Energy for Pakistan Annual Report 2014 Contents Chairman’s Statement Chief Executive’s Statement Group Strategic Report Report of the Directors Report of the Independent Auditors Consolidated Statement of Profit or Loss Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Statement of Cash Flows Company Statement of Cash Flows Notes to the Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements Notice of Annual General Meeting Company Information 01 02 03 07 14 16 17 18 19 20 21 22 23 24 25 43 44 01 Chairman’s Statement For the year ended 31 December 2014 I am pleased to present Oracle Coalfields' (or the "Company") results for the period ending 31 December 2014. It has been a year of sharp contrast. The EPC Framework Agreement that we signed with our Chinese partners the Shandong Electric Power Company (SEPCO) in September gives us a clear outline of the overall cost and financing of the project. The Placing, announced after the year-end in February, provides us with sufficient funding to take the project through to financial close. We are now working with SEPCO to finalise Term Sheets on the two EPC contracts (for the mine and for the power plant). When this work is complete we will progress financing arrangements with Sinosure, the China Export & Credit Insurance Corporation. The underlying philosophy of our Company has always been to progress this project in a judicious manner in line with all relevant professional and international standards. In this same spirit we handled the unexpected and arbitrary decision by the Coal Mines Department to cancel our mining lease over Block VI in November 2014. As urgently as possible we followed due process and took the necessary actions, which led to the restoration of the lease in February 2015. In this respect we are grateful to many stakeholders for their support during this difficult and testing time. Regrettably, this development has delayed project progress by some months, but our keenness to deliver an integrated coal mine and power generation project at Thar Coalfield, Province of Sindh is as strong as ever. Reflecting the position of the Company as a mining company, now moving towards financial close, the consolidated financial results for the year to 31 December 2014 show an operational loss after taxation for Oracle and its subsidiaries (the "Group") of £709,479 (2013: £1,038,342). The basic loss per share was 0.21p (2013: loss 0.37p). At the end of 2014 the Group had cash and cash equivalents of £383,063 (2013: £538,789) and total assets less current liabilities of £4.09 million (2013: £4.19 million). In September 2014, we raised further capital of £775,000 including contributions from shareholders and management. In February 2015 a further £3.37 million was raised. It is anticipated that, with these funds, the Company will have sufficient working capital to reach financial close, anticipated by the year-end. Towards the end of the year, the Company intends to approach the market for the major fund raising needed to develop the Block VI coal mine and power generation project. The Group is considering options to raise the necessary debt and equity, and has started discussions with potential investors from the Middle East and Far East, as well as being further strengthened by new shareholders in the Company's fund raising in February 2015. The Government in Pakistan continues to demonstrate firm support for the development of the country's indigenous coal resource, recognising that it will be a fundamental game changer for the economic development of Pakistan. Support from China, both diplomatic and economic, remains strong. The Board extends its thanks to the relevant authorities in the Province of Sindh and in Pakistan for their continued assistance. The Board welcomes the new shareholders who invested in the Company in September last year and in February this year, and continues to be very grateful for the patience and support of our longer standing shareholders. Adrian Loader Chairman 9 April 2015 Oracle Coalfields PLCAnnual Report 2014 02 Chief Executive’s Statement For the year ended 31 December 2014 Pakistan continues to be affected by electricity shortages which are reducing the potential for economic growth. The Government of Pakistan's National Power Policy 2013 states that the current shortfall in generating capacity is 5,500MW and is projected to rise. The Government is committed to eradicating this shortfall and to diversifying the electricity supply market with particular support for the development of indigenous fuel sources including the Thar Coalfield, Province of Sindh. Following the submission of the Environmental and Social Impact Assessment (ESIA) for the coal mine in 2013 and the issuance of the No Objection Certificate in January 2014, the Company submitted its Resettlement Action Plan (RAP) to the Sindh Environmental Protection Agency (SEPA) in May 2014 as required before project implementation. The Environmental Impact Assessment (EIA) of the proposed power plant is being assessed and will be the subject of further studies this year to provide an EIA for the integrated mine and power project. The Thar Coal and Energy Board (TCEB) prepared a Coal Pricing Mechanism (CPM) proposal for the Thar Coalfield in mid-2014 and this was followed by a round table meeting of leaseholders and interested parties in August 2014. The CPM was subsequently approved and the rules placed into a legal framework which was enacted by the Government of Sindh. The CPM puts into practice the previously announced internal rate of return (of 20%/20.5%) for the Thar Special Economic Zone. The Company is preparing its petition under the CPM for submission in the near future to agree the coal price for the Block VI project. In September 2014 the Company signed an Engineering, Procurement and Construction (EPC) Framework Agreement with SEPCO for the construction of initially a 600MW mine-mouth power plant and for the development of a 4.0Mt per year open-pit mine to supply the power plant. In March 2015 this Agreement was extended to 31 December 2015. Work is ongoing to develop this agreement into EPC term sheets for both the mine and the power plant and we are working with our advisors Mott MacDonald UK on the power plant, and Turner and Townsend for the coal mine development. When these term sheets are in place, we will enter into detailed discussion on the indicative financing offered through Sinosure, and certain Chinese banks. We continue to work with K–Electric (KE) to negotiate a Power Purchase Agreement (PPA) with the Company to purchase the entire output from the 600MW power plant for a period of 30 years which will require the finalisation of the coal price under the CPM to complete. It can then be presented to the National Electric Power Regulatory Authority (NEPRA) for approval. These are all exciting steps in the development of an integrated coal and power development within the Block VI lease area in Thar, and the work in 2015 will concentrate on formalising agreements and contracts to bring the project into full implementation. In late November 2014, the Company's subsidiary, Sindh Carbon Energy Limited (SCEL), received a notification for the cancellation of the Mining Lease at our Block VI licence. The Company responded to this notification in the form of an Appeal as per the Rules set out in the Sindh Mining Concession Rules 2002 which was followed by a Hearing in the presence of the Secretary, Energy Department, and Government of Sindh. Following the hearing, the Decision was made by the Secretary, Energy Department that the cancellation of the Mining Lease shall be rescinded ab initio subject to SCEL complying with submission of the Performance Guarantee and setting up of an office in Karachi. These two conditions were met by SCEL and in late February 2015, the Mining Lease was restored by the Coal Mines Development, Government of Sindh. Work is continuing on site in the pre-development stage to implement a Corporate Social Responsibility Programme (CSR) to provide early benefits to the local community in terms of water, basic healthcare and veterinary support. Land survey work is being undertaken in accordance with the RAP prepared in 2014 which will also align with the Resettlement Policy Framework published in draft by the Sindh Government and that will conform to international best practice. The Company remains steadfast in its objective of developing one of the largest private sector integrated coal mine and power generation projects in Pakistan. This comes with the responsibility of maintaining high standards in delivering on the project and subsequently rewarding shareholders. Our project is strategically placed in Pakistan's energy mix that includes the project in the 'approved list' of the China-Pakistan Economic Corridor (CPEC). The CPEC is a bilateral arrangement between China and Pakistan, the essence behind which is to access Chinese funding in the development of infrastructure, including energy, for the economic corridor to be established from Pakistan's North to the South. The Board is grateful to the support of the Government of Sindh in restoring the Mining Lease in a speedy and amicable manner and in providing continued support. The Company extends its thanks to the shareholders for their continued patience and support. Shahrukh Khan Chief Executive Officer 9 April 2015 Oracle Coalfields PLCAnnual Report 2014 03 Group Strategic Report For the year ended 31 December 2014 The Directors present their strategic report of the Company and the Group for the year ended 31 December 2014. PRINCIPAL ACTIVITY AND BUSINESS MODEL The principal activity of the Group in the year under review was that of an energy project, based on the exploration for and development of coal, and building a mine-mouth power station in Pakistan. The exploration and development is primarily carried out in Pakistan, but the Group is controlled, financed and administered within the United Kingdom which remains the principal place of business. The Group's business model is to create value through a balanced portfolio of coal assets at the various stages in the value cycle, in the procurement of exploration leases, exploration work, development of commercially viable discoveries, their implementation and operation. The Group will seek judiciously to enhance value further through asset trade. REVIEW OF THE BUSINESS During the year the Group continued to utilise its funds to develop its Pakistan Thar mine project. The expenditures are either capitalised in accordance with IFRS, or expensed. The capitalised expenditures are shown as intangible fixed assets in the Statement of Financial Position and the expensed expenditures are shown as administrative expenses in the Statement of Profit or Loss and hence determine the loss for Oracle Coalfields PLC Group of Companies after taxation of £709,479 (2013: £1,038,342). The Chairman, in his statement, and the Chief Executive in his report, have fully described the activities of the Company during the financial year and the further steps now required to take the Company through to final investment decision. PRINCIPAL RISKS AND UNCERTAINTIES The Group is principally engaged in the development of lignite coal resources in Block VI in the Thar desert in the Sindh province in Pakistan through an open-pit mine supplying a mine-mouth power plant. The principal strategic and operational risks and uncertainties facing the Group are described below, together with the steps taken for their mitigation. Information on financial risk management is set out in the Financial Instruments section in this report. Environmental and social risk Impact The Thar coal mine project is subject to environmental regulations both in Pakistan and through international standards and conventions. Non-compliance could significantly impact the development of the mine and raising of debt financing. The development of the Block VI mine could negatively impact communities near its operation due to resettlements, population inflow and necessary infrastructure. Mitigation The completion of the ESIA in 2013 by Wardell Armstrong International and Hagler Bailly of Pakistan and its subsequent approval in January 2014 by the Sindh Environmental Protection Agency is another significant step towards project implementation. A Resettlement Action Plan (RAP) was produced in 2014 in accordance with national and international standards in consultation with the affected communities and Oracle is developing a resettlement framework. Since 2012 Oracle has employed a Community Liaison Officer (CLO) to ensure the local community can be fully engaged in the process and this liaison is ongoing. The environmental impact of the integrated mine and power plant will require further work in 2015. Technical risk Impact Co-completion risk exists where the success of one project depends on the completion of another. Both the mine and any associated power station cannot operate without the other. If the power station does not complete on time then the mine cannot start deliveries, and vice versa. There is a similar co-dependency in the operational phase. Both also depend on the construction of a high voltage transmission network to evacuate power from Thar mine-mouth power plants and this also needs to be completed for the power plant to operate. The National Transmission and Despatch Company is committed to this objective. The mine must be de-watered prior to mine construction and during production. The water will be used for the mine and the power plant as well as being available for the local community. Surplus water produced must be disposed of safely. Mitigation During 2014 the Company has been actively seeking strategic relationships to facilitate the development of an integrated mine and power plant on the site. In September 2014 the Company signed an EPC Framework Agreement with SEPCO for the initial construction initially of a 600MW mine-mouth power plant and for the development of a 4.0Mt per year open-pit mine to supply the power plant. Work is ongoing to develop this agreement into EPC termsheets for both the mine and the power plant and we are working with our advisors Mott MacDonald UK on the power plant, and Turner and Townsend on the mine development. As reported last year the Company entered a JDA with KE initially to develop a 300MW power plant with the potential to increase this to 1,100MW over time. Additionally KE have proposed entering into a Power Purchase Agreement (PPA) with the Company to purchase the entire output from the power plant for a period of 30 years and the Company is working with KE to draw up the PPA agreement which will be presented to the National Electric Power Regulatory Authority (NEPRA) for approval later in 2015. It is to be noted that following the MOU with SEPCO, KE have agreed to collaborate with Oracle and SEPCO to develop SEPCO's 600 MW power plant. Oracle Coalfields PLCAnnual Report 2014 04 Group Strategic Report continued Economic risk Impact There are inherent uncertainties in estimation of the capital and operating costs to reach first production, and the fiscal regime applicable to the project, which will only be resolved when the project contracts are negotiated and the fiscal regime legally confirmed. Similarly the fiscal incentives for the construction and operation of the power plant will need to be confirmed prior to contract finalisation. Offtake agreements need to be reached at sustainable commercial rates the mine-mouth power station to justify the project investment, with sufficient creditworthiness to meet lenders' risk criteria. Mitigation Following the signing of the EPC Framework Agreement with SEPCO for the development of the mine and power plant the estimates for capital and operating costs for the integrated project are in preparation. These will allow for the Fiscal Incentives announced for Thar coal and power developments in the Special Economic Zone to be included and factored into the coal price for supply to the power plant. The TCEB has produced a CPM which was enacted by the Sindh Government in 2014. The CPM has adopted a cost plus approach to setting the coal price and also recognises the uncertainties of mining within its review mechanism. The Company intends to submit a price petition in accordance with the CPM in 2015. Financing risk Impact The overall project is expected to cost in the region of US$1,500 million. The greater part of this will be covered by two EPC contracts with SEPCO, one or the mine and one for the power plant. Sinosure have offered outline terms on the basis of which, subject to detailed agreement, they will securitise up to 85% of the two EPC contracts. The balance will be met by some additional borrowing, but mainly through equity. Some third party equity is anticipated, but the greater part will be from Oracle Coalfields PLC. The major risks to this plan are that the Company fails to come to final agreement with Sinosure and that the Company has difficulty in raising the equity required for the project. Mitigation The Company will work to reach full agreement with Sinosure to assure the EPC debt financing, and will similarly work to attract and secure third party equity. It will develop a strategy with its brokers, Brandon Hill and Peterhouse, to find the balance of equity through LSE AIM. Political, legal and regulatory risk Impact Although the Federal and Sindh Governments have demonstrated strong support for the integrated Thar coal mining and power plant development, there is potential for the Group's operations and financial results to be affected by instability and changes to the legal, regulatory or fiscal frameworks in Pakistan. This includes political unrest, variation to the lease terms, and changes to the royalty and tax rates, and, as occurred in 2014, lease cancellation. The relevant federal and Sindh authorities need to fund and complete local infrastructure, including the power transmission line from the power plant. The risk of terrorist attack on the Company and its staff in Pakistan, or on suppliers and customers, remains real and could restrict the Company's ability to manage at the site and the Karachi office. Mitigation The Company works closely with the Energy Department and maintains strong working relations with the Sindh Government. It was through these relationships that the Company ensured that the arbitrary cancellation of the Mining Lease was expeditiously reversed. The Thar Coalfield area has been declared a Special Economic Zone and the Sindh Government has already built roads and a rescue centre, started construction of an airport capable of taking B737 and C130 transport aircraft, and plans more road and transmission line upgrades. Company staff are instructed to take a range of security precautions and generally keep a low profile in the country. As the profile of the project builds, the Company will implement further appropriate protection for its staff. Generally the Sindh Province has a low incidence of such attacks. Oracle Coalfields PLCAnnual Report 2014 05 CORPORATE SOCIAL RESPONSIBILITY (CSR) Objective: Oracle Coalfields PLC is a responsible corporate entity, and is continuing to apply international best practice to the Thar project. The Company is aware of the key role we have to play in developing this pioneering project, in minimising the impact our operations can have on the natural and social environment and in creating opportunities for the local community. Environmental and Social Impact Assessment (ESIA) The Company commissioned Wardell Armstrong International Ltd (WAI) to produce an ESIA for the Block VI project. WAI is working with Hagler Bailly Pakistan, a local group of environmental consultants, based in Islamabad, to complete the ESIA to meet both national and international standards. The ESIA was completed in April 2013 and was submitted to SEPA in April 2013. A public hearing held on the site in June 2013 which was attended by local people along with government representatives, SEPA, various non-governmental organisations and our consultants as part of the public consultation process. The project along with its impacts and mitigation plans was presented to the public and all were given the opportunity to comment on the proposals and question the Company and the Government on all aspects of the proposed development. There was overall support for the project and the Company will continue its consultation with local people as the project moves into the implementation phase. Early in July 2013 SEPA held a Technical Committee Hearing in Karachi to examine the technical aspects of the ESIA and to take on board concerns raised at the public hearing which was attended by the Company and its consultants along with government representatives. All the technical queries raised by the panel were addressed satisfactorily and the Company outlined how the Environmental Management Plan would be implemented and monitored through the life of the project. Following these meetings SEPA has issued the No Objection Certificate giving formal approval for the ESIA in January 2014 which is another significant step towards mine development. Community and consultation In addition to the environmental characterisation of the site and its environs, a comprehensive social data gathering campaign is underway. Background information on local demography, village structure, local culture, resources and socioeconomics is being collected. In addition, an ongoing public consultation is underway, to gather the views and opinions of local stakeholders (both at a local and national level), and to disseminate information about the project. Resettlement Community response has generally been positive, with an interest in the project, and the associated community benefits that it will deliver. Because of the location of the lignite seams, and the requirement for associated infrastructure, some relocation of local communities currently residing within the Block, will be required. The Thar Coal and Energy Board, Government of Sindh published an Interim Resettlement Policy Framework in September 2013 which sets out the formal mechanism for resettlement in Thar and is generally in line with international performance standards. A Resettlement Framework and Resettlement Action Plan is being developed in line with the draft Resettlement Policy framework, to ensure that the process is managed in line with best practice standards, and a full programme of consultation, specifically dealing with this issue is being instigated. Communities will be resettled locally within the Block area. As part of the resettlement process, which will occur in full consultation with the affected communities and Project Affected Peoples, resettled communities will be given equivalent, alternative land for their villages. Oracle intends to construct replacement villages, with full electricity, sanitation, and potable water supply, and culturally appropriate places of worship, with opportunities for a local market area. The exact design of resettlement villages will be decided in consultation with the affected communities. Oracle social development initiatives The Company has appointed a Community Liaison Officer (CLO) in 2012 to act as the local point of contact for stakeholders, and to receive information from, and disseminate information to local community members. The CLO will also act as an intermediary, to represent the interests of the local communities to Oracle. As part of Oracle's Corporate Social Responsibility (CSR) initiatives, a strategy is being developed, to identify, and support community development projects. This is an ongoing process and will continue as the project moves into implementation. Oracle Coalfields PLCAnnual Report 2014 06 Group Strategic Report continued Benefits and opportunities Oracle Coalfields PLC is working with local groups to ensure that the Block VI project delivers sustainable benefits to the communities and an overall improvement in local living conditions, whilst also positively responding to the energy crisis in Pakistan. This project will result in direct and indirect benefits to the local communities. Direct benefits will include employment at the mine and power plant, whilst indirect benefits may include revenues generated by local supply of goods and services to the operations. Benefits and opportunities include: – Improvements and extension of the existing government primary schools in Block VI: – Training of literate male and female community members for teaching – Extension of the building to support more students – Supply of stationery and other provisions – Bi-annual hygiene and healthcare awareness campaign in all communities – Setting up water filter systems in all communities – Awareness campaign on methods to improve livestock health and productivity in all communities – A compact link road to connect local villages and communities to the mine site access road proposed under project On behalf of the Board: Adrian Loader Director 9 April 2015 Oracle Coalfields PLCAnnual Report 2014 07 Report of the Directors For the year ended 31 December 2014 The Directors present their report with the financial statements of the Company and the Group for the year ended 31 December 2014. DIVIDENDS No dividends will be distributed for the year ended 31 December 2014. EVENTS SINCE THE END OF THE YEAR Information relating to events since the end of the year is given in the notes to the financial statements. DIRECTORS The Directors during the year under review were: Mr W A Loader Mr S Khan Mr A C R Scutt Mr M R Stead Chairman Chief Executive Senior Independent Director Non-executive Director The beneficial interests of the Directors holding office on 31 December 2014 in the issued share capital of the Company were as follows: Ordinary 0.1p shares Mr S Khan Mr W A Loader Mr A C R Scutt Mr M R Stead 31 December 2014 33,081,153 4,321,992 1,173,857 1,040,857 1 January 2014 32,395,967 2,967,460 858,865 765,865 In addition to the above, in his capacity as a joint honorary trustee, Mr A C R Scutt also holds 225,000 shares for The Acumen Brigade Investment Club and 165,000 shares for The Ridgeway Investors Group. Mr A C R Scutt is not a beneficial member of these investment clubs and has no beneficial interest in the shareholdings. Ordinary 0.1p shares under option Mr S Khan Mr A C R Scutt Mr W A Loader Mr M R Stead Mr M R Stead Number 6,000,000 2,000,000 1,000,000 200,000 250,000 Exercise price 5p 5p 10p 5p 10p Expiry date 31.03.2017 31.03.2017 01.08.2016 31.03.2017 31.03.2017 Oracle Coalfields PLCAnnual Report 2014 08 Report of the Directors continued INFORMATION ON DIRECTORS AND SENIOR MANAGEMENT Adrian Loader Chairman Mr Loader has extensive international experience with Royal Dutch Shell in strategy, business development, energy projects and new markets. He held regional responsibility for Shell Pakistan and, as President of Shell Canada, was responsible for Shell's oil sands open-pit mining operations. He previously served on the boards of Shell Canada, Alliance-Boots and Candax Energy and Compton Petroleum, the last two as Chairman. Mr Loader is currently a Director of Holcim, Sherritt International and Alderon Iron Ore, as well as being a member of the International Advisory Board of Garda World. Mr Loader is a Fellow of the Chartered Institute of Personnel and Development and holds a Masters degree in History from Cambridge University. Shahrukh Khan Chief Executive Officer Mr Khan was educated in the USA and UK. He was awarded a BA in Business administration and Economics at Richmond, the American International University in London. Mr Khan has project finance experience in the natural resource and infrastructure related sector, predominantly in the Middle East, South Asia and China. He has specialist expertise in large and complex projects, including project valuation and investment appraisal, feasibility studies and other project finance related services. Anthony Scutt Senior Independent Director Mr Scutt is a qualified Chartered Secretary and a Certified Internal Auditor with the US Institute of Internal Auditors. He has over 30 years of financial management experience with Shell International Petroleum and has worked in many parts of the world, including the Malagasy Republic, East and Central Africa, South Vietnam, Cambodia, the Philippines, Gabon and latterly as the Chief Internal Auditor of Shell UK. Mr Scutt then went on to become an investment analyst, writer and investor. Mr Scutt is a Non-executive Director of AIM-listed Starvest plc. Roderick Stead Non-executive Director Mr Stead was awarded a BSc in Economics from the London School of Economics and is qualified accountant, FCCA. He brings experience in a variety of management roles in the oil, gas, coal, mining and forestry industries in different environments. This includes Board experience in over 16 companies with particular expertise in corporate governance issues, strategic business analysis and the management of major joint venture relationships. Mr Stead has extensive experience in project finance negotiations with investment banks, multilateral agencies, export credit agencies, commercial banks, law firms and accountants. Simon Smith Finance Manager Mr Smith has background in finance from a twenty-five year career in Shell, in a variety of posts. He was Finance Director in Sierra Leone and in Egypt where he also deputised for the Chief Executive. He also worked in Shell's M&A unit, particularly on the sale of Billiton, Shell's Metals division, the sale of Shell's agrochemical interests and Shell's early expansion into eastern Europe. Latterly he headed up Group Finance HR. Mr Smith has an MA in Economics from Cambridge University and is a fellow of the Institute of Chartered Accountants in England and Wales. Brian Rostron Mining and Contracts Manager Mr Rostron is a Mining Engineer with over 30 years' international experience and an expert on coal. He is a Chartered Engineer who has been responsible for the operational management of various coal mining companies with overall responsibility for production, financial performance, acquisitions and restructuring. Mr Rostron has previously worked with Miller Argent South Wales Ltd, H.J. Banks Mining, Scottish Coal Company, Coal Contractors Ltd as well as serving as the Director General of the Confederation of UK Coal Producers and was a UK member of Eurocoal Executive Committee. Oracle Coalfields PLCAnnual Report 2014 09 FINANCIAL INSTRUMENTS The Group's financial instruments comprise cash and cash equivalents, loan investments and financial assets, and various items such as trade receivables, trade payables, accruals and prepayments that arise directly from its operations. The main purpose of these financial instruments is to finance the Group's operations. The Board regularly reviews and agrees policies for managing the level of risk arising from the Group's financial instruments which are summarised as follows: Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's policy throughout the year has been to ensure that it has adequate liquidity to meet its liabilities when due by careful management of its working capital. Credit risk The Group's principal financial assets are the cash and cash equivalents and taxation receivable as recognised in the statement of financial position, and which represent the Group's maximum exposure to credit risk in relation to financial assets. Capital management The Company's capital consists wholly of ordinary shares. The Board's policy is to preserve a strong capital base in order to maintain investor, creditor and market confidence, and to safeguard the future development of the business, whilst balancing these objectives with the efficient use of capital. Market risk Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates, interest rates and equity prices will affect the Group's and Company's income or value of its holdings in financial instruments. GOING CONCERN The Directors consider that the Company's present cash balance should fund the Group through to final investment decision. They therefore believe that the going concern basis is appropriate for the preparation of the financial statements. SUBSTANTIAL SHAREHOLDINGS The Directors are aware of the following who were interested, directly or indirectly, in 3% or more of the Group's ordinary shares on 31 December 2014: Mr S Khan Generali Investments Mr A Neubauer Starvest plc Sunvest Corporation Limited Mr WPS Richards Newbridge Silverware Ltd Shareholding % holding 33,081,153 29,400,000 22,668,663 21,867,333 20,000,000 18,000,000 13,035,795 8.50% 7.56% 5.83% 5.62% 5.14% 4.63% 3.35% AUTHORITY TO ISSUE SHARES At the Annual General Meeting held on May 2014, shareholders gave authority for the Directors to allot equity securities for cash up to an aggregate nominal value of £100,000, and at the General Meeting held on 25 February, 2015, a further £535,000 was authorised. HEALTH AND SAFETY There were no reported personal injuries or fatalities among the Company's staff or contractors during the year. SIGNIFICANT AGREEMENTS The Companies Act 2006 requires the Company to disclose any significant agreements which take effect, alter or terminate upon a change in control of the Company. The Company is not aware of, or party to, any such agreement. Oracle Coalfields PLCAnnual Report 2014 10 Report of the Directors continued REMUNERATION REPORT This report has been prepared in accordance with the requirements of Schedules 2 Part 1 to the Companies Act 2006 (the Schedule) and describes how the Board has applied the Principles of Good Governance relating to Directors' Remuneration. In accordance with Section 439 of the Companies Act 2006 (the Act), a resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the Financial Statements are to be approved. Remuneration policy Executive remuneration packages are designed to attract, motivate and retain Directors of the necessary calibre and to reward them for enhancing value to shareholders. The performance measurement of the Executive Director and key members of senior management and the determination of their annual remuneration package is undertaken by the Remuneration Committee. The remuneration of Non-executive Directors is determined by the Board within limits set in the Articles of Association. Executive Directors are entitled to accept appointments outside the Company providing the Board's permission is sought. Non-executive Directors’ terms of engagement The Non-executive Directors have specific terms of engagement. Their remuneration is determined by the Board. In the event that a Non-executive undertakes additional assignments for the Company, the Non-executive's fee will be agreed by the Company in respect of each assignment. Aggregate Directors’ remuneration The remuneration paid to the Directors, inclusive of Employer National Insurance contributions, in accordance with the service contracts, during the year ended 31 December 2014 was as follows: Executive Mr S Khan Non-executive Mr M R Stead Mr A C R Scutt Mr W A Loader Salary & fees £ 112,702 27,352 27,352 61,492 Bonuses £ Pensions £ Termination benefits £ Share based payments £ 2014 Total £ 2013 Total £ – – – – – – – – – – – – – – – – 112,702 150,292 27,352 27,352 61,492 27,388 27,388 61,528 As part settlement of the above salaries, the Directors received 2,928,253 new ordinary shares of 0.1p each in lieu of cash remuneration of £36,603. The settlement was on the same terms as a larger placement with the placing price of 1.25 pence per share. Directors’ service contracts The Directors have contracts with an indefinite term and a stated termination notice period. Executive Mr S Khan Non-executive Mr M R Stead Mr A C R Scutt Mr W A Loader Date of appointment Notice period 13.2.2007 1 month 1.11.2007 22.12.2006 1.8.2011 6 months 6 months 3 months Performance Evaluation The Board undertakes a formal evaluation annually of its performance, and of its committees and individual Directors through a questionnaire and interview process that is overseen by Mr Anthony Scutt, the Senior Independent Director. Oracle Coalfields PLCAnnual Report 2014 11 CORPORATE GOVERNANCE REPORT Throughout 2014 the Board has continued to demonstrate its commitment to maintaining high standards of corporate governance. The Company has complied substantially throughout the period with the corporate governance guidelines (Guidelines) for smaller quoted companies issued by the Quoted Companies Alliance. This statement describes how the Company applies the principles of the Guidelines and the Company's compliance with the specific provisions of the Guidelines. The principles set out in the Guidelines cover four areas: the Board, Directors' remuneration, accountability and audit, and relations with shareholders. With the exception of the Directors' Remuneration (which is dealt with separately in the Remuneration Report) the following report sets out how the Board has applied such principles. Board and Board Committees The Board of Directors The Board of the Company is responsible for the Group's system of corporate governance. At 31 December 2014 the Board consisted of four Directors being a Chief Executive Officer, Mr S Khan; and three Non-executive Directors including the Chairman, Mr W A Loader. The two other Non-executive Directors were Mr A C R Scutt, Senior Independent Director, and Mr M R Stead. The Board has appointed Anthony Scutt, one of the independent Non-executive Directors to be the Senior Independent Director to provide a sounding board for the Chairman and to serve as an intermediary for the other Directors when necessary. He is available to shareholders if they have concerns which contact through the normal channels of Chairman or Chief Executive has failed to resolve or for which such contact is inappropriate. The Board has considered the independence of Anthony Scutt and Roderick Stead and considers them to be fully independent, notwithstanding that they hold equity and warrants in the Company; indeed the Board is of the view that these interests serve to align their interests more closely with those of the Company. Details of Directors' service contracts are given in the Remuneration Report. All Directors had access throughout the year to the advice and services of the Company Secretary, Mr T Everitt, who was responsible for ensuring that Board procedures and applicable regulations under the Company's Articles of Association or otherwise were complied with. Each Director is entitled, if necessary, to seek independent professional advice at the Company's expense. Board meetings The Board of Directors meets every two months and has a defined schedule of matters reserved for its decision. The matters so reserved include responsibility for the overall Group strategy, approval of contracts, commitments to capital expenditure budgets over £10,000, appointment of Directors and staff, approval of remuneration of Directors on the recommendation of the Nomination Committee, issue of shares and warrants, appointment of a financial advisor, approval of announcements to the market, and a final investment decision to proceed with project implementation. Board Committees The Board Committees are comprised of Non-executive Directors, except for the Nomination Committee which is chaired by the Chief Executive, Mr S Khan, and the Tender Board which additionally comprises of Mr B Rostron and Mr S Smith. They operate within defined terms of reference, details of which are posted to the Company's website, and they report regularly to the Board. The Board Nomination Committee Remuneration Committee Audit Committee Tender Board Number of Meetings in 2014 10 0 1 6 3 Members (& attendance) Mr A Loader (all), Mr S Khan (absent once) Mr A Scutt (all), Mr R Stead (absent once) Mr S Khan (–), Mr A Scutt (–), Mr R Stead (–) Mr A Scutt (all), Mr R Stead (all) Mr R Stead (all), Mr A Scutt (all) Mr R Stead (all), Mr B Rostron (all), Mr S Smith (all) Nomination Committee The Nomination Committee was established post-admission to review the structure, size and composition of the Board, including the skills, knowledge and experience required and to make recommendations to the Board with regard to any changes. It oversees the Company's Equality and Diversity Policy. No meetings were needed during the year as matters were covered by Board Meetings. Oracle Coalfields PLC is committed to eliminating discrimination and encouraging diversity amongst the Company's workforce. Diversity and equality in the workplace are good management practices and make sound business sense. The Company's aim is that each employee feels respected and able to give their best. To that end, the purpose of this policy is to provide equality and fairness for all in the Company's employment and not to discriminate on grounds of gender, marital status (including civil partnerships), race, ethnic origin, colour, nationality, national origin, disability, sexual orientation, religion or age. The Company opposes all forms of unlawful and unfair discrimination. All employees, whether part-time, full-time or temporary, will be treated fairly and with respect. Selection for employment, promotion, training or any other benefit will be on the basis of aptitude and ability. All employees will be helped and encouraged to develop their full potential and the talents and resources of the workforce will be fully utilised to maximise the efficiency of the organisation. Oracle Coalfields PLCAnnual Report 2014 12 Report of the Directors continued Remuneration Committee The Remuneration Committee is responsible for reviewing the remuneration of Board members and senior executives of the Company. This responsibility will extend to the review of the remuneration of Board members and senior executives of the Pakistani subsidiary – at present the Directors of Sindh Carbon Energy Limited are unpaid. It is policy that no individual participates in discussions or decisions concerning his own remuneration. None of the Committee has any conflicts of interest arising from cross-directorships or day-to-day involvement in running the business. Re-election All Directors are submitted for re-election at regular intervals, subject to continued satisfactory performance. All Directors are subject to election by shareholders at the first annual general meeting after their appointment. Audit Committee Report The Audit Committee of the Board met six times in 2014. The Audit Committee is composed of Mr Roderick Stead, Non-executive Director, as Chairman, and Mr Anthony Scutt, Senior Independent Director as a member. Other Directors and officers are invited to attend where appropriate, and Mr Simon Smith, as Finance Manager, was in attendance at all the 2014 meetings. The role of the Audit Committee is to monitor the integrity of the financial statements, reviewing any significant financial reporting issues, especially the consistency of, and changes to, accounting policy. The Committee also assesses the effectiveness of the Company's internal controls and risk management systems. The Committee consider and make recommendations to the Board, to be put to shareholders for approval at the AGM, in relation to the appointment, re-appointment and replacement of the Company's external auditors. This extends to monitoring the effectiveness, remuneration and independence of the external auditors. The Audit Committee is composed of Directors of Oracle Coalfields PLC, but also has a role to advise the Boards of group subsidiary companies particularly Sindh Carbon Energy Ltd. The auditors of Oracle Coalfields PLC are Price Bailey who have served since the Company was founded. The Committee view is that Price Bailey have served the Company well and that their audit fee remains reasonable. The Committee met with Price Bailey in May and discussed future audit plans. The Committee concluded that with the limited size of this audit, the costs of re-tendering could not be justified at this stage, as this may require further visits to Pakistan. It was agreed, however, that the audit partner would be rotated. The Pakistani auditors of Sindh Carbon Energy Ltd, IECnet S.K.S.S.S., resigned in December. The Committee recommended to the Board of Sindh Carbon Energy Ltd the appointment of A.F. Ferguson & Co., the local affiliates in Karachi of Price Waterhouse Coopers. This firm had previously advised the Group on local taxation and the formation of the proposed subsidiary for the power plant project. This appointment has now been confirmed. In the area of reporting and accounting the Committee agreed the change of the Company description from exploration to exploration and development. The 'going concern' assumption for the Company was discussed with the external auditors and modified wording on the 'emphasis of matter' was recommended to the Board. The proposal to make a provision against the loans to Sindh Koela was recommended to the Board of Sindh Carbon Energy Ltd. The reporting framework in Oracle Coalfields was reviewed in the light of the changes to the AIM rules in 2014. In the area of internal control, the Committee monitors the internal control environment of the Group and considers this is sound given the small scale of current operations. The Company Internal Control Manual was finalised in 2014 and recommended to the Oracle Coalfields Board for approval. This has now been adopted. Accountability and audit Financial Reporting The Board is responsible for presenting a balanced and understandable assessment of the Company's position and prospects, extending to interim financial reports and other announcements. All major announcements are approved by the Chairman, the Executive Directors and the NOMAD. Internal control The Directors have overall responsibility for ensuring that the Group maintains a system of internal control to provide them with reasonable assurance that the assets of the Group are safeguarded and that the shareholders' investments are safeguarded. The system includes internal controls covering financial, operational and compliance areas, and risk management. There are limitations in any system of internal control, which can provide reasonable but not absolute assurance with respect to the preparation of financial information, the safeguarding of assets and the possibility of material misstatement or loss. At the time of the AIM listing, the Board reviewed the system of financial internal controls in place and adopted a series of accounting and control procedures. These were further strengthened later during 2013 with a series of changes being made particularly in respect of commitments, payments, cashflow forecasting and monthly financial reporting. The Board considers that an internal audit function would not be appropriate at this stage of the Group's development but keeps the matter under review. Relations with shareholders The Directors place great importance on maintaining good communications with both institutional and private investors. The Group reports formally to shareholders twice a year and more regular communication is provided through Press Releases and through the website. The Chief Executive supported by the Group's brokers, presented to shareholders regularly during the year. Oracle Coalfields PLCAnnual Report 2014 13 DIRECTORS' RESPONSIBILITIES STATEMENT The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union. Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to: – select suitable accounting policies and then apply them consistently; – make judgements and accounting estimates that are reasonable and prudent; – state that the financial statements comply with IFRS; – prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's and the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS So far as the Directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the Group's auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Group's auditors are aware of that information. AUDITORS The auditors, Price Bailey LLP, have expressed their willingness to continue in office and a resolution to re-appoint them will be proposed at the Group's forthcoming Annual General Meeting. On behalf of the Board: Adrian Loader Director 9 April 2015 Oracle Coalfields PLCAnnual Report 2014 14 Report of the Independent Auditors to the members of Oracle Coalfields PLC Group of Companies We have audited the financial statements of Oracle Coalfields PLC Group of Companies for the year ended 31 December 2014 which comprise the Consolidated Statement of Profit or Loss, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Company Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Company Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, and as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in a Report of the Auditors 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 Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on 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 Group's and the parent 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 Chairman's Statement, the Chief Executive's Report the Group Strategic Report and the Report of the Directors to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. 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 give a true and fair view of the state of the Group's and the parent company's affairs as at 31 December 2014 and of the Group's loss for the year then ended; – the Group's financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; – the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and – the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Emphasis of matter – Exploration costs In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 9 to the financial statements concerning the valuation of the exploration costs. The Group has sufficient reserves to bring the exploration part of the project to financial close, however to justify sufficient value to justify the carrying value of the intangible assets the Group needs to raise additional finance, both debt and equity for the opening up of the mine and construction of the power plant. Based upon the current economic climate there exists a material uncertainty which may cast significant doubt as to whether the Group will be able to generate sufficient funds. The financial statements do not include the adjustments that would be necessary if the Group was unable to raise these funds. Oracle Coalfields PLCAnnual Report 2014 15 Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Group Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: – adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or – the parent company financial statements are not in agreement with the accounting records and returns; or – certain disclosures of directors' remuneration specified by law are not made; or – we have not received all the information and explanations we require for our audit. Paul Cullen FCCA (Senior Statutory Auditor) for and on behalf of Price Bailey LLP Chartered Accountants & Statutory Auditors Richmond House Ely Cambridgeshire CB7 4AH 13 April 2015 Oracle Coalfields PLCAnnual Report 2014 16 Consolidated Statement of Profit or Loss For the year ended 31 December 2014 CONTINUING OPERATIONS Revenue Other operating income Administrative expenses OPERATING LOSS Finance income LOSS BEFORE INCOME TAX Income tax LOSS FOR THE YEAR Loss attributable to: Owners of the parent Non-controlling interests Earnings per share expressed in pence per share: Basic Diluted The notes form part of these financial statements. Notes 2014 £ 2013 £ 2 4 5 6 8 – 491 (712,016) – 82 (1,041,434) (711,525) 2,046 (1,041,352) 3,010 (709,479) – (1,038,342) – (709,479) (1,038,342) (709,479) – (1,028,042) (10,300) (709,479) (1,038,342) -0.21 -0.21 -0.37 -0.37 Oracle Coalfields PLCAnnual Report 2014 17 Consolidated Statement of Comprehensive Income For the year ended 31 December 2014 LOSS FOR THE YEAR OTHER COMPREHENSIVE INCOME Item that will not be reclassified to profit or loss: Exchange difference on consolidation Income tax relating to item of other comprehensive income 2014 £ 2013 £ (709,479) (1,038,342) (121,645) – (3,272) – OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX (121,645) (3,272) TOTAL COMPREHENSIVE INCOME FOR THE YEAR (831,124) (1,041,614) Total comprehensive income attributable to: Owners of the parent Non-controlling interests The notes form part of these financial statements. (831,124) – (1,031,314) (10,300) (831,124) (1,041,614) Oracle Coalfields PLCAnnual Report 2014 18 Consolidated Statement of Financial Position 31 December 2014 ASSETS NON-CURRENT ASSETS Intangible assets Property, plant and equipment Investments Loans and other financial assets CURRENT ASSETS Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY SHAREHOLDERS’ EQUITY Called up share capital Share premium Translation reserve Share scheme reserve Retained earnings Non-controlling interests TOTAL EQUITY LIABILITIES CURRENT LIABILITIES Trade and other payables TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES The notes form part of these financial statements. Notes 2014 £ 2013 £ 9 10 11 12 13 14 16 17 17 17 17 15 3,809,019 934 – – 3,755,014 1,228 – – 3,809,953 3,756,242 66,816 383,063 449,879 40,952 538,789 579,741 4,259,832 4,335,983 389,009 8,346,733 (144,106) 63,070 (4,562,209) 4,092,497 5,729 327,009 7,672,130 (22,461) 63,070 (3,852,730) 4,187,018 5,729 4,098,226 4,192,747 18 161,606 143,236 161,606 143,236 4,259,832 4,335,983 The financial statements were approved and authorised for issue by the Board of Directors on 9 April 2015 and were signed on its behalf by: Shahrukh Khan Director Oracle Coalfields PLCAnnual Report 2014 19 Company Statement of Financial Position 31 December 2014 ASSETS NON-CURRENT ASSETS Intangible assets Property, plant and equipment Investments Loans and other financial assets CURRENT ASSETS Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY SHAREHOLDERS’ EQUITY Called up share capital Share premium Share scheme reserve Retained earnings TOTAL EQUITY LIABILITIES CURRENT LIABILITIES Trade and other payables TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES The notes form part of these financial statements. Notes 2014 £ 2013 £ 9 10 11 12 13 14 2,721,660 – 868,631 1,181,214 2,632,542 165 868,631 1,136,214 4,771,505 4,637,552 135,545 382,510 518,055 94,332 517,356 611,688 5,289,560 5,249,240 16 17 17 17 389,009 8,346,733 63,070 (4,449,703) 327,009 7,672,130 63,070 (3,757,636) 4,349,109 4,304,573 18 940,451 944,667 940,451 944,667 5,289,560 5,249,240 The financial statements were approved and authorised for issue by the Board of Directors on 9 April 2015 and were signed on its behalf by: Shahrukh Khan Director Oracle Coalfields PLCAnnual Report 2014 20 Consolidated Statement of Changes in Equity For the year ended 31 December 2014 Called up share capital £ Retained earnings £ Share premium £ Translation reserve £ Share scheme reserve £ Non-controlling interests £ Total £ Total equity £ Balance at 1 January 2013 216,011 (2,824,688) 6,070,418 (19,189) 63,070 3,505,622 16,029 3,521,651 Loss for the year Other comprehensive income Exchange difference on consolidation Total comprehensive income Transactions with owners Issue of share capital Total transactions with owners – – – (1,028,042) – (1,028,042) – – – – (3,272) (3,272) 110,998 110,998 – – 1,601,712 1,601,712 – – – – – – – (1,028,042) (10,300) (1,038,342) (3,272) (1,031,314) – (10,300) (3,272) (1,041,614) 1,712,710 1,712,710 – – 1,712,710 1,712,710 Balance at 31 December 2013 327,009 (3,852,730) 7,672,130 (22,461) 63,070 4,187,018 5,729 4,192,747 Loss for the year Other comprehensive income Exchange difference on consolidation Total comprehensive income Transactions with owners Issue of share capital Total transactions with owners – – – (709,479) – (709,479) – – – – (121,645) (121,645) 62,000 62,000 – – 674,603 674,603 – – – – – – – (709,479) (121,645) (831,124) 736,603 736,603 – – – – – (709,479) (121,645) (831,124) 736,603 736,603 Balance at 31 December 2014 389,009 (4,562,209) 8,346,733 (144,106) 63,070 4,092,497 5,729 4,098,226 The notes form part of these financial statements. Oracle Coalfields PLCAnnual Report 2014 21 Company Statement of Changes in Equity For the year ended 31 December 2014 Balance at 1 January 2013 Loss for the year Total comprehensive income Transactions with owners Issue of share capital Total transactions with owners Called up share capital £ Retained earnings £ Share premium £ Share scheme reserve £ Total equity £ 216,011 (2,786,785) 6,070,418 63,070 3,562,714 – – (970,851) (970,851) – – 110,998 110,998 – – 1,601,712 1,601,712 – – – – (970,851) (970,851) 1,712,710 1,712,710 Balance at 31 December 2013 327,009 (3,757,636) 7,672,130 63,070 4,304,573 Loss for the year Total comprehensive income Transactions with owners Issue of share capital Total transactions with owners – – (692,067) (692,067) – – 62,000 62,000 – – 674,603 674,603 – – – – (692,067) (692,067) 736,603 736,603 Balance at 31 December 2014 389,009 (4,449,703) 8,346,733 63,070 4,349,109 The notes form part of these financial statements. Oracle Coalfields PLCAnnual Report 2014 22 Consolidated Statement of Cash Flows For the year ended 31 December 2014 Cash flows from operating activities Cash generated from operations Net cash from operating activities Cash flows from investing activities Purchase of intangible fixed assets Cash acquired with subsidiary Interest received Net cash from investing activities Cash flows from financing activities Proceeds of share issue Cost of share issue Net cash from financing activities (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes Cash and cash equivalents at end of year The notes form part of these financial statements. Notes 2014 £ 2013 £ 1 (655,341) (935,211) (655,341) (935,211) (200,746) – 2,046 (272,169) 804,516 2,395 (198,700) 534,742 738,397 (42,419) 695,978 (158,063) 538,789 2,337 383,063 934,240 (94,393) 839,847 439,378 99,592 (181) 538,789 2 2 Oracle Coalfields PLCAnnual Report 2014 23 Company Statement of Cash Flows For the year ended 31 December 2014 Cash flows from operating activities Cash generated from operations Net cash from operating activities Cash flows from investing activities Purchase of intangible fixed assets Loan to subsidiary Interest received Net cash from investing activities Cash flows from financing activities Loan from subsidiary Proceeds of share issue Cost of share issue Net cash from financing activities (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year The notes form part of these financial statements. Notes 2014 £ 2013 £ 1 (669,708) (931,378) (669,708) (931,378) (118,162) (45,000) 2,046 (147,784) (143,904) 2,395 (161,116) (289,293) – 738,397 (42,419) 804,516 934,240 (98,415) 695,978 1,640,341 (134,846) 517,356 382,510 2 2 419,670 97,686 517,356 Oracle Coalfields PLCAnnual Report 2014 24 Notes to the Consolidated Statement of Cash Flows For the year ended 31 December 2014 1. RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS Group Loss before income tax Depreciation charges Shares issued in lieu of remuneration Impairment of exploration costs Impairment of loans Impairment of accrued interest receivable Finance income (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables Cash generated from operations Company Loss before income tax Depreciation charges Shares issued in lieu of remuneration Impairment of exploration costs Impairment of loans Impairment of accrued interest receivable Finance income (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables Cash generated from operations 2. CASH AND CASH EQUIVALENTS 2014 £ (709,479) 165 36,603 – – – (2,046) (674,757) (25,808) 45,224 2013 £ (1,038,342) 166 72,369 217,519 58,334 5,904 (3,010) (687,060) 5,722 (253,873) (655,341) (935,211) 2014 £ (692,067) 165 36,603 – – – (19,458) (674,757) (23,801) 28,850 2013 £ (970,851) 166 72,369 183,326 41,029 5,904 (19,002) (687,059) 5,735 (250,054) (669,708) (931,378) The amounts disclosed on the statements of cash flow in respect of cash and cash equivalents are in respect of these statement of financial position amounts: Year ended 31 December 2014 Cash and cash equivalents Year ended 31 December 2013 Cash and cash equivalents The notes form part of these financial statements. 31 December 2014 £ Group 1 January 2014 £ 31 December 2014 £ Company 1 January 2014 £ 383,063 538,789 382,510 517,356 31 December 2013 £ 1 January 2013 £ 31 December 2013 £ 538,789 99,592 517,356 1 January 2013 £ 97,686 Oracle Coalfields PLCAnnual Report 2014 25 Notes to the Consolidated Financial Statements For the year ended 31 December 2014 1. ACCOUNTING POLICIES Reporting entity Oracle Coalfields PLC Group is a group domiciled in United Kingdom. The parent is a public limited company with the registered office at Richmond House, Broad Street, Ely, Cambridgeshire, CB7 4AH. The Group primarily is involved in the exploration for coal. Going concern The Directors have considered the cashflow requirements of the Group over the next 12 months. The Directors consider that the Group has funds to bring the project to financial close and therefore believe that the going concern basis is appropriate for the preparation of the financial statements. Compliance with accounting standards These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to reporting groups under IFRS. The financial statements have been prepared under the historical cost convention. Significant accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for revenues and expenses during the year and the amounts reported for assets and liabilities at the statement of financial position date. However, the nature of estimation means that the actual outcomes could differ from those estimates. The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement of any impairment on intangible assets and the estimation of share-based payment costs. The Group determines whether there is any impairment of intangible assets on an annual basis. The estimation of share-based payment costs requires the selection of an appropriate model, consideration as to the inputs necessary for the valuation model chosen and the estimation of the number of awards that will ultimately vest. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. Business acquisitions have been accounted for in accordance with IFRS 3, 'Business Combinations'. Fair values are attributed to the Group's share of net assets. Where the cost of acquisition exceeds the fair values attributed to such assets, the difference is treated as purchased goodwill and is capitalised. In the case of subsequent acquisitions of minority interests, the difference between the consideration payable for the additional interest in the subsidiary and the minority interest's share of the assets and liabilities reflected in the consolidated statement of financial position at the date of acquisition of the minority interest has been treated as goodwill. Intangible fixed assets – exploration costs Expenditure on the acquisition costs, exploration and evaluation of interests in licences, including related finance and administration costs, are capitalised. Such costs are carried forward in the statement of financial position under intangible assets and amortised over the minimum period of the expected commercial production of coal in respect of each area of interest where: a) such costs are expected to be recouped through successful development and exploration of the area of interest or alternatively by its sale; b) exploration activities have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active operations in relation to the areas are continuing. An annual impairment review is carried out by the Directors to consider whether any exploration or development costs have suffered impairment in value where a site has been abandoned or confirmed as no longer technically feasible. Accumulated costs in respect of areas of interest that have been abandoned are written off to the profit and loss account in the year in which the area is abandoned. Exploration costs are carried at cost less any provision for impairment. Oracle Coalfields PLCAnnual Report 2014 26 Notes to the Consolidated Financial Statements continued 1. ACCOUNTING POLICIES continued Property, plant and equipment Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life. Motor vehicles Computer equipment – 20% on reducing balance – 30% on reducing balance Investments Fixed asset investments are stated at cost. The investments are reviewed annually and any impairment is taken directly to the statement of profit or loss. Financial instruments Financial assets and liabilities are recognised on the statement of financial position when the Group becomes a party to the contractual provisions of the instrument. – Cash and cash equivalents comprise cash held at bank and short term deposits. – Trade payables are not interest bearing and are stated at their nominal value. – Equity instruments issued by the Company are recorded at the proceeds received except where those proceeds appear to be less than the fair value of the equity instruments issued, in which case the equity instruments are recorded at fair value. The difference between the proceeds received and the fair value is reflected in the share based payments reserve. – Derivative assets designated at fair value are loans made in Pakistan Rupees and their values are subject to foreign exchange fluctuations. Taxation Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the statement of financial position date. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position date. Foreign currencies Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the statement of financial position date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result. Profit and losses of overseas subsidiary undertakings are translated into sterling at average rates for the year. The statements of financial position of overseas subsidiary undertakings are translated at the rate ruling at the statement of financial position date. Differences arising from the translation of Group investments in overseas subsidiary undertakings are recognised as a separate component of equity. Net exchange differences classified as equity are separately tracked and the cumulative amount disclosed as a translation reserve. The principal place of business of the Group is the United Kingdom with sterling being the functional currency. Funds are advanced to Pakistan as required to finance the exploration costs which are payable in Rupees. Hire purchase and leasing commitments Rentals paid under operating leases are charged to the statement of profit or loss on a straight line basis over the period of the lease. Share-based payment transactions Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of all options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition. Where terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the statement of profit or loss over the remaining vesting period. Where equity instruments are granted to persons other than employees, the statement of profit or loss is charged with the fair value of goods and services received. Cash and cash equivalents Cash and cash equivalents for the purpose of the cash flow statement comprise cash and bank balances. Oracle Coalfields PLCAnnual Report 2014 27 1. ACCOUNTING POLICIES continued New standards and interpretations applied In preparing these financial statements the Company has reviewed all new standards and interpretations, but there are no standards effective for the year commencing 1 January 2014 requiring new interpretations to be applied. New Standards and Interpretations adopted with no effect on the financial statements The following new and revised Standards and Interpretations have also been adopted in these financial statements. Their adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions or arrangements: – IAS 27 Separate Financial Statements (revised 2011 and 2012) – IAS 28 Investments in Associates (revised 2011) – IAS 32 Financial Instruments Disclosures (amended 2011) – IAS 36 Impairment of Assets (amended 2013) – IAS 39 Financial Instruments: Recognition and Measurement (amended 2013) – IFRS 10 Consolidated Financial Statements (issued 2011 and amended 2012) – IFRS 11 Joint Arrangements (issued 2011 and amended 2012) – IFRS 12 Disclosure of Interests in Other Entities (issued 2011 and amended 2012) – IFRIC 21 Levies (issued 2013) New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective for the year commencing 1 January 2014 and have not been applied in preparing these financial statements: – IAS 1 Presentation of Financial Statements (amended 2013 and 2014) – IAS 16 Property, Plant and Equipment (amended 2013 and 2014) – IAS 19 Employee Benefits (amended 2013 and 2014) – IAS 24 Related Party Disclosures (amended 2013) – IAS 27 Separate Financial Statements (amended 2014) – IAS 28 Investments in Associates and Joint Ventures (amended 2014) – IAS 34 Interim Financial Reporting (amended 2014) – IAS 38 Intangible Assets (amended 2013 and 2014) – IAS 40 Investment Property (amended 2013) – IAS 41 Agriculture (amended 2014) – IFRS 1 First-time adoption of International Financial Reporting Standards (amended 2013) – IFRS 2 Share-based Payment (amended 2013) – IFRS 3 Business Combinations (amended 2013) – IFRS 5 Non-current Assets Held for Sale and Discounted Operations (amended 2014) – IFRS 7 Financial Instruments Disclosures (amended 2011, 2013 and 2014) – IFRS 8 Operating Segments (amended 2013) – IFRS 9 Financial Instruments (amended 2014) – IFRS 10 Consolidated Financial Statements (amended 2014) – IFRS 11 Joint Arrangements (issued 2011 and amended 2014) – IFRS 12 Disclosure of Interests in Other Entities (amended 2014) – IFRS 13 Fair Value Measurement (amended 2013) – IFRS 14 Regulatory Deferral Accounts (issued 2014) – IFRS 15 Revenue from Contracts with Customers (issued 2014) The Directors do not consider that the implementation of any of these new standards will have a material impact upon reported income or reported net assets. 2. SEGMENTAL REPORTING The principal activity of the Group is the exploration for and development of coal in Pakistan. All expenditure is in respect of this one activity and the £3,809,953 (2013: £3,756,242) non-current assets of the Group are wholly attributable to the project in Pakistan (2013: £3,756,077 relate to the project in Pakistan and £165 relates to assets held in the UK). Oracle Coalfields PLCAnnual Report 2014 28 Notes to the Consolidated Financial Statements continued 3. EMPLOYEES AND DIRECTORS Wages and salaries Social security costs The average monthly number of employees during the year was as follows: Directors Administration and production Directors’ remuneration Information regarding the highest paid Directors is as follows: Emoluments etc 4. NET FINANCE INCOME Finance income: Deposit account interest Other loan interest 5. LOSS BEFORE INCOME TAX The loss before income tax is stated after charging/(crediting): Hire of plant and machinery Other operating leases Depreciation – owned assets Auditors' remuneration Foreign exchange differences Impairment of exploration costs Impairment of loans Impairment of accrued interest receivable 2014 £ 378,989 42,228 421,217 2013 £ 352,380 41,835 394,215 2014 2013 4 3 7 2014 £ 4 3 7 2013 £ 205,000 238,000 2014 £ 2013 £ 100,000 133,000 2014 £ 2,046 – 2,046 2014 £ 908 41,550 410 11,250 – – – – 2013 £ 2,395 615 3,010 2013 £ – 35,078 446 10,750 (82) 217,519 58,334 5,904 The depreciation charges shown above include £245 (2013: £280) which have been capitalised as exploration costs by the subsidiary company in accordance with the accounting policy. Oracle Coalfields PLCAnnual Report 2014 29 6. INCOME TAX Analysis of tax expense No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2014 nor for the year ended 31 December 2013. Factors affecting the tax expense The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below: Loss on ordinary activities before income tax Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 21.500% (2013 – 23.250%) Effects of: Interest capitalised in subsidiary Potential deferred taxation on losses for year Foreign losses of subsidiary Tax expense 2014 £ 2013 £ (709,479) (1,038,342) (152,538) (241,415) 3,744 148,794 – – 3,718 225,724 11,973 – The main rate of UK corporation tax changed from 24% to 23% on 1 April 2013 and from 23% to 21% on 1 April 2014 giving an effective rate for the year of 21.50% (2013: 23.25%). The Group and Company has estimated UK excess management charges of £3,919,897 (2013: £3,227,995) to carry forward against future income. The overseas subsidiary has losses of £51,498 (2013: £51,498) which will be carried forward to offset future profits. There is no charge for foreign taxation for the year (2013: nil). 7. LOSS OF PARENT COMPANY As permitted by Section 408 of the Companies Act 2006, the statement of profit and loss and the statement of comprehensive income of the parent company are not presented as part of these financial statements. The parent company's loss for the financial year was £692,067 (2013: £970,851). Oracle Coalfields PLCAnnual Report 2014 30 Notes to the Consolidated Financial Statements continued 8. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares. No adjustment is made where the effect would be to dilute a loss attributable to the ordinary shareholders. Reconciliations are set out below. Basic EPS Earnings attributable to ordinary shareholders Effect of dilutive securities Diluted EPS Adjusted earnings Basic EPS Earnings attributable to ordinary shareholders Effect of dilutive securities Diluted EPS Adjusted earnings Earnings £ Weighted average number of shares (709,479) 345,014,973 – – 2014 Per-share amount pence -0.21 – (709,479) 345,014,973 -0.21 Earnings £ Weighted average number of shares (1,038,342) – 282,644,053 – (1,038,342) 282,644,053 2013 Per-share amount pence -0.37 – -0.37 Oracle Coalfields PLCAnnual Report 2014 31 9. INTANGIBLE ASSETS Group COST At 1 January 2014 Additions Exchange differences At 31 December 2014 NET BOOK VALUE At 31 December 2014 Group COST At 1 January 2013 Additions Impairments Exchange differences At 31 December 2013 NET BOOK VALUE At 31 December 2013 Exploration costs £ 3,755,014 180,981 (126,976) 3,809,019 3,809,019 Exploration costs £ 3,672,424 402,089 (217,519) (101,980) 3,755,014 3,755,014 The Group exploration costs of £3,809,019 are currently being carried forward at cost in the financial statements. The Group has sufficient funds to bring the project to financial close. Part of financial close involves the raising of finance, both debt and equity for the opening up of the mine and the construction of the power plant. If the Group is unable to raise this finance, some of the assets may require impairment. Company COST At 1 January 2014 Additions At 31 December 2014 NET BOOK VALUE At 31 December 2014 Company COST At 1 January 2013 Additions Impairments At 31 December 2013 NET BOOK VALUE At 31 December 2013 The impairment of exploration costs is charged to administration and included within the statement of profit or loss as an expense. Exploration costs £ 2,632,542 89,118 2,721,660 2,721,660 Exploration costs £ 2,639,040 176,828 (183,326) 2,632,542 2,632,542 Oracle Coalfields PLCAnnual Report 2014 32 Notes to the Consolidated Financial Statements continued 10. PROPERTY, PLANT AND EQUIPMENT Group COST At 1 January 2014 Exchange differences At 31 December 2014 DEPRECIATION At 1 January 2014 Charge for year Exchange differences At 31 December 2014 NET BOOK VALUE At 31 December 2014 Group COST At 1 January 2013 Exchange differences At 31 December 2013 DEPRECIATION At 1 January 2013 Charge for year Exchange differences At 31 December 2013 NET BOOK VALUE At 31 December 2013 Company COST At 1 January 2014 and 31 December 2014 DEPRECIATION At 1 January 2014 Charge for year At 31 December 2014 NET BOOK VALUE At 31 December 2014 Company COST At 1 January 2013 and 31 December 2013 DEPRECIATION At 1 January 2013 Charge for year At 31 December 2013 NET BOOK VALUE At 31 December 2013 Motor vehicles £ 4,685 511 5,196 3,703 218 403 4,324 872 Motor vehicles £ 5,177 (492) 4,685 3,819 246 (362) 3,703 Computer equipment £ 832 36 868 586 192 28 806 62 Computer equipment £ 867 (35) 832 409 200 (23) 586 Totals £ 5,517 547 6,064 4,289 410 431 5,130 934 Totals £ 6,044 (527) 5,517 4,228 446 (385) 4,289 982 246 1,228 Computer equipment £ 497 332 165 497 – Computer equipment £ 497 166 166 332 165 Oracle Coalfields PLCAnnual Report 2014 33 11. INVESTMENTS Company COST At 1 January 2014 and 31 December 2014 NET BOOK VALUE At 31 December 2014 Company COST At 1 January 2013 Additions At 31 December 2013 NET BOOK VALUE At 31 December 2013 The Group or the Company's investments at the balance sheet date in the share capital of companies include the following: Subsidiaries Sindh Carbon Energy Limited Country of incorporation: Pakistan Nature of business: Coal exploration and mining Class of shares: Ordinary Aggregate capital and reserves Loss for the year Shares in Group undertakings £ 868,631 868,631 Shares in Group undertakings £ 64,115 804,516 868,631 868,631 % holding 80.00 2013 £ 28,646 (51,498) 2014 £ 28,646 – The subsidiary company was incorporated in Pakistan on 23 January 2007 for the exploration and future extraction of coal in Pakistan. Oracle Coalfields PLC agreed to acquire 80% of the ordinary share capital of the Company at par, fully paid by cash. The investment in share capital for the 80% holding amounted to £64,115. Company Revive Financial Limited Country of incorporation: United Kingdom Nature of business: Administration and financial support Class of shares: Ordinary Aggregate capital and reserves The Company was incorporated on 8 October 2013. % holding 100.00 2013 £ 2014 £ 804,516 804,516 The Company was acquired under the terms of a share exchange agreement whereby shares in Oracle Coalfields PLC were allotted to the shareholders of Revive Financial Limited in exchange for their shareholdings in Revive Financial Limited. The Company became a subsidiary of Oracle Coalfields PLC upon the completion of the share exchange on 18 October 2013. Oracle Coalfields PLCAnnual Report 2014 34 Notes to the Consolidated Financial Statements continued 11. INVESTMENTS continued Following the share for share exchange, Revive Financial Limited made a loan of £804,516 to Oracle Coalfields PLC. The loan of £804,516 (2013: £804,516) which remains outstanding is interest free and has no fixed terms for repayment. The investment in share capital for the 100% holding amounted to £804,516. 12. LOANS AND OTHER FINANCIAL ASSETS Sindh Koela Limited holds 20% of the issued shares of Sindh Carbon Energy Limited and these shares are funded by a loan from Oracle Coalfields PLC. The loan accrues interest on a daily basis at a rate of 9 per cent per annum. The loan is unsecured and repayable from 50% of dividends due to Sindh Koela Limited from Sindh Carbon Energy Limited, when the project starts to generate revenues, or is repayable in full on any early transfer of shares by Sindh Koela Limited in Sindh Carbon Energy Limited. There is a loan of PKR 2,000,000, amounting to £16,029 (2013: £16,029) made by Oracle Coalfields PLC to Sindh Koela Limited, representing Sindh Koela Limited's initial 20 per cent shareholding of 200,000 shares of PKR 10 per share. Further loans were made to Sindh Koela Limited to fund initial expenditure in Pakistan on behalf of the Group as follows: At the statement of financial position date there is a loan of £25,000 (2013: £25,000) from Oracle Coalfields PLC to Sindh Koela Limited. The loan is interest free, unsecured and is not due for repayment until the project starts to generate revenues. At the statement of financial position date there is a loan of PKR 3,000,000, amounting to £17,305 (2013: £17,305) from Sindh Carbon Energy Limited to Sindh Koela Limited. The loan is interest free, unsecured and is not due for repayment until the project starts to generate revenues. A full impairment provision of £58,334 (2013: £58,334) has been made against the above loans and a full impairment provision of £5,904 (2013: £5,904) has been made against the accrued interest, No interest charge (2013: £615) has been provided for the year although it is legally payable and will be charged in the future if the impairment provision is reversed. Company At 1 January 2014 New in year At 31 December 2014 Company At 1 January 2013 New in year Impairment of loan At 31 December 2013 Loans to Group undertakings £ 1,136,214 45,000 1,181,214 Loans to Group undertakings £ 992,310 143,904 – Other loans £ 41,029 – (41,029) Totals £ 1,033,339 143,904 (41,029) 1,136,214 – 1,136,214 In addition to items disclosed for the Group, Oracle Coalfields PLC made loans of £45,000 (2013: £143,904) during the period to its subsidiary company Sindh Carbon Energy Limited and the amount outstanding at the statement of financial position date was £1,181,214 (2013: £1,136,214). Interest accrues on a daily basis at a rate of 1% over the Bank of England base rate. The loan is unsecured and although it is repayable on demand, it is unlikely to be repaid until the project becomes successful and the subsidiary starts to generate revenue. Oracle Coalfields PLCAnnual Report 2014 35 13. TRADE AND OTHER RECEIVABLES Current: Other receivables VAT Prepayments and accrued income 14. CASH AND CASH EQUIVALENTS Cash in hand Bank deposit account Bank accounts 15. NON-CONTROLLING INTERESTS 2014 £ 3,272 13,930 49,614 66,816 2014 £ 227 372,283 10,553 383,063 Group 2013 £ 3,034 19,533 18,385 40,952 Group 2013 £ – 507,356 31,433 538,789 2014 £ 74,413 13,930 47,202 135,545 2014 £ 227 372,283 10,000 382,510 Company 2013 £ 56,795 19,533 18,004 94,332 Company 2013 £ – 507,356 10,000 517,356 The non-controlling interest representing 20 per cent of the capital and reserves of the subsidiary Sindh Carbon Energy Limited is held by Sindh Koela Limited. There were no pre-acquisition reserves or goodwill. 16. CALLED UP SHARE CAPITAL Allotted, issued and fully paid 389,009,493 (2013: 327,009,493) Ordinary shares of 0.1p each 2014 £ 2013 £ 389,009 327,009 59,071,747 Ordinary shares of 0.1p each were allotted as fully paid for cash at a premium of 1.15p per share during the year. 2,928,253 Ordinary shares of 0.1p each were allotted to Directors and senior managers as fully paid in lieu of cash remuneration, at a premium of 1.15p per share during the year. The number of shares in issue are as follows: At 1 January 2014 Issued during the year At 31 December 2014 2014 No. 2013 No. 327,009,493 62,000,000 216,011,000 110,998,493 389,009,493 327,009,493 Oracle Coalfields PLCAnnual Report 2014 36 Notes to the Consolidated Financial Statements continued 17. RESERVES Group At 1 January 2014 Deficit for the year Proceeds of share issue Cost of share issue Exchange translation difference At 31 December 2014 Group At 1 January 2013 Deficit for the year Proceeds of share issue Cost of share issue Exchange translation difference At 31 December 2013 Company At 1 January 2014 Deficit for the year Proceeds of share issue Cost of share issue At 31 December 2014 Company At 1 January 2013 Deficit for the year Proceeds of share issue Cost of share issue At 31 December 2013 18. TRADE AND OTHER PAYABLES Current: Trade payables Amounts owed to Group undertakings Social security and other taxes Other payables Accruals and deferred income Retained earnings £ (3,852,730) (709,479) – – – Share premium £ 7,672,130 – 713,000 (38,397) – Translation reserve £ (22,461) – – – (121,645) Share scheme reserve £ 63,070 – – – – Totals £ 3,860,009 (709,479) 713,000 (38,397) (121,645) (4,562,209) 8,346,733 (144,106) 63,070 3,703,488 Retained earnings £ (2,824,688) (1,028,042) – – – Share premium £ 6,070,418 – 1,700,127 (98,415) – Translation reserve £ (19,189) – – – (3,272) Share scheme reserve £ 63,070 – – – – Totals £ 3,289,611 (1,028,042) 1,700,127 (98,415) (3,272) (3,852,730) 7,672,130 (22,461) 63,070 3,860,009 Retained earnings £ (3,757,636) (692,067) – – Share premium £ 7,672,130 – 713,000 (38,397) Share scheme reserve £ 63,070 – – – Totals £ 3,977,564 (692,067) 713,000 (38,397) (4,449,703) 8,346,733 63,070 3,960,100 Retained earnings £ (2,786,785) (970,851) – – Share premium £ 6,070,418 – 1,700,127 (98,415) Share scheme reserve £ 63,070 – – – Totals £ 3,346,703 (970,851) 1,700,127 (98,415) (3,757,636) 7,672,130 63,070 3,977,564 2014 £ 62,190 – 3,557 56,094 39,765 Group 2013 £ 60,392 – 16,800 50,252 15,792 2014 £ 62,190 804,516 3,557 56,094 14,094 161,606 143,236 940,451 Company 2013 £ 60,391 804,516 16,800 50,252 12,708 944,667 Oracle Coalfields PLCAnnual Report 2014 37 19. LEASING AGREEMENTS Future minimum lease payments under non-cancellable operating leases fall due as follows: Group Within one year Between one and five years Company Within one year Between one and five years Non-cancellable operating leases 2013 £ 34,800 14,500 49,300 2013 £ 34,800 14,500 49,300 2014 £ 50,384 111,860 162,244 2014 £ 50,384 111,860 162,244 20. FINANCIAL RISK MANAGEMENT The Group's financial instruments comprise cash and cash equivalents, loan investments and financial assets and various items such as trade receivables, trade payables, accruals and prepayments that arise directly from its operations as follows: At 31 December 2014 Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Derivative financial assets Financial liabilities Trade and other payables At 31 December 2013 Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Derivative financial assets Financial liabilities Trade and other payables Fair value through profit and loss £ – – – – – – – Fair value through profit and loss £ – – – – – – – Held at amortised cost £ 383,063 66,816 – – 449,879 161,606 161,606 Held at amortised cost £ 538,789 40,952 – – 579,741 143,236 143,236 Fair value through other comprehensive income £ – – – – – – – Fair value through other comprehensive income £ – – – – – – – Total £ 383,063 66,816 – – 449,879 161,606 161,606 Total £ 538,789 40,952 – – 579,741 143,236 143,236 Oracle Coalfields PLCAnnual Report 2014 38 Notes to the Consolidated Financial Statements continued 20. FINANCIAL RISK MANAGEMENT continued The main purpose of these financial instruments is to finance the Group's operations. The Board regularly reviews and agrees policies for managing the level of risk arising from the Group's financial instruments as summarised below. a) Market risk Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates, interest rates and equity prices will affect the Group's income or value of it's holdings in financial instruments. i) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from currency exposures. The Group is exposed to currency risk on cash and cash equivalents, loans, receivables and payables that are denominated in currencies other than sterling which is the functional currency of the Group. The Group's exposure to foreign currency risk in Rupees at the reporting date is as follows: Cash and cash equivalents Loans Receivables Payables 2014 PKR 86,420 – 403,029 (4,012,931) 2013 PKR 3,715,707 – 89,283 (534,633) (3,523,482) 3,270,357 Sensitivity analysis A 10 percent strengthening of sterling against the Pakistan Rupee at 31 December 2014 would have increased/(decreased) equity and profit and loss by the amounts shown below: Pakistan Rupees 2014 £ 2,254 Equity 2013 £ (1,887) Profit and loss 2013 £ – 2014 £ – A 10 percent weakening of sterling against the Pakistan Rupee at 31 December 2014 would have an equal but opposite effect on the amounts shown above. ii) Interest rate risk The Group is exposed to interest rate risk on its interest bearing bank accounts and loans. Cash and cash equivalents Loans Weighted average interest rate % 0.56 1.50 Weighted average interest rate % 0.70 1.50 2014 £ 367,099 – 367,099 2013 £ 339,979 – 339,979 Sensitivity analysis A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit and loss by £5,717 (2013: £5,816). Oracle Coalfields PLCAnnual Report 2014 39 20. FINANCIAL RISK MANAGEMENT continued b) Credit risk The Group's principal financial assets are the cash and cash equivalents and taxation receivable as recognised in the statement of financial position, and which represent the Group's maximum exposure to credit risk in relation to financial assets. The Company has made an unsecured loan of £1,181,214 (2013: £1,136,214) to its subsidiary Sindh Carbon Energy Limited. Although it is repayable on demand, it is unlikely to be repaid until the project becomes successful and the subsidiary starts to generate revenue. c) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's policy throughout the year has been to ensure that it has adequate liquidity to meet its liabilities when due by careful management of its working capital. The following tables illustrate the contractual maturity profiles of its financial liabilities, all of which are repayable within one year, as at 31 December: Trade payables Tax liabilities 2014 £ 158,049 3,557 161,606 2013 £ 126,436 16,800 143,236 d) Fair values of financial assets and liabilities The Group measures the fair value of its financial assets and liabilities in the statement of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels: Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities; Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Inputs for the asset or liability that are not based on observable market data (unobservable inputs). Level 3: There were no financial instruments held at fair value requiring valuation for the year (2013: nil). Capital management The Company's capital consists wholly of ordinary shares. The Board's policy is to preserve a strong capital base in order to maintain investor, creditor and market confidence and to safeguard the future development of the business, whilst balancing these objectives with the efficient use of capital. Oracle Coalfields PLCAnnual Report 2014 40 Notes to the Consolidated Financial Statements continued 21. RELATED PARTY DISCLOSURES During the year Oracle Coalfields PLC accrued interest of £17,412 (2013: £15,992) in respect of loans totalling £1,181,214 (2013: £1,136,214) made to Sindh Carbon Energy Limited. At the Statement of Financial Position date the total interest outstanding amounted to £71,307 (2013: £53,895). Following the decision in 2013 to make a full impairment provision against loans and interest owed by Sindh Koela Limited, Oracle Coalfields PLC accrued no interest in the year (2013: £615) in respect of the loans totalling £41,029 (2013: £41,029). At the Statement of Financial Position date the total interest accrued amounted to £5,904 (2013: £5,904). Full provision was been made in 2013 for these outstanding loans and accrued interest as the Directors consider their recovery to be in doubt. Oracle Coalfields PLC owes £804,516 (2013: £804,516) to its subsidiary Revive Financial Limited in respect of a loan. The loan is interest free and has no fixed terms for repayment. During the year the Directors participated in a placing of new ordinary shares of 0.1 pence each at a placing price of 1.25 pence per share. Within this placement the Directors received 840,000 shares for cash consideration of £10,500 and 1,667,056 shares in lieu of cash remuneration of £20,838. Key management personnel compensation The Directors' and key management personnel of the Group during the year were are follows: Mr S Khan (Chief Executive Officer) Mr A C R Scutt (Senior Independent Director) Mr M R Stead (Non-executive Director) Mr W A Loader (Chairman) Mr S Smith (Finance Manager) Mr B Rostron (Mining and Contracts Manager) The aggregate compensation made to key management personnel of the Group is set out below: Short-term employee benefits Post-employment benefits Termination benefits Share-based benefits 2014 £ 384,440 – – – 384,440 2013 £ 370,459 – – – 370,459 Details of key management personnel compensation are disclosed in the Remuneration Report included in the Directors Report. Key management personnel equity holdings Details of key management personnel beneficial interests in the fully paid ordinary shares of the Company and share options held, are unchanged during the year and are disclosed in the Directors Report. 22. EVENTS AFTER THE REPORTING PERIOD On 3 February 2015 a performance guarantee for USD$500,000 was issued in favour of Director General, Coal Mines Development Department. The guarantee is valid up to the earliest of the date commercial operations begin, three years from the date of issue, or 2 February 2018. This performance guarantee is secured by a deposit by Oracle Coalfields in the issuing bank. On 25 February 2015 the Company undertook a placing of 522,773,633 ordinary shares of 0.1 pence each at a placing price of 0.65 pence per share, raising 3,398,028 before expenses. Other than the above, there has not arisen in the interval between the year end and the date of this report any other item, transaction or event of a material nature, likely, in the opinion of the Directors of the Group to affect: i) The Group's operations in future financial periods; or ii) The results of those operations in future periods; or iii) The Group's state of affairs in future financial periods. Oracle Coalfields PLCAnnual Report 2014 41 23. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS Group Loss for the financial year Proceeds of share issue Cost of share issue Exchange translation difference Net (reduction)/addition to shareholders' funds Opening shareholders’ funds Closing shareholders’ funds Company Loss for the financial year Proceeds from issue of shares Cost of share issue Net addition to shareholders' funds Opening shareholders’ funds Closing shareholders’ funds 2014 £ 2013 £ (709,479) 775,000 (38,397) (121,645) (94,521) 4,187,018 (1,028,042) 1,811,125 (98,415) (3,272) 681,396 3,505,622 4,092,497 4,187,018 2014 £ (692,067) 775,000 (38,397) 44,536 4,304,573 2013 £ (970,851) 1,811,125 (98,415) 741,859 3,562,714 4,349,109 4,304,573 Oracle Coalfields PLCAnnual Report 2014 42 24. SHARE-BASED PAYMENT TRANSACTIONS The Company has a share option programme that entitles the holders to purchase shares in the Company with the options exercisable at the price determined at the date of granting the option. The terms and conditions of the grants are as follows; there are no vesting conditions to be met and all options are to be settled by the issue of shares: Grant date 13 February 2007 (expiry date extended on admission to AIM) 15 November 2007 (expiry date extended on admission to AIM) 14 April 2011 18 April 2011 1 August 2011 23 July 2012 The number and weighted average exercise prices of share options is as follows: Outstanding at 1 January Expired during the period Granted during period Outstanding at 31 December Exercisable at 31 December Number of instruments Contractual life of options 8,080,000 200,000 600,000 250,000 1,000,000 666,666 10 years 10 years 5 years 6 years 5 years 3 years Weighted average exercise price 2014 Number of options 2014 Weighted average exercise price 2013 5.73p – – 10,796,666 – – 5.73p 10,796,666 5.73p – – 5.73p Number of options 2013 10,796,666 – – 10,796,666 5.73p 10,796,666 5.73p 10,796,666 No share options were exercised or expired unexercised during the year (2013: nil). The options outstanding at 31 December 2014 have an exercise price of 5.73p (2013: 5.73p) and a weighted average remaining contractual life of 2.03 years (2013: 3.03 years). The fair value of services received and commission payable in return for share options granted is based on the fair value of share options granted, measured using a binomial lattice model, with the following inputs: Fair value at grant date Share price Exercise price Expected volatility Option life Risk-free interest rate Services 23.07.12 2.75p 1p 4.8p 43% 3 years 3.75% Services 1.08.11 8.75p 1p 10p 56% 5 years 4% Services 18.04.11 14.11p 1p 5p 67% 6 years 4% Commission 14.04.11 14.67p 1p 10p 67% 5 years 4% Services 13.02.07 0.0003p 1p 5p 20% 10 years 5% The expected volatility was determined by reviewing the actual volatility of the Company's share price since its listing on AIM to the date of granting the option. In calculating the fair value, consideration was given to the market trends at the grant date of the option. There is no expense (2013: nil) for the year in respect of equity-settled share-based payment transactions. Oracle Coalfields PLCAnnual Report 2014 43 Notice of Annual General Meeting Notice is hereby given that the Annual General Meeting (Meeting) of Oracle Coalfields PLC (the Company) will be held at 23 Hanover Square, Mayfair, London, W1S 1JB on Wednesday 20 May 2015 at 2.30pm to transact the following business: As ordinary business To consider and if thought fit, to pass the following resolutions which will be proposed as ordinary resolutions: 1. To receive and adopt the Company’s audited report and accounts for the period from 1 January 2014 to 31 December 2014 and the Directors’ and auditors’ reports thereon; 2. To approve and consider the Remuneration Report as detailed on page 10 of the Company’s annual report and financial statements; 3. To re-elect Anthony Scutt as a Director of the Company; 4. To re-appoint Price Bailey LLP as auditors to hold office from the conclusion of the meeting to the conclusion of the next meeting at which the accounts are laid before the Company and authorise the Directors to fix the auditors’ remuneration. By order of the Board Tony Everitt Company secretary Oracle Coalfields PLC Richmond House Broad Street Ely, Cambridgeshire CB7 4AH Appointment of proxies 1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those members registered on the Company’s register of members at 2.30pm on Monday 18 May 2015 or, if this Annual General Meeting is adjourned, 48 hours (excluding bank holidays and weekends) prior to the time fixed for the adjourned meeting, shall be entitled to attend and vote at the Annual General Meeting. 2. 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 proxy form. 3. A proxy does not need to be a member of the Company but must attend the Annual General Meeting to represent you. Details of how to appoint the Chairman of the Annual General Meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you wish your proxy to speak on your behalf at the Annual General Meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them. 4. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, please contact the Company’s Registrars, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA to obtain another hard copy form. 5. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Annual General Meeting. 6. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote. To appoint a proxy using the proxy form, the form must be completed and signed, sent or delivered to the Company’s Registrars, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA by no later than 2.30pm on Monday 18 May 2015. Completion and return of the form of proxy will not preclude a member from attending and voting in person at the Annual General Meeting. In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with the proxy form. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the first-named being the most senior). 7. 8. 9. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hard-copy proxy form, please contact the Company’s Registrars, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. Oracle Coalfields PLCAnnual Report 2014 44 Company Information For the year ended 31 December 2014 Oracle Coalfields PLC is registered as a public company under English Law. Its shares are listed on the AIM market of the London Stock Exchange. Oracle Coalfields PLC is incorporated and domiciled in England and its registered number is 05867160. DIRECTORS Mr S Khan Mr A C R Scutt Mr M R Stead Mr W A Loader SECRETARY Mr T Everitt LONDON OFFICE 23 Hanover Square Mayfair London W1S 1JP REGISTERED OFFICE Richmond House Broad Street Ely Cambridgeshire CB7 4AH AUDITORS Price Bailey LLP Richmond House Ely Cambridgeshire CB7 4AH NOMINATED ADVISOR Grant Thornton UK LLP 30 Finsbury Square London EC2P 2YU REGISTRAR Neville Registrars Limited 18 Laurel Lane, Halesowen West Midlands B63 3DA BROKERS Brandon Hill Capital Ltd 1 Tudor Street London EC4Y 0AH Peterhouse Corporate Finance Limited 15 Eldon Street London EC2M 7LD SOLICITORS Trowers & Hamlins LLP 40 Tower Hill London EC3N 4DX HaiderMota BNR D-79, Block No.5 Karachi 75600 Pakistan BANKERS Royal Bank of Scotland plc 1st Floor, Conqueror House Vision Park Histon Cambridge CB24 9NL Habib Metroplolitan Bank Habib Bank Plaza I.I.Chundrigar Road Karachi 75650 Pakistan PR Blytheweigh 4-5 Castle Street London EC3V 9DL Forbridge Consultancy 61 Monkton Street London SE11 4TX Oracle Coalfields PLCAnnual Report 2014 Design & Production www.carrkamasa.co.uk Oracle Coalfields PLC 23 Hanover Square Mayfair London W1S 1JB T: +44 (0)203 102 4807 F: +44 (0)203 102 4601 www.oraclecoalfields.com