TIDMBSRT
RNS Number : 5301H
Baker Steel Resources Trust Ltd
18 August 2016
BAKER STEEL RESOURCES TRUST LIMITED
(Incorporated in Guernsey with registered number 51576 under the
provisions of The Companies (Guernsey) Law, 2008 as amended)
18 August 2016
BAKER STEEL RESOURCES TRUST LTD
(the "Company")
Half-Yearly Report and Unaudited Condensed Interim Financial
Statements
For the period from 1 January 2016 to 30 June 2016
The Company has today, in accordance with DTR 6.3.5, released
its Half-Yearly Report and Unaudited Condensed Interim Financial
Statements for the period ended 30 June 2016. The Report is
available via www.bakersteelresourcestrust.com and will shortly be
submitted to the National Storage Mechanism and will also shortly
be available for inspection at www.hemscott.com/nsm.do
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 + 44 (0)1481 707 000
Company Secretary
MANAGEMENT AND ADMINISTRATION
DIRECTORS: Howard Myles (Chairman)
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
34 Dover Street
London W1S 4NG
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) Redwood 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
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
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey GY2 4LH
Channel Islands
UK PAYING AGENT AND TRANSFER AGENT: Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
RECEIVING AGENT: Capita Asset Services
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 MANAGER'S REPORT
For the period from 1 January 2016 to 30 June 2016
Financial Performance
The unaudited net asset value per Ordinary Share as at 30 June
2016 was 38.8 pence per share, up 15.7% over the six months. During
this period the Euromoney Global Mining 100 Index was up 58.9% in
Sterling terms.
For the purpose of calculating the Net Asset Value ("NAV") per
share, all investments are carried at fair value as at 30 June
2016. The fair value of unquoted investments is determined by the
Directors with assistance from the Investment Manager. Quoted
investments are carried at closing prices as at 30 June 2016.
Net assets at 30 June 2016 comprised the
following:
GBPm % of net
assets
Unquoted Investments 32.6 73.3
Quoted Investments 12.4 27.9
Net Cash Equivalents and Accruals (0.6) (1.2)
------- -----------
44.4 100.0
Investment Update
Top 10 Holdings - 30 June 2016
% of NAV
Polar Silver Resources Ltd/Argentum 28.9%
Metals Exploration plc 16.8%
Bilboes Gold Limited 16.6%
Ivanhoe Mines Limited 8.1%
Cemos Group plc (formerly Global Oil Shale
Group Limited) 8.1%
Black Pearl Limited Partnership 5.9%
Ironstone Resources Limited 5.5%
Gobi Coal & Energy Limited 2.9%
Archipelago Metals Limited 2.7%
Nussir ASA 2.5%
Other Investments 3.2%
Net Cash and Equivalents (1.2%)
Top 10 Holdings - 31 December 2015
% of NAV
Polar Silver Resources Ltd/Argentum 26.2%
Black Pearl Limited Partnership 18.5%
Metals Exploration Plc 11.0%
Bilboes Gold Limited 9.4%
Cemos Group plc (formerly Global Oil
Shale Group Limited) 9.1%
Ivanhoe Mines Limited 5.4%
Ironstone Resources Limited 5.1%
Gobi Coal & Energy Limited 3.7%
China Polymetallic Mining Company
Limited 3.5%
Archipelago Metals Limited 2.7%
Other Investments 4.1%
Net Cash Equivalents and Accruals 1.3%
Review
At the end of June 2016, Baker Steel Resources Trust Limited
continued to be fully invested. The negative net cash and
equivalents position is a reflection of the agreement to acquire a
further interest in Polar Silver which was not due for completion
until after the reorganisation of that company.
During the first six months of the year, the unaudited net asset
value per share rose 15.7% to 38.8p in a recovering market for
mining shares, with the Euromoney Global Mining 100 Index rising
58.9% in Sterling terms. The most significant factor in the
recovery of the Euromoney Global Mining 100 Index was a 24.6% rise
in the gold price in dollar terms, to US$1,322.20 per ounce, which
translated into a 38.3% rise in Sterling terms during the period.
This in turn led to a recovery in gold mining stocks with the FTSE
Gold Mines Index up 133.7% during the first half of 2016 in
Sterling terms. This, has been reflected in the carrying value of
Bilboes Gold which was increased by 86% in June 2016 in US$ terms
in line with the performance of a basket of similar listed
companies.
The increase in the Company's NAV would have been greater but
the Board considered it necessary to provide against the carrying
value of the Company's convertible loans to Black Pearl. The Black
Pearl beach placer iron sands project had been hit by the weaker
global iron ore price, although it should have been able to
withstand this as its simple process and proximity to China meant
it expected to be able to deliver iron ore concentrate, CIF China,
at one of the lowest costs in the world. However it was also hit by
the Indonesian Government 2014 ban on the export of unrefined raw
materials. As a consequence of these new regulations Black Pearl
had to revise its strategy for the mine and engaged with a number
of parties interested in utilising Black Pearl's operations as the
basis for a new iron/steel smelter in Indonesia. As the Company had
invested in the project via convertible bonds rather than equity,
at the end of 2015 it was still expected that there was a
reasonable prospect of the loans and accrued interest thereon being
recovered following any transaction. However the latest information
at 30 June 2016 suggested that bondholders might be asked to accept
a reduction in the amount they are owed or to convert into equity.
Accordingly the Company decided to reduce the carrying value of its
bond and accrued interest by 68%.
During the half year, the Investment Manager's main focus has
been on resolving the impasse over the Company's largest
investment, Polar Silver Resources Limited ("Polar Silver") and its
wholly owned subsidiary ZAO Argentum ("Argentum") which holds a 50
per cent. indirect interest in the Prognoz silver project, 444km
north of Yakutsk in Russia. The majority of the Company's
investment in Polar Silver is in the form of convertible loans to
Argentum and Polar Silver and despite being the majority loan
holder, the Company was only a minority shareholder in Polar Silver
and therefore unable to control the strategy of that
investment.
The dispute between Polar Silver shareholders was the subject of
an Extraordinary General Meeting ("EGM") at the beginning of
January 2016 at which the support of the Company's shareholders
gave it the authority to increase its interest in Polar Silver up
to 35% of the NAV of the Company. This allowed a specially formed
subsidiary of the Company to offer to acquire the interests of the
other shareholders of Polar Silver. During June 2016, following
negotiations with the other Polar Silver shareholders an
alternative settlement was reached whereby all loans in the Polar
Silver group would be converted into equity in Polar Silver. In
addition, the Company agreed to acquire the interests of certain
other Polar Silver shareholders, immediately following the debt
conversion, for a total outlay of US$1.2 million in cash. The
overall effect at 30 June 2016 was an approximate 2% increase in
the Company's NAV before currency considerations but more
importantly this enables the Company to take control of the
investment in order to progress the development of the Prognoz
asset which remains one of the most attractive undeveloped silver
projects in the world. An NI 43-101 compliant resource report by
independent consultants 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 silver and
inferred resources of 9.64 million tonnes of ore grading 473g/t
silver containing 147 million ounces silver. An NI 43-101 compliant
preliminary economic assessment by Micon envisages a mine producing
an average of 13 million ounces of silver per annum over a 16-year
mine life.
A second step is envisaged, dependent on an extension to the
terms of the Prognoz Mining Licence, which will incorporate a
further reorganisation and a subscription by a new investor.
The majority of the Company's remaining investments continue to
make progress. In particular Metals Exploration Plc commenced the
commissioning of its 100,000 ounce per annum Runruno gold project
in the Philippines, following the delays to repair damage caused by
a super typhoon in October 2015 and it announced the first pour of
gold from Runruno in June 2016. Ivanhoe Mines has also continued to
make progress on all three of its major projects during 2016.
Following completion of the sale of 49.5% of its Kamoa copper
project in Democratic Republic of Congo to Zijin Mining for US$412
million, Ivanhoe announced the results of a positive
pre-feasibility study for the first phase of development and also
the discovery of a major new extension to the mineralisation. In
May 2016 Ivanhoe announced the results of an independent,
preliminary economic assessment (PEA) for the planned redevelopment
of its Kipushi zinc-copper joint venture also in the Democratic
Republic of Congo. The capital costs of the redevelopment were
estimated to be US$528 million, giving an after-tax net present
value at an 8% real discount rate of US$533 million and a 30.9%
after-tax real internal rate of return. Meanwhile, at its Platreef
Project in South Africa, Ivanhoe commenced sinking of the first
development shaft and reported a 45% increase in Indicated Mineral
Resources to contain an estimated 42.0 million ounces of platinum
group metals and gold plus an additional 52.8 million ounces in the
inferred mineral resource category.
Net Asset Value (pence/share) 38.8 +15.7% -60.5%*
------------------------------------ --------- ------- ---------
Ordinary Share Price (pence/share) 24.0 +65.5% -76.0%**
------------------------------------ --------- ------- ---------
MSCI All Country World Index (GBP) 300.94 +11.0% +66.2%
------------------------------------ --------- ------- ---------
Euromoney Global Mining 100 Index
(GBP) 428.53 +58.9% -49.6%
------------------------------------ --------- ------- ---------
Iron Ore delivered to China 62%
Fe (US$) 55.66 +27.7% -68.5%
------------------------------------ --------- ------- ---------
Copper (US$/t) 4,840.00 +2.9% -35.1%
------------------------------------ --------- ------- ---------
Gold (US$/oz) 1,322.20 +24.6% +13.2%
------------------------------------ --------- ------- ---------
Source: Bloomberg closing 27/4/10, **Issue price 28/4/10, * NAV
30/4/10
Outlook
As mentioned in the Company's 2015 Annual Report the gold sector
of the mining market appeared to have bottomed out around the end
of 2015, with the gold price rising 18.9% in the first quarter of
2016. In the second quarter this recovery continued so that the
gold price was up 24.6% in the first half in US Dollar terms.
Historically the silver price has tended to move in tandem with the
gold price albeit with greater volatility and this rose 35% in the
first half of the year. The devaluation of Sterling against the US
Dollar following Brexit has enhanced these rises in Sterling terms.
Although other minerals such as coal, iron ore and base metals may
take a while to work through their current supply/demand
fundamentals, as at 30 June 2016 the Company's top three holdings
representing 62% of net assets are invested in gold and silver
projects which means the Company's portfolio is well placed to
capture any further increases in the gold sector.
Baker Steel Capital Managers LLP
August 2016
DIRECTORS' REPORT
For the Period from 1 January 2016 to 30 June 2016
To Shareholders of Baker Steel Resources Trust Limited (the
"Company")
The Board of the Company is pleased to present the Directors'
Report for the six months ended 30 June 2016.
The Directors' Report contains information that covers this
period and the period up to the date of publication of this Report.
Please note that more up to date information is available on the
Company's website www.bakersteelresourcestrust.com.
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.
Investment Objective
The Company's investment objective is to seek capital growth
over the long-term through a focused, global portfolio consisting
principally of the equities, loans 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 making attractive investment returns
through uplift in value resulting from development progression of
the investee companies' projects and through exploiting value
inherent in market inefficiencies and pricing anomalies.
Performance
In the period ended 30 June 2016, the Company's NAV per Ordinary
Share increased by 15.7%. This compares with a rise in the
Euromoney Global Mining 100 Index (capital return in Sterling
terms) of 58.9%. A more detailed explanation of the performance of
the Company is provided within the Investment Manager's Report on
pages 3 to 5.
The results for the period are shown in the Statement of
Comprehensive Income on pages 12 and 13 and the Company's financial
position at the end of the period is shown in the Statement of
Financial Position on page 11.
Dividend and dividend policy
During the year ended 31 December 2015 the Board introduced a
capital returns policy whereby, subject to applicable laws and
regulations, it will allocate cash for distributions to
shareholders. The amount to be distributed will be calculated
following publication of the Company's audited financial statements
for each year and will be no less than 15% of the aggregate net
realised cash gains (after deducting losses) in that financial
year. 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.
Directors and their interests
The Directors of the Company who served during the period and
subsequently to the date of this report were:
Howard Myles (Chairman)
Charles Hansard
Clive Newall
Christopher Sherwell
Biographical details of each of the Directors are presented on
page 13 of the Company's annual report and financial statements for
the year ended 31 December 2015.
Each of the Directors is considered to be independent in
character and judgement, notwithstanding that they have each served
on the Board since the inception of the Company.
The Directors' interests in the share capital of the Company
were:
Number of Number of
Ordinary Shares Ordinary Shares
30 June 2016 31 December 2015
Christopher Sherwell 96,821 96,821
Clive Newall 25,000 25,000
Attendance at the Board and Audit Committee meetings during the
period was as follows:
Audit Committee Ad hoc Committee
Board Meetings Meetings Meetings
He Held Attended Held Attended Held Attended
Howard Myles 3 3 2 2 0 N/A
Christopher Sherwell 3 3 2 2 0 N/A
Charles Hansard 3 1 N/A N/A 0 N/A
Clive Newall 3 1 2 1 0 N/A
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 valuation and 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 period ended 30 June 2016 the total remuneration of the
Directors was GBP57,500 (30 June 2015: GBP70,000), with GBP28,750
payable at 30 June 2016 (31 December 2015: GBP28,750).
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 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. 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.
Following in specie transactions on 28 June 2014 and 1 July
2014, a total of 5,561,243 Ordinary Shares were issued and,
following in specie transactions on 25 February 2015 and 4 March
2015, 40,196,071 Ordinary Shares were issued.
Of the 40,196,071 Ordinary Shares issued in 2015, 38,819,601
were issued to acquire two portfolios of investments with a total
value of GBP12.66 million and 1,376,470 to acquire 1,462,500
ordinary shares of Cemos (formerly Global Oil Shale Group Limited)
for a consideration of GBP0.45 million. In addition the Company
issued a total of 3,368,488 new Ordinary Shares in respect of cash
subscriptions under an Open Offer to all shareholders for a
consideration of GBP1,219,393.
On 14 August 2015 and 20 August 2015 the Company bought back
200,000 and 500,000 Ordinary Shares respectively, both at an
average price of 20 pence per share. The repurchased Ordinary
Shares are held in Treasury. The buy-back policy was suspended
pending completion of the acquisition of a majority interest in
Polar Silver.
Following the transactions noted above the Company has a total
of 114,568,335 Ordinary and 10,000 Management Shares in issue as at
30 June 2016, of which 700,000 Ordinary Shares are held in
Treasury.
Going Concern
Having assessed the principal risks and uncertainties on pages
10 and 11 of the annual report and financial statements (the
"Annual Report"), and the other matters discussed in connection
with the viability statement as set out on pages 11 and 12 of the
Annual Report for the year ended 31 December 2015, the Directors
consider it is appropriate to adopt the going concern basis in
preparing these interim accounts.
Related Party Transactions
Transactions with related parties are based on terms equivalent
to those that prevail in an arm's length transaction and are
disclosed in Note 9.
Principal risks & uncertainties
The principal risks facing the Company which include market and
financial risk and portfolio management and performance risk are
considered in detail, along with the risks relating to a vote to
wind up the Company, on pages 10 and 11 of the Company's Annual
Report and Audited Financial Statements for the year ended 31
December 2015 which is available on the Company's website
www.bakersteelresourcestrust.com. The Directors do not consider
that these risks and uncertainties have materially changed during
the period ended 30 June 2016 and do not expect any changes in the
second half of 2016.
Directors' responsibility statement
The Directors confirm that to the best of their knowledge, this
set of condensed financial statements has been prepared in
accordance with the Companies (Guernsey) Law, 2008 and with
International Financial Reporting Standards and that this Interim
Management Report includes a fair review of the information
required by 4.2.7R and 4.2.8R of the FCA's Disclosure and
Transparency Rules.
Corporate Governance Compliance
As described in the Company's annual report for the year ended
31 December 2015 the Board has considered the principles and
recommendations set out in UK Corporate Governance Code (September
2014) (the "UK Code") issued by the Financial Reporting Council
(the "FRC"). Page 17 of the Annual Report presents those matters
where the Company has not compiled with the UK Code. There is no
change in compliance since the Annual Report.
Signed for and on behalf of the Directors
Howard Myles
Chairman
17August 2016
UNAUDITED PORTFOLIO STATEMENT
AS AT 30 JUNE 2016
% of
Shares Investments Fair value Net
/Warrants/ GBP equivalent assets
Nominal
Listed equity shares
Canadian Dollars
2,566,167 Aquila Resources Inc 297,477 0.67
107,818 BacTech Environmental Corporation 2,500 0.01
658,000 Buffalo Coal Corporation 7,627 0.02
6,171,000 Ivanhoe Mines Limited 3,612,560 8.13
Canadian Dollars Total 3,920,164 8.83
--------------- -------
Great Britain Pounds
101,099,527 Metals Exploration Plc 7,456,090 16.79
Great Britain Pounds Total 7,456,090 16.79
--------------- -------
United States Dollars
China Polymetallic Mining Company Limited
55,246,318 (CPM)* 996,018 2.24
(held via a vehicle which holds the
shares in CPM)
United States Dollars Total 996,018 2.24
--------------- -------
Total investment in listed equity shares 12,372,272 27.86
--------------- -------
Debt instruments
Canadian Dollars
250,500 Ironstone Resources Limited Loan Note 274,289 0.62
Canadian Dollars Total 274,289 0.62
--------------- -------
United States Dollars
15,400,000 Argentum Convertible Note 11,582,431 26.08
440,000 Bilboes Holdings Convertible Loan Note 418,859 0.94
220,000 Bilboes Holdings Loan Note 171,254 0.38
7,000,000 Black Pearl Limited Partnership 2,632,371 5.93
1,640,000 Polar Silver Convertible Notes 1,233,454 2.78
United States Dollars Total 16,038,369 36.11
--------------- -------
Total investments in Debt instruments 16,312,658 36.73
--------------- -------
*Classified as Level 2 (Refer Note 3)
% of
Shares Investments Fair value Net
/Warrants/ GBP equivalent assets
Nominal
Unlisted equity shares and warrants
Australian Dollars
1,070,163 Burrabulla Corporation Limited - -
Australian Dollars Total - -
--------------- -------
Canadian Dollars
4,000,000 Aquila Resources Inc Warrants 11/10/2016 - -
13,083,936 Ironstone Resources Limited 2,161,332 4.87
Ironstone Resources Limited Warrants
38,400 01/09/2016 - -
Ironstone Resources Limited Warrants
3,036,605 31/12/2016 - -
Ironstone Resources Limited Warrants
606,667 31/07/2017 4,961 0.01
Ironstone Resources Limited Warrants
143,143 22/02/2018 3,720 0.01
3,531,000 MagIndustries Corporation - -
500,000 Salmon River Resources Limited - -
Canadian Dollars Total 2,170,013 4.89
--------------- -------
Great Britain Pounds
1,594,646 Celadon Mining Limited 15,947 0.03
Cemos Group plc (formerly Global Oil
24,004,167 Shale Group Limited) 3,600,625 8.11
Great Britain Pounds Total 3,616,572 8.14
--------------- -------
Norwegian Krone
7,100,689 Nussir ASA 1,116,439 2.51
Norwegian Krone Total 1,116,439 2.51
--------------- -------
United States Dollars
16,151,567 Archipelago Metals Limited 1,214,769 2.73
Archipelago Metals Limited Warrants
1,000,000 31/12/2016 5 -
451,445 Bilboes Gold Limited 6,790,689 15.29
4,244,550 Gobi Coal & Energy Limited 1,276,940 2.88
1,000,000 Midway Resources International 94,013 0.21
3,408 Polar Silver Resources Limited 2,563 0.01
United States Dollars Total 9,378,979 21.12
--------------- -------
Total Unlisted equity shares and warrants 16,282,003 36.66
--------------- -------
Financial assets held at fair value
through profit or loss 44,966,933 101.25
--------------- -------
Other Assets & Liabilities (555,005) (1.25)
--------------- -------
Total Equity 44,381,541 100.00
--------------- -------
UNAUDITED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
Unaudited Audited
30 June 31 December
2016 2015
Notes GBP GBP
Assets
Cash and cash equivalents 68,538 562,101
Due from broker 290,733 3,720
Other receivables 57,484 77,361
Financial assets held at fair value through
profit or loss 3 44,966,933 37,823,488
Total assets 45,383,688 38,466,670
-------------- -------------
Equity and Liabilities
Liabilities
Due to broker 840,646 -
Directors' fees payable 28,750 28,750
Management fees payable 7 43,103 25,979
Administration fees payable 28,689 23,253
Audit fees payable 10,906 21,683
Other payables 19,666 29,737
Total liabilities 971,760 129,402
-------------- -------------
Equity
Management Ordinary Shares 8 10,000 10,000
Ordinary Shares 8 80,557,984 80,557,984
Profit and loss account (36,156,056) (42,230,716)
Total equity 44,411,928 38,337,268
-------------- -------------
Total equity and liabilities 45,383,688 38,466,670
============== =============
Net Asset Value per Ordinary Share (in Pence)
- Basic and diluted 5 38.8 33.5
These unaudited condensed financial statements on page 11 to 15 were
approved by the Board of Directors on 17 August 2016 and signed on
its behalf by:
Howard Myles Christopher Sherwell
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2016 TO 30 JUNE 2016
Unaudited Unaudited Unaudited
period ended period ended period ended
30 June 30 June 30 June
2016 2016 2016
Revenue Capital Total
Notes GBP GBP GBP
Income
Net gain on financial assets at
fair value through profit or loss 3 - 6,550,736 6,550,736
Net foreign exchange gain - 4,634 4,634
Net income - 6,555,370 6,555,370
-------------- -------------- --------------
Expenses
Management fees 7 177,529 - 177,529
Interest expense 66,014 - 66,014
Directors' fees 57,500 - 57,500
Administration fees 45,828 - 45,828
Custody fees 29,678 - 29,678
Legal fees 26,612 - 26,612
Audit fees 26,348 - 26,348
Directors' expenses 6,963 - 6,963
Other expenses 44,238 - 44,238
Total expenses 480,710 - 480,710
-------------- -------------- --------------
Net gain for the period (480,710) 6,555,370 6,074,660
============== ============== ==============
Net gain for the period per Ordinary
Share:
Basic and diluted (in pence) 5 (0.4) 5.7 5.3
In the period ended 30 June 2016 there were no gains or losses other than those recognised
above.
The Directors consider all results to derive from continuing activities.
The format of the Income Statement follows the recommendations of the 2014 AIC Statement of
Recommended Practice.
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2015 TO 30 JUNE 2015
Unaudited Unaudited Unaudited
period ended period ended period ended
30 June 30 June 30 June
2015 2015 2015
Revenue Capital Total
Notes GBP GBP GBP
Income
Interest income 35,547 - 35,547
Other income 25,783 - 25,783
Net gain on financial assets at
fair value through profit or loss 3 - 4,205,771 4,205,771
Net foreign exchange loss - (21,395) (21,395)
Net income 61,330 4,184,376 4,245,706
-------------- -------------- --------------
Expenses
Management fees 7 258,814 - 258,814
Director's fees 70,000 - 70,000
Administration fees 41,447 - 41,447
Custody fees 27,745 - 27,745
Audit fees 22,291 - 22,291
Directors' expenses 2,583 - 2,583
Legal fees 1,044 - 1,044
Other expenses 61,110 - 61,110
Total expenses 485,034 - 485,034
-------------- -------------- --------------
Net gain for the period (423,704) 4,184,376 3,760,672
============== ============== ==============
Net gain for the period per Ordinary
Share:
Basic and diluted (in pence) 5 (0.4) 3.9 3.5
In the period ended 30 June 2015 there were no gains or losses other than those recognised
above.
The Directors consider all results to derive from continuing activities.
The format of the Income Statement follows the recommendations of the 2014 AIC Statement of
Recommended Practice.
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2016 TO 30 JUNE 2016
Profit Profit
Management and loss and loss
Ordinary Ordinary Treasury account account
Shares Shares Shares (Revenue) (Capital) Period end
GBP GBP GBP GBP GBP GBP
Balance as at
1 January 2016 10,000 80,698,476 (140,492) (7,292,263) (34,938,453) 38,337,268
Net gain for the
period - - - (480,710) 6,555,370 6,074,660
Balance as at
30 June 2016 10,000 80,698,476 (140,492) (7,772,973) (28,383,083) 44,411,928
=========== =========== =========== ============ ============= =============
Notes: 8 8
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2015 TO 30 JUNE 2015
Profit and Profit
Management loss account and loss
Ordinary Ordinary (Revenue) account
Shares Shares (Capital) Period end
GBP GBP GBP GBP GBP
Balance as at 1 January
2015 10,000 66,945,285 (6,482,078) (28,306,651) 32,166,556
Issue of Ordinary
Shares for cash - 1,219,393 - - 1,219,393
Issue of Ordinary
Shares in specie - 13,112,248 - - 13,112,248
Expenses related to
the issue of shares - (578,450) - - (578,450)
Net gain for the period - - (423,704) 4,184,376 3,760,672
Balance as at 30 June
2015 10,000 80,698,476 (6,905,782) (24,122,275) 49,680,419
=========== =========== =============== ============= =============
UNAUDITED CONDENSED INTERIM STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 1 JANUARY 2016 TO 30 JUNE 2016
Unaudited Unaudited
Period ended Period ended
30 June 30 June
2016 2015
GBP GBP
Cash flows from operating activities
Net gain for the period 6,074,660 3,760,672
Adjustments to reconcile gain/(loss) for the
period to net cash provided by/(used in) operating
activities:
Interest income - (35,547)
Net gain on financial assets at fair value
through profit or loss (6,550,736) (4,205,771)
Net increase in other receivables (40,405) (1,686)
Net increase/(decrease) in other payables 1,712 (202,675)
-------------- --------------
(514,769) (685,007)
Interest received 60,282 45,801
-------------- --------------
Net cash used in operating activities (454,487) (639,206)
-------------- --------------
Cash flows from investing activities
Purchase of financial assets at fair value
through profit or loss (381,211) (619,391)
Sale of financial assets at fair value through
profit or loss 342,135 2,252,756
-------------- --------------
Net cash (used in)/provided by investing activities (39,076) 1,633,365
-------------- --------------
Cash flows from financing activities
Proceeds from shares issued - 1,219,393
Expenses related to issue of shares - (578,450)
Net cash provided by financing activities - 640,943
-------------- --------------
Net (decrease)/increase in cash and cash equivalents (493,563) 1,635,102
Cash and cash equivalents at the beginning
of the period 562,101 94,217
Cash and cash equivalents at the end of the
period 68,538 1,729,319
============== ==============
Supplemental disclosure of non-cash flow information
Purchase of financial assets at fair value
through profit or loss - (13,112,248)
Issue of Ordinary Shares in specie - 13,112,248
============== ==============
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2016 TO 30 JUNE 2016
1. GENERAL INFORMATION
Baker Steel Resources Trust Limited (the "Company") is a
closed-ended investment company with limited liability incorporated
and domiciled 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
2015 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.
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.
Baker Steel Capital Managers LLP (the "Investment Manager") was
authorised to act as an Alternative Investment Fund Manager
("AIFM") of Alternative Investment Funds ("AIFs") on 22 July 2014.
On 14 November 2014, the Investment Manager signed an amended
Investment Management 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.
The Half-Yearly financial report has not been audited or
reviewed by the auditors pursuant to the Auditing Practices Board
guidance on review of Interim Financial Information.
2. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies adopted in the preparation of these
unaudited condensed interim financial statements have been
consistently applied during the period, unless otherwise
stated.
a) Statement of compliance
The unaudited condensed interim financial statements of the
Company for the period 1 January 2016 to 30 June 2016 have been
prepared in accordance with IAS 34, "Interim Financial Reporting"
as adopted in the EU, together with applicable legal and regulatory
requirements of The Companies (Guernsey) Law, 2008 and the Listing
Rules of the London Stock Exchange's Main Market. The unaudited
condensed interim financial statements do not include all the
information and disclosure required in the annual financial
statements and should be read in conjunction with the annual report
and audited financial statements as at 31 December 2015.
b) Basis of preparation
The unaudited condensed interim financial statements have been
prepared under the historical cost basis, modified by the
revaluation of certain financial instruments designated at Fair
value through Profit or Loss upon initial recognition. The
accounting policies adopted in the preparation of these unaudited
condensed interim financial statements are consistent with the
accounting policies stated in Note 2 of the annual financial
statements for the year ended 31 December 2015. The preparation of
unaudited condensed interim financial statements in conformity with
IAS 34, "Interim Financial Reporting", requires the Company to make
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the unaudited condensed
interim financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
The Company's functional currency is the Great Britain pound
Sterling ("GBP"), being the currency in which its Ordinary Shares
are issued and in which returns are made to shareholders. The
presentation currency is the same as the functional currency. The
Financial Statement have been rounded to the nearest GBP. 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.
c) 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 in future periods.
(i) Judgements
In the process of applying the Company's accounting policies,
the Directors have 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 fulfils
the following criteria:
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 the above criteria in and is therefore
considered to be an investment entity and therefore all entities
that qualify as subsidiaries or associates are carried at fair
value through profit or loss.
Subsidiaries
Entities in which the Company holds more than 50% of the voting
rights, or where the Company is otherwise able to exercise control
are considered as subsidiaries of the Company, these are disclosed
in Note 11 of these unaudited condensed interim financial
statements. Subsidiary companies are carried at fair value through
profit or loss.
Associates
The Directors consider that entities in which the Company holds
more than 20% of the voting rights should be considered as
associates of the Company and these are disclosed in Note 13 of the
Annual Report.
Going Concern
As stated in the Directors' Report the Directors have assessed
the principal risks and uncertainties (as described in pages 10 and
11 of the Annual Report) and the other matters discussed in
connection with the viability statement as set out on pages 11 and
12 of the Annual Report for the year ended 31 December 2015. The
Directors consider it is appropriate to adopt the going concern
basis in preparing these interim accounts.
(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 for further information.
(iii) 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.
d) Change in accounting policy
Amendments to IAS 1: Disclosure Initiative
In December 2014, the International Accounting Standards Board
(the IASB or the Board) issued amendments to IAS 1 Presentation of
Financial Statements and an exposure draft proposing amendments to
IAS 7 Statement of Cash Flows as part of its Disclosure
Initiative.
The following narrow-scope amendments have been made to IAS
1:
-- Materiality and aggregation: clarifies that an entity should
not obscure useful information by aggregating or disaggregating
information; and that materiality considerations apply to the
primary statements, notes and any specific disclosure requirements
in IFRSs, i.e. disclosures specifically required by IFRSs need to
be provided only if the information is material.
-- Statement of Financial Position and Statement of
Comprehensive Income: clarifies that the list of line items
specified by IAS 1 for these statements can be disaggregated and
aggregated as relevant. Additional guidance has been added on the
presentation of subtotals in these statements.
-- Presentation of items of other comprehensive income ("OCI"):
clarifies that an entity's share of OCI of equity-accounted
associates and joint ventures should be presented in aggregate as
single line items based on whether or not it will subsequently be
reclassified to profit or loss.
-- Notes: clarifies that entities have flexibility when
designing the structure of the notes and provides guidance on how
to determine a systematic order of the notes. Also, unhelpful
examples regarding the identification of significant accounting
policy have been removed.
The amendments are applicable for annual periods beginning on or
after 1 January 2016. Adoption of this amendment does not have a
material impact on the presentation of Company's financial
statements.
Amendments to IFRS 10, IFRS 12 and IAS 28: Investment
Entities-Applying the Consolidation Exception
The amendment issued in December 2014, and effective for annual
periods beginning on or after 1 January 2016, addresses the
following issues that have arisen in applying the investment
entities exception under IFRS 10 Consolidated Financial Statements:
(i) clarifies that the exemption from presenting consolidated
financial statements applies to a parent entity that is a
subsidiary of an investment entity, when the investment entity
measures all of its subsidiaries at fair value (ii) clarifies that
only a subsidiary that is not an investment entity itself and
provides support services to the investment entity is consolidated;
all other subsidiaries of an investment entity are measured at fair
value (iii) allows the investor, when applying the equity method,
to retain fair value measurement applied by the investment entity
associate or joint venture to its interests in subsidiaries.
Adoption of these amendments does not have a significant impact on
the Company's financial statements.
e) Accounting standards and amendments to existing accounting
standards in issue but not yet effective
IFRS 9 Financial Instruments
IFRS 9 Financial Instrument, effective date 1 January 2018,
specifies how an entity should classify and measure financial
assets and liabilities, including some hybrid contracts. The
standard improves and simplifies the approach for classification
and measurement of financial assets compared with the requirements
of IAS 39 Financial Instruments: Recognition and Measurement. Most
of the requirements in IAS 39 for classification and measurement of
financial liabilities were carried forward unchanged. The standard
applies a consistent approach to classifying financial assets and
replaces the numerous categories of financial assets in IAS 39,
each of which had its own classification criteria. The standard is
not expected to have a significant impact on the Company's
financial position or performance, as it is expected that the
Company will continue to classify its financial assets and
financial liabilities (both long and short) as being at fair value
through profit or loss.
Amendments to IAS 7 - Statements of cash flow
Amendments to IAS 7, 'Statements of cash flow' effective for
annual periods beginning on or after 1 January 2017. The IASB
requires that the following changes in liabilities arising from
financing activities are disclosed (to the extent necessary): (i)
changes from financing cash flows; (ii) changes arising from
obtaining or losing control of subsidiaries or other businesses;
(iii) the effect of changes in foreign exchange rates; (iv) changes
in fair values; and (v) other changes. The amendments state that
one way to fulfil the new disclosure requirement is to provide a
reconciliation between the opening and closing balances in the
statement of financial position for liabilities arising from
financing activities. Finally, the amendments state that changes in
liabilities arising from financing activities must be disclosed
separately from changes in other assets and liabilities. Earlier
application is permitted. The Company does not expect the
measurement and classification requirements to have a significant
impact on its financial statements.
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Listed
equity Unlisted
30 June 2016 shares equity shares Debt instruments Warrants Total
GBP GBP GBP GBP GBP
Financial assets at fair value through profit
or loss
Cost 15,434,516 26,132,382 14,758,620 21,826 56,347,344
Unrealised (loss)/gain (3,062,244) (9,859,065) 1,554,038 (13,140) (11,380,411)
Market value at 30 June 2016 12,372,272 16,273,317 16,312,658 8,686 44,966,933
=========== ============== ================ ======== ============
Listed
equity Unlisted
31 December 2015 shares equity shares Debt instruments Warrants Total
GBP GBP GBP GBP GBP
Financial assets at fair value through
profit or loss
Cost 17,010,213 25,904,903 13,764,242 21,826 56,701,184
Unrealised (loss)/gain (9,018,307) (13,614,664) 3,766,844 (11,569) (18,877,696)
Market value at 31 December 2015 7,991,906 12,290,239 17,531,086 10,257 37,823,488
============ ============== ================ ========= =============
The following table analyses net (losses)/gains on financial
assets at fair value through profit or loss for the period/year
ended 30 June 2016 and 31 December 2015.
Year ended
Period ended 31 December
30 June 2016 2015
GBP GBP
Financial assets at fair value through profit
or loss
Realised gain/( losses) on:
- Listed equity shares (946,549) (4,035,152)
- Unlisted equity shares - (11,956,811)
- Convertible Debt instruments - (9,011)
- Warrants - (7,092)
-------------- -------------
(946,549) (16,008,066)
Movement in unrealised gains/(losses) on:
- Listed equity shares 5,956,063 1,856,871
- Unlisted equity shares 3,755,599 6,446,620
- Debt instruments (2,212,806) 1,116,693
- Warrants (1,571) (37,446)
-------------- -------------
7,497,285 9,382,738
Net gain/ (loss) on financial assets at
fair value through profit or loss 6,550,736 (6,625,328)
============== =============
The following table analyses investments by type and by level
within the fair valuation hierarchy at 30 June 2016.
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 11,376,254 996,018 - 12,372,272
Unlisted equity shares - - 16,273,317 16,273,317
Warrants - - 8,686 8,686
Debt instruments - - 16,312,658 16,312,658
------------- ------------------ ------------ ----------
11,376,254 996,018 32,594,661 44,966,933
============= ================== ============ ==========
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
The following table analyses investments by type and by level
within the fair valuation hierarchy at 31 December 2015.
Quoted prices Quoted market Unobservable
in active 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 6,266,464 1,725,442 - 7,991,906
Unlisted equity shares - - 12,290,239 12,290,239
Warrants - - 10,257 10,257
Debt instruments - - 17,531,086 17,531,086
------------------ ------------------ ------------ -----------
6,266,464 1,725,442 29,831,582 37,823,488
================== ================== ============ ===========
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 period/year included in net loss on
financial assets and liabilities at fair value through profit or
loss held at 30 June 2016.
Debt
Unlisted instruments Warrants Total
Equities
GBP GBP GBP GBP
Opening balance 1 January
2016 12,290,239 17,531,086 10,257 29,831,582
Purchases of investments 227,479 994,378 - 1,221,857
Change in net unrealised
(losses)/gains 3,755,599 (2,212,806) (1,571) 1,541,222
Closing balance 30 June
2016 16,273,317 16,312,658 8,686 32,594,661
------------ ------------ --------- ------------
Unrealised gain/(losses)
on investments still held
at 30 June 2016
held at 31(st) December
2015 (9,859,065) 1,554,038 (13,140) (8,318,167)
------------ ------------ --------- ------------
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 period/year included in net loss on
financial assets and liabilities at fair value through profit or
loss held at 31 December 2015.
Debt
Unlisted instruments Warrants Total
Equities
GBP GBP GBP GBP
Opening balance 1 January
2015 12,128,320 12,497,799 280 24,626,399
Purchases of investments 6,893,464 3,925,604 21,826 10,840,894
Sales of investments* (1,318,043) - - (1,318,043)
Change in net unrealised
(losses)/gains 6,446,128 1,116,694 (11,849) 7,550,973
Realised gains/(losses) (11,956,811) (9,011) - (11,965,822)
Transfer from Level 1
to 3 97,181 - - 97,181
-------------- ------------ ---------- -------------
Closing balance 31 December
2015 12,290,239 17,531,086 10,257 29,831,582
-------------- ------------ ---------- -------------
Unrealised gain/(losses)
on investments still held
at 31 December 2015 (17,585,378) 3,368,631 (11,569) (14,228,316)
-------------- ------------ ---------- -------------
*The most significant sale during the year ended 31 December
2015 was Ferrous Resources which was sold for GBP1,307,957. These
proceeds represented a gain of GBP354,767 against the 31 December
2014 book value, but the investment had previously been written
down substantially and a loss of GBP11,876,647 was realised against
acquisition cost.
It is the Company's policy to recognise a change in hierarchy
level when there is a change in the status of the investment, for
example when a listed company delists or vice versa, or when shares
previously subject to a restriction have that restriction
released.
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
There were no transfers into Level 3 during the period ended 30
June 2016. During the year ended 31 December 2015 Burrabulla
Corporation Limited (formerly South American Ferro Metals Limited)
has been transferred from Level 1 to Level 3 as it is no longer
listed. The value of the investment has been written down to zero
following it being placed into administration and delisted.
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. Level 2 investments are valued with
reference to the listed price of the shares should they be freely
tradeable after applying a discount for liquidity if relevant. 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 30 June 2016 amounting to
GBP996,018 (31 December 2015: GBP1,725,442).
Investments classified within Level 3 have significant
unobservable inputs. They include unlisted debt instruments,
unlisted equity shares and warrants. Level 3 investments are valued
using valuation techniques explained below. 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
The default valuation technique is of Latest Recent Transaction.
Where an unquoted investment has been acquired or where there has
been a material arm's length transaction 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.
Where there has been no Latest Recent Transaction the primary
valuation driver is IndexVal. 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.
A subsidiary driver of valuation is DRAV. 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.
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
Valuation methodology of Level 3 investments (continued)
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, due to the difficulty in
establishing a sensible volatility for unlisted shares without
giving distorted results.
iv. Convertible loans
Convertible loans are valued at principal plus accrued interest,
taking into account credit risk and the value of the conversion
aspect as related to the DRAV derived which relates to the
valuation of the sub-sector of the equity, 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
30 June Range
2016 Unobservable (weighted
Description GBP Valuation technique input average)
Unlisted Equity 7,208,773 Recent Transactions Private transactions n/a
Unlisted Equity 8,952,021 IndexVal Change in IndexVal n/a
Unlisted Equity 112,523 Other Project Milestones n/a
Debt Instruments
Argentum & 12,815,885 Valued at par Development n/a
Polar Silver with reference risk discount
Convertible to credit risk rate
Loan Notes and value on conversion
Black Pearl Valued at estimated
Limited Partnership 2,632,371 cash recoverable Recovery estimation +/-33%
Other Debentures/Loans 864,402 Valued at par Development n/a
with reference risk discount
to credit risk rate
Simplified Black
Warrants 8,686 & Scholes Model Volatilities 40%
31 December Range
2015 Unobservable (weighted
Description GBP Valuation technique input average)
Unlisted Equity 6,373,862 Recent Transactions Private transactions n/a
Unlisted Equity 4,710,067 IndexVal Change in IndexVal n/a
Unlisted Equity 1,206,310 Other Project Milestones n/a
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
Quantitative information of significant unobservable inputs -
Level 3 (continued)
31December Range
2015 Unobservable (weighted
Description GBP Valuation technique input average)
Debt Instruments (continued)
Argentum & Polar 10,038,650 Valued at par Development n/a
Silver Convertible with reference risk discount
Loan Notes to credit risk rate
and value on conversion
Black Pearl Limited 7,071,647 Valued at par Probability n/a
Partnership plus interest Weighting
accrued with reference
to weighted average
of probabilities
of repayment
Other Debentures/Loans 420,789 Valued at par Development n/a
with reference risk discount
to credit risk rate
Simplified Black
Warrants 10,257 & 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 above as this
was the greatest amount that Index Val moved for any single
investment during any six month period since IndexVal was first
adopted. The valuation method for Ironstone changed from Recent
Transaction at 31 December 2015 to IndexVal at 30 June 2016. The
valuation for Black Pearl changed from valued at par plus interest
accrued with reference to weighted average of probabilities of
repayment at 31 December 2015 to the estimated cash recoverable at
30 June 2016. The valuation technique for Gobi changed from
"IndexVal" at 31 December 2015 to "Recent Transaction" at 30 June
2016 and Nussir changed from "Other" to "Recent Transaction".
Credit Risk analysis of 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 30 June
2016 are as shown below:
Description Input Sensitivity Effect on Fair
used* Value (GBP)
Unlisted Equity Change in IndexVal +/-70% +/-11,391,322
Debt Instruments
Argentum Convertible Development risk +20% nil
& Polar Silver discount rate
Loan Notes
Black Pearl Limited Estimated recovery
Partnership range +/-33% +/-1,166,667
Other Debentures/Loans Development risk +20% nil
discount rate
Warrants Volatility of 40% +/-20% +8,307/-6,352
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
Credit Risk analysis of significant changes in unobservable
inputs within Level 3 investments (continued)
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
2015 are as shown below:
Description Input Sensitivity Effect on Fair
used* Value (GBP)
Unlisted Equity Change in IndexVal +/-70%** +/-8,603,167
Debt Instruments
Argentum Convertible Development risk +20%*** nil
& Polar Silver discount rate
Loan Notes
Black Pearl Limited
Partnership Probability weighting +/-33% +/-1,823,228
Other Debentures/Loans Development risk +20% nil
discount rate
Warrants Volatility of 40% +/-20% +9,727/-7,387
*The sensitivity analysis refers to a percentage amount added or
deducted from the input and the effect this has on the fair value.
The 70% sensitivity was used as this was the highest movement
observed for IndexVal for any investment since the commencement of
the technique.
** Where the recent transaction methodology is used, the change
in IndexVal is also referred to in ascertaining that the
transaction that occurred during the period still reflects fair
value.
***Of amount outstanding
4. OTHER FINANCIAL INSTRUMENTS
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.
Cash and cash equivalents include cash in hand, deposits held
with banks and other short-term investments in an active
market.
Other assets include the contractual amounts for settlement of
the trades and other obligations due to the Company. 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.
5. NET ASSET VALUE PER SHARE AND PROFIT OR LOSS PER SHARE
Net asset value per share is based on the net assets of
GBP44,411,928 (31 December 2015: GBP38,337,268) and 114,578,335 (31
December 2015: 114,578,335) Ordinary Shares, being the number of
shares in issue at 30 June 2016. The calculation for basic and
diluted net asset value per share is as below:
30 June 2016 31 December 2015
Ordinary Shares Ordinary Shares
Net assets at the period end (GBP) 44,411,928 38,337,268
Number of shares* 114,578,335 114,578,335
Net asset value per share (in pence)
basic and diluted 38.8 33.5
Weighted average number of shares 114,578,335 111,241,585
*Including 10,000 Management Ordinary Shares
5. NET ASSET VALUE PER SHARE AND PROFIT OR LOSS PER SHARE (CONTINUED)
The basic and diluted gain per share for the period ended 30
June 2016 is based on the net gain for the period of the Company of
GBP6,074,660 and on 114,578,335 Ordinary Shares, being the weighted
average number of Ordinary Shares in issue during the period.
The basic and diluted gain per share for the period ended 30
June 2015 is based on the net gain for the period of the Company of
GBP3,760,672 and on 107,788,169 Ordinary Shares, being the weighted
average number of Ordinary Shares in issue during the period.
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 exemption fee of
GBP1,200 (2015: GBP1,200) has been paid.
7. 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 average market capitalisation
of the Company during each 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 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, 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 have 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.
The management fee for the period ended 30 June 2016 was
GBP177,529 (30 June 2015: GBP 258,814) out of which GBP43,103 (31
December 2015: GBP25,979) was outstanding at the period end.
8. 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 114,568,335 (31 December
2015:114,568,335) Ordinary Shares in issue with 700,000 held in
treasury. In addition, the Company has 10,000 (31 December 2015:
10,000) Management Ordinary Shares in issue, which are held by the
Investment Manager.
On 28 August 2014, the Company agreed to subscribe for 1,462,500
Ordinary Shares of Cemos Group plc (formerly Global Oil Shale Group
Limited) for a consideration of GBP585,000. This consideration was
settled through the issue of 1,376,470 Ordinary Shares of the
Company at the unaudited net asset value of 42.5 pence per share on
27 February 2015. Under IFRS the consideration of this transaction
has to be valued based on listed price of 32.5 pence per share as
at 2 March 2015. Therefore the consideration for this transaction
is GBP0.45 million which is recognised in the financial
statements.
On 25 February 2015, the Company acquired two portfolios of
Investments with a total value of GBP16 million. This consideration
was settled through the issue of 30,468,522 new Ordinary Shares of
the Company based on the unaudited net asset value of 42.6 pence
per share on 18 February 2015 and 8,351,079 new Ordinary Shares of
the Company based on a 15% discount to this unaudited net asset
value. Under IFRS the consideration for this transaction has to be
valued based on listed price of 32.6 pence per Ordinary Shares of
the Company as at 23 February 2015. Therefore the consideration for
this transaction is GBP12.66 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.
In addition the Company issued a total of 3,368,488 new Ordinary
Shares in respect of cash subscriptions under the Open Offer to all
shareholders for a consideration of GBP1,219,393.
On 14 August 2015 and 20 August 2015 the Company bought back
200,000 and 500,000 Ordinary Shares respectively, both at an
average of 20 pence per share. The repurchased Ordinary Shares are
held in Treasury.
The above transactions had no impact on the profit or loss of
the Company in the year they were processed; they did however
impact the NAV per share of the Company.
The Ordinary Shares are admitted to the Premium Listing segment
of the Official List.
The details of issued share capital of the Company are as
follows:
30 June 2016 31 December 2015
Amount No. of shares** Amount No. of shares**
GBP GBP
Issued and fully paid share
capital
Ordinary Shares of no par value* 80,708,476 115,278,335 80,708,476 115,278,335
(including Management Ordinary
Shares)
Treasury Shares (140,492) (700,000) (140,492) (700,000)
The issue of Ordinary Shares during the period ended 30 June
2016 took place as follows:
Ordinary Shares Treasury Shares
Amount No. of shares** Amount No. of shares
GBP GBP
Balance at 1 January 2016 80,567,984 114,578,335 140,492 700,000
Issue of Ordinary Shares - - - -
Redemption of Ordinary Shares - - - -
----------- ---------------- --------- ---------------
Balance at 30 June 2016 80,567,984 114,578,335 140,492 700,000
=========== ================ ========= ===============
8. SHARE CAPITAL (CONTINUED)
The issue of Ordinary Shares during the year ended 31 December
2015 took place as follows:
Ordinary Shares Treasury Shares
Amount No. of shares** Amount No. of shares
GBP GBP
Balance at 1 January 2015 66,955,285 71,713,776 - -
Issue of Ordinary Shares 13,753,191 43,564,559 - -
Buy-back of Ordinary Shares (140,492) (700,000) 140,492 700,000
----------- ---------------- --------- ---------------
Balance at 31 December 2015 80,567,984 114,578,335 140,492 700,000
=========== ================ ========= ===============
* On 9 March 2010, 1 Management Ordinary Share was issued and on
26 March 2010, 9,999 Management Ordinary Shares were issued.
** Includes 10,000 Management Ordinary Shares
9. RELATED PARTY TRANSACTIONS
The Directors' interests in the share capital of the Company
were:
Number of Number of
Ordinary Shares Ordinary Shares
30 June 2016 31 December 2015
Christopher Sherwell 96,821 96,821
Clive Newall 25,000 25,000
The Manager, Baker Steel Capital Managers (Cayman) Limited, had
an interest in Nil Ordinary Shares at 30 June 2016 (31 December
2015: 504,832).
The Investment Manager, Baker Steel Capital Managers LLP, had an
interest in 10,000 Management Ordinary Shares at 30 June 2016 (31
December 2015: 10,000).
Baker Steel Global Funds SICAV - Precious Metals Fund ("Precious
Metals Fund") had an interest in 7,669,609 Ordinary Shares in the
Company at 30 June 2016 (31 December 2015: 7,669,609). These shares
are held in a custodian account with Citibank N.A. London. Precious
Metals Fund shares a common Investment Manager with the
Company.
10. SUBSEQUENT EVENTS
There were no events subsequent to the period end that
materially impacted on the Company.
11. SUBSIDIARY COMPANIES
The Company holds a 100% interest in Polar Acquisition Limited
("PAL"); a Company incorporated in the British Virgin Islands. PAL
has been incorporated to allow the Company to acquire the interest
of other shareholders of Polar Silver.
The interest in PAL is for investment purposes and it is deemed
a subsidiary as more than 50% of the voting rights are controlled
by the Company. As at the date of publishing these unaudited
condensed interim financial statements, it is the opinion of the
Directors that the fair value of PAL is US$1, the amount of capital
the Company has invested in PAL.
12. APPROVAL OF HALF YEARLY REPORT AND UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
The Half-Yearly Report and Unaudited Condensed Interim Financial
Statements to 30 June 2016 were approved by the Board of Directors
on 17 August 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DVLBFQVFLBBF
(END) Dow Jones Newswires
August 18, 2016 03:25 ET (07:25 GMT)
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