BAKER STEEL RESOURCES TRUST LIMITED
Annual Report and
Audited Financial Statements
For the period from 9 March 2010 (date of incorporation) to 31 December 2010
BAKER STEEL RESOURCES TRUST LIMITED
CONTENTS
Investment Objectives & Policies
Chairman’s Statement
Investment Manager’s Report
Board of Directors
Directors’ Report
Portfolio Statement
Independent Auditor’s Report
Letter of Valuation Review
Statement of Financial Position
Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Notice of 2011 Annual General Meeting
Management and Administration
PAGE
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37
40
MISSION STATEMENT
To seek growth over the long term through a
focused global portfolio of natural resources
companies, investing predominantly in attractively
valued private companies with strong development
projects and focused management.
80
70
60
50
40
30
20
10
0
)
M
£
(
V
A
N
d
e
t
u
l
i
d
n
U
10
14
5
2
4
2
1
26
Progression of Undiluted Net Asset Value
NAV at 31/12/10
Ivanplats (US$15m)
Ferrous (US$12m)
Gobi (US$7m)
Ironstone (US$5m)
SAFM (US$4m)
Copperbelt (US$3m)
First Coal (US$3m)
Forbes Coal (US$3m)
Other Investments (US$3m)
Net Cash (US$14m)
15
12
7
5
4
3
3
3
3
14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
1
INVESTMENT OBJECTIVES AND POLICIES
Investment objective
The Company’s investment objective is to seek capital growth over the long-term through a focused, global portfolio
consisting principally of the equities, or related instruments, of natural resources companies. The Company will invest
predominantly in unlisted companies (i.e. those companies that have not yet made an initial public offering or “IPO”) but also
in listed securities (including special situations opportunities and less liquid securities) with a view to exploiting value inherent
in market inefficiencies and pricing anomalies.
Investment policy
The core of the Company’s strategy is to invest in natural resources companies, predominantly unlisted, that the Investment
Manager considers to be undervalued and have strong fundamentals and attractive growth prospects. Natural resources
companies, for the purposes of the investment policy, are those involved in the exploration for and extraction of base metals,
precious metals, bulk commodities, thermal and metallurgical coals, industrial minerals, energy and uranium and include
single-asset as well as diversified natural resources companies.
It is intended that unlisted investments be realised through an IPO, trade sale, management repurchase or other methods.
The Company will primarily focus on making investments in companies with producing and/or tangible assets such as
resources and reserves that have been verified under internationally recognised standards for reporting, such as those of the
Australasian Joint Ore Reserves Committee. The Company may also invest from time to time in exploration companies whose
activities are speculative by nature.
The Company has flexibility to invest in a wide range of investments in addition to unlisted and listed equities and equity-
related securities, including but not limited to commodities, convertible bonds, debt securities, royalties, options, warrants and
futures. Derivatives may be used for efficient portfolio management, hedging and for the purposes of obtaining investment
exposure. The Company may also have exposure from time to time to other companies within the wider resources and
materials sector, including services companies, transport and infrastructure companies, utilities and downstream processing
companies.
The Company may take legal or management control of a company from time to time. The Company may invest in other
investment funds or vehicles, including any managed by the Manager or Investment Manager, where such investment would be
complementary to the Company’s investment objective and policy.
There will be no fixed limits on the allocation between unlisted and listed equities or equity-related securities and cash
although, as a guideline, typically the Investment Manager will aim for the Company to be invested over the long-term:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
between 40 and 100 per cent of the value of its gross assets in unlisted equities or equity-related securities;
up to 50 per cent of the value of its gross assets in listed equities or equity-related securities;
up to 10 per cent of the value of its gross assets in cash or cash-like holdings; and
typically in between 10 and 15 core positions to provide adequate diversification whilst retaining a focused core
approach. Core positions will typically be between 5 per cent and 15 per cent of NAV as at the date of acquisition.
The actual percentage of the Company’s gross assets invested in listed and unlisted equities and equity-related securities and
cash and cash-like holdings and the number of positions held may fall outside these ranges from time to time. For example,
listed securities might exceed the above guideline following a significant number of IPOs or in certain market conditions and
likewise cash balances may exceed the above guideline following the realisation of one or more investments or following the
issue of new equity in the Company, pending investment of the proceeds.
The investment policy has the following limits:
(cid:120) Save in respect of cash and cash-like holdings awaiting investment, the Company will invest or lend no more than 20
per cent in aggregate of the value of its gross assets in or to any one particular company or group of companies, as at the
date of the relevant transaction.
(cid:120) No more than 10 per cent in aggregate of the value of the gross assets of the Company may be invested in other listed
closed-ended investment funds, except for those which themselves have stated investment strategies to invest no more
than 15 per cent of their gross assets in other listed closed-ended investment funds.
2
INVESTMENT OBJECTIVES AND POLICIES (CONTINUED)
Where derivatives are used for investment exposure, these limits will be applied in respect of the investment exposures so
obtained.
If, and for so long as required by the Listing Rules, the Company will avoid (a) cross-financing between the businesses
forming part of its investment portfolio and (b) the operation of common treasury functions as between it and the investee
companies.
When deemed appropriate, the Company may borrow up to 10 per cent of NAV for temporary purposes such as settlement
mis-matches. Borrowings will not however be incurred for the purposes of any Share repurchases.
The Investment Manager will not normally hedge the exposure of the Company to currency fluctuations.
Any material change in the investment objective, investment policy or borrowing policy will only be made with the prior
approval of holders of Ordinary Shares by Ordinary Resolution.
Performance
Price/Index % Change from
At 31 December 2010 Level Inception
Net Asset Value (pence/share) 103.4 +3.4%*
Diluted Net Asset value (pence/share) 102.8 +2.8%*
Ordinary Share Price (pence/share) 78.5 -21.5%**
Subscription Share Price (pence/share) 15.5 n/a
MSCI World Index 330.6 +7.3%†
HSBC Global Mining Index 1620.1 +24.6%†
CRB Index 332.8 +21.8%†
Chinese Domestic Iron Ore – Hebie/Tangshan (US$/t) 215 +12.0%†
Copper (US$/t) 9650.0 +29.5%†
Gold (US$/oz) 1420.8 +21.7%†
Source: Bloomberg † closing 27/4/10, **Issue price 28/4/10. *NAV 30/4/10
Commodity Exposure
7%
2%
0%
2%
3%
0%
Cash
Other
Platinum
Coal
Gold
Iron Ore
Copper
Source: Baker Steel internal
20%
12%
18%
40%
31-Dec-10
30-Apr-10
30%
25%
20%
21%
3
CHAIRMAN’S STATEMENT
For the period from 9 March 2010 (date of incorporation) to 31 December 2010
I am pleased to present the Company’s first annual report and would like to thank all our shareholders for their support at the
time of listing of the Company and subsequently.
The Company was admitted to listing on 28 April 2010. Its structure as an investment company listed on the London Stock
Exchange gives investors an almost unique opportunity to invest in private developing mining companies. We are therefore
well-positioned to capture value as these companies move up the steepest part of the development curve and move on to a
listing or other form of monetisation.
As with most investment companies at launch, the main focus of the Company has been concentrated on making suitable
investments with sufficient potential at the right price. We had the significant benefit of acquiring an existing investment
portfolio from Genus Capital Fund so that the Company was already half invested at the outset. When making investments in
private companies, the level of due diligence required to be undertaken is much greater than for public companies which have
been through a listing process and are required to provide regular information to their shareholders. It has therefore taken time
to invest, but at year end the Company was 79.7% invested and since that time we have achieved our target of being fully
invested with a small cash holding to allow for working capital.
Following listing, the markets for commodities and listed mining shares were initially weak but the second half of 2010 saw a
strong recovery. The initial weakness was reflected in the disappointing postponement of the IPO of our largest position,
Ferrous Resources Limited in June 2010. Fortunately, Ferrous is well-funded for its immediate needs, with cash of US$430
million at the end of September 2010, which has meant it has been able to continue its preparations towards commencing
development of its first mine in mid-2011. We expect further news on the corporate front from Ferrous in the second quarter of
2011.
The strength of public markets for both commodities and associated companies is not necessarily immediately recognised in
our net asset value because when we assess “fair value” to determine carrying value for our unlisted holdings, we require
compelling evidence to support an adjustment, such as “grey market” transactions conducted at arm’s length. I am confident
that further developments in the assets which the Company holds will in time add to the value of the portfolio. Two of our
investments achieved listings during the year, South American Ferro Metals and Forbes & Manhattan Coal, and by year end
had risen by 31% and 48% respectively on our carrying value prior to listing.
Howard Myles
Chairman
21 April 2011
4
INVESTMENT MANAGER’S REPORT
For the period from 9 March 2010 (date of incorporation) to 31 December 2011
The objective of the Company is to seek capital growth over the long-term by investing through a focused global portfolio
consisting principally of the equities, or related instruments, of natural resources companies. These investments are
predominantly in private companies with strong development projects and focused management, but also in listed securities to
exploit value inherent in market inefficiencies.
Financial Performance
The audited net asset value per ordinary share as at 31 December 2010 was 103.4p per share, up 5.6% from the Company’s
first net asset value (“NAV”) calculated on 30 April 2010. During this period the HSBC World Mining Index was up 25.1% in
sterling terms.
On 10 January 2011, the Company announced an unaudited NAV for 31 December 2010 of 96.9p per share. During December
2010, Ivanhoe Nickel & Platinum (“Ivanplats”) undertook a placing of stock equivalent to around 1% of the shares in issue of
Ivanplats. At the time the year end NAV was being finalised, it was unclear whether this placing represented a change in fair
value and the carrying value was, therefore, not changed. However, during January, a further larger placing and significant
trading on the “grey” market demonstrated that the December placing had indeed indicated an upward revaluation was
necessary. This increase has been included in these financial statements and was also reflected in the 31 January 2011 NAV
statement announced on 4 February 2011. Accordingly, the audited NAV at 31 December 2010 has been restated to 103.4p to
reflect this uplift to the carrying value of Ivanplats together with a change in the valuation methodology for unlisted warrants
which contributed 0.3p to this increase.
For the purpose of calculating the net asset value per share, unquoted investments are carried at fair value as at 31 December
2010 as determined by the Directors and quoted investments are carried at fair value as at 31 December 2010.
Net assets at 31 December 2010 comprised the following:
Unquoted investments
Quoted investments
Net cash and fixed income instruments
Issue of Shares
£m
47.4
7.0
13.9
------
68.3
% net assets
69.4
10.3
20.3
------
100.0
The Company was admitted to trading on the London Stock Exchange on 28 April 2010. On that date, 30,468,865 Ordinary
Shares and 6,093,772 Subscription Shares were issued pursuant to a placing and offer for subscription and 35,554,224
Ordinary Shares and 7,110,822 Subscription Shares were issued pursuant to a scheme of reorganisation of Genus Capital Fund.
In addition 10,000 Management Ordinary Shares were issued.
Following the exercise of Subscription Shares at the end of September 2010, 7,543 Ordinary Shares were issued and as a
result, the Company had 66,030,632 Ordinary Shares and 13,197,051 Subscription Shares in issue at 31 December 2010.
Investment Update
Largest Investments
Ivanhoe Nickel and Platinum Limited
Ferrous Resources Limited
Gobi Coal & Energy Limited
Ironstone Resources Limited
South American Ferro Metals Limited
Copperbelt Minerals Limited
Forbes & Manhattan Coal Corporation
First Coal Corporation
Other Investments
Net Cash and fixed income instruments
22.0%
17.2%
9.7%
7.6%
5.4%
5.0%
4.3%
4.0%
4.5%
20.3%
5
INVESTMENT MANAGER’S REPORT
For the period from 9 March 2010 (date of incorporation) to 31 December 2011
During the period, the emphasis has been on identifying investments with the requisite potential and by 31 December 2010, the
Company was 79.7% invested. There has also been corporate activity in the Company’s portfolio.
(cid:120)
(cid:120)
In May 2010 Ferrous Resources announced its decision to float on the London Stock Exchange, which might have
seen it enter the FTSE 100 Index. However, due to “volatile markets” the Company postponed its listing in June 2010.
Following this postponement, the major shareholders of Ferrous moved to achieve a greater influence over the
direction of the company. As a result seven directors have departed and eight shareholder representative directors
were appointed representing over 75% of the shareholder base. In August 2010, the new Board appointed Deutsche
Bank as exclusive financial advisor with a remit to examine all options for the financing of the company including a
revived IPO, sale of a strategic stake and a sale of non-core assets. We expect more news on developments in Q2
2011.
In May 2010 Copperbelt Minerals agreed an offer from a consortium of Chinese investors, subject to approval by the
government of the Democratic Republic of Congo (“DRC”). Following delays in receiving the requisite approval, one
of the two parties which had agreed jointly to acquire Copperbelt, decided not to extend the date of completion and
effectively pulled out of the acquisition. Following this withdrawal, Copperbelt and the other party to the original
acquisition agreement, China Africa Development Fund (“CAD Fund”), entered into a new sale deed. At 31 March
2011, DRC Government approval for the transaction is still pending.
(cid:120) During July the Company invested in a pre-IPO fundraising in Forbes Coal, a South African coal producer at C$2.80
per share. Forbes Coal listed on the Toronto Stock Exchange at the end of September 2010 and was quoted at C$4.14
per share at 31 December 2010. In February 2011, Forbes Coal raised C$36.4 million at C$4.55 per share.
(cid:120) During November 2010, South American Ferro Metals (“SAFM”) listed on the Australian Stock Exchange at a price
31% above the Company’s previous carrying value. A significant portion of the Company’s holding in SAFM is in
the form of unlisted Performance Shares which are held at a discount to the Ordinary Shares pending conversion to
Ordinary Shares upon SAFM meeting various project milestones at its Ponto Verde iron ore project in Brazil. At the
end of October the mining of ore commenced at Ponto Verde and was trucked to a nearby third party processing plant
for beneficiation prior to sale, whilst SAFM commissioned its own plant at Ponto Verde. This is a key step towards
meeting two of the project milestones for the conversion of the Performance Shares which would unlock further value
for the Company.
We have added precious metals exposure to the Fund’s commodity mix given the positive outlook for precious metals and a
wish to diversify. New investments in silver and gold have been made in 2011 adding to the platinum exposure provided by
Ivanhoe Nickel and Platinum, our largest holding.
Description of Largest Investments
Ivanhoe Nickel and Platinum Limited ("IvanPlats")
IvanPlats is a private company which owns the Kamoa copper project in the Democratic Republic of Congo and the Turfspruit
nickel, platinum, palladium, copper and gold project in South Africa.
IvanPlats holds exploration licences covering 9000km² of the Congolese copperbelt. Primary amongst these is the Kamoa
copper project, situated less than 20km from Kolwezi, the DRC’s copper mining hub. A Canadian National Instrument 43-101
(“NI 43-101”)1
compliant report was completed on Kamoa in January 2011 by independent technical consultants AMEC.
The Turfspruit project is situated on the northern limb of the Bushveld Igneous Complex in South Africa. Drilling during 2010
intersected high-grade mineralisation over substantial widths and demonstrated a flattening of the Platreef mineralisation at
depth. A NI 43-101 compliant resource and technical report has been produced by independent consultants, AMEC.
1 Canadian National Instrument 43-101 is a mineral resource classification instrument which dictates reporting and public
disclosure of information in Canada relating to mineral properties.
6
INVESTMENT MANAGER’S REPORT
For the period from 9 March 2010 (date of incorporation) to 31 December 2011
Description of Largest Investments (continued)
Ferrous Resources Limited ("Ferrous")
Ferrous is a private company with five iron-ore projects in the iron quadrilateral region in Minas Gerais state and one in Bahia
state in Brazil. It has Joint Ore Resource Committee (“JORC”) 2
resources of 4.5 billion tonnes of iron ore and exploration
potential of a further 2.4 billion tonnes.
Production of iron ore has commenced with an initial output planned to reach 2.5 million tonnes by the end of 2011 and is
targeting a rate of 25 million tonnes per annum from 2014, potentially expanding to 62 million tonnes per annum by 2016.
Ferrous is developing its own infrastructure system which is expected to encompass a port terminal in Presidente Kennedy,
Espirito Santo state and a 400km slurry pipeline connecting the port terminal to Ferrous’ Viga Mine.
As at September 2010 Ferrous held over US$430 million in cash.
Gobi Coal & Energy Limited ("Gobi")
Gobi is a private company with three coking coal projects in Mongolia with a JORC compliant resource of 322 million tonnes.
The company is examining the feasibility of commencing production and hauling coal by road to its target markets in China
with a plan to commence production in the second half of 2011. The company is considering a listing on the Hong Kong Stock
Exchange in 2012.
Ironstone Resources Limited ("Ironstone")
Ironstone is a private Canadian company which owns the Clear Hills Iron Ore/Vanadium Project ("Clear Hills") in Alberta,
Canada. Clear Hills currently has a resource of 203 million tonnes of iron ore at a grade of 33% designated under NI 43-101.
Historic work (pre NI 43-101) in the 1950's estimated a resource of over 1 billion tonnes of iron ore at Clear Hills so there is a
good opportunity for Ironstone to increase its NI 43-101 resource significantly. The project has also demonstrated significant
vanadium by-product and gold assays in recent core samples suggesting the potential for further credits from those
commodities.
South American Ferro Metals Limited ("SAFM")
SAFM is a company listed on the Australian Stock Exchange whose main asset is the Ponto Verde iron ore project in Minas
Gerais in Brazil. The property has been drilled and the geology is well understood. While sufficient work is yet to be
completed to secure a JORC or similar resource, the property/asset is believed to contain the potential for 140-150 million
tonnes iron ore. Mining started at Ponto Verde in the fourth quarter of 2010 and commissioning of the beneficiation plant
commenced in the first quarter 2011 following the completion of its refurbishment. Production is increasing steadily towards
its design rate of 700,000 tonnes of iron ore per annum.
Geographical Exposure
30 Apr 2010
31 Dec 2010
Congo
21%
Cash
20%
Congo
21%
Cash
40%
S Africa
2%
Canada
4%
Mongolia
8%
Source: Baker Steel internal
S Africa
11%
Canada
14%
Brazil
25%
Brazil
23%
Mongolia
10%
Other
1%
2 The Code for Reporting of Mineral Resources and Ore Reserves (the JORC Code ) of the Australasian Joint Ore Reserves
Committee (JORC) is widely accepted as a standard for professional reporting of mineral resources and ore reserves. Mineral
resources are classified as 'inferred', 'indicated' or 'measured', while ore reserves are either 'probable' or 'proven'.
7
INVESTMENT MANAGER’S REPORT
For the period from 9 March 2010 (date of incorporation) to 31 December 2011
Copperbelt Minerals Limited ("Copperbelt")
Copperbelt is a private company with a copper-cobalt project in the Democratic Republic of Congo (“DRC”). Copperbelt has a
68% interest in the Deziwa Copper Project one of the largest copper oxide deposits in the DRC. Gecamines, a state owned
mining and exploration enterprise that holds most of the DRC's state mining activities, holds the remaining 32%. Copperbelt
completed a positive Definitive Feasibility Study on the project in January 2009.
In September 2010 Copperbelt signed an agreement with Chinese investment company, CAD Fund, for an all cash offer
valuing Copperbelt at US$282 million. The transaction was due to have been completed by the end of 2010. However, the
requisite approvals from the Chinese and Congolese authorities were still to be received by that date and it was agreed to
extend the deadline as sufficient progress had already been made.
Forbes and Manhattan Coal Corporation ("Forbes Coal")
Forbes Coal is a coal producer listed on the Toronto Stock Exchange with two mines in the Kwa-Zulu Province of South
Africa. The Magdalena Mine has a NI 43-101 compliant resource of 54.2 million tonnes of bituminous coal and produced
449,000 tonnes of coal in 2009. The Aviemore Mine has a NI 43-101 compliant resource of 52.8 million tonnes of anthracite
coal and resumed operations in June 2010, following the company’s refinancing.
First Coal Corporation ("First Coal")
First Coal is a private company with a coking and Pulverised Coal Injection coal3
Coal has announced NI 43-101 compliant resources of 78 million tonnes coal.
project in British Columbia, Canada. First
Market Outlook
We anticipate that a major theme for 2011 will be the increase in new IPOs in the gold and mining sectors. The strong
performance of listed issues in 2010 (HSBC Global Mining Index +27.9%) and continuing strength in commodity prices
means that the market is increasingly receptive to new opportunities, particularly if they are relatively attractively priced.
Commodity markets should continue to benefit from rising demand for industrial metals and energy, both in the US, where
recovery is slowly taking place in the manufacturing sector, and in Asia, as the economies of China and India continue to
generate growth and increase output. Manufacturing sector recovery and a growing demand for construction materials in Asia
will continue to support industrial metal prices in 2011. However, the recent natural disaster in Japan is likely to depress
demand for industrial raw materials, in particular iron ore and coal, in the short-term. Japan is the second largest consumer of
copper ore and Asia’s biggest importer of aluminium. Inflation is set to be one of the most significant challenges for
governments and investors in 2011, especially as commodity and energy prices rise on growing demand from emerging
markets. For instance, China’s inflation rate accelerated to 4.9% during January, the highest rate for over two years. The
potential for fears over inflation to prompt increases in interest rates presents a threat to industrial metals prices.
Recent volatility in energy markets is likely to continue in 2011, as the unclear outcome of the North African uprisings
promotes uncertainty regarding the future of one of the world’s key oil producing regions. Surging oil prices will potentially
restrict output growth and increase headline inflation. These factors are a risk to global economic recovery. Higher oil prices
are also likely to feed through to higher operating costs for producing mines increasing the cost curve of the mining industry
and putting upward pressure on metal prices.
The outlook for precious metals in 2011 remains strong. There appear to have been no major structural economic changes in
the past twelve months that might undermine the case for gold. In the short-term we anticipate the gold price will be driven
upwards by sustained political instability, financial imbalances and global inflation concerns. In the long-term the case for gold
appears robust. In particular, Central Banks have been net buyers of gold since late 2009 and remain underweight gold relative
to FX reserves. This signals fundamental concerns that the world’s money supply is strongly out-growing gold mine
production, raising the incentive to increase gold reserves as fiat currencies debase. Gold production has remained relatively
static since 2001 (GFMS)4
yet discovery rates have, at best, replaced production which compounds issues of supply tightness.
Collectively, these trends are steadily re-establishing gold’s status as a currency that cannot be printed.
With regard to the principal risks which the Company faces, please refer to the Directors’ Report on page 10 and note 5 on
pages 28 to 31.
3 Pulverised Coal Injection coal is crushed (pulverised) into a fine powder and injected into blast furnaces as a replacement for
coke in the production of pig iron.
4 Gold Fields Mineral Services (“GFMS”) is a leading precious metals consultancy, specialising in research into the global
gold, silver, platinum and palladium markets.
8
BOARD OF DIRECTORS
Howard Myles (aged 61): Howard Myles currently acts as a non-executive director of a number of investment companies.
Howard was a partner in Ernst & Young from 2001 until 2007 and was responsible for the Investment Funds Corporate
Advisory team. He was previously with UBS Warburg from 1987 to 2001. Howard began his career in stock broking in 1971
as an equity salesman and joined Touche Ross in 1975 where he qualified as a chartered accountant. In 1978 he joined W.
Greenwell & Co. in the corporate broking team and in 1987 moved to SG Warburg Securities where he was involved in a wide
range of commercial and industrial transactions in addition to leading UBS Warburg’s corporate finance function for
investment funds. He is a fellow of the Institute of Chartered Accountants and of The Chartered Institute for Securities and
Investments.
R. Edward Flood (aged 65): In March 2007, Edward Flood was appointed Managing Director, Investment Banking,
Haywood Securities (UK) Limited. Following graduation from university Edward enjoyed a career as an economic geologist
with several different companies in the mining industry over a 20-year period. At Nerco Minerals he was head of the
company’s acquisition team during a period of rapid growth fuelled by the purchase of a number of operating precious metal
mines. This experience enabled him to make a transition to the financial community as a principal at Robertson Stephens
investment bank in San Francisco in 1992. He initially worked as a securities analyst following the gold mining industry before
becoming a member of the firm’s investment management team for the Contrarian Fund, a public mutual fund concentrated on
natural resource opportunities in emerging markets around the world and the Orphan Fund, a similarly structured hedge fund.
The funds managed a portfolio of approximately US$2 billion. Edward became Ivanhoe Mines’ founding President in 1995
and served in that capacity until 1999. He has been a member of the board of directors since Ivanhoe was formed. Between
1999 and 2001, Edward held the position of senior mining analyst with Haywood Securities in Vancouver before returning to
Ivanhoe Mines as deputy chairman, a position held until joining Haywood Securities (UK) Limited in March 2007. He is also
the Chairman of Western Uranium Corporation and director of several mineral exploration and development companies.
Edward holds a Masters of Science (Geology) degree from the University of Montana and is a member of the Geological
Society of London.
Charles Hansard (aged 63): Charles Hansard has over 30 years’ experience in the investment industry as a professional and
in a non-executive capacity. He currently serves as a non-executive director on a number of boards which include the Moore
Capital group of funds, AAA- rated Deutsche Bank Global Liquidity Fund, and Electrum Ltd., a privately owned gold
exploration company. He formerly served as a director of Apex Silver Mines Ltd., where he chaired the finance committee
during its capital raising phase and as chairman of the board of African Platinum Plc, which he led through reorganisation and
feasibility prior to its sale to Impala Platinum. He commenced his career in South Africa with Anglo American Corporation
and Fleming Martin as a mining analyst. He subsequently worked in New York as an investment banker for Hambros before
returning to the UK to co-found IFM Ltd., one of the earliest European hedge fund managers. Charles holds a B.B.S. from
Trinity College Dublin.
Clive Newall (aged 61): Clive Newall graduated from the Royal School of Mines, University of London, England in 1971
with an honours degree in Mining Geology, and was awarded an MBA from the Scottish Business School at Strathclyde
University. He has worked in mining and exploration throughout his career, having held senior management positions with
Amax Exploration Inc. and the Robertson Group plc. Clive has been a director of a number of public companies in the United
Kingdom and Canada.
Christopher Sherwell (aged 63): Christopher Sherwell has worked since 2004 as a Senior Non-Executive Director based in
Guernsey with roles in the offshore finance industry. Christopher has served as director with a variety of listed funds managed
by institutions such as Goldman Sachs, Hermes and Dexion. Christopher also acts as a non-executive director of a number of
locally incorporated operational companies including Raven Russia Limited. Prior to January 2004, Christopher was a
Managing Director of Schroders’ offshore investment and private banking operations in the Channel Islands. Christopher was
previously Investment Director from 1993-2000 and also served on boards of various Schroder group companies and funds
during his period there. Prior to Schroders he worked at Smith New Court as a research analyst specialising in asset allocation
for Asian markets. Christopher is a Rhodes Scholar with degrees in science and in economics and politics. He has worked as a
university lecturer and was for sixteen years a journalist, most of them working for the Financial Times.
9
DIRECTORS’ REPORT
For the period from 9 March 2010 (date of incorporation) to 31 December 2010
The Directors of the Company present their first annual report and the audited financial statements for the period ended 31
December 2010.
Principal activity and business review
Baker Steel Resources Trust Limited (the "Company") is a closed-ended investment company with limited liability
incorporated on 9 March 2010 in Guernsey under The Companies (Guernsey) Law 2008 with registration number 51576. The
Company is a registered closed-ended investment scheme registered pursuant to the Protection of Investors (Bailiwick of
Guernsey) Law, 1987, as amended (“POI Law”) and the Registered Collective Investment Scheme Rules 2008 issued by the
Guernsey Financial Services Commission (GFSC). On 28 April 2010 the Ordinary Shares and Subscription Shares of the
Company were admitted to the Official List of the UK Listing Authority and to trading on the Main Market of the London
Stock Exchange
The Company’s investment objective is to seek capital growth over the long-term through a focused, global portfolio
consisting principally of the equities, or related instruments, of natural resources companies. The Company will invest
predominantly in unlisted companies (i.e. those companies that have not yet made an initial public offering or “IPO”) but also
in listed securities (including special situations opportunities and less liquid securities) with a view to exploiting value inherent
in market inefficiencies and pricing anomalies.
The Company’s investment policy is detailed on pages 2 and 3.
Portfolio analysis
A detailed analysis of the Portfolio has been provided on pages 16 and 17.
Performance
In the period to 31 December 2010, the Company’s Ordinary NAV per share increased by 5.6%. This compares with a rise in
the HSBC World Mining Index (capital return in sterling terms) of 25.1%.
The Investment Manager’s report on pages 5 to 8 includes a review of the main developments during the year together with
information on investment activity within the Company’s Portfolio and on the market outlook.
Results and dividends
The results for the year are shown in the Statement of Comprehensive Income on page 21 and the Company's financial position
at the end of the year is shown in the Statement of Financial Position on page 20.
Dividend policy
It is not currently envisaged that any income or gains will be distributed by the Company by way of dividend. This does not
preclude the Directors from declaring a dividend at any time in the future if they consider it appropriate to do so. To the extent
that any dividends are paid they will be paid in accordance with any applicable laws and the regulations of the UK Listing
Authority.
Directors
The Directors of the Company who served during the period were:
Edward Flood
Charles Hansard
Howard Myles
Clive Newall
Christopher Sherwell
The Directors are remunerated for their services at such rate as the Directors determine provided that the aggregate amount of
such fees may not exceed £200,000 per annum (or such sum as the Company in general meeting shall from time to time
determine).
10
DIRECTORS’ REPORT (CONTINUED)
For the period from 9 March 2010 (date of incorporation) to 31 December 2010
Directors (Continued)
The Directors' interests in the share capital of the Company at 31 December 2010 were:
Edward Flood
Christopher Sherwell
Clive Newall
Significant shareholdings
Ordinary Shareholder
The Bank of New York (Nominees) Limited*
HSBC Global Custody Nominee Limited*
Lynchwood Nominees Limited*
Nortrust Nominees Limited*
Roy Nominees Limited*
Royal Bank of Canada Europe Limited
State Street Nominees Limited*
Number of
Ordinary Shares
65,000
25,000
25,000
Number of
Subscription Shares
13,000
5,000
5,000
Number of
Ordinary Shares
26,105,199
6,622,800
2,840,397
3,963,412
2,248,036
4,001,864
2,811,608
% of Total
Shares in issue
39.53
10.03
4.30
6.00
3.40
6.06
4.26
* Custodian accounts held on behalf of individual shareholder(s). These holdings are aggregated holdings.
The Manager
Baker Steel Capital Managers (Cayman) Limited has been appointed as the Manager of the Company.
Auditors
Ernst & Young LLP have been appointed as auditors to the Company and have expressed their willingness to continue in
office.
Administrator
HSBC Securities Services (Guernsey) Limited has been appointed as the Administrator and Company Secretary while HSBC
Securities Services (Ireland) Limited has been appointed as Sub-Administrator to the Company.
Listing
On 28 April 2010 the Ordinary Shares and Subscription Shares of the Company were admitted to the Official List of the UK
Listing Authority and to trading on the Main Market of the London Stock Exchange.
Authorised and Issued Share Capital
The authorised share capital of the Company on incorporation was represented by an unlimited number of Ordinary Shares of
no par value. The Company raised £30,468,865 through the issue of 30,468,865 Ordinary Shares and 6,093,772 Subscription
Shares via a Placing and Offer. In addition, the Company issued 35,554,224 Ordinary Shares and 7,110,822 Subscription
Shares to the holders of shares in Genus Capital Fund pursuant to a scheme of reorganisation of Genus Capital Fund, in
exchange for substantially all the non-cash assets of Genus Capital Fund. With effect from 30 September 2010, 7,543 Ordinary
Shares were issued as a result of the exercise of Subscription Shares.
Going Concern
The Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future
and, after due consideration, believe it is appropriate to adopt the going concern basis in preparing the financial statements.
11
DIRECTORS’ REPORT (CONTINUED)
For the period from 9 March 2010 (date of incorporation) to 31 December 2010
Corporate Governance
The Company is committed to maintaining high standards of corporate governance. The Board has put in place a framework
for corporate governance which it believes is suitable for an overseas investment company and which will enable the Company
to comply with the relevant provisions of the Combined Code issued by the Financial Reporting Council in June 2008.
Compliance
The Board has made the appropriate disclosures in this report to ensure that the Company meets its continuing obligations. The
Company considers that it has complied with the provisions of the Combined Code throughout the accounting period, except
where disclosed below.
Information and training
The Board receives full details of the Company’s assets, liabilities and other relevant information in advance of Board
meetings. Typically, the Board meets formally four times a year; however, the Investment Manager and Company Secretary
stay in more regular, less formal contact with the Directors. Individual Directors have direct access to the Company Secretary
and may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the
furtherance of their duties. New Directors will receive an induction from the Investment Manager and Company Secretary on
joining the Board, and all Directors receive other relevant training as necessary.
Independence
The Board consists solely of non-executive Directors of whom Howard Myles is Chairman. The Board considers all of the
Directors as independent of the Manager, Investment Manager and the Investment Advisers and free from any business or
other relationship that could materially interfere with the exercise of their independent judgement.
Senior Independent Director
In view of its non-executive nature, the Board considers that it is not appropriate for a Senior Independent Director to be
appointed.
Appointment and re-election
Directors are selected and appointed by the Board as a whole functioning as a nomination committee. There is no separate
nomination committee as the Board is wholly independent and is considered small relative to listed trading companies. All the
Directors are therefore responsible for reviewing the size, structure and skills of the Board and considering whether any
changes are required or new appointments are necessary to meet the requirements of the Company’s business or to maintain a
balanced Board. The Directors are not required to retire by rotation at each annual general meeting of the Company. The
Board’s policy on tenure is that continuity and experience are considered to add significantly to the strength of the Board and,
as such, no limit on the overall length of service of any of the Company’s Directors, including the Chairman, has been
imposed.
Performance appraisal
The performance of the Board and the Audit Committee will be evaluated through an assessment process led by the Chairman.
The performance of the Chairman will be evaluated by the other Directors.
12
DIRECTORS’ REPORT (CONTINUED)
For the period from 9 March 2010 (date of incorporation) to 31 December 2010
Audit committee
The Board has established an Audit Committee. The Audit Committee meets at least twice a year and is responsible for
ensuring that the financial performance of the Company is properly reported on and monitored and will provide a forum
through which the Company’s external auditors may report to the Board. The Audit Committee reviews the annual and interim
accounts, results, announcements, internal control systems and procedures and accounting policies of the Company. The Audit
Committee is composed of Charles Hansard (Chairman of the Audit Committee), Howard Myles and Chris Sherwell.
Remuneration, nomination and management engagement committees
Given the size and nature of the Company, it is not deemed necessary to form separate remuneration, nomination and
management engagement committees. The Board, as a whole, will consider new Board appointments, remuneration and the
engagement of service providers.
Board Meetings
The Board generally meets at least four times a year, at which time the Directors review the management of the Company's
assets and all other significant matters so as to ensure that the Directors maintain overall control and supervision of the
Company's affairs. The Board is responsible for the appointment and monitoring of all service providers to the Company.
Between these quarterly meetings there is regular contact with the Investment Manager. The Directors are kept fully informed
of investment and financial controls and other matters which are relevant to the business of the Company and which should be
brought to the attention of the Directors. The Directors also have access to the Company Secretary (through its appointed
representatives who are responsible for ensuring that Board procedures are followed and that applicable rules and regulations
are complied with) and, where necessary in the furtherance of their duties, to independent professional advice at the expense of
the Company.
Internal Controls
The Board recognises the need for effective high-level internal controls. The principal controls to address financial, operational
and compliance risks are embedded in the operational procedures of the Investment Manager, the Administrator and the
Custodian.
High-level controls in operation in relation to the Company include segregation of duties between relevant functions and
departments within the Administrator and the Investment Manager At every quarterly meeting, the Board considers the
compliance reports, administration reports, and portfolio valuations provided by the Administrator, and the Investment
Manager’s reports and analyses.
The Administrator has a number of internal control functions including a dedicated Compliance Officer who is appointed as a
statutory requirement and whose role is determined by the Guernsey Financial Services Commission which includes the
maintenance of a log of errors and breaches which are reported to the Board at each quarterly Board meeting.
The Board reviews the effectiveness of the Company’s internal control systems on an ongoing basis. Procedures are in place to
ensure that necessary action is taken to address any significant weaknesses identified in the control framework. The Board is
not aware of any significant failings or weaknesses in the Company’s internal controls in the period under review. The Board
recognises that the internal controls framework is designed to manage rather than to eliminate relevant risks. The key risks
faced by the Company are set out below. The Board reviews the policies for managing each of these principal risks as
summarised below. Please also refer to note 5 on pages 28 to 31.
Investment Manager Assessment
The Investment Manager prepares regular reports to the Board to allow it to review and assess the Company’s activities and
performance on an ongoing basis. The Board and the Investment Manager have agreed clearly defined investment criteria,
exposure limits and specified levels of authority. Regular reports on these issues, including performance information and
portfolio valuations, are submitted to the Board at each meeting.
13
DIRECTORS’ REPORT (CONTINUED)
For the period from 9 March 2010 (date of incorporation) to 31 December 2010
Relations with Shareholders
The Board believes that the maintenance of good relations with shareholders is vital for the long-term prospects of the
Company. The Board receives feedback on the views of shareholders from the Company’s brokers, RBC Capital Markets and
Winterflood Securities Limited, and from the Investment Manager.
General Meetings
All general meetings of the Company will be held in Guernsey. The Company will hold an Annual General Meeting each year.
Principal risks & uncertainties
Performance risk
The Board is responsible for determining the investment strategy to allow the Company to fulfil its objectives and also for
monitoring the performance of the Investment Manager who has been delegated day to day management of the Company’s
Portfolio. An inappropriate strategy may lead to poor performance. To manage this risk the Investment Manager provides to
the Board, on an ongoing basis, an explanation of the significant stock selection recommendations and the rationale for the
composition and the investment portfolio. The Board monitors and mandates an adequate diversification of investments, both
geographically and sectorally, in order to minimise the risks associated with particular sectors, based on the diversification
requirements inherent in the Company’s investment policy.
Market risk
Market risk arises from volatility in the prices of the Company’s underlying investments which, in view of the Company’s
investment objectives, in turn are particularly sensitive to commodity prices. Market Risk represents the potential loss the
Company might suffer through holding investments in the face of negative market movements. The Board has set investment
restrictions and guidelines which are monitored and reported on by the Investment Manager on a regular basis.
Financial risk
The Company’s investment activities expose it to a variety of financial risks that include foreign currency risk and interest rate
risk. Further details are disclosed in note 5 on pages 28 to 31.
Operational risk
In common with most other investment vehicles, the Company has no employees. The Company therefore relies upon the
services provided by third parties and is dependent on the control systems of the Investment Manager and the Company’s other
service providers. For example, the security of the Company’s assets, dealing procedures, accounting records and compliance
with regulatory and legal requirements, depend on the effective operation of these systems.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the financial statements in accordance with applicable Guernsey law and generally
accepted accounting principles.
The Guernsey Company Law requires the Directors to prepare financial statements for each financial year which give a true
and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these
consolidated financial statements the Directors should:
-
-
-
-
-
-
select suitable accounting policies and then apply them consistently;
make judgments and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material departures disclosed and
explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will
continue in business;
confirm that there is no relevant audit information of which the Company’s auditor is unaware; and
confirm that they have taken reasonable steps they ought to have taken as directors to make themselves aware of any
relevant audit information and to establish that the Company’s auditor is aware of that information.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the
financial position of the Company and which enable the Directors to ensure that the financial statements comply with the
Companies (Guernsey) Law, 2008. The Directors are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities.
14
DIRECTORS’ REPORT (CONTINUED)
For the period from 9 March 2010 (date of incorporation) to 31 December 2010
Statement of Directors' Responsibilities (Continued)
The Directors confirm that to the best of their knowledge:
-
-
-
-
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union (EU);
The financial statements have been prepared in accordance with the applicable set of accounting standards, and give a
true and fair view of the assets, liabilities and financial position and profit or loss of the Company;
The Chairman’s Statement, Directors Report and Investment Manager’s Report include a fair review of the
development and performance of the business and position of the Company together with the description of the
principal risks and uncertainties that the Company faces, as required by the Disclosure and Transparency Rules of the
UK Listing Authority; and
So far as each of the Directors is aware, there is no relevant audit information of which the Company’s auditors are
unaware and each Director has taken all reasonable steps he ought to have taken as a director to make himself aware
of any relevant audit information and to establish that the Company’s auditors are aware of that information.
Signed on behalf of the Board of Directors by:
Howard Myles
Date: 21 April 2011
Christopher Sherwell
15
PORTFOLIO STATEMENT
AT 31 DECEMBER 2010
Shares
/Warrants
Investments
Listed equity shares
Australian Dollars
7,223,364 South American Ferro Metals
Australian Dollars Total
Canadian Dollars
3,383,333 BacTech Environmental Corporation
1,100,000 Forbes & Manhattan
358,333 MBAC Fertilizer Corporation
16,916,667 REBgold Corporation
Canadian Dollars Total
Great Britain Pounds
2,400,000 European Nickel
Great Britain Pounds Total
Fair value
£ equivalent
% of Net
assets
1,704,599
1,704,599
217,865
2,932,489
563,015
1,034,860
4,748,229
552,000
552,000
2.50
2.50
0.32
4.29
0.82
1.52
6.95
0.81
0.81
Total investments in listed equity shares
7,004,828
10.26
Fixed Income Instruments
Great Britain Pounds
12,500,000 UK Treasury Bills 4.25% 07/03/2011
Great Britain Pounds Total
12,753,510
18.68
12,753,510
18.68
Total investments in fixed income instruments
12,753,510
18.68
Unlisted equity shares and warrants
Australian Dollars
4,445,586 South American Ferro Metals Class A
4,445,586 South American Ferro Metals Class B
4,445,586 South American Ferro Metals Class C
Australian Dollars Total
744,852
734,362
472,089
1,951,303
1.09
1.08
0.69
2.86
16
PORTFOLIO STATEMENT
AT 31 DECEMBER 2010
Shares
/Warrants
Investments
Canadian Dollars
10,250,000 BacTech Mining Corporation Warrants 06/17/2015
6,666,667 BacTech Mining Corporation Warrants 08/06/2013
5,000,000 First Coal Corporation
2,428,571 First Coal Corporation Warrants 05/20/2011
6,073,209
3,036,605
Ironstone Resources
Ironstone Resources Limited Warrants 03/31/2012
Fair value
£ equivalent
% of Net
assets
247,513
123,078
2,221,583
531,708
5,041,991
109,502
0.36
0.18
3.25
0.78
7.39
0.16
Canadian Dollars Total
8,275,375
12.12
Great Britain Pounds
1,594,646 Celadon Mining Limited
Great Britain Pounds Total
United States Dollars
268,889 Copperbelt Minerals
6,123,642 Ferrous Resources
5,169,550 Gobi Coal and Energy
500,000 Ivanhoe Nickel and Platinum
791,666
507,500
Ivanhoe Nickel Platinum Warrants 1 for 1.2 ordinary
Ivanhoe Nickel Platinum Warrants 1 for 1 ordinary
United States Dollars Total
Total unlisted equity shares
297,720
297,720
3,444,425
11,766,429
6,622,110
3,842,951
7,301,601
3,900,596
0.44
0.44
5.05
17.23
9.70
5.63
10.69
5.71
36,878,112
54.01
47,402,510
69.43
Financial Assets held at fair value through profit or loss
67,160,848
98.37
Other Assets & Liabilities
Total Equity
1,113,450
1.63
68,274,298
100.00
17
INDEPENDENT AUDITOR’S REPORT
For the period from 9 March 2010 (date of incorporation) to 31 December 2010
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAKER STEEL RESOURCES TRUST LIMITED
We have audited the financial statements of Baker Steel Resources Trust Limited for the period ended 31 December 2010
which comprise the Statement of Financial Position, Statement of Comprehensive Income, Statement of Changes in Equity,
Statement of Cash Flows, and the related notes 1 to 14. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards as adopted by the European Union.
This report is made solely to the company’s members, as a body, in accordance with Section 262 of the Companies (Guernsey)
Law, 2008. 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.
Respective responsibilities of directors and auditors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 14 of the Directors Report, the directors
are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are appropriate to the company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors;
and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in
the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
(cid:120)
(cid:120)
(cid:120)
give a true and fair view of the state of the company’s affairs as at 31 December 2010, and of its net comprehensive
income for the period then ended;
have been properly prepared in accordance with International Financial Reporting Standards as adopted by the
European Union; and
have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies (Guernsey) Law, 2008, we are required to report to you, if in our opinion:
(cid:120)
proper accounting records have not been kept; or
(cid:120)
the financial statements are not in agreement with the accounting records; or
(cid:120) we have not received all the information and explanations we require for our audit.
Under the Listing Rules, we are required to review the part of the Corporate Governance Statement relating to the company’s
compliance with the nine provisions of the June 2008 Combined Code specified for our review.
Michael Bane
For and behalf of Ernst & Young LLP
Guernsey, Channel Islands
Date: 26 April 2011
18
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Grant Thornton UK LLP
30 Finsbury Square
London EC2P 2YU
T +44 (0)20 7383 5100
F +44 (0)20 7184 4301
www.grant-thornton.co.uk
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•
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•
•
•
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6(cid:11)(cid:21).(cid:14)(cid:31)%(cid:24)(cid:2)(cid:2)(cid:2)
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(cid:6)(cid:7)(cid:8)(cid:5)(cid:9)(cid:10)(cid:11)(cid:8)(cid:12)4(cid:2) 3(cid:4)(cid:7)(cid:9)(cid:4)(cid:2) (cid:4)(cid:14)(cid:12)(cid:2) 5(cid:5)(cid:5)(cid:31)(cid:2) (cid:14)(cid:22)#(cid:7)(cid:12)(cid:5)(cid:22)(cid:2)5%(cid:2) (cid:13)(cid:14)(cid:15)(cid:5)(cid:8)(cid:2)(cid:16)(cid:10)(cid:5)(cid:5)(cid:17)(cid:2)6(cid:14).(cid:7)(cid:10)(cid:14)(cid:17)(cid:2) +(cid:14)(cid:31)(cid:14)2(cid:5)(cid:8)(cid:12)(cid:2) (cid:20)(cid:20)(cid:23)4(cid:2)(cid:10)(cid:4)(cid:5)(cid:2)6(cid:11)(cid:21).(cid:14)(cid:31)%"(cid:12)(cid:2)(cid:7)(cid:31)#(cid:5)(cid:12)(cid:10)(cid:21)(cid:5)(cid:31)(cid:10)(cid:2)
(cid:21)(cid:14)(cid:31)(cid:14)2(cid:5)(cid:8)(cid:24)(cid:2)(cid:2)
(cid:3)(cid:4)(cid:7)(cid:12)(cid:2)(cid:17)(cid:5)(cid:10)(cid:10)(cid:5)(cid:8)(cid:2)(cid:4)(cid:14)(cid:12)(cid:2)5(cid:5)(cid:5)(cid:31)(cid:2).(cid:8)(cid:5).(cid:14)(cid:8)(cid:5)(cid:22)(cid:2)(cid:5)(cid:26)(cid:9)(cid:17)(cid:19)(cid:12)(cid:7)#(cid:5)(cid:17)%(cid:2)-(cid:11)(cid:8)(cid:2)(cid:10)(cid:4)(cid:5)(cid:2)(cid:7)(cid:31)-(cid:11)(cid:8)(cid:21)(cid:14)(cid:10)(cid:7)(cid:11)(cid:31)(cid:2)(cid:11)-(cid:2)(cid:10)(cid:4)(cid:5)(cid:2)(cid:14)(cid:22)(cid:22)(cid:8)(cid:5)(cid:12)(cid:12)(cid:5)(cid:5)(cid:12)(cid:24)(cid:2)(cid:2),(cid:5)(cid:2)(cid:19)(cid:31)(cid:22)(cid:5)(cid:8)(cid:12)(cid:10)(cid:14)(cid:31)(cid:22)(cid:2)(cid:10)(cid:4)(cid:14)(cid:10)(cid:2)
(cid:10)(cid:4)(cid:7)(cid:12)(cid:2)(cid:17)(cid:5)(cid:10)(cid:10)(cid:5)(cid:8)(cid:2)(cid:21)(cid:14)%(cid:2)5(cid:5)(cid:2) (cid:7)(cid:31)(cid:9)(cid:17)(cid:19)(cid:22)(cid:5)(cid:22)(cid:2)(cid:7)(cid:31)(cid:2) (cid:10)(cid:4)(cid:5)(cid:2)6(cid:11)(cid:21).(cid:14)(cid:31)%"(cid:12)(cid:2)(cid:12)(cid:5)(cid:21)(cid:7)=(cid:14)(cid:31)(cid:31)(cid:19)(cid:14)(cid:17)(cid:2) (cid:11)(cid:8)(cid:2)(cid:14)(cid:31)(cid:31)(cid:19)(cid:14)(cid:17)(cid:2) (cid:12)(cid:4)(cid:14)(cid:8)(cid:5)(cid:4)(cid:11)(cid:17)(cid:22)(cid:5)(cid:8)(cid:2)(cid:8)(cid:5).(cid:11)(cid:8)(cid:10)(cid:12)(cid:24)(cid:2)(cid:2) (cid:3)(cid:4)(cid:7)(cid:12)(cid:2)(cid:17)(cid:5)(cid:10)(cid:10)(cid:5)(cid:8)(cid:2)
(cid:12)(cid:4)(cid:14)(cid:17)(cid:17)(cid:2)(cid:31)(cid:11)(cid:10)(cid:2)5(cid:5)(cid:2)(cid:19)(cid:12)(cid:5)(cid:22)4(cid:2)(cid:8)(cid:5).(cid:8)(cid:11)(cid:22)(cid:19)(cid:9)(cid:5)(cid:22)4(cid:2)(cid:8)(cid:5)-(cid:5)(cid:8)(cid:8)(cid:5)(cid:22)(cid:2)(cid:10)(cid:11)(cid:2)(cid:7)(cid:31)(cid:2)(cid:14)(cid:31)%(cid:2)(cid:11)(cid:10)(cid:4)(cid:5)(cid:8)(cid:2)(cid:22)(cid:11)(cid:9)(cid:19)(cid:21)(cid:5)(cid:31)(cid:10)(cid:2)(cid:11)(cid:8)(cid:2)(cid:9)(cid:7)(cid:8)(cid:9)(cid:19)(cid:17)(cid:14)(cid:10)(cid:5)(cid:22)(cid:2)-(cid:11)(cid:8)(cid:2)(cid:14)(cid:31)%(cid:2)(cid:11)(cid:10)(cid:4)(cid:5)(cid:8)(cid:2).(cid:19)(cid:8).(cid:11)(cid:12)(cid:5)4(cid:2)
(cid:7)(cid:31)(cid:2) 3(cid:4)(cid:11)(cid:17)(cid:5)(cid:2) (cid:11)(cid:8)(cid:2) (cid:7)(cid:31)(cid:2) .(cid:14)(cid:8)(cid:10)4(cid:2) 3(cid:7)(cid:10)(cid:4)(cid:11)(cid:19)(cid:10)(cid:2) (cid:11)(cid:19)(cid:8)(cid:2) .(cid:8)(cid:7)(cid:11)(cid:8)(cid:2) 3(cid:8)(cid:7)(cid:10)(cid:10)(cid:5)(cid:31)(cid:2) (cid:9)(cid:11)(cid:31)(cid:12)(cid:5)(cid:31)(cid:10)4(cid:2) 3(cid:4)(cid:7)(cid:9)(cid:4)(cid:2) (cid:9)(cid:11)(cid:31)(cid:12)(cid:5)(cid:31)(cid:10)(cid:2) 3(cid:7)(cid:17)(cid:17)(cid:2) (cid:11)(cid:31)(cid:17)%(cid:2) 5(cid:5)(cid:2) 2(cid:7)#(cid:5)(cid:31)(cid:2) (cid:14)-(cid:10)(cid:5)(cid:8)(cid:2) -(cid:19)(cid:17)(cid:17)(cid:2)
(cid:9)(cid:11)(cid:31)(cid:12)(cid:7)(cid:22)(cid:5)(cid:8)(cid:14)(cid:10)(cid:7)(cid:11)(cid:31)(cid:2)(cid:11)-(cid:2)(cid:10)(cid:4)(cid:5)(cid:2)(cid:9)(cid:7)(cid:8)(cid:9)(cid:19)(cid:21)(cid:12)(cid:10)(cid:14)(cid:31)(cid:9)(cid:5)(cid:12)(cid:2)(cid:14)(cid:10)(cid:2)(cid:10)(cid:4)(cid:5)(cid:2)(cid:10)(cid:7)(cid:21)(cid:5)(cid:24)(cid:2)
&(cid:11)(cid:19)(cid:8)(cid:12)(cid:2)-(cid:14)(cid:7)(cid:10)(cid:4)-(cid:19)(cid:17)(cid:17)%(cid:2)
(cid:2)
$(cid:18)(cid:30))(cid:3)(cid:2)(cid:3) (cid:25)(cid:18))(cid:3)(cid:25))(cid:2)>?(cid:2)(cid:20)(cid:20)(cid:23)(cid:2)
@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@(cid:2)
Chartered Accountants
Member firm within Grant Thornton International Ltd
Grant Thornton UK LLP is a limited liability partnership registered in England and Wales: No.OC307742. Registered office: Grant Thornton House, Melton Street, Euston Square, London NW1 2EP
A list of members is available from our registered office.
Grant Thornton UK LLP is authorised and regulated by the Financial Services Authority for investment business.
19
STATEMENT OF FINANCIAL POSITION
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
Assets
Cash and cash equivalents
Other receivables
Financial assets held at fair value through profit or loss (Cost: £63,126,417)
Total assets
Equity and Liabilities
Liabilities
Management fees payable
Formation expenses payable
Directors’ fees payable
Audit fees payable
Administration fees payable
Other payables
Total liabilities
Equity
Management Ordinary Shares
Ordinary Shares
P&L account
Total equity
Total equity and liabilities
Notes
10
3
8
7
11
11
31 December
2010
£
1,013,506
330,561
67,160,848
68,504,915
79,513
26,529
36,000
40,000
10,193
38,382
230,617
10,000
64,655,155
3,609,143
68,274,298
68,504,915
Ordinary shares in issue
66,040,632
Net asset value per Ordinary Share (in Pence) – Basic
4
103.38
These financial statements were approved by the Board of Directors on 21 April 2011 and signed on its behalf by:
Howard Myles
Christopher
Sherwell
The accompanying notes form an integral part of these audited financial statements
20
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
Income
Interest income
Net gain on financial assets and liabilities at fair value
through profit or loss
Net foreign exchange gain
Other income
Net income
Expenses
Formation expenses
Management fees
Directors’ fees and expenses
Administration fees
Audit fees
Custody fees
Other expenses
Total expenses
Net comprehensive (loss)/income for the period
Net (loss)/earnings for the period per Ordinary Share:
Basic and diluted (in pence)
Weighted Average Number of Ordinary Shares
Outstanding:
Basic and diluted
Period ended
31 December
2010
Revenue
£
Period ended
31 December
2010
Capital
£
Period ended
31 December
2010
Total
£
Notes
132,564
-
132,564
3,950,281
-
- 494,905
-
4,445,186
335,021
467,585
3,950,281
494,905
335,021
4,912,771
152,870
724,147
116,000
74,773
40,000
27,220
168,618
1,303,628
-
-
-
-
-
-
-
-
152,870
724,147
116,000
74,773
40,000
27,220
168,618
1,303,628
(836,043)
4,445,186
3,609,143
(1.27)
6.73
5.47
66,035,918
3
8
7
9
4
4
In the current period there were no gains or losses other than those recognised above.
The Directors consider all results to derive from continuing activities.
The accompanying notes form an integral part of these audited financial statements
21
STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
Management
Ordinary
Shares
£
Ordinary
Shares
£
Total
gain
£
Period ended
31 December
2010
£
Proceeds on issue of Ordinary Shares
Share issue costs
Net gain for the period
10,000
-
-
66,030,632
(1,375,477)
-
-
-
3,609,143
66,040,632
(1,375,477)
3,609,143
Balance as at 31 December 2010
10,000
64,655,155
3,609,143
68,274,298
The accompanying notes form an integral part of these audited financial statements
22
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
Cash flows from operating activities
Net income for the period
Adjustments to reconcile income for the period to net cash used in operating
activities:
Net change in fair value of financial assets at fair value through profit or loss
Net increase in other receivables
Net increase in other payables
Net cash used in operating activities
Cash flows from investing activities
Purchase of financial assets at fair value through profit or loss
Sale of financial assets at fair value through profit or loss
Net cash used in investing activities
Cash flows from financing activities
Proceeds from shares issued
Share issue costs
Net cash provided from financing activities
Net increase in cash and cash equivalents
Notes
Period ended
31 December
2010
£
3,609,143
(3,780,046)
(330,561)
230,617
(270,847)
(33,367,828)
5,541,250
(27,826,578)
11
30,486,408
(1,375,477)
29,110,931
1,013,506
Cash and cash equivalents at the beginning of the period
10
-
Cash and cash equivalents at the end of the period
1,013,506
Represented by:
Cash and cash equivalents
Bank overdraft
Cash and cash equivalents at the end of the period
10
1,013,506
-
1,013,506
The accompanying notes form an integral part of these audited financial statements
23
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
1.
GENERAL INFORMATION
Baker Steel Resources Trust Limited (the "Company") is a closed-ended investment company with limited liability
incorporated on 9 March 2010 in Guernsey under the Companies (Guernsey) Law 2008 with registration number 51576.
The Company is a registered closed-ended investment scheme registered pursuant to the POI Law and the Registered
Collective Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission (GFSC). On 28 April
2010 the Ordinary Shares and Subscription Shares of the Company were admitted to the Official List of the UK Listing
Authority and to trading on the Main Market of the London Stock Exchange.
The Company is managed by Baker Steel Capital Managers (Cayman) Limited (the “Manager”). The Manager has
appointed Baker Steel Capital Managers LLP (the “Investment Manager”) as the Investment Manager to carry out
certain duties. The Company’s investment objective is to seek capital growth over the long-term through a focused,
global portfolio consisting principally of the equities, or related instruments, of natural resources companies. The
Company invests predominantly in unlisted companies (i.e. those companies which have not yet made an initial public
offering or “IPO”) and also in listed securities (including special situations opportunities and less liquid securities) with
a view to exploiting value inherent in market inefficiencies and pricing anomalies.
SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared on an historic cost basis except for financial assets and financial liabilities
at fair value through profit or loss, which are designated at fair value through profit or loss.
The Company has adopted the Great Britain pound sterling (“£”) as its presentation currency, being the currency in
which its Ordinary Shares and Subscription Shares are issued. The presentation currency is the same as the functional
currency.
The statement of comprehensive income is presented in accordance with the Statement of Recommended Practice
‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ issued in January 2009 by the
Association of Investment Companies, to the extent that it does not conflict with International Financial Reporting
Standards (IFRS).
Statement of Compliance
These financial statements of the Company have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union.
Significant accounting judgements and estimates
The preparation of the Company’s financial statements requires Directors to make judgements, estimates and
assumptions that affect the amounts recognised in the financial statements. However, uncertainty about these
assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of
the asset or liability affected in the future. The most significant judgement relates to the valuation of the Company’s
unlisted investments which are valued by the Board at fair value in accordance with IFRS having regard to such factors
as they deem relevant. This may include information received from market sources as to trading on unofficial or “grey”
markets requiring a judgement on whether a particular transaction represents fair value. It may also include using
industry specific models which require judgement about the investee company’s resources, reserve estimates and
associated operating and cost projections. Judgement is also required regarding the long term market prices for relevant
commodities produced and comparison with comparable transactions and listed company multiples.
2.
a)
b)
c)
Financial assets and liabilities at fair value through profit or loss
The Company designates its investments, other than derivatives, as at fair value through profit or loss, at initial
recognition. All derivatives are classified as held for trading and included in financial assets at fair value through profit
or loss.
Recognition and derecognition
The Company recognises financial assets and financial liabilities on the date it becomes a party to the contractual
provisions of the instruments. Routine purchases and sales of investments are accounted for on the trade date.
24
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
2.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c)
Financial assets and liabilities at fair value through profit or loss (continued)
Recognition and derecognition (continued)
Financial assets and financial liabilities at fair value through profit or loss are initially recognised at fair value.
Transaction costs are expensed in the Statement of Comprehensive Income. Subsequent to initial recognition, all
financial assets and financial liabilities at fair value through profit or loss are re-measured at fair value. Gains and losses
arising from changes in fair value are recognised in the Statement of Comprehensive Income in the period in which they
arise.
A financial asset is derecognised when the Company no longer has control over the contractual rights that comprise that
asset. This occurs when the rights are realised, expired or are surrendered. A financial liability is derecognised when it is
extinguished or when the obligation specified in the contract is discharged, cancelled or expired.
Basis of Designation of Fair value
Designation of the investments in this way is consistent with the company’s documented risk management policy and
investment strategy, and information about the investments is provided to the Board on this basis.
After initial recognition, investments are measured at fair value, with unrealised gains and losses on investments
recognised in the Statement of Comprehensive Income. Investments are derecognised on sale. Gains and losses on sale
of investments will be recognised in the Statement of Comprehensive Income.
Determination of fair value
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing
parties in an arm's length transaction.
The fair value for financial instruments traded in active markets at the reporting date is based on their quoted price or
binding dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for
transaction costs.
For all other financial instruments not traded in an active market, fair value is determined by using appropriate valuation
techniques. Valuation techniques include: using recent arm's length market transactions; reference to the current market
value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models
making as much use of available and supportable market data as possible. An analysis of fair values of financial
instruments and further details as to how they are measured are provided in note 3.
Interest income and expense
Bank interest income, fixed income instruments interest and interest expense is recognised on an accruals basis based on
the effective interest method.
Cash and cash equivalents, margin accounts with brokers and cash overdrawn
Cash and cash equivalents comprise cash balances held at banks.
Expenses
All expenses are recognised on an accruals basis.
Translation of foreign currencies
Foreign currency transactions during the period are translated into £ at the rate of exchange ruling at the dates of the
transaction. Assets and liabilities denominated in foreign currencies are translated into £ at the rate of exchange ruling at
the Statement of Financial Position date. Exchange differences including those arising from adjustment to fair value of
financial instruments during the period, are included in the Statement of Comprehensive Income.
Segment information
IFRS 8 ‘Operating Segments’ was issued by the IASB in November 2006 and is effective for annual periods beginning
on or after 1 January 2009, with early application permitted. This standard requires disclosures on the financial
performance of the operating segments of the entity. The Directors are of the opinion that the Company is engaged in a
single segment of business, being investing in natural resources companies.
d)
e)
f)
g)
h)
25
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
2.
i)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Net asset value per share
Net Asset Value per share disclosed on the face of the Statement of Financial Position is calculated in accordance with
the Company’s Prospectus by dividing the net assets of the Company on the Statement of Financial Position date by the
number of Ordinary Shares outstanding at that date.
j)
New accounting pronouncements
The following standards, amendments and interpretations are effective for the current period:
IFRS 1: First-time Adoption of International Financial Reporting Standards - New Structure
IFRS 1: First-time Adoption of International Financial Reporting Standards - Additional exemptions (Amendments)
IFRS 2: Group Cash-Settled Share - Based Payment Arrangements (Amendments) - for accounting periods commencing
on or after 1 January 2010
IFRS 3: Business combinations (Revised) - for accounting periods commencing on or after 1 July 2009
IAS 27: Consolidation and Separate Financial Statements (Amendment) - for accounting periods commencing on or
after 1 July 2009
IAS 39: Financial Instruments: Recognition and Measurement - Eligible Hedged Items effective 1 July 2009
IFRS 12 Service Concessions - for accounting periods commencing on or after 28 March 2009
IFRS 15: Agreements for the Construction of Real Estate - for accounting periods commencing on or after 31 December
2009
IFRIC 17: Distribution to non - cash assets to owners - for accounting periods commencing on or after 1 July 2009
IFRIC 18: Transfers of Assets from Customers - effective from 1 July 2009
These standards have been adopted in the Company’s accounting policies.
k)
New accounting pronouncements not yet effective
At the date of authorisation of these financial statements, the following standards and interpretations, which have not
been applied, were in issue but not yet effective:
IAS 24: Related party disclosures - for accounting periods commencing on or after 1 January 2011
IFRS 9: Financial Instruments - for accounting periods commencing on or after 1 January 2013
IFRIC 19: Extinguishing Financial Liabilities with Equity Instruments - for accounting periods commencing on or after
1 July 2010
IFRIC 14: Prepayments of a minimum funding requirement - for accounting periods commencing on or after 1 January
2011
IAS 32 amendments: Classification of rights issue-for accounting periods commencing on or after 1 February 2010
IFRS 1 amendments: Limited exemption from comparative IFRS 7 disclosures - for accounting periods commencing on
or after 1 July 2010
IFRS 7: Disclosures - Transfer of financial assets- for accounting periods commencing on or after 1 July 2011
IAS 12: Income Taxes -Tax recovery of underlying assets (Amendment)
IAS 39: Financial Instruments: Recognition and Measurement - Classification of rights issues 2010 improvements to
IFRS
The Directors have not yet assessed the impact that the adoption of these standards and interpretations in future periods
will have on the financial statements of the Company. These standards and interpretations will be adopted when they
become effective.
26
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
3.
FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
31 December 2010
Financial assets at fair value through profit
or loss
Cost
Unrealised (loss)/gain
Market value at 31 December 2010
* includes interest income of £170,235.
Listed equity
shares
£
Unlisted
equity shares
£
Fixed income
instruments Warrants
£
£
Total
£
5,021,326
1,983,502
7,004,828
36,930,304
(1,741,792)
35,188,512
12,766,600
(13,090)*
12,753,510
8,408,187
3,805,811
12,213,998
63,126,417
4,034,431
67,160,848
The following table analyses net gain on financial assets and liabilities at fair value through profit or loss for the period
ended 31 December 2010.
Financial assets and liabilities at fair value through profit or loss
Realised (losses)/gains on:
- Fixed income instruments
Unrealised gains/(losses) on:
- Listed equity shares
- Unlisted equity shares
- Fixed income instruments
- Warrants
Net gain on financial assets and liabilities at fair value through profit or loss
2010
£
(84,150)
(84,150)
1,983,502
(1,741,792)
(13,090)
3,805,811
4,034,431
3,950,281
The following table analyses investments by type and by level within the fair valuation hierarchy at 31 December 2010.
Financial assets at fair value through
profit or loss
Listed equity shares
Unlisted equity shares
Warrants
Fixed income instruments
Quoted prices in
active markets
Level 1
£
Quoted market
based observables
Level 2
£
Unobservable
inputs
Level 3
£
Total
£
7,004,828
-
-
12,753,510
19,758,338
-
-
-
-
-
-
7,004,828
35,188,512 35,188,512
12,213,998 12,213,998
- 12,753,510
47,402,510 67,160,848
In determining an investment's placement within the fair value hierarchy, the Directors take into consideration the
following.
Investments whose values are based on quoted market prices in active markets are classified within level 1. These
include listed equities and fixed income instruments with observable market price. The Directors do not adjust the
quoted price for such instruments, even in situations where the Company holds a large position and a sale could
reasonably impact the quoted price.
Investments that trade in markets that are not considered to be active but are valued based on quoted market prices,
dealer quotations or alternative pricing sources supported by observable inputs, are classified within level 2. These
include certain less liquid listed equities. As level 2 investments include positions that are not traded in active markets
and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability,
which are generally based on available market information. The Company did not hold any such investments at
31 December 2010.
27
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
3.
FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
Investments classified within level 3 have significant unobservable inputs. They include unlisted equity shares and
warrants. Level 3 investments are valued using valuation techniques explained in the Company’s accounting policies.
The inputs used by the Directors in estimating the value of level 3 investments include the original transaction price,
recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying
investment of comparable issuers, subsequent rounds of financing, recapitalisations and other transactions across the
capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows. Level 3
investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount
estimated by the Directors in the absence of market information.
4.
NET ASSET VALUE PER SHARE AND EARNING PER SHARE
Basic net asset value per share is based on the net assets of £68,274,298 and 66,040,632 Ordinary Shares, being the
number of shares in issue at the period end. The subscription shares are entitled to be converted to ordinary shares at
100p per share.
The calculation for basic net asset value is as below:-
31 December 2010
Net assets at the period end (£)
Number of shares
Basic net asset value per share (in pence)
Ordinary
Shares
68,274,298
66,040,632
103.38
Subscription
Shares
13,197,051
13,197,051
The basic and diluted earnings per share is based on the net gain for the period of the Company of £3,609,143 and on
66,035,918 Ordinary Shares, being the weighted average number of shares in issue during the period. This calculation is
done in accordance with IFRS.
5.
RISK MANAGEMENT POLICIES AND DISCLOSURES
The Company’s principal financial instruments comprise financial assets, primarily unlisted equity investments in
natural resources companies. These investments reflect the core of the Company’s investment strategy.
The Company’s financial liabilities principally comprise fees payable to various parties and arise directly from its
operations.
Risk exposures and responses
The Company manages its exposure to key financial risks in accordance with the Company’s financial risk management
policy. The objective of the policy is to support the delivery of the Company’s core investment objective whilst
maintaining future financial security. The main risks that could adversely affect the Company’s financial assets, or
future cash flows are market risk (comprising, market price risk, currency risk and interest rate risk), commodity price
risk, liquidity risk and credit risk.
The Company’s Board of Directors oversees the management of financial risks, each of which is summarised below.
a) Market risk
Market risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk: market price risk, currency risk and interest rate risk.
Market Price risk
Market price risk is the risk that the fair value or future cash flows will fluctuate because of changes in the market prices
of the Company’s investment portfolio.
The following illustrates the sensitivity of the income to an increase or decrease of 10% in the fair value of the
Company’s investment portfolio. The level of change is considered to be reasonably possible based on observations of
current market conditions in 2011. The sensitivity analysis assumes all other variables are held constant.
i.
28
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
5.
RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
a) Market risk (continued)
i.
ii.
Market Price risk (continued)
The impact of a 10% increase in the value of investments on the net assets and revenue of the Company as at
31 December 2010 would have been an increase of £6,716,084. A decrease of 10% would have had an equal but
opposite effect on both the net assets and revenue.
Currency risk
The majority of the Company's financial assets and liabilities are denominated in US dollars. The functional currency of
the Company is sterling. Currency risk is the risk that the value of non-£ financial instruments will fluctuate due to
changes in foreign exchange rates. The table below shows the currencies and amounts the Company was exposed to, at
31 December 2010.
31 December 2010
Currency
GBP
AUD
USD
EURO
CAD
Amount
14,403,704
5,577,272
57,577,068
(10,469)
20,726,156
Conversion rate
(based on £)
1.0000
0.6555
0.6405
0.8589
0.6439
Value % of net assets
£
14,403,704
3,655,902
36,878,112
(8,992)
13,345,572
68,274,298
21.10
5.35
54.01
(0.01)
19.55
100
At 31 December 2010, had any foreign currencies strengthened by 5% relative to sterling, with all other variables held
constant, total equity would have increased by the amounts shown below.
Currency
AUD
USD
EURO
CAD
Value
£
182,795
1,843,906
(450)
667,279
2,693,530
A 5% decrease in foreign currencies relative to sterling, with all other variables held constant, would lead to a
corresponding decrease in the total equity by the exact amounts as shown in the above tables. The estimated movement
is based on management’s determination of a reasonably possible change in foreign exchange rates. In practice, the
actual results may differ from the sensitivity analysis above and the difference could be material.
iii.
Interest rate risk
Although the Company’s interest-bearing financial assets and liabilities expose it to risks associated with the effects of
fluctuations in the prevailing levels of market interest rates on its financial position and cash flows, it is subject to little
direct exposure to interest rate fluctuations as the majority of the financial assets are equity investments which do not
pay interest. Any excess cash and cash equivalents are invested at short-term market interest rates which exposes the
Company, to a limited extent, to interest rate risk and corresponding gains/losses from a change in the fair value of these
financial instruments.
29
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
5.
RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
a) Market risk (continued)
iii.
Interest rate risk (continued)
The table below summarises the Company's exposure to interest rate risk. It includes the Company's assets and liabilities
at fair values, categorised by the earlier of contractual re-pricing or maturity dates.
At 31 December 2010
Assets
Cash and cash equivalents
Financial assets held at fair value through profit
or loss
Other receivables
Up to
1 month 1 - 3 months
£
-
£
1,013,506
Non-interest
bearing
£
-
Total
£
1,013,506
-
12,753,510
-
54,407,338 67,160,848
330,561
330,561
Total Assets
1,013,506
12,753,510
54,737,899 68,504,915
Liabilities
Investment management fees payable
Formation expenses payable
Director fees payable
Audit fees payable
Administration fees payable
Other payables
Total Liabilities
Up to More than Non-interest
bearing
£
79,513
26,529
36,000
40,000
10,193
38,382
230,617
6 months
£
-
-
-
-
-
-
-
1 month
£
-
-
-
-
-
-
-
Total
£
79,513
26,529
36,000
40,000
10,193
38,382
230,617
Interest rate sensitivity gap
1,013,506
12,753,510
Interest rate sensitivity
At 31 December 2010, should interest rates have fallen between 10 and 25 basis points with all other variables
remaining constant, the decrease in net assets attributable to holders of Ordinary Shares for the period would amount to
approximately £1,014 and £2,534 for assets up to 1 month respectively and £12,753 and £31,884 for assets more than 6
months respectively. If interest rates had risen by between 10 and 25 basis points, the increase in net assets attributable
to holders of Ordinary Shares would amount to approximately £1,014 and £2,534 for assets up to 1 month respectively
and £12,753 and £31,884 for assets more than 6 months respectively.
The income on the Company’s cash assets is positively correlated to interest rates. As interest rates rise, the interest
earned would follow (rise) thus increasing the value of the Company.
The Board reviews and agrees policies for managing these risks. The Investment Manager assesses the exposure to
market risk when making investment decisions and monitors the overall level of market risk on the investment portfolio
on an ongoing basis.
Commodity price risk
The Company is exposed to the risk of fluctuations in prevailing market commodity prices through its investment
portfolio. Commodity price risk is beyond the Company’s control but will be mitigated to a certain extent as a result of
the Company’s diversified portfolio as long as commodity prices remain uncorrelated. It is not possible to quantify
within reasonable ranges the impact of commodity price changes on the valuation of the company's investments.
However in general, long term commodity price increases should give rise to an increase in fair value.
Liquidity risk
Liquidity risk is defined as the risk that the Company may not be able to settle or meet its obligations on time or at a
reasonable price. The Company manages overall liquidity by investing through reputable brokers who trade in global
markets. In addition, the Company is fully funded.
b)
c)
30
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
5.
c)
RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
Liquidity risk (continued)
The Company has the ability to incur borrowings of up to 10 percent of its Net Asset Value but the Company's policy is
to restrict any such borrowings for temporary purposes only such as settlement mis-matches.
The table below analyses the Company's financial assets and liabilities into relevant maturity groupings based on the
remaining period at the Statement of Financial Position date to the contractual maturity date. The amounts in the table
are the contractual undiscounted cash flows.
At 31 December 2010
Assets
Cash and cash equivalents
Financial assets held at
fair value through profit
or loss
Other receivables
Liabilities
Other payables
and accrued expenses
Total liabilities
Less than
1 month
£
1,013,506
1-3 months 3-12 months
£
-
£
-
More than
12 months
£
-
No
contractual
maturity
£
-
Total
£
1,013,506
-
330,561
1,344,067
23,955,707
-
23,955,707
531,708
-
531,708
480,093
-
480,093
42,193,340
42,193,340
67,160,848
330,561
68,504,915
Less than
1 month
£
1-3 months 3-12 months
£
£
More than
12 months
£
No
contractual
maturity
£
Total
£
151,935
151,935
38,382
38,382
40,000
40,000
-
-
-
-
230,617
230,617
Net assets attributable to shareholders
68,274,298
d)
Credit risk
Credit risk is the risk that a counterparty will be unable to pay amounts in full as they fall due. The Company has
exposure to credit risk in relation to its cash balances, fixed income instruments and trade receivables as stated in the
Statement of Financial Position.
As at 31 December 2010, the Company's financial assets were held with the following weight:
Financial Assets
Counterparty
Credit
2010
Rating % of net assets
Fixed income instruments
- Short dated gilts
Cash and cash equivalents
Total
6.
TAXATION
UK Government
HSBC Bank plc
AAA
AA-
18.68
1.58
20.26
The Company is a Guernsey Exempt Company and is therefore not subject to taxation on its income under the Income
Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. An annual exempt fee of £600 has been paid.
31
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
7.
ADMINISTRATION FEES
The Administrator, HSBC Securities Services (Guernsey) Limited, is paid fees for acting as administrator of the
Company at the rate of 7 basis points of gross asset value up to US$250 million; the rate reduces to 5 basis points of
gross asset value above US$250 million. The Administrator is also reimbursed by the Company for reasonable out-of-
pocket expenses. These fees accrue and are calculated as at the last Business Day of each month and paid monthly in
arrears.
The Administrator is also entitled to a fee for its provision of corporate secretarial services provided to the Company on
a time spent basis and subject to a minimum annual fee of £40,000. The Company is also responsible for any sub-
administration fees as agreed in writing from time to time, and reasonable out-of-pocket expenses. The Administrator is
also entitled to fees of €5,000 for preparation of the financial statements of the Company.
The administration fees paid for the period from 9 March 2010 (date of incorporation) to 31 December 2010 were
£74,773 of which £10,193 was payable at 31 December 2010.
8. MANAGEMENT AND PERFORMANCE FEES
The Manager was appointed pursuant to a management agreement with the Company dated 31 March 2010 (the
“Management Agreement”). The Company pays to the Manager a management fee which is equal to 1/12th of 1.75% of
the total market capitalisation of the Company per month. The management fee is calculated and accrued as at the last
Business Day of each month and is paid monthly in arrears.
The Manager may in certain circumstances also be entitled to be paid a performance fee if the Net Asset Value at the
end of any Performance Period exceeds the Hurdle as at the end of the Performance Period. For this purpose the
“Hurdle” means an amount equal to the Issue Price of £1 multiplied by the number of shares in issue as at Admission, as
increased at a rate of 8% per annum compounded to the end of the relevant Performance Period. In respect of the first
Performance Period and any other Performance Period which is less than a full 12 months, the Hurdle will be applied
pro rata. The performance fee is subject to adjustments for any issue and/or repurchase of Ordinary Shares.
The amount of the performance fee (if any) will be 15 per cent of the total increase in the Net Asset Value at the end of
the relevant Performance Period over the highest previously recorded Net Asset Value as at the end of a Performance
Period in respect of which a performance fee was last accrued, (or the Issue Price multiplied by the number of shares in
issue as at Admission, if no performance fee has been so accrued) having made adjustments for numbers of Ordinary
Shares issued and/or repurchased as described above.
The first performance period commenced on the date of Admission and ended on 31 December 2010 and thereafter, is
each 12 month period ending on 31 December in each year (the “Performance Period”). The last Performance Period
will end on the date on which the Management Agreement is terminated or the Company is wound up. No performance
fees were accrued or paid in respect of the period ended 31 December 2010
If the Company wishes to terminate the Management Agreement without cause it is required to give the Manager 12
months’ prior notice or pay to the Manager an amount equal to: (a) the aggregate investment management fee which
would otherwise have been payable during the 12 months following the date of such notice (such amount to be
calculated for the whole of such period by reference to the Market Capitalisation prevailing on the Valuation Day on or
immediately prior to the date of such notice); and (b) any performance fee accrued at the end of any Performance Period
which ended on or prior to termination and which remains unpaid at the date of termination which shall be payable as
soon as, and to the extent that, sufficient cash or other liquid assets are available to the Company (as determined in good
faith by the Directors), provided that such accrued performance fee shall be paid prior to the Company making any new
investment or settling any other liabilities; and (c) where termination does not occur at 31 December in any year, any
performance fee accrued at the date of termination shall be payable as soon as and to the extent that sufficient cash or
other liquid assets are available to the Company (as determined in good faith by the Directors), provided that such
accrued performance fee shall be paid prior to the Company making any new investment or settling any other liabilities.
The management fees paid for the period ended 31 December 2010 were £724,147 of which £79,513 was outstanding at
the period end.
32
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
9.
OTHER EXPENSES
For the period ended 31 December 2010
Legal and professional fees
Agents fees
Consulting fees
Board meeting expenses
Marketing costs
Listing fees
Compliance fees
Insurance fees
Investor servicing fee
Guernsey financial services fee
Website expenses
Miscellaneous expenses
10. CASH AND CASH EQUIVALENTS
Cash and cash equivalents
Total
Represented by:
Deposits at HSBC Bank plc
11.
SHARE CAPITAL
TOTAL
£
27,749
25,000
19,859
12,860
11,044
10,891
10,000
12,000
3,596
2,250
2,040
31,329
168,618
31 December 2010
£
1,013,506
1,013,506
1,013,506
The authorised share capital of the Company on incorporation was represented by an unlimited number of Ordinary
Shares of no par value. The Company raised £30,468,865 through the issue of 30,468,865 Ordinary Shares and
6,093,772 Subscription Shares via a Placing and Offer. In addition, the Company issued 35,554,224 Ordinary Shares
and 7,110,822 Subscription Shares to the holders of shares in Genus Capital Fund pursuant to a scheme of
reorganisation of Genus Capital Fund, in exchange for substantially all the non-cash assets of Genus Capital Fund which
are detailed as follows:
Quantity
Investments
358,333
500
1,594,646
268,889
6,123,642
2,571,429
3,350,285
500,000
791,666
306,980
6,500,000
Listed equity shares
MBAC Fertilizer Corporation
Unlisted equity shares and warrants
BacTech Mining
Celadon Mining
Copperbelt Minerals
Ferrous Resources
First Coal Corporation
Gobi Coal and Energy
Ivanhoe Nickel and Platinum
Ivanhoe Nickel Platinum warrants 1 for 1.2 ordinary
Ivanhoe Nickel Platinum warrants 1 for 1 ordinary
South American Ferro Metals
Total assets transferred
Less Cash
Value of shares issued
Transfer value
£
567,717
567,717
328,699
297,720
3,545,594
14,130,705
2,315,920
4,417,716
2,884,457
5,480,463
1,770,941
2,024,889
37,197,104
37,764,821
(2,210,597)
35,554,224
33
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
11.
SHARE CAPITAL (CONTINUED)
With effect from 30 September 2010, 7,543 Ordinary Shares were issued as a result of the exercise of Subscription
Shares. The Company has in issue 66,030,632 Ordinary Shares and 13,197,051 Subscription Shares denominated in
sterling.
The subscription rights conferred by the Subscription Shares are exercisable every six months from 30 September 2010
until 31 March 2013 (inclusive). Each Subscription Share carries the right to subscribe for one Ordinary Share at a price
of 100 pence.
On 28 April 2010 the Ordinary Shares and Subscription Shares were admitted to the Official List of the UK Listing
Authority and to trading on the Main Market of the London Stock Exchange.
In addition, the Company has 10,000 Management Ordinary Shares in issue, which are held by the Investment Manager.
No application has been or will be made to have the Management Ordinary Shares admitted to listing on the Official
List or to trading on the London Stock Exchange’s Main Market for listed securities.
Holders of Ordinary Shares have the right to receive notice of and to attend and vote at general meetings of the
Company. Each holder of Ordinary Shares being present in person or by proxy at a meeting will, upon a show of hands,
have one vote and upon a poll each such holder of Ordinary Shares present in person or by proxy will have one vote for
each Ordinary Share held by him.
Holders of Management Ordinary Shares have the right to receive notice of and to attend and vote at general meetings
of the Company, except that the holders of Management Ordinary Shares are not entitled to vote on any resolution
relating to certain specific matters, including a material change to the Company’s investment objective, investment
policy or borrowing policy. Each holder of Management Ordinary Shares being present in person or by proxy at a
meeting will, upon a show of hands, have one vote and upon a poll each such holder of Management Ordinary Shares
present in person or by proxy will have one vote for each Management Ordinary Share held by him.
Holders of Subscription Shares are not entitled to attend or vote at meetings of Shareholders.
Holders of Ordinary Shares and Management Ordinary Shares are entitled to receive, and participate in, any dividends
or other distributions out of the profits of the Company available for dividend and resolved to be distributed in respect
of any accounting period or other income or right to participate therein. The Subscription Shares carry no right to any
dividend or other distribution by the Company.
The details of issued share capital of the Company are as follows:
Issued and fully paid share capital
Ordinary Shares of no par value*
Subscription Shares of no par value
31 December
2010
66,030,632
13,197,051
The issue of Ordinary Shares during the period ended 31 December 2010 took place as follows:
Issued during the period via Placing and Offer
Conversion of Subscription Shares
Issued during the period to holders of Genus Capital Fund
Balance at 31 December 2010
Ordinary Shares*
30,468,865
7,543
35,554,224
66,030,632
Subscription Shares
6,093,772
(7,543)
7,110,822
13,197,051
* In addition 10,000 Management Ordinary Shares were issued. On 9 March 2010, 1 Management Ordinary Share was
issued and on 26 March 2010, 9,999 Management Ordinary Shares were issued.
Capital Management
The Company's investment objective is to seek capital growth over the long-term through a focused, global portfolio
consisting principally of the equities or related instruments of natural resources companies.
34
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
11.
SHARE CAPITAL (CONTINUED)
The Company's investment strategy is to invest in natural resources companies, predominantly unlisted. Whilst there are
no fixed limits on the allocation of investments between unlisted securities and listed equities, equity-related securities
and cash, typically the Investment Manager will aim for the Company over the long term to be between 40% and 100%
invested by value of gross assets and up to 10% by value of gross assets to be held in cash and cash like holdings. The
Company will aim to hold sufficient cash to meet ongoing operational expenses. Where deemed appropriate, the
Company may borrow up to 10% of NAV for temporary purposes such as settlement mismatched.
At 31 December 2010 the Company was 79.7% invested. Of the Company’s total assets, 18.6% was held in short term
UK Government gilts maturing in less than 3 months.
It is not currently envisaged that any income or gains will be distributed by way of dividend, although this does not
preclude the Directors from declaring a dividend at any time in the future if they consider it appropriate to do so.
The Board monitors the extent to which capital has been deployed and the manner in which capital has been invested,
using inter alia, sectoral and geographic analyses.
The Company is not subject to any externally imposed capital requirements.
12. RELATED PARTY TRANSACTIONS
Transactions with related parties are based on terms equivalent to those that prevail in an arm’s length transaction. The
following transactions with related parties took place for the period ended 31 December 2010.
On 30 March 2010 the Company agreed to acquire the majority of the non-cash assets of Genus Capital Fund as set out
in the Prospectus issued by the Company dated 31 March 2010. Charles Hansard and Edward Flood were also directors
of Genus Capital Fund. Edward Flood and Charles Hansard resigned from Genus Capital Fund’s Board of Directors on
12 July 2010 and on 26 July 2010 respectively.
Genus Dynamic Gold Fund (GDGF) is a related party by virtue of common Manager and Investment Manager with the
Company. GDGF had an interest in 3,000,000 Ordinary Shares and 600,000 Subscription Shares in the Company at
31 December 2010.
CF Ruffer Baker Steel Gold Fund (CFRBSG) is a related party by virtue of common Investment Manager with the
Company. CFRBSG had an interest in 7,100,000 Ordinary Shares and 1,420,000 Subscription Shares in the Company at
31 December 2010.
Baker Steel Gold Fund (BSGF) is a related party by virtue of common Investment Manager with the company. BSGF
had an interest in 1,472,070 Ordinary Shares and 294,414 Subscription Shares in the Company at 31 December 2010.
Genus Natural Resources Fund (GNRF) is a related party by virtue of common Manager and an Investment Manager
with the company. GNRF had an interest in 1,727,308 Ordinary Shares and 441,513 Subscription Shares in the
Company at 31 December 2010.
Ironman Investment Company Limited, which is wholly owned by the Investment Manager, had an interest of 82,557
Ordinary Shares and 16,451 Subscription Shares at 31 December 2010.
The Manager, Baker Steel Capital Managers (Cayman) Limited had an interest in 430,348 Ordinary Shares and 86,069
Subscription Shares at 31 December 2010.
The Investment Manager, Baker Steel Capital Managers LLP, had an interest in 10,000 Management Ordinary shares at
31 December 2010.
Directors’ remuneration
For the period from 9 March 2010 to 31 December 2010 the total remuneration of the Directors was £116,000, with
£36,000 payable at year end.
35
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM 9 MARCH 2010 (DATE OF INCORPORATION) TO 31 DECEMBER 2010
13.
SUBSEQUENT EVENTS
AWR Lloyd was appointed by the Investment Manager to provide it with investment advice in relation to the Company
since launch. With effect from 1 January 2011, AWR Lloyd has been replaced with a new investment advisor entity
AWR Capital (“AWRC”). The Investment Manager and AWRC have entered into a new investment advisor agreement
on identical terms to the previous agreement in place with AWR Lloyd (which has now been terminated). There has
been no impact on the duties provided or the personnel involved.
On 10 January 2011, the Company announced an unaudited NAV for 31 December 2010 of 96.9p per share. During
December 2010, Ivanhoe Nickel & Platinum (“Ivanplats”) undertook a placing of stock equivalent to around 1% of the
shares in issue of Ivanplats. At the time the year end NAV was being finalised, it was unclear whether this placing
represented a change in fair value and the carrying value was, therefore, not changed. However, during January, a
further larger placing and significant trading on the “grey” market demonstrated that the December placing had indeed
indicated an upward revaluation was necessary. This increase has been included in these financial statements and was
also reflected in the 31 January 2011 NAV statement announced on 4 February 2011.
There were no other significant subsequent events since the period end.
14. APPROVAL OF ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
The Annual Report and Audited Financial Statements for the period from 9 March 2010 to 31 December 2010 were
approved by the Board of Directors on 21 April 2011.
36
BAKER STEEL RESOURCES TRUST LIMITED
(the “Company”)
(incorporated in Guernsey with registered number: 51576 )
NOTICE OF 2011 ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN THAT the 2011 Annual General Meeting of the Company will be
held at Arnold House, St Julian’s Avenue, St Peter Port, Guernsey, GY1 3NF on Thursday 30 June
2011 at 2.30 p.m. for the purpose of considering and, if thought fit, passing the following resolutions,
of which resolutions numbered 1 to 11 will be proposed as ordinary resolutions:
Ordinary Resolutions
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
That the financial statements of the Company for the period ended 31 December 2010 and the
reports of the Directors and the auditors thereon be received and adopted.
That the reappointment of Ernst & Young LLP (the “Auditors”) of 14 New Street, St. Peter
Port, Guernsey, GY1 4AF as Auditors of the Company for the year ended 31 December 2011,
be approved and ratified.
That the Directors be and are hereby authorised to fix the remuneration of the Auditors for the
year ended 31 December 2011.
That Howard Myles, being eligible and offering himself for re-election, be re-elected as a
Director of the Company.
That R. Edward Flood, being eligible and offering himself for re-election, be re-elected as a
Director of the Company.
That Charles Hansard, being eligible and offering himself for re-election, be re-elected as a
Director of the Company.
That Clive Newall, being eligible and offering himself for re-election, be re-elected as a
Director of the Company.
That Christopher Sherwell, being eligible and offering himself for re-election, be re-elected as
a Director of the Company.
That the maximum remuneration of the Directors for the year ended 31 December 2011 be
fixed at an aggregate amount of £200,000.
That, without prejudice to Article 3(b) of the Articles of Incorporation of the Company (the
“Articles”), the Company generally be and is hereby authorised for the purposes of section
315 of The Companies (Guernsey) Law, 2008 (the “Law”) to make market acquisitions of its
Ordinary Shares (as defined in the Articles) for all and any purposes, provided that:
(i)
the maximum number of Ordinary Shares hereby authorised to be purchased shall be
14.99% of the Ordinary Shares in issue at the date of the passing of this resolution;
(ii) the minimum price (exclusive of expenses) which may be paid for an Ordinary Share
in issue shall be GBP 0.01;
(iii) the maximum price (exclusive of expenses) which may be paid for an Ordinary Share
in issue shall not be more than the higher of (i) 5% above the average mid-market
values of the Ordinary Shares as derived from the Official List of the London Stock
Exchange plc for the five business days immediately preceding the date of the
purchase; and (ii) the higher of the last independent trade and the highest current
37
independent bid for the Ordinary Shares on the trading venue where the purchase is
carried out;
(iv) the authority hereby conferred shall expire at the conclusion of the next Annual
General Meeting of the Company or, if earlier, on the expiry of 14 months from the
passing of this resolution, unless such authority is renewed, varied or revoked prior to
such time save that the Company may, prior to such expiry, enter into a contract to
purchase any Ordinary Share in issue from time to time under such authority which
will or may be executed wholly or partly after the expiration of such authority and
may make a purchase of such Ordinary Shares pursuant to any such contract;
(v) the purchase price may be paid by the Company to the fullest extent permitted by the
Law; and
(vi) any Ordinary Shares bought back by the Company may be held in treasury in
accordance with the Law or be subsequently cancelled by the Company.
11.
That, without prejudice to resolution 10 above, the Company generally be and is hereby
authorised in accordance with the Law to make market purchases of its Ordinary Shares
pursuant to a tender offer provided that:
(i)
the maximum number of Ordinary Shares hereby authorised to be purchased is up to
twenty five per cent. of the Ordinary Shares in issue, at the date of the passing of this
resolution;
(ii) the maximum price (exclusive of expenses) which may be paid for an Ordinary Share
shall be not more than the then prevailing Net Asset Value per Ordinary Share (as
defined in the Articles);
(iii) the minimum price (exclusive of expenses) which may be paid for an Ordinary Share
is GBP 0.01;
(iv) the authority hereby conferred shall expire at the conclusion of the next Annual
General Meeting of the Company or, if earlier, on the expiry of 14 months from the
passing of this resolution, unless such authority is renewed, varied or revoked prior to
such time save that the Company may, prior to such expiry, enter into a contract to
purchase any Ordinary Share in issue from time to time under such authority which
will or may be executed wholly or partly after the expiration of such authority and
may make a purchase of such Ordinary Shares pursuant to any such contract;
(v) the purchase price may be paid by the Company to the fullest extent permitted by the
Law; and
(vi) any Ordinary Shares bought back by the Company may be held in treasury in
accordance with the Law or be subsequently cancelled by the Company.
Dated 20 May 2011
By order of the Board
HSBC Securities Services (Guernsey) Limited
Company Secretary
38
38
Notes
1.
2.
3.
As a member of the Company, you are entitled to appoint a proxy to exercise all or any of your rights to attend,
speak and vote at the meeting and you should have received a proxy form with this notice of meeting. You can
only appoint a proxy using the procedures set out in these notes and the notes to the form of proxy.
A form of proxy is attached which, if required, should be completed in accordance with these instructions and the
instructions thereon.
A proxy does not need to be a member of the Company but must attend the meeting to represent you. Details of
how to appoint the Chairman of the meeting or another person as your proxy using the form of proxy are set out in
the notes to the form of proxy. If you wish your proxy to speak on your behalf at the meeting you will need to
appoint your own choice of proxy (not the Chairman) and give your instructions directly to them.
If you do not intend to attend the meeting please complete and return the form of proxy as soon as possible.
4.
5.
6.
7.
8.
9.
You may appoint more than one proxy provided each proxy is appointed to exercise the rights attached to different
shares or a different class of shares. You may not appoint more than one proxy to exercise rights attached to any
one share. To appoint more than one proxy you may photocopy the form of proxy. Please indicate the proxy
holder’s name and the number and class of shares in relation to which they are authorised to act as your proxy
(which, in aggregate, should not exceed the number of shares of the relevant class held by you). Please indicate if
the proxy instruction is one of multiple instructions being given. All forms of proxy must be signed and should be
returned together in the same envelope.
The notes to the form of proxy explain how to direct your proxy to vote on each resolution or abstain from voting.
To appoint a proxy using the form of proxy, the form of proxy must be:
(cid:120)
(cid:120)
(cid:120)
completed and signed;
sent or delivered to the Company at Capita Registrars, FREEPOST RSBH-UXKS-LRBC, PXS,
34 Beckenham Road, Beckenham Kent, BR3 4TU; and
received by the Company’s registrars no later than 2.30 p.m. on 28 June 2011.
Any power of attorney or any other authority under which the form of proxy is signed or any instrument
appointing a proxy (or a notarially certified copy of such power or authority) must be included with the form of
proxy.
To change your proxy instructions simply submit a new form of proxy using the methods set out above and in the
notes to the form of proxy. Note that the cut-off date and time for receipt of a form of proxy (see above) also
apply in relation to amended instructions; any amended form of proxy received after the relevant cut-off date and
time will be disregarded.
Where you have appointed a proxy using the hard-copy form of proxy and would like to change the instructions
using another hard-copy form of proxy, please contact Capita Registrars on 0871 664 0300 (calls cost 10p per
minute plus network extras) or if calling from overseas +44 (0)20 8639 3399. Lines are open from 9.00 a.m. to
5.30 p.m., Monday to Friday.
If you submit more than one valid form of proxy, the form received last before the latest time for the receipt of
proxies will take precedence.
In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice
clearly stating your intention to revoke your proxy appointment to Capita Registrars, FREEPOST RSBH-UXKS-
LRBC, PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU. In the case of a member which is an individual
the revocation notice must be under the hand of the appointer or of his attorney duly authorised in writing or in the
case of a member which is a company, the revocation notice must be executed under its common seal or under the
hand of an officer of the company or an attorney duly authorised. Any power of attorney or any other authority
under which the revocation notice is signed (or a notarially certified copy of such power or authority) must be
included with the revocation notice.
The revocation notice must be received by the Capita Registrars no later than 2.30 p.m. on 28 June 2011 or
48 hours before any adjourned meeting.
If you attempt to revoke your proxy appointment but the revocation is received after the time specified then,
subject to the paragraph directly below, your proxy appointment will remain valid.
Appointment of a proxy does not preclude you from attending the meeting and voting in person. If you have
appointed a proxy and attend the meeting in person, your proxy appointment will automatically be terminated.
Except as provided above, members who have general queries about the meeting should contact Capita Registrars
on 0871 664 0300 (calls cost 10p per minute plus network extras) or if calling from overseas +44 (0)20 8639 3399.
Lines are open from 9.00 a.m. to 5.30 p.m. Monday to Friday. No other methods of communication will be
accepted.
To appoint a proxy or to give or amend an instruction to a previously appointed proxy via the CREST system, the
CREST message must be received by the Company’s agent RA10 by 2.30 p.m. on 28 June 2011. For this purpose,
the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the
CREST Applications Host) from which the Company’s agent is able to retrieve the message. After this time any
change of instructions to a proxy appointed through CREST should be communicated to the proxy by other means.
CREST Personal Members or other CREST sponsored members, and those CREST Members who have appointed
voting service provider(s) should contact their CREST sponsor or voting service provider(s) for assistance with
appointing proxies via CREST. For further information on CREST procedures, limitations and system timings
please refer to the CREST Manual. The Company may treat as invalid a proxy appointment sent by CREST in the
circumstances set out in Regulation 35(5) (a) of the United Kingdom Uncertificated Securities Regulations 2001.
In any case your form of proxy must be received by the Company’s registrars no later than 2.30 p.m. on 28 June
2011.
39
39
MANAGEMENT AND ADMINISTRATION
DIRECTORS:
REGISTERED OFFICE:
MANAGER:
INVESTMENT MANAGER:
BROKERS:
SOLICITORS TO THE COMPANY:
(as to English law)
ADVOCATES TO THE COMPANY:
(as to Guernsey law)
Howard Myles (Chairman)
Edward Flood*
Charles Hansard**
Clive Newall
Christopher Sherwell
All of whom are non-executive and independent directors
Arnold House
St. Julian’s Avenue
St. Peter Port
Guernsey GYI 3NF
Channel Islands
Baker Steel Capital Managers (Cayman) Limited
PO Box 309
George Town
Grand Cayman KY1-1104
Cayman Islands
Baker Steel Capital Managers LLP
86 Jermyn Street
London SW1Y 6JD
England
United Kingdom
RBC Capital Markets
71 Queen Victoria Street
London EC4V 4DE
United Kingdom
Winterflood Securities Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
United Kingdom
Simmons & Simmons
CityPoint
One Ropemaker Street
London EC2Y 9SS
United Kingdom
Ogier
Ogier House
St. Julian’s Avenue
St. Peter Port
Guernsey GY1 1WA
Channel Islands
* Edward Flood resigned from Genus Capital Fund’s Board of Directors on 12 July 2010 and from that date forward has been an Independent Director
** Charles Hansard resigned from Genus Capital Fund’s Board of Directors on 26 July 2010 and from that date forward has been an Independent Director
40
MANAGEMENT AND ADMINISTRATION (CONTINUED)
ADMINISTRATOR & COMPANY SECRETARY:
SUB-ADMINISTRATOR TO THE COMPANY:
CUSTODIAN TO THE COMPANY:
AUDITORS:
REGISTRAR:
PRINCIPAL BANKER
HSBC Securities Services (Guernsey) Limited
Arnold House
St. Julian’s Avenue
St. Peter Port
Guernsey GY1 3NF
Channel Islands
HSBC Securities Services (Ireland) Limited
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
HSBC Institutional Trust Services (Ireland) Limited
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Ireland
Ernst & Young LLP
Royal Chambers
St. Julian’s Avenue
St. Peter Port
Guernsey GY1 4AF
Channel Islands
Capita Registrars (Guernsey) Limited
Longue Hougue House
St. Sampson
Guernsey GY2 4JN
Channel Islands
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
41