REG - Baker Steel Res Tst - Half-year Report
BAKER STEEL RESOURCES TRUST LIMITED
(Incorporated in Guernsey with registered number 51576 under the provisions of The Companies (Guernsey) Law, 2008 as amended)
17 August 2018
BAKER STEEL RESOURCES TRUST LTD
(the "Company")
Half-Yearly Report and Unaudited Condensed Interim Financial Statements
For the period from 1 January 2018 to 30 June 2018
The Company has today, in accordance with DTR 6.3.5, released its Half-Yearly Report and Unaudited Condensed Interim Financial Statements for the period ended 30 June 2018. The Report is available via www.bakersteelresourcestrust.com and will shortly be submitted to the National Storage Mechanism and will also shortly be available for inspection at www.hemscott.com/nsm.do
Further details of the Company and its investments are available on the Company's website www.bakersteelresourcestrust.com
Enquiries:
Baker Steel Resources Trust Limited +44 20 7389 8237
Francis Johnstone
Trevor Steel
Numis Securities Limited +44 20 7260 1000
David Benda (corporate)
James Glass (sales)
HSBC Securities Services (Guernsey) Limited + 44 (0)1481 707 000
Company Secretary
DIRECTORS:
Howard Myles (Chairman)
Charles Hansard
Clive Newall
Christopher Sherwell
(all of whom are non-executive and independent)
REGISTERED OFFICE:
Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey, GY1 3NF
Channel Islands
MANAGER:
Baker Steel Capital Managers (Cayman) Limited
PO Box 309
George Town
Grand Cayman KY1-1104
Cayman Islands
INVESTMENT MANAGER:
Baker Steel Capital Managers LLP*
34 Dover Street
London W1S 4NG
United Kingdom
STOCK BROKERS:
Numis Securities Limited
10 Paternoster Square
London EC4M 7LT
United Kingdom
SOLICITORS TO THE COMPANY:
Norton Rose Fulbright LLP
(as to English law)
3 More London Riverside
London SE1 2AQ
United Kingdom
ADVOCATES TO THE COMPANY:
Ogier
(as to Guernsey law)
Redwood House
St. Julian's Avenue
St. Peter Port
Guernsey GY1 1WA
Channel Islands
ADMINISTRATOR & COMPANY SECRETARY:
HSBC Securities Services (Guernsey) Limited
Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey GY1 3NF
Channel Islands
* The Investment Manager was authorised as an Alternative Investment Fund Manager ("AIFM") for the purpose of the Alternative Investment Fund Managers Directive ("AIFMD") on 22 July 2014.
SUB-ADMINISTRATOR TO THE COMPANY:
HSBC Securities Services (Ireland) DAC
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
CUSTODIAN TO THE COMPANY:
HSBC Institutional Trust Services (Ireland) DAC
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
SAFEKEEPING AND MONITORING AGENT:
HSBC Institutional Trust Services (Ireland) DAC
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
AUDITOR:
BDO Limited
P O Box 180
Place du Pre
Rue du Pre
St. Peter Port
Guernsey GY1 3LL
Channel Islands
REGISTRAR:
Link Market Services (Guernsey) Limited
(previously Capita Registrars (Guernsey) Limited)
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey GY2 4LH
Channel Islands
UK PAYING AGENT AND TRANSFER AGENT:
Link Asset Services (Holdings) Limited
(previously Capita Asset Services)
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
RECEIVING AGENT:
Link Asset Services (Holdings) Limited
(previously Capita Asset Services)
Corporate Actions
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
PRINCIPAL BANKER:
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
INVESTMENT MANAGER'S REPORT
For the period from 1 January 2018 to 30 June 2018
Financial Performance
The unaudited net asset value per Ordinary Share as at 30 June 2018 was 57.1 pence per share, up 0.5% over the six months. During this period the EPIX Global Mining Index was up 1.1% in Sterling terms.
For the purpose of calculating the Net Asset Value ("NAV") per share, all investments are carried at fair value as at 30 June 2018. The fair value of unquoted investments is determined by the Directors with assistance from the Investment Manager. Quoted investments are carried at closing market prices as at 30 June 2018.
Net assets at 30 June 2018 comprised the following:
£m
% of net assets
Unquoted Investments
40.1
60.4
Quoted Investments
25.8
38.9
Cash and Other net assets
0.4
0.7
66.3
100.0
Investment Update
Largest 10 Holdings - 30 June 2018
% of NAV
Polymetal International Plc
29.8%
Bilboes Gold Limited
15.4%
Cemos Group Plc
10.0%
Polar Acquisition Limited
9.6%
Futura Resources Limited (formerly Queensland Coal Investment Holdings Ltd)
8.7%
Metals Exploration Plc
6.0%
Sarmin Minerals Exploration Inc
4.6%
Black Pearl Limited Partnership
4.0%
PRISM Diversified Ltd (formerly Ironstone Resources Limited)
3.6%
Ivanhoe Mines Limited
3.0%
94.7%
Other Investments
4.6%
Cash and other net assets
0.7%
100.0%
Largest 10 Holdings - 31 December 2017
% of NAV
Polar Acquisition Limited
37.4%
Bilboes Gold Limited
12.6%
Ivanhoe Mines Limited
11.3%
Cemos Group Plc
9.1%
Metals Exploration Plc
6.8%
Sarmin Minerals Exploration Inc
4.5%
Queensland Coal Investment Holdings Ltd
4.4%
Black Pearl Limited Partnership
3.9%
Ironstone Resources Limited
3.8%
Nussir ASA
3.1%
96.9%
Other Investments
1.8%
Cash and other net assets
1.3%
100.0%
Review
At the end of June 2018, Baker Steel Resources Trust Limited was fully invested. During the first six months of 2018, the unaudited net asset value per share rose 0.5% to 57.1p in an overall flat market for mining shares, with the EPIX Global Mining Index rising 1.1% in Sterling terms. Commodities gave up some of their gains from the second half of 2017 with the steel minerals, coking coal and iron ore, falling 24.4% and 10.6% respectively. Likewise, gold fell 3.8% during the first six months of 2018 and silver fell 4.9%.
The first half of 2018 saw the culmination of the two-year reorganisation of the Company's indirect interest in the Tier 1 Prognoz silver project. At the beginning of January 2016, shareholders supported a resolution which gave the Company the authority to increase its interest in Polar Silver Resources Limited ("Polar Silver"), up to 35% of NAV of the Company. This allowed a specially formed subsidiary Polar Acquisition Limited ("PAL") to offer to acquire the interests of the other shareholders of Polar Silver. During June 2016, following negotiations with the other Polar Silver shareholders, a settlement was agreed whereby all loans in the Polar Silver group would be converted into equity in Polar Silver and subsequently PAL acquired all the shares in Polar Silver. The Company also agreed to acquire the interests of certain other Polar Silver shareholders for cash which together with the debt conversion enabled the Company to gain a 64% interest in PAL and thereby control of the investment.
In early 2017, Polymetal International plc ("Polymetal"), the London listed Russian gold and silver producer, acquired a 10% interest in Polar Silver and committed to undertake and fund the feasibility study on Prognoz over the next two years, budgeted at up to US$20 million. In consideration for this, Polymetal had the option to acquire the remainder of Polar Silver upon completion of the technical study and the reserve estimate. In early 2018, it was agreed between Polymetal and PAL to accelerate the exercise of this option and in April 2018, PAL completed the sale of Polar Silver for 6,307,000 Polymetal shares plus 2-4% royalty on its 45% pro rata share of future production from the Prognoz silver project. During June 2018 PAL distributed the Polymetal shares it had received as consideration to its shareholders and consequently the Company received 2.95 million Polymetal shares (equivalent to 0.65% of Polymetal), 90% of which are locked-up until October 2018.
The realisation process for the Prognoz investment has been extremely complicated and taken significant time but shows the advantage and potential value of being able to proactively manage investments in the mining sector. Overall the Company invested US$15.7 million in PAL, realised US$6.9 million in sales and dividends, holds 2.95 million shares in Polymetal valued at US$26.1 million and retains exposure to the Prognoz project through a royalty. This was during a period when the silver price almost halved and silver shares fell over 60%.
The Company made one significant new investment during the first half of 2018, completing its acquisition of A$10 million convertible loan notes in Futura Resources, ("Futura"). Futura owns the Wilton and Fairhill coking coal projects in the Bowen Basin in Queensland, Australia, which is well known for its high quality coking mines. On 30 May 2018 BHP Billiton Mitsubishi Alliance announced that it had agreed to sell the Gregory Crinum Mine in central Queensland, to Sojitz Corporation ("Sojitz"). This was an important milestone for the development of Futura's Wilton and Fairhill coking coal properties as Futura is currently finalising its agreements with Sojitz for Sojitz to contract-mine Wilton and Fairhill. The acquisition of Gregory Crinum by Sojitz means Futura will have access to the coal washing plant at Gregory Crinum which is 17km away from Wilton and means Futura can move into production by the end of 2018 as against several years for the permitting and construction of its own wash plant.
Bilboes Gold has completed its resource/reserve definition drilling for the definitive feasibility study ("DFS") following the positive pre-feasibility study published in the second half of 2017. An updated resource statement is expected in September 2018. In addition as part of the DFS a pilot plant has been erected at a site for a six month test programme to optimise the parameters for the concentration and BIOX® circuits. The DFS into a mine producing up to 200,000 ounces of gold per annum remains on course for completion in the first quarter 2019.
CEMOS Group PLC continued to make good progress on the construction of a cement plant at its Tarfaya project in Morocco, which commenced in the fourth quarter of 2017. The cement plant was manufactured by Loesche GmbH in Düsseldorf, Germany, shipped to Morocco, and installed on site by Loesche. The cement plant will have a capacity of up to 270,000 tonnes per annum and commissioning is due to commence in September 2018. The operation is expected to have annual revenues of more than €25 million and a payback of less than two years.
Elsewhere in the portfolio, Metals Exploration finally achieved its target throughput from the BIOX Plant at its Runruno gold project in the Philippines during April 2018. However in June 2018 unscheduled power outages caused the bacteria in the BIOX to become passive although this issue has now been addressed by the installation of additional electrical circuitry during July 2018. The pre-feasibility study on Sarmin Mineral Exploration's potash project in the Republic of Congo is proceeding according to schedule and is due for completion in September 2018.
The Company has carried out its normal half yearly review of general market movements in mining equities, as well as specific factors, and an assessment of whether these should impact the carrying values of its unlisted holdings. The Investment Manager maintains an index of comparable listed companies for each unlisted investment, in order to quantify how the share price of a particular unlisted stock might have moved during the period had it been listed. In accordance with this assessment the carrying value of Bilboes Gold Limited has been increased by 18% and that of Nussir ASA decreased by 12%.
At 30 June 2018
Price / Index Level
% Change in Six Months
% Change from Inception
Net Asset Value (pence/share)
57.1
+0.5%
-41.7%*
Ordinary Share Price (pence/share)
46.5
-1.1%
-53.5%**
MSCI World Index (£)
382.90
+0.9%
+111.5%†
EPIX Global Mining Index (£)
606.68
1.1%
-12.9%†
Chinese Import Iron Ore Fines 62% Fe spot (US$)
64.73
-10.6%
-63.4%†
Copper (US$/t)
6,625
-8.1%
-11.1%†
Gold (US$/oz)
1,253.17
-3.8%
+7.3%†
Silver (US$/oz)
16.12
-4.9%
-11.3%†
SBB Premium Hard Coking Coal (US$/t)
196.60
-24.4%
n/a
Source: Bloomberg † closing 27/4/10, **Issue price 28/4/10, * NAV 30/4/10
Outlook
The Investment Manager has been undertaking due diligence on a number of interesting projects with a view to being in a position to invest once the lock-up on its Polymetal shares expires in October 2018. Polymetal is a cash generative mid-size producer with a good growth profile and progressive dividend policy but does not fit into the strategy of the Company. The Company will therefore utilise the high liquidity of Polymetal's shares to provide funds when the Company has a strong investment proposition more in line with its strategy. This would usually be through convertible instruments in projects where the Company would have a significant interest and be able to proactively influence policy such as through Board representation. Shareholders are reminded of the Company's policy to distribute at least 15% of the aggregate net realised cash gains (after deducting losses) during a financial year. It is anticipated that the realisation of the PAL investment should result in the first such distribution following the publication of the 2018 year end accounts.
Baker Steel Capital Managers LLP
Investment Manager
August 2018
DIRECTORS' REPORT
For the period from 1 January 2018 to 30 June 2018
The Board of the Company is pleased to present the Directors' Report for the six months ended 30 June 2018.
The Directors' Report contains information that covers this period and the period up to the date of publication of this Report. Please note that more up to date information is available on the Company's website www.bakersteelresourcestrust.com.
Principal activity and business review
Baker Steel Resources Trust Limited (the "Company") is a closed-ended investment company with limited liability incorporated on 9 March 2010 in Guernsey under the Companies (Guernsey) Law, 2008 with registration number 51576. The Company is a registered closed-ended investment scheme registered pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended ("POI Law") and the Registered Collective Investment Scheme Rules 2015 issued by the Guernsey Financial Services Commission ("GFSC"). On 28 April 2010 the Ordinary Shares and Subscription Shares of the Company were admitted to the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange.
Investment Objective
The Company's investment objective is to seek capital growth over the long-term through a focused, global portfolio consisting principally of the equities, loans or related instruments of natural resources companies. The Company invests predominantly in unlisted companies (i.e. those companies that have not yet made an initial public offering ("IPO")) but also in listed securities (including special situations opportunities and less liquid securities) with a view to making attractive investment returns through uplifts in value resulting from development of the investee companies' projects and through exploiting value inherent in market inefficiencies and pricing anomalies.
Performance
During the period ended 30 June 2018, the Company's NAV per Ordinary Share increased by 0.5%. This compares with a rise in the Euromoney Global Mining 100 Index (capital return in Sterling terms) of 1.1%. A more detailed explanation of the performance of the Company is provided within the Investment Manager's Report on pages 3 to 5.
The results for the period are shown in the Statement of Comprehensive Income on pages 12 and 13 and the Company's financial position at the end of the period is shown in the Statement of Financial Position on page 11.
Dividend and dividend policy
During the year ended 31 December 2015 the Board introduced a capital returns policy whereby, subject to applicable laws and regulations, it will make distributions to shareholders. The amount to be distributed will be calculated following publication of the Company's audited financial statements for each year and will be no less than 15% of the aggregate net realised cash gains (after deducting losses) in that financial year. The Board will retain discretion for determining the most appropriate manner to make such distribution which may include share buybacks, tender offers and dividend payments. The Company realised an aggregate cash loss for the year ended 31 December 2017 and therefore no distributions were made for the 2017 financial year. The Company has net realised gains of GBP 2.3million for the period ended 30 June 2018 and it is therefore expected that a distribution may be made in respect of the current financial year.
Directors and their interests
The Directors of the Company who served during the period and subsequently up to the date of this report were:
Howard Myles (Chairman)
Charles Hansard
Clive Newall
Christopher Sherwell
Biographical details of each of the Directors are presented on page 16 of the Company's annual report and financial statements for the year ended 31 December 2017.
Each of the Directors is considered to be independent in character and judgement.
The Directors' interests in the share capital of the Company were:
Number of
Ordinary Shares
30 June 2018
Number of
Ordinary Shares
31 December 2017
Christopher Sherwell
104,198
104,198
Clive Newall
25,000
25,000
Attendance at the Board and Audit Committee meetings during the period was as follows:
Board Meetings
Audit Committee
Meetings
He Held
Attended
Held
Attended
Howard Myles
2
2
2
2
Christopher Sherwell
2
2
2
2
Clive Newall
2
2
2
2
Charles Hansard
2
2
N/A
N/A
In addition to formal meetings, all Directors contribute to a significant ad hoc exchange of views between the Directors and the Investment Manager on specific matters, in particular in relation to valuation and developments in the portfolio.
The Directors are remunerated for their services at such rate as the Directors determine provided that the aggregate amount of such fees may not exceed £200,000 per annum (or such sum as the Company in general meeting shall from time to time determine).
For the period ended 30 June 2018 the total remuneration of the Directors was £57,500 (30 June 2017: £57,500). No fees were outstanding as at 30 June 2018 (31 December 2017: £28,750)
Authorised Share Capital
The share capital of the Company on incorporation was represented by an unlimited number of Ordinary Shares of no par value. The Company may issue an unlimited number of shares of a nominal or par value and/or of no par value or a combination of both.
Issue of Shares
The Company was admitted to trading on the London Stock Exchange on 28 April 2010. On that date, 30,468,865 Ordinary Shares and 6,093,772 Subscription Shares were issued pursuant to a placing and offer for subscription and 35,554,224 Ordinary Shares and 7,110,822 Subscription Shares were issued pursuant to a Scheme of Reorganisation of Genus Capital Fund.
In addition 10,000 Management Ordinary Shares were issued.
Following the exercise of Subscription Shares at the end of September 2010, March 2011, March 2012, June 2012 and September 2012, a total of 119,444 Ordinary Shares were issued. The final exercise date for the Subscription Shares was 2 April 2013. No Subscription Shares were exercised at this time and all residual Subscription Shares were subsequently cancelled.
Following in specie transactions on 28 June 2014 and 1 July 2014, a total of 5,561,243 Ordinary Shares were issued.
Following in specie transactions on 25 February 2015 and 4 March 2015, 40,196,071 Ordinary Shares were issued. In addition the Company issued a total of 3,368,488 Ordinary Shares on 4 March 2015 under an open offer.
Following an in specie transaction on 22 September 2016, 1,561,645 Ordinary Shares were issued.
Details of these transactions are included within Note 8 of these financial statements.
On 14 August 2015 and 20 August 2015 the Company bought back 200,000 and 500,000 Ordinary Shares respectively, both at an average price of 20 pence per share. The repurchased Ordinary Shares are held in Treasury.
Following the transactions noted above the Company has a total of 116,129,980 Ordinary and 10,000 Management Shares in issue as at 30 June 2018, of which 700,000 Ordinary Shares are held in Treasury.
Going Concern
Having reassessed the principal risks and uncertainties described on pages 13 and 14 of the annual report and financial statements (the "Annual Report"), and the other matters discussed in connection with the viability statement as set out on pages 14 and 15 of the Annual Report for the year ended 31 December 2017, the Directors consider it is appropriate to adopt the going concern basis in preparing these interim Financial Statements.
Related Party Transactions
Transactions with related parties are based on terms equivalent to those that prevail in an arm's length transaction and are disclosed in Note 9.
Principal risks & uncertainties
The principal risks facing the Company, which include market and financial risk and portfolio management and performance risk, are considered in detail, along with the risks relating to a vote to wind up the Company, on pages 13 and 14 of the Company's Annual Report and Audited Financial Statements for the year ended 31 December 2017 which is available on the Company's website www.bakersteelresourcestrust.com. The Directors do not consider that these risks and uncertainties have materially changed during the period ended 30 June 2018 and do not expect any changes in the second half of 2018.
Directors' responsibility statement
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and give a true and fair view of the assets, liabilities and financial position and profit or loss of the Company; and
- the Interim Management Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the FCA's Disclosure and Transparency Rules.
Corporate Governance Compliance
As described in the Company's Annual Report for the year ended 31 December 2017, the Board has considered the principles and recommendations set out in UK Corporate Governance Code (September 2014) (the "UK Code") issued by the Financial Reporting Council (the "FRC"). Page 20 of the Annual Report presents and explains those matters where the Company has not complied with the UK Code. There is no change in compliance since the Annual Report.
The Board has noted the publication of proposals for a further revised UK Corporate Governance Code in December 2017 which applies to financial years beginning on or after 1 January 2019. The latest update of the UK Code is to make the code "shorter and sharper" than its previous iteration with supporting principles removed and either incorporated into new principles and provisions, or moved to guidance on board effectiveness. The Board is considering the Company's future governance in light of these new provisions.
Signed for and on behalf of the Directors
Howard Myles
Chairman
15 August 2018
UNAUDITED PORTFOLIO STATEMENT
AS AT 30 JUNE 2018
Shares
Investments
Fair value
% of Net
/Warrants/
£ equivalent
assets
Nominal
Listed equity shares
Canadian Dollars
1,283,001
Ivanhoe Mines Limited
1,995,830
3.01
Canadian Dollars Total
1,995,830
3.01
Great Britain Pounds
122,760,000
Metals Exploration Plc
3,989,700
6.02
2,953,140
Polymetal International Plc
19,786,038
29.84
Great Britain Pounds Total
23,775,738
35.86
Total investment in listed equity shares
25,771,568
38.87
Debt instruments
Australian Dollars
200,000
Indian Pacific Resources Limited Loan Note
210,285
0.32
200
Futura Resources Limited
5,754,015
8.68
Australian dollar Total
5,964,300
9.00
Canadian Dollars
250,500
PRISM Diversified Limited Loan Note
262,952
0.40
Canadian Dollars Total
262,952
0.40
Euro
730
Cemos Group Plc Loan Notes
3,278,793
4.95
Euro Total
3,278,793
4.95
United States Dollars
440,000
Bilboes Holdings Convertible Loan Note
1,047,986
1.58
220,000
Bilboes Holdings Loan Note
157,705
0.24
7,000,000
Black Pearl Limited Partnership Loan Note
2,652,520
4.00
United States Dollars Total
3,858,211
5.82
Total investments in debt instruments
13,364,256
20.17
Shares
Investments
Fair value
% of Net
/Warrants/
£ equivalent
assets
Nominal
Unlisted equity shares and warrants
Australian Dollars
20,011,015
Indian Pacific Resources Limited
196,315
0.30
Australian Dollars Total
196,315
0.30
Canadian Dollars
13,083,936
PRISM Diversified Limited
2,148,405
3.24
Canadian Dollars Total
2,148,405
3.24
Great Britain Pounds
2,000,000
Anglo Saxony Mining Limited
200,000
0.30
1,594,646
Celadon Mining Limited
15,947
0.02
24,004,167
Cemos Group Plc
3,324,577
5.01
Great Britain Pounds Total
3,540,524
5.33
Norwegian Krone
11,457,628
Nussir ASA
1,875,238
2.83
Norwegian Krone Total
1,875,238
2.83
United States Dollars
17,151,567
Archipelago Metals Limited
129,985
0.20
2,000,000
Archipelago Metals Limited Warrants 31/12/2018
-
-
451,445
Bilboes Gold Limited
8,982,712
13.55
4,244,550
Gobi Coal & Energy Limited
386,014
0.58
1,000,000
Midway Resources International
37,893
0.06
15,314
Polar Acquisition Limited
6,387,208
9.63
50
Sarmin Minerals Exploration Inc
3,031,451
4.57
United States Dollars Total
18,955,263
28.59
Total Unlisted equity shares and warrants
26,715,745
40.29
Financial assets held at fair value through profit or loss
65,851,569
99.33
Other Assets & Liabilities
442,920
0.67
Total Equity
66,294,489
100.00
UNAUDITED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
Unaudited
30 June
2018
Audited
31 December
2017
Notes
£
£
Assets
Cash and cash equivalents
578,403
1,060,077
Other receivables
14,166
15,406
Financial assets held at fair value through profit or loss
3
65,851,569
65,070,244
Total assets
66,444,138
66,145,727
Equity and Liabilities
Liabilities
Directors' fees payable
-
28,750
Management fees payable
7
78,024
74,679
Administration fees payable
29,240
54,221
Audit fees payable
22,550
45,050
Other payables
14,164
5,984
Custodian fees payable
5,671
5,587
Total liabilities
149,649
214,271
Equity
Management Ordinary Shares
8
10,000
10,000
Ordinary Shares
8
81,024,525
81,024,525
Profit and loss account
(14,740,036)
(15,103,069)
Total equity
66,294,489
65,931,456
Total equity and liabilities
66,444,138
66,145,727
Net Asset Value per Ordinary Share (in Pence) - Basic and diluted
5
57.1
56.8
These unaudited condensed financial statements were approved by the Board of Directors on 15 August 2018 and signed on its behalf by:
____________ _________________
Howard Myles
Christopher Sherwell
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018
Unaudited period ended 30 June
2018
Unaudited period ended 30 June
2018
Unaudited period ended 30 June
2018
Revenue
Capital
Total
Notes
£
£
£
Income
Net gain on financial assets at fair value through profit or loss
3
-
1,020,295
1,020,295
Net foreign exchange gain
-
58,817
58,817
Net income
-
1,079,112
1,079,112
Expenses
Management fees
7
482,531
-
482,531
Directors' fees
57,500
-
57,500
Administration fees
49,858
-
49,858
Other expenses
37,718
-
37,718
Custody fees
35,039
-
35,039
Audit fees
22,500
-
22,500
Broker fees
22,417
-
22,417
Directors' expenses
7,827
-
7,827
Legal fees
689
-
689
Total expenses
716,079
-
716,079
Net (loss)/gain for the period
(716,079)
1,079,112
363,033
Net gain for the period per Ordinary Share:
Basic and diluted (in pence)
5
(0.6)
0.9
0.3
In the period ended 30 June 2018 there were no other gains or losses than those recognised above.
The Directors consider all results to derive from continuing activities.
The format of the Income Statement follows the recommendations of the AIC Statement of Recommended Practice.
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2017 TO 30 JUNE 2017
Unaudited period ended 30 June
2017
Unaudited period ended 30 June
2017
Unaudited period ended 30 June
2017
Revenue
Capital
Total
Notes
£
£
£
Income
Net gain on financial assets at fair value through profit or loss
3
-
4,692,844
4,692,844
Net foreign exchange loss
-
(20,640)
(20,640)
Other income
2,381
-
2,381
Net income
2,381
4,672,204
4,674,585
Expenses
Management fees
7
366,589
-
366,589
Directors' fees
57,500
-
57,500
Administration fees
47,784
-
47,784
Custody fees
33,247
-
33,247
Other expenses
32,205
-
32,205
Audit fees
23,950
-
23,950
Broker fees
17,500
-
17,500
Directors' expenses
8,695
-
8,695
Total expenses
587,470
-
587,470
Net (loss)/gain for the period
(585,089)
4,672,204
4,087,115
Net gain for the period per Ordinary Share:
Basic and diluted (in pence)
5
(0.5)
4.0
3.5
In the period ended 30 June 2017 there were no other gains or losses than those recognised above.
The Directors consider all results to derive from continuing activities.
The format of the Income Statement follows the recommendations of the AIC Statement of Recommended Practice.
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018
Management
Ordinary
Shares
Ordinary
Shares
Treasury
Shares
Profit and loss account (Revenue)
Profit and loss account (Capital)
Total Equity
£
£
£
£
£
£
Balance as at 1 January 2018
10,000
81,165,017
(140,492)
(9,540,751)
(5,562,318)
65,931,456
Net (loss)/gain for the period
-
-
-
(716,079)
1,079,112
363,033
Balance as at 30 June 2018
10,000
81,165,017
(140,492)
(10,256,830)
(4,483,206)
66,294,489
Note: 8 8
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2017 TO 30 JUNE 2017
Management
Ordinary
Shares
Ordinary
Shares
Treasury
Shares
Profit and loss account (Revenue)
Profit and loss account (Capital)
Total Equity
£
£
£
£
£
£
Balance as at 1 January 2017
10,000
81,165,017
(140,492)
(8,284,845)
(17,141,890)
55,607,790
Net (loss)/gain for the period
-
-
-
(585,089)
4,672,204
4,087,115
Balance as at 30 June 2017
10,000
81,165,017
(140,492)
(8,869,934)
(12,469,686)
59,694,905
UNAUDITED CONDENSED INTERIM STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018
Unaudited Period ended
30 June
2018
Unaudited Period ended
30 June
2017
£
£
Cash flows from operating activities
Net gain for the period
363,033
4,087,115
Adjustments to reconcile gain/(loss) for the period to net cash used in operating activities:
Net gain on financial assets at fair value through profit or loss
(1,020,295)
(4,692,844)
Net decrease in other receivables
1,240
98,495
Net decrease in payables
(64,622)
(28,178)
Net cash used in operating activities
(720,644)
(535,412)
Cash flows from investing activities
Purchase of financial assets at fair value through profit or loss
(3,285,227)
(1,345,029)
Sale of financial assets at fair value through profit or loss
2,853,131
5,662,374
Dividend Received
671,066
-
Net cash (used in)/provided by investing activities
238,970
4,317,345
Net (decrease)/increase in cash and cash equivalents
(481,674)
3,781,933
Cash and cash equivalents at the beginning of the period
1,060,077
549,612
Cash and cash equivalents at the end of the period
578,403
4,331,545
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2018
1. GENERAL INFORMATION
Baker Steel Resources Trust Limited (the "Company") is a closed-ended investment company with limited liability incorporated and domiciled on 9 March 2010 in Guernsey under the Companies (Guernsey) Law, 2008 with registration number 51576. The Company is a registered closed-ended investment scheme registered pursuant to the Protection of Investors Law and the Registered Collective Investment Scheme Rules 2015 issued by the Guernsey Financial Services Commission ("GFSC"). On 28 April 2010 the Ordinary Shares and Subscription Shares of the Company were admitted to the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange. The Company's Ordinary and Subscription Shares were admitted to the Premium Listing Segment of the Official List on 28 April 2010.
The final exercise date for the Subscription Shares was 2 April 2013. No Subscription Shares were exercised at this time and all residual/unexercised Subscription Shares were subsequently cancelled.
The Company's portfolio is managed by Baker Steel Capital Managers (Cayman) Limited (the "Manager"). The Manager has appointed Baker Steel Capital Managers LLP (the "Investment Manager") as the Investment Manager to carry out certain duties. The Company's investment objective is to seek capital growth over the long-term through a focused, global portfolio consisting principally of the equities, or related instruments, of natural resources companies. The Company invests predominantly in unlisted companies (i.e. those companies which have not yet made an Initial Public Offering ("IPO")) and also in listed securities (including special situations opportunities and less liquid securities) with a view to exploiting value inherent in market inefficiencies and pricing anomalies.
Baker Steel Capital Managers LLP (the "Investment Manager") was authorised to act as an Alternative Investment Fund Manager ("AIFM") of Alternative Investment Funds ("AIFs") on 22 July 2014. On 14 November 2014, the Investment Manager signed an amended Investment Management Agreement with the Company, to take into account AIFM regulations. AIFMD focuses on regulating the AIFM rather than the AIFs themselves, so the impact on the Company is limited.
The Half-Yearly financial report has not been audited or reviewed by the auditors pursuant to the Auditing Practices Board
Guidance on review of Interim Financial Information.
2. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies adopted in the preparation of these unaudited condensed interim financial statements have been consistently applied during the period, unless otherwise stated.
a) Statement of compliance
The unaudited condensed interim financial statements of the Company for the period 1 January 2018 to 30 June 2018 have been prepared in accordance with IAS 34, "Interim Financial Reporting" as adopted in the EU, together with applicable legal and regulatory requirements of The Companies (Guernsey) Law, 2008 and the Listing Rules of the London Stock Exchange's Main Market. The unaudited condensed interim financial statements do not include all the information and disclosure required in the annual financial statements and should be read in conjunction with the annual report and audited financial statements at 31 December 2017.
b) Basis of preparation
The unaudited condensed interim financial statements have been prepared under the historical cost basis, modified by the revaluation of certain financial instruments designated at Fair value through Profit or Loss. The accounting policies adopted in the preparation of these unaudited condensed interim financial statements have been consistent with the accounting policies stated in Note 2 of the annual financial statements for the year ended 31 December 2017. The preparation of unaudited condensed interim financial statements in conformity with IAS 34, "Interim Financial Reporting", requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited condensed interim financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Company's functional currency is the Great Britain pound Sterling ("£"), being the currency in which its Ordinary Shares are issued and in which returns are made to shareholders. The presentation currency is the same as the functional currency. The financial statements have been rounded to the nearest £. The Company invests in companies around the world whose shares are denominated in various currencies. Currently the majority of the portfolio is denominated in GBP but this will not necessarily remain the case as the portfolio develops.
c) Significant accounting judgements and estimates
The preparation of the Company's financial statements requires the Directors to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements and disclosure of contingent liabilities.
However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability in future periods.
(i) Judgements
In the process of applying the Company's accounting policies, the Directors have made the following judgements, which have had the most significant effect on the amounts recognised in the financial statements:
Assessment as Investment Entity
As per IFRS 10, an entity shall determine whether it is an investment entity. An investment entity is an entity that fulfils the following criteria:
Ø It obtains funds from one or more investors for the purpose of providing those investors with investment services.
Ø It commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both.
Ø It measures and evaluates the performance of substantially all of its investments on a fair value basis.
The Company meets the above criteria and is therefore considered to be an investment entity and therefore all investments, including those which qualify as subsidiaries or associates are carried at fair value through profit or loss.
Subsidiaries
Entities in which the Company holds more than 50% of the voting rights, and where the Company has appointed or has the right to appoint the majority of directors or where the Company is otherwise able to exercise control are considered as subsidiaries of the Company. These are disclosed in Note 9 of these unaudited condensed interim financial statements. Investments in subsidiaries are carried at fair value through profit or loss.
Associates
The Directors consider that entities over which the Company exercises significant influence, including where it holds between 20% and 50% of the voting rights, or where there is a shareholders agreement giving the Company the right to appoint a director and the right to veto significant financial decisions, should be considered as associates of the Company. These are disclosed in Note 14 of the Annual Report. This also includes entities where the Company has representation on the board and such representation is considered to have significant influence over the major decisions of such entity.
Going Concern
As stated in the Directors' Report the Directors have assessed the principal risks and uncertainties (as described in pages 13
and 14 of the Annual Report) and the other matters discussed in connection with the viability statement as set out on pages
14 and 15 of the Annual Report for the year ended 31 December 2017. The Directors consider it is appropriate to adopt the going concern basis in preparing these interim accounts.
(ii) Estimates and assumptions
The key assumptions concerning the future and other key sources of uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets liabilities within the next financial year, are discussed below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur. Please refer to Note 3 for further information.
(iii) Fair value of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. The estimates include considerations of liquidity and model inputs related to items such as credit risk, correlation and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments in the statement of financial position and the level where the instruments are disclosed in the fair value hierarchy. The models are tested for validity by calibrating to prices from any observable current market transactions in the same instrument (without modification or repackaging) when available. To assess the significance of a particular input to the entire measurement, the Company performs sensitivity analysis or stress testing techniques.
d) Change in accounting policy
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments, effective date for annual periods beginning on or after 1 January 2018, specifies how an entity should classify and measure financial assets and liabilities, including some hybrid contracts. The standard changes the approach for classification and measurement of financial assets compared with the requirements of IAS 39 Financial Instruments: Recognition and Measurement. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged. The standard applies a consistent approach to classifying financial assets and replaces the numerous categories of financial assets in IAS 39, each of which had its own classification criteria.
The Company's financial assets in equity instruments and derivative instruments continue to be held at fair value through profit or loss ("FVTPL"). Debt instruments are measured at FVTPL as the Company's business model is to convert the debt to equity and sell for gain.
The application of IFRS 9 may change the measurement and presentation of many financial instruments, depending on their contractual cash flows and the business model under which they are held. However, it is not expected that classification of financial assets and liabilities will change from FVTPL and therefore it is not expected that the implementation of IFRS 9 on 1 January 2019 and reflected in the financial statements as at year end 31 December 2019 will have a significant impact on the financial statements given most financial instruments are expected to be at FVTPL.
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Investment Summary:
Period ended 30 June
2018
Year ended 31 December 2017
£
£
Opening book cost
50,780,732
54,964,732
Purchases at cost
3,285,227
9,542,851
Proceeds on sale
(2,853,131)
(11,079,780)
Realised gains/(losses)
2,304,224
(2,647,071)
Closing cost
53,517,052
50,780,732
Unrealised gains
12,334,517
14,289,512
Financial assets held at fair value through profit or loss
65,851,569
65,070,244
The following table analyses net gains/ (losses) on financial assets at fair value through profit or loss for the period/year ended 30 June 2018 and 31 December 2017.
Period ended 30 June
2018
Year ended
31 December 2017
£
£
Financial assets at fair value through profit or loss
Realised gains/(losses) on:
- Listed equity shares
2,232,106
(2,446,616)
- Unlisted equity shares
-
(269,983)
- Debt instruments
72,118
69,528
2,304,224
(2,647,071)
Movement in unrealised (losses)/gains on:
- Listed equity shares
9,063,744
4,286,190
- Unlisted equity shares
(11,412,987)
9,805,381
- Debt instruments
395,229
51,428
- Warrants
(981)
(4,322)
(1,954,995)
14,138,677
Net gain on financial assets at fair value through profit or loss
349,229
11,491,606
Dividend Income
671,066
-
Total net gain on financial assets at fair value through profit or loss.
1,020,295
11,491,606
The following table analyses investments by type and by level within the fair valuation hierarchy at 30 June 2018.
Quoted prices in active markets
Quoted market based observables
Unobservable
inputs
Level 1
Level 2
Level 3
Total
£
£
£
£
Financial assets at fair value through profit or loss
Listed equity shares
25,771,568
-
-
25,771,568
Unlisted equity shares
-
-
26,715,745
26,715,745
Warrants
-
-
-
-
Debt instruments
-
-
13,364,256
13,364,256
25,771,568
-
40,080,001
65,851,569
The following table analyses investments by type and by level within the fair valuation hierarchy at 31 December 2017.
Quoted prices in active markets
Quoted market based observables
Unobservable
inputs
Level 1
Level 2
Level 3
Total
£
£
£
£
Financial assets at fair value through profit or loss
Listed equity shares
11,862,289
-
-
11,862,289
Unlisted equity shares
-
-
43,595,292
43,595,292
Warrants
-
-
981
981
Debt instruments
-
-
9,611,682
9,611,682
11,862,289
-
53,207,955
65,070,244
The tables below shows a reconciliation of beginning to ending fair value balances for Level 3 investments and the amount of total gains or losses for the period included in net gain on financial assets and liabilities at fair value through profit or loss held at 30 June 2018.
Debt
30 June 2018
Unlisted Equities
instruments
Warrants
Total
£
£
£
£
Opening balance 1 January 2018
43,595,292
9,611,682
981
53,207,955
Purchases of investments
-
3,285,227
-
3,285,227
Change in net unrealised gains and losses
(11,412,987)
395,229
(981)
(11,018,739)
Realised gains
-
72,118
-
72,118
Transfer to Level 1 during the period
(5,466,560)
-
-
(5,466,560)
Closing balance 30 June 2018
26,715,745
13,364,256
-
40,080,001
Unrealised losses on investments still held at 30 June 2018
(135,247)
(796,391)
(21,826)
(953,464)
The tables below shows a reconciliation of beginning to ending fair value balances for Level 3 investments and the amount of total gains or losses for the year included in net loss on financial assets and liabilities at fair value through profit or loss held at 31 December 2017.
Debt
31 December 2017
Unlisted Equities
instruments
Warrants
Total
£
£
£
£
Opening balance 1 January 2017
37,819,837
4,037,448
5,303
41,862,588
Purchases of investments
957,241
8,019,379
-
8,976,620
Sale of investments
(4,717,184)
(2,566,101)
-
(7,283,285)
Change in net unrealised gains
9,805,381
51,428
(4,322)
9,852,487
Realised (losses)/gains
(269,983)
69,528
-
(200,455)
Closing balance 31 December 2017
43,595,292
9,611,682
981
53,207,955
Unrealised gains / (losses) on investments still held at 31 December 2017
11,277,740
(1,191,620)
(20,845)
10,065,275
It is the Company's policy to recognise a change in hierarchy level when there is a change in the status of the investment, for example when a listed company delists or vice versa, or when shares previously subject to a restriction have that restriction released. The transfers between levels are recorded either on the value of the transaction the value of the investment immediately after the event or the carrying value of the investment at the beginning of the financial year.
In determining an investment's position within the fair value hierarchy, the Directors take into consideration the following factors:
Investments whose values are based on quoted market prices in active markets are classified within Level 1. These include listed equities with observable market prices. The Directors do not adjust the quoted price for such instruments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.
Investments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs, are classified within Level 2. These include certain less-liquid listed equities. Level 2 investments are valued with reference to the listed price of the shares should they be freely tradable after applying a discount for liquidity if relevant. As Level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. The Company held no Level 2 investments at 30 June 2018 (31 December 2017: none).
Investments classified within Level 3 have significant unobservable inputs. They include unlisted debt instruments, unlisted equity shares and warrants. Level 3 investments are valued using valuation techniques explained below. The inputs used by the Directors in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments if representative in volume and nature, completed or pending third-party transactions in the underlying investment of comparable issuers, subsequent rounds of financing, recapitalisations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows. Level 3 investments may also be adjusted with a discount to reflect illiquidity and/or non-transferability in the absence of market information.
There have been no transfers between levels during the period. However the distribution of Polymetal shares by PAL has resulted in an increase in Level 1 investments and a decrease in Level 3 investments, because Polymetal is listed on the London Stock Exchange.
Valuation methodology of Level 3 investments
The default valuation technique is of "Latest Recent Transaction". Where an unquoted investment has been acquired or where there has been a material arm's length transaction during the past six months it will be carried at transaction value unless there are changes or events which suggest cost is not equivalent to fair value. Where there has been no Latest Recent Transaction the primary valuation driver is IndexVal. For each core unlisted investment, the Company maintains a weighted average basket of listed companies which are comparable to the investment in terms of commodity, stage of development and location ("IndexVal"). IndexVal is used as an indication of how an investment's share price might have moved had it been listed. Movements in commodity prices are deemed to have been taken into account by the movement of IndexVal.
A secondary tool used by Management to evaluate potential investments as well as to provide underlying valuation references for the Fair Value already established is Development Risk Adjusted Values ("DRAV"). DRAVs are not a primary determinant of Fair Value. The Investment Manager prepares discounted cash flow models for the Company's core investments annually and also for significant new information and decision making purposes when required. From these, DRAVs are derived. The computations are based on consensus forecasts for long term commodity prices and investee company management estimates of operating and capital costs. The Investment Manager takes account of market, country and development risks in its discount factors. Some market analysts incorporate development risk into the discount rate in arriving at a net present value ("NPV") rather than establishing an NPV discounted purely for cost of capital and country risk and then applying a further overall discount to the project economics dependent on where such project sits on the development curve per the DRAV calculations.
The valuation technique for Level 3 investments can be divided into four groups:
i. Transactions
Where there have been transactions within the past 6 months either through a capital raising by the investee company or known secondary market transactions, representative in volume and nature and conducted on an arm's length basis, this is taken as the primary driver for valuing Level 3 investments.
ii. IndexVal
Where there have been no known transactions for 6 months, at the Company's half year and year end, movements in IndexVal will generally be taken into account in assessing Fair Value where there has been at least a 10% movement in IndexVal over at least a six month period. The IndexVal results are used as an indication of trend and are viewed in the context of investee company progress and any requirement for finance in the short term for further progression.
iii. Warrants
Warrants are valued using a simplified Black Scholes model taking into account time to expiry, exercise price and volatility. Where there is no established market for the underlying shares the average volatility of the companies in that investment's basket of comparables as utilised in the IndexVal.
iv. Convertible loans
Convertible loans are valued at fair value through profit and loss, taking into account credit risk and the value of the conversion aspect.
Quantitative information on significant unobservable inputs - Level 3
Description
30 June 2018
£
Valuation technique
Unobservable input
Range
(weighted average)
Unlisted Equity
12,943,236
Recent Transactions
Private transactions
n/a
Unlisted Equity
13,392,369
IndexVal
Change in IndexVal
n/a
Unlisted Equity
380,140
Other
Exploration results, study results, financings
n/a
Description
30 June 2018
£
Valuation technique
Unobservable input
Range
(weighted average)
Debt Instruments
Black Pearl Limited Partnership
2,652,520
Valued at mean estimated recovery
Estimated recovery range
+/- 50%
Other Convertible Debentures/Loans
10,711,736
Valued at fair value with reference to credit risk and value of embedded derivative
Rate of Credit Risk
n/a
Description
31 December
2017
£
Valuation technique
Unobservable input
Range
(weighted average)
Unlisted Equity
33,443,276
Recent Transactions
Private transactions
n/a
Unlisted Equity
10,009,161
IndexVal
Change in IndexVal
n/a
Unlisted Equity
142,854
Other
Exploration results, study results, financings
n/a
Debt Instruments
Black Pearl Limited Partnership
2,589,715
Valued at mean estimated recovery
Estimated recovery range
+/- 50%
Other Convertible Debentures/Loans
7,021,967
Valued at fair value with reference to credit risk and value of embedded derivative
Rate of Credit Risk
n/a
Warrants
981
Simplified Black Scholes Model
Volatilities
40%
Information on third party transactions in unlisted equities is derived from the Investment Manager's market contacts. The change in IndexVal for each particular unlisted equity is derived from the weighted average movements of the individual baskets for that equity so it is not possible to quantify the range of such inputs.
Sensitivity analysis to significant changes in unobservable inputs within Level 3 investments
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy together with a quantitative sensitivity analysis as at 30 June 2018 are as shown below:
Description
Input
Sensitivity used*
Effect on Fair Value (£)
Unlisted Equity
Change in IndexVal
+/-31%
+/-8,281,881
Debt Instruments
Black Pearl Limited Partnership
Probability weighting
+/-33%
+/-884,173
Others/Loans
Risk discount rate
+/-20%
-/+2,095,156
*The sensitivity analysis refers to a percentage amount added or deducted from the input and the effect this has on the fair value. The 31% sensitivity was used as this was the highest movement observed for IndexVal for any investment during 2018.
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy together with a quantitative sensitivity analysis as at 31 December 2017 are as shown below:
Description
Input
Sensitivity used*
Effect on Fair Value (£)
Unlisted Equity
Change in IndexVal
+/-31%
+/-3,102,840
Debt Instruments
Black Pearl Limited Partnership
Probability weighting
+/-33%
+/-863,238
Others/Loans
Risk discount rate
+/-20%
-244,066/+244,066
Warrants
Volatility of 40%
+/-20%
+1,426/-703
*The sensitivity analysis refers to a percentage amount added or deducted from the input and the effect this has on the fair value. The 31% sensitivity was used as this was the highest movement observed for IndexVal for any investment during 2017.
4. OTHER FINANCIAL INSTRUMENTS
The Company has not disclosed the fair value for financial assets such as cash and cash equivalents and short-term receivables and payables, because their carrying amounts are a reasonable approximation of fair values.
Cash and cash equivalents include cash in hand, deposits held with banks and other short-term investments in an active market.
Other assets include the contractual amounts for settlement of the trades and other obligations due to the Company. Investment management fees payable, directors' fees payable, audit fees payable, administration fees payable and other payables represent the contractual amounts and obligations due by the Company for settlement for trades and expenses.
5. NET ASSET VALUE PER SHARE AND LOSS PER SHARE
Net asset value per share is based on the net assets of £66,294,489 (31 December 2017: £65,931,456) and 116,139,980 (31 December 2017: 116,139,980) Ordinary Shares, being the number of shares in issue at 30 June 2018. The calculation for basic and diluted NAV per share is as below:
30 June 2018
31 December 2017
Ordinary Shares
Ordinary Shares
Net assets at the period end (£)
66,294,489
65,931,456
Number of shares*
116,139,980
116,139,980
Net asset value per share (in pence) basic and diluted**
57.1
56.8
Weighted average number of shares
116,139,980
116,139,980
*Including 10,000 Management Ordinary Shares
**As there are no subscription shares, options or other relevant share issuances in place at the period end, there is no difference between the net asset value per share and the diluted net asset value per share
The basic and diluted gain per share for the period ended 30 June 2018 is based on the net gain for the period of the Company of £363,033 and on 116,139,980 Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period.
The basic and diluted gain per share for the period ended 30 June 2017 is based on the net gain for the period of the Company of £4,087,115 and on 116,139,980 Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period.
6. TAXATION
The Company is a Guernsey Exempt Company and is therefore not subject to taxation on its income under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. An annual exemption fee of £1,200 (2017: £1,200) has been paid.
7. MANAGEMENT AND PERFORMANCE FEES
The Manager was appointed pursuant to a management agreement with the Company dated 31 March 2010 (the "Management Agreement"). The Company pays to the Manager a management fee which is equal to 1/12th of 1.75 per cent of the total average market capitalisation of the Company during each month. The management fee is calculated and accrued as at the last business day of each month and is paid monthly in arrears. The Investment Managers fees are paid by the Manager.
The management fee for the period ending 30 June 2018 was £482,531 (30 June 2017: £366,589) of which £78,024 (31 December 2017: £74,679) was outstanding at the period end.
The Manager is also entitled to a performance fee. The Performance Period is each 12 month period ending on 31 December in each year (the "Performance Period"). The amount of the performance fee is 15 per cent of the total increase in the NAV, if the Hurdle has been met, at the end of the relevant Performance Period, over the highest previously recorded NAV as at the end of a Performance Period in respect of which a performance fee was last accrued, having made adjustments for numbers of Ordinary Shares issued and/or repurchased as described above. In addition, the performance fee will only become payable if there have been sufficient net realised gains.
There were no performance fees for the current or prior period.
If the Company wishes to terminate the Management Agreement without cause it is required to give the Manager 12 months prior notice or pay to the Manager an amount equal to: (a) the aggregate investment management fee which would otherwise have been payable during the 12 months following the date of such notice (such amount to be calculated for the whole of such period by reference to the Market Capitalisation prevailing on the Valuation Day on or immediately prior to the date of such notice); and (b) any performance fee accrued at the end of any Performance Period which ended on or prior to termination and which remains unpaid at the date of termination which shall be payable as soon as, and to the extent that, sufficient cash or other liquid assets are available to the Company (as determined in good faith by the Directors), provided that such accrued performance fee shall be paid prior to the Company making any new investment or settling any other liabilities; and (c) where termination does not occur at 31 December in any year, any performance fee accrued at the date of termination shall be payable as soon as and to the extent that sufficient cash or other liquid assets are available to the Company (as determined in good faith by the Directors), provided that such accrued performance fee shall be paid prior to the Company making any new investment or settling any other liabilities.
8. SHARE CAPITAL
The share capital of the Company on incorporation was represented by an unlimited number of Ordinary Shares of no par value. The Company may issue an unlimited number of shares of a nominal or par value and/or of no par value or a combination of both.
The Company has a total of 116,129,980 (31 December 2017: 116,129,980) Ordinary Shares in issue with an additional 700,000 (31 December 2017: 700,000) held in treasury. In addition, the Company has 10,000 (31 December 2017: 10,000) Management Ordinary Shares in issue, which are held by the Investment Manager.
On 22 September 2016, the Company acquired 3,926,425 Ordinary Shares of Nussir ASA from three different parties for a total consideration of £624,658. This consideration was settled through the issue of 1,561,645 Ordinary Shares of the Company at the unaudited NAV of 40.0 pence per share. In accordance with IFRS the consideration of the transaction is recorded in the Company's financial statements based on its (trading) share price, which was 29.875pence per share, the consideration recorded is therefore £0.47million.
The Ordinary Shares are admitted to the Premium Listing segment of the Official List of the London Stock Exchange.
The details of issued share capital of the Company are as follows:
30 June 2018
31 December 2017
Amount
No. of shares**
Amount
No. of shares**
£
£
Issued and fully paid share capital
Ordinary Shares of no par value*
81,175,017
116,839,980
81,175,017
116,839,980
(including Management Ordinary Shares)
Treasury Shares
(140,492)
(700,000)
(140,492)
(700,000)
* On 9 March 2010, 1 Management Ordinary Share was issued and on 26 March 2010, 9,999 Management Ordinary Shares were issued.
** Includes 10,000 Management Ordinary Shares
9. RELATED PARTY TRANSACTIONS
The Directors' interests in the share capital of the Company were:
Number of
Ordinary Shares
30 June 2018
Number of
Ordinary Shares
31 December 2017
Christopher Sherwell
104,198
104,198
Clive Newall
25,000
25,000
The Directors' fees for the period ended 30 June 2018 were £57,500 (30 June 2017: £57,500), with £Nil payable at 30 June 2018 (31 December 2017: £28,750).
The Investment Manager, Baker Steel Capital Managers LLP had an interest in 10,000 Management Ordinary Shares at 30 June 2018 (31 December 2017: 10,000).
The Management fees paid and accrued for the year are disclosed under Note 7.
Baker Steel Global Funds SICAV - Precious Metals Fund ("Precious Metals Fund") had an interest of 7,469,609 Ordinary Shares in the Company at 30 June 2018 (31 December 2017: 7,469,609). Precious Metals Fund shares a common Investment Manager with the Company.
At 31 December 2017, the Company held a 47.3% fully diluted interest in PAL, a company incorporated in the British Virgin Islands. Several of the other shareholders' interests were held through options and convertibles such that the Company's undiluted shareholding at 31 December 2017 was 75.9%. PAL was accordingly regarded as a subsidiary.
During the first half of 2018 all options and convertibles into PAL were exercised so that at 30 June 2018 the Company held a 46.8% (diluted and undiluted) interest in PAL. Accordingly PAL is no longer considered a subsidiary of the Company.
10. SUBSEQUENT EVENTS
There were no other events subsequent to the period end that materially impacted on the Company.
11. APPROVAL OF HALF YEARLY REPORT AND UNAUDITED CONDENSED INTERIM FINANCIAL
STATEMENTS
The Half-Yearly Report and Unaudited Condensed Interim Financial Statements to 30 June 2018 were approved by the Board of Directors on 15 August 2018.
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.ENDIR VDLBFVVFBBBZ
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