TIDMGRIT
RNS Number : 9274D
Global Resources Investment Tst PLC
01 July 2019
Global Resources Investment Trust plc
Annual Results announcement for the year ended
31 December 2018
Financial Highlights
Total Return Year to Year to
31 December 31 December 2017
2018
Net asset value (82.6)% (12.1)%
------------- ------------------
Ordinary share price (64.4)% 14.1%
------------- ------------------
Capital Values 31 December 31 December 2017 % change
2018 period
Net asset value per
share 3.4p 19.7p (82.6)%
------------ ----------------- ---------
Ordinary share price
(mid market) 3.25p 9.125p (64.4)%
------------ ----------------- ---------
Discount 4.4% 53.7%
------------ ----------------- ---------
Revenue and Dividends 31 December 31 December 2017
2018
Loss per ordinary
share (1.38)p (1.04)p
------------ -----------------
Ongoing charges 11.4% 5.6%
------------ -----------------
Period Highs/Lows 2018 2018
High Low
Net asset value 19.7p 3.4p
------ ------
Ordinary share price
(mid market) 10.0p 3.25p
------ ------
Discount 53.7% 4.4%
------ ------
Chairman's Statement
Introduction
When I wrote to you in September 2018 I said that the five
months since I became Chairman had been extremely difficult ones
for
your Company. I regret to report that the nine months since then
have been no easier.
Investment and Share Price Performance
At 31 December 2017 the Company had three core investments,
Anglo-African Minerals plc ("AAM": GBP2.1m), Siberian
Goldfields
("Siberian": GBP1.8m) and Kalia Holdings ("Kalia": GBP2.4m),
together with four smaller investments (GBP1.3m). I reported in
September that insufficient progress had been made towards
refinancing AAM to give the Board confidence that the necessary
funding would be forthcoming. Progress continues to be made, as I
report below, but given the progress to date the Board has taken
the decision to write down the value of the investment in AAM to
US$600,000 (GBP471,000) as at the year end.
Siberian had also been seeking funding but, against a backdrop
of increasing international tension with and sanctions against
Russia, this has so far proved impossible to complete. The Board
has therefore made the decision to value the investment using an
industry benchmark approach which has resulted in the valuation
being written down to GBP151,000 at year end.
Kalia became a listed position during the year under review and
is valued at the price at which the company trades on the
Australian Securities Exchange. At 31 December 2018 the Kalia price
was AUS$0.003, giving the position a value of GBP796,000. Since the
year
end the Kalia share price has fluctuated between AUS$0.001 and
AUS$0.005 and is currently trading at the AUS$0.001 level.
The Executive Director writes more fully concerning all the
Company's investments in his Review.
Your Company's net asset value at 31 December 2018 was 3.42
pence per share, a decrease of 82.6% from the 19.66 pence at which
it stood on 31 December 2017. As I write, it is 1.28 pence per
share.
The Company's ordinary share price was 3.25 pence at 31 December
2018. The Company's shares are currently suspended pending the
publication of these results as the UKLA requirement to publish
results within four months was missed.
General Meeting
The Company's largest shareholder, Mardasa Nominees Pty Ltd
(owning 29.7% of the Company) requisitioned a General Meeting of
the Company which was held on 22 August 2018. At that meeting
shareholders resolved to appoint Mr David Johnston and Mr Jonathan
Reynolds to the Board as non-executive Directors. Mr Johnston
resigned on 14 June 2019. The Board does not consider Mr Reynolds
to be independent.
Outlook
Whilst the Board continues to believe in the merits of the
investment case attaching to each of the Company's three
significant investments, the fact is that the catalysts to realise
value remain elusive and uncertain. That said, AAM is currently in
negotiations regarding a potential refinancing with a private
international trading group, which has already completed due
diligence on the company and its projects. There can be no
assurance that these negotiations will be successful; however, if
they are, it could lead to a significant uplift in the value of the
Company's investment in AAM.
The Board has been urgently considering the future direction of
the Company, and on 17 May 2019 appointed Peterhouse Capital
Limited to assist in advising the Company as to its future
development. The Board has since concluded that it is unrealistic
to expect the Company to continue trading as a going concern. A
Circular to shareholders is being prepared which will convene a
General Meeting at which shareholders will be asked to approve the
placing of the Company into Members' Voluntary Liquidation. More
detail is given in the sections of the Strategic Review which deal
with Going Concern and Viability.
Haruko Fukuda
Director
28 June 2019
Executive Director's Review
As foreshadowed in the Interim Report in September 2018, it has
been a difficult and disappointing year for the investment
portfolio. The remaining small holdings, including Wishbone Gold
plc and Zenith Energy plc were sold on market, and since the year
end, the IMC Exploration plc holding has also been sold. This has
left the investment portfolio focused on three core holdings as
outlined in the Interim Report - Anglo-African Minerals plc
("AAM"), Siberian Goldfields plc ("Siberian") and Kalia Limited
("Kalia").
In the Interim Report, we had written the carrying value of AAM
down to nil, as the company had been unable to complete a much
needed refinancing. Currently the company has still not been able
to complete a major refinancing, however it has been able to raise
additional short term funding of over $650,000 in 2019. This has
allowed the company to maintain its licences in Guinea on a care
and maintenance basis while also maintaining its relationships with
the Government. The company is currently proposing to raise further
funds via a listing on the Canadian Securities Exchange, and it has
recently appointed a Canadian broker to manage this process, which
will still take some 3 months to complete.
Given the contingent nature of the fund raising and the time
that it will take for AAM to come to market, it is premature to
revalue the total investment. For the year end, our equity
investment continues to be valued at nil, along with the
outstanding loans, although the 9% convertible loan will be valued
at par, giving an attributed value of US$600,000 to our investment
in the Company.
Unfortunately, Siberian has not been able to raise the pre-IPO
funding that was mentioned in the Interim Report and, without such
funding, the company's operations remain on a care and maintenance
basis. The geopolitical climate for Russian related investments
remains particularly challenging and given that Siberian has been
unable to raise the required funding to move the project forward,
the Board has taken the difficult decision to reduce the carrying
value of the investment from GBP1.1m at the time of the Interim
Report, to GBP0.1m at the year end. The valuation basis changing to
a model based industry valuation benchmark approach. This does not
mean that we have lost faith in the company or the project, but
from a pragmatic point of view, with Siberian unable to raise the
required capital to move the project into production our valuation
could be seen as overly optimistic. The adjustment in the valuation
of Siberian represents approximately 2.5p per share.
Having listed on the Australian Stock Exchange ("ASX") last
year, GRIT exchanged its shares in the private company, Kalia
Holdings Pty Ltd for new shares in the ASX listed Kalia Limited. At
year end, GRIT held 480,000,000 shares in Kalia Limited which
represented 19.09% of the company's issued capital. Since listing
the share price performance has been unspectacular although the
company has managed to complete the first major geophysical survey
of its exploration licences and this initial survey has already
identified 64 major targets for porphyry and epithermal style
mineralisation. This includes 12 priority targets, which the
company hopes to drill later this year.
While I had hoped that this year end Review would have made for
more positive reading, that has not been the case. Unfortunately,
as noted opposite, both AAM and Siberian, were unable to complete
capital raisings necessary to move their respective projects
forward and transform them from development companies to production
companies. The experiences of AAM and Siberian are not unique in
the world of small cap mining companies, and it only serves to
highlight how difficult and unforgiving this sector can be.
David Hutchins
Investment Director
28 June 2019
Portfolio Review
Kalia Limited
Kalia Limited (KLH) is an ASX listed copper/gold exploration
company, active on the Pacific island of Bougainville. In
conjunction with its local partner, Toremana Resources Limited,
Kalia Ltd was recently granted Exploration Licences EL03 and EL04
by the Autonomous Bougainville Government in the Tore region in the
north of Bougainville Island.
Bougainville Island is one of the last undeveloped mineralised
provinces of the world. The island straddles the Pacific "Ring of
Fire" tectonic plate boundary, and is an ideal setting for porphyry
copper/gold and associated epithermal gold mineralisation. Rio
Tinto developed the Panguna Mine in the 1960s until it was shut
down in 1989. While in operation, the Panguna Mine was considered
among the richest mines in the world and during its 17 years of
operation it produced over 3 million tonnes of copper
and over 9 million ounces of gold.
There has been no exploration activity on Bougainville Island
since 1987 although last year, Kalia Ltd completed the first
extensive geophysical survey since then. This survey has already
identified 64 targets of porphyry copper/gold epithermal style
mineralisations, including 12 priority targets. Following further
desk top studies and additional technical interpretation, drill
targets will be established.
Further information on Kalia's exploration projects and program
is available on the company's website -
http://www.kaliagroup.com.
Anglo-African Minerals plc
Anglo-African Minerals plc (AAM) is a private advanced mineral
exploration company focused on the progression of its bauxite
mining projects located in the Republic of Guinea, which hosts
two-thirds of the world's bauxite. Bauxite is the composite
material that contains alumina, which is the feedstock for
aluminium. AAM, via its subsidiary Forward Africa Resources (FAR),
has entered into the first stage of a joint venture with a major
Chinese State Owned Enterprise, which will provide full project
funding, mining services and an "off take" agreement, subject to
AAM completing a number of conditions precedent. Initial production
at FAR is anticipated at 3 million tonnes per annum, rising to 5
million tonnes per annum.
AAM recently completed major drilling programmes, overseen by
independent consultants SRK Consulting, on their two other
exploration assets, Somalu and Toubal. Following the drill
programs, SRK have updated the Mineral Resource Estimates and have
confirmed a combined resource in the vicinity of 2 billion tonnes
of export grade bauxite. While the company has also begun early
stage high level infrastructure reviews for both projects, further
development has been severely restricted by the lack of available
funding to the company. While the company has been pursuing a
number of potential funding solutions, at this stage the company
remains unfunded and therefore its ability to continue to do the
work required to move the projects forward is severely limited.
Siberian Goldfields plc
Siberian Goldfields plc (SGL) is a private gold development
company, incorporated in the UK which is looking to develop and
bring into production its wholly-owned Zhelezny Kryazh Project
("ZK"), a gold/iron ore project located in the prospective mineral
region of Eastern Siberia.
The ZK Project currently has a mineable resource of almost
800,000 ozs of gold grading 2.42 g/t and 36 million tonnes of iron
ore grading 42% and it is anticipated that the project will
initially produce 50,000 ounces of gold and over 1 million tonnes
of iron ore per year, at a cash cost of around US$326/oz, allowing
for byproduct credits. While construction of the project has
already commenced, unfortunately, it is not progressing any
further, as the current investment climate for Russian based
projects is extremely difficult, meaning the company has been
unable to raise the required funding to complete the construction
phase and move into production.
Until the investment climate improves for Russian based
projects, the ZK Project will remain on a care and maintenance
basis.
IMC Exploration Group plc
IMC is an Irish exploration company, listed on the NEX Exchange,
although it is trying to seek a standard listing on the London
Stock Exchange. The company holds a number of mineral prospecting
licences in Ireland, but is specifically focused on three main
projects - the Avoca Tailings Project, the North Wexford Gold
Project and a zinc project adjacent to the Kilbricken zinc deposit
of Hannon Metals.
Subsequent to the year end, this holding was sold and realised
GBP47,000 compared to the 31 December 2018 valuation of
GBP130,000.
The portfolio retains holdings in Maxim Resources Inc, Portex
Minerals Inc, Sniper Resources Ltd and Waterberg Coal Company
Limited. However, these holdings remain valued at nil as the
prospects of recoverability or realising value in the short to
medium term is unlikely.
Classification of Investment Portfolio by Sector
31 December 2018 31 December 2017
Total Investments Total Investments
(%) (%)
Gold / Copper 61.2 63.5
-------------------- --------------------
Bauxite 30.4 27.8
-------------------- --------------------
Lead / Nickel / Zinc 8.4 5.1
-------------------- --------------------
Oil - 3.6
-------------------- --------------------
Copper - -
-------------------- --------------------
Uranium - -
-------------------- --------------------
Total Investments 100.0 100.0
-------------------- --------------------
Classification of Investments by Stockmarket Quotation
31 December 2018 31 December 2017
Total Investments Total Investments
(%) (%)
Canada - 7.3
------------------ ---------------------
Europe - 5.1
------------------ ---------------------
UK 8.4 4.0
------------------ ---------------------
Australia 51.4 -
------------------ ---------------------
Unquoted 40.2 83.6
------------------ ---------------------
Total Investments 100.0 100.0
------------------ ---------------------
Investment Portfolio - as at 31 December 2018
Valuation Total Investments
Company Sector GBP'000 %
Kalia Limited Gold/Copper 796 51.4
------------------ ---------- ------------------
Anglo African Minerals
9% CLN * Bauxite 471 30.4
------------------ ---------- ------------------
Siberian Goldfields
* Gold 151 9.8
------------------ ---------- ------------------
IMC Exploration Group Lead/Nickel/Zinc 130 8.4
------------------ ---------- ------------------
Anglo African Minerals Bauxite - -
*
------------------ ---------- ------------------
Sniper Resources Gold - -
Ltd
------------------ ---------- ------------------
Portex Minerals Inc Lead/Nickel/Zinc - -
------------------ ---------- ------------------
Waterberg Coal Company Coal - -
Limited
------------------ ---------- ------------------
Maxim Resources Inc Oil and Gas - -
------------------ ---------- ------------------
Total Investments 1,548 100
---------- ------------------
* Denotes an unquoted security
Strategic Review
Introduction
This review is part of the Strategic Report being presented by
the Company under updated guidelines for UK-listed companies'
Annual Reports in accordance with the Companies Act 2006, and is
designed to provide information primarily about the Company's
business and results for the twelve months to 31 December 2018. It
should be read in conjunction with the Chairman's Statement and the
Executive Director's Review, which provide a detailed review of the
investment activities for the period and outlook for the
future.
As outlined in those sections, the Board has determined to
prepare the accounts on a non-going concern basis and seek
shareholder approval for a Members Voluntary Liquidation .
Global Resources Investment Trust plc ('GRIT' or the 'Company')
is an investment trust established to seek to exploit investment
opportunities in the junior mining and natural resource sectors. On
7 March 2014, GRIT conducted a share exchange issue through which
it acquired an initial portfolio in return for the issue of
ordinary shares. The initial portfolio comprised 41 companies and
had an aggregate value of GBP39,520,012 based on the share exchange
valuation and, pursuant to the share exchange issue, 39,520,012
ordinary shares were issued (credited as fully paid up) and were
admitted to trading on the London Stock Exchange's main market.
At launch, GRIT raised GBP4,850,000 through the issue of 9%
Convertible Unsecured Loan Stocks ('CULS'). The Company repaid the
final tranche of the CULS on 28 February 2017.
Business Model
Global Resources Investment Trust is a self-managed investment
trust run by its Board, which takes all major decisions
collectively. While David ('Sam') Hutchins has executive duties,
all of the Directors regard themselves and one another as equal in
duties and responsibilities they owe to shareholders and
accordingly work together as a unitary Board.
Investment objective
GRIT's investment objective is to generate medium and long-term
capital growth through investing in a diverse portfolio of
primarily small and mid-capitalisation natural resources and mining
companies, which are listed/quoted on a relevant exchange.
Investment Policy
GRIT seeks to diversify its investments across a number of
companies, with a range of natural resource assets, in
jurisdictions globally. There are no restrictions as to the
commodity classes and geographical regions into which GRIT may
invest, however, GRIT will invest and manage its assets in a way
which is consistent with its objective of spreading risk. GRIT will
adhere to the following investment restrictions:
-- GRIT may only invest up to 60 per cent. of its Gross Asset
Value (at the time of investment) in non-quoted, seed capital or
pre-IPO companies provided that at any one time such new
investments above a 15 per cent. limit will not be in more than two
companies, with an emphasis in such instances on potentially large
scale assets that also have the ability to bring them to production
in the coming years;
-- GRIT will not invest more than 40 per cent. of its Gross
Asset Value in any one company (measured at the time of investment)
provided that at any one time such new investments above a 15 per
cent. limit will not be in more than two companies, with an
emphasis in such instances on potentially large scale assets that
also have the ability to bring them to production in the coming
years;
-- GRIT will not take legal or management control over investments in its Portfolio;
-- GRIT will not invest more than 10 per cent., in aggregate, of
its Gross Asset Value in other listed closed-ended investment
funds;
-- distributable income (if any) will be principally derived
from investments. GRIT will not conduct a trading activity which is
significant in the context of the activities of GRIT as a
whole;
-- GRIT will not enter into derivative transactions for
speculative purposes. GRIT does not expect to enter into any
hedging transactions, although it may do so for the purposes of
efficient portfolio management and to hedge against exposure to
changes in currency rates to the full extent of any such
exposure;
-- GRIT will not incur any debt beyond such amount that is
covered four times by the gross value of its investments at the
time of incurring such debt (ie a "4 to 1 cover ratio");
-- GRIT will manage the overall portfolio to ensure that there
is a spread of investments to provide diversification, with a
target of having between 4 and 8 different investments at any one
time.
-- GRIT will hold any uninvested funds in cash, cash equivalents
or other liquid instruments with a view to maximising the returns
on any such funds.
As a result of the non-going concern basis of preparation the
investment policy will not apply going forward.
Going Concern
As a result of the Company's operations being cash flow negative
since its inception, the Company has been required to dispose of
non-core investment portfolio assets to generate the cash needed to
finance its operational costs.
In 2018, GBP594,000 was realised from investment proceeds
compared with operating expenses and interest costs of
GBP579,000.
As at 28 June 2019, the Company currently has cash of GBP5,000
and net current liabilities of GBP290,000 (excluding investments).
The creditors are in respect of director fees, administration and
adviser costs. The Board estimates the operating expenses over the
next twelve months (the minimum going concern period) to be
GBP400,000.
Taking into account the existing net creditor position and the
operating costs to June 2020, the Company requires at least
GBP700,000 of cash to remain a going concern.
The Company now has investments in only three companies with
value attached to them. Two of these companies, Anglo African
Minerals plc ("AAM") and Siberian Goldfields plc ("Siberian"), are
unlisted and illiquid. The third company is Kalia Limited
("Kalia"), an ASX listed exploration company.
Siberian and AAM require further funding to achieve
commercialisation. Whilst Siberian continues to find attracting
finance difficult, there has been positive developments in respect
of AAM recently with a significant fundraising being discussed.
Should this fundraising complete, the Company would receive
repayment of the debt instruments in this entity amounting to
GBP1.3m. However, the discussion currently remains at negotiation
stage and the Directors are therefore of the view that the
likelihood of the funding completing in order to mitigate the
current liquidity issues within GRIT is remote.
In respect of Kalia, the Company owns 480,000,000 shares. The
listed price of Kalia ordinary shares is currently AUD 0.1c having
fallen from AUD 0.3c since 31 December 2018. The Company had
expected to be able to use the Kalia proceeds at 0.3c to cover
existing creditors and ongoing operating expenditure. However, at
the current share price, disposal receipts would equate to
GBP260,000 at the prevailing AUD to GBP exchange rate. As this is
significantly less than the GBP700,000 required as outlined above,
the disposal proceeds are not on their own enough to permit the
Company to trade as a going concern for the next twelve months.
The Company appointed Peterhouse Capital Limited ('PCL') as
Corporate Broker to liaise with shareholders and advise the Board
on the future direction of the Company, the aim of which being to
seek a solution to the liquidity issues outlined above. However,
PCL has not been able to provide the Board with a resolution that
could adequately address the liquidity issues.
Based on the prevailing net creditor position, liquidity issues
and absence of a realistic alternative, and the intention to wind
up the company, to ceasing trade , the Board intends to seek
shareholder approval to wind up the Company in an orderly manner
via a Members Voluntary Liquidation (MVL). In the period up until
the general meeting where the MVL will be voted on, the Board is
open to proposals (either alternative proposals from PCL or new
proposals from other sources) which would mitigate the current
liquidity issues within GRIT and create a medium term capital base
which permits continuation as an investment trust a viable option.
As noted above, however, no such proposals have been identified at
the date the accounts were approved.
A Circular will be sent to shareholders setting out further
details and timescales however at this stage the Board expect the
meeting to take place during August 2019.
As a result of the lack of a realistic alternative, the Board
has therefore prepared the financial statements on a non-going
concern basis. Other than investments now being classified as
current assets, these financial statements are indifferent to
results that would have been reported had the Company been a going
concern.
Viability Statement
Normally the Board would have considered a longer term viability
of 2 years. However, this is considered irrelevant given the
prevailing net creditor position, liquidity issues and an absence
of a realistic alternative to ceasing trade, as outlined in the
Going Concern statement. The Directors intend to seek shareholder
approval for an orderly winding up of the Company through a Members
Voluntary Liquidation process. Should shareholders vote to pass the
resolution on the MVL, the Company would cancel its listing status
at that point.
The directors have carried out a robust assessment of the
principal risks facing the entity, including those that would
threaten the business model, future performance, solvency or
liquidity, and as described above and in note 1 of the financial
statements, have concluded that the Company is not a going concern.
Based on their assessment of the prospects and viability, the
directors confirm that they do not have a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due.
Principal Risks and Uncertainties and Risk Mitigation
As a result of the current issues faced by the Company, the
principal risk and uncertainty relates to liquidity. The Board have
assessed this risk and elected to take the action outlined in the
Going Concern and Viability Statement sections.
Prior to this outcome, the Board established a risk framework of
key risks that the business, as an investment trust company, was
exposed to which included policies and processes to mitigate and
manage those risks. The principal risks which previously applied
and the reasons for the Board actions not mitigating the intention
to wind up and therefore preparation of the financial statements on
a non-going concern basis are also outlined. The main uncertainty
and risk that contributed to the intention to wind up being Sector
risk.
Investment and Strategy Risk - The Board is responsible for
deciding the investment strategy to fulfil the Company's objectives
and monitoring the performance of the Executive Director.
Inappropriate strategy, including country and sector allocation,
stock selection and the use of gearing, could lead to poor returns
for shareholders. To manage this risk the Board requires the
Executive Director to provide an explanation of significant stock
selection decisions and the rationale for the composition of the
investment portfolio at each Board meeting, when gearing levels are
also reviewed. The Board monitors the spread of investments to
ensure that it is adequate to minimise the risk associated with
particular countries or factors specific to particular sectors. As
a result of the concentrated portfolio which the Company had been
managing over recent years, the ability to manage the risks
associated with investing in certain sectors and principally the
exposure to unquoted investments, resulted in this contributing to
the Board's decision to seek shareholder approval for a Members
Voluntary Liquidation.
Market Risk- In addition to ordinary movements in the prices of
the Company's investments and the loss that the Company might
suffer through holding investments in the face of negative market
movements, the Company's investment strategy necessarily amplifies
this risk (see Sector Risk below). The Board seeks to mitigate this
risk through the processes described in the paragraph above,
monitoring the implementation and results of the investment process
with the Executive Director.
The Board is cognisant of the uncertainty over the process of
the UK leaving the European Union, however does not assess this is
a risk that will have an impact on GRIT given the specific nature
of the investment portfolio.
Sector Risk - The largest part of the Company's assets consist
of equity-related investments in natural resource and mining
companies, often unquoted, with a range of commodity exposures. The
prices of the underlying commodities are often volatile and the
companies can be located in countries at risk of political
instability and vulnerable to natural disasters. The liquidity in
the shares of the companies is often restricted, meaning that it
can be difficult to buy or sell volumes of shares at the quoted
price. The Board seeks to mitigate this risk through the processes
described in the paragraph above on Investment and Strategy Risk.
In addition, the closed-ended structure of the Company is an
essential part of the Board's management of this risk, ensuring
that parts of the portfolio do not have to be sold to raise
liquidity to fund redemptions at short notice. However, as the
portfolio became more concentrated and the weighting of listed
securities compared to unlisted securities changed, the Board were
unable to obtain the liquidity required to avoid the preparing the
financial statements on a non-going concern basis.
Financial Risk - The Company's investment activities expose it
to a variety of financial risks that include market price risk,
foreign currency risk, interest rate risk and liquidity and credit
risk. Further details of these risks and the ways in which they are
managed are disclosed in note 15 to the financial statements.
Operational Risk - The Company relies upon the services provided
by third parties and is reliant on the control systems of the
Company's service providers. The security and/or maintenance of,
inter alia, the Company's assets, dealing and settlement
procedures, and accounting records depend on the effective
operation of these systems. These are regularly tested and
monitored. An internal control report, which includes an assessment
of risks, together with the procedures to mitigate such risks, is
prepared by the Executive Director and the Company Secretary and
reviewed by the Audit Committee at least once a year. The
Custodian, BNP Paribas Securities Services, produces an internal
control report each year which is reviewed by its auditors and
gives assurance regarding the effective operation of controls. This
is reviewed by the Audit Committee.
Regulatory Risk - A breach of regulatory rules could lead to the
suspension of the Company's stock exchange listing or financial
penalties. Breach of Sections 1158 to 1159 of the Corporation Tax
Act 2010 could lead to the Company being subject to tax on
chargeable gains. The Company Secretary monitors the Company's
compliance with the Listing Rules of the UK Listing Authority and
the relevant regulations regarding maintenance of Investment Trust
status. Compliance with the principal rules is reviewed by the
Audit Committee after seeking input from the Company's tax
adviser.
Performance Measurement and Key Performance Indicators
The Board uses a number of performance measures to assess the
Company's success in meeting its objectives. The key performance
indicators are as follows and are considered Alternative
Performance Measures.
-- Total Return
The Board reviews the Company's Net Asset Value ("NAV") total
return and share price total return (see graph on inside front
cover). The fact that the Company has not paid a dividend means
that the total return numbers are the same as the capital return
numbers. It compares these to the returns from the FTSE AIM Basic
Resources Index, although the latter is not a benchmark;
-- Discount/premium to NAV
At each Board meeting, the Board monitors the level of the
Company's discount/premium to NAV. The Company publishes a NAV per
share figure through the official newswire of the London Stock
Exchange (see inside front cover).
-- Ongoing charges
The ongoing charges are a measure of the total expenses incurred
by the Company expressed as a percentage of the average
shareholders' funds over the period. The Board regularly reviews
the ongoing charges and monitors Company expenses.
Social, Community, Employee Responsibilities and Environmental
Policy
The Company has only one employee. As an Investment Trust with
its current structure, the Company has no direct social, community,
or environmental responsibilities.
The Directors recognise that their first duty is to act in the
best financial interests of the Company's shareholders and to
achieve good financial returns against acceptable levels of risk,
in accordance with the objectives of the Company.
In asking the Company's Executive Director to deliver against
these objectives, they have also requested that the Executive
Director take into account the broader social, ethical and
environmental issues of companies within the Company's portfolio,
acknowledging that companies failing to manage these issues
adequately run a long term risk to the sustainability of their
businesses. More specifically, they expect companies to demonstrate
ethical conduct, effective management of their stakeholder
relationships, responsible management and mitigation of social and
environmental impacts, as well as due regard for wider societal
issues.
The Company does not provide goods or services in the normal
course of business and does not have customers. Accordingly, the
Directors consider that the Company does not fall within the scope
of the Modern Slavery Act 2015 and it is not therefore, obliged to
make a slavery and human trafficking statement. In any event, the
Company considers its supply chains to be of low risk as its
suppliers are typically professional advisers.
In line with the requirements of the Criminal Finances Act 2017,
the Directors confirm that the Company has a commitment to zero
tolerance towards the criminal facilitation of tax evasion. In
order to ensure compliance with the UK Bribery Act 2010, the
Directors confirm that the Company has zero tolerance towards
bribery and a commitment to carry out business openly, honestly,
and fairly.
The Company has no greenhouse gas emissions to report from its
operations for the twelve months ended 31 December 2018, nor does
it have responsibility for any other emissions producing sources
under the Companies Act 2006 (Strategic Report and Directors'
Reports) Regulations 2013 (including those within the underlying
investment portfolio).
Gender Representation
At 31 December 2018 the Board comprised four male Directors
(including one executive Director) and one female Director. The
Board believes in the benefits of having a diverse range of skills
and backgrounds, and the need to have a balance of experience,
independence, diversity, including gender, and knowledge on its
Board of Directors. The Board believes that the current Directors
have the appropriate range of skills and experience required by the
Company. All appointments will continue to be based on merit and
therefore the Board is unwilling to commit to numerical diversity
targets. Diversity will continue to be considered as an important
factor in any future appointments.
By order of the Board
Maitland Administration Services (Scotland) Limited
Secretaries
28 June 2019
Board of Directors
All of the Directors, except Mr Hutchins, are non-executive and
all except Mr Reynolds are considered by the majority of the
Directors to be independent. The independent non-executive
Directors fulfil the function of the Nomination Committee and the
independent non-executive Directors fulfil the function of the
Audit Committee. The Board maintains overall control over the
formulation of Company's investment policy and has overall
responsibility for the Company's activities. The Board has
delegated responsibility for day-to-day investment management to
David Hutchins, the Company's executive director.
Simon James Farrell
Independent Non-Executive Chairman
Date of appointment: 31 January 2014
Experience:
Mr Farrell is non-executive co-chairman of Pathfinder Minerals
PLC. He has a Bachelor of Commerce degree from the University of
Western Australia and an MBA from the Wharton School of the
University of Pennsylvania. He has held a number of senior
management and board positions, principally in the natural resource
sector over the past 30 years to include Bougainville Copper,
Kalgoorlie Super Pit, Hamersley Iron, Woodie Woodie Manganese and
Valiant Consolidated. He was chairman of AIM and ASX listed Vmoto
Limited and a non-executive director of Kenmare Resources plc,
listed on the main market of the London Stock Exchange until 2013,
and was also the founding director and chief executive officer of
Coal of Africa Ltd.
Remuneration: GBP30,000 per annum
Shared Directorships with any other Trust Directors: None
Shareholding in Company: None
Haruko Fukuda
Independent Non-Executive Director and Chair of the Audit
Committee
Date of appointment: 17 September 2013
Experience:
Miss Fukuda is a non-executive director of Investec Bank PLC and
Aberdeen Standard Asia Focus Investment Trust PLC. She is an
adviser to Braj Binani Group of India. She was the CEO and board
director of the World Gold Council, having previously been vice
chairman and board member of Nikko Europe PLC, a partner of James
Capel & Co, and senior adviser at Lazard. She has held many
non-executive directorships of major public companies including AB
Volvo of Sweden and the Foreign & Colonial Investment Trust
PLC. She has published books on international trade policy, and has
been a member of the Council of the Institute for Fiscal
Studies.
Remuneration: GBP25,000 per annum
Shared Directorships with any other Trust Directors: None
Shareholding in Company: None
David ('Sam') Hutchins
Independent Executive Director
Date of appointment: 16 January 2017
Experience:
Mr Hutchins has 30 years' experience as a resources analyst and
fund manager. His career began with the Melbourne Stock Exchange in
1979 and he subsequently became an executive director of M&G
Investment Management in London. He headed the International Desk
at M&G Investment Management from 1995, where he was
concurrently responsible for M&G's investments in the precious
metals and commodities sector globally. He later became involved in
fund management with Yorkton and AWI Administration Services. He
was a founding director of Resources Investment Trust plc ('RIT')
at its launch in January 2002, and chief executive of Ocean
Resource Capital Holdings plc which was admitted to the AIM Market
of the London Stock Exchange from 2003 to 2007. Sam was also a
founding partner of www.minesite.com, a resource industry specific
news related website and conference business, and is a member of
the FTSE gold mines index committee. Sam is also of one of two
partners of RDP. RDP was the Company's Investment Manager from
launch until 16 January 2017.
Remuneration: GBP30,000 per annum
Shared Directorships with any other Trust Directors: None
Shareholding in Company: 1,994,500 shares
Jonathan Reynolds
Non-Independent Non-Executive Director Date of appointment: 22
August 2018
Experience:
Mr. Reynolds is a chartered accountant with more than 25 years'
experience across many sectors. He has held the position of finance
director, chief financial officer and company secretary with
numerous UK and Australian listed companies.
Remuneration: GBPnil per annum
Shared Directorships with any other Trust Directors: None
Shareholding in Company: None
Directors' Report
The Directors present their Annual Report and the audited
financial statements for the year ended 31 December 2018.
Principal Activity and Status
The Company is registered as a public limited company in terms
of the Companies Act 2006 (number: 8256031). It is an investment
company as defined by Section 833 of the Companies Act 2006. It
carries on the business of an investment trust and has been
approved as such by HM Revenue & Customs.
The Company's shares are eligible for inclusion in a New
Individual Savings Account ('NISA').
Capital Structure
As at 31 December 2018 there were 41,964,512 ordinary shares of
1 pence each in issue. The ordinary shares give shareholders the
entitlement to all of the capital growth in the Company's net
assets and to all the Company's income that is resolved to be
distributed.
Tygola Pty Ltd
On 10 August 2018 the Board was notified that Tygola Pty Ltd had
appointed receivers over certain assets of the Company in
connection with expenses of US$251,000 that Tygola claimed were due
to it from the Company in connection with the guarantee by the
Company of a US$500,000 loan by Tygola to AAM.
On 27 September 2018 the receivers were discharged, the parties
having reached agreement. The costs expended in responding to and
resolving this matter were GBP0.3m.
Substantial Interests in Share Capital
At 28 June 2019, the only persons known to the Company who,
directly or indirectly, were interested in 3 per cent or more of
the Company's issued share capital were as follows:
Ordinary shares Number held % held
Mardasa Nominees
Pty Ltd 12,461,896 29.7
----------- ------
Philip J Milton 9,661,602 23.0
----------- ------
Armstrong Investments
Ltd 3,000,000 7.1
----------- ------
D Hutchins 1,994,500 4.8
----------- ------
Some of the shareholdings listed above refer to funds managed on
behalf of clients of the groups named.
Annual General Meeting
The Notice of the Annual General Meeting was posted to
shareholders on 7 June 2019. The Annual General Meeting will have
been held on 1 July 2019 by the time these Financial Statements are
in the hands of Shareholders. A subsequent general meeting where
the financial statements will be laid will be set in due
course.
Directors' Remuneration Policy and Report
Among the resolutions put to the Annual General Meeting as
ordinary business, is one approving the Directors' Remuneration
Policy. This vote is binding. It is also mandatory for listed
companies to put their Directors' Remuneration Report to an
advisory shareholder vote.
Induction and Training
New Directors appointed to the Board are required to have an
understanding of the Company predating their appointment, which is
deepened and expanded through individual discussion and contact
with the Executive Director and Company Secretary and, in
particular, participation at Board meetings. Relevant training is
available to Directors as necessary.
Statement Regarding Annual Report and Accounts
Following a detailed review of the Annual Report and Accounts by
the Audit Committee, the Directors consider that taken as a whole
it is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
performance, business model and strategy. In reaching this
conclusion, the Directors have assumed that the reader of the
Annual Report and Accounts would have a reasonable level of
knowledge of the investment industry in general and investment
trusts in particular.
Disclosure of Information to the Auditor
The Directors confirm that, so far as each of the Directors is
aware, there is no relevant information of which the Company's
auditors are unaware and the Directors have taken all the steps
that they ought to have taken as Directors to make themselves aware
of any relevant audit information and to establish that the
Company's auditors are aware of that information.
Independent Auditor
KPMG LLP were appointed as the Company's auditors shortly after
its launch and have indicated their willingness to continue in
office. The Directors will place a Resolution before the Annual
General Meeting for the reappointment of KPMG LLP as independent
auditor of the Company for the ensuing year, and to authorise the
Directors to determine their remuneration.
Continuation Vote
In accordance with the Articles of Association an ordinary
resolution, Resolution 6, will be proposed at the Annual General
Meeting for the Company to continue as an investment trust.
As the Board intend to seek shareholder approval for a Members
Voluntary Liquidation, the Board will seek a discontinuance result
in this resolution.
Directors' Authority to Allot Shares
The Directors are seeking authority to allot shares. Resolution
7 will, if passed, authorise the Directors to allot (and grant
subscription and conversion rights over) new shares up to an
aggregate nominal amount of GBP41,923, being 9.99 per cent of the
total issued shares as at 27 June 2019.
Resolution 9, which is a special resolution, will, if passed,
renew the Directors' existing power to make limited allotments of
shares for cash other than according to the statutory pre-emption
rights which require all shares issued for cash to be offered first
to all existing shareholders. This power applies to the allotment
of (and grant of subscription and conversion rights over) shares up
to a maximum nominal amount of GBP20,940 (being 4.99 per cent of
the total of issued shares as at 27 June 2019), and otherwise in
connection with an offer to holders of ordinary shares in
proportion to their existing shareholdings, but subject to
exclusions and other arrangements the Directors may consider
necessary.
Resolution 8 also allows the sale of treasury shares for cash,
on the same basis, without offering such shares first to all
existing shareholders. These authorities will continue in effect
until the earlier of 15 months from the date the resolutions are
passed and the conclusion of the Annual General Meeting in 2020.
The Directors do not have any immediate plans to issue further
ordinary shares in the Company.
Directors' Authority to Buy Back Shares
The Company did not purchase any shares for cancellation or to
hold in treasury during the year.
Resolution 10, as set out in the notice of the Annual General
Meeting, seeks renewal of the Company's buy-back authority. The
renewed authority to make market purchases will be in respect of a
maximum of 14.99 per cent of the issued ordinary shares of the
Company on the date of the passing of the resolution. The price
paid for the shares will not be less than the nominal value of 1p
per share nor more than the higher of (i) 5 per cent above the
average middle market value of those shares for the five business
days before the shares are purchased and (ii) the higher of the
last independent trade and of the highest current independent bid
for any number of the Company's ordinary shares on the trading
venue where the purchase is carried out. This power will only be
exercised if, in the opinion of the Directors, a purchase would
result in an increase in net asset value per share and be in the
interests of the shareholders as a whole. Any shares purchased
under this authority will be cancelled or held in treasury. The
Directors have no current intention of utilising this authority.
This authority will expire at the earlier of 15 months from the
date the resolutions were passed and the conclusion of the Annual
General Meeting of the Company
Recommendation
The Directors consider the passing of the resolutions to be
proposed at the Annual General Meeting to be in the best interests
of the Company and its shareholders as a whole and likely to
promote the success of the Company for the benefit of its
shareholders as a whole. Accordingly, the Directors unanimously
recommend that shareholders should vote in favour of the
resolutions.
By Order of the Board
Maitland Administration Services (Scotland) Limited
Secretaries
28 June 2019
Statement of Directors' Responsibilities
The directors are responsible for preparing the Annual Report
and the Company financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare Company financial
statements for each financial year. Under that law they are
required to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU) and applicable law and
have elected to prepare the financial statements on the same
basis.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of its profit or
loss for that period. In preparing the Company financial
statements, the directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with IFRSs as adopted by the EU;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations or have no
realistic alternative but to do so (as explained in note 1, the
directors do not believe it is appropriate to prepare these
financial statements on a going concern basis).
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its financial statements comply with the Companies Act 2006. They
are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement
that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company; and
-- the strategic report includes a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy.
On behalf of the Board
Haruko Fukuda Director
28 June 2019
Annual Report on Directors' Remuneration
Directors' Emoluments (audited)
The Directors who served in the twelve months to 31 December
2018 received the following fees:
Year to Year to
31 December 31 December
2018 2017
GBP'000 GBP'000
S Farrell* 27 32
------------ ------------
H Fukuda** 23 20
------------ ------------
D Hutchins*** 27 19
------------ ------------
D Johnston^ - -
------------ ------------
J Reynolds^ - -
------------ ------------
A St John
!= 8 25
------------ ------------
Totals 85 96
------------ ------------
Directors' remuneration for the current year will be as
follows:
2019
GBP'000
S Farrell* 30
--------
H Fukuda** 25
--------
D Hutchins*** 30
--------
J Reynolds nil
--------
Totals 85
--------
* Chairman.
** Chairman of the Audit Committee.
*** David Hutchins was appointed Executive Director on 16
January 2017
Fees paid to Newcove International Inc.appointed 22 August
2018.
^ Resigned on 27 April 2018.
Resigned on 14 June 2019.
Relative Importance of Spend on Pay
The remuneration paid to Directors is shown above. There were no
distributions made to shareholders.
Directors' Interests
No Directors who held office during the year held ordinary
shares or CULS in the Company as at 31 December 2018 or 31 December
2017, with the exception of Mr Hutchins who held 1,994,500 shares
at 31 December 2018.
There has been no change in the ordinary share holdings of the
Directors for the year end 31 December 2018 and up to the signing
date.
Voting at Annual General Meeting
An ordinary resolution for the approval of this Directors'
Remuneration Report will be put to an advisory shareholder vote at
the forthcoming Annual General Meeting.
An ordinary resolution for the approval of the Directors'
Remuneration Policy will be put to a binding shareholder vote at
the forthcoming Annual General Meeting.
Approval
The Directors' Remuneration Report was approved by the Board of
Directors and signed on its behalf on 28 June 2019.
Haruko Fukuda
Director
Income Statement
Year ended 31 December Year ended 31 December
2018 2017
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----- ------- -------- -------- -------- ------- -------
Losses on investments 8 - (5,426) (5,426) - (158) (158)
Exchange losses - (4) (4) - (17) (17)
Foreign exchange forward
contract loss - - - - (83) (83)
Income 2 - - - 76 - 76
Investment management fee 3,17 - - - (37) (629) (666)
Other expenses 4 (549) (810) (1,359) (453) - (453)
---------------------------------- ----- ------- -------- -------- -------- ------- -------
Net return before finance
costs and taxation (549) (6,240) (6,789) (414) (887) (1,301)
Interest payable and similar
charges 5 (30) - (30) (24) - (24)
---------------------------------- ----- ------- -------- -------- -------- ------- -------
Net return on ordinary activities
before taxation (579) (6,240) (6,819) (438) (887) (1,325)
Taxation on ordinary activities 6 - - - - - -
---------------------------------- ----- ------- -------- -------- -------- ------- -------
Net return attributable
to equity shareholders (579) (6,240) (6,819) (438) (887) (1,325)
---------------------------------- ----- ------- -------- -------- -------- ------- -------
Loss per ordinary share 7 (1.38)p (14.87)p (16.25)p (1.04)p (2.12)p (3.16)p
---------------------------------- ----- ------- -------- -------- -------- ------- -------
The 'total' column of this statement represents the Company's
profit and loss account, prepared in accordance with IFRS.
All revenue and capital items in this statement derive from
continuing operations. All of the gains and losses for the year are
attributable to the owners of the Company.
No operations were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses is not required
as all gains and losses of the Company have been reflected in the
above Income Statement.
The accompanying notes are an integral part of the financial
statements.
Statement of Changes in Equity
For the year ended 31 December Share premium Capital Revenue
2018 Share capital account reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ----------------------------- ----------------- -------- -------- --------
Balance at 31 December 2017 420 36,880 (25,669) (3,381) 8,250
Return on ordinary activities
after taxation - - (6,240) (579) (6,819)
Value of shares issued in lieu - - - - -
of management fee
Value of unissued share tranches - - - - -
Issue of shares - - - - -
--------------------------------- ----------------------------- ----------------- -------- -------- --------
Balance at 31 December 2018 420 36,880 (31,909) (3,960) 1,431
--------------------------------- ----------------------------- ----------------- -------- -------- --------
For the year ended 31 December
2017 Share
Share premium Capital Revenue
capital account reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ----------------------------- ----------------- -------- -------- --------
Balance at 31 December 2016 400 36,800 (25,311) (2,943) 8,946
Return on ordinary activities
after taxation - - (887) (438) (1,325)
Value of shares issued in lieu
of management fee - - 229 - 229
Value of unissued share tranches - - 400 - 400
Issue of shares 20 80 (100) - -
--------------------------------- ----------------------------- ----------------- -------- -------- --------
Balance at 31 December 2017 420 36,880 (25,669) (3,381) 8,250
--------------------------------- ----------------------------- ----------------- -------- -------- --------
The revenue reserve represents the amount of the Company's
reserves distributable by way of dividend. The accompanying notes
are an integral part of the financial statements.
Balance Sheet
As at 31 December 2018 As at 31 December
GBP'000 2017
Notes GBP'000
--------------------------------- ----- ---------------------- -----------------
Fixed assets
Investments 8 - 7,568
--------------------------------- ----- ---------------------- -----------------
Current assets
Investments 8 1,548 -
Debtors 9 23 440
Cash at bank and on deposit 32 325
--------------------------------- ----- ---------------------- -----------------
1,603 765
Creditors: amounts falling
due within one year
Other creditors 10 (172) (83)
9% Convertible Unsecured
Loan Stock 2017 11 - -
--------------------------------- ----- ---------------------- -----------------
Net current assets/(liabilities) 1,431 (83)
--------------------------------- ----- ---------------------- -----------------
Net assets 1,431 8,250
--------------------------------- ----- ---------------------- -----------------
Capital and reserves
Called up share capital 12 420 420
Share premium 36,880 36,880
Capital reserve (31,909) (25,669)
Revenue reserve (3,960) (3,381)
--------------------------------- ----- ---------------------- -----------------
Equity shareholders'
funds 1,431 8,250
--------------------------------- ----- ---------------------- -----------------
Net asset value per share 13 3.41p 19.66p
--------------------------------- ----- ---------------------- -----------------
The financial statements were approved by the Board of Directors
and authorised for issue on 28 June 2019 and were signed on its
behalf by:
S. Farrell Chairman
The accompanying notes are an integral part of the financial
statements.
Cash Flow Statement
Year ended Year ended
31 December 2018 31 December
GBP'000 2017
Notes GBP'000
-------------------------------------- ----- ----------------- ------------
Operating activities
Loss before taxation (6,819) (1,301)
Loss on investments 8 5,426 158
Decrease in foreign exchange
creditor - (2,412)
(Decrease)/increase in other
receivables (13) 613
Increase in other payables 89 11
Realised exchange loss on currency
balances 4 100
Value of share tranches in lieu
of management fee - 629
Capital expenses 810 -
-------------------------------------- ----- ----------------- ------------
Net cash outflow from operating
activities before taxation (503) (2,202)
Taxation paid - -
-------------------------------------- ----- ----------------- ------------
Net cash outflow from operating
activities (503) (2,226)
-------------------------------------- ----- ----------------- ------------
Investing activities
Purchases of investments - (2,125)
Sales of investments 594 4,724
Tygola guarantee (380) -
Advanced loan to Anglo African
Minerals - (390)
-------------------------------------- ----- ----------------- ------------
Net cash inflow from investing
activities 214 2,209
-------------------------------------- ----- ----------------- ------------
Financing
Redemption of CULS - (2,700)
-------------------------------------- ----- ----------------- ------------
Net cash outflow from financing - (2,700)
-------------------------------------- ----- ----------------- ------------
Decrease in cash and cash equivaLents
14 14 (289) (2,717)
Exchange movements including
forward contracts (4) (100)
Net cash at the start of the
year 325 3,142
-------------------------------------- ----- ----------------- ------------
Net cash at the end of the year 32 325
-------------------------------------- ----- ----------------- ------------
Notes to the Financial Statements
For the year to 31 December 2018
Accounting Policies
(a) Basis of accounting
The financial statements of the Company have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the International Accounting Standards Board (IASB)
and to the extent that they have been adopted by the European
Union.
The financial statements have also been prepared in accordance
with the Statement of Recommended Practice ("SORP") 'Financial
Statements of Investment Trust Companies and Venture Capital
Trusts' issued in November 2014 and updated in February 2018 with
consequential amendments, to the extent that it is consistent with
IFRS.
The functional and reporting currency of the Company is pounds
sterling because that is the primary economic environment in which
the Company operates. The notes and financial statements are
presented in pounds sterling and are rounded to the nearest
thousand except where otherwise indicated.
In order to better reflect the activities of an investment trust
company and in accordance with guidance issued by the AIC,
supplementary information which analyses the Income Statement
between items of a revenue and capital nature has been presented
alongside the Income Statement. Additionally, the net revenue of
the Company is the measure the Directors believe appropriate in
assessing its compliance with certain requirements set out in
Sections 1158 - 1159 of the Corporation Tax Act 2010.
During the year a Litigation Committee, consisting of the
Company's independent Directors, was formed to deal with all
matters in connection with the appointment by Tygola Pty Ltd of
receivers over certain assets of the Company.
At the date of authorisation of these financial statements, the
following Standards and Interpretations were effective for annual
periods beginning on or after 1 January 2019:
-IFRS 16 - Leases (early adoption permitted)
The Directors anticipate that the adoption of these Standards
and Interpretations in future periods will have no material
financial impact on the financial statements of the Company. The
Company concludes however that certain additional disclosures may
be necessary on their application.
Going Concern
As a result of the Company's operations being cash flow negative
since its inception, the Company has required to redeem non-core
investment portfolio assets to generate the cash needed to finance
operational costs.
In 2018, GBP594,000 was realised from investment proceeds
compared with operating expenses and interest costs of
GBP579,000.
As at 28 June 2019, the Company currently has cash of GBP5,000
and net creditors of GBP290,000 (excluding investments). The
creditors are in respect of director fees, administration and
adviser costs. The Board estimate the operating expenses over the
next twelve months (the minimum going concern period) to be
GBP400,000.
Taking into account the existing net creditor position and the
operating costs to June 2020, the Company requires at least
GBP700,000 of cash to remain a going concern.
The Company appointed Peterhouse Captal Limited ('PCL') as
Corporate Broker to liaise with shareholders and advise the Board
on the future direction of the Company, the aim of which being to
seek a solution to the liquidity issues outlined above.
Based on the prevailing net creditor position and the absence of
a meaningful solution available to the Board at the current time to
mitigate these liquidity issues, the Board intends to seek
shareholder approval to wind up the Company in an orderly manner
via a Members Voluntary Liquidation (MVL).
A Circular will be sent to shareholders setting out further
details and timescales however at this stage the Board expects the
meeting to take place during August 2019. Should this vote be
passed, the Directors assess the holdings in Kalia in Siberian and
AAM would be disposed of over the course of 6-12 months to permit
scopt for these entities to secure financing based on current
discussions.
As a result of the lack of a realistic alternative, and the
intention to wind up the Company, the Board has therefore prepared
the financial statements on a non-going concern basis. Other than
investments now being classified as current assets, these financial
statements are indifferent to results that would have been reported
had the Company been a going concern.
Critical accounting estimates and judgements
The preparation of the financial statements necessarily requires
the exercise of judgement both in application of accounting
policies which are set out below and in the selection of
assumptions used in the calculation of estimates. These estimates
and judgements are reviewed on an ongoing basis and are continually
evaluated based on historical experience and other factors.
However, actual results may differ from these estimates. The most
significant judgements are the valuation of unlisted investments
which is described in note 1(b) with further analysis provided in
note 8.
A summary of the principal accounting policies which have been
applied to all periods presented in these financial statements is
set out below.
(b) Investments
Purchases or sales of investments are recognised/derecognised on
the date the Company commits to purchase/sell the investments.
Investments are classified at fair value through profit and loss on
initial recognition with any resultant gain or loss recognised in
the Income Statement. Listed securities are valued at bid price or
last traded price, depending on the convention of the exchange on
which the investment is listed, adjusted for accrued income where
it is reflected in the market price. Unlisted investments are
valued at fair value by the Directors on the basis of all
information available to them at the time of valuation and in
accordance with the methodologies consistent with the International
Private Equity and Venture Capital Valuation guideline ('IPEV').
This includes a review of: the financial and trading information of
trustee the company, covenant compliance and ability to repay the
interest and cash balances. Where no reliable fair value can be
estimated, investments may be carried at cost less any provision
for impairment.
Realised gains or losses on the disposal of investments and
permanent impairments in the value of investments are taken to the
capital reserve. Gains and losses arising from changes in the fair
value of investments are included in the Income Statement as a
capital item as per note (i).
As a result of the Directors' intention to wind up the Company,
investments as at 31 December 2018 have been reflected as current
assets and recognised at realisable value.
(c) Income
Dividends receivable on equity shares are recognised as income
on the date that the related investments are marked ex-dividend.
Dividends receivable on equity shares where no ex-dividend date is
quoted are recognised as income when the Company's right to receive
payment is established. Fixed returns on non-equity shares are
recognised on a time apportioned basis so as, if material, to
reflect the effective interest rate on those instruments. Other
returns on non-equity shares are recognised when the right to the
return is established. The fixed return on a debt security is
recognised on a time apportioned basis so as to reflect the
effective interest rate on each such security.
Interest has not been recognised on debt instruments held in AAM
in 2018. Income from deposit interest is recognised on an accruals
basis.
(d) Taxation
The charge for taxation is based on net revenue for the period.
The tax effect of different items of income/gain and
expenditure/loss is allocated between capital and revenue on the
same basis as the particular item to which it relates.
Deferred tax is provided, using the liability method, on all
temporary differences at the balance sheet date between the tax
basis of assets and liabilities and their carrying amounts for
financial reporting purposes. Deferred tax liabilities are measured
at the tax rates that are expected to apply to the period when the
liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at the balance sheet date.
Deferred tax assets are only recognised if it is considered more
likely than not that there will be suitable profits from which the
future reversal of underlying timing differences can be
deducted.
Because the Company intends each year to qualify as an
investment trust under Chapter 4 of Part 24 of the Corporation Tax
Act 2010 (previously S842 of the Income and Corporation Taxes Act
1988), no provision is made for deferred taxation in respect of the
capital gains that have been realised, or are expected in the
future to be realised, on the sale of fixed asset investments.
Based on the smaller portfolio of the Company, after taking
advice, it remains the position of the Board that the Company
continues to qualify under these rules.
(e) Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged through the Income Statement as a revenue item except
as
follows:
- expenses which are incidental to the acquisition of an
investment are included within the cost of the investment;
- expenses which are incidental to the disposal of an investment
are deducted from the disposal proceeds of the investment;
- expenses where a connection with the maintenance or
enhancement of the value of the investments can be
demonstrated.
(f) Foreign currency
Transactions denominated in foreign currencies are recorded in
the local currency at actual exchange rates at the date of the
transaction. Overseas assets and liabilities denominated in foreign
currencies at the year end are reported at the rates of exchange
prevailing at the year end. Any gain or loss arising from a change
in exchange rates subsequent to the date of a transaction is
included as an exchange gain or loss in capital reserves. The
financial currency of the Company, being its statutory reporting
currency, is sterling.
(g) Finance costs
Finance costs are accounted for on an accruals basis. Finance
costs of debt, insofar as they relate to the financing of the
Company's investments or to financing activities aimed at
maintaining or enhancing the value of the Company's investments,
are allocated between revenue and capital in accordance with the
Board's expected long-term split of returns, in the form of income
and capital gains respectively, from the Company's investment
portfolio. For further details refer to note 5.
(h) Share based payments
The amount recognised is based on the fair value of the shares
as measured at the date of the award. The shares are valued using a
Black Scholes type model. The value of issued and unissued share
tranches are charged to the capital reserve.
(i) Reserves
(a) Share premium - the surplus of net proceeds received from
the issuance of new shares over their par value is credited to this
account and the related issue costs are deducted from this account.
This reserve is non-distributable.
(b) Capital reserve - the following are accounted for in this
reserve:
- gains and losses on the realisation of investments;
- realised and unrealised exchange differences on transactions
of a capital nature;
- capitalised expenses and finance costs, together with the
related taxation effect; and
- increases and decreases in the valuation of investments
held.
This reserve is non-distributable
(c) Revenue reserve - the net profit/(loss) arising in the
revenue column of the Income Statement is added to or deducted from
this reserve. This reserve is available for paying dividends.
(j) Segmental information
The Directors are of the opinion that the Company is engaged in
a single segment of business, being investment. (k) Investments in
Associates
As an Investment Trust, the Company considers they are an
Investment Entity under IFRS and therefore investments, which would
ordinarily be considered associates and require to be equity
accounted, are accounted on a fair value through profit and loss
basis.
2. Income
Year ended Year ended
31 December 2018 31 December
GBP'000 2017
GBP'000 GBP'000
----------------- -----------------------
Income from investments* Overseas interest - 76
----------------- -----------------------
Total income - 76
----------------- -----------------------
Total income comprises: Fixed interest securities - 76
----------------- -----------------------
- 76
----------------- -----------------------
*All investment income arises on investments valued at fair
value through profit or loss on initial recognition.
Income for the twelve months ended 31 December 2017 relates to
accrued income from Anglo African Minerals 9% Convertible Loan
Stock and Siberian Goldfields 15% Convertible Loan Stock.
3 Investment Management Fee
2018 2018 2018 2017 2017 2017
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment Management
Fee - - - 37 629 666
---------- ---------- ---------- --------- --------- ---------
Since 17 January 2017, RDP is no longer the Company's Investment
Manager.
From 1 January 2017 to 16 January 2017, the Company's Investment
Manager was RDP. RDP received a monthly fee at the rate of 1.5% per
annum on the preceding monthly average net assets up to GBP100
million and 0.75% per annum on the amount by which the preceding
monthly average net assets exceeds GBP100 million. On 16 January
2017, at a General Meeting, the shareholders approved a change in
the arrangement with RDP for managing the Company and, as a result,
the Company and its Portfolio became self-managed. RDP received
GBP37,000 in relation to the twelve months ended 31 December 2017
and this has been charged to revenue. On 16 January 2017, at the
Company's General Meeting, 1,994,500 shares were issued to RDP at a
value of 11.5p, the value of this share issuance was allocated to
capital. GRIT has recognised the remaining tranches of share based
payment at fair value and the expense has been charged to Capital -
as approved by the Board.
There is no performance fee.
Investment management fees have been allocated to revenue and
capital.
4 Other Expenses (including irrecoverable VAT)
2018 Revenue 2018 2018 2017 2017 2017
Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------------------- -------- ---------- ------------------------- -------- ----------
Secretarial and
administration
fees 122 - 122 84 - 84
Directors' fees 85 - 85 96 - 96
Auditor (KPMG)
remuneration
for:
- statutory audit 40 - 40 42 - 42
Tax services - Chiene
& Tait 16 - 16 4 - 4
Legal fees 83 - 83 88 - 88
Broker fees 36 - 36 24 - 24
Public relations 17 - 17 13 - 13
Regulatory fees 22 - 22 23 - 23
Tygola guarantee - 380 380 - - -
Safe custody fee 30 - 30 30 - 30
Travel expenses 31 - 31 22 - 22
Registrar fees 17 - 17 17 - 17
Printing fees 8 - 8 10 - 10
Write-off of Advanced
loan to Anglo African
Minerals - 430 430 - - -
Professional fees 8 - 8 - - -
Other 34 - 34 - - -
-------------------------- ------------------- -------- ---------- ------------------------- -------- ----------
549 810 1,359 453 - 453
-------------------------- ------------------- -------- ---------- ------------------------- -------- ----------
The Company has an agreement with Maitland Administration
Services (Scotland) Limited for the provision of secretarial and
administration services. During the year the total fees paid and
payable were GBP122,281. The balance due to Maitland for
secretarial services at the year end was GBP81,543. Maitland
receive a fee comprising 0.08% per annum of the total assets
subject to a minimum fee of GBP87,378.
The adminstration agreement has a six month notice period.
No pension contributions were payable in respect of any of the
Directors.
The Tygola guarantee cost relates to monies paid in respect of a
guarantee provided by GRIT in respect of Anglo African Minerals.
The write-off of the AAM loan amount relates to an assessed
unrecoverable amount in respect of a debtor owed by AAM.
5 Interest Payable and Similar Charges
2018 Revenue 2018 2018 2017 Revenue 2017 2017
Capital Total Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------------- -------- ---------- ------------------------ -------- ----------
Interest on 9% Convertible
Unsecured Loan Stock
2017 ('CULS') - - - 24 - 24
Interest paid on guarantee
to Tygola 30 - 30 - - -
--------------------------- --------------- -------- ---------- ------------------------ -------- ----------
30 - 30 24 - 24
--------------------------- --------------- -------- ---------- ------------------------ -------- ----------
Interest payable on the CULS is allocated to revenue.
The interest has been paid gross to all CULS shareholders. The
CULS contract contained an undertaking to pay the note-holders the
full amount and not to deduct withholding tax from these payments.
There were no CULS remaining outstanding at the start of the year
as they were fully paid in February 2017.
6 Tax on Ordinary Activities
2018 2018 2018 2017 2017 2017
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- -------------- -------------- ----------- ----------------------- ----------------- --------------
Corporation - - - - - -
tax
------------- -------------- -------------- ----------- ----------------------- ----------------- --------------
Overseas - - - - - -
taxation
------------- -------------- -------------- ----------- ----------------------- ----------------- --------------
Total tax - - - - - -
charge
------------- -------------- -------------- ----------- ----------------------- ----------------- --------------
Reconciliation of Tax Charge
A reconciliation of the current tax charge is set out below:
2018 2017
Total Total
GBP'00 GBP'000
(Loss)/return on ordinary activities
before taxation (6,819) (1,325)
-------- ---------
Corporation tax at standard rate 19%
(prior year: 19%) (1,296) (252)
-------- ---------
Effects of:
-------- ---------
Non taxable losses 1,031 30
-------- ---------
Excess management expenses 264 203
-------- ---------
Exchange losses 1 19
-------- ---------
Current year tax charge - -
-------- ---------
Due to the Company's status as an Investment Trust, and the
intention to continue meeting the conditions required to obtain
approval in the foreseeable future, the Company has not provided
for deferred tax on capital gains and losses arising on the
revaluation or disposal of investments.
At 31 December 2018 the Company had surplus management expenses
of GBP1,221,000 (2017: GBP957,000) which have not been recognised
as a deferred tax asset.
7 Return per ordinary share
Return per ordinary share attributable to shareholders reflects
the overall performance of the Company in the year.
Year ended 31 Year ended
December 2018 31 December
2017
Revenue return (1.38)p (1.04)p
------------------------ -----------------------
Capital return (14.87)p (2.12)p
------------------------ -----------------------
Total return (16.25)p (3.16)p
------------------------ -----------------------
Number Number
Weighted average ordinary shares in issue 41,964,512 41,877,082
---------- ----------
8 Investments
2018 Total 2017 Total
GBP'000 GBP'000
------------------------------------------ ---------------------------- --------------------------------
Investments listed/quoted on a recognised
investment exchange 926 1,242
Unquoted investments 622 6,326
------------------------------------------ ---------------------------- --------------------------------
1,548 7,568
------------------------------------------ ---------------------------- --------------------------------
Equity shares 1,077 7,125
Convertible securities 471 443
------------------------------------------ ---------------------------- --------------------------------
1,548 7,568
------------------------------------------ ---------------------------- --------------------------------
All investments are designated fair value through profit or loss
at initial recognition, therefore all gains and losses arise on
investments designated at fair value through profit or loss. As a
result of the Directors' intention to wind up the Company,
investments at 31 December 2018 year have been reflected in current
assets in the Balance Sheet at realisable value.
International Financial Reporting Standard ('IFRS') 'Financial
Instruments: Disclosures' requires an analysis of investments
valued at fair value based on the reliability and significance of
information used to measure their fair value. The level is
determined by the lowest (that is the least reliable or
independently observable) level of input that is significant to the
fair value measurement for the individual investment in its
entirety as follows:
Level 1 - investments quoted in an active market;
Level 2 - investments whose fair value is based directly on
observable current market prices or indirectly being derived from
market prices;
Level 3 - investments whose fair value is determined using a
valuation technique based on assumptions that are not supported by
observable current market prices or based on observable market
data.
Level 1 Level 1 Level 2 2018 2017
Listed Listed overseas Listed in Level Total Total
in UK UK 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ------------- ---------------- ---------------- ------- -------- ---------
Opening book cost 1,475 5,114 - 5,623 12,212 21,361
Opening fair value adjustment (785) (4,563) - 704 (4,644) (11,036)
------------------------------ ------------- ---------------- ---------------- ------- -------- ---------
Opening valuation 690 551 - 6,327 7,568 10,325
Transfers (524) 768 524 (768) - -
Purchases at cost - - - - - 2,125
Sales - proceeds (100) (443) (51) - (594) (4,724)
Sales - realised losses (851) (281) (211) - (1,343) (6,550)
Increase/(decrease) in
fair value adjustment 785 201 (132) (4,937) (4,083) 6,392
------------------------------ ------------- ---------------- ---------------- ------- -------- ---------
Closing valuation - 796 130 622 1,548 7,568
------------------------------ ------------- ---------------- ---------------- ------- -------- ---------
Closing book cost - 5,158 262 4,855 10,275 12,212
Closing fair value adjustment - (4,362) (132) (4,233) (8,727) (4,644)
------------------------------ ------------- ---------------- ---------------- ------- -------- ---------
Closing valuation - 796 130 622 1,548 7,568
------------------------------ ------------- ---------------- ---------------- ------- -------- ---------
The gains and losses included in the above table have all been
recognised within losses on investments in the Income Statement.
The Directors believe that the use of reasonable possible
alternative assumptions for its Level 3 holdings would not result
in a valuation significantly different from the valuation included
in these financial statements.
During the year IMC shares were reclassified from level 1 to
level 2 due to the decrease in trading activity. Kalia shares were
reclassified from level 3 to level 1 due to the transfer to listed
shares on the Australian Securities Exchange.
The Board considered the matters which were most relevant in
establishing the fair value of level 3 investments were:
- Siberian Goldfields - the investment in Siberian Goldfields
has been valued based on the assessed value of the proven and
estimated reserves, taking into account the market value of similar
projects, discounted to reflect the geopolitical risks associated
with the location of those reserves and the resulting difficulties
in securing finance to move the project into production.
- AAM - the valuation reflects recent debt finance being raised
in the entity and operational developments in respect of larger
scale funding being secured.
For both AAM and Siberian, the Board consider the valuations
will increase significantly at the point the desired level of
finance is achieved in each entity. Conversely, the valuations will
reduce to, or close to, nil should such finance not be secured in
the next 6-12 months.
2018 2017
Losses on investments GBP'000 GBP'000
------------------------------------------------ ---------- ---------
Realised losses on sale (1,343) (6,550)
Movement in fair value (4,083) 6,392
------------------------------------------------ ---------- ---------
Losses on investments (5,426) (158)
------------------------------------------------ ---------- ---------
During the year the Company did not incur any transaction costs on
purchases or sales.
9 Debtors
2018 2017
GBP'000 GBP'000
------------------------------------------------ ---------- ---------
Advanced loan to Anglo African Minerals - 390
Prepayments and accrued income 8 42
VAT recoverable 15 8
------------------------------------------------ ---------- ---------
23 440
------------------------------------------------ ---------- ---------
10 Other creditors
2018 2017
GBP'000 GBP'000
------------------------------------------------ ---------- ---------
Other creditors 172 83
------------------------------------------------ ---------- ---------
172 83
------------------------------------------------ ---------- ---------
11 9% Convertible Unsecured Loan Stock 2017
2018 2017
Nominal Nominal
value of value of
CULS CULS
GBP'000 GBP'000
Balance at the beginning
of the period - 2,700
----------- ----------
Redemption of CULS - (2,700)
----------- ----------
Balance at the end - -
of the period
----------- ----------
On 7 March 2014, the Company issued GBP4,850,000 9% Convertible
Unsecured Loan Stock 2017 ('CULS') and 4,850,000 warrants (for nil
consideration on the basis of one warrant for every GBP1 of CULS
subscribed). A further GBP150,000 CULS and 150,000 warrants were
issued on 28 November 2014. During the 16 months to 31 December
2015, the Company converted GBP300,000 of CULS into equity. On 23
August 2016 and 1 November 2016, the Company made two repayments
each of GBP1,000,000 nominal of CULS. On 19 January 2017, a further
GBP1,500,000 nominal of CULS was repaid and on 28 February 2017 the
Company repaid the outstanding GBP1,200,000 of 9% Convertible
Unsecured Loan Stock. At 31 December 2017, there was no CULS
outstanding.
Warrant instrument
The warrants are unlisted and are exercisable up to the fifth
anniversary of admission in amounts or multiples of 50,000 warrants
at GBP1.00 per ordinary share. Given the current share price, no
liability is recognised for the warrants. No warrants were
exercised in 2018.
12 Share Capital
2018 2018
Shares GBP'000
Authorised at 31 December
Ordinary shares of 1p each 100,000,000 1,000
------------ ---------
Allotted, called up and fully paid
Total issued ordinary shares of 1p
each as at 31 December 2018 41,964,512 420
------------ ---------
Capital management policies and procedures
The Company's capital management objectives are:
- to ensure, as far as reasonably possible, that the Company
will be able to continue as a going concern; and
- to maximise the capital return to its equity shareholders
through an appropriate balance of equity capital and loan
notes.
The Board monitors and reviews the broad structure of the
Company's capital on an ongoing basis. The Company has no
externally imposed capital requirements.
The capital of the Company is managed in accordance with its
investment policy detailed in the Strategic Review. As noted in
that section and in note 1, the Board is seeking shareholder
approval to wind up the Company via a Members Voluntary Liquidation
process.
13 Net Asset Value per Ordinary Share
2018 2017
------------------------------- ---------- ----------
Net asset value per share 3.41p 19.66p
Net assets attributable at end GBP1.4m GBP8.3m
of period
Ordinary shares of 1p each in
issue at end of period 41,964,512 41,964,512
------------------------------- ---------- ----------
14 Analysis of Changes in Net Cash
At 1 January 2018 Cash flow Currency movements At 31 December
2018
GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----------------- --------- ------------------ --------------
Cash at bank and
in hand 325 (289) (4) 32
----------------- ----------------- --------- ------------------ --------------
Total 325 (289) (4) 32
----------------- ----------------- --------- ------------------ --------------
15 Financial Instruments
The Company's financial instruments comprise its investment
portfolio, cash balances and debtors and creditors that arise
directly from its operations. As an investment trust the Company
holds a small portfolio of financial assets in pursuit of its
investment objective.
Listed fixed asset investments held (see note 8) are measured at
fair value. For listed securities this is either bid price or the
last traded price depending on the convention of the exchange on
which the investment is listed. Unlisted investments are valued by
the Directors on the basis of all the information available to them
at the time of valuation. The fair value of all other financial
assets and liabilities is represented by their carrying value in
the Balance Sheet.
The main risks that the Company faces arising from its financial
instruments are:
(i) market price risk, being the risk that the value of
investment holdings will fluctuate as a result of changes in market
prices caused by
(ii) factors other than interest rate or currency rate movements;
(iii) interest rate risk, being the risk that the future cash
flows of a financial instrument will fluctuate because of changes
in market interest rates;
(iv) foreign currency risk, being the risk that the value of
investment holdings, investment purchases, investment sales and
income will fluctuate because of movements in currency rates;
(v) credit risk, being the risk that a counterparty to a
financial instrument will fail to discharge an obligation or
commitment that it has entered into with the Company; and
(vi) liquidity risk, being the risk that the Company may not be
able to liquidate its investments to satisfy ongoing operational
requirements. The Company's operations have been cash flow negative
since its inception, with the Company relying on the sale of
investments to generate the cash needed to continue to operate.
GBP0.6m was realised from the sale of investments during the period
under review.
The Company held the following categories of financial instruments
as at 31 December:
2018 2017
GBP'000 GBP'000
--------------------------------------------- ----------- -----------
Financial instruments
Investment portfolio 1,548 7,568
Cash at bank and on deposit 32 325
Debtors 23 440
--------------------------------------------- ----------- -----------
Financial liabilities
Other creditors 172 83
Market price risk
Market price risk arises mainly from uncertainty about future
prices of financial instruments held. It represents the potential
loss the Company might suffer through holding market positions in
the face of price movements. To mitigate the risk the Board's
investment strategy is to select investments for their fundamental
value. Stock selection is therefore based on disciplined
accounting, market and sector analysis, with the emphasis on long
term investments. The very focussed investment portfolio amplifies
the risk arising from factors specific to a country or sector. The
Executive Director actively monitors market prices throughout the
year and reports to the Board, which meets regularly in order to
consider investment strategy.
Investment and portfolio performance are discussed in more
detail in the Executive Director's Review.
If the investment portfolio valuation fell by 10 per cent at 31
December 2018, the impact on the profit or loss and the net asset
value would have been negative GBP0.2 million (2017: GBP0.8
million). If the investment portfolio valuation rose by 10 per cent
the impact would have been equal and opposite. The calculations are
based on the portfolio valuation as at the balance sheet date and
are not representative of the period as a whole, and may not be
reflective of future market conditions.
Interest rate risk
Financial assets
Bond and preference share yields, and their prices, are
determined by market perception as to the appropriate level of
yields given the economic background. Key determinants include
economic growth prospects, inflation, the Government's fiscal
position, short term interest rates and international market
comparisons. The Executive Director takes all these factors into
account when making any investment decisions as well as considering
the financial standing of the potential investee company.
Returns from bonds and preference shares are fixed at the time
of purchase, as the fixed coupon payments are known, as are the
final redemption proceeds. Consequentially, if a bond is held until
its redemption date, the total return achieved is unaltered from
its purchase date. However, over the life of a bond the market
price at any given time will depend on the market environment at
that time. Therefore, a bond sold before its redemption date is
likely to have a different price to its purchase level and a profit
or loss may be incurred.
Interest rate risk on fixed rate interest instruments is
considered to be part of market price risk as disclosed above.
Floating rate
When the Company retains cash balances they are held in floating
rate deposit accounts. The benchmark rate which determines the
interest payments received on cash balances is the bank base rate
for the relevant currency for each deposit.
Fixed rate
The Company holds fixed interest investments and in the prior
year had fixed interest liabilities.
2018 2017
Weighted Weighted
2018 average 2017 average
period
Weighted period for Weighted for
average which the average which the
2018 rate is rate is
interest fixed 2017 interest fixed
GBP'000 rate (%)* (years) GBP'000 rate (%)* (years)
----------------------- ------- --------- ---------- ------- --------- ---------
Assets:
Convertible securities 471 - - 443 - -
----------------------- ------- --------- ---------- ------- --------- ---------
* The 'weighted average interest rate' is based on the current
yield of each asset, weighted by their market value.
Foreign currency risk
The Company invests in overseas securities and may hold foreign
currency cash balances which give rise to currency risks. Although
the Executive Director may seek to manage all or part of the
Company's foreign exchange exposure, there is no assurance that
this can be performed effectively.
Foreign currency exposure at 31 December was as follows:
2018 Net 2017
2018 2018 current 2018 2017 2017 Net current 2017
Investments Cash assets Total Investments Cash assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ------------ ------- -------- ------- ------------ ------- ------------ -------
Canadian Dollar - - - - 551 - - 551
US Dollar 471 - 471 - 2,111 5 - 2,116
Australian Dollar 796 - 796 - 2,403 - - 2,403
Euro - - - - - - - -
------------------ ------------ ------- -------- ------- ------------ ------- ------------ -------
1,267 - 1,267 - 5,065 5 - 5,070
------------------ ------------ ------- -------- ------- ------------ ------- ------------ -------
If the value of sterling had weakened against each of the
currencies in the portfolio by 5 per cent, the impact on the profit
or loss and the net asset value would have been positive GBP0.06
million (2017: GBP0.25 million). If the value of sterling had
strengthened by the same amount the effect would have been equal
and opposite. The calculations are based on the portfolio
valuation, cash balances and net current assets/(liabilities) as at
the respective balance sheet dates and are not representative of
the year as a whole, and may not be reflective of future market
conditions.
The Executive Director does not intend to hedge the Company's
foreign currency exposure at the present time.
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company. The Executive Director has in
place a monitoring procedure in respect of counterparty risk which
is reviewed on an ongoing basis. The carrying amounts of financial
assets best represents the maximum credit risk exposure at the
balance sheet date.
At the reporting date, the Company's financial assets exposed to
credit risk amounted to the following:
At the reporting date, the Company's financial assets exposed to credit
risk amounted to the following:
2018 2017
GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Cash and cash equivalents 32 325
Interest, dividends and other receivables - 440
------------------------------------------------------ --------- ---------
32 765
------------------------------------------------------ --------- ---------
Credit risk on fixed interest investments is considered to be part
of market price risk.
Credit risk arising on transactions with brokers relates to
transactions awaiting settlement. Risk relating to unsettled
transactions is considered to be small due to the short settlement
period involved and the high credit quality of the brokers used.
The Board monitors the quality of service provided by the brokers
used to further mitigate this risk.
The cash held by the Company and all the assets of the Company
which are traded on a recognised exchange are held by BNP Paribas
Security Services ('BNP'), the Company's custodian. Bankruptcy or
insolvency of the custodian may cause the Company's rights with
respect to securities held by the custodian to be delayed or
limited. The Board monitors the Company's risk by reviewing the
custodian's internal control reports. Should the credit quality or
the financial position of BNP deteriorate significantly the
Executive Director will move the cash holdings to another bank.
As at 31 December 2018, the Company held 3 per cent or more of
issued share capital of the following companies:
2018
Number of 2017
Ordinary shares 2018 Percentage Number of 2017 Percentage
issued held Ordinary shares issued held
Kalia Holdings 2,514,347,391 19.1% - -
Kalia Holdings Ltd
Pty - - 240,000,000 27.7%
Anglo African Minerals 444,648,075 25.4% 444,648,075 25.4%
IMC Exploration Group 147,291,719 17.6% 147,291,719 17.6%
Siberian Goldfields 250,010,000 6.1% 250,010,000 6.1%
These companies are not treated as associates as the policy
choice under IFRS is taken whereby they are not equity accounted as
GRIT considers itself as an investment entity and therefore
accounts for these investments on a fair value through profit and
loss basis.
Liquidity risk
The Company's financial instruments include investments in
unlisted investments which are not traded on an organised public
market and which generally may be illiquid. As a result, the
Company may not be able to liquidate these investments at an amount
close to their fair value.
At the reporting date, the Company's financial assets exposed to
liquidity risk amounted to the following:
2018 2017
GBP'000 GBP'000
Unquoted investments:
Unquoted convertible
securities that are
convertible into unlisted
securities 471 443
Unquoted equities 151 5,883
622 6,326
The Company's liquidity risk is managed on an ongoing basis by
the Executive Director in accordance with policies and procedures
in place as described in the Directors' Report. The Company's
overall liquidity risks are monitored by the Board whenever it
meets. Consideration of such matters has resulted in the Board
recommending the Company is wound up via a Members Voluntary
Liquidation process.
16 Related Party Transactions
The Board of Directors are considered related parties.
Details of the fee arrangement with the Executive Director are
included within the Directors' Report under the heading Management
Arrangements and are disclosed in note 3.
There are no other transactions with the Board other than
aggregated remuneration for services as Directors.
There were fees of GBP24,000 (2017: GBP7,000) due to Directors
at the year end.
As a result of the Company holding more than 20% of the shares
in AAM, it is considered a related party. Details of transactions
with AAM are outlined in notes 4, 8 and 9.
17 Share Based Payments
On 16 January 2017, the Company entered into a termination
agreement with RDP and agreed a share incentive plan which allows
RDP to benefit from an award of share based payments. David
Hutchins, Executive Director, is one of two partners of RDP. The
Company's incentive plan has conditions attached before RDP becomes
entitled to the award. The conditions require the share price of
the Company to be above the trigger points for 30 consecutive days.
On achievement of this condition each tranche of shares will be
issued. As an equity settled share based payment, the fair value is
assessed at the date of award with no revision. The Company
obtained a valuation of the share based payment award to determine
an appropriate fair value to reflect in the financial statements.
The value was based on a forward looking expectation reflecting the
likelihood of portfolio investments growing in value to a
sufficient extent that the NAV (after adjusting for the discount)
would permit the triggers to be achieved.
The first tranche was reflected at the share price and number of
shares issued. The model was used to estimate the fair value of the
remaining three tranches which was assessed as GBP400,000. Based on
the model output a range of values that could have been reflected
was GBP240,000 to GBP475,000.
Cost per share Share price Number of
Trigger point Date of payment (p) (p) shares
First trigger On admission 16/1/17 5 11.5 1,994,500
Second trigger 14p n/a 5 n/a 2,000,000
Third trigger 16p n/a 5 n/a 2,000,000
Fourth trigger 18p n/a 5 n/a 2,000,000
The first tranche was valued at GBP229,638 using the share price
on the day the agreement was signed. The remaining three tranches
have a value of GBP400,000 and are also recognised at fair
value.
No trigger points have been achieved since the share based
payments were awarded.
18 Post Balance Sheet Events
On 11th March 2019, the Company disposed of its investment in
IMC Exploration Group Plc for GBP47,000. The investment was valued
at GBP130,000 as at 31 December 2018.
19 Post Balance Sheet Events The financial information set out
above does not constitute the Company's statutory accounts for the
years ended 31 December 2018 or 2017. Statutory accounts for 2017
have been delivered to the registrar of companies, and those for
2018 will be delivered in due course. The auditor has reported on
those accounts, the report for the year ended 31 December 2017 was
(i) unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006, while the
report for the year ended 31 December 2018 was (i) unqualified,
(ii) did include a reference to non-going concern basis of
preparation to which the auditor drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
Registered Number
8256031
Registered Office
Hamilton Centre
Rodney Way
Chelmsford
CM1 3BY
Directors
Simon Farrell (Chairman)
Haruko Fukuda
David Hutchins
Jonathan Reynolds ++
* Chairman of the Audit Committee. ++ Appointed on 22 August
2018.
Secretary and Administrator
Maitland Administration Services (Scotland) Limited
20 Forth Street
Edinburgh
EH1 3LH
Tel: 0131 550 3760
Solicitors
DMH Stallard LLP
6 New Street Square
New Fetter Lane
London
EC4A 3BF
Sponsor and Financial Adviser
Beaumont Cornish Limited
2nd Floor, Bowman house
29 Wilson Street
London
EC3V 3LT
Corporate Broker
Peterhouse Capital Limited
New Liverpool House
15 Eldon Street
London
EC2M 7LD
Bankers and Custodian
BNP Paribas Securities Services, London
55 Moorgate
London
EC2R 6PA
Auditor
KPMG LLP
20 Castle Terrace
Edinburgh
EH1 2EG
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Shareholder helpline UK: 0370 707 1556** Shareholder helpline
overseas: +44 0370 707 1556
** Calls to this number cost 8p per minute (excluding VAT) plus
network extras. Calls from outside the UK will be charged at
international rates. Other telephone provider costs may vary. Lines
open 8.30am to 5.30pm, Monday to Friday
Tax Advisor
Chiene & Tait
61 Dublin Street
Edinburgh EH3 6NL
Shareholder Information
Net Asset Value/Share Price
The net asset value of the Company's ordinary shares may be
obtained by contacting RDP on 0207 290 8540 or by email at
info@rdplimited.co.uk or alternatively by visiting the Company's
website at www.grit.london.
Website
www.grit.london
END
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LLFEIRVIIVIA
(END) Dow Jones Newswires
July 01, 2019 02:00 ET (06:00 GMT)
Grit Investment (LSE:GRIT)
Historical Stock Chart
From Apr 2024 to May 2024
Grit Investment (LSE:GRIT)
Historical Stock Chart
From May 2023 to May 2024