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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Grit Investment Trust Plc | LSE:GRIT | London | Ordinary Share | GB00BL594W83 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Svcs Allied W/exchanges, Nec | 96k | -155k | -0.0031 | -4.03 | 629.47k |
TIDMGRIT
RNS Number : 7408D
Global Resources Investment Tst PLC
28 April 2017
To: RNS and the Channel Islands Securities Exchange Authority Limited From: Global Resources Investment Trust plc LEI: 2138005OJKGWG3X4SY51 Date: 28 April 2017
Audited results for the year ended 31 December 2016
Chairman's Statement
Introduction
I am pleased to report that your Company has achieved a solid performance after change and consolidation during the past year. This was in part due to the recovery in the commodity cycle and more focus in the investment strategy from a diversified portfolio to a more concentrated portfolio of core investments in companies with a strong resource backing.
Investment and Share Price Performance
On the 31(st) December 2016, your Company's NAV was 22.4 pence, an increase of 10.2% from the preceding year. The Company's ordinary share price rose 25.0% from 6.4p to 8.0p over the same period. This was a welcome recovery after the collapse in the sector in January 2016. Your Company's performance had to a large degree been constrained by the 9% Cumulative Unsecured Loan Stock ('CULS'), which contributed to the share price trading at a deep discount to net asset value. A more comprehensive overview of the investment portfolio is contained in the Investment Manager's Review.
9% Cumulative Unsecured Loan Stock 2017 ('CULS')
The Company issued GBP5 million nominal of CULS in 2014 to provide working capital, of which GBP4.7 million remained in issue at 1 January 2016.
GBP2.0m of CULS was repaid during the year, and the balance of GBP2.7m has been repaid since the year end, leaving the Company ungeared.
Change to Future Investment Strategy and Outlook
The change in the Company's investment policy reflected our desire to reduce the portfolio's exposure from exploration and early stage development companies, to focus more on companies with potentially large scale assets that are likely to be brought into production in the foreseeable future. We will continue to maintain a diversified portfolio, both geographically and by commodity.
Our more focused portfolio, with a significant asset base, will expedite your Company's transition from holding development companies to production companies.
Whilst there has been a marked recovery both in sentiment and in commodity prices, we forecast a more sustained recovery following the reduction of supply excesses and, in many cases, improved balance sheet discipline, which is now underpinning the sector.
Optimism clearly needs to be tempered with an element of caution in the face of increased global political risk and the current uncertainty of a potential trade war between East and West.
Your Company is now far better positioned to take advantage of opportunities as they occur.
Lord St John
Chairman
28 April 2017
Investment Manager's Review
After arguably the worst slump in commodity markets for several decades, 2016 proved to be a watershed, heralding a recovery across virtually all commodities. Bulk commodities, such as iron ore, coal and oil, which had fallen below the marginal cost of production, recovered dramatically, more than doubling in price from their lows. Base metals showed a more mixed picture but nevertheless useful price increases were recorded in copper and zinc, with more muted gains in other metals. Gold rose by almost 30% to $1390 by the third quarter, only to drift back to $1150 by the year end, a rise of only 8%. The prime cause of the weakness was the "demonetisation" of
cash in India, whereby higher denomination notes of R500 and R1000 were removed from the system, causing a slump in physical demand, in a market primarily based on cash transactions. The election of President Trump resulted in further strengthening of the Dollar, causing a substantial outflow of ETF gold holdings.
The commodity recovery naturally had a positive effect on resource stocks which resulted in a 10.2% increase in the fund's NAV for the year ended 31st December 2016. Individually, there were some better performances, but the overall benefit was reduced by write-downs of two nonperforming positions.
The mining industry responded rapidly to weak metal prices with aggressive cost-cutting measures and production cutbacks. Capital expenditure and exploration programmes were sharply curtailed, enabling debt levels to be reduced and balance sheets rebuilt. For most metals supply and demand are in better balance allowing inventory levels to decline. The extraordinary rise in coal prices has been largely as a result of a reduction in working days in China, from 330 to 276 days per annum. The oil market appears to have stabilised in a broad range between $40-60/bbl with Brent averaging around $50/bbl. Attempts by OPEC countries to reduce production have had little effect - any increases in price only helping to sustain shale production in the US.
The gold mining sector continues to experience the most corporate activity, with acquisitions, mergers and joint ventures helping consolidate the industry. A healthy profit was realised in NuLegacy Gold, while Merrex Gold performed strongly on positive drilling results from its Diakha project in Mali and, towards the end of the year, IAMGOLD announced an agreed bid for the company at a 30% premium to the weighted average price before the announcement. Mineral Mountain performed well and has attracted market interest ahead of the drilling programme on its properties in the Homestake region in South Dakota. Additionally, it is anticipated that Siberian Goldfields will seek an AIM Listing in the third quarter of 2017.
Elsewhere, Anglo African Minerals has made excellent progress in making the transition from explorer to producer, having agreed the first stage of a joint venture with a major Chinese State Owned enterprise, which will provide full project funding, mining services and an "off take" agreement and lead to production by Q2 2018. The Company is also working towards a listing on an appropriate Stock Exchange during the second half of 2017.
While in the oil sector, Zenith Energy achieved a milestone deal in acquiring an 80% interest in a producing oil field in Azerbaijan, for no upfront cost, but a commitment to increase production in line with specified targets. A number of other non-core holdings were sold during the year.
The difficulties of doing mining business in South Africa have been highlighted by the plight of Waterberg Coal, which has been unable to attract capital to develop its large coal project in the Limpopo province. This position has been written down to zero, pending a restructuring and refinancing of the company.
While the commodity recovery has got off to a sound start, a challenging year politically lies ahead. A pre-Brexit UK, elections in Europe, and the new Trump administration in the US, will hopefully not prove obstacles to the moderate economic recovery currently in progress. The Trump infrastructure programme, once underway, should enhance demand for many basic raw materials, but the macro picture remains reliant on sound growth from Asia, where over half the world's population are still on a stronger consumption growth trend. This bodes well for the fund which is now specifically focussed on a few core positions where it has meaningful exposure and therefore the potential for delivering high returns is better.
David Hutchins and Kjeld Thygesen
RDP Fund Management LLP
28 April 2017
Enquiries:
RDP Fund Management LLP
David Hutchins
Tel +44 (0) 207 290 8541
Beaumont Cornish Limited
Roland Cornish
Tel: +44 (0) 207 628 3396
Felicity Geidt
Tel: +44 (0) 207 628 3396
R&H Fund Services Limited
Martin Cassels
Tel: +44 (0) 131 550 3760
Audited Income Statement
Hot Features
Premium
Year ended 31 December 2016
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
-------------------------------------- ------ -------- -------- --------
Gains on investments - 1,664 1,664
Exchange gains - 114 114
Foreign exchange forward contract
loss - (38) (38)
Income 258 - 258
Investment management fee (155) - (155)
Other expenses (638) - (638)
-------------------------------------- ------ -------- -------- --------
Net return before finance costs
and taxation (535) 1,740 1,205
Interest payable and similar charges (374) - (374)
-------------------------------------- ------ -------- -------- --------
Net return on ordinary activities
before taxation (909) 1,740 831
Tax expense - - -
-------------------------------------- ------ -------- -------- --------
Net return attributable to equity
shareholders (909) 1,740 831
-------------------------------------- ------ -------- -------- --------
(Loss)/ earnings per ordinary
share 2 (2.28)p 4.35p 2.08p
-------------------------------------- ------ -------- -------- --------
Sixteen months ended 31 December
2015
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
-------------------------------------- ------- -------- --------- ---------
Losses on investments - (16,929) (16,929) Exchange losses - (5) (5) Foreign exchange forward contract - - - loss Income (221) - (221) Investment management fee (368) - (368) Other expenses (670) - (670) -------------------------------------- ------- -------- --------- --------- Net return before finance costs and taxation (1,259) (16,934) (18,193) Interest payable and similar charges (591) - (591) -------------------------------------- ------- -------- --------- --------- Net return on ordinary activities before taxation (1,850) (16,934) (18,784) Tax expense - - - -------------------------------------- ------- -------- --------- --------- Net return attributable to equity shareholders (1,850) (16,934) (18,784) -------------------------------------- ------- -------- --------- --------- Loss per ordinary share 2 (4.67)p (42.73)p (47.40)p -------------------------------------- ------- -------- --------- ---------
The 'total' column of this statement represents the Company's profit and loss account, prepared in accordance with IFRS. All revenue and capital items in this statement derive from continuing operations. All of the loss for the year is attributable to the owners of the Company.
No operations were acquired or discontinued in the year.
The Company does not have any income or expenses that is not included in profit for the year, and therefore the "Net return is attributable to equity shareholders" is also the "Total comprehensive income attributable to equity holders" as defined in IAS 1 (revised).
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Equity
For the year to 31 December 2016
Share
Share premium Capital Revenue
capital account reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- --------- --------- --------
Balance at 31 December 2015 400 36,800 (27,051) (2,034) 8,115
Return on ordinary activities
after taxation - - 1,740 (909) 831
Balance at 31 December 2016 400 36,800 (25,311) (2,943) 8,946
------------------------------- --------- --------- --------- --------- --------
For the sixteen months ended 31 December 2015
Share
Share premium Capital Revenue
capital account reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- --------- --------- ---------
Balance at 31 August 2014 396 36,504 (10,117) (184) 26,599
CULS conversion 4 296 - - 300
Return on ordinary activities
after taxation - - (16,934) (1,850) (18,784)
Balance at 31 December 2015 400 36,800 (27,051) (2,034) 8,115
------------------------------- --------- --------- --------- --------- ---------
Audited Balance Sheet
As at As at
31 December 31 December
2016 2015
Notes GBP'000 GBP'000
-------------------------------- ------ ------------- -------------
Fixed assets
Investments 10,325 12,256
Current assets
Debtors 663 399
Cash at bank and on deposit 3,142 331
-------------------------------- ------ ------------- -------------
3,805 730
Creditors: amounts falling due
within one year
Other creditors (2,484) (171)
9% Convertible Unsecured Loan
Stock 2017 (2,700) (4,700)
-------------------------------- ------ ------------- -------------
Net current liabilities (5,184) (4,141)
Net assets 8,946 8,115
-------------------------------- ------ ------------- -------------
Capital and Reserves
Called up share capital 400 400
Share premium 5 36,800 36,800
Capital reserve 5 (25,311) (27,051)
Revenue reserve 5 (2,943) (2,034)
-------------------------------- ------ ------------- -------------
Equity shareholders' funds 8,946 8,115
-------------------------------- ------ ------------- -------------
Net asset value per share 3 22.38p 20.30p
-------------------------------- ------ ------------- -------------
Audited Cash Flow Statement
Sixteen months
Year ended ended
31 December 31 December
2016 2015
GBP'000 GBP'000
------------------------------------------- ------------- ---------------
Operating activities
Gain/(loss) before finance costs
and taxation 1,205 (18,193)
(Gain)/loss on investments (1,664) 16,929
Increase in forward exchange
creditor 2,412 -
(Increase)/decrease in other
receivables (264) 392
(Decrease)/increase in other
payables (99) 41
Realised exchange gain on currency
balances (76) -
Net cash inflow/(outflow) from operating
activities before interest and taxation 1,514 (831)
-------------------------------------------- ------------- ---------------
Interest paid (375) (690)
Taxation paid - (27)
Net cash inflow/(outflow) from operating
activities 1,139 (1,548)
-------------------------------------------- ------------- ---------------
Investing activities
Purchases of investments (1,664) (665)
Sales of investments 5,259 1,944
Interest received 1 -
Net cash inflow from investing activities 3,596 1,279
-------------------------------------------- ------------- ---------------
Financing
Redemption of CULS (2,000) -
Issue of CULS - 150
Net cash (outflow)/inflow from
financing (2,000) 150
-------------------------------------------- ------------- ---------------
Increase/(decrease) in cash and cash
equivalents 2,735 (119)
Exchange movements including forward
contracts 76 -
Net cash at the start of the
year/period 331 450
-------------------------------------------- ------------- ---------------
Net cash at the end of the year/period 3,142 331
-------------------------------------------- ------------- ---------------
Notes
1. Accounting Policies
(a) Basis of accounting
These financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the International Accounting Standards Board ('IASB') and in accordance with the guidance set out in the Statement of Recommended Practice ('SORP') for investment trust companies and venture capital trusts issued by the Association of Investment Companies ('AIC') in January 2009.
The functional and reporting currency of the Company is pounds sterling because that is the primary economic environment in which the Company operates. The notes and financial statements are presented in pounds sterling and are rounded to the nearest thousand except where otherwise indicated.
The financial statements have been prepared on the historical cost basis, except that investments are stated at fair value and categorised as financial assets at fair value through profit or loss.
In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. Additionally, the net revenue of the Company is the measure the Directors believe appropriate in assessing its compliance with certain requirements set out in Sections 1158 - 1159 of the Corporation Tax Act 2010.
At the date of authorisation of these financial statements, the following Standards and Interpretations were effective for annual periods beginning on or after 1 January 2016:
-IFRS 14 - Regulatory Deferral Accounts
At the date of authorisation of these financial statements, the following Standards and Interpretations were effective for annual periods beginning on or after 1 January 2018:
-IFRS 9 - Financial Instruments (revised, early adoption permitted)
-IFRS 15 - Revenue from Contracts with Customers (early adoption permitted)
At the date of authorisation of these financial statements, the following Standards and Interpretations were effective for annual periods beginning on or after 1 January 2019:
-IFRS 16 - Leases (early adoption permitted)
The following amendments to Standards are all effective for annual periods beginning on or after 1 January 2016:
-IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture
-IFRS 10, IFRS 12 and IAS 28 - Investment Entities: Applying the Consolidation Exception
-IFRS 11 - Accounting for Acquisitions of Interests in Joint Operations
-IAS 1 - Disclosure Initiative
-IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation
-IAS 27 - Equity Method in Separate Financial Statements
In addition, under the Annual Improvements to IFRSs 2012 - 2014 Cycle, a number of Standards are included for annual periods beginning on or after 1 January 2016.
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material financial impact on the financial statements of the Company. The Company concludes however that certain additional disclosures may be necessary on their application.
Going Concern basis of accounting
The Company's operations have been cash flow negative since its inception; the Company relying on the sale of investments to generate the cash needed to continue to operate. GBP5.3m was realised from the sale of investments during the year under review and a further GBP3.5m from the sale of shares in Merrex Gold in January and February 2017. On 28 February 2017, the remaining GBP1.2m nominal of Loan Notes was repaid, and the Board is pleased that the Company no longer has any gearing.
On 16 January 2017, at the General Meeting, the Shareholders approved a change in the arrangement with RDP for managing the Company and, as a result, the Company and its portfolio became self-managed. In addition, the shareholders approved the appointment of David Hutchins as an Executive Director.
During the year under review, the management fee was GBP155,000. Prior to the change in the structure of the Company, if the net asset base of the Company were to grow, then the fee could have risen without limit and this would have represented a large cash cost to the Company. The new arrangement eliminates this cash cost in return for David Hutchins' Executive Director's fee of GBP20,000, ongoing office support services to RDP of GBP40,000 and the issue of Ordinary Shares to RDP. In addition, it is considered more practical for the Company to take direct charge of the investment strategy and thus eliminate a layer of costly bureaucracy inherent in a formal investment management agreement. The impetus for the change came from certain major shareholders, who had expressed a concern about the cash cost of running what had become a relatively small investment trust.
David ('Sam') Hutchins has said that he expects to be able to realise sufficient proceeds from the sale of two quoted positions, Merrex Gold and Mineral Mountains, over a period of 12 months to cover the operating expenses of the Company. During January and February 2017, GBP3.5m was realised from the sale of Merrex Gold. The Directors have carefully reviewed the Company's cash flow forecast and, after close enquiry, the Directors have concluded that these sales are more likely than not to go ahead.
The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for at least the next twelve months. Thus they continue to adopt the going concern basis in preparing the annual financial statements.
Critical accounting estimates and judgements
The preparation of the financial statements necessarily requires the exercise of judgement both in application of accounting policies which are set out below and in the selection of assumptions used in the calculation of estimates. These estimates and judgements are reviewed on an ongoing basis and are continually evaluated based on historical experience and other factors. However, actual results may differ from these estimates. The most significant judgements are the valuation of unlisted investments which is described in note 1(b) below and the adoption of the going concern basis of preparation which is discussed above.
A summary of the principal accounting policies which have been applied to all periods presented in these financial statements is set out below.
(b) Fixed asset investments
Purchases or sales of investments are recognised/derecognised on the date the Company commits to purchase/sell the investments. Investments are classified at fair value through profit and loss on initial recognition with any resultant gain or loss recognised in the Income Statement. Listed securities are valued at bid price or last traded price, depending on the convention of the exchange on which the investment is listed, adjusted for accrued income where it is reflected in the market price. Investments which are not listed or where trading in the securities of an investee company is suspended are valued at the Board's best estimate of fair value. Unlisted investments are valued by the Directors on the basis of all the information available to them at the time of valuation. This includes a review of: the financial and trading information of the Company, covenant compliance and ability to repay the interest and cash balances. Where no reliable fair value can be estimated, investments may be carried at cost less any provision for impairment.
Realised gains or losses on the disposal of investments and permanent impairments in the value of investments are taken to the capital reserve. Gains and losses arising from changes in the fair value of investments are included in the Income Statement as a capital item as per note (i).
(c) Income
Dividends receivable on equity shares are recognised as income on the date that the related investments are marked ex-dividend. Dividends receivable on equity shares where no ex-dividend date is quoted are recognised as income when the Company's right to receive payment is established.
Fixed returns on non-equity shares are recognised on a time apportioned basis so as, if material, to reflect the effective interest rate on those instruments. Other returns on non-equity shares are recognised when the right to the return is established. The fixed return on a debt security is recognised on a time apportioned basis so as to reflect the effective interest rate on each such security.
Income from deposit interest is recognised on an accruals basis.
Where the Company has elected to receive its dividends in the form of additional shares rather than cash, an amount equal to the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital reserves.
(d) Taxation
The charge for taxation is based on net revenue for the period. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue on the same basis as the particular item to which it relates.
Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of underlying timing differences can be deducted.
Because the Company intends each year to qualify as an investment trust under Chapter 4 of Part 24 of the Corporation Tax Act 2010 (previously S842 of the Income and Corporation Taxes Act 1988), no provision is made for deferred taxation in respect of the capital gains that have been realised, or are expected in the future to be realised, on the sale of fixed asset investments.
(e) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged through the Income Statement as a revenue item except as follows:
- expenses which are incidental to the acquisition of an investment are included within the cost of the investment;
- expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment;
(f) Foreign currency
Transactions denominated in foreign currencies are recorded in the local currency at actual exchange rates at the date of the transaction. Overseas assets and liabilities denominated in foreign currencies at the year end are reported at the rates of exchange prevailing at the year end. Any gain or loss arising from a change in exchange rates subsequent to the date of a transaction is included as an exchange gain or loss in capital reserves. The financial currency of the Company, being its statutory reporting currency, is sterling.
(g) Finance costs
Finance costs are accounted for on an accruals basis. Finance costs of debt, insofar as they relate to the financing of the Company's investments or to financing activities aimed at maintaining or enhancing the value of the Company's investments, are allocated between revenue and capital in accordance with the Board's expected long-term split of returns, in the form of income and capital gains respectively, from the Company's investment portfolio. For further details refer to note 8.
(h) 9% Convertible Unsecured Loan Stock 2017 ('CULS')
The CULS were unquoted and at the year end are valued at fair value by the Directors based upon all information available to them at the time of valuation. This includes consideration of the discounted cash flows of the interest and principal and underlying equity value.
Direct expenses associated with the CULS issue are allocated to the share premium account.
The interest expense on the CULS is recognised on an accruals basis.
(i) Reserves
(a) Share premium - the surplus of net proceeds received from the issuance of new shares over their par value is credited to this account and the related issue costs are deducted from this account. This reserve is non-distributable.
(b) Capital reserve - the following are accounted for in this reserve:
- gains and losses on the realisation of investments;
- realised and unrealised exchange differences on transactions of a capital nature;
- capitalised expenses and finance costs, together with the related taxation effect; and
- increases and decreases in the valuation of investments held.
(c) Revenue reserve - the net profit/(loss) arising in the revenue column of the Income Statement is added to or deducted from this reserve. This reserve is available for paying dividends.
(j) Segmental information
The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business.
2. Income
Sixteen months
Year ended ended
31 December 31 December
2016 2015
GBP'000 GBP'000
--------------------------- ------------- ---------------
Income from investments*
Overseas interest 258 (221)
---------------------------- ------------- ---------------
Total income 258 (221)
---------------------------- ------------- ---------------
Total income comprises:
Fixed interest securities 258 (221)
---------------------------- ------------- ---------------
258 (221)
--------------------------- ------------- ---------------
*All investment income arises on investments valued at fair value through profit or loss on initial recognition.
Income of GBP258,000 was recognised for Siberian Gold with the total accrual of GBP627,000 deemed recoverable by the Directors of the Company.
3. Investment Management Fee
2016 2016 2016 2015 2015 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- --------- -------- --------- --------- --------
Investment management
fee 155 - 155 368 - 368
----------------------- --------- --------- -------- --------- --------- --------
During the year to 31 December 2016, the Company's Investment Manager was RDP. RDP received a monthly fee at the rate of 1.5% per annum on the preceding monthly average net assets up to GBP100 million and 0.75% per annum on the amount by which the preceding monthly average net assets exceeds GBP100 million.
No performance fee was payable for the period to 31 December 2016.
The balance due to RDP for management fees at the period end was GBP11,000.
Investment management fees have been fully allocated to revenue.
4. Other Expenses (including irrecoverable VAT)
2016 2016 2016 2015 2015 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- --------- -------- --------- --------- --------
Secretarial and administration
fees 122 - 122 142 - 142
Directors' fees 81 - 81 116 - 116
Auditor remuneration
for:
- Statutory audit 32 - 32 41 - 41
- Other services relating
to taxation 8 - 8 41 - 41
Legal fees 155 - 155 115 - 115
Broker fees 120 - 120 86 - 86
Public relations 29 - 29 58 - 58
Regulatory fees 23 - 23 23 - 23
Other 68 - 68 48 - 48
-------------------------------- --------- --------- -------- --------- --------- --------
638 - 638 670 - 670
-------------------------------- --------- --------- -------- --------- --------- --------
The Company has an agreement with R&H Fund Services Limited ('R&H') for the provision of secretarial and administration services. During the year the total fees paid and payable were GBP122,000. The balance due to R&H for secretarial services at the year-end was GBP7,000. R&H receive a fee comprising 0.08% per annum of the total assets subject to a minimum fee of GBP81,633. The administration agreement has a six month notice period with effect not earlier than the first anniversary of admission.
No pension contributions were payable in respect of any of the Directors.
The Company does not have any employees.
5. Interest Payable and Similar Charges
2016 2016 2016 2015 2015 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- -------- --------- --------- --------
Interest on 9% Convertible
Unsecured Loan Stock
2017 ('CULS') 374 - 374 591 - 591
---------------------------- --------- --------- -------- --------- --------- --------
374 - 374 591 - 591
---------------------------- --------- --------- -------- --------- --------- --------
Interest payable on the CULS has been charged 100 per cent to revenue.
The interest has been paid gross to all CULS shareholders. The CULS contract contained an undertaking to pay the note-holders the full amount and not to deduct withholding tax from these payments.
6. Tax expense
2016 2016 2016 2015 2015 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------- --------- -------- --------- --------- --------
Corporation tax - - - - - -
Overseas taxation - - - - - -
------------------ --------- --------- -------- --------- --------- --------
Total tax charge - - - - - -
------------------ --------- --------- -------- --------- --------- --------
Reconciliation of Tax Charge
A reconciliation of the current tax charge is set out below:
2016 2015
Total Total
GBP'000 GBP'000
----------------------------------------------- -------- ---------
Return on ordinary activities before taxation 831 (18,784)
Corporation tax at standard rate 20% (prior
year: 21%) 166 (3,944)
Effects of:
Non taxable (losses)/gains (333) 3,555
Excess management expenses 182 388
Exchange (gains)/losses (15) 1
----------------------------------------------- -------- ---------
Current year tax charge - -
----------------------------------------------- -------- ---------
Due to the Company's status as an Investment Trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided for deferred tax on capital gains and losses arising on the revaluation or disposal of investments.
At 31 December 2016 the Company had surplus management expenses of GBP754,000 (2015: GBP572,000) which have not been recognised as a deferred tax asset.
7. Return per ordinary share
Return per ordinary share attributable to shareholders reflects the overall performance of the Company in the year.
Sixteen months
Year ended ended
31 December 31 December
2016 2015
GBP'000 GBP'000
---------------------------------- ------------- ---------------
Revenue return (2.28)p (4.67)p
Capital return 4.35p (42.73)p
----------------------------------- ------------- ---------------
Total return 2.08p (47.40)p
----------------------------------- ------------- ---------------
Number Number
---------------------------------- ------------- ---------------
Weighted average ordinary shares
in issue 39,970,012 39,631,340
----------------------------------- ------------- ---------------
8. Investments
2016 2015
Total Total
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Investments listed/quoted on a recognised investment
exchange 5,592 6,642
Unquoted investments 4,733 5,614
------------------------------------------------------ -------- --------
10,325 12,256
------------------------------------------------------ -------- --------
Equity shares 7,379 9,111
Convertible securities 2,946 3,145
10,325 12,256
------------------------------------------------------ -------- --------
The Company does not intend to acquire securities that are unquoted or unlisted at the time of investment with the exception of securities which, at the time of acquisition, are intending to list on a stock exchange or securities which are convertible into quoted securities. However, the Company may continue to hold securities that cease to be quoted or listed or hold a convertible in which the underlying equity is not listed if the Investment Manager considers this to be appropriate.
All investments are designated fair value through profit or loss at initial recognition, therefore all gains and losses arise on investments designated at fair value through profit or loss.
International Financial Reporting Standard ('IFRS') 'Financial Instruments: Disclosures' requires an analysis of investments valued at fair value based on the reliability and significance of information used to measure their fair value. The level is determined by the lowest (that is the least reliable or independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety as follows:
-- Level 1 - investments quoted in an active market;
-- Level 2 - investments whose fair value is based directly on observable current market prices or indirectly being derived from market prices;
-- Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or based on observable market data.
Level Level
1 1
Listed Listed Level 2016 2015
in UK overseas 3 Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- ---------- -------- --------- ---------
Opening book cost 1,760 21,105 9,441 32,306 40,567
Opening fair value adjustment (1,286) (14,937) (3,827) (20,050) (10,157)
------------------------------- -------- ---------- -------- --------- ---------
Opening valuation 474 6,168 5,614 12,256 30,410
Purchases at cost 150 - 1,514 1,664 -
Transfers 320 (6,163) 5,843 - 665
Sales - proceeds - (3,736) (1,523) (5,259) (1,890)
- realised losses - (1,933) (5,417) (7,350) (7,036)
(Decrease)/increase in
fair value adjustment (286) 10,598 (1,298) 9,014 (9,893)
------------------------------- -------- ---------- -------- --------- ---------
Closing valuation 658 4,934 4,733 10,325 12,256
------------------------------- -------- ---------- -------- --------- ---------
Closing book cost 2,230 9,273 9,858 21,361 32,306
Closing fair value adjustment (1,572) (4,339) (5,125) (11,036) (20,050)
------------------------------- -------- ---------- -------- --------- ---------
Closing valuation 658 4,934 4,733 10,325 12,256
------------------------------- -------- ---------- -------- --------- ---------
The gains and losses included in the above table have all been recognised within (losses)/gains on investments in the Income Statement. The Directors believe that the use of reasonable possible alternative assumptions for its Level 3 holdings would not result in a valuation significantly different from the valuation included in these financial statements.
2016 2015
Gains/(losses) on investments GBP'000 GBP'000
------------------------------- ------------ --------------
Realised losses on sale (7,350) (7,036)
Movement in fair value 9,014 (9,893)
------------------------------- ------------ --------------
Gains/(losses) on investments 1,664 (16,929)
------------------------------- ------------ --------------
During the year the Company did not incur transaction costs on purchases and incurred transactions costs on sales of GBP35,000.
9. Debtors
2016 2015
GBP'000 GBP'000
-------------------------------- -------- --------------
Prepayments and accrued income 632 378
VAT recoverable 31 21
-------------------------------- -------- --------------
663 399
-------------------------------- -------- --------------
10. Other creditors
2016 2015
GBP'000 GBP'000
------------------------------------------- -------- --------
Unrealised forward exchange rate contract 2,412 -
Other creditors 72 171
------------------------------------------- -------- --------
2,484 171
------------------------------------------- -------- --------
Included within other creditors is GBP28,000 due to RDP in respect of management fees.
11. 9% Convertible Unsecured Loan Stock 2017
Nominal
Value of CULS
GBP'000
-------------------------------------- ---------------
Balance at the beginning of the year 4,700
Redemption of CULS (2,000)
--------------------------------------- ---------------
Balance at the end of the year 2,700
--------------------------------------- ---------------
On 7 March 2014, the Company issued GBP4,850,000 9% Convertible Unsecured Loan Stock 2017 ('CULS') and 4,850,000 warrants (for nil consideration on the basis of one warrant for every GBP1 of CULS subscribed). A further GBP150,000 CULS and 150,000 warrants were issued on 28 November 2014. During the 16 months to 31 December 2015, the Company issued a further GBP150,000 CULS and GBP150,000 warrants and converted GBP200,000 of CULS into equity. On 23 August 2016 and 1 November 2016, the Company made two repayments each of GBP1,000,000 nominal of CULS. At 31 December 2016, the Company had GBP2,700,000 nominal of 9% Convertible Loan Stock.
On 19 January 2017, a further GBP1,500,000 nominal of CULS was repaid and on 28 February 2017 the Company repaid the outstanding GBP1,200,000 of 9% Convertible Unsecured Loan Stock.
Warrant instrument
The warrants are unlisted and are exercisable up to the fifth anniversary of admission in amounts or multiples of 50,000 warrants at GBP1.00 per ordinary share.
12. Share Capital
2016 2016
Shares GBP'000
Authorised at 31 December
Ordinary shares of 1p each 100,000,000 1,000
----------------------------------------- ------------ ---------
Allotted, called up and fully-paid
Total issued ordinary shares of 1p each
as at 31 December 2016 39,970,012 400
----------------------------------------- ------------ ---------
On 16 January 2017 at the Company's General Meeting, the Shareholders approved the issue of a further 1,994,500 shares. As at 28 April 2017 there were 41,964,512 shares in issue.
Capital management policies and procedures
The Company's capital management objectives are:
- to ensure that the Company will be able to continue as a going concern; and
- to maximise the capital return to its equity shareholders through an appropriate balance of equity
capital and loan notes.
The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. The Company has no externally imposed capital requirements.
13. Reserves
Share Capital Revenue
premium reserve reserve
GBP'000 GBP'000 GBP'000
At 1 January 2016 36,800 (27,051) (2,034)
Gains on investments - 1,664 -
Exchange gains - 76 -
Retained net revenue expense for the
year - - (909)
At 31 December 2016 36,800 (25,311) (2,943)
-------------------------------------- --------- --------- ---------
14. Net Asset Value per Ordinary Share
31 December 31 December
2016 2016
GBP'000 GBP'000
Net asset value per share 22.38p 20.30p
Net assets attributable at end of year GBP8.9m GBP8.1m
Ordinary shares of 1p each as at end of
year 39,970,012 39,970,012
----------------------------------------- ------------ ------------
15. Analysis of Changes in Net Cash
At 1 January Currency At 31 December
2016 Cash flow movements 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------- ---------- ----------- ---------------
Cash at bank and on
deposit 331 3,066 76 3,142
Total 331 3,066 76 3,142
--------------------- ------------- ---------- ----------- ---------------
16. Financial Instruments
The Company's financial instruments comprise its investment portfolio, cash balances, bank facilities and debtors and creditors that arise directly from its operations. As an investment trust the Company holds a portfolio of financial assets in pursuit of its investment objective. The Company can make use of flexible borrowings for short term purposes to achieve improved performance in rising markets and to seek to enhance the returns to shareholders, when considered appropriate by the Investment Manager. The downside risk of borrowings may be reduced by raising the level of cash balances held.
Listed fixed asset investments held (see note 8) are valued at fair value. For listed securities this is either bid price or the last traded price depending on the convention of the exchange on which the investment is listed. Unlisted investments are valued by the Directors on the basis of all the information available to them at the time of valuation. The fair value of all other financial assets and liabilities is represented by their carrying value in the Balance Sheet. The fair value of the 9% Convertible Unsecured Loan Stock 2017 is not materially different from its carrying value in the Balance Sheet.
The main risks that the Company faces arising from its financial instruments are:
(i) market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate or currency rate movements;
(ii) interest rate risk, being the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates;
(iii) foreign currency risk, being the risk that the value of investment holdings, investment purchases, investment sales and income will fluctuate because of movements in currency rates;
(iv) credit risk, being the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company; and
(v) liquidity risk, being the risk that the bank may demand re-payment of any loan or that the Company may not be able to liquidate quickly its investments. The Company's operations have been cash flow negative since its inception, the Company relying on the sale of investments to generate the cash needed to continue to operate. GBP5.3m was realised from the sale of investments during the year under review.
The Company held the following categories of financial instruments as at 31 December :
2016 2015
GBP'000 GBP'000
Financial instruments
Investment portfolio 10,325 12,256
Cash at bank and on deposit 3,142 331
Accrued income 627 369
Other debtors 36 30
------------------------------------------ -------- --------
Financial liabilities
9% Convertible Unsecured Loan Stock 2017 2,700 4,700
CULS interest due 72 171
------------------------------------------ -------- --------
Market price risk
Market price risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. To mitigate the risk the Board's investment strategy is to select investments for their fundamental value. Stock selection is therefore based on disciplined accounting, market and sector analysis, with the emphasis on long term investments. An appropriate spread of investments is held in the portfolio in order to reduce both the statistical risk and the risk arising from factors specific to a country or sector. The Investment Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to consider investment strategy.
Investment and portfolio performance are discussed in more detail in the Investment Manager's Review.
If the investment portfolio valuation fell by 10 per cent at 31 December 2016, the impact on the profit or loss and the net asset value would have been negative GBP1.0 million. If the investment portfolio valuation rose by 10 per cent the impact would have been equal and opposite. The calculations are based on the portfolio valuation as at the balance sheet date and are not representative of the year as a whole, and may not be reflective of future market conditions.
Interest rate risk
Financial assets
Bond and preference share yields, and their prices, are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the Government's fiscal position, short term interest rates and international market comparisons. The Investment Manager takes all these factors into account when making any investment decisions as well as considering the financial standing of the potential investee company.
Returns from bonds and preference shares are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds. Consequentially, if a bond is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a bond the market price at any given time will depend on the market environment at that time. Therefore, a bond sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred.
Interest rate risk on fixed rate interest instruments is considered to be part of market price risk as disclosed above.
Floating rate
When the Company retains cash balances they are held in floating rate deposit accounts. The benchmark rate which determines the interest payments received on cash balances is the bank base rate for the relevant currency for each deposit.
Fixed rate
The Company holds fixed interest investments and has fixed interest liabilities.
2016 2015
Weighted Weighted
2016 average 2015 average period
Weighted period for Weighted for which
average which the average the rate
2016 interest rate is 2015 interest is fixed
GBP'000 rate (%)* fixed (years) GBP'000 rate (%)* (years)
------------------------ --------- ----------- --------------- --------- ----------- ----------------
Assets:
Convertible securities 2,946 0.2 15.0 3,145 0.9 13.7
------------------------ --------- ----------- --------------- --------- ----------- ----------------
* The 'weighted average interest rate' is based on the current yield of each asset, weighted by their market value.
Foreign currency risk
The Company invests in overseas securities and may hold foreign currency cash balances which give rise to currency risks. During the year, the Company entered into a contract to hedge its currency exposure. Although the Investment Manager may seek to manage all or part of the Company's foreign exchange exposure, there is no assurance that this can be performed effectively.
Foreign currency exposure at 31 December was as follows:
2016 2015
2016 2016 Net current 2016 2015 2015 Net current 2015
Investments Cash assets Total Investments Cash assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------------- -------- ------------- -------- -------------- -------- ------------- --------
Canadian Dollar 4,916 - - 4,916 5,888 - - 5,888
US Dollar 4,733 - 627 5,360 5,040 - 369 5,409
Australian
Dollar 18 - - 18 371 - - 371
Euro - - - - 61 - - 61
---------------- -------------- -------- ------------- -------- -------------- -------- ------------- --------
9,667 - 627 10,294 11,360 - 369 11,729
---------------- -------------- -------- ------------- -------- -------------- -------- ------------- --------
If the value of sterling had weakened against each of the currencies in the portfolio by 5 per cent, the impact on the profit or loss and the net asset value would have been positive GBP0.5 million. If the value of sterling had strengthened by the same amount the effect would have been equal and opposite. The calculations are based on the portfolio valuation, cash balances and net current assets/(liabilities) as at the respective balance sheet dates and are not representative of the year as a whole, and may not be reflective of future market conditions.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represents the maximum credit risk exposure at the balance sheet date.
At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:
2016 2015
GBP'000 GBP'000
Cash and cash equivalents 3,142 331
Interest, dividends and other receivables 663 399
------------------------------------------- ------------------- ---------
3,805 1,730
------------------------------------------- ------------------- ---------
Credit risk on fixed interest investments is considered to be part of market price risk.
Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the high credit quality of the brokers used. The Board monitors the quality of service provided by the brokers used to further mitigate this risk.
The cash held by the Company and all the assets of the Company which are traded on a recognised exchange are held by BNP Paribas Security Services ('BNP'), the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed or limited. The Board monitors the Company's risk by reviewing the custodian's internal control reports. Should the credit quality or the financial position of BNP deteriorate significantly the Investment Manager will move the cash holdings to another bank.
As at 31 December 2016, the Company held 3 per cent or more of issued share capital of the following companies:
Number of ordinary Percentage
shares issued held
Anglo African Minerals 438,303,275 25.15%
IMC Exploration Group 89,316,719 23.51%
Merrex Gold 199,226,505 13.10%
Mineral Mountain Resources 40,419,069 13.40%
Maxim Resources 42,954,254 12.80%
Blue River Resources 124,965,756 6.35%
Wishbone Gold 999,990,364 4.90%
---------------------------- ------------------- -----------
Liquidity risk
The Company's financial instruments include investments in unlisted investments which are not traded on an organised public market and which generally may be illiquid. As a result, the Company may not be able to liquidate these investments at an amount close to their fair value.
At the reporting date, the Company's financial assets exposed to liquidity risk amounted to the following:
2016 2015
GBP'000 GBP'000
Unquoted investments:
Unquoted convertible securities that are convertible
into unlisted securities 1,787 3,145
Unquoted equities 2,946 2,469
------------------------------------------------------ --------- ---------
4,733 5,614
------------------------------------------------------ --------- ---------
The Company's liquidity risk is managed on an ongoing basis by the Investment Manager. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.
The Company maintains sufficient cash, has a short term bank facility and has identified securities that could be sold to pay accounts payable and accrued expenses.
17. Related Party Transaction
The following are considered related parties: the Board of Directors ('the Board') and RDP Fund Management LLP ('Investment Manager').
There were no fees due to Directors at the year end.
18. Post Balance Sheet Events
On 16 January 2017 at the Company's General Meeting, the Shareholders voted in favour of Resolutions 1-3. Resolution 1 authorised the Directors of the Company to allot shares up to a maximum of GBP80,000, resolution 2 resulted in the termination of the Management Agreement and resolution 3 approved a New Investing Policy. As a result of the approval of these resolutions, the Company became a self-managed trust run by its Board and David ('Sam') Hutchins was appointed as an Executive Director of the Company. The change in the Company's investment policy reflects the Company's transition from investing in development companies to investing in companies with large scale assets that are likely to be brought into production in the foreseeable future.
On 20 January 2017, the Company repaid GBP1.5 million nominal of 9% Convertible Unsecured Loan
Stock 2017 to LIM Asia Multi-Strategy Fund Inc ('LIM').
On 28 February 2017, the Company repaid the outstanding GBP1.2 million nominal of 9% Convertible Unsecured Loan Stock.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEWFDAFWSEIL
(END) Dow Jones Newswires
April 28, 2017 10:15 ET (14:15 GMT)
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