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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Baker Steel Resources Trust Limited | LSE:BSRT | London | Ordinary Share | GG00B6686L20 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.50 | 1.05% | 48.00 | 47.00 | 49.00 | 48.00 | 47.50 | 47.50 | 59,690 | 15:51:57 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Unit Inv Tr, Closed-end Mgmt | -18.48M | -20.32M | -0.1908 | -2.52 | 51.1M |
From Apr 2019 to Apr 2024
TIDMBSRT
RNS Number : 1608O
Baker Steel Resources Trust Ltd
16 August 2017
BAKER STEEL RESOURCES TRUST LIMITED
(Incorporated in Guernsey with registered number 51576 under the provisions of The Companies (Guernsey) Law, 2008 as amended)
16 August 2017
BAKER STEEL RESOURCES TRUST LTD
(the "Company")
Half-Yearly Report and Unaudited Condensed Interim Financial Statements
For the period from 1 January 2017 to 30 June 2017
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 2017. 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
Hot Features
Premium
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, GY1 3NF
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
United Kingdom
STOCK BROKERS: 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
*The Investment Manager was authorised as an Alternative Investment Fund Manager ("AIFM") for the purpose of the Alternative Investment Fund Managers Directive ("AIFMD") on 22 July 2014.
HSBC
Securities
Services
SUB-ADMINISTRATOR TO THE COMPANY: (Ireland) DAC
1 Grand Canal
Square
Grand Canal
Harbour
Dublin 2
Ireland
HSBC
Institutional
Trust Services
CUSTODIAN TO THE COMPANY: (Ireland) DAC
1 Grand Canal
Square
Grand Canal
Harbour
Dublin 2
Ireland
HSBC
SAFEKEEPING Institutional
AND Trust
MONITORING Services
AGENT: (Ireland) DAC
1 Grand Canal
Square
Grand Canal
Harbour
Dublin 2
Ireland
Ernst & Young
AUDITOR: LLP
Royal Chambers
St. Julian's
Avenue
St. Peter Port
Guernsey GY1
4AF
Channel
Islands
Capita
Registrars
(Guernsey)
REGISTRAR: Limited
Mont Crevelt
House
Bulwer Avenue
St. Sampson
Guernsey GY2
4LH
Channel
Islands
Capita Asset
UK PAYING AGENT AND TRANSFER AGENT: Services
The Registry
34 Beckenham
Road
Beckenham
Kent BR3 4TU
United Kingdom
Capita Asset
RECEIVING AGENT: 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 2017 to 30 June 2017
Financial Performance
The unaudited net asset value per Ordinary Share as at 30 June 2017 was 51.4 pence per share, up 7.3% over the six months. During this period the Euromoney Global Mining 100 Index was down 2.3% 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 2017. The fair value of unquoted investments is determined by the Directors with assistance from the Investment Manager. Quoted investments are carried at closing market prices as at 30 June 2017.
Net assets at 30 June 2017 comprised the following:
GBPm % of net
assets
Unquoted Investments 42.6 71.4
Quoted Investments 12.9 21.6
Cash and Other net assets 4.2 7.0
--------------- ------------
59.7 100.0
Investment Update
Top 10 Holdings - 30 June 2017
% of NAV
Polar Acquisition Limited 34.2%
Ivanhoe Mines Limited 12.3%
Bilboes Gold Limited 12.1%
Cemos Group Plc 7.3%
Metals Exploration Plc 6.9%
Black Pearl Limited Partnership 4.5%
Ironstone Resources Limited 4.2%
Sarmin Minerals Exploration Inc 3.7%
Nussir ASA 3.1%
China Polymetallic Mining Company Limited 2.3%
------
90.6%
Other Investments 2.4%
Cash and other net assets 7.0%
------
100%
------
Top 10 Holdings - 31 December 2016
% of NAV
Polar Acquisition Limited 37.9%
Bilboes Gold Limited 13.6%
Ivanhoe Mines Limited 11.4%
Metals Exploration Plc 10.0%
Cemos Group plc 6.8%
Black Pearl Limited Partnership 5.1%
Ironstone Resources Limited 4.5%
Nussir ASA 3.5%
China Polymetallic Mining Company Limited 2.4%
Archipelago Metals Limited 2.4%
---------
97.6%
Other Investments 1.5%
Cash and other net assets 0.9%
---------
100%
=========
Review
At the end of June 2017, Baker Steel Resources Trust Limited was 93% invested. The Company made one small investment during the first half of 2017 and is currently analysing a number of potential additional investments both to fund further progress at existing investments within the portfolio as well as to access new opportunities with the aim of being fully invested.
During the first six months of the year, the unaudited net asset value per share rose by 7.3% to 51.4p in an overall flat market for mining shares, with the Euromoney Global Mining 100 Index falling 2.3% in Sterling terms. Metals prices were mixed during the first half with copper and gold both rising around 7% whereas the iron ore price fell back 17.6% after the sharp recovery seen in 2016 but is still almost 50% higher than at the beginning of 2016. This period of consolidation after the initial recovery seen in 2016 is welcome as it forms a new base for the industry to build upon. This has meant the Company has seen an increase in attractive projects with valuations and prospects having recovered sufficiently that project owners are prepared to suffer dilution to see the next phase of development whilst offering enough value to provide the potential for above average returns for investors.
The greatest contributor to the increase in net assets during the half year was Polar Acquisition Limited ("PAL"). In January 2017, Polymetal International plc acquired a 10% interest in PAL's subsidiary, Polar Silver Resources Limited ("PSR"), and took on an obligation to undertake 25,000 metres of diamond drilling, and to complete a technical study, which will produce an externally audited JORC-compliant reserves estimate for the property by 31 March 2019. Polymetal quickly mobilised a technical team and drilling is on target to complete the 25,000 metres within this year's drilling season. Upon completion of the technical study and the reserve estimate, but no later than 31 March 2020, Polymetal will have an option to acquire the 90 per cent of the PSR shares that it does not already own. The consideration for the option exercise will depend, among other things, on spot silver prices and the size of estimated reserves and will be determined at the time of the option exercise. Following the Polymetal transaction, PAL was able to attract Sprott International as an investor through a US$4.75 million zero coupon convertible loan. This enabled PAL to undertake a buy-back of its shares into which the Company tendered shares and realised approximately US$3 million.
The second largest position in the portfolio, Ivanhoe Mines, also made good progress during the six months under review. Following on from 2016 when its share price rose 274% in Sterling terms, it rose a further 56% in the first half of 2017. Exploration results from its 2016 Kakula discovery at the Kamoa copper project in the Democratic Republic of Congo have been outstanding and a further resource upgrade in May 2017 estimated Kakula's Indicated Mineral Resource at 116 million tonnes at a grade of 6.09% copper, using a 3% cut-off grade for contained copper of 7.1 million tonnes. This updated resource statement has brought the total Indicated Mineral Resource at the whole of the Kamoa project to 31.4 million tonnes of contained copper with a further 5.2 million tonnes of contained copper in the Inferred category. An updated Preliminary Economic Assessment is expected during the second half of 2017 together with further resource upgrades with drilling continuing apace at Kakula. At Ivanhoe's second major project, the Platreef Project, sinking of the development Shaft 1 remains on course to reach the Platreef deposit during the first half of 2018 whilst preparations are being made for the sinking of the main development shaft. The feasibility study for the first phase of underground mine development at Platreef, which is being finalised by DRA Global, is expected to be completed in the third quarter 2017.
Elsewhere in the portfolio, Bilboes Gold completed a resource definition drilling campaign in March 2017 and the subsequent JORC resource statement estimated a resource of 53 million tonnes at 2.53 g/t containing a total of 4.3 million ounces of gold. The majority of this resource is expected to be open pittable and is being incorporated into a pre-feasibility study for a mine producing up to 200,000 ounces of gold per annum, due to be published during the third quarter 2017.
Metals Exploration is one investment that has struggled. Commissioning of its 100,000 ounce per annum Runruno gold project in the Philippines was delayed by heavy rain and delays in receiving the requisite operating permits and then compounded by a generator failure in June 2017 which damaged the bacteria in the Biox plant, resulting in a loss of recovery. The Biox plant will take approximately two months to reach maximum recovery and it is therefore hoped that Runruno will achieve its design output during the third quarter 2017.
The Company made one small new investment in 2017, investing US$500,000 in SME Inc ("SMEI"), which holds a potash exploration licence in the Republic of Congo. During July 2017, the Company exercised its option to acquire a further stake for US$250,000. Following the results of the first exploration well on the project, the largest shareholder in SMEI has triggered its option to make a further investment which will fund the pre-feasibility study for the project at a cost of approximately US$15 million. The value of this investment is such that the Company's interest is now valued at US$4 million on a pro rata basis. The pre-feasibility study is expected to take approximately 18 months.
The Company carried out its normal half yearly review of general market movements in mining equities, as well as specific factors, and made an assessment of whether these should impact the carrying values of its unlisted holdings. The Investment Manager maintains an index of comparable listed companies for each unlisted investment in order to quantify how the share price of a particular unlisted stock might have moved during the period had it been listed. In accordance with this assessment the carrying value of Cemos was increased by 10% and that of Gobi Coal decreased by 40%.
At 30 June 2017 Price / Index % Change % Change from
Level in Six Months Inception
-------------------------------------- -------------- --------------- --------------
Net Asset Value (pence/share) 51.4 +7.3% -47.5%*
-------------------------------------- -------------- --------------- --------------
Ordinary Share Price (pence/share) 33.5 +16.5% -66.5%**
-------------------------------------- -------------- --------------- --------------
MSCI World Index (GBP) 357.54 +4.6% +97.5%
-------------------------------------- -------------- --------------- --------------
Euromoney Mining 100 Index (GBP) 496.65 -2.3% -41.6%
-------------------------------------- -------------- --------------- --------------
Chinese Import Iron Ore Fines
62% Fe spot (US$) 64.95 -17.6% -63.2%
-------------------------------------- -------------- --------------- --------------
Copper (US$/t) 5,927.00 +7.3% -20.5%
-------------------------------------- -------------- --------------- --------------
Gold (US$/oz) 1,241.55 +7.7% +6.3%
-------------------------------------- -------------- --------------- --------------
Source: Bloomberg closing 27/4/10, **Issue price 28/4/10, * NAV 30/4/10
Outlook
Although the Company cannot normally expect to multiply the value of an investment over such a short period in the way that SMEI achieved (multiplying by over 5 times in the three months from first investment), it is an example of the type of returns that can be made by investing in carefully selected projects at a favourable point in the mining cycle. The Investment Manager has been undertaking due diligence on a number of interesting projects and it is hoped that the Company will make its first major new investment for some time during the second half of 2017. As always, the key in deciding whether to make a new investment is not only the quality of the mining project but also the ability of management to deliver the latent value contained therein.
Baker Steel Capital Managers LLP
Investment Manager
July 2017
DIRECTORS' REPORT
For the period from 1 January 2017 to 30 June 2017
The Board of the Company is pleased to present the Directors' Report for the six months ended 30 June 2017.
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 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.
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 uplifts in value resulting from development of the investee companies' projects and through exploiting value inherent in market inefficiencies and pricing anomalies.
Performance
During the period ended 30 June 2017, the Company's NAV per Ordinary Share increased by 7.3%. This compares with a fall in the Euromoney Global Mining 100 Index (capital return in Sterling terms) of 2.3%. 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 make 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. The Company realised an aggregate cash loss for the year ended 31 December 2016 and therefore no distributions were made for the 2016 financial year.
Directors and their interests
The Directors of the Company who served during the period and subsequently up 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 2016.
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 2017 31 December 2016
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
Board Meetings Meetings
He Held Attended Held Attended
Howard Myles 2 2 2 2
Christopher Sherwell 2 2 2 2
Clive Newall 2 2 2 2
Charles Hansard 2 2 N/A 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 2017 the total remuneration of the Directors was GBP57,500 (30 June 2016: GBP57,500), with GBP28,750 payable at 30 June 2017 (31 December 2016: 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.
Following in specie transactions on 25 February 2015 and 4 March 2015, 40,196,071 Ordinary Shares were issued. In addition the Company issued a total of 3,368,488 Ordinary Shares on 4 March 2015 Shares under an open offer.
Following an in specie transaction on 22 September 2016, 1,561,645 Ordinary Shares were issued.
Details of these transactions are included within Note 8 of these financial statements.
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.
Following the transactions noted above the Company has a total of 116,129,980 Ordinary and 10,000 Management Shares in issue as at 30 June 2017, of which 700,000 Ordinary Shares are held in Treasury.
Going Concern
Having reassessed the principal risks and uncertainties described 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 2016, the Directors consider it is appropriate to adopt the going concern basis in preparing these interim Financial Statements.
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 2016 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 2017 and do not expect any changes in the second half of 2017.
Directors' responsibility statement
The Directors confirm that to the best of their knowledge:
- the condensed set of 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; and
- the 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 2016, 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 and explains those matters where the Company has not complied with the UK Code. There is no change in compliance since the Annual Report.
The Board has noted the publication of a further revised UK Corporate Governance Code in April 2016 which applies to financial years beginning on or after 17 June 2016. The latest update of the UK Code has been driven by the implementation of the EU's Audit Regulation and Directive and its impact on audit committees, and the Board is considering the Company's framework in light of the new provisions.
Signed for and on behalf of the Directors
Howard Myles
Chairman
15 August 2017
UNAUDITED PORTFOLIO STATEMENT
AS AT 30 JUNE 2017
Shares Investments Fair value % of Net
/Warrants/ GBP equivalent assets
Nominal
Listed equity shares
Canadian Dollars
550,000 Buffalo Coal Corporation 3,258 -
2,963,001 Ivanhoe Mines Limited 7,318,954 12.26
Canadian Dollars Total 7,322,212 12.26
------------------- -------------
Great Britain Pounds
122,760,000 Metals Exploration Plc 4,143,150 6.94
Great Britain Pounds Total 4,143,150 6.94
------------------- -------------
Hong Kong Dollars
China Polymetallic Mining Company Limited
51,931,318 (CPM) 1,382,823 2.32
Hong Kong Dollars Total 1,382,823 2.32
------------------- -------------
Total investment in listed equity shares 12,848,185 21.52
------------------- -------------
Debt instruments
Australian Dollars
200,000 Indian Pacific Resources Limited Loan Note 118,162 0.20
Australian Dollars Total 118,162 0.20
------------------- -------------
Canadian Dollars
250,500 Ironstone Resources Limited Loan Note 277,776 0.47
Canadian Dollars Total 277,776 0.47
------------------- -------------
Euro
378,467 Cemos Group Plc Loan Notes 354,019 0.59
Euro Total 354,019 0.59
------------------- -------------
Great Britain Pounds
50,000 Cemos Group Plc Loan Note 53,750 0.09
Great Britain Pounds Total 53,750 0.09
------------------- -------------
United States Dollars
440,000 Bilboes Holdings Convertible Loan Note 613,426 1.03
220,000 Bilboes Holdings Loan Note 177,800 0.30
7,000,000 Black Pearl Limited Partnership Loan Note 2,694,588 4.51
United States Dollars Total 3,485,814 5.84
------------------- -------------
Total investments in debt instruments 4,289,521 7.19
------------------- -------------
Unlisted equity shares and warrants
Australian Dollars
16,000,000 Indian Pacific Resources Limited 94,529 0.16
Australian Dollars Total 94,529 0.16
------------------- -------------
Canadian Dollars
13,083,936 Ironstone Resources Limited 2,208,841 3.70
606,667 Ironstone Resources Limited Warrants 31/07/2017 6 -
143,143 Ironstone Resources Limited Warrants 22/02/2018 2,199 -
Canadian Dollars Total 2,211,046 3.70
------------------- -------------
Great Britain Pounds
1,594,646 Celadon Mining Limited 15,946 0.03
24,004,167 Cemos Group plc 3,960,688 6.63
Great Britain Pounds Total 3,976,634 6.66
------------------- -------------
Norwegian Krone
11,027,114
11,027,114 Nussir ASA 1,875,041 3.14
Norwegian Krone Total 1,875,041 3.14
------------------- -------------
United States Dollars
17,151,567 Archipelago Metals Limited 660,234 1.11
1,000,000 Archipelago Metals Limited Warrants 31/12/2017 - -
451,445 Bilboes Gold Limited 6,443,753 10.80
4,244,550 Gobi Coal & Energy Limited 392,136 0.66
1,000,000 Midway Resources International 96,235 0.16
16,877 Polar Acquisition Limited 20,386,491 34.15
36 Sarmin Minerals Exploration Inc 2,217,261 3.71
United States Dollars Total 30,196,110 50.59
------------------- -------------
Total Unlisted equity shares and warrants 38,353,360 64.25
------------------- -------------
Financial assets held at fair value through
profit or loss 55,491,066 92.96
------------------- -------------
Other Assets & Liabilities 4,203,839 7.04
------------------- -------------
Total Equity 59,694,905 100.00
------------------- -------------
UNAUDITED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
Unaudited Audited
30 June 31 December
2017 2016
Notes GBP GBP
Assets
Cash and cash equivalents 4,331,545 549,612
Other receivables 24,939 123,434
Financial assets held at fair value through
profit or loss 3 55,491,066 55,115,567
Total assets 59,847,550 55,788,613
----------------- -------------
Equity and Liabilities
Liabilities
Directors' fees payable 28,750 28,750
Management fees payable 7 57,952 47,212
Administration fees payable 28,880 57,551
Audit fees payable 24,000 36,550
Other payables 13,063 10,760
Total liabilities 152,645 180,823
----------------- -------------
Equity
Management Ordinary Shares 8 10,000 10,000
Ordinary Shares 8 81,024,525 81,024,525
Profit and loss account (21,339,620) (25,426,735)
Total equity 59,694,905 55,607,790
----------------- -------------
Total equity and liabilities 59,847,550 55,788,613
================= =============
Net Asset Value per Ordinary Share (in Pence)
- Basic and diluted 5 51.4 47.9
These unaudited condensed financial statements on pages 11 to 27 were
approved by the Board of Directors on 15 August 2017
and signed on its behalf by:
Howard Myles Christopher Sherwell
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2017 TO 30 JUNE 2017
Unaudited Unaudited Unaudited
period ended period ended period ended
30 June 30 June 30 June
2017 2017 2017
Revenue Capital Total
Notes GBP GBP GBP
Income
Net gain on financial assets at
fair value through profit or loss 3 - 4,692,844 4,692,844
Net foreign exchange loss - (20,640) (20,640)
Other income 2,381 - 2,381
Net income 2,381 4,672,204 4,674,585
-------------- -------------------- --------------------
Expenses
Management fees 7 366,589 - 366,589
Directors' fees 57,500 - 57,500
Administration fees 47,784 - 47,784
Custody fees 33,247 - 33,247
Other expenses 32,205 - 32,205
Audit fees 23,950 - 23,950
Broker Fees 17,500 - 17,500
Directors' expenses 8,695 - 8,695
Total expenses 587,470 - 587,470
-------------- -------------------- --------------------
Net gain for the period (585,089) 4,672,204 4,087,115
============== ==================== ====================
Net gain for the period per Ordinary
Share:
Basic and diluted (in pence) 5 (0.5) 4.0 3.5
In the period ended 30 June 2017 there were no other gains or losses 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 AIC Statement of Recommended
Practice.
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2017 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
Other expenses 44,238 - 44,238
Custody fees 29,678 - 29,678
Legal fees 26,612 - 26,612
Audit fees 26,348 - 26,348
Directors' expenses 6,963 - 6,963
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 other gains or losses 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 AIC Statement of Recommended
Practice.
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2017 TO 30 JUNE 2017
Management Profit and Profit and
Ordinary Ordinary Treasury loss account loss account
Shares Shares Shares (Revenue) (Capital) Total Equity
GBP GBP GBP GBP GBP GBP
Balance as at 1 January
2017 10,000 81,165,017 (140,492) (8,284,845) (17,141,890) 55,607,790
Net gain for the
period - - - (585,089) 4,672,204 4,087,115
Balance as at 30
June 2017 10,000 81,165,017 (140,492) (8,869,934) (12,469,686) 59,694,905
============= =========== =========== =============== =============== ===============
Note: 8 8
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2016 TO 30 JUNE 2016
Management Profit and Profit and
Ordinary Ordinary Treasury loss account loss account
Shares Shares Shares (Revenue) (Capital) Total Equity
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
============= =========== =========== =============== =============== ===============
UNAUDITED CONDENSED INTERIM STATEMENT OF CASH
FLOWS
FOR THE PERIOD FROM 1 JANUARY 2017 TO 30 JUNE
2017
Unaudited Unaudited
Period Period
ended ended
30 June 30 June
2017 2016
GBP GBP
Cash flows from operating activities
Net gain for the period 4,087,115 6,074,660
Adjustments to reconcile gain/(loss) for the
period to net cash used in operating activities:
Net gain on financial assets at fair value through
profit or loss (4,692,844) (6,550,736)
Net decrease/(increase) in other receivables 98,495 (40,405)
Net (decrease)/increase in payables (28,178) 1,712
----------------- ------------
(535,412) (514,769)
Interest received - 60,282
----------------- ------------
Net cash used in operating activities (535,412) (454,487)
----------------- ------------
Cash flows from investing activities
Purchase of financial assets at fair value through
profit or loss (1,345,029) (381,211)
Sale of financial assets at fair value through
profit or loss 5,662,374 342,135
----------------- ------------
Net cash provided by/(used in) investing activities 4,317,345 (39,076)
----------------- ------------
Net increase/(decrease) in cash and cash equivalents 3,781,933 (493,563)
Cash and cash equivalents at the beginning of
the period 549,612 562,101
Cash and cash equivalents at the end of the
period 4,331,545 68,538
================= ============
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2017
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 2017 to 30 June 2017 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 at 31 December 2016.
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. The accounting policies adopted in the preparation of these unaudited condensed interim financial statements have been consistent with the accounting policies stated in Note 2 of the annual financial statements for the year ended 31 December 2016. 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 Statements 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 have had 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 and is therefore considered to be an investment entity and therefore all investments, including those which 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, and where the Company has appointed or has the right to appoint the majority of directors 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. Investments in subsidiaries are carried at fair value through profit or loss.
Associates
The Directors consider that entities over which the Company exercises significant influence, including where it holds between 20% and 50% of the voting rights, or where there is a shareholders agreement giving the Company the right to appoint a director and the right to veto significant financial decisions, should be considered as associates of the Company. These are disclosed in Note 13 of the Annual Report. This also includes entities where the Company has representation on the board and such representation is considered to have significant influence over the major decisions of such entity.
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 2016. 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 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 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 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. 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
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. There are other accounting pronouncements but the ones listed are most relevant to the financial statements of the Company and are therefore expanded on below.
IFRS 9 Financial Instruments
IFRS 9 Financial Instrument, effective date for annual periods beginning on or after 1 January 2018, specifies how an entity should classify and measure financial assets and liabilities, including some hybrid contracts. The standard changes 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 Company's financial assets in equity instruments and derivative instruments continue to be held at fair value through profit or loss ("FVTPL"). Debt instruments are measured at FVTPL as the Company's business model is to convert the debt to equity and sell for gain.
The application of IFRS 9 may change the measurement and presentation of many financial instruments, depending on their contractual cash flows and the business model under which they are held. However, it is not expected that classification of financial assets and liabilities will change from FVTPL and therefore it is not expected that the implementation of IFRS 9 on 1 January 2018 and reflected in the financial statements as at year end 31 December 2018 will have a significant impact on the financial statements given most financial instruments are expected to be at FVTPL.
IFRIC 22 Foreign Currency Transactions and Advance Consideration
On 8 December 2016, the IFRS Interpretations Committee of the International Accounting Standards Board (IASB) issued IFRS Interpretation, IFRIC 22, Foreign Currency Transactions and Advance Consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.
As per IFRIC 22, the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. Where there are multiple payments or receipts in advance, the entity should determine a date of the transaction for each payment or receipt of advance consideration.
This interpretation is applicable for annual periods beginning on or after 1 January 2018. Early application is permitted. The Company does not expect the requirements to have a significant impact on its financial statements.
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Period ended Year ended
Investment Summary: 30 June 31 December
2017 2016
GBP GBP
Opening book cost 54,964,732 56,701,184
Purchases at cost 1,345,029 2,490,872
Proceeds on sale (5,662,374) (2,982,758)
Realised gains/(losses) 2,989,997 (1,244,566)
-------------- -------------
Closing cost 53,637,384 54,964,732
Unrealised gains 1,853,682 150,835
-------------- -------------
Financial assets held at fair value through profit
or loss 55,491,066 55,115,567
============== =============
The following table analyses net gains/ (losses) on financial assets at fair value through profit or loss for the period/year ended 30 June 2017 and 31 December 2016.
Period ended Year ended
30 June 31 December
2017 2016
GBP GBP
Financial assets at fair value through profit
or loss
Realised gains/(losses) on:
- Listed equity shares 1,718,705 (1,244,564)
- Unlisted equity shares 1,271,292 (2)
2,989,997 (1,244,566)
Movement in unrealised gains on:
- Listed equity shares 508,088 8,956,354
- Unlisted equity shares 1,283,887 15,087,023
- Debt instruments (86,030) (5,009,892)
- Warrants (3,098) (4,954)
------------- -------------
1,702,847 19,028,531
Net gain on financial assets at fair value through
profit or loss 4,692,844 17,783,965
============= =============
The following table analyses investments by type and by level within the fair valuation hierarchy at 30 June 2017.
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 12,848,185 - - 12,848,185
Unlisted equity shares - - 38,351,155 38,351,155
Warrants - - 2,205 2,205
Debt instruments - - 4,289,521 4,289,521
------------- ------------------ ------------ -----------
12,848,185 - 42,642,881 55,491,066
============= ================== ============ ===========
The following table analyses investments by type and by level within the fair valuation hierarchy at 31 December 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 13,252,979 - - 13,252,979
Unlisted equity shares - - 37,819,837 37,819,837
Warrants - - 5,303 5,303
Debt instruments - - 4,037,448 4,037,448
------------- ------------------ ------------ -----------
13,252,979 - 41,862,588 55,115,567
============= ================== ============ ===========
The tables 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 included in net gain on financial assets and liabilities at fair value through profit or loss held at 30 June 2017.
Debt
30 June 2017 Unlisted instruments Warrants Total
Equities
GBP GBP GBP GBP
Opening balance 1 January
2017 37,819,837 4,037,448 5,303 41,862,588
Purchases of investments 440,697 338,103 - 778,800
Sales during the period (2,464,558) - - (2,464,558)
Change in net unrealised
gains 1,283,887 (86,030) (3,098) 1,194,759
Realised gains 1,271,292 - - 1,271,292
Closing balance 30 June
2017 38,351,155 4,289,521 2,205 42,642,881
------------- ------------ ---------- -----------------------
Unrealised gains / (losses)
on investments still held
at 30 June 2017 1,283,887 (86,030) (3,098) 1,194,759
============= ============ ========== =======================
The tables 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 net loss on financial assets and liabilities at fair value through profit or loss held at 31 December 2016.
Debt
31 December 2016 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 801,949 1,156,882 - 1,958,831
Reorganisation 9,640,628 (9,640,628) - -
Change in net unrealised
gains 15,087,023 (5,009,892) (4,954) 10,072,177
Realised (losses) (2) - - (2)
Closing balance 31 December
2016 37,819,837 4,037,448 5,303 41,862,588
------------ ------------ --------- -----------
Unrealised gains / (losses)
on investments still held
at 31 December 2016 15,087,023 (5,009,892) (4,954) 10,072,177
============ ============ ========= ===========
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. The transfers between levels are recorded either on the value of the transaction the value of the investment immediately after the event or the carrying value of the investment at the beginning of the financial year.
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 tradable 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 nil Level 2 investments at 30 June 2017 (31 December 2016: GBPnil).
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 with a discount to reflect illiquidity and/or non-transferability 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 transaction value 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 secondary tool used by Management to evaluate potential investments as well as to provide underlying valuation references for the Fair Value already established is Development Risk Adjusted Values ("DRAV"). DRAVs are not a primary determinant of Fair Value. The Investment Manager 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, 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. Some market analysts incorporate development risk into the discount rate in arriving at a net present value ("NPV") rather than establishing an NPV discounted purely for cost of capital and country risk and then applying a further overall discount to the project economics dependent on where such project sits on the development curve per the DRAV calculations.
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 and any requirement for finance in the short term for further progression.
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 fair value through profit and loss, taking into account credit risk and the value of the conversion aspect. This is then compared with the DRAV for that equity. When there is a clear path towards conditions for conversion, for example, an IPO, 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
2017 Unobservable (weighted
Description GBP Valuation technique input average)
Unlisted Equity 23,358,515 Recent Transactions Private transactions n/a
Unlisted Equity 14,880,459 IndexVal Change in IndexVal n/a
Unlisted Equity 112,181 Other Exploration n/a
results, study
results, financings
Debt Instruments
Black Pearl Limited Valued at mean Estimated recovery
Partnership 2,694,588 estimated recovery range +/-50%
Other Convertible 1,594,933 Valued at fair Rate of Credit n/a
Debentures/Loans value with reference Risk
to credit risk
and value of embedded
derivatives
Simplified Black
Warrants 2,205 & Scholes Model Volatilities 40%
31 December Range
2016 Unobservable (weighted
Description GBP Valuation technique input average)
Unlisted Equity 28,676,885 Recent Transactions Private transactions n/a
Unlisted Equity 9,025,782 IndexVal Change in IndexVal n/a
Unlisted Equity 117,170 Other Exploration n/a
results, study
results, financings
Debt Instruments
Black Pearl Limited Valued at mean estimated Estimated recovery
Partnership 2,834,238 recovery range +/-50%
Others/Loans 1,203,210 Valued at fair value Rate of Credit n/a
with reference to Risk
credit risk and
value of embedded
derivative
Simplified Black
Warrants 5,303 & 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 IndexVal moved for any single investment during any six month period since IndexVal was first adopted.
Sensitivity analysis 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 30 June 2017 are as shown below:
Description Input Sensitivity Effect on Fair Value
used* (GBP)
Unlisted Equity Change in IndexVal +/-70% +/-26,845,809
Debt Instruments
Black Pearl Limited
Partnership Probability weighting +/-33% +/- 898,196
Others/Loans Rate discount rate +/-20% -285,623/+103,231
Warrants Volatility of 40% +/-20% +1,410/-1262
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 2016 are as shown below:
Description Input Sensitivity Effect on Fair
used* Value (GBP)
Unlisted Equity Change in IndexVal +/-70% +/-26,845,809
Debt Instruments
Black Pearl Limited
Partnership Probability weighting +/-33% +/-944,746
Others/Loans Rate discount rate +20% -231,287/+97,872
Warrants Volatility of 40% +/-20% +5,458/-3,620
*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.
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 LOSS PER SHARE
Net asset value per share is based on the net assets of GBP59,694,905 (31 December 2016: GBP55,607,790) and 116,139,980 (31 December 2016: 116,139,980) Ordinary Shares, being the number of shares in issue at 30 June 2017. The calculation for basic and diluted NAV per share is as below:
30 June 2017 31 December 2016
Ordinary Shares Ordinary Shares
Net assets at the period end (GBP) 59,694,905 55,607,790
Number of shares* 116,139,980 116,139,980
Net asset value per share (in pence)
basic and diluted 51.4 47.9
Weighted average number of shares 116,139,980 115,098,883
*Including 10,000 Management Ordinary Shares
The basic and diluted gain per share for the period ended 30 June 2017 is based on the net gain for the period of the Company of GBP4,087,115 and on 116,139,980 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 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.
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 (2016: 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 Investment Managers fees are paid by the Manager.
The management fee for the period ending 30 June 2017 was GBP366,589 (30 June 2016: GBP177,529) of which GBP57,952 (31 December 2016: GBP47,212) was outstanding at the period end.
The Manager is also entitled to a performance fee. The Performance Period is each 12 month period ending on 31 December in each year (the "Performance Period"). The amount of the performance fee is 15 per cent of the total increase in the NAV, if the Hurdle has been met, at the end of the relevant Performance Period, over the highest previously recorded NAV 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.
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 116,129,980 (31 December 2016: 116,129,980) Ordinary Shares in issue with an additional 700,000 (31 December 2016: 700,000) held in treasury. In addition, the Company has 10,000 (31 December 2016: 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 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 NAV of 42.5 pence per share on 27 February 2015. In accordance with IFRS the consideration of the transaction is recorded in the Company's financial statements based on its (trading) share price, which was 32.5 pence per share. The consideration was therefore GBP0.45 million.
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 NAV 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 NAV. In accordance with IFRS the consideration of the transaction is recorded in the Company's financial statements based on its (trading) share price, which was 32.6 pence per share. The consideration was therefore GBP12.66 million. 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, on 25 February 2015, 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 of 20 pence per share. The repurchased Ordinary Shares are held in Treasury.
On 22 September 2016, the Company acquired 3,926,425 Ordinary Shares of Nussir ASA from three different parties for a total consideration of GBP624,658. This consideration was settled through the issue of 1,561,645 Ordinary Shares of the Company at the unaudited NAV of 40.0 pence per share. In accordance with IFRS the consideration of the transaction is recorded in the Company's financial statements based on its (trading) share price, which was 29.875pence per share, the consideration recorded is therefore GBP0.47million.
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 2017 31 December 2016
No. of
Amount No. of shares** Amount shares**
GBP GBP
Issued and fully paid share
capital
Ordinary Shares of no par value* 81,175,017 116,839,980 81,175,017 116,839,980
(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 2017 took place as follows:
Ordinary Shares Treasury Shares
No. of
Amount No. of shares** Amount shares
GBP GBP
Balance at 1 January 2017 81,034,525 116,139,980 140,492 700,000
Balance at 30 June 2017 81,034,525 116,139,980 140,492 700,000
=========== ================ ============ ============
The issue of Ordinary Shares during the year ended 31 December 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 466,541 1,561,645 - -
Balance at 31 December 2016 81,034,525 116,139,980 140,492 700,000
=========== ================ ========= ===============
* 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 2017 31 December 2016
Christopher Sherwell 96,821 96,821
Clive Newall 25,000 25,000
The Directors' fees for the period ended 30 June 2017 were GBP57,500 (30 June 2016: GBP57,500), with GBP28,750 payable at 30 June 2017 (31 December 2016: GBP28,750).
The Investment Manager, Baker Steel Capital Managers LLP had an interest in 10,000 Management Ordinary Shares at
30 June 2017 (31 December 2016: 10,000).
The Management fees paid and accrued for the year are disclosed under Note 7.
Baker Steel Global Funds SICAV - Precious Metals Fund ("Precious Metals Fund") had an interest of 7,669,609 Ordinary Shares in the Company at 30 June 2017 (31 December 2016: 7,669,609). Precious Metals Fund shares a common Investment Manager with the Company.
10. SUBSIDIARY COMPANIES
At 30 June 2017, the Company held a 55.8% fully diluted interest which constituted control in Polar Acquisition Limited ("PAL"); a Company incorporated in the British Virgin Islands.
As described in Note 2 (i) the Company qualifies as an Investment Entity and therefore in accordance with IFRS 10, and as explained in Note 2(k) of Annual Report it is exempt from preparing consolidated financial statements. The interest in PAL has therefore not been consolidated within these financial statements.
11. SUBSEQUENT EVENTS
Following the end of the period, the Company sold a further 11% of its holding in PAL for US$2.9 million which reduced its interest in PAL to just below 50% and the PAL investment to 30% of NAV as at 31 July 2017. At this point the Investment Manager is content with this level of holding in PAL and plans to hold the current position until the exercise date of Polymetal's option.
There were no other events subsequent to the period end that materially impacted on the Company.
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 2017 were approved by the Board of Directors on 15 August 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BQLFFDVFBBBZ
(END) Dow Jones Newswires
August 16, 2017 06:13 ET (10:13 GMT)
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