TIDMBSRT
RNS Number : 1353Y
Baker Steel Resources Trust Ltd
17 August 2018
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.
HSBC Securities
Services (Ireland)
SUB-ADMINISTRATOR TO THE COMPANY: DAC
1 Grand Canal
Square
Grand Canal
Harbour
Dublin 2
Ireland
HSBC Institutional
Trust Services
CUSTODIAN TO THE COMPANY: (Ireland) DAC
1 Grand Canal
Square
Grand Canal
Harbour
Dublin 2
Ireland
SAFEKEEPING HSBC
AND Institutional
MONITORING Trust Services
AGENT: (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:
% of net
GBPm 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(R) 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 EUR25 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 % Change % Change
Level in Six Months 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 (GBP) 382.90 +0.9% +111.5%
-------------- --------------- ----------------
EPIX Global Mining Index (GBP) 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 Number of
Ordinary Shares Ordinary Shares
30 June 2018 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:
Audit Committee
Board Meetings Meetings
He Held Attended Held Attended
Howard Myles 2 2 2 2
Christopher Sherwell 2 2 2 2
Clive Newall 2 2 2 2
Charles Hansard 2 2 N/A N/A
In addition to formal meetings, all Directors contribute to a
significant ad hoc exchange of views between the Directors and the
Investment Manager on specific matters, in particular in relation
to valuation and developments in the portfolio.
The Directors are remunerated for their services at such rate as
the Directors determine provided that the aggregate amount of such
fees may not exceed GBP200,000 per annum (or such sum as the
Company in general meeting shall from time to time determine).
For the period ended 30 June 2018 the total remuneration of the
Directors was GBP57,500 (30 June 2017: GBP57,500). No fees were
outstanding as at 30 June 2018 (31 December 2017: GBP28,750)
Authorised Share Capital
The share capital of the Company on incorporation was
represented by an unlimited number of Ordinary Shares of no par
value. The Company may issue an unlimited number of shares of a
nominal or par value and/or of no par value or a combination of
both.
Issue of Shares
The Company was admitted to trading on the London Stock Exchange
on 28 April 2010. On that date, 30,468,865 Ordinary Shares and
6,093,772 Subscription Shares were issued pursuant to a placing and
offer for subscription and 35,554,224 Ordinary Shares and 7,110,822
Subscription Shares were issued pursuant to a Scheme of
Reorganisation of Genus Capital Fund.
In addition 10,000 Management Ordinary Shares were issued.
Following the exercise of Subscription Shares at the end of
September 2010, March 2011, March 2012, June 2012 and September
2012, a total of 119,444 Ordinary Shares were issued. The final
exercise date for the Subscription Shares was 2 April 2013. No
Subscription Shares were exercised at this time and all residual
Subscription Shares were subsequently cancelled.
Following in specie transactions on 28 June 2014 and 1 July
2014, a total of 5,561,243 Ordinary Shares were issued.
Following in specie transactions on 25 February 2015 and 4 March
2015, 40,196,071 Ordinary Shares were issued. In addition the
Company issued a total of 3,368,488 Ordinary Shares on 4 March 2015
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/ GBP 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
Indian Pacific Resources Limited Loan
200,000 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
Bilboes Holdings Convertible Loan
440,000 Note 1,047,986 1.58
220,000 Bilboes Holdings Loan Note 157,705 0.24
Black Pearl Limited Partnership Loan
7,000,000 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/ GBP 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
Archipelago Metals Limited Warrants
2,000,000 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 Audited
30 June 31 December
2018 2017
Notes GBP GBP
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 Unaudited Unaudited
period ended period ended period ended
30 June 30 June 30 June
2018 2018 2018
Revenue Capital Total
Notes GBP GBP GBP
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 Unaudited Unaudited
period ended period ended period ended
30 June 30 June 30 June
2017 2017 2017
Revenue Capital Total
Notes GBP GBP GBP
Income
Net gain on financial assets at
fair value through profit or loss 3 - 4,692,844 4,692,844
Net foreign exchange loss - (20,640) (20,640)
Other income 2,381 - 2,381
Net income 2,381 4,672,204 4,674,585
-------------- -------------------- --------------------
Expenses
Management fees 7 366,589 - 366,589
Directors' fees 57,500 - 57,500
Administration fees 47,784 - 47,784
Custody fees 33,247 - 33,247
Other expenses 32,205 - 32,205
Audit fees 23,950 - 23,950
Broker fees 17,500 - 17,500
Directors' expenses 8,695 - 8,695
Total expenses 587,470 - 587,470
-------------- -------------------- --------------------
Net (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 Profit Profit
Ordinary Ordinary Treasury and loss and loss
Shares Shares Shares account account
(Revenue) (Capital) Total Equity
GBP GBP GBP GBP GBP GBP
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 Profit Profit
Ordinary Ordinary Treasury and loss and loss
Shares Shares Shares account account
(Revenue) (Capital) Total Equity
GBP GBP GBP GBP GBP GBP
Balance as at 1 January
2017 10,000 81,165,017 (140,492) (8,284,845) (17,141,890) 55,607,790
Net (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 Unaudited
Period Period
ended ended
30 June 30 June
2018 2017
GBP GBP
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 ("GBP"), being the currency in which its Ordinary Shares
are issued and in which returns are made to shareholders. The
presentation currency is the same as the functional currency. The
financial statements have been rounded to the nearest GBP. The
Company invests in companies around the world whose shares are
denominated in various currencies. Currently the majority of the
portfolio is denominated in 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
Period ended Year ended
30 June 31 December
Investment Summary: 2018 2017
GBP GBP
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 Year ended
30 June 31 December
2018 2017
GBP GBP
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 Quoted market Unobservable
markets based observables inputs
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets at fair
value through profit
or loss
Listed equity shares 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 Quoted market Unobservable
markets based observables inputs
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets at fair
value through profit
or loss
Listed equity shares 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
Unlisted
30 June 2018 Equities instruments Warrants Total
GBP GBP GBP GBP
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 instruments Warrants Total
Equities
GBP GBP GBP GBP
Opening balance 1 January
2017 37,819,837 4,037,448 5,303 41,862,588
Purchases of investments 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
30 June Range
2018 Unobservable (weighted
Description GBP Valuation technique input 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 n/a
results, study
results, financings
30 June Range
2018 Unobservable (weighted
Description GBP Valuation technique input average)
Debt Instruments
Black Pearl Limited Valued at mean Estimated recovery
Partnership 2,652,520 estimated recovery range +/- 50%
Other Convertible 10,711,736 Valued at fair Rate of Credit n/a
Debentures/Loans value with reference Risk
to credit risk
and value of embedded
derivative
31 December Range
2017 Unobservable (weighted
Description GBP Valuation technique input 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 n/a
results, study
results, financings
Debt Instruments
Black Pearl Limited Valued at mean estimated Estimated recovery
Partnership 2,589,715 recovery range +/- 50%
Other Convertible 7,021,967 Valued at fair value Rate of Credit n/a
Debentures/Loans with reference to Risk
credit risk and
value of embedded
derivative
Simplified Black
Warrants 981 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 Effect on Fair
used* Value (GBP)
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 Effect on Fair
used* Value (GBP)
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
GBP66,294,489 (31 December 2017: GBP65,931,456) 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 (GBP) 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
GBP363,033 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
GBP4,087,115 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
GBP1,200 (2017: GBP1,200) has been paid.
7. MANAGEMENT AND PERFORMANCE FEES
The Manager was appointed pursuant to a management agreement
with the Company dated 31 March 2010 (the "Management Agreement").
The Company pays to the Manager a management fee which is equal to
1/12th of 1.75 per cent of the total average market capitalisation
of the Company during each month. The management fee is calculated
and accrued as at the last business day of each month and is paid
monthly in arrears. The Investment Managers fees are paid by the
Manager.
The management fee for the period ending 30 June 2018 was
GBP482,531 (30 June 2017: GBP366,589) of which GBP78,024 (31
December 2017: GBP74,679) 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 GBP624,658. This consideration was settled through
the issue of 1,561,645 Ordinary Shares of the Company at the
unaudited NAV of 40.0 pence per share. In accordance with IFRS the
consideration of the transaction is recorded in the Company's
financial statements based on its (trading) share price, which was
29.875pence per share, the consideration recorded is therefore
GBP0.47million.
The 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
No. of
Amount No. of shares** Amount shares**
GBP GBP
Issued and fully paid share
capital
Ordinary Shares of no par value* 81,175,017 116,839,980 81,175,017 116,839,980
(including Management Ordinary
Shares)
Treasury Shares (140,492) (700,000) (140,492) (700,000)
* On 9 March 2010, 1 Management Ordinary Share was issued and on
26 March 2010, 9,999 Management Ordinary Shares were issued.
** Includes 10,000 Management Ordinary Shares
9. RELATED PARTY TRANSACTIONS
The Directors' interests in the share capital of the Company
were:
Number of Number of
Ordinary Shares Ordinary Shares
30 June 2018 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
GBP57,500 (30 June 2017: GBP57,500), with GBPNil payable at 30 June
2018 (31 December 2017: GBP28,750).
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.
END
IR VDLBFVVFBBBZ
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August 17, 2018 04:06 ET (08:06 GMT)
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