and strategy; and
- so far as each of the Directors is aware, there is no relevant
audit information of which the Company's auditor is unaware and
each Director has taken all the 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 auditor is aware of
that information.
Retail Distribution of Unregulated Collective Investment
Schemes
The Board of BSRT notes the changes to the FCA rules relating to
the restrictions on the retail distribution of unregulated
collective investment schemes and close substitutes which came into
effect on 1 January 2014. The Company conducts its affairs so that
the shares issued by the Company can be promoted by authorised
persons to ordinary retail investors in accordance with the FCA's
rules in relation to non-mainstream investment products and intends
to continue to do so for the foreseeable future. Following the
receipt of legal advice, the Board confirms that it conducts the
Company's affairs, and intends to continue to conduct the Company's
affairs, such that the Company would qualify for approval as an
investment trust if it were resident and listed in the United
Kingdom.
Signed on behalf of the Board of Directors by:
Howard Myles Christopher Sherwell 13 April 2015
Report of the Audit Committee
For the year ended 31 December 2014
The Audit Committee's main function is to ensure that the
Company maintains high standards of integrity in its financial
reporting and internal controls. The Audit Committee is appointed
by the Board and it meets at least three times a year for the
purposes of audit planning and for consideration of the interim and
final statements. The Audit Committee is chaired by Christopher
Sherwell and it operates within clearly defined terms of reference
which are available on the Company's website. Its other members are
Howard Myles and Clive Newall. Only independent directors can serve
on the Audit Committee and members of the Audit Committee must have
no links with the Company's external auditor and must be
independent of the Investment Manager.
The Board is satisfied that the Audit Committee is properly
constituted with members having recent and relevant financial
experience, and in particular, one member having a background as a
chartered accountant.
Responsibilities
The main duties of the Audit Committee are:
(a) monitoring the integrity of the Company's financial
statements and any other financial information published by the
Company;
(b) reviewing the Company's investments, and in particular, the
valuation of its unquoted investments. The Audit Committee
carefully assesses the recommendations of the Investment Manager in
this respect;
(c) meeting the external auditor to review its proposed audit
programme, reviewing its annual report and discussing any matters
arising from its audit, assessing the effectiveness of the overall
audit process and reviewing the levels of fees paid to the auditor
in respect of its audit and non-audit work;
(d) monitoring the Company's accounting and internal control
systems and making recommendations on any improvement to such
systems; and
(e) monitoring the Company's procedures for ensuring compliance
with statutory, regulatory and other financial reporting
requirements and its relationship with the relevant regulatory
authorities.
The Audit Committee has ample opportunity to meet the external
auditor without the Manager or Investment Manager present. The
Chairman of the Audit Committee has access to the audit partner, if
he requires, at any meeting. After each audit, the Audit Committee
reviews the audit process and considers its effectiveness.
The Audit Committee also provides a forum through which the
Company's auditor reports to the Board. The objectivity and
independence of the auditor are reviewed by the Audit Committee.
The Board approves all non-audit work carried out by the auditor in
advance and the fees paid to the auditor in this respect.
External Audit
The Company's external auditor is Ernst & Young LLP ("EY").
EY has been the Company's auditor since its incorporation in
2010.
The Company's auditor is advised of the timing of Audit
Committee meetings to consider the Company's annual and semi-annual
accounts.
During 2014 the Audit Committee reviewed the services provided
by the auditor, and the related fees, and concluded that it was not
necessary to conduct a competitive tender at that stage. However,
the Audit Committee does keep this matter under consideration and
is cognisant of the Corporate Governance provisions relating to
audit tenure.
The audit fees during the year were GBP42,800 (2013: GBP49,875).
In 2013, there was an additional once-off fee of GBP6,000 for
assistance with the new corporate governance requirements and
GBP5,000 for assistance with the new IFRS 13 requirements.
The fees for non-audit services carried out by the auditor for
the financial year ended 31 December 2014 were GBP34,750 (2013:
GBP7,000). These services consisted of advice to the Board on FATCA
with fees of GBP7,500 (2013: GBPNil) and Agreed Upon Procedures in
relation to the interim financial statements principally comprising
the checking of disclosures in the interim report not subject to
statutory audit with fees of GBP7,250 (2013: GBP7,000). Also in
2014, work began on providing advice and comfort in relation to the
revised prospectus with fees of GBP45,000 (2013: GBPNil), of which
GBP20,000 was accrued at year end*.
* Part of this work was completed in 2015 and will be billed and
paid in 2015.
The external auditor provides a planning report in advance of
the annual audit, a report on the annual audit and a report on
their review of the half year financial statements. The Committee
has an opportunity to question and challenge the auditor in respect
of each of these reports. Based on levels of interaction with the
auditor, and the assessment of auditor reporting the Committee is
satisfied that the reappointment of the external auditor should be
proposed at the Annual General Meeting of the Company.
The Audit Committee confirms that it has reviewed the non-audit
services provided by EY and received confirmation from EY that due
to the type of services provided there was no risk or any threat to
its independence and is satisfied that they do not compromise EY's
independence or objectivity. The Audit Committee is also satisfied
that fees for non-audit services are proportionate in relation to
the fees for audit services. In conclusion, the Audit Committee is
satisfied that EY remains independent. The Audit Committee has
assessed the effectiveness of the external auditors and concluded
that it is appropriate to reappoint EY as external auditors.
Internal Audit
The Audit Committee believes that the Company does not require
an internal audit function because it delegates its day-to-day
functions to third party service providers although the Audit
Committee oversees these operations and receives regular reports in
this respect.
Risk Management and Internal Controls
The Board is responsible for the Company's system of internal
controls and risk management. The Audit Committee has been
delegated the responsibility for reviewing the effectiveness of the
Company's internal controls on an ongoing basis and it discharges
its duties in this area by determining the nature and extent of the
significant risks it is willing to accept in achieving the
Company's objectives and ensuring that effective systems of risk
identification, assessment and mitigation have been
implemented.
The Company delegates its day to day operations to third parties
therefore it relies on the internal control arrangements of its
outsourced service providers in respect of a number of key
controls. It is the Audit Committee's responsibility to ensure that
suitable internal control systems are implemented by the Company's
third party service providers and to review the effectiveness of
these controls on an ongoing basis.
The key risks faced by the Company, and the controls in place to
mitigate such risks, are set out in a Risk Matrix which is
regularly reviewed by the Board. The Risk Matrix identifies the
likelihood and severity of the impact of each identified risk
factor and the mitigating controls in place to minimise the
probability of such risks occurring.
The Audit Committee considers that valuation of the Company's
unquoted investments at fair value through profit or loss is a key
risk, in the context of the judgements necessary to determine the
fair values of these holdings as there is no observable market
price.
By their nature, the control mechanisms can only provide
reasonable rather than absolute assurance against misstatement or
loss. The Board seeks continual improvement of its internal
controls mechanisms. The Audit Committee is not aware of any
significant failings or weaknesses in the Company's internal
controls in the year under review.
Financial Reporting
The primary role of the Audit Committee in relation to financial
reporting is to review the annual accounts with the Administrator
and the Investment Manager and assess their appropriateness. It
focuses in this respect, amongst other matters, on:
-- the clarity of the disclosures in the financial reporting and
compliance with statutory, regulatory and other financial reporting
requirements;
-- the quality and acceptability of accounting policies and practices;
-- material areas where significant judgements have been applied
or where there has been discussion with the auditor; and
-- taken as a whole, whether the financial statements are fair,
balanced and understandable and provide shareholders with the
necessary information to assess the Company's performance and
strategy although the Board retains overall responsibility in this
respect.
Primary Areas of Judgement
As part of its review, the Audit Committee takes account of the
most significant issues and risks, both operational and financial,
likely to impact on the Company's financial statements and the
mitigating controls to address these risks. The Audit Committee has
determined that the key risk of misstatement of the Company's
financial statements is valuation of investments for which there is
no readily observable market price. Such investments are recorded
at fair value which is the price that would be expected to be
received to sell an asset in an orderly transaction between market
participants at the measurement date. Significant judgements are
required in respect of the valuation of the Company's investments
for which there is no observable market price. The Company bases
most of its valuations on the most recent observable transactions
for each investment and other comparable companies and adjusts
these for changes in company specific performance and comparable
company performance for which there is observable data. This
performance information, by its nature, takes into account market
expectations of future commodity prices. Further information on the
Company's methodologies is provided in Note 3 to the financial
statements.
The risk is mitigated through the review by the Board of
detailed reports prepared by the Investment Manager on portfolio
valuation including valuation methodology, the underlying
assumptions and the valuation process.
The Investment Manager also provides information to the Board on
relevant market indices, recent transactions in similar assets and
other relevant information to allow an assessment of appropriate
carrying value having regard to the relevant factors.
The responsibility for ensuring that investments are carried at
fair value lies with the Board.
Going Concern
The Audit Committee has made an assessment of the Company's
ability to continue as a going concern. Particular regard has been
given to the factors described below:
-- The Company holds listed securities that can if necessary be
realised to meet liabilities as they become due; as at 31 December
2014, approximately 17.2% of the Company's assets were represented
by cash and unrestricted listed and quoted investments.
On the basis of its review, the Audit Committee is satisfied
that the Company has the resources to continue in business for the
foreseeable future and it is not aware of any material
uncertainties that may cast significant doubt upon the Company's
ability to continue as a going concern. The Audit Committee is of
the opinion that the financial statements should be prepared on a
going concern basis and has accordingly recommended its opinion to
the Board.
Christopher Sherwell
Audit Committee Chairman
BOARD OF DIRECTORS
Howard Myles (aged 65): 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 stockbroking 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 69): From March 2007 to December 2009,
Edward Flood acted as Managing Director of Investment Banking at
Haywood Securities (UK) Limited. He currently serves as Co-Chairman
of Western Lithium USA Corp. 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.
In the 1980's at Nerco Minerals he was a member 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. He was then a founder and President of
Turquoise Hill Resources Limited (formerly Ivanhoe Mines) from 1994
to 1999 when he joined Haywood Securities in Vancouver as a senior
mining analyst. He returned to Ivanhoe in 2001 where he served as
Deputy Chairman until 2007 but remained on the Ivanhoe board until
2012 when Rio Tinto assumed control of the company. Edward holds a
Masters' of Science (Geology) degree from the University of Montana
and is a member of the Geological Society of London and the Society
of Economic Geologists.
Charles Hansard (aged 67): 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 65): 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. He is the founder of
First Quantum Minerals Ltd and has been its President and a
director since its incorporation.
Christopher Sherwell (aged 67): Christopher Sherwell has worked
since 2004 as a senior Non-Executive Director based in Guernsey
with roles in the offshore finance industry and is a director of a
number of listed investment companies. 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 the 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
AS AT 31 DECEMBER 2014
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
Listed equity shares
Australian Dollars
20,560,122 South American Ferro Metals Limited 97,181 0.30
Australian Dollars Total 97,181 0.30
--------------- ---------
Canadian Dollars
1,931,667 Aquila Resources Inc 107,024 0.33
676,667 BacTech Environmental Corporation 9,373 0.03
1,100,000 Buffalo Coal Corporation 45,709 0.14
4,306,502 Ivanhoe Mines Limited (restricted)* 2,287,704 7.11
1,654,995 Ivanhoe Mines Limited 935,285 2.91
Canadian Dollars Total 3,385,095 10.52
--------------- ---------
Great Britain Pounds
48,202,024 Metals Exploration Plc 2,590,859 8.06
Great Britain Pounds Total 2,590,859 8.06
--------------- ---------
United States Dollars
6,576,192 China Polymetallic Mining Company Limited* 1,622,697 5.04
United States Dollars Total 1,622,697 5.04
--------------- ---------
Listed warrants
Canadian Dollars
660,000 Ivanhoe Mines Limited Warrants 10/12/2015 25,597 0.08
Canadian Dollars Total 25,597 0.08
--------------- ---------
Total investment in listed equity shares
and warrants 7,721,429 24.00
--------------- ---------
Convertible debt instruments
Canadian Dollars
Ironstone Resources Limited Convertible
250,500 Note 138,789 0.43
Aquila Resources Unsecured Convertible
150,000 Debenture 83,107 0.26
Canadian Dollars Total 221,896 0.69
--------------- ---------
United States Dollars
7,600,000 Argentum Convertible Note 4,876,484 15.16
440,000 Bilboes Holdings Convertible Loan Note 282,323 0.88
7,000,000 Black Pearl Limited Partnership 6,469,037 20.11
1,010,000 Polar Silver Convertible Notes 648,059 2.01
United States Dollars Total 12,275,903 38.16
--------------- ---------
Total investments in Convertible debt instruments 12,497,799 38.85
--------------- ---------
*Classified as Level 2 (Refer Note 3)
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
Unlisted equity shares and warrants
Canadian Dollars
10,250,000 Aquila Resources Inc Warrants 17/06/2015 - -
2,400,000 Aquila Resources Inc Warrants 11/10/2016 - -
6,282,341 Ironstone Resources Limited 1,357,479 4.22
38,400 Ironstone Resources Limited Warrants 09/01/2016 3 -
143,143 Ironstone Resources Limited Warrants 22/02/2018 277 -
Canadian Dollars Total 1,357,759 4.22
--------------- ---------
Great Britain Pounds
1,594,646 Celadon Mining Limited 143,518 0.45
5,285,715 Global Oil Shale Group Limited 2,114,286 6.57
Great Britain Pounds Total 2,257,804 7.02
--------------- ---------
United States Dollars
3,034,734 Archipelago Metals Limited 438,123 1.36
451,445 Bilboes Gold Limited 4,397,135 13.67
5,713,642 Ferrous Resources Limited 953,190 2.96
4,244,550 Gobi Coal and Energy Limited 2,723,484 8.47
1,722 Polar Silver Resources Limited 1,105 0.01
--------------- ---------
United States Dollars Total 8,513,037 26.47
--------------- ---------
Total unlisted equity shares and warrants 12,128,600 37.71
--------------- ---------
Financial assets held at fair value through
profit or loss 32,347,828 100.56
--------------- ---------
Other assets & liabilities (181,272) (0.56)
--------------- ---------
Total equity 32,166,556 100.00
--------------- ---------
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF BAKER STEEL
RESOURCES TRUST LIMITED
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 2014 and of its loss for the year then ended;
have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European Union
("IFRS"); and
have been prepared in accordance with the requirements of the
Companies (Guernsey) Law, 2008 ("the Companies Law").
What we have audited
We have audited the financial statements of Baker Steel
Resources Trust Limited for the year ended 31 December 2014 which
comprise the Statement of Financial Position, Statement of
Comprehensive Income, Statement of Changes in Equity, Statement of
Cash Flows and related notes 1 to 14. The financial reporting
framework that has been applied in their preparation is applicable
law and IFRS.
This report is made solely to the company's members, as a body,
in accordance with Section 262 of the Companies Law. Our audit work
has been undertaken so that we might state to the company's members
those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the company and the company's members as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditor
As explained more fully in the Statement of Directors'
Responsibilities set out on page 17, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board's Ethical Standards for
Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of whether the accounting policies are
appropriate to the Company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the Directors; and the
overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the Annual
Report to identify material inconsistencies with the audited
financial statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Our assessment of risks of material misstatement
We identified the following risk that we believed would have the
greatest effect on the overall audit strategy, the allocation of
resources and directing the efforts of the engagement team:
valuation of the Company's unlisted investments, because
valuations of level 3 investments require significant judgement and
estimation.
Our application of materiality
We determined planning materiality for the Company to be GBP643k
(2013: GBP820k), which is approximately 2 per cent of equity. This
provided a basis for determining the nature, timing and extent of
risk assessment procedures, identifying and assessing the risk of
material misstatement and determining the nature, timing and extent
of further audit procedures. We used equity as a basis for
determining planning materiality because the Company's primary
performance measures for internal and external reporting are based
on net asset value.
On the basis of our risk assessments, together with our
assessment of the Company's overall control environment, our
judgement was that overall performance materiality (i.e. our
tolerance for misstatement in an individual account or balance) for
the Company should be 50 per cent of materiality, namely GBP322k
(2013: GBP410k). Our objective in adopting this approach was to
ensure that total uncorrected and undetected audit differences in
the financial statements did not exceed our materiality level.
We agreed with the Audit Committee that we would report to them
all audit differences in excess of GBP32k (2013: GBP41k), as well
as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluated any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations.
An overview of the scope of our audit
We adopted a risk-based approach in determining our audit
strategy. This approach focuses audit effort towards higher risk
areas, such as management judgments and estimates.
The audit was led from Guernsey and utilised valuations and
other industry experts from Ernst & Young LLP. We operated as
an integrated audit team and we performed audit procedures and
responded to the risk identified as described below.
We addressed the risk of incorrect valuation of the Company's
unlisted investments as set out below.
We confirmed our understanding of the Company's processes,
inputs and methodologies, including the use of industry specific
measures, and policies for valuing unlisted investments held by the
Company;
We vouched valuation inputs that did not require specialist
knowledge to independent sources and we tested the arithmetical
accuracy of the Company's calculations; and
We engaged our own internal mining industry valuation experts
to:
a) assist us to determine whether the methodologies, inputs and
assumptions used to value investments were in accordance with
methods, particularly those specific to the industry, usually used
by market participants; and
b) for the more complex investments, use their knowledge of the
market to corroborate and challenge management's market related
judgements and valuation inputs including discount rates, forward
prices, production values and recent relevant transaction data;
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the ISAs (UK and Ireland), we are required to report to
you if, in our opinion, information in the Director's report
is:
materially inconsistent with the information in the audited
financial statements; or
apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Company; or
is otherwise misleading.
In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge acquired
during the audit and the directors' statement that they consider
the Annual Report is fair, balanced and understandable and whether
the Annual Report appropriately discloses those matters that we
communicated to the Audit Committee which we consider should have
been disclosed.
Under the Companies Law 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 Report relating to the company's
compliance with the nine provisions of the UK Corporate Governance
Code specified for our review.
Michael Bane
For and on behalf of Ernst & Young LLP
Guernsey, Channel Islands
13 April 2015
(1) The maintenance and integrity of the Company's website is
the sole responsibility of the Directors; the work carried out by
the auditors does not involve consideration of these matters and,
accordingly, the auditor accepts no responsibility for any changes
that may have occurred to the Financial Statements since they were
initially presented on the website.
(2) Legislation in Guernsey governing the preparation and
dissemination of Financial Statements may differ from legislation
in other jurisdictions.
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2014
2014 2013
Notes GBP GBP
Assets
Cash and cash equivalents 10 94,217 477,495
Other receivables 93,294 26,746
Financial assets held at fair value through
profit or loss 3 32,347,828 40,657,467
Total assets 32,535,339 41,161,708
------------- -------------
Equity and Liabilities
Liabilities
Legal fees payable 13 167,806 -
Directors' fees payable 35,712 36,000
Management fees payable 8 34,335 42,297
Audit fees payable 35,308 38,625
Administration fees payable 7 27,563 13,671
Other payables 68,059 40,410
Total liabilities 368,783 171,003
------------- -------------
Equity
Management Ordinary Shares 11 10,000 10,000
Ordinary Shares 11 66,945,285 64,767,056
Profit and loss account (34,788,729) (23,786,351)
Total equity 32,166,556 40,990,705
------------- -------------
Total equity and liabilities 32,535,339 41,161,708
============= =============
Net asset value per Share (in Pence) - Basic
and diluted 4 44.9 62.0
These financial statements on page 27 to 31 were approved by the Board
of Directors on 13 April 2015 and signed on its behalf by:
Howard Myles Christopher Sherwell
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
Year ended Year ended Year ended
2014 2014 2014
Revenue Capital Total
Notes GBP GBP GBP
Income
Interest income 77,998 - 77,998
Net loss on financial assets and
liabilities at fair value through
profit or loss 3 - (9,955,713) (9,955,713)
Net foreign exchange loss - (3,461) (3,461)
Net income/(loss) 77,998 (9,959,174) (9,881,176)
------------ ------------ -------------
Expenses
Management fees 8 472,295 - 472,295
Legal fees 168,185 - 168,185
Directors' fees 140,000 - 140,000
Administration fees 7 88,642 - 88,642
Audit fees 41,125 - 41,125
Custody fees 32,112 - 32,112
Director's expenses 8,273 - 8,273
Other expenses 9 170,570 - 170,570
Total expenses 1,121,202 - 1,121,202
------------ ------------ -------------
Total comprehensive loss for the
year (1,043,204) (9,959,174) (11,002,378)
============ ============ =============
Net loss for the year per Ordinary
Share:
Basic and diluted (in pence) 4 (1.5) (14.4) (15.9)
In the year ended 31 December 2014 there were no gains or losses other than those recognised
above.
The Directors consider all results to derive from continuing activities.
Year ended Year ended Year ended
2013 2013 2013
Revenue Capital Total
Notes GBP GBP GBP
Income
Interest income 13,194 - 13,194
Net loss on financial assets and
liabilities at fair value through
profit or loss 3 - (29,934,397) (29,934,397)
Net foreign exchange loss - (24,368) (24,368)
Other income 8,028 - 8,028
------------ ------------- -------------
Net income/(loss) 21,222 (29,958,765) (29,937,543)
------------ ------------- -------------
Expenses
Management fees 8 740,205 - 740,205
Directors' fees 140,000 - 140,000
Administration fees 7 94,618 - 94,618
Audit fees 42,052 - 42,052
Custody fees 37,609 - 37,609
Legal fees 8,351 - 8,351
Director's expenses 6,731 - 6,731
Other expenses 9 201,841 - 201,841
Total expenses 1,271,407 - 1,271,407
------------ ------------- -------------
Total comprehensive loss for the
year (1,250,185) (29,958,765) (31,208,950)
============ ============= =============
Net loss for the year per Ordinary
Share:
Basic and diluted (in pence) 4 (1.9) (45.3) (47.2)
In the year ended 31 December 2013 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 YEAR ENDED 31 DECEMBER 2014
Management
Ordinary Ordinary Profit and Year ended
Shares Shares loss account 2013
GBP GBP GBP GBP
Balance as at 1 January
2013 10,000 64,767,056 7,422,599 72,199,655
Net loss for the year - - (31,208,950) (31,208,950)
Balance as at 31 December
2013 10,000 64,767,056 (23,786,351) 40,990,705
Issue of Ordinary Shares
in specie - 2,178,229 - 2,178,229
Net loss for the year - - (11,002,378) (11,002,378)
----------- ----------- --------------- -------------
Balance as at 31 December
2014 10,000 66,945,285 (34,788,729) 32,166,556
=========== =========== =============== =============
Note 11 11
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014
Year ended Year ended
2014 2013
Notes GBP GBP
Cash flows from operating activities
Net loss for the year (11,002,378) (31,208,950)
Adjustments to reconcile income for the year
to net cash used in operating activities:
Interest income (77,998) (13,194)
Net loss on financial assets at fair value through
profit or loss 3 9,955,713 29,934,397
Net decrease/(increase) in other receivables 5317 (7,633)
Net increase/(decrease) in other payables 197,780 (3,647,675)
------------- -------------
(921,566) (4,943,055)
Interest received 6,133 51,752
------------- -------------
Net cash used in operating activities (915,433) (4,891,303)
------------- -------------
Cash flows from investing activities
Purchase of financial assets at fair value through
profit or loss 11 (1,127,370) (1,655,154)
Sale of financial assets at fair value through
profit or loss 1,659,525 6,422,778
------------- -------------
Net cash provided by investing activities 532,155 4,767,624
------------- -------------
Net decrease in cash and cash equivalents (383,278) (123,679)
Cash and cash equivalents at the beginning of
the year 477,495 601,174
Cash and cash equivalents at the end of the
year 10 94,217 477,495
============= =============
Supplemental disclosure of non-cash flow information
Purchase of financial assets at fair value through
profit or loss 11 (2,178,229) -
Issue of Ordinary Shares in specie 11 2,178,229 -
============= =============
NOTES TO THE FINANCIAL STATEMENTS
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's Ordinary and Subscription Shares were admitted to the
Premium Listing Segment of the Official List on 28 April 2010.
Effective 1 June 2012 the Subscription Shares were assigned to the
Standard Segment of the Official List.
The final exercise date for the Subscription Shares was 2 April
2013. No Subscription Shares were exercised at this time and all
residual/unexercised Subscription Shares were subsequently
cancelled.
The Company's portfolio 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 ("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.
From 22 July 2014, Baker Steel Capital Managers LLP (the
"Investment Manager") is authorised to act as an Alternative
Investment Fund Manager ("AIFM") of Alternative Investment Funds
("AIFs"). On 14 November 2014, the Investment Manager signed an
amended Investment Manager agreement with the Company, to take into
account AIFM regulations. AIFMD focuses on regulating the AIFM
rather than the AIFs themselves, so the impact on the Company is
limited.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union. The financial statements have been prepared on
a historical cost basis except for financial assets at fair value
through profit or loss, which are designated at fair value through
profit or loss.
The Company's functional currency is the Great Britain pound
Sterling ("GBP"), being the currency in which its Ordinary Shares
and Subscription Shares are issued and in which returns are made to
shareholders. The presentation currency is the same as the
functional currency. The Company invests in companies around the
world whose shares are denominated in various currencies. Currently
the majority of the portfolio is denominated in US Dollars but this
will not necessarily remain the case as the portfolio develops.
The Statement of Comprehensive Income is presented in accordance
with the Statement of Recommended Practice ("SORP") '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 IFRS.
Income encompasses both revenue and capital gains/losses. For a
listed investment company it is necessary to distinguish revenue
from capital for the purpose of determining the distribution.
Revenue includes items such as dividends, interests, fees, rent and
other equivalent items. Capital is the return, positive or
negative, from holding investments other than that part of the
return that is revenue. SORP provides guidance on the items that
should be recognised as capital/revenue. Where specific guidance is
not given an item is recognised in accordance with its economic
substance.
b) Significant accounting judgements and estimates
The preparation of the Company's financial statements requires
the Directors to make judgements, estimates and assumptions that
affect the reported amounts recognised in the financial statements
and disclosure of contingent liabilities. 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 future periods.
(i) Judgements
In the process of applying the Company's accounting policies,
management has made the following judgements, which has the most
significant effect on the amounts recognised in the financial
statements:
Assessment as Investment Entity
As per IFRS 10, an entity shall determine whether it is an
investment entity. An investment entity is an entity that:
Ø It obtains funds from one or more investors for the purpose of
providing those investors with investment services.
Ø It commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income or both.
Ø It measures and evaluates the performance of substantially all
of its investments on a fair value basis.
The Company meets these criteria in order to be considered as an
investment entity.
(ii) Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets liabilities within the next financial year, are
discussed below. The Company based its assumptions and estimates on
parameters available when the financial statements were prepared.
However, existing circumstances and assumptions about future
developments may change due to market changes or circumstances
arising beyond the control of the Company. Such changes are
reflected in the assumptions when they occur. Please refer to Note
3 and 5 for further information.
Fair value of financial instruments
When the fair values of financial assets and financial
liabilities recorded in the statement of financial position cannot
be derived from active markets, their fair value is determined
using a variety of valuation techniques that include the use of
valuation models. The inputs to these models are taken from
observable markets where possible, but where this is not feasible,
estimation is required in establishing fair values. The estimates
include considerations of liquidity and model inputs related to
items such as credit risk, correlation and volatility. Changes in
assumptions about these factors could affect the reported fair
value of financial instruments in the statement of financial
position and the level where the instruments are disclosed in the
fair value hierarchy. The models are tested for validity by
calibrating to prices from any observable current market
transactions in the same instrument (without modification or
repackaging) when available. To assess the significance of a
particular input to the entire measurement, the Company performs
sensitivity analysis or stress testing techniques.
c) Financial assets at fair value through profit or loss
The Company designates its investments as at fair value through
profit or loss, at initial recognition. All derivatives are
classified as held for trading and are 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 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 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 year 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.
Financial assets may be acquired for a consideration in the form
of an issue of the Company's own shares.
A contract that will be settled by the entity (receiving or)
delivering a fixed number of its own equity instruments in exchange
for a fixed amount of cash or another financial asset is accounted
for as an equity instrument.
The cost of the assets acquired is determined as at the fair
value of the consideration given, being the fair value of the
equity instruments issued or the asset received, if that is more
easily measured, together with directly attributable transaction
cost on the transaction date.
Determination of the fair value is set out in note 3.
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 are
recognised in the Statement of Comprehensive Income.
Determination of fair value
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
The fair value for financial instruments traded in active
markets at the reporting date is based on their last 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) Other financial assets and liabilities
Other receivables, measured at amortised cost, include the
contractual amounts for settlement of trades and other obligations
due to the Company. Amount due to brokers, investment management
fees payable, directors' fees payable, audit fees payable,
administration fees payable and other payables represent the
contractual amounts and obligations due by the Company for
settlement for trades and expenses.
e) Interest income and expense
Bank interest income, convertible debt instruments interest
income and interest expense are recognised on an accruals basis
based on the effective interest method.
f) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position
comprise cash balances held at banks. Initially accounted for at
fair value and subsequently measured at amortised cost.
g) Expenses
All expenses are recognised on an accruals basis.
h) Translation of foreign currencies
Foreign currency transactions during the year are translated
into Sterling at the rate of exchange ruling at the date of the
transaction. Assets and liabilities denominated in foreign
currencies are translated into Sterling 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 year, are included in the
Statement of Comprehensive Income. The foreign exchange movements
relating to financial assets form part of the fair value movement
in the Statement of Comprehensive Income.
i) Segment information
The Directors are of the opinion that the Company is engaged in
a single segment of business, being investing in
natural resources companies.
j) 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 (including the Management Ordinary Shares) outstanding at
that date.
k) New accounting pronouncements
The following amendments were applicable for the first time this
year but had no impact on the financial position or performance of
the Company.
- IFRS 10 Consolidated Financial Statements - Amendments
(effective 1 January 2014)
- IFRS 11 Joint Arrangements (effective 1 January 2014)
- IFRS 12 Disclosure of Interests in Other Entities - Amendments
(effective 1 January 2014)
- IAS 27 Separate Financial Statements - Amendments (effective 1
January 2014)
- IAS 28 Investments in Associates and Joint Ventures -
Amendments (effective 1 January 2014)
l) 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. The Company does not
expect that the adoption of these standards will have a significant
impact on its financial statements.
- IFRS 8 Operating Segments - Amendments (effective 1 July
2014)
Amendments to some disclosure requirements regarding the
judgements made by management in applying the aggregation criteria,
as well as those to certain reconciliations.
- IFRS 9 Financial Instruments - Amendments (effective 1 January
2018)
A finalised version of IFRS 9 has been issued which replaces IAS
39 Financial Instruments: Recognition and Measurement. The
completed standard comprises guidance on Classification and
Measurement, Impairment Hedge Accounting and Derecognition.
IFRS 9 carries forward the derecognition requirements of
financial assets and liabilities from IAS 39.
- IFRS 10 Consolidated Financial Statements - Amendments (effective 1 January 2016)
Narrow-scope amendments to IFRS 10, IFRS 12 and IAS 28 introduce
clarifications to the requirements when accounting for investment
entities. The amendments also provide relief in particular
circumstances, which will reduce the costs of applying the
Standards.
- IFRS 11 Joint Arrangements - Amendments (effective 1 January 2016)
Amendments add new guidance on how to account for the
acquisition of an interest in a joint operation that constitutes a
business which specifies the appropriate accounting treatment for
such acquisitions.
- IFRS 12 Disclosure of Interests in Other Entities - Amendments (effective 1 January, 2016)
Narrow-scope amendments to IFRS 10, IFRS 12 and IAS 28 introduce
clarifications to the requirements when accounting for investment
entities. The amendments also provide relief in particular
circumstances, which will reduce the costs of applying the
Standards.
- IFRS 13 Fair Value Measurement - Amendments (effective 1 January 2015)
Amendments clarifies the measurement requirements for those
short-term receivables and payables. Amendments also clarifies that
the portfolio exception applies to all contracts within the scope
of, and accounted for in accordance with, IAS 39 or IFRS 9.
- IFRS 14 - Regulatory Deferral Accounts (effective 1 January, 2016)
IFRS 14 permits first-time adopters to continue to recognise
amounts related to its rate regulated activities in accordance with
their previous GAAP requirements when they adopt IFRS. However, to
enhance comparability with entities that apply IFRS and do not
recognise such amounts, the Standard requires that the effect of
rate regulation must be presented separately from other items. An
entity that already presents IFRS financial statements is not
eligible to apply the Standard.
- IFRS 15 - Revenue from Contracts with Customers (effective 1 January, 2017)
New standard that requires entities to recognise revenue to
depict the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
This core principle is achieved through a five step methodology
that is required to be applied to all contracts with customers.
- IAS 1 - Presentation of Financial Statements (effective 1 January, 2016)
This amendment is designed to encourage entities to apply
professional judgement in determining what information to disclose
in their financial statements. For example, the amendments make
clear that materiality applies to the whole of financial statements
and that the inclusion of immaterial information can inhibit the
usefulness of financial disclosures. Furthermore, the amendments
clarify that entities should use professional judgement in
determining where and in what order information is presented in the
financial disclosures.
- IAS 24 - Related Party Disclosures- Amendments (effective 1 July, 2014)
Amendments provides the definitions and disclosure requirements
for key management personnel.
- IAS 27 Consolidated and Separate Financial Statements (effective 1 January, 2016)
Amendments to IAS 27 will allow entities to use the equity
method to account for investments in subsidiaries, joint ventures
and associates in their separate financial statements.
IFRS 9 and 15 has not yet been endorsed by the European
Union.
The Board currently intends to adopt the standards on the
mandatory adoption dates. The Board anticipates that the adoption
of these standards and interpretations in the future period will
not have a material impact on the financial statements of the
Group.
2. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Listed equity Convertible debt
31 December 2014 shares Unlisted equity shares instruments Warrants Total
GBP GBP GBP GBP GBP
Financial assets at fair
value through profit or
loss
Cost 21,113,026 29,647,588 9,847,648 - 60,608,262
Unrealised (loss)/gain (13,417,194) (17,519,268) 2,650,151 25,877 (28,260,434)
Market value at 31 December
2014 7,695,832 12,128,320 12,497,799 25,877 32,347,828
============= ====================== ========================== ======== ============
Listed equity Convertible debt
31 December 2013 shares Unlisted equity shares instruments Warrants Total
GBP GBP GBP GBP GBP
Financial assets at fair
value through profit or
loss
Cost 23,391,498 28,192,871 8,533,524 - 60,117,893
Unrealised loss/(gain) (9,429,958) (10,794,264) 722,419 41,377 (19,460,426)
Market value at 31
December 2013 13,961,540 17,398,607 9,255,943 41,377 40,657,467
============= ====================== ========================== ======== =============
The following table analyses net (losses)/gains on financial
assets at fair value through profit or loss for the year ended 31
December 2014 and 31 December 2013.
Year ended Year ended
2014 2013
GBP GBP
Financial assets at fair value through profit
or loss
Realised (losses)/gains on:
- Listed equity shares (1,155,705) 296,988
- Unlisted equity shares - 240,541
- Convertible debt instruments - 11,155
------------ -------------
(1,155,705) 548,684
Movement in unrealised (losses)/gains on:
- Listed equity shares (3,987,236) (23,290,798)
- Unlisted equity shares (6,725,004) (7,666,428)
- Convertible debt instruments 1,927,732 452,472
- Warrants (15,500) 21,673
------------ -------------
(8,800,008) (30,483,081)
Net loss on financial assets at fair value through
profit or loss (9,955,713) (29,934,397)
============ =============
The following table analyses investments by type and by level
within the fair valuation hierarchy at 31 December 2014.
Quoted prices
in active Quoted market Unobservable
markets based 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 3,785,431 3,910,401 - 7,695,832
Unlisted equity shares - - 12,128,320 12,128,320
Warrants 25,597 - 280 25,877
Convertible debt instruments - - 12,497,799 12,497,799
------------- ------------------ ------------ ----------
3,811,028 3,910,401 24,626,399 32,347,828
============= ================== ============ ==========
The following table analyses investments by type and by level
within the fair valuation hierarchy at 31 December 2013.
Quoted prices
in active Quoted market Unobservable
markets based 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 3,609,480 10,352,060 - 13,961,540
Unlisted equity shares - - 17,398,607 17,398,607
Warrants - - 41,377 41,377
Convertible debt instruments - - 9,255,943 9,255,943
------------- ------------------ ------------ -----------
3,609,480 10,352,060 26,695,927 40,657,467
============= ================== ============ ===========
During the year the only transfer between levels related to the
release of the locked up Ivanhoe Mines Limited ("Ivanhoe") shares,
from Level 2 to Level 1. The total number of Ivanhoe shares
released during year was 3,131,996 (782,999 per quarter) total
amounting to GBP2,371,125 (2013: There were no transfers).
The table below shows a reconciliation of beginning to ending
fair value balances for Level 3 investments and the amount of total
gains or losses for the year included in earnings attributable to
the change in unrealised gains or losses relating to assets and
liabilities held at 31 December 2014 and at 31 December 2013.
Listed and Convertible
debt
Unlisted instruments Warrants Total
Equities
GBP GBP GBP GBP
Opening balance 1 January
2014 17,398,607 9,255,943 41,377 26,695,927
Purchases of investments 1,454,717 1,314,124 - 2,768,841
Change in net unrealised
(losses)/gains (6,725,004) 1,927,732 (41,097) (4,838,369)
Closing balance 31 December
2014 12,128,320 12,497,799 280 24,626,399
============ ============ ========= =============
Listed and Convertible
debt
Unlisted instruments Warrants Total
Equities
GBP GBP GBP GBP
Opening balance 1 January
2013 28,107,083 9,018,210 19,704 37,144,997
Purchases of investments - 256,669 - 256,669
Sales of investments (3,282,586) (482,563) - (3,765,149)
Change in net unrealised
(losses)/gains (7,666,431) 452,472 21,673 (7,192,286)
Realised gains 240,541 11,155 - 251,696
------------- ------------ --------- -------------
Closing balance 31 December
2013 17,398,607 9,255,943 41,377 26,695,927
============= ============ ========= =============
In determining an investment's position within the fair value
hierarchy, the Directors take into consideration the following
factors:
Investments whose values are based on quoted market prices in
active markets are classified within Level 1. These include listed
equities with observable market prices. 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 held such investments
at 31 December 2014 amounting to GBP3,910,401 (31 December 2013:
GBP10,352,060).
Investments classified within Level 3 have significant
unobservable inputs. They include unlisted convertible debt
instruments, 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 if representative in volume and nature, 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.
Valuation methodology of Level 3 investments
Where an unquoted investment has been acquired during the past
six months it will be carried at cost unless there are changes or
events which suggest cost is not equivalent to fair value.
For each core unlisted investment, the Company maintains a
weighted average basket of listed companies which are comparable to
the investment in terms of commodity, stage of development and
location ("IndexVal"). IndexVal is used as an indication of how an
investment's share price might have moved had it been listed.
Movements in commodity prices are deemed to have been taken into
account by the movement of IndexVal.
The Investment Manager also prepares discounted cash flow models
for the Company's core investments annually and also for
significant new information and decision making purposes when
required. From these, Development Risk Adjusted Values ("DRAVs")
are derived. The computations are based on consensus forecasts for
long term commodity prices and investee company management
estimates of operating and capital costs. The Investment Manager
takes account of market, country and development risks in its
discount factors. The DRAVs are not a primary determinant of Fair
Value but are instead a tool that the Investment Manager uses to
evaluate potential investments as well as to provide underlying
valuation references for the Fair Value already established.
The valuation technique for Level 3 investments can be divided
into four groups:
i. Transactions
Where there have been transactions within the past 6 months
either through a capital raising by the investee company or known
secondary market transactions, representative in volume and nature
and conducted on an arm's length basis, this is taken as the
primary driver for valuing Level 3 investments.
ii. IndexVal
Where there have been no known transactions for 6 months, at the
Company's half year and year end, movements in IndexVal will
generally be taken into account in assessing Fair Value where there
has been at least a 10% movement in IndexVal over at least a six
month period. The IndexVal results are used as an indication of
trend and are viewed in the context of investee company
progress.
iii. Warrants
Warrants are valued using a simplified Black & Scholes model
taking into account time to expiry, exercise price and volatility.
Where there is no established market for the underlying shares an
assumed volatility of 40% is used.
iv. Convertible loans
Convertible loans are valued at par, taking into account credit
risk, except when there is a clear path towards conditions for
conversion such as an IPO, when the equity value of the investment
on conversion is also taken into account when determining Fair
Value.
Quantitative information of significant unobservable inputs -
Level 3
Unobservable Range (weighted
Description 2014 Valuation technique input average)
GBP
Transactions & Private transactions. n/a
Unlisted Equity 12,128,320 IndexVal Change in IndexVal
Convertible Debt Instruments
Argentum Convertible 5,524,543 Valued at par with Credit Risk n/a
& Polar Silver reference to credit
Loan Notes risk and value
on conversion
Black Pearl Limited 6,469,037 Valued at par plus Credit Risk n/a
Partnership interest accrued
with reference
to credit risk
and value on conversion
Other Convertible 504,219 Valued at par Credit Risk n/a
Debentures/Loans
Simplified Black
Warrants 280 & Scholes Model Volatilities 40%
Information on third party transactions in unlisted equities is
derived from the Investment Manager's market contacts. The change
in IndexVal for each particular unlisted equity is derived from the
weighted average movements of the individual baskets for that
equity so it is not possible to quantify the range of such inputs.
A sensitivity of 70% has been used in the analysis below as this
was the greatest amount that IndexVal moved for any single
investment during any six month period.
Sensitivityanalysis to significant changes in unobservable
inputs within Level 3 investments
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
together with a quantitative sensitivity analysis as at 31 December
2014 are as shown below:
Description Input Sensitivity Effect on Fair
used* Value (GBP)
Unlisted Equity Change in IndexVal +/-70% +/-8,489,824
Convertible Debt Instruments
Argentum Convertible
& Polar Silver
Loan Notes Credit Risk +20% -1,104,909
Black Pearl Limited
Partnership Credit Risk +20% -1,293,807
Other Convertible
Debentures/Loans Credit Risk +20% -100,844
Warrants Volatility of 40% +/-20% +1,862/-280
*The sensitivity analysis refers to a percentage amount added or
deducted from the input and the effect this has on the fair
value
The Company has not disclosed the fair value for financial
assets such as cash and cash equivalents and short-term receivables
and payables, because their carrying amounts are a reasonable
approximation of fair values.
4. NET ASSET VALUE PER SHARE AND LOSS PER SHARE
Net asset value per share is based on the net assets of
GBP32,166,556 (31 December 2013: GBP40,990,705) and 71,713,776 (31
December 2013: 66,152,533) Ordinary Shares, being the number of
shares in issue at the year end. The final exercise date for the
Subscription Shares was 2 April 2013. No Subscription Shares were
exercised at this time and all residual Subscription Shares were
subsequently cancelled and were anti-dilutive. The calculation for
basic and diluted net asset value per share is as below:
31 December 2014 31 December 2013
Ordinary Shares Ordinary Shares
Net assets at the year end (GBP) 32,166,556 40,990,705
Number of shares 71,713,776 66,152,533
Net asset value per share (in
pence) basic and diluted 44.9 62.0
Weighted average number of shares 69,121,434 66,152,533
The basic and diluted loss per share for 2014 is based on the
net loss for the year of the Company of GBP11,895,873 and on
69,121,434 Ordinary Shares, being the weighted average number of
Ordinary Shares in issue during the year.
The basic and diluted loss per share for 2013 is based on the
net loss for the year of the Company of GBP31,208,950 and on
66,152,533 Ordinary Shares, being the weighted average number of
Ordinary Shares in issue during the year. As the Subscription
Shares were cancelled on 2 April 2013 no diluted calculations are
required.
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 of 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 2014. The sensitivity analysis assumes all other
variables are held constant.
The impact of a 10% decrease in the value of investments on the
net assets and income of the Company as at 31 December 2014 would
have been a decrease of GBP3,234,783 (31 December 2013:
GBP4,065,747). An increase of 10% would increase the net asset
value by GBP3,234,783 (31 December 2013: GBP4,065,747). In
practice, the actual results may differ from the sensitivity
analysis above and the difference could be material.
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 Sterling. Currency risk is the risk that the value of
non-GBP denominated 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
2014 and 31 December 2013.
31 December 2014
Currency Amount in Conversion rate Value % of net assets
local currency (based on GBP) GBP
AUD 185,042 0.5252 97,181 0.30
CAD 9,157,075 0.5540 5,073,456 15.78
EUR (7,417) 0.7766 (5,760) (0.02)
GBP 4,590,042 1.0000 4,590,042 14.27
USD 34,928,536 0.6416 22,411,637 69.67
----------- ---------------
32,166,556 100.00
----------- ---------------
31 December 2013
Currency Amount in Conversion rate Value % of net assets
local currency (based on GBP) GBP
AUD 1,130,806 0.5399 610,481 1.49
CAD 23,388,725 0.5681 13,286,855 32.42
EUR (5,123) 1.2032 (6,164) (0.02)
GBP 2,888,426 1.0000 2,888,426 7.05
USD 40,115,383 0.6035 24,211,107 59.06
---------- ---------------
40,990,705 100.00
---------- ---------------
At 31 December 2014 and 31 December 2013, had any foreign
currencies strengthened by 10% relative to Sterling, with all other
variables held constant, total equity would have increased by the
amounts shown below.
2014 2013
Currency Value Value
GBP GBP
AUD 9,718 61,048
CAD 507,346 1,328,686
EUR (576) (616)
USD 2,241,164 2,421,111
2,757,652 3,810,229
--------- ---------
A 10% decrease in foreign currencies relative to Sterling, with
all other variables held constant, would lead to a corresponding
decrease in the total equity by equal but opposite 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 indirectly to risks associated with the
effects of fluctuations in the prevailing levels of market interest
rates on its financial position and fair value, it is subject to
little direct exposure to interest rate fluctuations as the
majority of the financial assets are equity investments or similar
investments which do not pay interest. Any excess cash and cash
equivalents are invested at short-term market interest rates which
expose 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 2014 Up to More than Non-interest
1 month 6 months bearing Total
Assets GBP GBP GBP GBP
Cash and cash equivalents 94,217 - - 94,217
Financial assets held at fair value through profit or loss - 11,849,740 20,498,088 32,347,828
Receivables - - 93,294 93,294
Total Assets 94,217 11,849,740 20,591,382 32,535,339
======= ========== ============ ===========
Liabilities
Other liabilities - - 368,783 368,783
Total Liabilities - - 368,783 368,783
======= ========== ============ ===========
Interest rate sensitivity gap 94,217 11,849,740
======= ==========
At 31 December 2013 Up to More than Non-interest
1 month 6 months bearing Total
Assets GBP GBP GBP GBP
Cash and cash equivalents 477,495 - - 477,495
Financial assets held at fair value through profit or loss - 8,755,007 31,902,460 40,657,467
Receivables - - 26,746 26,746
Total Assets 477,495 8,755,007 31,929,206 41,161,708
======== ========= ============ ===========
Liabilities
Other liabilities - - 171,003 171,003
Total Liabilities - - 171,003 171,003
======== ========= ============ ===========
Interest rate sensitivity gap 477,495 8,755,007
======== =========
Interest rate sensitivity
At 31 December 2014, should interest rates have fallen by 25
basis points with all other variables remaining constant, the
decrease in net assets attributable to holders of Ordinary Shares
for the year would amount to approximately GBP236 (2013: GBP1,194)
for assets up to 1 month respectively and GBP29,624 (2013:
GBP9,516) for assets more than 6 months respectively. If interest
rates had risen by 25 basis points it would have an equal but
opposite effect as the decrease.
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 of the Company's investments.
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 invests in unlisted equities for
which there may not be an immediate market. The Company seeks to
mitigate this risk by maintaining a cash and listed share position
which will cover its ongoing operational expenses.
The Company has the ability to incur borrowings of up to 10% 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 2014 Less than More than No contractual
1 month 1-3 months 3-12 months 12 months maturity Total
Assets GBP GBP GBP GBP GBP GBP
Cash and cash equivalents 94,217 - - - - 94,217
Financial assets held at fair value
through profit
or loss - - 25,597 12,498,079 19,824,152 32,347,828
Receivables 93,294 - - - - 93,294
--------- ---------- ----------- ---------- -------------- -----------
Total Assets 187,511 - 25,597 12,498,079 19,824,152 32,535,339
========= ========== =========== ========== ============== ===========
Less than More than No contractual
1 month 1-3 months 3-12 months 12 months maturity Total
Liabilities GBP GBP GBP GBP GBP GBP
Other payables
and accrued expenses 97,610 235,865 35,308 - - 368,783
--------- ---------- ----------- ---------- -------------- -----------
Total Liabilities 97,610 235,865 35,308 - - 368,783
========= ========== =========== ========== ============== ===========
Net assets attributable to shareholders 32,166,556
===========
At 31 December 2013 Less than More than No contractual
1 month 1-3 months 3-12 months 12 months maturity Total
Assets GBP GBP GBP GBP GBP GBP
Cash and cash equivalents 477,495 - - - - 477,495
Financial assets held at fair value
through profit
or loss - 16,753 5,591,757 3,688,810 31,360,147 40,657,467
Receivables 26,746 - - - - 26,746
--------- ---------- ----------- --------- -------------- ------------
Total Assets 504,241 16,753 5,591,757 3,688,810 31,360,147 41,161,708
========= ========== =========== ========= ============== ============
Less than More than No contractual
1 month 1-3 months 3-12 months 12 months maturity Total
Liabilities GBP GBP GBP GBP GBP GBP
Other payables
and accrued expenses 91,968 40,410 38,625 - - 171,003
--------- ---------- ----------- --------- -------------- ------------
Total Liabilities 91,968 40,410 38,625 - - 171,003
========= ========== =========== ========= ============== ============
Net assets attributable to shareholders 40,990,705
==========
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, Convertible debt
instruments and trade receivables as stated in the Statement of
Financial Position. The maximum credit risk for the Company is
GBP12,592,016 (2013:GBP9,733,438).
As at 31 December 2014, the Company's financial assets exposed
to credit risk were held with the following weight:
Financial Assets Counterparty Credit 2014
Rating % of net assets
Convertible debt instruments
- Convertible Loan Note Black Pearl Limited Partnership NR 20.11
- Convertible Loan Note ZAO Argentum NR 15.16
- Convertible Loan Note Bilboes Holdings NR 0.88
- Convertible Loan Note Ironstone Resources Limited NR 0.43
- Convertible Loan Note Polar Silver Resources Limited NR 2.01
- Unsecured Convertible Debenture Aquila Resources Inc NR 0.26
Cash and cash equivalents HSBC Bank plc AA- 0.29
Total 39.14
===============
As at 31 December 2013, the Company's financial assets exposed
to credit risk were held with the following weight:
Financial Assets Counterparty Credit 2013
Rating % of net assets
Convertible debt instruments
- Convertible Loan Note Black Pearl Limited Partnership NR 13.29
- Convertible Loan Note Argentum Convertible Note NR 7.51
- Convertible Loan Note Ironstone Resources Limited NR 0.35
- Convertible Loan Note Polar Silver Resources Limited NR 1.22
- Unsecured Convertible Debenture REBgold Corporation NR 0.21
Cash and cash equivalents HSBC Bank plc AA- 1.16
Total 23.74
=================
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 administration fees paid for the year ended 31 December 2014
were GBP88,642 (2013: GBP94,618) of which GBP27,563 (2013:
GBP13,671) was payable at 31 December 2014. HSBC Securities
Services (Ireland) Limited, the sub-Administrator, is paid a
portion of these fees by the Administrator.
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.
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 per cent 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 Performance Period is each 12 month period ending on 31
December in each year (the "Performance Period"). 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. The
performance fee is subject to adjustments for any issue and/or
repurchase of Ordinary Shares.
The amount of the performance fee is 15 per cent of the total
increase in the Net Asset Value, if the Hurdle has been met, 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. In addition, the performance fee will only become
payable if there has been sufficient net realised gains.
There were no performance fees for the current or prior
period.
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.
No further performance fee will be accrued or paid until the Net
Asset Value exceeds GBP94,720,839 (132.0p per share) as adjusted
for further issues and repurchases of shares.
The management fee for the year ending 31 December 2014 was
GBP472,295 (2013: GBP740,205) out of which GBP34,335 (2013:
GBP42,297) was outstanding at the year end.
9. OTHER EXPENSES
2014 2013
TOTAL TOTAL
GBP GBP
Professional/Consulting fees 50,275 44,142
Brokerage fee 27,806 34,745
Marketing costs 855 30,855
Registrar fees 20,980 30,790
Board meeting expenses 8,311 17,990
Compliance fees 10,000 11,667
Listing fees 25,876 10,569
Other regulatory fees 5,500 5,465
Guernsey regulatory fees 3,165 3,165
Website expenses 270 1,095
Miscellaneous expenses 17,532 11,358
--------
170,570 201,841
======== ========
10. CASH AND CASH EQUIVALENTS
2014 2013
GBP GBP
Deposits at HSBC Bank plc 94,217 477,495
======= ========
11. SHARE CAPITAL
The share capital of the Company on incorporation was
represented by an unlimited number of Ordinary Shares of no par
value. The Company may issue an unlimited number of shares of a
nominal or par value and/or of no par value or a combination of
both.
The Company has a total of 71,703,776 (2013: 66,142,533)
Ordinary Shares in issue. In addition, the Company has 10,000
(2013: 10,000) Management Ordinary Shares in issue, which are held
by the Investment Manager.
On 28 June 2014, the Company entered into an agreement to
acquire US$2.5 million nominal amount of convertible loans in ZAO
Argentum, the wholly owned subsidiary of Polar Silver Resources
Limited, and 500 shares in Polar Silver Resources Limited for a
consideration of GBP1.32 million. The consideration was settled
through the issue of 2,259,357 Ordinary Shares of the Company at
the unaudited net asset value of 58.5 pence per share on 31 May
2014. Under IFRS the consideration of this transaction has to be
valued at listed price of 40.875 pence per share as at 28 June
2014. Therefore the consideration for this transaction is GBP0.92
million which is recognised in the financial statements.
On 1 July 2014, the Company entered into an agreement to acquire
5,000,000 Ordinary Shares of Global Oil Shale for a consideration
of GBP1.75 million. This consideration was settled through the
issue of 3,301,886 Ordinary Shares of the Company to the vendor at
the unaudited net asset value of 53 pence per share on 30 June
2014. Under IFRS the consideration of this transaction has to be
valued at listed price of 38 pence per share as at 1 July 2014.
Therefore the consideration for this transaction is GBP1.25 million
which is recognised in the financial statements.
The fair values of the loan notes and shares received were
determined by reference to the valuation techniques as outlined in
Note 3.
The above transactions had no impact on the profit or loss for
the current financial year.
The final exercise date for the Subscription Shares was 2 April
2013. No Subscription Shares were exercised at this time and
residual/unexercised Subscription Shares were subsequently
cancelled.
The Ordinary Shares are admitted to the Premium Listing segment
of the Official List.
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 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 carried no right to any dividend or other
distribution by the Company.
The details of issued share capital of the Company are as
follows:
2014 2013
No. of No. of
Amount shares Amount shares
GBP GBP
Issued and fully paid share
capital
Ordinary Shares of no par value* 67,848,780 71,713,776 64,777,056 66,152,533
(including Management Ordinary
Shares)
The issue of Ordinary Shares during the year ended 31 December
2014 took place as follows:
Ordinary Shares Subscription Shares
Amount No. of shares Amount No. of shares
GBP GBP
Balance at 1 January 2014 64,777,056 66,152,533 - -
Issue of Ordinary Shares 3,071,724 5,561,243 - -
----------- -------------- ------- --------------
Balance at 31 December 2014 67,848,780 71,713,776 - -
=========== ============== ======= ==============
The issue of Ordinary Shares during the year ended 31 December
2013 took place as follows:
Ordinary Shares Subscription Shares
No. of No. of
Amount shares Amount shares
GBP GBP
Balance at 1 January 2013 64,777,056 66,152,533 - 13,085,150
Cancellation of Subscription
Shares - - - (13,085,150)
----------- ----------- -------- -------------
Balance at 31 December 2013 64,777,056 66,152,533 - -
=========== =========== ======== =============
* 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 regards capital as comprising its issued Ordinary
Shares. The Company does not have any debt that might be regarded
as capital. The Company's objectives in managing capital are:
-- To safeguard its ability to continue as a going concern and
provide returns to shareholders in the form of capital growth over
the long-term through a focused, global portfolio consisting
principally of the equities or related instruments of natural
resources companies;
-- To allocate capital to those assets that the Directors
consider are most likely to provide the above returns; and
-- To manage, so far as is reasonably possible, any discount
between the Company's share price and its NAV per Ordinary
Share.
From August 2015, the Company will set aside at least 50% of the
aggregate net cash proceeds of realisations over the immediately
preceding six month period and utilise this cash to buy back shares
if they are trading at a discount in excess of 15 per cent. to NAV.
In addition the Board intends to allocate 15 per cent of the
aggregate net realised cash gains achieved in the year, for
distribution to Shareholders which may be done through share
buybacks, tender offers or dividend payments. This will commence
following completion of the audit of the current financial
year.
As described in the Directors' Report on page 11, the Company
does not currently intend to pay dividends or other distributions.
The Directors monitor 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 Directors also consider
whether the Company should undertake further share issues or
arrange buy-backs or other capital management programmes consistent
with the above objectives although no such action has been taken so
far.
The Company has authority to make market purchases of up to
14.99% of its own Ordinary Shares in issue. A renewal of such
authority is sought from Shareholders at each Annual General
Meeting of the Company or at a General Meeting of the Company, if
required. Any purchases of Ordinary Shares will be made within
internal guidelines established from time to time by the Board and
within applicable regulations.
The Company is not subject to any externally imposed capital
requirements.
12. RELATED PARTY TRANSACTIONS
The Directors' interests in the share capital of the Company
were:
Number of Number of
Ordinary Shares Ordinary Shares
2014 2013
Edward Flood 65,000 65,000
Christopher Sherwell 25,000 25,000
Clive Newall 25,000 25,000
Mr Sherwell also had an indirect interest in the shares of the
Company through an investment in another Fund which is also managed
by the Manager.
During February 2015, these shares were compulsorily redeemed
and Mr. Sherwell was issued with 71,821 additional shares as part
of the acquisition of assets referred to in Note 13 on page 50
(Subsequent Events).
The Manager, Baker Steel Capital Managers (Cayman) Limited, had
an interest in 504,832 Ordinary Shares at 31 December 2014 (2013:
504,832).
The Investment Manager, Baker Steel Capital Managers LLP, had an
indirect interest in 150,000 ordinary shares in the Company through
Ironman Investment Company Limited at 31 December 2014 (2013:
150,000). Ironman Investment Company Limited is a company set up by
the Investment Manager for co-investment purposes.
The Investment Manager, Baker Steel Capital Managers LLP, had an
interest in 10,000 Management Ordinary Shares at 31 December 2014
(2013: 10,000).
CFRBSGF had an interest in 6,080,000 Ordinary Shares in the
Company at 31 December 2014. These shares are held in a custodian
account with The Bank of New York (Nominees) Limited. CFRBSGF
shares a common Investment Manager with the Company (2013:
6,080,000).
GDG had an interest in 3,000,000 Ordinary Shares in the Company
at 31 December 2014. These shares are held in a custodian account
with HSBC GC. GDG shares a common Manager and Investment Manager
with the Company (2013: 3,000,000).
GNRMF had an interest in 1,727,308 Ordinary Shares in the
Company at 31 December 2014. These shares are held in a custodian
account with HSBC GC. GNRMF shares a common Manager and Investment
Manager with the Company (2013: 1,727,308).
The Management fees and Director's fees accrued for the year
were:
2014 2013
Management fees 472,295 740,205
Director's fees 140,000 140,000
The Management fees and Director's fees outstanding at the year
end were:
2014 2013
Management fees 34,335 42,297
Director's fees 35,712 36,000
13. SUBSEQUENT EVENTS
On 25 February 2015, the Company issued 3,368,488 New Ordinary
Shares at a price of 36.2p per share pursuant to valid applications
under an Open Offer to shareholders.
On 25 February 2015, the Company issued a total of 38,819,601
New Ordinary Shares in respect of the acquisition of assets as
outlined in a Circular to Shareholders and Prospectus both dated 26
January 2015. This issue comprised 30,468,522 New Ordinary Shares
issued at 42.6p per New Ordinary Share as consideration for the
acquisition of unlisted investments and 8,351,079 new Ordinary
Shares issued at 36.2p per New Ordinary Share as consideration for
the acquisition of listed investments. The legal fees payable as at
31 December 2014 of GBP167,806 relates to this event.
Following the year end, Black Pearl Limited Partnership agreed
an extension to its loan note to Rui Tong Limited from 25 November
2014 to 25 March 2015 and repayment is expected to be received
during the two month moratorium period thereafter. As compensation
for this extension, the interest rate on the loan increased
retrospectively from 20% to 25%. This will increase interest
receivable by the Company at 25 March 2015 by approximately
US$854,499 (GBP548,283).
14. APPROVAL OF ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
The Annual Report and Audited Financial Statements for the year
end 31 December 2014 were approved by the Board of Directors on -13
April 2015.
GLOSSARY OF TERMS
4PE - Platinum, Palladium, Gold and Rhodium
CFRBSGF - CF Ruffer Baker Steel Gold Fund
DRAVs - Development Risk Adjusted Values
DRC -- Democratic Republic of Congo
GFSC - Guernsey Financial Services Commission
g/t - Grams per tonne
IFRS - International Financial Reporting Standards as adopted by
the European Union
IndexVal - Where there have been no known transactions for 6
months, at the Company's half year and year end, movements in
IndexVal will generally be taken into account in assessing Fair
Value where there has been at least a 10% movement in IndexVal over
at least a six month period. The IndexVal results are used as an
indication of trend and are viewed in the context of investee
company progress.
IPO - Initial Public Offering (stock market launch)
JORC - AUSTRALASIAN JOINT ORE RESERVES COMMITTEE
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'.
Mt - million tonnes
NI 43-101 - CANADIAN NATIONAL INSTRUMENT 43-101
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.
NR - Not rated
PEA - Preliminary Economic Assessment
PGM - Platinum Group Metals - Platinum, Palladium, Rhodium,
Iridium, Ruthenium and Osmium
POI Law - Protection of Investors (Bailiwick of Guernsey) Law,
1987, as amended
SORP - Statement of Recommended Practice issued by The
Association of Investments Companies dated January 2009
This information is provided by RNS
The company news service from the London Stock Exchange
END
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