REG - Global Resources Inv - Final Results

Grit Investment TrustAnnouncement

30/04/2018 07:05

2018-04-30T06:00:24.173Zreuters.comtag:reuters.com,2018-04-30:newsml_RSd4585Ma:13TXT
This file is provided for EAP sample purposes only; it's structure and detail are subject to change, and should not be used as a definitive reference for actual development and processing.2018-04-30T06:00:24.173Z2018-04-30T06:00:24.173Z_UCDP:parsn_lse_10.54.132.131_1.2.37102:2019-05-31T06:00:24.173Z3RSd4585MaREG - Global Resources Inv  - Final ResultsLEGACY: Financials (TRBC)LEGACY: Investment Trusts (TRBC)UK Investment Trusts (TRBC level 5)Financials (TRBC level 1)Collective Investments (TRBC level 3)Western EuropeUnited KingdomEuropeSuggested SourcesServicesNews AnnouncementsRegulatory Corporate News AnnouncementsCompany NewsEurope daily earnings hits & missesGlobal Resources Investment Trust PLC








RNS Number : 4585M
Global Resources Investment Tst PLC
30 April 2018
 

To:                   RNS
From:               Global Resources Investment Trust plc
LEI:                  2138005OJKGWG3X4SY51
Date:                30 April 2018
 
 
Audited results for the year ended 31 December 2017
 
 
Chairman's Statement
 
Introduction
Since I wrote to you at this time last year, your Company has made encouraging progress in restoring shareholder value.
 
Investment and Share Price Performance
On 31 December 2017 your Company's net asset value was 19.7 pence, a decrease of 12.1% from the 22.4 pence at which it stood on 31 December 2016. In contrast, the Company's ordinary share price rose by 14.1% from 8.0p to 9.125p over the same period, as the discount at which its ordinary shares trade to net asset value narrowed from 64.3% to 53.7%.
 
This re-rating of the Company's shares is inevitably a work in progress, and the discount has further narrowed to 34.0% since the year end, a consequence of an increase in share price to 10.25 pence and a decrease in net asset value to 15.5 pence. We look for the former to continue and the latter to be reversed.
 
9% Cumulative Unsecured Loan Stock 2017 ('CULS')
The Company issued £5 million nominal of CULS in 2014 to provide working capital, of which £2.7 million remained in issue at 31 December 2016. This outstanding balance was repaid during the first quarter, leaving the Company ungeared and removing a significant constraint on performance.
 
Change to Investment Strategy and Outlook
The change in the Company's investment policy in January 2017 reflected our desire to reduce the portfolio's exposure to exploration and early stage development companies, and to focus more on companies with potentially large scale assets that are likely to be brought into production in the foreseeable future. It is here that we see the best opportunities to create value for shareholders.
 
The principal factors influencing the Company's net asset value since 31 December 2016, currency movements to one side, have been the fall in the value of the Company's investment in Siberian Goldfields from £2.9 million at 31 December 2016 to £1.8 million now and a significant increase in the value of the Company's position in the Bougainville based Kalia Holdings. These investments and the rest of the investment portfolio are discussed in the Executive Director's review; we believe that each of the Company's three largest investments, Siberian Goldfields, Anglo African Minerals and Kalia Holdings represent significant opportunities for the Company.
 
Board Changes
After I took on the role of non-executive Chairman in March 2014, we experienced a longer than expected bear market in commodity prices which necessitated substantial change and restructuring, both to ensure that the CULS holders were repaid and to restore value to shareholders. This has been accomplished.
 
When I wrote to you last September I said that I intended to retire shortly. As of the date of these results I am doing so, and I am happy to hand on the baton to the able hands of Simon Farrell. The concomitant process of Board refreshment will be carried out with a careful eye to board balance.
 
Lord St John
Chairman
 
27 April 2018
 
 
Executive Director's Review
 
Investor sentiment towards the natural resource sector has generally been positive during the course of the year and although there has been a small decline in the net asset value during the year, the share price has shown some improvement and the discount has also narrowed.
 
Since the last Annual Report, the Company's investment policy was amended to allow a more focused and concentrated portfolio, while still providing some diversification. The three largest holdings represented 83.7% of shareholder's funds at year end and are; Siberian Goldfields Limited (gold), Anglo African Minerals plc (bauxite) and Kalia Holdings Pty Ltd (copper/gold).
 
In the Interim Report, we advised that Siberian Goldfields had agreed a corporate restructuring with its Russian partner to create a new holding company that would own 100% of the Zhelezny Kryazh gold and iron ore project. This has now completed and was done as a precursor to a fund raising and listing on a recognised Stock Exchange. Unfortunately, the deterioration of global relationships with Russia has made it increasingly difficult for Siberian Goldfields to complete a pre-IPO fund raising, meaning that the company's planned IPO for early 2018 is inevitably delayed.
 
Progress for Anglo African Minerals (AAM) to finalise its joint venture with its Chinese partners has been slow, as unfortunately, the company is still working with the government of Guinea to complete the Mining Convention for the FAR Project, which among other things is required to complete the proposed joint venture. However the company's independent consultants, SRK, have recently completed new measured mineral resource estimates for its other two development projects, Somalu and Toubal, and these have confirmed combined bauxite resources of over 2 billion tonnes of export grade bauxite and the company has also commenced high level infrastructure reviews for both projects.
 
Also in the Interim report we spoke of developments at Kalia Holdings Pty Ltd, and that GRIT would not be accepting the offer from GB Energy Limited to acquire it's holding in Kalia Holdings Pty Ltd and that GRIT would enter into a Shareholder's Agreement with the company. Since completing the acquisition of the majority interest in Kalia Holdings Pty Ltd, GB Energy Ltd changed its name to Kalia Ltd (ASX Code: KLH) and following on-going discussions and negotiations with Kalia Ltd, in February this year, GRIT agreed to transfer its minority interest in Kalia Holdings Pty Ltd to Kalia Ltd, for the issue of 480,000,000 new Kalia Ltd shares and 55,150,000 existing Kalia Ltd shares. This will give GRIT a total holding of 535,150,000 Kalia Ltd shares, or 21.28% of the company's issued capital. The issue of the new shares is still subject to
the approval of Kalia Ltd shareholders, at a shareholder meeting that has been scheduled for 11 May 2018. GRIT will also have the right, but not the obligation, to maintain its interest in the share capital of Kalia Ltd by subscribing for fully paid ordinary shares on the same terms as those attaching to any future capital raises, although this right will expire after 5 years or in the event the GRIT's relevant interest in Kalia Ltd is
less than 10%.
 
Currently GRIT is valuing its investment in Kalia, on the basis of 277,108,431 shares, although this will increase to 535,150,000 shares following shareholder approval of the proposed transaction and will result in an uplift in GRIT's net asset value.
 
Bougainville is one of the last undeveloped mineralised provinces in the world and in a recent Stock Exchange announcement, Terry Larkin, the managing director of Kalia Ltd stated that, "We believe that the licence areas in Bougainville hold exceptional potential and our objective remains to identify targets for drilling in 2018."
 
The GRIT portfolio includes four other small listed investments, which are not deemed core investments and will probably be sold in due course and as market conditions permit, as the current focus of the portfolio is on the three main investments discussed above. Consequently, the fund's future performance is directly linked to the future performance of those investments; Siberian Goldfields, Anglo African Minerals and Kalia Ltd.
 
David Hutchins
 
27 April 2018
 
 
Enquiries:
 
RDP Fund Management LLP
David Hutchins   
Tel        +44 (0) 207 290 8541
 
Beaumont Cornish Limited                                                           
Roland Cornish
Tel:       +44 (0) 207 628 3396
Felicity Geidt
Tel:       +44 (0) 207 628 3396
 
Maitland Administration Services (Scotland) Limited
Martin Cassels  
Tel:       +44 (0) 131 550 3760
    
 
 
 
 
Audited Income Statement
           




 


Year ended 31 December 2017




 


 


Revenue


Capital


Total




 


Notes


£'000


£'000


£'000




Losses on investments


 


-


(158)


(158)




Exchange losses


 


-


(17)


(17)




Foreign exchange forward contract loss


 


-


(83)


(83)




Income


 


76


-


76




Investment management fee


 


(37)


(629)


(666)




Other expenses


 


(453)


-


(453)




Net return before finance costs and taxation


 


(414)


(887)


(1,301)




 


 


 


 


 




Interest payable and similar charges


 


(24)


-


(24)




Net return on ordinary activities before taxation


 


(438)


(887)


(1,325)




 


 


 


 


 




Taxation on ordinary activities


 


-


-


-




 


 


 


 


 




Net return attributable to equity shareholders


 


(438)


(887)


(1,325)




 


 


 


 


 




Loss per ordinary share (basic and diluted)


2


(1.04)p


(2.12)p


(3.16)p




 
 
 
 
 
 




 


Year ended 31 December 2016




 


 


Revenue


Capital


Total




 


Notes


£'000


£'000


£'000




Gains on investments


 


-


1,664


1,664




Exchange gains


 


-


114


114




Foreign exchange forward contract loss


 


-


(38)


(38)




Income


 


258


-


258




Investment management fee


 


(155)


-


(155)




Other expenses


 


(638)


-


(638)




Net return before finance costs and taxation


 


(535)


1,740


1,205




 


 


 


 


 




Interest payable and similar charges


 


(374)


-


(374)




Net return on ordinary activities before taxation


 


(909)


1,740


831




 


 


 


 


 




Tax on ordinary activities


 


-


-


-




 


 


 


 


 




Net return attributable to equity shareholders


 


(909)


1,740


831




 


 


 


 


 




(Loss)/earnings per ordinary share (basic and diluted)


2


(2.28)p


4.35p


2.07p




 
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.
 
 
 
 
Audited Statement of Changes in Equity
 
For the year to 31 December 2017
 




 


Share capital


Share premium account


Capital reserve


Revenue reserve


Total




 


£'000


£'000


£'000


£'000


£'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




 
 
For the year to 31 December 2016
 




 


Share capital


Share premium account


Capital reserve


Revenue reserve


Total




 


£'000


£'000


£'000


£'000


£'000




Balance at 31 December 2015


400


36,800


(27,051)


(2,034)


8,115




Return on ordinary activities after taxation


-


-


1,740


(909)


831




Balance at 31 December 2016


400


36,800


(25,311)


(2,943)


8,946




 
 
 
 
Audited Balance Sheet
 




 


 


As at
31 December 2017


As at
31 December 2016




 


Notes


£'000


£'000




Fixed assets


 


 


 




Investments


 


7,568


10,325




 


 


 


 




Current assets


 


 


 




Debtors


 


440


663




Cash at bank and on deposit


 


325


3,142




 


 


765


3,805




Creditors: amounts falling due within one year


 


 


 




Other creditors


 


(83)


(2,484)




9% Convertible Unsecured Loan Stock 2017


 


-


(2,700)




 


 


 


 




Net current liabilities


 


(83)


(5,184)




 


 


 


 




Net assets


 


8,250


8,946




 


 


 


 




Capital and Reserves


 


 


 




Called up share capital      


 


420


400




Share premium                                                  


5


36,880


36,800




Capital reserve                                              


5


(25,669)


(25,311)




Revenue reserve                  


5


(3,381)


(2,943)




 


 


 


 




Equity shareholders' funds


 


8,250


8,946




 


 


 


 




Net asset value per share          


3


19.66p


22.38p




 
 
 
 
Audited Cash Flow Statement
 




 


 


Year ended
31 December 2017


Year ended
31 December 2016




 


 


£'000


£'000




Operating activities


 


 


 




(Loss)/gain before finance costs and taxation


 


(1,301)


1,205




Loss/(gain) on investments


 


158


(1,664)




(Decrease)/increase in forward exchange creditor


(2,412)


(2,412)




Increase/(decrease) in other receivables


 


613


(264)




Increase/(decrease) in other payables


 


11


(99)




Realised exchange loss/(gain) on currency balances


100


(76)




Value of share tranches in lieu of management fee


629


-




 


 


 


 




Net cash (outflow)/inflow from operating activities before interest and taxation


(2,202)


1,514




 


 


 


 




Interest paid


 


(24)


(375)




Taxation paid


 


-


-




 


 


 


 




Net cash (outflow)/inflow from operating activities


(2,226)


1,139




 


 


 


 




Investing activities


 


 


 




Purchases of investments


 


(2,125)


(1,664)




Sales of investments


 


4,724


5,259




Advanced loan to Anglo African Minerals


 


(390)


-




Interest received


 


-


1




 


 


 


 




Net cash inflow from investing activities


2,209


3,596




 


 


 


 




Financing


 


 


 




Redemption of CULS


 


(2,700)


(2,000)




 


 


 


 




Net cash outflow from financing


 


(2,700)


(2,000)




 


 


 


 




(Decrease)/increase in cash and cash equivalents


(2,717)


2,735




Exchange movements including forward contracts


(100)


76




Net cash at the start of the year


 


3,142


331




 


 


 


 




Net cash at the end of the year


 


325


3,142




 


 


 


 




 
 
 
 
Notes
 
1. 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 January 2017 with consequential amendments, to the extent that it is consistent with IFRS.
 
The functional and reporting currency of the Company is pounds sterling because

The functional and reporting currency of the Company is pounds sterling because that is the primary economic environment in which the Company operates. The notes and financial statements are presented in pounds sterling and are rounded to the nearest thousand except where otherwise indicated.


The financial statements have been prepared on the historical cost basis, except that investments are stated at fair value and categorised as financial assets at fair value through profit or loss.


In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. Additionally, the net revenue of the Company is the measure the Directors believe appropriate in assessing its compliance with certain requirements set out in Sections 1158 - 1159 of the Corporation Tax Act 2010.


At the date of authorisation of these financial statements, the following Standards and Interpretations were effective for annual periods beginning on or after 1 January 2018:
 
- IFRS 14 - Regulatory Deferral Accounts
 
At the date of authorisation of these financial statements, the following Standards and Interpretations have not yet been applied in these Financial Statements since they were in issue but not yet effective.
 
- IFRS 9 - Financial Instruments (effective 1 January 2018) replaces IAS 39 and deals with a package of improvements including principally a revised model for classification and measurement of financial instruments, a forward looking expected loss impairment model and a revised framework for hedge accounting. In terms of classification and measurement the revised standard is principles based and depending on the business model and nature of cash flows. Under this approach, instruments are measured at either amortised cost or fair value.
 
- IFRS 15 - Revenue from Contracts with Customers (effective 1 January 2018) specifies how and when an entity should recognise revenue and enhances the nature of revenue disclosures. Given the nature of the Group's income streams from financial instruments the provisions of this standard are not expected to be applicable.


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
 
The Company's operations have been cash flow negative since its inception; the Company relying on the sale of investments to generate the cash needed to continue to operate. £4.7m was realised from the sale of investments during the year under review. On 28 February 2017, the remaining £1.2m nominal of Loan Notes was repaid, and the Board is pleased that the Company no longer has any gearing.
 
On 16 January 2017, at the General Meeting, the Shareholders approved a change in the arrangement with RDP for managing the Company and, as a result, the Company and its portfolio became self-managed. In addition, the shareholders approved the appointment of David Hutchins as an Executive Director.


During the year under review, the management fee was £37,000 paid in cash and £629,000 in respect of the termination of the existing RDP investment management agreement which is settled by way of share issues (see note 17). Prior to the change in the structure of the Company, if the net asset base of the Company were to grow, then the fee could have risen without limit and this would have represented a large cash cost to the Company. The new arrangement eliminates this cash cost in return for the issue of Ordinary Shares under the termination arrangement. In addition, it is considered more practical for the Company to take direct charge of the investment strategy and thus eliminate a layer of cost inherent in a formal investment management agreement. The impetus for the change came from certain major shareholders, who had expressed a concern about the cash cost of running what had become a relatively small investment trust.
 
Critical accounting estimates and judgements
 
The preparation of the financial statements necessarily requires the exercise of judgement both in application of accounting policies which are set out below and in the selection of assumptions used in the calculation of estimates. These estimates and judgements are reviewed on an ongoing basis and are continually evaluated based on historical experience and other factors. However, actual results may differ from these estimates. The most significant judgements are the valuation of unlisted investments which is described in note 1(b) below and establishing the fair value of the investment management fee settled by way of share based arrangements.
 
A summary of the principal accounting policies which have been applied to all periods presented in these financial statements is set out below.
 
(b) Fixed asset investments
Purchases or sales of investments are recognised/derecognised on the date the Company commits to purchase/sell the investments. Investments are classified at fair value through profit and loss on initial recognition with any resultant gain or loss recognised in the Income Statement. Listed securities are valued at bid price or last traded price, depending on the convention of the exchange on which the investment is listed, adjusted for accrued income where it is reflected in the market price. 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'). Unlisted investments are valued by the Directors on the basis of all the information available to them at the time of valuation. This includes a review of: the financial and trading information of the Company, covenant compliance and ability to repay the interest and cash balances. Where no reliable fair value can be estimated, investments may be carried at cost less any provision for impairment.
 
Realised gains or losses on the disposal of investments and permanent impairments in the value of investments are taken to the capital reserve. Gains and losses arising from changes in the fair value of investments are included in the Income Statement as a capital item as per note (i).


(c) Income
Dividends receivable on equity shares are recognised as income on the date that the related investments are marked ex-dividend. Dividends receivable on equity shares where no ex-dividend date is quoted are recognised as income when the Company's right to receive payment is established.
 
Fixed returns on non-equity shares are recognised on a time apportioned basis so as, if material, to reflect the effective interest rate on those instruments. Other returns on non-equity shares are recognised when the right to the return is established. The fixed return on a debt security is recognised on a time apportioned basis so as to reflect the effective interest rate on each such security.
 
Income from deposit interest is recognised on an accruals basis.
 
Where the Company has elected to receive its dividends in the form of additional shares rather than cash, an amount equal to the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital reserves.
 
(d) Taxation
The charge for taxation is based on net revenue for the period. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue on the same basis as the particular item to which it relates.
 
Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of underlying timing differences can be deducted.
 
Because the Company intends each year to qualify as an investment trust under Chapter 4 of Part 24 of the Corporation Tax Act 2010 (previously S842 of the Income and Corporation Taxes Act 1988), no provision is made for deferred taxation in respect of the capital gains that have been realised, or are expected in the future to be realised, on the sale of fixed asset investments.


(e) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged through the Income Statement as a revenue item except as follows:


- expenses which are incidental to the acquisition of an investment are included within the cost of the investment;


- expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment;
 
(f) Foreign currency
Transactions denominated in foreign currencies are recorded in the local currency at actual exchange rates at the date of the transaction. Overseas assets and liabilities denominated in foreign currencies at the year end are reported at the rates of exchange prevailing at the year end. Any gain or loss arising from a change in exchange rates subsequent to the date of a transaction is included as an exchange gain or loss in capital reserves. The financial currency of the Company, being its statutory reporting currency, is sterling.
 
(g) Finance costs
Finance costs are accounted for on an accruals basis. Finance costs of debt, insofar as they relate to the financing of the Company's investments or to financing activities aimed at maintaining or enhancing the value of the Company's investments, are allocated between revenue and capital in accordance with the Board's expected long-term split of returns, in the form of income and capital gains respectively, from the Company's investment portfolio. For further details refer to note 5.


(h) Share based payments
The calculation of the share based payments is performed annually by a qualified valuer. 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 account for investments, which would ordinarily be considered associates and require to be equity accounted, on a fair value through profit and loss basis.
 
 
2. Income
 




 


 


Year ended
31 December 2017


Year ended
31 December 2016




 


 


£'000


£'000




Income from investments*


 


 


 




Overseas interest


 


76


258




Total income


 


76


258




Total income comprises:


 


 


 




Fixed interest securities


 


76


258




 


 


76


258




*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 the Anglo African Minerals 9% Convertible Loan Stock and Siberian Goldfields 15% Convertible Loan Stock.
 
 
3. Investment Management Fee
 




 


2017
Revenue


2017
Capital


2017
Total


2016
Revenue


2016
Capital


2016
Total




 


£'000


£'000


£'000


£'000


£'000


£'000




Investment management fee


37


629


666


155


-


155




 
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 £100 million and 0.75% per annum on the amount by which the preceding monthly average net assets exceeds £100 million. On 16 January 2017, at the General Meeting, the shareholders approved a change in the arrangement with RDP for managing the Company and, as a result, the Company and its Portfolio became self-managed. RDP received £37,000 in relation to the twelve months ended 31 December 2017 and this has been charged to revenue. On 16 January, 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)   
 




 


2017
Revenue


2017
Capital


2017
Total


2016
Revenue


2016
Capital


2016
Total




 


£'000


£'000


£'000


£'000


£'000


£'000




Secretarial and administration fees


84


-


84


122


-


122




Directors' fees


96


-


96


81


-


81




Auditor (KPMG) remuneration for:


 


 


 


 


 


 




- Statutory audit


42


-


42


32


-


32




- Other services relating to taxation


-


-


-


8


-


8




Tax Services - Chiene & Tait


4


-


4


-


-


-




Legal fees


88


-


88


155


-


155




Broker fees


24


-


24


120


-


120




Public relations


13


-


13


29


-


29




Regulatory fees


23


-


23


23


-


23




Other


79


-


79


68


-


68




 


453


-


453


638


-


638




 
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 £84,000. The balance due to Maitland for secretarial services at the year end was £7,000. Maitland receive a fee comprising 0.08% per annum of the total assets subject to a minimum fee of £83,359. The administration agreement has a six month notice period with effect not earlier than the first anniversary of admission.
 
No pension contributions were payable in respect of any of the Directors.
 
 
5. Interest Payable and Similar Charges
 




 


2017
Revenue


2017
Capital


2017
Total


2016
Revenue


2016
Capital


2016
Total




 


£'000


£'000


£'000


£'000


£'000


£'000




Interest on 9% Convertible


 


 


 


 


 


 




Unsecured Loan Stock 2017 ('CULS')


24


-


24


374


-


374




 


24


-


24


374


-


374




 
Interest payable on the CULS has been charged 100 per cent to revenue.


The interest has been paid gross to all CULS shareholders. The CULS contract contained an undertaking to pay the note-holders the full amount and not to deduct withholding tax from these payments. The CULS remaining outstanding at the start of the year were fully paid in February 2017.
 
 
6. Tax on Ordinary Activities
 




 


2017
Revenue


2017
Capital


2017
Total


2016
Revenue


2016
Capital


2016
Total




 


£'000


£'000


£'000


£'000


£'000


£'000




Corporation tax


-


-


-


-


-


-




Overseas taxation


-


-


-


-


-


-




Total tax charge


-


-


-


-


-


-




 
 
Reconciliation of Tax Charge


A reconciliation of the current tax charge is set out below:




 


2017
Total


2016
Total




 


£'000


£'000




(Loss)/return on ordinary activities before taxation


(1,325)


831




Corporation tax at standard rate 19% (prior year: 20%)


(252)


166




Effects of:


 


 




     Non taxable gains/(losses)


30


(333)




     Excess management expenses


203


182




     Exchange losses/(gains)


19


(15)




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 2017 the Company had surplus management expenses of £957,000 (2016: £754,000) which have not been recognised as a deferred tax asset.
 
 
7. Return per ordinary share (basic and diluted)
 
Return per ordinary share attributable to shareholders reflects the overall performance of the Company in the year.




 


 


Year ended
31 December 2017


Year ended
31 December 2016




 


 


£'000


£'000




Revenue return


 


(1.04)p


(2.28)p




Capital return


 


(2.12)p


4.35p




Total return


 


(3.16)p


2.07p




 


 


Number


Number




Weighted average ordinary shares in issue


 


41,877,082


39,970,012




 
 
8. Investments




 


2017
Total


2016
Total




 


£'000


£'000




Investments listed/quoted on a recognised investment exchange


1,242


5,592




Unquoted investments


6,326


4,733




 


7,568


10,325




Equity shares


7,125


7,379




Convertible securities


443


2,946




 


7,568


10,325






All investments are designated fair value through profit or loss at initial recognition, therefore all gains and losses arise on investments designated at fair value through profit or loss.


International Financial Reporting Standard ('IFRS') 'Financial Instruments: Disclosures' requires an analysis of investments valued at fair value based on the reliability and significance of information used to measure their fair value. The level is determined by the lowest (that is the least reliable or independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety as follows:
 
·    Level 1 - investments quoted in an active market;
 
·    Level 2 - investments whose fair value is based directly on observable current market prices or indirectly being derived from market prices;
 
·    Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or based on observable market data.
 




 


Level 1
Listed in UK


Level 1
Listed overseas


Level 3


2017
Total


2016
Total




 


£'000


£'000


£'000


£'000


£'000




Opening book cost


2,230


9,273


9,858


21,361


32,306




Opening fair value adjustment


(1,572)


(4,339)


(5,125)


(11,036)


(20,050)




Opening valuation


658


4,934


4,733


10,325


12,256




 


 


 


 


 


 




Purchases at cost


154


54


1,917


2,125


1,664




Sales - proceeds


(89)


(4,635)


-


(4,724)


(5,529)




          - realised gains


820


422


(6,152)


(6,550)


(7,350)




(Increase)/decrease in fair value adjustment


787


(224)


5,829


6,392


9,014




Closing valuation


690


551


6,327


7,568


10,325




Closing book cost


1,475


5,114


5,623


12,212


21,361




Closing fair value adjustment


(785)


(4,562)


704


(4,644)


(11,036)




Closing valuation


690


551


6,327


7,568


10,325




 
The gains and losses included in the above table have all been recognised within gains/(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.
 
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 funding level at which the investee company is currently seeking equity fundraising. Subsequent developments in the success of this fundraising may have an impact on the carrying value of this investment.
 
-    Anglo African - The investment in Anglo African Minerals has been valued at the last traded price for the company's shares, although the company is about to complete a new fundraising, which may have an impact on the carrying value of this investment.
 
-    Kalia - The investment in Kalia Holdings Pty Ltd is being valued on the "see through" basis reflecting the number of shares that the Company would have received in the listed equity Kalia Limited had it accepted the offer made for its shares in Kalia Holdings Pty Ltd in September 2017. A revised offer for a larger number of shares has been made and is subject to the approval of the shareholders of Kalia Limited.
 




 


        2017


          2016




(Losses)/gains on investments


£'000


£'000




Realised losses on sale


(6,550)


(7,350)




Movement in fair value


6,392


9,014




(Losses)/gains on investments


(158)


1,664




 
During the year the Company did not incur transaction costs on purchases and sales.
 
 
9. Debtors




 


        2017


          2016




 


£'000


£'000




Advanced loan to Anglo African Minerals


390


-




Prepayments and accrued income


42


632




VAT recoverable


8


31




 


440


663




 
 
10. Other creditors
 




 


        2017


          2016




 


£'000


£'000




Unrealised forward exchange rate contract


-


2,412




Other creditors


83


72




 


83


2,484




 
 
11. 9% Convertible Unsecured Loan Stock 2017
 




 


 


Nominal
Value of CULS




 


 


£'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 £4,850,000 9% Convertible Unsecured Loan Stock 2017 ('CULS') and 4,850,000 warrants (for nil consideration on the basis of one warrant for every £1 of CULS subscribed). A further £150,000 CULS and 150,000 warrants were issued on 28 November 2014. During the 16 months to 31 December 2015, the Company converted £300,000 of CULS into equity. On 23 August 2016 and 1 November 2016, the Company made two repayments each of £1,000,000 nominal of CULS. On 19 January 2017, a further £1,500,000 nominal of CULS was repaid and on 28 February 2017 the Company repaid the outstanding £1,200,000 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 £1.00 per ordinary share. Given the current share price, no liability is recognised for the warrants.
 
 
12. Share Capital
 




 


2017
Shares


2017
£'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 2017


41,964,512


420




 
 
Capital management policies and procedures


The Company's capital management objectives are:
 
-      to ensure that the Company will be able to continue as a going concern; and
 
-      to maximise the capital return to its equity shareholders through an appropriate balance of equity capital and loan notes.

 
The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. The Company has no externally imposed capital requirements.
 
 
13. Net Asset Value per Ordinary Share
 




 


31 December 2017


31 December 2016




 


£'000


£'000




Net asset value per share


19.66p


22.38p




Net assets attributable at end of period


£8.3m


£8.9m




Ordinary shares of 1p each as at end of period


41,964,512


39,970,012




 
 
14. Analysis of Changes in Net Cash
 




 


At 1 January 2017


Cash flow


Currency movements


At 31 December 2017




 


£'000


£'000


£'000


£'000




Cash at bank and in hand


3,142


(2,717)


(100)


325




Total


3,142


(2,717)


(100)


325




 
 
15. Financial Instruments
 
The Company's financial instruments comprise its investment portfolio, cash balances, bank facilities and debtors and creditors that arise directly from its operations. As an investment trust the Company holds a portfolio of financial assets in pursuit of its investment objective.


Listed fixed asset investments held (see note 8) are valued at fair value. For listed securities this is either bid price or the last traded price depending on the convention of the exchange on which the investment is listed. Unlisted investments are valued by the Directors on the basis of all the information available to them at the time of valuation. The fair value of all other financial assets and liabilities is represented by their carrying value in the Balance Sheet.


The main risks that the Company faces arising from its financial instruments are:
 
(i)     market price risk, being the risk that the value of investment holdings will fluctuate as a result of      
        changes in market prices caused by factors other than interest rate or currency rate movements;
 
(ii)    interest rate risk, being the risk that the future cash flows of a financial instrument will fluctuate  
        because of changes in market interest rates;
 
(iii)   foreign currency risk, being the risk that the value of investment holdings, investment purchases,   
        investment sales and income will fluctuate because of movements in currency rates;
 
(iv)  credit risk, being the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company; and
 
(v)   liquidity risk, being the risk that the 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. £4.7m 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:
 




 


2017


2016




 


£'000


£'000




Financial instruments


 


 




Investment portfolio


7,568


10,325




Cash at bank and on deposit


325


3,142




Debtors


440


663




Financial liabilities


 


 




9% Convertible Unsecured Loan Stock 2017


-


2,700




Other creditors


83


72




 
Market price risk


Market price risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. To mitigate the risk the Board's investment strategy is to select investments for their fundamental value. Stock selection is therefore based on disciplined accounting, market and sector analysis, with the emphasis on long term investments. An appropriate spread of investments is held in the portfolio in order to reduce both the statistical risk and the risk arising from factors specific to a country or sector. The 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 2017, the impact on the profit or loss and the net asset value would have been negative £0.8 million (2016: £1.0 million). If the investment portfolio valuation rose by 10 per cent the impact would have been equal and opposite. The calculations are based on the portfolio valuation as at the balance sheet date and are not representative of the 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. The fixed interest liabilities reflected the CULS and were fully repaid in 2017.
 




 


2017
£'000


2017
Weighted average interest rate (%)*


2017
Weighted average period for which the rate is fixed (years)


2016
£'000


2016
Weighted average interest rate (%)*


2016
Weighted average period for which the rate is fixed (years)




Assets:


 


 


 


 


 


 




Convertible securities


443


-


-


2,946


0.2


15.0




 
* The 'weighted average interest rate' is based on the current yield of each asset, weighted by their market value.
 
Foreign currency risk
 
The Company invests in overseas securities and may hold foreign currency cash balances which give rise to currency risks. During the year, the Company entered into a contract to hedge its currency exposure. Although the 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:
 




 


2017 Investments


2017 Cash


2017 Net current assets


2017 Total


2016 Investments


2016 Cash


2016 Net current assets


2016 Total




 


£'000


£'000


£'000


£'000


£'000


£'000


£'000


£'000




Canadian Dollar


551


-


-


551


4,916


-


-


4,916




US Dollar


2,111


5


-


2,116


4,733


-


627


5,360




Australian Dollar


2,403


-


-


2,403


18


-


-


18




Euro


-


-


-


-


-


-


-


-




 


5,065


5


-


5,070


9,667


-


627


10,294




 
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 £0.25 million (2016: £0.6 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:
 




 


2017
£'000


2016
£'000




Cash and cash equivalents


              325


         3,142




Interest, dividends and other receivables


440


663




 


765


3,805




 
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 2017, the Company held 3 per cent or more of issued share capital of the following companies:
 
 
 
 
 




 


2017
Number of ordinary shares issued


2017 Percentage held


2016
Number of ordinary shares issued


2016 Percentage held




 


 


 


 


 




Kalia Holdings


240,000,000


27.7%


-


-




Anglo African Minerals


444,648,075


25.4%


438,303,275


25.4%




IMC Exploration Group


147,291,719


17.6%


89,316,719


23.5%




Siberian Goldfields


250,010,000


6.1%


-


-




Wishbone Gold


1,305,256,635


2.9%


999,990,364


4.9%




Merrex Gold


-


-


199,226,505


13.1%




Mineral Resources


-


-


40,419,069


13.4%




Maxim Resources


-


-


42,954,254


12.8%




Blue River Resources


-


-


124,965,756


6.4%




 
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:
 




 


2017
£'000


2016
£'000




Unquoted investments:


 


 




Unquoted convertible securities that are convertible into unlisted securities


443


1,787




Unquoted equities


5,883


2,946




 


6,326


4,733




 
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 on a quarterly basis by the Board.
 
The Company maintains sufficient cash and has identified securities that could be sold to pay accounts payable and accrued expenses. The Executive Director plans to sell Mineral Mountains, Zenith Energy, Wishbone Gold and IMC Exploration in the next 24 months.
 
 
16. Related Party Transaction
 
The following are considered related parties: the Board of Directors.
 
There were fees of £7,000 due to Directors at the year end.
 
 
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 £400,000. Based on the model output a range of values that could have been reflected was £240,000 to £475,000.
 
There was no share incentive plan in the prior year.
 




 


Trigger point


Date of payment


Cost per share (p)


Share price (p)


Number of shares




First trigger


On admission


16-Jan-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 £229,368 using the share price on the day the agreement was signed. The remaining three tranches have a value of £400,000 and are also recognised at fair value.
 
 
18. Post Balance Sheet Events
 
In September 2017, GB Energy Limited (ASX: GBX) an Australian listed company exercised an option to acquire the outstanding share capital of Kalia Holdings Pty Ltd, for the issue of new GB Energy Limited shares. GRIT did not accept this offer for its shares in Kalia Holdings Pty Ltd. Subsequent to GRIT's year end, it has accepted a revised offer for its holding which is subject to the approval of Kalia Limited's shareholders. GB Energy has subsequently changed its name to Kalia Limited (ASX: KLH).



This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR SESFIWFASELL