TIDMGRIT
RNS Number : 2952Y
Global Resources Investment Tst PLC
12 May 2021
For immediate release 12 May 2021
GLOBAL RESOURCES INVESTMENT TRUST PLC ("GRIT" or "the
Company")
Annual Audited Results for the year ended 31 December 2019
The Directors are pleased to announce the audited results of the
Company for the year ended 31 December 2019.
A copy of the Annual Report and Financial Statements will be
available for viewing at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
In addition, the Company announces that it will shortly publish
the unaudited half year results for the six months to 30 June 2020
and, in due course, the annual audited results for the year ended
31 December 2020 together with a Notice of Annual General
Meeting.
The Annual Report and Financial Statements for 2019 will be
posted to shareholders with the Annual Report and Financial
Statements for 2020.
Please note that page references in the text below refer to the
page numbers in the Annual Report and Financial Statements.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2012 as it forms part of
UK Domestic Law by virtue of the European Union (Withdrawal) Act
2018 ("UK MAR").
For further information, please contact:
Global Resources Investment Trust Tel: +44 (0) 203 198
PLC 2554
Martin Lampshire
----------------------
Beaumont Cornish L imi t e d Tel: +44 (0) 207 628
3396
----------------------
Roland Cornish
Felicity Geidt
----------------------
Peterhouse Capital Limited Tel: +44 (0) 207 469
0930
----------------------
Lucy Williams
Duncan Vasey
Heena Karani
----------------------
2 Financial Highlights
Year to Year to
Total Return 31 December 2019 31 December
2018
Net asset value* (130.4%) (82.6%)
Share price* 15.4% (64.4%)
% change
Capital Values 31 December 2019 31 December 2018 in the year
Net (liability) asset value
per share (0.96p) 3.41p (100.6%)
Share price (mid-market) 3.75p 3.25p 15.4%
Share price (premium) discount
to net asset value* (127.6%) 4.4%
Year to Year to
Revenue and Dividends 31 December 2019 31 December
2018
Loss per share (1.40p) (1.38p)
Ongoing charges* 335.5% 11.4%
Highs and Lows in 2019 High Low
Net asset value 3.41p (0.96p)
Share price (mid-market) 4.95p 1.125p
Share price (premium) discount
to net asset value (127.6%) 67.0%
A glossary of the terms used can be found on page 34.
*These are considered Alternative Performance Measures (APM's)
and are further defined in the glossary
Chairman's Statement 3
Introduction
The frustrations experienced by my predecessors continued
throughout 2019 and 2020. In my interim statement (in September
2019), shortly after I and my colleagues, Martin Lampshire and
Stephen Roberts, took over from your previous Board, I explained
that our objective was to see through the disposal of the Company's
remaining principal investments, to reduce the overheads and thus
put the Company onto a proper financial footing, thereby restoring
the Company's share price and enabling the formulation of plans for
a profitable future. I regret to report that the first of these
objectives remains elusive and thus the remainder are as yet
unfulfilled.
Investments
Shareholders will recall that the Company started 2019 with four
investments of any value. Two of these (IMC Exploration Group plc
and Kalia Limited) were sold during the year (retaining a very
small residual holding in Kalia, now known as MCB Resources).
The Company's principal investment remains its 25% equity
interest in and loans to Anglo-African Minerals plc ("AAM"). As
announced on 17 December 2019, negotiations with the prospective
investor, referred to in an announcement on 30 August 2019 and in
my interim statement, ended without agreement. A replacement
purchaser (TerraCom Limited) (see announcement dated 24 February
2020) has been prevented by the coronavirus from completing its due
diligence process, although that process continues as far as it is
able.
Because of the long history of failed attempts to realise value
from the Company's investment in AAM, we have decided to adopt a
prudent view and therefore to make full provision against the
remaining loans to AAM.
Siberian Goldfields Limited was entirely dormant throughout the
year under review and, in these financial statements, was therefore
written down to a nil value. As a consequence, the Company's
investment portfolio is reflected in the balance sheet at just
GBP28,000 (the sterling equivalent of the balance sheet value of
the residual investment in shares in the then-listed MCB Resources.
Limited).
Very recently, however, the Company received and subsequently
accepted an offer for its shares in Siberian Goldfields (see note
13 to the financial statements). This is not reflected in these
financial statements on the grounds that it does not affect the
directors' assessment of the value of the shareholding at the
balance sheet date. The surplus of sale proceeds over the nil value
attributed to the holding at 31 December 2019 will be reflected in
the 2020 financial statements.
Net assets
As a result of these write-downs, at 31 December 2019 your
Company had net liabilities equivalent to 0.96p per share, a
reduction of 128.2% from the 3.41p per share at which the Company's
net assets stood at 31 December 2018.
The Company's share price was 3.75 pence at 31 December 2019.
Trading in the Company's shares is currently suspended pending the
publication of these results as the UKLA extended requirement to
publish results within six months was missed.
Board of directors
Following the review of the Company's future conducted by
Peterhouse Capital Limited and referred to in last year's
Chairman's Statement, Haruka Fukuda, Simon Farrell and Sam Hutchins
resigned from the Board; and Martin Lampshire, Stephen Roberts and
I were appointed.
Creditors
I should like to express my thanks to creditors, who,
recognising the Company's predicament, have taken a pragmatic view
and expressed that by being prepared to defer settlement in whole
or in part in order to allow the Company the opportunity to realise
the value of its investments, in the expectation that this will
permit full settlement of the Company's indebtedness to them. This
stance has also been taken by your Board. None of the directors has
received any remuneration since October 2019.
In November 2020, however, it became clear to the Board that the
sale of the Company's shares in AAM and the repayment by AAM of its
loan from GRIT was unlikely to take place for the foreseeable
future. Accordingly, the Board proposed a Creditors' Voluntary
Arrangement ('CVA') (described fully in the circular to
shareholders dated 3 December 2020). Simultaneously the Board
re-negotiated the terms of a placing first arranged in June 2020 to
raise GBP125,893 from the issue of new shares and a further
GBP100,000 in the form of Convertible Loan Notes. Creditors and
shareholders approved the CVA and the issue of the shares at
meetings on 21 December 2020.
Outlook
The Company remains committed to its investment policy in the
natural resources sector, which is having a resurgence, driven by
macro-economic factors supporting the gold price, combined with the
needs for metals such as copper and lithium by the ever-increasing
market for electric and hybrid 'powertrains' in the automotive
industry in place of pure hydrocarbon combustion engines.
The CVA has removed from the Company's balance sheet creditors
amounting to approximately GBP800,000 and enabled GRIT to secure
funding for the Company's re-launch. On publication of this report
and of the 2020 interim report, application will be made to the
London Stock Exchange for the suspension of trading in the
Company's shares to be lifted. It is anticipated that a new Board
will be appointed to take GRIT into a new chapter of its
existence.
James Normand
Chairman
11 May 2021
4 Portfolio Review
MCB Resources Limited (formerly Kalia Limited)
MCB Resources Limited (formerly known as Kalia Limited) ("MCB")
is a copper/gold exploration company, active on the Pacific island
of Bougainville. The majority of the MCB holding was sold, as
announced on 20 September 2019, realising gross proceeds of
GBP225,000. The Company continues to hold 500,000 ordinary shares
in MCB with a market value at 31 December 2019 of approximately
GBP28,000. MCB's listing on the ASX was cancelled on 26 February
2021 because it had failed to pay its annual listing fee.
Anglo-African Minerals plc
Anglo-African Minerals plc ("AAM") is an unlisted advanced
mineral exploration company, incorporated in Ireland, 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. As already explained in the Chairman's
Statement, AAM is currently in advanced discussions for the sale of
the company to Terracom Limited (as announced in February 2020).
However, due to the coronavirus pandemic, there has been a delay in
the due diligence process resulting from the inability to complete
a Guinea mine site visit. While there is no certainty on the exact
timing of this transaction, discussions between AAM and Terracom
Limited continue and, we understand, remain positive. In the light
of the continuing uncertainties, the Company has, in the interests
of accounting prudence, made full provision against both its
investment in AAM's shares and its loans to AAM.
Siberian Goldfields Limited
Siberian Goldfields Limited ("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 by-product credits. While construction of the project had
already commenced, it has not progressed as expected due to the
unfavourable political and economic climate in Russian based
projects. SGL has been unable to raise the required funding to
complete the construction phase and move to production. In the
meantime, the ZK project will remain on a care and maintenance
basis. In the circumstances further provision has been made against
the Company's investment in SGL so that it is carried at a nil
value in these financial statements.
In recent days the Company has received and accepted an offer
for its shares in SGL. The resultant surplus from the sale will be
reflected in the financial statements for 2020, the year in which,
implicitly, the Company's stake in Siberian regained its underlying
value.
Classification of Investment Portfolio by Sector 5
31 December 2019 31 December
Total Investments 2018
(%) Total Investments
(%)
------------------- ------------------ ------------------
Gold / Copper 100.0 61.2
Bauxite - 30.4
Lead/ Nickel/ Zinc - 8.4
Total Investments 100.0 100.0
Classification of Investments by Stockmarket Quotation
31 December 2019 31 December
Total Investments (%) 2018
Total Investments
(%)
------------------------------------------- ---------------------- --------------------
UK - 8.4
Australia 100.0 51.4
Unquoted - 40.2
------------------------------------------- ---------------------- ------------------
Total Investments 100.0 100.0
Classification of Investments by Principal Area of Operation
31 December 2019 31 December
Total Investments 2018
(%) Total Investments
(%)
-------------------------------- ----------------------------- ------------------
Bougainville Island 100.0 51.4
Africa - 30.4
Russia - 9.8
Europe - 8.4
Total Investments 100.0 100.0
Investment Portfolio
Valuation Total Investments
Company Sector GBP'000 %
MCB Resources Limited Gold/Copper 28 100.00
Anglo-African Minerals Bauxite - -
plc*
Siberian Goldfields Limited* Gold - -
----------------------------- ------------ --------- -----------------
Total investments 28 100
------------------------------------------- --------- -----------------
*- 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 2019. It
should be read in conjunction with the Chairman's Statement on page
3, which provides a detailed review of the investment activities
for the period and outlook for the future.
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, which have since been
redeemed.
Business model
Global Resources Investment Trust is a self-managed investment
trust run by its Board, which takes all major decisions
collectively.
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's investment policy is 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 invest up to only 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 all have the ability to be brought into
production in the succeeding years;
-- GRIT will invest no 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 succeeding
years;
-- GRIT will not take legal or management control over investments in its portfolio;
--
GRIT will invest no 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 (i.e. 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.
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
investment portfolio assets to generate the cash needed to finance
its operational costs.
In 2019, GBP220,000 was realised from investment proceeds. This
compares with operating expenses in that period of GBP589,000.
As outlined in the Chairman's Statement, it became clear to the
Board that the sale of the Company's shares in AAM and the
repayment by AAM of its loan from GRIT was unlikely to take place
for the foreseeable future; and so, in December 2020 the Board
proposed a Creditors' Voluntary Arrangement (described fully in the
circular to shareholders dated 3 December 2020). Simultaneously the
Board re-negotiated the terms of a placing first arranged in June
2020 to raise GBP125,893 from the issue of new shares and a further
GBP100,000 in the form of Convertible Loan Notes. Creditors and
shareholders approved the CVA and the issue of the shares at
meetings on 21 December 2020.
Outlook
The CVA has removed from the Company's balance sheet creditors
amounting to approximately GBP800,000 and enabled GRIT to secure
funding for the Company's re-launch. On publication of this report
and of the 2020 interim report, application will be made to the
London Stock Exchange for the suspension of trading in the
Company's shares to be lifted.
As at the date of this report, the Company has undertakings from
investors to inject additional funds sufficient to meet the
Company's obligations for at least the next 12 months. Accordingly,
the Board is adopting a going concern accounting basis for these
financial statements.
7
Principal Risks and Uncertainties and Risk Mitigation
The sole objectives of the new management team have been to
realise the value of the Company's remaining investments and to
minimise its administration expenses, with a view to restoring
liquidity to the Company and enabling it to re-set and re-launch
itself as an active Investment Trust.
A conventional report on risks and uncertainties and their
mitigation; on performance; and on Social, Community, Employee
Responsibilities and Environmental Policy is, therefore,
inappropriate to the position inherited by the current Board.
Suffice it to say that the Board's objectives have not been met,
in that the disposal of the Company's remaining investments has not
been achieved. This has resulted in the CVA described in the
Chairman's statement. The consequence of this has been to remove
the majority of all creditors from the current balance sheet and
thus to allow the Company to secure equity funding which will
enable GRIT to be 're-launched' as an Investment Trust.
Viability Statement
Normally the Board would have considered a longer-term viability
in excess of the going concern period. However, this is not
currently considered relevant given the currently liquidity
position, as disclosed in the Going Concern and Outlook statements
above, whereby further funds will be required to finance future
activities.
Section 172 Statement
The Directors believe they have acted in the way most likely to
promote the success of the Company for the benefit of its members
as a whole, as required by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
-- consider the likely consequences of any decision in the long term;
-- act fairly between the members of the Company;
-- maintain a reputation for high standards of business conduct;
-- consider the interests of the Company's employees;
-- foster the Company's relationships with suppliers, customers and others; and
-- consider the impact of the Company's operations on the community and the environment.
The Company's operations and strategic aims are set out
throughout the Strategic Review and in the Chairman's Statement,
and relationships with shareholders are also dealt with in the
Statement of Corporate Governance.
By order of the Board
Peterhouse Capital Limited
Secretary
11 May 2021
Directors' Report and Governance Reports Board of Directors and Investment Manager
8 Board of Directors
All of the Directors are non-executive and independent. The
Board fulfils the functions of the Nomination Committee and 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 Directors who held office during the year and up to the date
of signing the financial statements were as follows:
Haruko Fukuda (resigned
30 August 2019)
Simon Farrell (resigned
30 August 2019)
David Hutchins (resigned
30 August 2019)
Jonathan Reynolds (resigned
1 July 2019)
David Johnston (resigned
14 June 2019)
Martin Lampshire (appointed
30 August 2019)
James Normand (appointed
30 August 2019)
Stephen Roberts (appointed
30 August 2019)
Martin Lampshire
Independent Executive Director
Experience:
Board positions currently include Bould Opportunities Plc
(Non-Executive Director) and Valirx Plc (Non-Executive
Director).
Martin is currently a consultant to Peterhouse Capital, drawing
on experience from over twenty years as a corporate broker in the
smaller companies market, working primarily in London but also in
Hong Kong, Singapore and Dubai.
Remuneration: GBP40,000 p.a.
Shared Directorships with any other Trust Directors: None
Shareholding in Company: None
James Normand
Independent Non-Executive Chairman
Experience:
Chartered Accountant
45 years in the City
Previously Finance Director of Pathfinder Minerals plc
(AIM-listed)
Currently Non-executive Chairman of All Active Asset Capital
Limited and a Non-Executive Director of Vela Technologies plc and
of Ridgecrest plc (all AIM-listed)
Remuneration: GBP35,000 p.a.
Shared Directorships with any other Trust Directors: None
Shareholding in Company: None
Stephen Roberts
Independent Non-Executive Director
Experience:
Former board positions include: Chairman of Xtrabio B.V.,
Non-executive Director of Mining Investment Resources Plc and
Director of Grand Group plc China. Steve had a career in M&A
and advisory assignments in various sectors. He was previously a
senior member of the corporate finance teams at a number of
City-based brokers including Fairfax, Evolution Securities, Collins
Stewart and Charterhouse Securities.
Remuneration: GBP30,000 p.a.
Shared Directorships with any other Trust Directors: None
Shareholding in Company: None
Directors' Report Directors' Report and Governance Reports
Directors' Report 9
The Directors present their Annual Report and the audited
financial statements for the year ended 31 December 2019.
Results
Financial Highlights of the Company's results are shown on page
2 of this Report.
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 2019 there were 41,964,512 ordinary shares of
one penny 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.
Substantial Interests in Share Capital
At 27 April 2021, 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.
Financial Statements
The Directors' responsibilities regarding the financial
statements and safeguarding of assets are set out on page 11.
Annual General Meeting
A notice of the Annual General Meeting will be posted to
shareholders in due course.
Directors' Remuneration Policy and Report
Among the resolutions to be put to the Annual General Meeting as
ordinary business will be 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 pre-dating their appointment, which is
deepened and expanded through individual discussion and contact
with the other directors and, in particular, participation at Board
meetings. Relevant training is available to directors as
required.
Statement Regarding Annual Report and Accounts
Following a detailed review of the Annual Report and Accounts by
the Board (acting as 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 has 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
PKF Littlejohn LLP was appointed as the Company's auditor during
the year and has indicated its willingness to continue in office.
The Directors will place a Resolution before the Annual General
Meeting for the reappointment of PKF Littlejohn LLP as independent
auditor of the Company for the ensuing year and to authorise the
Directors to determine its remuneration.
Continuation Vote
In accordance with the Articles of Association an ordinary
resolution will be proposed at the Annual General Meeting for the
Company to continue as an investment trust.
10 Directors' Report
Directors' Authority to Allot Shares
The Directors will be seeking authority to allot shares. A
resolution will, if passed at the Annual General Meeting, authorise
the Directors to allot (and grant subscription and conversion
rights over) new shares following the completion of the placing on
the lifting of the suspension of trading in the Company's shares
expected following the publication of the Annual Report.
A resolution will, if passed at the Annual General Meeting,
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
following the completion of the placing on the lifting of the
suspension of trading in the Company's shares; 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.
A further resolution will allow 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
2022.
Directors' Authority to Buy Back Shares
The Company did not purchase any shares for cancellation or to
hold in treasury during the year.
A further resolution will seek 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.
By Order of the Board
Peterhouse Capital Limited
Secretary
11 May 2021
Statement of Directors Responsibilities Directors' Report and Governance Reports
Statement of Directors' Responsibilities 11
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 accounting standards in conformity with the
requirements of the Companies Act 2006 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
international accounting standards in conformity with the Companies
Act 2006;
-- 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.
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
James Normand
Chairman
11 May 2021
12 Statement of Corporate Governance
Introduction
The UK Listing Authority requires all listed companies to
describe how they have complied with the principles of the UK
Corporate Governance Code 2016 (the 'UK Governance Code'). which is
available on the Financial Reporting Council's website:
www.frc.org.uk. The UK Governance Code covers in particular the
annual re-appointment of Directors, Board diversity, external
evaluation, the Board's responsibilities in relation to risk, and a
clear explanation of business model and strategy.
The Association of Investment Companies also published a Code of
Corporate Governance, which is available on the AIC's website:
www.theaic.co.uk. The AIC Code addresses all of the principles set
out in Section 1 of the UK Governance Code as well as setting out
additional principles and recommendations on issues that are of
specific relevance to investment companies. The Company has adopted
the 2019 AIC Code.
Application of the Principles of the Codes
The Company has complied with the provisions of the AIC Code and
the UK Governance Code, except for the UK Governance Code
provisions relating to:
-- the role of the chief executive;
-- executive directors' remuneration; and
-- the need for an internal audit function.
As indicated by the AIC Code, the above exceptions are not
believed to be applicable to a self-managed investment company.
The Board
The Board consists of two non-executive directors and one
executive Director, all of whom are regarded as independent. Mr
Normand is Chairman and is responsible for leadership of the Board
and ensuring its effectiveness on all aspects of its role.
There are no relationships or circumstances which the Board
considers likely to affect the judgement of the independent
directors.
The Board takes the view that independence is not compromised by
length of tenure and that experience and continuity can add
significantly to the Board's strength.
The current Board does not have a record of the meetings of the
previous Board. Since taking office on 30 August 2019 the current
Board has operated as a three-man team; and virtually all actions
taken and decisions made have followed consultation between all the
members of the Board.
Simon Farrell, Haruko Fukuda and David Hutchins resigned from
the Board on 30 August 2019. David Johnston resigned on 14 June
2019 and Jonathan Reynolds resigned on 1 July 2019. Martin
Lampshire, James Normand and Stephen Roberts were appointed to the
Board on 30 August 2019.
There is an agreed procedure for Directors to take independent
professional advice if necessary and at the Company's expense.
Nomination Committee
There have been no appointments to the Board since the current
members took office on 30 August 2019. Accordingly, since that date
there has been no cause to form a Nominations Committee nor has one
met.
Stewardship Code
The Financial Reporting Council ('FRC') published "The UK
Stewardship Code--("Code") for institutional shareholders on 2 July
2010. The purpose of the Code is to enhance the quality of
engagement between institutional investors and companies to help
improve long-term returns to shareholders and the efficient
exercise of governance responsibilities.
The FRC is encouraging institutional investors to make a
statement of their commitment to the Code.
None of GRIT's investee companies has held a shareholders'
meeting during the period under review and so there has been no
occasion for votes to be cast. Nevertheless the Board has been in
active consultation with members of the Board of GRIT's only active
investee company, Anglo-African Minerals plc, particularly in view
of its successive attempts to find a purchaser for the whole of its
issued share capital.
Relations with Shareholders
The Directors place a great deal of importance on communication
with shareholders. The Annual Report and Accounts are widely
distributed to other parties who have an interest in the Company's
performance. Shareholders and investors may obtain up-to-date
information on the Company through the Company's website. The
Company responds to letters from shareholders on a wide range of
issues.
A regular dialogue is maintained with the Company's principal
shareholders. Reference to significant holdings in the Company's
ordinary shares can be found under 'Substantial Interests' on page
9.
All shareholders have the opportunity to put questions to the
Board at the Company's Annual General Meeting. The Company
Secretary is available to answer general shareholder queries at any
time throughout the year.
By Order of the Board
Peterhouse Capital Limited
Secretary
11 May 2021
Report of the Audit Committee Directors' Report and Governance Reports
Report of the Audit Committee 13
Composition of the Audit Committee
Because, during the period under review, the activity of the
Company has been confined to attempting the sale of its remaining
investments, there has been no cause to form or convene an Audit
Committee.
Review of Auditor
As part of its review of the scope and results of the audit,
during the year the Board considered and approved PKF Littlejohn's
plan for the audit of the financial statements for the year to 31
December 2019. PKF Littlejohn issued an unqualified audit report
which is included on pages 16 to 18.
No non-audit services have been provided by PKF Littlejohn LLP
in the year.
As part of the review of auditor independence and effectiveness,
PKF Littlejohn LLP has confirmed that it is independent of the
Company and has complied with relevant auditing standards. In
appointing PKF Littlejohn LLP, the Board (in the absence of an
Audit Committee) took into consideration the standing, skills and
experience of the firm and the audit team; and remains satisfied
that PKF Littlejohn LLP continues to provide effective independent
challenge in carrying out its responsibilities.
Audit Tenure
Following professional guidelines, the audit Responsible
Individual rotates after five years. The current Responsible
Individual is in the first year of his appointment. PKF Littlejohn
LLP was appointed auditor in 2020 and the Board recommends its
continuing appointment. PKF Littlejohn LLP's performance will
continue to be reviewed annually, taking into account all relevant
guidance and best practice.
Internal Controls
The Board is ultimately responsible for the Company's system of
internal control and for reviewing its effectiveness. Following
publication of the Financial Reporting Council's 'Internal Control:
Revised Guidance for Directors on the Combined Code' (the 'FRC
guidance') the Board confirms that there is an ongoing process for
identifying, evaluating and managing the significant risks faced by
the Company. This process has been in place for the year under
review and up to the date of approval of this Annual Report and is
regularly reviewed by the Board and accords with the FRC
Guidance.
The Board has reviewed the effectiveness of the system of
internal control. In particular, it has overseen the process for
identifying and evaluating the significant risks affecting the
Company and policies by which these risks are managed. The
significant risks faced by the Company are as follows:
-- investment and strategy; market;
-- liquidity; sector; earnings;
-- financial sustainability; operational; and regulatory.
The key components designed to provide effective internal
control are outlined below:
-- Peterhouse Capital Limited ('Peterhouse') as Company
Secretary and Administrator prepares forecasts and management
accounts which allow the Board to assess the Company's activities
and review its performance;
-- the Board has agreed clearly defined investment criteria,
specified levels of authority and exposure limits. Reports on these
issues, including performance statistics and investment valuations
are reviewed regularly by the Board;
-- written agreements are in place which specifically define the
roles and responsibilities Board and, where applicable, other
third-party service providers;
-- the Board has considered the need for an internal audit
function but, given the limited nature of the activities during the
year, this was concluded as not currently required. This will
continue to be reviewed in the future.
Internal control systems are designed to meet the Company's
particular needs and the risks to which it is exposed. Accordingly,
the internal control systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives and by
their nature can only provide reasonable and not absolute assurance
against mis-statement and loss.
The principal risks and uncertainties affecting the Company are
disclosed on page 7.
James Normand
Chairman of the Board of Directors
11 May 2021
Directors' Report and Governance Reports Directors' Remuneration Report
14 Directors' Remuneration Report
Remuneration Committee
For the same reasons that there is not currently an Audit
Committee, neither is there a Remuneration Committee.
The Board has prepared this report in accordance with the
requirements of Section 421 of the Companies Act 2006. An ordinary
resolution for the approval of this Report will be put to the
members at the forthcoming Annual General Meeting. This Report has
been divided into separate sections for unaudited and audited
information.
Policy on Directors' Remuneration
The Board's policy is that the remuneration of Directors should
reflect the experience of the Board as a whole and be comparable to
that of other relevant investment trusts that are similar in
size.
New independent Directors are provided with a letter of
appointment. Any Director who has served on the Board for more than
nine years will offer himself for re-election annually. The
requirements for the retirement of Directors are also contained in
the Company's Articles of Association. There is no notice period
and no provision for compensation upon early termination of
appointment.
Due Date
Director Date of Appointment for Re-election
M Lampshire 30 August 2019 AGM 2021
J Normand 30 August 2019 AGM 2021
S Roberts 30 August 2019 AGM 2021
Annual Report on Directors' Remuneration
Directors' Emoluments (audited)
The Directors who served in the twelve months to 31 December
2019 (and, for comparative purposes those who served in the twelve
months ended 31 December 2018) were awarded the following fees and
have similar investment objectives and structures. Furthermore, the
level of remuneration should be sufficient to attract and retain
the Directors needed to oversee properly the Company and to reflect
the specific circumstances of the Company, the duties and
responsibilities of the Directors and the value and amount of time
committed to the Company's affairs. The fees for the Directors are
determined within the limits set out in the Company's Articles of
Association. The present limit is GBP200,000 per annum in aggregate
and the approval of shareholders in a general meeting would be
required to change this limit. At the prevailing level of
Directors' fees, the aggregate amount payable to the Company's
Directors during the year to 31 December 2019 was GBP43,736.
Non-executive Directors are not eligible for bonuses, pension
benefits, share options, long-term incentive schemes or other
benefits.
The Company has not been able to obtain Directors' and Officers'
liability insurance.
The terms of Directors' appointments provide that Directors are
obliged to retire by rotation, and to offer themselves for re-
election by shareholders at least every three years after that.
2019 2018
Additional Additional
Standard contracted Standard contracted
Name fee services Total fee services Total
Simon Farrell 20,000 - 20,000 27,000 - 27,000
Haruko Fukuda 18,333 - 18,333 23,000 - 23,000
David ('Sam') Hutchins 18,333 - 18,333 27,000 - 27,000
James Normand 11,667 12,000 23,667 - - -
Martin Lampshire 13,333 6,000 19,333 - - -
Stephen Roberts 10,000 31,500 41,500 - - -
David Johnston - - - - - -
John Reynolds - - - - - -
Lord Anthony St
John - - - 8,000 - 8,000
Directors' Remuneration Report 15
Unpaid fees
As at 31 December 2019 a significant proportion of these fees
remained unpaid, as follows:
Simon Farrell 20,583
Haruko Fukuda 19,012
David ('Sam')
Hutchins 16,250
James Normand 25,833
Martin Lampshire 22,000
Stephen Roberts 34,708
Directors' Interests
Biographies of the Directors are shown on page 8.
No Directors who held office during the year held ordinary
shares or CULS in the Company as at 31 December 2019 or 31 December
2018, 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 2019 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 on pages 14 and 15 was
approved by the Board of Directors and signed on its behalf on 11
May 2021.
James Normand
Chairman of the Board of Directors
Directors' Report and Governance Reports Auditor's Report
16 Independent Auditor's Report
to the members of Global Resources lnvestment Trust plc
Opinion
We have audited the financial statements of Global Resources
Investment Trust Plc (the 'company') for the year ended 31 December
2019 which comprise the Income Statement, the Statement of Changes
in Equity, Balance Sheet and the Cash Flow Statement and notes to
the financial statements, including a summary of significant
accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and
international accounting standards in conformity with the
requirements of the Companies Act 2006.
In our opinion, the financial statements:
-- give a true and fair view of the state of the company's
affairs as at 31 December 2019 and of its loss for the year then
ended;
-- have been properly prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to principal risks, going concern and
viability statement
We have nothing to report in respect of the following
information in the annual report, in relation to which the ISAs
(UK) require us to report to you whether we have anything material
to add or draw attention to:
-- the disclosures in the annual report set out on page 7 that
describe the principal risks and explain how they are being managed
or mitigated;
-- the directors' confirmation set out on page 9 in the annual
report that they have carried out a robust assessment of the
principal risks facing the company, including those that would
threaten its business model, future performance, solvency or
liquidity;
-- the directors' statement set out on page 6 in the financial
statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting in preparing the
financial statements and the directors' identification of any
material uncertainties to the company's ability to continue to do
so over a period of at least twelve months from the date of
approval of the financial statements;
-- whether the directors' statement relating to going concern
required under the Listing Rules in accordance with Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained in
the audit; or
-- the directors' explanation set out on page 6 in the annual
report as to how they have assessed the prospects of the company,
over what period they have done so and why they consider that
period to be appropriate, and their statement as to whether they
have a reasonable expectation that the company will be able to
continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or
assumptions.
Our application of materiality
Materiality for the Financial Statements was set at GBP13,000
determined with reference to a benchmark of gross assets, of which
it represents 2%. Gross assets are deemed the primary driver for an
investment trust Company. There were no revisions to the
materiality as the audit progressed.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding GBP650, in addition
to other identified misstatements that warranted reporting on
qualitative grounds.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and
assessed the risk of material misstatement in the Financial
Statements. In particular, we looked at areas involving significant
accounting estimates and judgement by the directors and considered
future events that are inherently uncertain such as the valuation
of investments. We also addressed the risk of management override
of internal controls, including among other matters consideration
of whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
Auditor's Report Directors' Report and Governance Reports
17
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter How the scope of our audit responded
to the key audit matter
Investments valuation, classification
and ownership (see Note 5)
-------------------------------------------------------------
The Company holds unquoted investments Our work in this area included:
that involve measurement factors * reviewing the ownership of the investments;
such as recent transactions,
valuation benchmarks of comparable
entities and net assets of the * challenging management on the valuation basis adopted
investee. The choice of valuation and ensuring it complied with industry best practice
methodology, together with the and accounting practice;
absence of reliable information
for non-listed investments,
makes the valuation judgemental * ensuring that the carrying value of the investment is
and could result in a material not impaired, over and above that currently
misstatement. As a result, this recognised in the financial statements; and
is a key judgemental area that
our audit focuses on.
* ensuring that appropriate disclosures surrounding any
estimates and judgements made regarding their
valuations.
Based on the procedures performed,
we consider management's judgements
and investment valuation estimates
to be reasonable and the related
disclosures appropriate.
-------------------------------------------------------------
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon. In connection with our audit of the
financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required
to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our
responsibility to specifically address the following items in the
other information and to report as uncorrected material
misstatements of the other information where we conclude that those
items meet the following conditions:
-- Fair, balanced and understandable set out on page 9 - the
statement by the directors that they consider the annual report and
financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the company's performance, business model
and strategy, is materially inconsistent with our knowledge
obtained in the audit; or
-- Audit committee reporting set out on page 13 - the section
describing the work of the audit committee does not appropriately
address matters communicated by us to the audit committee; or
-- Directors' statement of compliance with the UK Corporate
Governance Code set out on page 12 - the parts of the directors'
statement required under the Listing Rules relating to the
company's compliance with the UK Corporate Governance Code
containing provisions specified for review by the auditor in
accordance with Listing Rule 9.8.10R(2) do not properly disclose a
departure from a relevant provision of the UK Corporate Governance
Code.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion the part of the directors' remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements;
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements;
-- the information about internal control and risk management
systems in relation to financial reporting processes and about
share capital structures, given in compliance with rules 7.2.5 and
7.2.6 in the Disclosure Rules and Transparency Rules sourcebook
made by the Financial Conduct Authority (the FCA Rules), is
consistent with the financial statements and has been prepared in
accordance with applicable legal requirements; and
-- information about the company's corporate governance code and
practices and about its administrative, management and supervisory
bodies and their committees complies with rules 7.2.2, 7.2.3 and
7.2.7 of the FCA Rules.
Directors' Report and Governance Reports Auditor's Report
18
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the strategic report or
the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the financial statements and the part of the directors'
remuneration report to be audited are not in agreement with the
accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made;
-- we have not received all the information and explanations we require for our audit; or
-- a corporate governance statement has not been prepared by the company.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities .
This description forms part of our auditor's report.
Other matters which we are required to address
We were appointed by the Directors on 3 April 2020 to audit the
financial statements for the period ending 31 December 2019. This
is the first year of our engagement.
The non-audit services prohibited by the FRC's Ethical Standard
were not provided to the company and we remain independent of the
company in conducting our audit.
The objectives of our audit, in respect of fraud, are; to
identify and assess the risks of material misstatement of the
financial statements due to fraud; to obtain sufficient appropriate
evidence regarding the assessed risk of material misstatement due
to fraud, through designing and implementing appropriate responses;
and to respond appropriately to fraud or suspected fraud identified
during the audit. However, the primary responsibility for the
prevention and detection of fraud risks lies with those charged
with governance of the entity and management.
We assessed the susceptibility of the Company's financial
statements to material misstatement by considering the controls
that the company has established to address risks identified by the
entity and how management monitor those controls, and by evaluating
conditions in the context of incentive/pressure to commit fraud,
considering the opportunity to commit fraud.
Based on our understanding obtained through the procedures
outlined above, we designed our audit procedures to identify
non-compliance with the aforementioned laws and regulations. Our
procedures included journal entry testing, inquiries of management
and focused testing, as referred to in the key audit matters
section.
Our audit opinion is consistent with the additional report to
the audit committee.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone, other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
David Thompson (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
Canary Wharf
London
E14 4HD
11 May 2021
Income Statement 19
Year ended 31 December Year ended 31 December
2019 2018
Revenue Capital Total Revenue Capital Total
---------------------------------
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------ -------- -------- -------- --------- --------- ---------
Losses on investments 5 - (777) (777) (5,426) (5,426)
Exchange losses - - - (4) (4)
Other expenses 2 (589) (471) (1,060) (549) (810) (1,359)
--------------------------------- ------ -------- -------- -------- --------- --------- ---------
Net loss before finance
costs and taxation (589) (1,248) (1,837) (549) (6,240) (6,789)
Interest payable and similar
charges - - - (30) - (30)
--------------------------------- ------ -------- -------- -------- --------- --------- ---------
Net loss on ordinary activities
before taxation (589) (1,248) (1,837) (579) (6,240) (6,819)
Taxation on ordinary activities 3 - - - - - -
--------------------------------- ------ -------- -------- -------- --------- --------- ---------
Net loss attributable
to equity shareholders (589) (1,248) (1,837) (579) (6,240) (6,819)
--------------------------------- ------ -------- -------- -------- --------- --------- ---------
Loss per ordinary share 4 (1.40p) (2.97p) (4.37p) (1.38p) (14.87p) (16.25p)
--------------------------------- ------ -------- -------- -------- --------- --------- ---------
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 Other Comprehensive Income 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.
Financial Statements Statement of Changes in Equity
20 Statement of Changes in Equity
Share Revenue
Share premium Capital reserve
For the year ended 31 December capital account reserve deficit Total
2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- -------- -------- --------
Balance at 31 December 2018 420 36,880 (31,909) (3,960) 1,431
Loss on ordinary activities
after taxation - - (1,248) (589) (1,837)
------------------------------- -------- -------- -------- -------- --------
Balance at 31 December 2019 420 36,880 (33,157) (4,549) (406)
------------------------------- -------- -------- -------- -------- --------
Share Revenue
Share premium Capital reserve
For the year ended 31 December capital account reserve deficit Total
2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- -------- -------- --------
Balance at 31 December 2017 420 36,880 (25,669) (3,381) 8,250
Loss on ordinary activities
after taxation - - (6,240) (579) (6,819)
------------------------------- -------- -------- -------- -------- --------
Balance at 31 December 2018 420 36,880 (31,909) (3,960) 1,431
------------------------------- -------- -------- -------- -------- --------
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 21
2019 2018
Notes GBP'000 GBP'000
-------------------------------------- ------ -------- --------
Current assets
Investments 5 28 1,548
Receivables 6 13 23
Cash at bank 2 32
-------------------------------------- ------ -------- --------
43 1,603
Creditors: amounts falling due within
one year
Trade and other payables 7 (449) (172)
-------------------------------------- ------ -------- --------
Net current (liabilities) assets (406) 1,431
-------------------------------------- ------ -------- --------
Net (liabilities) assets (406) 1,431
-------------------------------------- ------ -------- --------
Capital and reserves
Called up share capital 8 420 420
Share premium 36,880 36,880
Capital reserve (33,157) (31,909)
Revenue reserve (4,549) (3,980)
-------------------------------------- ------ -------- --------
Equity shareholders' funds (deficit) (406) 1,431
-------------------------------------- ------ -------- --------
Net (deficit) asset value per share 9 (0.96p) 3.41p
-------------------------------------- ------ -------- --------
The financial statements on pages 19 to 33 were approved by the
Board of Directors and authorised for issue on 11 May 2021 and were
signed on its behalf by:
James Normand
Chairman
The accompanying notes are an integral part of the financial
statements.
Financial Statements Cash Flow Statement
22 Cash Flow Statement
Year ended Year ended
31 December 31 December
2019 2018
Notes GBP'000 GBP'000
---------------------------------------------- ----- ------------ ------------
Operating activities
Loss before taxation (1,837) (6,819)
Loss on investments 5 1,248 5,426
Decrease (increase) in receivables 10 (13)
Increase in payables 277 89
Realised exchange loss on currency balances - 4
Value of share tranches in lieu of management
fee - 810
---------------------------------------------- ----- ------------ ------------
Net cash outflow from operating activities
before and after taxation (302) (503)
---------------------------------------------- ----- ------------ ------------
Investing activities
Sales of investments 272 594
Tygola guarantee - (380)
---------------------------------------------- ----- ------------ ------------
Net cash inflow from investing activities 272 214
---------------------------------------------- ----- ------------ ------------
Decrease in cash in the year (30) (289)
Exchange movements including forward
contracts - (4)
Net cash at the start of the year 32 325
---------------------------------------------- ----- ------------ ------------
Net cash at the end of the year 2 32
---------------------------------------------- ----- ------------ ------------
Notes to the Financial Statements 23
for the year to 31 December 2019
1 Accounting Policies
The Company is a public company limited by shares which is
incorporated in England. The registered office of the Company is 80
Cheapside, London EC2V 6EE.
The principal activity of the Company is to undertake the
business of an investment trust.
(a) Basis of accounting
The financial statements of the Company have been prepared in
accordance with international accounting standards in conformity
with the Companies Act 2006.
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.
There are no new Accounting Standards which came into effect on
1 January 2019 which are relevant to the Company's financial
statements. There are no new standards and interpretations issued
but not effective and not early adopted that are expected to have a
material impact on the Company.
Going Concern
For the reasons outlined in the Strategic Review, particularly
with regard to the CVA arrangement dated December 2020, the Board
has concluded that it is appropriate to prepare the financial
statements on a going concern basis. In assessing whether the going
concern assumption is appropriate, the Directors have taken into
account all relevant available information about the current and
future position of the Company, including the current level of
resources, additional funding raised based on investor commitments
and the level of contracted and committed expenditure over the
going concern period. The Company recorded a loss for the year and,
as at 31 December 2020, had net current liabilities of GBP0.4m.
The Company meets its working capital requirements from its cash
and cash equivalents. To date, the Company has raised finance
through equity placings, receipt of convertible loans and the sale
of investments. At the date of approval of these financial
statements, the Company has received placing letters from investors
amounting to GBP500,000, conditional only on the restoration of
trading of the Company's shares to the London Stock Exchange. After
the payment of creditors not included in the CVA, the Company has
sufficient funds to meet its working capital needs for a period of
at least 12 months from the date of approval of these financial
statements. Further funding will be required either through equity
raisings or other financial arrangements to fund future
activities.
Having prepared forecasts based on current resources, the
Directors believe the Company has sufficient resources to meet its
obligations for a period of at least 12 months from the date of
approval of these financial statements. The financial statements do
not include the adjustments that would be required should the going
concern basis of preparation no longer be appropriate.
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 judgement concerns the valuation of unlisted
investments. This is described in note 1(b) with further analysis
provided in note 5.
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 on the date the
Company commits to purchase or 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 the investee
company, covenant compliance and ability to repay interest and cash
balances. Where no reliable fair value can be estimated,
investments are 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 (see note (h) below).
26
(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 receivable (less any provision for doubtful receipt) is
recognised as it accrues.
(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 revenue items 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 are
aggregated with the cost of the related investments.
(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.
(h) 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 or loss arising in the
revenue column of the Income Statement is added to or deducted from
this reserve. This reserve, if positive, is available for paying
dividends.
(i) Segmental information
The Directors are of the opinion that the Company is engaged in
a single segment of business, being investment.
(j) Investments in Associates
As an Investment Trust, the Company considers that it is 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 basis in the Income
Statement.
2 Other expenses
2019 2019 2019 2018 2018 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- -------- -------- --------
Directors' fees 153 153 85 85
Auditors' remuneration 40 40 40 40
Call on Tygola guarantee - - - - 380 380
Provision against advances
to Anglo-African Minerals
plc - 471 471 - 430 430
Other costs 396 - 396 424 - 424
--------------------------- -------- -------- -------- -------- -------- --------
589 471 1,060 549 810 1,359
--------------------------- -------- -------- -------- -------- -------- --------
The Company had an agreement with Maitland Administration
Services (Scotland) Limited for the provision of secretarial and
administration services. This agreement ended on 31 August 2019.
During the period the total fees payable to Maitland were
GBP73,932. The balance due to Maitland for secretarial services at
the year-end was GBP81,316. Maitland received a fee comprising
0.08% per annum of the total assets subject to a minimum annual fee
of GBP87,378. From 1 September 2019 secretarial and administration
services have been provided by Peterhouse Capital Limited. During
the period the total fees payable to Peterhouse for administration
services were GBP32,000. The balance due to Peterhouse for
secretarial services at the year-end was GBP8,000.
The Tygola guarantee cost relates to monies paid in respect of a
guarantee provided by the Company of lending by Tygola to
Anglo-African Minerals plc.
The provision against the loans to Anglo-African Minerals plc
results from a review of the likely recoverability of that
loan.
3 Tax on Ordinary Activities
Reconciliation of Tax Charge/(Credit)
A reconciliation of the current tax charge/(credit) is set out
below:
2019 2018
Total Total
GBP'000 GBP'000
------------------------------------------------- -------- --------
Loss on ordinary activities before taxation (1,837) (6,819)
------------------------------------------------- -------- --------
Corporation tax at standard rate 19% (2018: 19%) (349) (1,296)
Effects of:
Non-taxable losses 147 1,031
Excess management expenses 202 264
Exchange losses - 1
------------------------------------------------- -------- --------
Current year tax charge/(credit) - -
------------------------------------------------- -------- --------
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 2019 the Company had surplus management expenses
of approximately GBP2,276,000 (2018: GBP1,221,000) which have not
been recognised as a deferred tax asset.
4 Return per ordinary share
Return per ordinary share attributable to shareholders reflects
the overall performance of the Company in the year.
Year ended Year ended
31 December 31 December
2019 2018
------------------------------------------ ------------ ------------
Revenue return (1.40p) (1.38p)
Capital return (2.97p) (14.87p)
------------------------------------------ ------------ ------------
Total return (4.37p) (16.25p)
------------------------------------------ ------------ ------------
Number Number
------------------------------------------ ------------ ------------
Weighted average ordinary shares in issue 41,964,512 41,964,512
------------------------------------------ ------------ ------------
5 Investments
2019 2018
Total Total
GBP'000 GBP'000
------------------------------------------ -------- --------
Investments listed/quoted on a recognised
investment exchange 28 926
Unquoted investments - 622
------------------------------------------ -------- --------
28 1,548
------------------------------------------ -------- --------
Equity shares 28 1,077
Convertible securities - 471
------------------------------------------ -------- --------
28 1,548
------------------------------------------ -------- --------
The fair value of investments is assessed at each balance sheet
and all gains and losses arising from these assessments are
reflected in the capital section of the Income Statement.
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 Level2
Listed Listed 2019 2018
overseas in UK Level3 Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ --------- -------- -------- -------- --------
Opening book cost 5,158 262 4,855 10,275 12,212
Opening fair value adjustment (4,362) (132) (4,233) (8,727) (4,644)
------------------------------ --------- -------- -------- -------- --------
Opening valuation 796 130 622 1,548 7,568
Sales - proceeds (225) (47) - (272) (594)
Sales - realised losses (543) (83) - (626) (1,343)
Fair value adjustment - - (622) (622) (4,083)
------------------------------ --------- -------- -------- -------- --------
Closing valuation 28 - - 28 1,548
------------------------------ --------- -------- -------- -------- --------
Closing book cost 181 - 4,855 5,036 10,275
Closing fair value adjustment (153) - (4,855) (5,008) (8,727)
------------------------------ --------- -------- -------- -------- --------
Closing valuation 28 - - 28 1,548
------------------------------ --------- -------- -------- -------- --------
The gains and losses included in the above table have all been
recognised within losses on investments in the Income Statement on
page 19.
The remaining Level 3 investment is the Company's equity stake
in and advances to Anglo African Minerals plc ('AAM'). In the 2018
balance sheet this investment was held at a fair value of
GBP471,000. The 2018 financial statements made reference to
refinancing initiatives then being negotiated; and specifically
stated that "the valuations will reduce to, or close to, nil should
finance not be secured in the next 6 to 12 months". Refinancing of
AAM has still not been achieved and so the Board has decided to
adopt a prudent approach to fair value by making full provision in
these financial statements for the possible non-payment of the
Company's loans to AAM.
2019 2018
Losses on investments GBP'000 GBP'000
------------------------ -------- --------
Realised losses on sale (626) (1,343)
Movement in fair value (622) (4,083)
------------------------ -------- --------
Losses on investments (1,248) (5,426)
------------------------ -------- --------
During the year the Company did not incur any transaction costs
on purchases or sales.
6 Debtors
2019 2018
GBP'000 GBP'000
------------------------------- -------- --------
Prepayments and accrued income 2 8
VAT recoverable 11 15
------------------------------- -------- --------
13 23
------------------------------- -------- --------
7 Other creditors
2019 2018
GBP'000 GBP'000
----------------------------- -------- --------
Other creditors and accruals 449 172
----------------------------- -------- --------
449 172
----------------------------- -------- --------
8 Share Capital
2019 2019
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 2019 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 on page 6.
9 Net Asset Value per Ordinary Share
2019 2018
----------------------------------------------------- ---------- ----------
Net (liability) asset value per share (1.0)p 3.41p
Net (liabilities) assets attributable at end of
period GBP(0.4m) GBP1.4m
Ordinary shares of 1p each in issue at end of period 41,964,512 41,964,512
----------------------------------------------------- ---------- ----------
30
10 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 shown on page 21.
The main risks that the Company faces arising from its financial
instruments are:
(i) market price risk, being the risk that the value of
investment holdings will fluctuate as a result of changes in market
prices caused by factors other than interest rate or currency rate
movements;
(ii) interest rate risk, being the risk that the future cash
flows of a financial instrument will fluctuate because of changes
in market interest rates;
(iii) foreign currency risk, being the risk that the value of
investment holdings, investment purchases, investment sales and
income will fluctuate because of movements in currency rates;
(iv) credit risk, being the risk that a counterparty to a
financial instrument will fail to discharge an obligation or
commitment that it has entered into with the Company; and
(v) liquidity risk, being the risk that the Company may not be
able to liquidate its investments to satisfy ongoing operational
requirements. The Company's operations have been cash flow negative
since its inception, with the Company relying on the sale of
investments to generate the cash needed to continue to operate.
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:
2019 2018
GBP'000 GBP'000
---------------------------- -------- --------
Financial instruments
Cash at bank and on deposit 2 32
Financial liabilities
Other creditors 449 172
---------------------------- -------- --------
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 Chairman's Statement and further information on the
investment portfolio is set out on page 5.
If the investment portfolio valuation fell by 10 per cent at 31
December 2019, the impact on the profit or loss and the net asset
value would have been negative GBP3,000 (2018: negative
GBP155,000). 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; nor
may they 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.
2019 2018
Weighted Weighted
average average
period period
2019 for 2018 for
Weighted which the Weighted which the
average rate is average rate is
2019 interest fixed 2018 interest fixed
GBP'000 rate (%)* (years) GBP'000 rate (%)* (years)
------------ -------- ---------- ---------- -------- ---------- ----------
Assets
Convertible
securities - - - 471 - -
------------ -------- ---------- ---------- -------- ---------- ----------
* The 'weighted average interest rate' is based on the current
yield of each asset, weighted by their market value.
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:
2019 2018
Net Net
2019 2019 current 2019 2018 2018 current 2018
Investments Cash assets Total Investments Cash assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- ------------ -------- -------- -------- ------------ -------- -------- --------
US Dollar - - - - 471 - 471 -
Australian
Dollar 28 - - 28- 796 - 796 -
28 = - 28 1,267 - 1,267 -
----------- ------------ -------- -------- -------- ------------ -------- -------- --------
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 negligible (2018:
GBP0.06 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; nor
may they 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.
2019 2018
GBP'000 GBP'000
-------------------------- -------- --------
Cash and cash equivalents 2 32
2 32
-------------------------- -------- --------
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 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 would move the
holdings to another bank.
As at 31 December 2019 and 31 December 2018 the Company held 3
per cent or more of issued share capital of the following
companies:
2019 2018
Number of 2019 Number of 2018
ordinary shares Percentage ordinary shares Percentage
issued held issued held
----------------------- ---------------- ----------- ---------------- -----------
Anglo African Minerals
plc 444,648,075 25.4% 444,648,075 25.4%
Siberian Goldfields
Limited 250,010,000 6.05% 250,010,000 6.1%
IMC Exploration
Group - - 147,291,719 17.6%
MCB Resources Limited
(formerly Kalia Less than
Limited) - 3% 2,514,347,391 19.1%
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:
2019 2018
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Unquoted investments
Unquoted convertible securities that are convertible
into unlisted securities - 471
Unquoted equities - 151
----------------------------------------------------- -------- --------
- 622
----------------------------------------------------- -------- --------
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.
11 Related Party Transactions
The 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 2.
There are no other transactions with the Board other than
aggregated remuneration for services as Directors as disclosed in
the Directors-- Remuneration Report on pages 14 and 15, and as set
out in note 2 to the financial statements. None of the Directors
has any interest in the ordinary shares of the Company.
There were fees of GBP141,430 (2018: GBP24,000) 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. There were no
transactions with AAM during the year.
12 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 (resigned as Director on 31 August 2019), 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 share-based payment arrangement has now fully lapsed.
13 Post Balance Sheet Events
Subsequent to the year-end, the Board proposed a Creditors'
Voluntary Arrangement ('CVA') (described fully in the circular to
shareholders dated 3 December 2020). Simultaneously the Board
re-negotiated the terms of a placing first arranged in June 2020 to
raise GBP125,893 from the issue of new shares and a further
GBP100,000 in the form of Convertible Loan Notes. Creditors and
shareholders approved the CVA and the issue of the shares at
meetings on 21 December 2020.
In April 2021 the Company sold its holding in Siberian
Goldfields Limited for GBP488,352, realising a surplus of the same
amount over the nil written down value at which it is held in these
financial statements. This surplus will be recognised in the 2020
financial statements and used to settle creditors under the
CVA.
In May 2021, the Company conditionally raised a minimum of
GBP500,000 in new equity funds, subject only to the restoration of
trading in the Company's shares on the London Stock Exchange.
34 Glossary of Terms and Definitions
Actual Gearing Total assets (as below) less all cash divided by
shareholders funds.
Asset Cover The value of a company's net assets available to
repay a certain security. Asset cover is usually
expressed as a multiple and calculated by dividing
the net assets available by the amount required
to repay the specific security.
Discount/Premium The amount by which the market price per share
of an investment trust is lower or higher than
the net asset value per share. The discount or
premium is normally expressed as a percentage of
the net asset value per share.
Dividend Cover Earnings per share divided by dividends per share
expressed as a ratio.
Dividend Yield The annual dividend expressed as a percentage of
the share price.
Net Asset Value or The value of total assets less liabilities. Liabilities
NAV* for this purpose included current and long-term
liabilities. To calculate the net asset value per
Ordinary share the net asset value divided by the
number of shares in issue produces the net asset
value per share.
Ongoing Charges Figure* A measure of all operating costs incurred in the
reporting period. calculated as a percentage of
average net assets in that year. Operating costs
exclude costs suffered within underlying investee
funds. costs of buying and selling investments,
interest costs, taxation and the costs of buying
back or issuing ordinary shares.
Potential Gearing Total assets (as below) divided by shareholders'
funds.
Price/Earnings Ratio The ratio is calculated by dividing the middle-market
price per share by the earnings per share.
The calculation assumes no change in earnings but
in practice the multiple reflects the stock market's
view of a company's prospects and profit growth
potential.
Prior Charges The name given to all borrowings including debentures.
loans and short-term loans and overdrafts that
are to be used for investment purposes, reciprocal
foreign currency loans, currency facilities to
the extent that they are drawn down, index-linked
securities, and all types of preference or preferred
capital and the income shares of split capital
trusts, irrespective of the time until repayment.
Redemption Yield The measure of the annualised total return on the
current price of a security up to the date of its
repayment. The calculation is based on aggregated
income and capital returns, no account being taken
of taxation.
Total Assets Total assets less current liabilities (excluding
prior charges as defined above).
Total Return* Total return involves reinvesting the net dividend
in the month that the share price goes ex-dividend.
The NAV total return involves investing the same
net dividend in the NAV of the Trust on the date
to which that dividend was earned, e.g. quarter
end, half year or year-end date.
Volume weighted average The measure of the average price within a time
price ('VWAP') period.
*These items are considered Alternative Performance Measures
("APM's")
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END
FR FLFFAEFILLIL
(END) Dow Jones Newswires
May 12, 2021 02:00 ET (06:00 GMT)
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