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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 |
From Apr 2019 to Apr 2024
TIDMGRIT
RNS Number : 9274D
Global Resources Investment Tst PLC
01 July 2019
Global Resources Investment Trust plc
Annual Results announcement for the year ended
31 December 2018
Financial Highlights
Hot Features
Premium
Total Return Year to Year to
31 December 31 December 2017
2018
Net asset value (82.6)% (12.1)%
------------- ------------------
Ordinary share price (64.4)% 14.1%
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Capital Values 31 December 31 December 2017 % change
2018 period
Net asset value per
share 3.4p 19.7p (82.6)%
------------ ----------------- ---------
Ordinary share price
(mid market) 3.25p 9.125p (64.4)%
------------ ----------------- ---------
Discount 4.4% 53.7%
------------ ----------------- ---------
Revenue and Dividends 31 December 31 December 2017
2018
Loss per ordinary
share (1.38)p (1.04)p
------------ -----------------
Ongoing charges 11.4% 5.6%
------------ -----------------
Period Highs/Lows 2018 2018
High Low
Net asset value 19.7p 3.4p
------ ------
Ordinary share price
(mid market) 10.0p 3.25p
------ ------
Discount 53.7% 4.4%
------ ------
Chairman's Statement
Introduction
When I wrote to you in September 2018 I said that the five months since I became Chairman had been extremely difficult ones for
your Company. I regret to report that the nine months since then have been no easier.
Investment and Share Price Performance
At 31 December 2017 the Company had three core investments, Anglo-African Minerals plc ("AAM": GBP2.1m), Siberian Goldfields
("Siberian": GBP1.8m) and Kalia Holdings ("Kalia": GBP2.4m), together with four smaller investments (GBP1.3m). I reported in September that insufficient progress had been made towards refinancing AAM to give the Board confidence that the necessary funding would be forthcoming. Progress continues to be made, as I report below, but given the progress to date the Board has taken the decision to write down the value of the investment in AAM to US$600,000 (GBP471,000) as at the year end.
Siberian had also been seeking funding but, against a backdrop of increasing international tension with and sanctions against Russia, this has so far proved impossible to complete. The Board has therefore made the decision to value the investment using an industry benchmark approach which has resulted in the valuation being written down to GBP151,000 at year end.
Kalia became a listed position during the year under review and is valued at the price at which the company trades on the Australian Securities Exchange. At 31 December 2018 the Kalia price was AUS$0.003, giving the position a value of GBP796,000. Since the year
end the Kalia share price has fluctuated between AUS$0.001 and AUS$0.005 and is currently trading at the AUS$0.001 level.
The Executive Director writes more fully concerning all the Company's investments in his Review.
Your Company's net asset value at 31 December 2018 was 3.42 pence per share, a decrease of 82.6% from the 19.66 pence at which it stood on 31 December 2017. As I write, it is 1.28 pence per share.
The Company's ordinary share price was 3.25 pence at 31 December 2018. The Company's shares are currently suspended pending the publication of these results as the UKLA requirement to publish results within four months was missed.
General Meeting
The Company's largest shareholder, Mardasa Nominees Pty Ltd (owning 29.7% of the Company) requisitioned a General Meeting of the Company which was held on 22 August 2018. At that meeting shareholders resolved to appoint Mr David Johnston and Mr Jonathan Reynolds to the Board as non-executive Directors. Mr Johnston resigned on 14 June 2019. The Board does not consider Mr Reynolds to be independent.
Outlook
Whilst the Board continues to believe in the merits of the investment case attaching to each of the Company's three significant investments, the fact is that the catalysts to realise value remain elusive and uncertain. That said, AAM is currently in negotiations regarding a potential refinancing with a private international trading group, which has already completed due diligence on the company and its projects. There can be no assurance that these negotiations will be successful; however, if they are, it could lead to a significant uplift in the value of the Company's investment in AAM.
The Board has been urgently considering the future direction of the Company, and on 17 May 2019 appointed Peterhouse Capital Limited to assist in advising the Company as to its future development. The Board has since concluded that it is unrealistic to expect the Company to continue trading as a going concern. A Circular to shareholders is being prepared which will convene a General Meeting at which shareholders will be asked to approve the placing of the Company into Members' Voluntary Liquidation. More detail is given in the sections of the Strategic Review which deal with Going Concern and Viability.
Haruko Fukuda
Director
28 June 2019
Executive Director's Review
As foreshadowed in the Interim Report in September 2018, it has been a difficult and disappointing year for the investment portfolio. The remaining small holdings, including Wishbone Gold plc and Zenith Energy plc were sold on market, and since the year end, the IMC Exploration plc holding has also been sold. This has left the investment portfolio focused on three core holdings as outlined in the Interim Report - Anglo-African Minerals plc ("AAM"), Siberian Goldfields plc ("Siberian") and Kalia Limited ("Kalia").
In the Interim Report, we had written the carrying value of AAM down to nil, as the company had been unable to complete a much needed refinancing. Currently the company has still not been able to complete a major refinancing, however it has been able to raise additional short term funding of over $650,000 in 2019. This has allowed the company to maintain its licences in Guinea on a care and maintenance basis while also maintaining its relationships with the Government. The company is currently proposing to raise further funds via a listing on the Canadian Securities Exchange, and it has recently appointed a Canadian broker to manage this process, which will still take some 3 months to complete.
Given the contingent nature of the fund raising and the time that it will take for AAM to come to market, it is premature to revalue the total investment. For the year end, our equity investment continues to be valued at nil, along with the outstanding loans, although the 9% convertible loan will be valued at par, giving an attributed value of US$600,000 to our investment in the Company.
Unfortunately, Siberian has not been able to raise the pre-IPO funding that was mentioned in the Interim Report and, without such funding, the company's operations remain on a care and maintenance basis. The geopolitical climate for Russian related investments remains particularly challenging and given that Siberian has been unable to raise the required funding to move the project forward, the Board has taken the difficult decision to reduce the carrying value of the investment from GBP1.1m at the time of the Interim Report, to GBP0.1m at the year end. The valuation basis changing to a model based industry valuation benchmark approach. This does not mean that we have lost faith in the company or the project, but from a pragmatic point of view, with Siberian unable to raise the required capital to move the project into production our valuation could be seen as overly optimistic. The adjustment in the valuation of Siberian represents approximately 2.5p per share.
Having listed on the Australian Stock Exchange ("ASX") last year, GRIT exchanged its shares in the private company, Kalia Holdings Pty Ltd for new shares in the ASX listed Kalia Limited. At year end, GRIT held 480,000,000 shares in Kalia Limited which represented 19.09% of the company's issued capital. Since listing the share price performance has been unspectacular although the company has managed to complete the first major geophysical survey of its exploration licences and this initial survey has already identified 64 major targets for porphyry and epithermal style mineralisation. This includes 12 priority targets, which the company hopes to drill later this year.
While I had hoped that this year end Review would have made for more positive reading, that has not been the case. Unfortunately, as noted opposite, both AAM and Siberian, were unable to complete capital raisings necessary to move their respective projects forward and transform them from development companies to production companies. The experiences of AAM and Siberian are not unique in the world of small cap mining companies, and it only serves to highlight how difficult and unforgiving this sector can be.
David Hutchins
Investment Director
28 June 2019
Portfolio Review
Kalia Limited
Kalia Limited (KLH) is an ASX listed copper/gold exploration company, active on the Pacific island of Bougainville. In conjunction with its local partner, Toremana Resources Limited, Kalia Ltd was recently granted Exploration Licences EL03 and EL04 by the Autonomous Bougainville Government in the Tore region in the north of Bougainville Island.
Bougainville Island is one of the last undeveloped mineralised provinces of the world. The island straddles the Pacific "Ring of Fire" tectonic plate boundary, and is an ideal setting for porphyry copper/gold and associated epithermal gold mineralisation. Rio Tinto developed the Panguna Mine in the 1960s until it was shut down in 1989. While in operation, the Panguna Mine was considered among the richest mines in the world and during its 17 years of operation it produced over 3 million tonnes of copper
and over 9 million ounces of gold.
There has been no exploration activity on Bougainville Island since 1987 although last year, Kalia Ltd completed the first extensive geophysical survey since then. This survey has already identified 64 targets of porphyry copper/gold epithermal style mineralisations, including 12 priority targets. Following further desk top studies and additional technical interpretation, drill targets will be established.
Further information on Kalia's exploration projects and program is available on the company's website - http://www.kaliagroup.com.
Anglo-African Minerals plc
Anglo-African Minerals plc (AAM) is a private advanced mineral exploration company focused on the progression of its bauxite mining projects located in the Republic of Guinea, which hosts two-thirds of the world's bauxite. Bauxite is the composite material that contains alumina, which is the feedstock for aluminium. AAM, via its subsidiary Forward Africa Resources (FAR), has entered into 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, subject to AAM completing a number of conditions precedent. Initial production at FAR is anticipated at 3 million tonnes per annum, rising to 5 million tonnes per annum.
AAM recently completed major drilling programmes, overseen by independent consultants SRK Consulting, on their two other exploration assets, Somalu and Toubal. Following the drill programs, SRK have updated the Mineral Resource Estimates and have confirmed a combined resource in the vicinity of 2 billion tonnes of export grade bauxite. While the company has also begun early stage high level infrastructure reviews for both projects, further development has been severely restricted by the lack of available funding to the company. While the company has been pursuing a number of potential funding solutions, at this stage the company remains unfunded and therefore its ability to continue to do the work required to move the projects forward is severely limited.
Siberian Goldfields plc
Siberian Goldfields plc (SGL) is a private gold development company, incorporated in the UK which is looking to develop and bring into production its wholly-owned Zhelezny Kryazh Project ("ZK"), a gold/iron ore project located in the prospective mineral region of Eastern Siberia.
The ZK Project currently has a mineable resource of almost 800,000 ozs of gold grading 2.42 g/t and 36 million tonnes of iron ore grading 42% and it is anticipated that the project will initially produce 50,000 ounces of gold and over 1 million tonnes of iron ore per year, at a cash cost of around US$326/oz, allowing for byproduct credits. While construction of the project has already commenced, unfortunately, it is not progressing any further, as the current investment climate for Russian based projects is extremely difficult, meaning the company has been unable to raise the required funding to complete the construction phase and move into production.
Until the investment climate improves for Russian based projects, the ZK Project will remain on a care and maintenance basis.
IMC Exploration Group plc
IMC is an Irish exploration company, listed on the NEX Exchange, although it is trying to seek a standard listing on the London Stock Exchange. The company holds a number of mineral prospecting licences in Ireland, but is specifically focused on three main projects - the Avoca Tailings Project, the North Wexford Gold Project and a zinc project adjacent to the Kilbricken zinc deposit of Hannon Metals.
Subsequent to the year end, this holding was sold and realised GBP47,000 compared to the 31 December 2018 valuation of GBP130,000.
The portfolio retains holdings in Maxim Resources Inc, Portex Minerals Inc, Sniper Resources Ltd and Waterberg Coal Company Limited. However, these holdings remain valued at nil as the prospects of recoverability or realising value in the short to medium term is unlikely.
Classification of Investment Portfolio by Sector
31 December 2018 31 December 2017
Total Investments Total Investments
(%) (%)
Gold / Copper 61.2 63.5
-------------------- --------------------
Bauxite 30.4 27.8
-------------------- --------------------
Lead / Nickel / Zinc 8.4 5.1
-------------------- --------------------
Oil - 3.6
-------------------- --------------------
Copper - -
-------------------- --------------------
Uranium - -
-------------------- --------------------
Total Investments 100.0 100.0
-------------------- --------------------
Classification of Investments by Stockmarket Quotation
31 December 2018 31 December 2017
Total Investments Total Investments
(%) (%)
Canada - 7.3
------------------ ---------------------
Europe - 5.1
------------------ ---------------------
UK 8.4 4.0
------------------ ---------------------
Australia 51.4 -
------------------ ---------------------
Unquoted 40.2 83.6
------------------ ---------------------
Total Investments 100.0 100.0
------------------ ---------------------
Investment Portfolio - as at 31 December 2018
Valuation Total Investments
Company Sector GBP'000 %
Kalia Limited Gold/Copper 796 51.4
------------------ ---------- ------------------
Anglo African Minerals
9% CLN * Bauxite 471 30.4
------------------ ---------- ------------------
Siberian Goldfields
* Gold 151 9.8
------------------ ---------- ------------------
IMC Exploration Group Lead/Nickel/Zinc 130 8.4
------------------ ---------- ------------------
Anglo African Minerals Bauxite - -
*
------------------ ---------- ------------------
Sniper Resources Gold - -
Ltd
------------------ ---------- ------------------
Portex Minerals Inc Lead/Nickel/Zinc - -
------------------ ---------- ------------------
Waterberg Coal Company Coal - -
Limited
------------------ ---------- ------------------
Maxim Resources Inc Oil and Gas - -
------------------ ---------- ------------------
Total Investments 1,548 100
---------- ------------------
* Denotes an unquoted security
Strategic Review
Introduction
This review is part of the Strategic Report being presented by the Company under updated guidelines for UK-listed companies' Annual Reports in accordance with the Companies Act 2006, and is designed to provide information primarily about the Company's business and results for the twelve months to 31 December 2018. It should be read in conjunction with the Chairman's Statement and the Executive Director's Review, which provide a detailed review of the investment activities for the period and outlook for the future.
As outlined in those sections, the Board has determined to prepare the accounts on a non-going concern basis and seek shareholder approval for a Members Voluntary Liquidation .
Global Resources Investment Trust plc ('GRIT' or the 'Company') is an investment trust established to seek to exploit investment opportunities in the junior mining and natural resource sectors. On 7 March 2014, GRIT conducted a share exchange issue through which it acquired an initial portfolio in return for the issue of ordinary shares. The initial portfolio comprised 41 companies and had an aggregate value of GBP39,520,012 based on the share exchange valuation and, pursuant to the share exchange issue, 39,520,012 ordinary shares were issued (credited as fully paid up) and were admitted to trading on the London Stock Exchange's main market.
At launch, GRIT raised GBP4,850,000 through the issue of 9% Convertible Unsecured Loan Stocks ('CULS'). The Company repaid the final tranche of the CULS on 28 February 2017.
Business Model
Global Resources Investment Trust is a self-managed investment trust run by its Board, which takes all major decisions collectively. While David ('Sam') Hutchins has executive duties, all of the Directors regard themselves and one another as equal in duties and responsibilities they owe to shareholders and accordingly work together as a unitary Board.
Investment objective
GRIT's investment objective is to generate medium and long-term capital growth through investing in a diverse portfolio of primarily small and mid-capitalisation natural resources and mining companies, which are listed/quoted on a relevant exchange.
Investment Policy
GRIT seeks to diversify its investments across a number of companies, with a range of natural resource assets, in jurisdictions globally. There are no restrictions as to the commodity classes and geographical regions into which GRIT may invest, however, GRIT will invest and manage its assets in a way which is consistent with its objective of spreading risk. GRIT will adhere to the following investment restrictions:
-- GRIT may only invest up to 60 per cent. of its Gross Asset Value (at the time of investment) in non-quoted, seed capital or pre-IPO companies provided that at any one time such new investments above a 15 per cent. limit will not be in more than two companies, with an emphasis in such instances on potentially large scale assets that also have the ability to bring them to production in the coming years;
-- GRIT will not invest more than 40 per cent. of its Gross Asset Value in any one company (measured at the time of investment) provided that at any one time such new investments above a 15 per cent. limit will not be in more than two companies, with an emphasis in such instances on potentially large scale assets that also have the ability to bring them to production in the coming years;
-- GRIT will not take legal or management control over investments in its Portfolio;
-- GRIT will not invest more than 10 per cent., in aggregate, of its Gross Asset Value in other listed closed-ended investment funds;
-- distributable income (if any) will be principally derived from investments. GRIT will not conduct a trading activity which is significant in the context of the activities of GRIT as a whole;
-- GRIT will not enter into derivative transactions for speculative purposes. GRIT does not expect to enter into any hedging transactions, although it may do so for the purposes of efficient portfolio management and to hedge against exposure to changes in currency rates to the full extent of any such exposure;
-- GRIT will not incur any debt beyond such amount that is covered four times by the gross value of its investments at the time of incurring such debt (ie a "4 to 1 cover ratio");
-- GRIT will manage the overall portfolio to ensure that there is a spread of investments to provide diversification, with a target of having between 4 and 8 different investments at any one time.
-- GRIT will hold any uninvested funds in cash, cash equivalents or other liquid instruments with a view to maximising the returns on any such funds.
As a result of the non-going concern basis of preparation the investment policy will not apply going forward.
Going Concern
As a result of the Company's operations being cash flow negative since its inception, the Company has been required to dispose of non-core investment portfolio assets to generate the cash needed to finance its operational costs.
In 2018, GBP594,000 was realised from investment proceeds compared with operating expenses and interest costs of GBP579,000.
As at 28 June 2019, the Company currently has cash of GBP5,000 and net current liabilities of GBP290,000 (excluding investments). The creditors are in respect of director fees, administration and adviser costs. The Board estimates the operating expenses over the next twelve months (the minimum going concern period) to be GBP400,000.
Taking into account the existing net creditor position and the operating costs to June 2020, the Company requires at least GBP700,000 of cash to remain a going concern.
The Company now has investments in only three companies with value attached to them. Two of these companies, Anglo African Minerals plc ("AAM") and Siberian Goldfields plc ("Siberian"), are unlisted and illiquid. The third company is Kalia Limited ("Kalia"), an ASX listed exploration company.
Siberian and AAM require further funding to achieve commercialisation. Whilst Siberian continues to find attracting finance difficult, there has been positive developments in respect of AAM recently with a significant fundraising being discussed. Should this fundraising complete, the Company would receive repayment of the debt instruments in this entity amounting to GBP1.3m. However, the discussion currently remains at negotiation stage and the Directors are therefore of the view that the likelihood of the funding completing in order to mitigate the current liquidity issues within GRIT is remote.
In respect of Kalia, the Company owns 480,000,000 shares. The listed price of Kalia ordinary shares is currently AUD 0.1c having fallen from AUD 0.3c since 31 December 2018. The Company had expected to be able to use the Kalia proceeds at 0.3c to cover existing creditors and ongoing operating expenditure. However, at the current share price, disposal receipts would equate to GBP260,000 at the prevailing AUD to GBP exchange rate. As this is significantly less than the GBP700,000 required as outlined above, the disposal proceeds are not on their own enough to permit the Company to trade as a going concern for the next twelve months.
The Company appointed Peterhouse Capital Limited ('PCL') as Corporate Broker to liaise with shareholders and advise the Board on the future direction of the Company, the aim of which being to seek a solution to the liquidity issues outlined above. However, PCL has not been able to provide the Board with a resolution that could adequately address the liquidity issues.
Based on the prevailing net creditor position, liquidity issues and absence of a realistic alternative, and the intention to wind up the company, to ceasing trade , the Board intends to seek shareholder approval to wind up the Company in an orderly manner via a Members Voluntary Liquidation (MVL). In the period up until the general meeting where the MVL will be voted on, the Board is open to proposals (either alternative proposals from PCL or new proposals from other sources) which would mitigate the current liquidity issues within GRIT and create a medium term capital base which permits continuation as an investment trust a viable option. As noted above, however, no such proposals have been identified at the date the accounts were approved.
A Circular will be sent to shareholders setting out further details and timescales however at this stage the Board expect the meeting to take place during August 2019.
As a result of the lack of a realistic alternative, the Board has therefore prepared the financial statements on a non-going concern basis. Other than investments now being classified as current assets, these financial statements are indifferent to results that would have been reported had the Company been a going concern.
Viability Statement
Normally the Board would have considered a longer term viability of 2 years. However, this is considered irrelevant given the prevailing net creditor position, liquidity issues and an absence of a realistic alternative to ceasing trade, as outlined in the Going Concern statement. The Directors intend to seek shareholder approval for an orderly winding up of the Company through a Members Voluntary Liquidation process. Should shareholders vote to pass the resolution on the MVL, the Company would cancel its listing status at that point.
The directors have carried out a robust assessment of the principal risks facing the entity, including those that would threaten the business model, future performance, solvency or liquidity, and as described above and in note 1 of the financial statements, have concluded that the Company is not a going concern. Based on their assessment of the prospects and viability, the directors confirm that they do not have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due.
Principal Risks and Uncertainties and Risk Mitigation
As a result of the current issues faced by the Company, the principal risk and uncertainty relates to liquidity. The Board have assessed this risk and elected to take the action outlined in the Going Concern and Viability Statement sections.
Prior to this outcome, the Board established a risk framework of key risks that the business, as an investment trust company, was exposed to which included policies and processes to mitigate and manage those risks. The principal risks which previously applied and the reasons for the Board actions not mitigating the intention to wind up and therefore preparation of the financial statements on a non-going concern basis are also outlined. The main uncertainty and risk that contributed to the intention to wind up being Sector risk.
Investment and Strategy Risk - The Board is responsible for deciding the investment strategy to fulfil the Company's objectives and monitoring the performance of the Executive Director. Inappropriate strategy, including country and sector allocation, stock selection and the use of gearing, could lead to poor returns for shareholders. To manage this risk the Board requires the Executive Director to provide an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio at each Board meeting, when gearing levels are also reviewed. The Board monitors the spread of investments to ensure that it is adequate to minimise the risk associated with particular countries or factors specific to particular sectors. As a result of the concentrated portfolio which the Company had been managing over recent years, the ability to manage the risks associated with investing in certain sectors and principally the exposure to unquoted investments, resulted in this contributing to the Board's decision to seek shareholder approval for a Members Voluntary Liquidation.
Market Risk- In addition to ordinary movements in the prices of the Company's investments and the loss that the Company might suffer through holding investments in the face of negative market movements, the Company's investment strategy necessarily amplifies this risk (see Sector Risk below). The Board seeks to mitigate this risk through the processes described in the paragraph above, monitoring the implementation and results of the investment process with the Executive Director.
The Board is cognisant of the uncertainty over the process of the UK leaving the European Union, however does not assess this is a risk that will have an impact on GRIT given the specific nature of the investment portfolio.
Sector Risk - The largest part of the Company's assets consist of equity-related investments in natural resource and mining companies, often unquoted, with a range of commodity exposures. The prices of the underlying commodities are often volatile and the companies can be located in countries at risk of political instability and vulnerable to natural disasters. The liquidity in the shares of the companies is often restricted, meaning that it can be difficult to buy or sell volumes of shares at the quoted price. The Board seeks to mitigate this risk through the processes described in the paragraph above on Investment and Strategy Risk. In addition, the closed-ended structure of the Company is an essential part of the Board's management of this risk, ensuring that parts of the portfolio do not have to be sold to raise liquidity to fund redemptions at short notice. However, as the portfolio became more concentrated and the weighting of listed securities compared to unlisted securities changed, the Board were unable to obtain the liquidity required to avoid the preparing the financial statements on a non-going concern basis.
Financial Risk - The Company's investment activities expose it to a variety of financial risks that include market price risk, foreign currency risk, interest rate risk and liquidity and credit risk. Further details of these risks and the ways in which they are managed are disclosed in note 15 to the financial statements.
Operational Risk - The Company relies upon the services provided by third parties and is reliant on the control systems of the Company's service providers. The security and/or maintenance of, inter alia, the Company's assets, dealing and settlement procedures, and accounting records depend on the effective operation of these systems. These are regularly tested and monitored. An internal control report, which includes an assessment of risks, together with the procedures to mitigate such risks, is prepared by the Executive Director and the Company Secretary and reviewed by the Audit Committee at least once a year. The Custodian, BNP Paribas Securities Services, produces an internal control report each year which is reviewed by its auditors and gives assurance regarding the effective operation of controls. This is reviewed by the Audit Committee.
Regulatory Risk - A breach of regulatory rules could lead to the suspension of the Company's stock exchange listing or financial penalties. Breach of Sections 1158 to 1159 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on chargeable gains. The Company Secretary monitors the Company's compliance with the Listing Rules of the UK Listing Authority and the relevant regulations regarding maintenance of Investment Trust status. Compliance with the principal rules is reviewed by the Audit Committee after seeking input from the Company's tax adviser.
Performance Measurement and Key Performance Indicators
The Board uses a number of performance measures to assess the Company's success in meeting its objectives. The key performance indicators are as follows and are considered Alternative Performance Measures.
-- Total Return
The Board reviews the Company's Net Asset Value ("NAV") total return and share price total return (see graph on inside front cover). The fact that the Company has not paid a dividend means that the total return numbers are the same as the capital return numbers. It compares these to the returns from the FTSE AIM Basic Resources Index, although the latter is not a benchmark;
-- Discount/premium to NAV
At each Board meeting, the Board monitors the level of the Company's discount/premium to NAV. The Company publishes a NAV per share figure through the official newswire of the London Stock Exchange (see inside front cover).
-- Ongoing charges
The ongoing charges are a measure of the total expenses incurred by the Company expressed as a percentage of the average shareholders' funds over the period. The Board regularly reviews the ongoing charges and monitors Company expenses.
Social, Community, Employee Responsibilities and Environmental Policy
The Company has only one employee. As an Investment Trust with its current structure, the Company has no direct social, community, or environmental responsibilities.
The Directors recognise that their first duty is to act in the best financial interests of the Company's shareholders and to achieve good financial returns against acceptable levels of risk, in accordance with the objectives of the Company.
In asking the Company's Executive Director to deliver against these objectives, they have also requested that the Executive Director take into account the broader social, ethical and environmental issues of companies within the Company's portfolio, acknowledging that companies failing to manage these issues adequately run a long term risk to the sustainability of their businesses. More specifically, they expect companies to demonstrate ethical conduct, effective management of their stakeholder relationships, responsible management and mitigation of social and environmental impacts, as well as due regard for wider societal issues.
The Company does not provide goods or services in the normal course of business and does not have customers. Accordingly, the Directors consider that the Company does not fall within the scope of the Modern Slavery Act 2015 and it is not therefore, obliged to make a slavery and human trafficking statement. In any event, the Company considers its supply chains to be of low risk as its suppliers are typically professional advisers.
In line with the requirements of the Criminal Finances Act 2017, the Directors confirm that the Company has a commitment to zero tolerance towards the criminal facilitation of tax evasion. In order to ensure compliance with the UK Bribery Act 2010, the Directors confirm that the Company has zero tolerance towards bribery and a commitment to carry out business openly, honestly, and fairly.
The Company has no greenhouse gas emissions to report from its operations for the twelve months ended 31 December 2018, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013 (including those within the underlying investment portfolio).
Gender Representation
At 31 December 2018 the Board comprised four male Directors (including one executive Director) and one female Director. The Board believes in the benefits of having a diverse range of skills and backgrounds, and the need to have a balance of experience, independence, diversity, including gender, and knowledge on its Board of Directors. The Board believes that the current Directors have the appropriate range of skills and experience required by the Company. All appointments will continue to be based on merit and therefore the Board is unwilling to commit to numerical diversity targets. Diversity will continue to be considered as an important factor in any future appointments.
By order of the Board
Maitland Administration Services (Scotland) Limited Secretaries
28 June 2019
Board of Directors
All of the Directors, except Mr Hutchins, are non-executive and all except Mr Reynolds are considered by the majority of the Directors to be independent. The independent non-executive Directors fulfil the function of the Nomination Committee and the independent non-executive Directors fulfil the function of the Audit Committee. The Board maintains overall control over the formulation of Company's investment policy and has overall responsibility for the Company's activities. The Board has delegated responsibility for day-to-day investment management to David Hutchins, the Company's executive director.
Simon James Farrell
Independent Non-Executive Chairman
Date of appointment: 31 January 2014
Experience:
Mr Farrell is non-executive co-chairman of Pathfinder Minerals PLC. He has a Bachelor of Commerce degree from the University of Western Australia and an MBA from the Wharton School of the University of Pennsylvania. He has held a number of senior management and board positions, principally in the natural resource sector over the past 30 years to include Bougainville Copper, Kalgoorlie Super Pit, Hamersley Iron, Woodie Woodie Manganese and Valiant Consolidated. He was chairman of AIM and ASX listed Vmoto Limited and a non-executive director of Kenmare Resources plc, listed on the main market of the London Stock Exchange until 2013, and was also the founding director and chief executive officer of Coal of Africa Ltd.
Remuneration: GBP30,000 per annum
Shared Directorships with any other Trust Directors: None Shareholding in Company: None
Haruko Fukuda
Independent Non-Executive Director and Chair of the Audit Committee
Date of appointment: 17 September 2013
Experience:
Miss Fukuda is a non-executive director of Investec Bank PLC and Aberdeen Standard Asia Focus Investment Trust PLC. She is an adviser to Braj Binani Group of India. She was the CEO and board director of the World Gold Council, having previously been vice chairman and board member of Nikko Europe PLC, a partner of James Capel & Co, and senior adviser at Lazard. She has held many non-executive directorships of major public companies including AB Volvo of Sweden and the Foreign & Colonial Investment Trust PLC. She has published books on international trade policy, and has been a member of the Council of the Institute for Fiscal Studies.
Remuneration: GBP25,000 per annum
Shared Directorships with any other Trust Directors: None Shareholding in Company: None
David ('Sam') Hutchins
Independent Executive Director
Date of appointment: 16 January 2017
Experience:
Mr Hutchins has 30 years' experience as a resources analyst and fund manager. His career began with the Melbourne Stock Exchange in 1979 and he subsequently became an executive director of M&G Investment Management in London. He headed the International Desk at M&G Investment Management from 1995, where he was concurrently responsible for M&G's investments in the precious metals and commodities sector globally. He later became involved in fund management with Yorkton and AWI Administration Services. He was a founding director of Resources Investment Trust plc ('RIT') at its launch in January 2002, and chief executive of Ocean Resource Capital Holdings plc which was admitted to the AIM Market of the London Stock Exchange from 2003 to 2007. Sam was also a founding partner of www.minesite.com, a resource industry specific news related website and conference business, and is a member of the FTSE gold mines index committee. Sam is also of one of two partners of RDP. RDP was the Company's Investment Manager from launch until 16 January 2017.
Remuneration: GBP30,000 per annum
Shared Directorships with any other Trust Directors: None Shareholding in Company: 1,994,500 shares
Jonathan Reynolds
Non-Independent Non-Executive Director Date of appointment: 22 August 2018
Experience:
Mr. Reynolds is a chartered accountant with more than 25 years' experience across many sectors. He has held the position of finance director, chief financial officer and company secretary with numerous UK and Australian listed companies.
Remuneration: GBPnil per annum
Shared Directorships with any other Trust Directors: None Shareholding in Company: None
Directors' Report
The Directors present their Annual Report and the audited financial statements for the year ended 31 December 2018.
Principal Activity and Status
The Company is registered as a public limited company in terms of the Companies Act 2006 (number: 8256031). It is an investment company as defined by Section 833 of the Companies Act 2006. It carries on the business of an investment trust and has been approved as such by HM Revenue & Customs.
The Company's shares are eligible for inclusion in a New Individual Savings Account ('NISA').
Capital Structure
As at 31 December 2018 there were 41,964,512 ordinary shares of 1 pence each in issue. The ordinary shares give shareholders the entitlement to all of the capital growth in the Company's net assets and to all the Company's income that is resolved to be distributed.
Tygola Pty Ltd
On 10 August 2018 the Board was notified that Tygola Pty Ltd had appointed receivers over certain assets of the Company in connection with expenses of US$251,000 that Tygola claimed were due to it from the Company in connection with the guarantee by the Company of a US$500,000 loan by Tygola to AAM.
On 27 September 2018 the receivers were discharged, the parties having reached agreement. The costs expended in responding to and resolving this matter were GBP0.3m.
Substantial Interests in Share Capital
At 28 June 2019, the only persons known to the Company who, directly or indirectly, were interested in 3 per cent or more of the Company's issued share capital were as follows:
Ordinary shares Number held % held
Mardasa Nominees
Pty Ltd 12,461,896 29.7
----------- ------
Philip J Milton 9,661,602 23.0
----------- ------
Armstrong Investments
Ltd 3,000,000 7.1
----------- ------
D Hutchins 1,994,500 4.8
----------- ------
Some of the shareholdings listed above refer to funds managed on behalf of clients of the groups named.
Annual General Meeting
The Notice of the Annual General Meeting was posted to shareholders on 7 June 2019. The Annual General Meeting will have been held on 1 July 2019 by the time these Financial Statements are in the hands of Shareholders. A subsequent general meeting where the financial statements will be laid will be set in due course.
Directors' Remuneration Policy and Report
Among the resolutions put to the Annual General Meeting as ordinary business, is one approving the Directors' Remuneration Policy. This vote is binding. It is also mandatory for listed companies to put their Directors' Remuneration Report to an advisory shareholder vote.
Induction and Training
New Directors appointed to the Board are required to have an understanding of the Company predating their appointment, which is deepened and expanded through individual discussion and contact with the Executive Director and Company Secretary and, in particular, participation at Board meetings. Relevant training is available to Directors as necessary.
Statement Regarding Annual Report and Accounts
Following a detailed review of the Annual Report and Accounts by the Audit Committee, the Directors consider that taken as a whole it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy. In reaching this conclusion, the Directors have assumed that the reader of the Annual Report and Accounts would have a reasonable level of knowledge of the investment industry in general and investment trusts in particular.
Disclosure of Information to the Auditor
The Directors confirm that, so far as each of the Directors is aware, there is no relevant information of which the Company's auditors are unaware and the Directors have taken all the steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
Independent Auditor
KPMG LLP were appointed as the Company's auditors shortly after its launch and have indicated their willingness to continue in office. The Directors will place a Resolution before the Annual General Meeting for the reappointment of KPMG LLP as independent auditor of the Company for the ensuing year, and to authorise the Directors to determine their remuneration.
Continuation Vote
In accordance with the Articles of Association an ordinary resolution, Resolution 6, will be proposed at the Annual General Meeting for the Company to continue as an investment trust.
As the Board intend to seek shareholder approval for a Members Voluntary Liquidation, the Board will seek a discontinuance result in this resolution.
Directors' Authority to Allot Shares
The Directors are seeking authority to allot shares. Resolution 7 will, if passed, authorise the Directors to allot (and grant subscription and conversion rights over) new shares up to an aggregate nominal amount of GBP41,923, being 9.99 per cent of the total issued shares as at 27 June 2019.
Resolution 9, which is a special resolution, will, if passed, renew the Directors' existing power to make limited allotments of shares for cash other than according to the statutory pre-emption rights which require all shares issued for cash to be offered first to all existing shareholders. This power applies to the allotment of (and grant of subscription and conversion rights over) shares up to a maximum nominal amount of GBP20,940 (being 4.99 per cent of the total of issued shares as at 27 June 2019), and otherwise in connection with an offer to holders of ordinary shares in proportion to their existing shareholdings, but subject to exclusions and other arrangements the Directors may consider necessary.
Resolution 8 also allows the sale of treasury shares for cash, on the same basis, without offering such shares first to all existing shareholders. These authorities will continue in effect until the earlier of 15 months from the date the resolutions are passed and the conclusion of the Annual General Meeting in 2020. The Directors do not have any immediate plans to issue further ordinary shares in the Company.
Directors' Authority to Buy Back Shares
The Company did not purchase any shares for cancellation or to hold in treasury during the year.
Resolution 10, as set out in the notice of the Annual General Meeting, seeks renewal of the Company's buy-back authority. The renewed authority to make market purchases will be in respect of a maximum of 14.99 per cent of the issued ordinary shares of the Company on the date of the passing of the resolution. The price paid for the shares will not be less than the nominal value of 1p per share nor more than the higher of (i) 5 per cent above the average middle market value of those shares for the five business days before the shares are purchased and (ii) the higher of the last independent trade and of the highest current independent bid for any number of the Company's ordinary shares on the trading venue where the purchase is carried out. This power will only be exercised if, in the opinion of the Directors, a purchase would result in an increase in net asset value per share and be in the interests of the shareholders as a whole. Any shares purchased under this authority will be cancelled or held in treasury. The Directors have no current intention of utilising this authority. This authority will expire at the earlier of 15 months from the date the resolutions were passed and the conclusion of the Annual General Meeting of the Company
Recommendation
The Directors consider the passing of the resolutions to be proposed at the Annual General Meeting to be in the best interests of the Company and its shareholders as a whole and likely to promote the success of the Company for the benefit of its shareholders as a whole. Accordingly, the Directors unanimously recommend that shareholders should vote in favour of the resolutions.
By Order of the Board
Maitland Administration Services (Scotland) Limited Secretaries
28 June 2019
Statement of Directors' Responsibilities
The directors are responsible for preparing the Annual Report and the Company financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare Company financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare the financial statements on the same basis.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing the Company financial statements, the directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and estimates that are reasonable, relevant and reliable; -- state whether they have been prepared in accordance with IFRSs as adopted by the EU;
-- assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
-- use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations or have no realistic alternative but to do so (as explained in note 1, the directors do not believe it is appropriate to prepare these financial statements on a going concern basis).
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the directors in respect of the annual financial report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
-- the strategic report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
On behalf of the Board
Haruko Fukuda Director
28 June 2019
Annual Report on Directors' Remuneration
Directors' Emoluments (audited)
The Directors who served in the twelve months to 31 December 2018 received the following fees:
Year to Year to
31 December 31 December
2018 2017
GBP'000 GBP'000
S Farrell* 27 32
------------ ------------
H Fukuda** 23 20
------------ ------------
D Hutchins*** 27 19
------------ ------------
D Johnston^ - -
------------ ------------
J Reynolds^ - -
------------ ------------
A St John
!= 8 25
------------ ------------
Totals 85 96
------------ ------------
Directors' remuneration for the current year will be as follows:
2019
GBP'000
S Farrell* 30
--------
H Fukuda** 25
--------
D Hutchins*** 30
--------
J Reynolds nil
--------
Totals 85
--------
* Chairman.
** Chairman of the Audit Committee.
*** David Hutchins was appointed Executive Director on 16 January 2017
Fees paid to Newcove International Inc.appointed 22 August 2018.
^ Resigned on 27 April 2018.
Resigned on 14 June 2019.
Relative Importance of Spend on Pay
The remuneration paid to Directors is shown above. There were no distributions made to shareholders.
Directors' Interests
No Directors who held office during the year held ordinary shares or CULS in the Company as at 31 December 2018 or 31 December 2017, with the exception of Mr Hutchins who held 1,994,500 shares at 31 December 2018.
There has been no change in the ordinary share holdings of the Directors for the year end 31 December 2018 and up to the signing date.
Voting at Annual General Meeting
An ordinary resolution for the approval of this Directors' Remuneration Report will be put to an advisory shareholder vote at the forthcoming Annual General Meeting.
An ordinary resolution for the approval of the Directors' Remuneration Policy will be put to a binding shareholder vote at the forthcoming Annual General Meeting.
Approval
The Directors' Remuneration Report was approved by the Board of Directors and signed on its behalf on 28 June 2019.
Haruko Fukuda
Director
Income Statement
Year ended 31 December Year ended 31 December
2018 2017
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----- ------- -------- -------- -------- ------- -------
Losses on investments 8 - (5,426) (5,426) - (158) (158)
Exchange losses - (4) (4) - (17) (17)
Foreign exchange forward
contract loss - - - - (83) (83)
Income 2 - - - 76 - 76
Investment management fee 3,17 - - - (37) (629) (666)
Other expenses 4 (549) (810) (1,359) (453) - (453)
---------------------------------- ----- ------- -------- -------- -------- ------- -------
Net return before finance
costs and taxation (549) (6,240) (6,789) (414) (887) (1,301)
Interest payable and similar
charges 5 (30) - (30) (24) - (24)
---------------------------------- ----- ------- -------- -------- -------- ------- -------
Net return on ordinary activities
before taxation (579) (6,240) (6,819) (438) (887) (1,325)
Taxation on ordinary activities 6 - - - - - -
---------------------------------- ----- ------- -------- -------- -------- ------- -------
Net return attributable
to equity shareholders (579) (6,240) (6,819) (438) (887) (1,325) ---------------------------------- ----- ------- -------- -------- -------- ------- ------- Loss per ordinary share 7 (1.38)p (14.87)p (16.25)p (1.04)p (2.12)p (3.16)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 gains and losses for the year are attributable to the owners of the Company.
No operations were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above Income Statement.
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Equity
For the year ended 31 December Share premium Capital Revenue
2018 Share capital account reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ----------------------------- ----------------- -------- -------- --------
Balance at 31 December 2017 420 36,880 (25,669) (3,381) 8,250
Return on ordinary activities
after taxation - - (6,240) (579) (6,819)
Value of shares issued in lieu - - - - -
of management fee
Value of unissued share tranches - - - - -
Issue of shares - - - - -
--------------------------------- ----------------------------- ----------------- -------- -------- --------
Balance at 31 December 2018 420 36,880 (31,909) (3,960) 1,431
--------------------------------- ----------------------------- ----------------- -------- -------- --------
For the year ended 31 December
2017 Share
Share premium Capital Revenue
capital account reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ----------------------------- ----------------- -------- -------- --------
Balance at 31 December 2016 400 36,800 (25,311) (2,943) 8,946
Return on ordinary activities
after taxation - - (887) (438) (1,325)
Value of shares issued in lieu
of management fee - - 229 - 229
Value of unissued share tranches - - 400 - 400
Issue of shares 20 80 (100) - -
--------------------------------- ----------------------------- ----------------- -------- -------- --------
Balance at 31 December 2017 420 36,880 (25,669) (3,381) 8,250
--------------------------------- ----------------------------- ----------------- -------- -------- --------
The revenue reserve represents the amount of the Company's reserves distributable by way of dividend. The accompanying notes are an integral part of the financial statements.
Balance Sheet
As at 31 December 2018 As at 31 December
GBP'000 2017
Notes GBP'000
--------------------------------- ----- ---------------------- -----------------
Fixed assets
Investments 8 - 7,568
--------------------------------- ----- ---------------------- -----------------
Current assets
Investments 8 1,548 -
Debtors 9 23 440
Cash at bank and on deposit 32 325
--------------------------------- ----- ---------------------- -----------------
1,603 765
Creditors: amounts falling
due within one year
Other creditors 10 (172) (83)
9% Convertible Unsecured
Loan Stock 2017 11 - -
--------------------------------- ----- ---------------------- -----------------
Net current assets/(liabilities) 1,431 (83)
--------------------------------- ----- ---------------------- -----------------
Net assets 1,431 8,250
--------------------------------- ----- ---------------------- -----------------
Capital and reserves
Called up share capital 12 420 420
Share premium 36,880 36,880
Capital reserve (31,909) (25,669)
Revenue reserve (3,960) (3,381)
--------------------------------- ----- ---------------------- -----------------
Equity shareholders'
funds 1,431 8,250
--------------------------------- ----- ---------------------- -----------------
Net asset value per share 13 3.41p 19.66p
--------------------------------- ----- ---------------------- -----------------
The financial statements were approved by the Board of Directors and authorised for issue on 28 June 2019 and were signed on its behalf by:
S. Farrell Chairman
The accompanying notes are an integral part of the financial statements.
Cash Flow Statement
Year ended Year ended
31 December 2018 31 December
GBP'000 2017
Notes GBP'000
-------------------------------------- ----- ----------------- ------------
Operating activities
Loss before taxation (6,819) (1,301)
Loss on investments 8 5,426 158
Decrease in foreign exchange
creditor - (2,412)
(Decrease)/increase in other
receivables (13) 613
Increase in other payables 89 11
Realised exchange loss on currency
balances 4 100
Value of share tranches in lieu
of management fee - 629
Capital expenses 810 -
-------------------------------------- ----- ----------------- ------------
Net cash outflow from operating
activities before taxation (503) (2,202)
Taxation paid - -
-------------------------------------- ----- ----------------- ------------
Net cash outflow from operating
activities (503) (2,226)
-------------------------------------- ----- ----------------- ------------
Investing activities
Purchases of investments - (2,125)
Sales of investments 594 4,724
Tygola guarantee (380) -
Advanced loan to Anglo African
Minerals - (390)
-------------------------------------- ----- ----------------- ------------
Net cash inflow from investing
activities 214 2,209
-------------------------------------- ----- ----------------- ------------
Financing
Redemption of CULS - (2,700)
-------------------------------------- ----- ----------------- ------------
Net cash outflow from financing - (2,700)
-------------------------------------- ----- ----------------- ------------
Decrease in cash and cash equivaLents
14 14 (289) (2,717)
Exchange movements including
forward contracts (4) (100)
Net cash at the start of the
year 325 3,142
-------------------------------------- ----- ----------------- ------------
Net cash at the end of the year 32 325
-------------------------------------- ----- ----------------- ------------
Notes to the Financial Statements
For the year to 31 December 2018
Accounting Policies
(a) Basis of accounting
The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the International Accounting Standards Board (IASB) and to the extent that they have been adopted by the European Union.
The financial statements have also been prepared in accordance with the Statement of Recommended Practice ("SORP") 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014 and updated in February 2018 with consequential amendments, to the extent that it is consistent with IFRS.
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.
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 Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. 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.
During the year a Litigation Committee, consisting of the Company's independent Directors, was formed to deal with all matters in connection with the appointment by Tygola Pty Ltd of receivers over certain assets of the Company.
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 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
As a result of the Company's operations being cash flow negative since its inception, the Company has required to redeem non-core investment portfolio assets to generate the cash needed to finance operational costs.
In 2018, GBP594,000 was realised from investment proceeds compared with operating expenses and interest costs of GBP579,000.
As at 28 June 2019, the Company currently has cash of GBP5,000 and net creditors of GBP290,000 (excluding investments). The creditors are in respect of director fees, administration and adviser costs. The Board estimate the operating expenses over the next twelve months (the minimum going concern period) to be GBP400,000.
Taking into account the existing net creditor position and the operating costs to June 2020, the Company requires at least GBP700,000 of cash to remain a going concern.
The Company appointed Peterhouse Captal Limited ('PCL') as Corporate Broker to liaise with shareholders and advise the Board on the future direction of the Company, the aim of which being to seek a solution to the liquidity issues outlined above.
Based on the prevailing net creditor position and the absence of a meaningful solution available to the Board at the current time to mitigate these liquidity issues, the Board intends to seek shareholder approval to wind up the Company in an orderly manner via a Members Voluntary Liquidation (MVL).
A Circular will be sent to shareholders setting out further details and timescales however at this stage the Board expects the meeting to take place during August 2019. Should this vote be passed, the Directors assess the holdings in Kalia in Siberian and AAM would be disposed of over the course of 6-12 months to permit scopt for these entities to secure financing based on current discussions.
As a result of the lack of a realistic alternative, and the intention to wind up the Company, the Board has therefore prepared the financial statements on a non-going concern basis. Other than investments now being classified as current assets, these financial statements are indifferent to results that would have been reported had the Company been a going concern.
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) with further analysis provided in note 8.
A summary of the principal accounting policies which have been applied to all periods presented in these financial statements is set out below.
(b) 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. Unlisted investments are valued at fair value by the Directors on the basis of all information available to them at the time of valuation and in accordance with the methodologies consistent with the International Private Equity and Venture Capital Valuation guideline ('IPEV'). This includes a review of: the financial and trading information of trustee 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).
As a result of the Directors' intention to wind up the Company, investments as at 31 December 2018 have been reflected as current assets and recognised at realisable value.
(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.
Interest has not been recognised on debt instruments held in AAM in 2018. Income from deposit interest is recognised on an accruals basis.
(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.
Based on the smaller portfolio of the Company, after taking advice, it remains the position of the Board that the Company continues to qualify under these rules.
(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;
- expenses where a connection with the maintenance or enhancement of the value of the investments can be demonstrated.
(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 5.
(h) Share based payments
The amount recognised is based on the fair value of the shares as measured at the date of the award. The shares are valued using a Black Scholes type model. The value of issued and unissued share tranches are charged to the capital reserve.
(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.
This reserve is non-distributable
(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. (k) Investments in Associates
As an Investment Trust, the Company considers they are an Investment Entity under IFRS and therefore investments, which would ordinarily be considered associates and require to be equity accounted, are accounted on a fair value through profit and loss basis.
2. Income
Year ended Year ended
31 December 2018 31 December
GBP'000 2017
GBP'000 GBP'000
----------------- -----------------------
Income from investments* Overseas interest - 76
----------------- -----------------------
Total income - 76
----------------- -----------------------
Total income comprises: Fixed interest securities - 76
----------------- -----------------------
- 76
----------------- -----------------------
*All investment income arises on investments valued at fair value through profit or loss on initial recognition.
Income for the twelve months ended 31 December 2017 relates to accrued income from Anglo African Minerals 9% Convertible Loan Stock and Siberian Goldfields 15% Convertible Loan Stock.
3 Investment Management Fee
2018 2018 2018 2017 2017 2017
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment Management
Fee - - - 37 629 666
---------- ---------- ---------- --------- --------- ---------
Since 17 January 2017, RDP is no longer the Company's Investment Manager.
From 1 January 2017 to 16 January 2017, 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. On 16 January 2017, at a 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. RDP received GBP37,000 in relation to the twelve months ended 31 December 2017 and this has been charged to revenue. On 16 January 2017, at the Company's General Meeting, 1,994,500 shares were issued to RDP at a value of 11.5p, the value of this share issuance was allocated to capital. GRIT has recognised the remaining tranches of share based payment at fair value and the expense has been charged to Capital - as approved by the Board.
There is no performance fee.
Investment management fees have been allocated to revenue and capital.
4 Other Expenses (including irrecoverable VAT)
2018 Revenue 2018 2018 2017 2017 2017
Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------------------- -------- ---------- ------------------------- -------- ----------
Secretarial and
administration
fees 122 - 122 84 - 84
Directors' fees 85 - 85 96 - 96
Auditor (KPMG)
remuneration
for:
- statutory audit 40 - 40 42 - 42
Tax services - Chiene
& Tait 16 - 16 4 - 4
Legal fees 83 - 83 88 - 88
Broker fees 36 - 36 24 - 24
Public relations 17 - 17 13 - 13
Regulatory fees 22 - 22 23 - 23
Tygola guarantee - 380 380 - - -
Safe custody fee 30 - 30 30 - 30
Travel expenses 31 - 31 22 - 22
Registrar fees 17 - 17 17 - 17
Printing fees 8 - 8 10 - 10
Write-off of Advanced
loan to Anglo African
Minerals - 430 430 - - -
Professional fees 8 - 8 - - -
Other 34 - 34 - - -
-------------------------- ------------------- -------- ---------- ------------------------- -------- ----------
549 810 1,359 453 - 453
-------------------------- ------------------- -------- ---------- ------------------------- -------- ----------
The Company has an agreement with Maitland Administration Services (Scotland) Limited for the provision of secretarial and administration services. During the year the total fees paid and payable were GBP122,281. The balance due to Maitland for secretarial services at the year end was GBP81,543. Maitland receive a fee comprising 0.08% per annum of the total assets subject to a minimum fee of GBP87,378.
The adminstration agreement has a six month notice period.
No pension contributions were payable in respect of any of the Directors.
The Tygola guarantee cost relates to monies paid in respect of a guarantee provided by GRIT in respect of Anglo African Minerals. The write-off of the AAM loan amount relates to an assessed unrecoverable amount in respect of a debtor owed by AAM.
5 Interest Payable and Similar Charges
2018 Revenue 2018 2018 2017 Revenue 2017 2017
Capital Total Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------------- -------- ---------- ------------------------ -------- ----------
Interest on 9% Convertible
Unsecured Loan Stock
2017 ('CULS') - - - 24 - 24
Interest paid on guarantee
to Tygola 30 - 30 - - -
--------------------------- --------------- -------- ---------- ------------------------ -------- ----------
30 - 30 24 - 24
--------------------------- --------------- -------- ---------- ------------------------ -------- ----------
Interest payable on the CULS is allocated 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. There were no CULS remaining outstanding at the start of the year as they were fully paid in February 2017.
6 Tax on Ordinary Activities
2018 2018 2018 2017 2017 2017
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:
2018 2017
Total Total
GBP'00 GBP'000
(Loss)/return on ordinary activities
before taxation (6,819) (1,325)
-------- ---------
Corporation tax at standard rate 19%
(prior year: 19%) (1,296) (252)
-------- ---------
Effects of:
-------- ---------
Non taxable losses 1,031 30
-------- ---------
Excess management expenses 264 203
-------- ---------
Exchange losses 1 19
-------- ---------
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 2018 the Company had surplus management expenses of GBP1,221,000 (2017: GBP957,000) 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.
Year ended 31 Year ended
December 2018 31 December
2017
Revenue return (1.38)p (1.04)p
------------------------ -----------------------
Capital return (14.87)p (2.12)p
------------------------ -----------------------
Total return (16.25)p (3.16)p
------------------------ -----------------------
Number Number
Weighted average ordinary shares in issue 41,964,512 41,877,082
---------- ----------
8 Investments
2018 Total 2017 Total
GBP'000 GBP'000
------------------------------------------ ---------------------------- --------------------------------
Investments listed/quoted on a recognised
investment exchange 926 1,242
Unquoted investments 622 6,326
------------------------------------------ ---------------------------- --------------------------------
1,548 7,568
------------------------------------------ ---------------------------- --------------------------------
Equity shares 1,077 7,125
Convertible securities 471 443
------------------------------------------ ---------------------------- --------------------------------
1,548 7,568
------------------------------------------ ---------------------------- --------------------------------
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. As a result of the Directors' intention to wind up the Company, investments at 31 December 2018 year have been reflected in current assets in the Balance Sheet at realisable value.
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 1 Level 1 Level 2 2018 2017
Listed Listed overseas Listed in Level Total Total
in UK UK 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ------------- ---------------- ---------------- ------- -------- ---------
Opening book cost 1,475 5,114 - 5,623 12,212 21,361
Opening fair value adjustment (785) (4,563) - 704 (4,644) (11,036)
------------------------------ ------------- ---------------- ---------------- ------- -------- ---------
Opening valuation 690 551 - 6,327 7,568 10,325
Transfers (524) 768 524 (768) - -
Purchases at cost - - - - - 2,125
Sales - proceeds (100) (443) (51) - (594) (4,724)
Sales - realised losses (851) (281) (211) - (1,343) (6,550)
Increase/(decrease) in
fair value adjustment 785 201 (132) (4,937) (4,083) 6,392
------------------------------ ------------- ---------------- ---------------- ------- -------- ---------
Closing valuation - 796 130 622 1,548 7,568
------------------------------ ------------- ---------------- ---------------- ------- -------- ---------
Closing book cost - 5,158 262 4,855 10,275 12,212
Closing fair value adjustment - (4,362) (132) (4,233) (8,727) (4,644) ------------------------------ ------------- ---------------- ---------------- ------- -------- --------- Closing valuation - 796 130 622 1,548 7,568 ------------------------------ ------------- ---------------- ---------------- ------- -------- ---------
The gains and losses included in the above table have all been recognised within losses 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.
During the year IMC shares were reclassified from level 1 to level 2 due to the decrease in trading activity. Kalia shares were reclassified from level 3 to level 1 due to the transfer to listed shares on the Australian Securities Exchange.
The Board considered the matters which were most relevant in establishing the fair value of level 3 investments were:
- Siberian Goldfields - the investment in Siberian Goldfields has been valued based on the assessed value of the proven and estimated reserves, taking into account the market value of similar projects, discounted to reflect the geopolitical risks associated with the location of those reserves and the resulting difficulties in securing finance to move the project into production.
- AAM - the valuation reflects recent debt finance being raised in the entity and operational developments in respect of larger scale funding being secured.
For both AAM and Siberian, the Board consider the valuations will increase significantly at the point the desired level of finance is achieved in each entity. Conversely, the valuations will reduce to, or close to, nil should such finance not be secured in the next 6-12 months.
2018 2017
Losses on investments GBP'000 GBP'000
------------------------------------------------ ---------- ---------
Realised losses on sale (1,343) (6,550)
Movement in fair value (4,083) 6,392
------------------------------------------------ ---------- ---------
Losses on investments (5,426) (158)
------------------------------------------------ ---------- ---------
During the year the Company did not incur any transaction costs on
purchases or sales.
9 Debtors
2018 2017
GBP'000 GBP'000
------------------------------------------------ ---------- ---------
Advanced loan to Anglo African Minerals - 390
Prepayments and accrued income 8 42
VAT recoverable 15 8
------------------------------------------------ ---------- ---------
23 440
------------------------------------------------ ---------- ---------
10 Other creditors
2018 2017
GBP'000 GBP'000
------------------------------------------------ ---------- ---------
Other creditors 172 83
------------------------------------------------ ---------- ---------
172 83
------------------------------------------------ ---------- ---------
11 9% Convertible Unsecured Loan Stock 2017
2018 2017
Nominal Nominal
value of value of
CULS CULS
GBP'000 GBP'000
Balance at the beginning
of the period - 2,700
----------- ----------
Redemption of CULS - (2,700)
----------- ----------
Balance at the end - -
of the period
----------- ----------
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 converted GBP300,000 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. 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. At 31 December 2017, there was no CULS outstanding.
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. Given the current share price, no liability is recognised for the warrants. No warrants were exercised in 2018.
12 Share Capital
2018 2018
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 2018 41,964,512 420
------------ ---------
Capital management policies and procedures
The Company's capital management objectives are:
- to ensure, as far as reasonably possible, 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.
The capital of the Company is managed in accordance with its investment policy detailed in the Strategic Review. As noted in that section and in note 1, the Board is seeking shareholder approval to wind up the Company via a Members Voluntary Liquidation process.
13 Net Asset Value per Ordinary Share
2018 2017
------------------------------- ---------- ----------
Net asset value per share 3.41p 19.66p
Net assets attributable at end GBP1.4m GBP8.3m
of period
Ordinary shares of 1p each in
issue at end of period 41,964,512 41,964,512
------------------------------- ---------- ----------
14 Analysis of Changes in Net Cash
At 1 January 2018 Cash flow Currency movements At 31 December
2018
GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----------------- --------- ------------------ --------------
Cash at bank and
in hand 325 (289) (4) 32
----------------- ----------------- --------- ------------------ --------------
Total 325 (289) (4) 32
----------------- ----------------- --------- ------------------ --------------
15 Financial Instruments
The Company's financial instruments comprise its investment portfolio, cash balances and debtors and creditors that arise directly from its operations. As an investment trust the Company holds a small portfolio of financial assets in pursuit of its investment objective.
Listed fixed asset investments held (see note 8) are measured 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 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
(ii) factors other than interest rate or currency rate movements;
(iii) interest rate risk, being the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates;
(iv) 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;
(v) 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
(vi) liquidity risk, being the risk that the Company may not be able to liquidate its investments to satisfy ongoing operational requirements. The Company's operations have been cash flow negative since its inception, with the Company relying on the sale of investments to generate the cash needed to continue to operate. GBP0.6m was realised from the sale of investments during the period under review.
The Company held the following categories of financial instruments
as at 31 December:
2018 2017
GBP'000 GBP'000
--------------------------------------------- ----------- -----------
Financial instruments
Investment portfolio 1,548 7,568
Cash at bank and on deposit 32 325
Debtors 23 440
--------------------------------------------- ----------- -----------
Financial liabilities
Other creditors 172 83
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. The very focussed investment portfolio amplifies the risk arising from factors specific to a country or sector. The Executive Director 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 Executive Director's Review.
If the investment portfolio valuation fell by 10 per cent at 31 December 2018, the impact on the profit or loss and the net asset value would have been negative GBP0.2 million (2017: GBP0.8 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 period 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 Executive Director 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 in the prior year had fixed interest liabilities.
2018 2017
Weighted Weighted
2018 average 2017 average
period
Weighted period for Weighted for
average which the average which the
2018 rate is rate is
interest fixed 2017 interest fixed
GBP'000 rate (%)* (years) GBP'000 rate (%)* (years)
----------------------- ------- --------- ---------- ------- --------- ---------
Assets:
Convertible securities 471 - - 443 - -
----------------------- ------- --------- ---------- ------- --------- ---------
* 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. Although the Executive Director 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:
2018 Net 2017
2018 2018 current 2018 2017 2017 Net current 2017
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 - - - - 551 - - 551
US Dollar 471 - 471 - 2,111 5 - 2,116
Australian Dollar 796 - 796 - 2,403 - - 2,403
Euro - - - - - - - -
------------------ ------------ ------- -------- ------- ------------ ------- ------------ -------
1,267 - 1,267 - 5,065 5 - 5,070
------------------ ------------ ------- -------- ------- ------------ ------- ------------ -------
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 GBP0.06 million (2017: GBP0.25 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.
The Executive Director does not intend to hedge the Company's foreign currency exposure at the present time.
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 Executive Director 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:
At the reporting date, the Company's financial assets exposed to credit
risk amounted to the following:
2018 2017
GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Cash and cash equivalents 32 325
Interest, dividends and other receivables - 440
------------------------------------------------------ --------- ---------
32 765
------------------------------------------------------ --------- ---------
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 Executive Director will move the cash holdings to another bank.
As at 31 December 2018, the Company held 3 per cent or more of issued share capital of the following companies:
2018
Number of 2017
Ordinary shares 2018 Percentage Number of 2017 Percentage
issued held Ordinary shares issued held
Kalia Holdings 2,514,347,391 19.1% - -
Kalia Holdings Ltd
Pty - - 240,000,000 27.7%
Anglo African Minerals 444,648,075 25.4% 444,648,075 25.4%
IMC Exploration Group 147,291,719 17.6% 147,291,719 17.6%
Siberian Goldfields 250,010,000 6.1% 250,010,000 6.1%
These companies are not treated as associates as the policy choice under IFRS is taken whereby they are not equity accounted as GRIT considers itself as an investment entity and therefore accounts for these investments on a fair value through profit and loss basis.
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:
2018 2017
GBP'000 GBP'000
Unquoted investments:
Unquoted convertible
securities that are
convertible into unlisted
securities 471 443
Unquoted equities 151 5,883
622 6,326
The Company's liquidity risk is managed on an ongoing basis by the Executive Director in accordance with policies and procedures in place as described in the Directors' Report. The Company's overall liquidity risks are monitored by the Board whenever it meets. Consideration of such matters has resulted in the Board recommending the Company is wound up via a Members Voluntary Liquidation process.
16 Related Party Transactions
The Board of Directors are considered related parties.
Details of the fee arrangement with the Executive Director are included within the Directors' Report under the heading Management Arrangements and are disclosed in note 3.
There are no other transactions with the Board other than aggregated remuneration for services as Directors.
There were fees of GBP24,000 (2017: GBP7,000) due to Directors at the year end.
As a result of the Company holding more than 20% of the shares in AAM, it is considered a related party. Details of transactions with AAM are outlined in notes 4, 8 and 9.
17 Share Based Payments
On 16 January 2017, the Company entered into a termination agreement with RDP and agreed a share incentive plan which allows RDP to benefit from an award of share based payments. David Hutchins, Executive Director, is one of two partners of RDP. The Company's incentive plan has conditions attached before RDP becomes entitled to the award. The conditions require the share price of the Company to be above the trigger points for 30 consecutive days. On achievement of this condition each tranche of shares will be issued. As an equity settled share based payment, the fair value is assessed at the date of award with no revision. The Company obtained a valuation of the share based payment award to determine an appropriate fair value to reflect in the financial statements. The value was based on a forward looking expectation reflecting the likelihood of portfolio investments growing in value to a sufficient extent that the NAV (after adjusting for the discount) would permit the triggers to be achieved.
The first tranche was reflected at the share price and number of shares issued. The model was used to estimate the fair value of the remaining three tranches which was assessed as GBP400,000. Based on the model output a range of values that could have been reflected was GBP240,000 to GBP475,000.
Cost per share Share price Number of
Trigger point Date of payment (p) (p) shares
First trigger On admission 16/1/17 5 11.5 1,994,500
Second trigger 14p n/a 5 n/a 2,000,000
Third trigger 16p n/a 5 n/a 2,000,000
Fourth trigger 18p n/a 5 n/a 2,000,000
The first tranche was valued at GBP229,638 using the share price on the day the agreement was signed. The remaining three tranches have a value of GBP400,000 and are also recognised at fair value.
No trigger points have been achieved since the share based payments were awarded.
18 Post Balance Sheet Events
On 11th March 2019, the Company disposed of its investment in IMC Exploration Group Plc for GBP47,000. The investment was valued at GBP130,000 as at 31 December 2018.
19 Post Balance Sheet Events The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2018 or 2017. Statutory accounts for 2017 have been delivered to the registrar of companies, and those for 2018 will be delivered in due course. The auditor has reported on those accounts, the report for the year ended 31 December 2017 was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006, while the report for the year ended 31 December 2018 was (i) unqualified, (ii) did include a reference to non-going concern basis of preparation to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Registered Number
8256031
Registered Office
Hamilton Centre
Rodney Way
Chelmsford
CM1 3BY
Directors
Simon Farrell (Chairman)
Haruko Fukuda
David Hutchins
Jonathan Reynolds ++
* Chairman of the Audit Committee. ++ Appointed on 22 August 2018.
Secretary and Administrator
Maitland Administration Services (Scotland) Limited
20 Forth Street
Edinburgh
EH1 3LH
Tel: 0131 550 3760
Solicitors
DMH Stallard LLP
6 New Street Square
New Fetter Lane
London
EC4A 3BF
Sponsor and Financial Adviser
Beaumont Cornish Limited
2nd Floor, Bowman house
29 Wilson Street
London
EC3V 3LT
Corporate Broker
Peterhouse Capital Limited
New Liverpool House
15 Eldon Street
London
EC2M 7LD
Bankers and Custodian
BNP Paribas Securities Services, London
55 Moorgate
London
EC2R 6PA
Auditor
KPMG LLP
20 Castle Terrace
Edinburgh
EH1 2EG
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Shareholder helpline UK: 0370 707 1556** Shareholder helpline overseas: +44 0370 707 1556
** Calls to this number cost 8p per minute (excluding VAT) plus network extras. Calls from outside the UK will be charged at international rates. Other telephone provider costs may vary. Lines open 8.30am to 5.30pm, Monday to Friday
Tax Advisor
Chiene & Tait
61 Dublin Street
Edinburgh EH3 6NL
Shareholder Information
Net Asset Value/Share Price
The net asset value of the Company's ordinary shares may be obtained by contacting RDP on 0207 290 8540 or by email at info@rdplimited.co.uk or alternatively by visiting the Company's website at www.grit.london.
Website
www.grit.london
END
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR LLFEIRVIIVIA
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