Results for the year ended 31 March 2015

RNS Number : 2110U

Duke Royalty Limited

27 July 2015

 

27 July 2015

Duke Royalty Limited

Results for the year ended 31 March 2015

Duke Royalty Limited ("Duke" or the "Company"), formerly known as Praetorian Resources Limited,  announces its audited results for the year to 31 March 2015. The financial information set out below does not constitute the statutory audited accounts for the year ended 31 March 2015 but is derived from those accounts.

The Company also announces that its Annual General Meeting ("AGM") will be held at Trafalgar Court, Suite B, 3rd Floor, West Wing, GY1 2JA on 10 September 2015 at 11:00 BST

The full Annual Report and Accounts, including the audit report and the notice of the Company's AGM, will soon be posted to applicable shareholders and will be available on the Company's website: www.dukeroyalty.com

Contacts:

For further information, please contact:

Duke Royalty Limited	Robert King
	[phone]
Grant Thornton UK LLP (Nominated Adviser)	Colin Aaronson/ Jamie Barklem
	[phone]

Company Summary

The Company

Duke Royalty Limited (the "Company") is a Guernsey registered investment holding company incorporated with limited liability. Its shares are traded on the AIM market of the London Stock Exchange ("AIM"). The Company was incorporated on 22 February 2012 and dealings on AIM commenced on 9 July 2012.

Following the results of an Extraordinary Meeting (the "EGM") held on 16 June 2015 the Company changed its name from Praetorian Resources Limited to Duke Royalty Limited. At the same EGM the Company changed its Investment Policy and Articles of Incorporation to permit the Company to invest in a diversified portfolio of royalty finance and related opportunities.

The "Group" is defined as the Company and its subsidiaries Praetorian Portfolio Holding L.P., Praetorian Resources (GP) Limited and Praetorian ZDP Limited.

Investment Policy

For the year ended 31 March 2015 the Company's investment policy was to achieve capital appreciation through the purchase and sale of a wide range of securities and other investments within target sectors, which it effected indirectly through its investment in a Limited Partnership. The initial target sector was natural resources, an area where the Board felt that there was an opportunity to take advantage of what it saw as depressed valuations in many mining and energy stocks.

Following the result of the EGM on 16 June 2015, the Company's Articles of Incorporation and Investment Policy were changed to invest in a diversified portfolio of royalty finance and related opportunities to build a stable and reliable income for Shareholders by seeking to invest in, without limitation and restrictions (including geographical restrictions):

(i)   Long term, revenue-based royalties in private and/or public companies; and/or

(ii)   Other alternative asset classes and/or financing instruments from time to time that bear similar risk and return characteristics to the investments in paragraph (i).

In order to capitalise on the opportunity, the Company assembled a high quality Board and set of advisers with substantial experience and a long term track record within a range of commercial businesses. The Company had been structured as an investment holding company in order to give the Board maximum flexibility to achieve its goals, and is domiciled in a tax efficient jurisdiction to ensure shareholders receive the benefit from any realised profits.

The Company will utilise the contacts and skill of the Board and its advisers to attract and carry out appropriate due diligence on portfolio opportunities. Management will use its expertise and contact base to source new opportunities.

Chairman's Report

Dear Shareholder

As previously advised the Company has been through a significant degree of change in the last twelve months. We have seen all-time highs in many of the global equity market but the prices of commodities have remained depressed and the small-cap mining sector has continued to have a difficult time. At the period-end our net assets attributable to ordinary shareholders was £3,136,344 equating to a Net Asset Value per Share of 7 pence at 31 March 2015, a decline of 69% from the previous audited year end statements. In the face of such negative market sentiment and negligible capital available to many mining projects your Board has considered several options as to the future of the Company.

In line with the previous announcements of 25 April and 30 June 2014 the Company has undertaken significant cost cutting initiatives. Of the £668,796 total expenses contained within the Consolidated Statement of Income, £305,000 represents expenses paid by way of share issuance in lieu of cash fees to directors, advisors and support services. The net cash outflow from the payment of operating expenses has decreased by £200,328 during the year.

On 28 May 2015 the Directors wrote to Shareholders to seek their approval to a number of proposals for the change of the investing policy of the Company to create a royalty finance company. At an Extraordinary General Meeting ("EGM") of the Company held on 16 June 2015 the proposed changes were approved by Shareholders.

Share Buy Backs

On 6 May 2014 the Company announced that it had completed the on-market buy-back of an aggregate of 7,858,015 Ordinary Shares at a price of 8 pence per Ordinary Share. These shares, along with the 1,000,000 Ordinary Shares held by the Company in Treasury were cancelled.

Issue of Ordinary Shares

On 25 April 2014 the Company announced the cancellation of the service agreement with Arlington Group Asset Management Limited and all outstanding fees under the terms of the service agreement were settled by the issuance of 2,400,000 Ordinary Shares.

On 30 June 2014 the Company announced the issuance of 2,000,000 Ordinary Shares in lieu of Director and Consultancy fees due to Messrs Lockwood, Burne and Cannon-Brookes and Directors fees due to Mr Hohnen.

On 20 May 2015 the Company announced that 90,247,000 new ordinary shares had been issued increasing the issued share capital of the Company to 135,882,936 Ordinary Shares. The proceeds from the issuance of these new ordinary shares provided additional working capital for the Company.

New Investing Policy

As are now aware on 16 June 2015 the Company held an EGM at which a new investing policy was adopted whereby the Company will provide alternative financing to a sectorally and geographically diverse range of businesses ("Company Partners"). Under this new investing policy it is intended that the Company will use an innovative financing structure that allows it to provide capital in a manner that is intended to maximise valuations of Company Partners and be tax efficient and allow existing owners of the Company Partners to retain control of their businesses. The primary objective is to generate predictable, stable cash flows from the Company Partners to allow the Company to provide an attractive, yet stable, yield to its shareholders. At the EGM a number of significant changes were made to the structure and management of the Company, which are described below.

Change of name to Duke Royalty Limited

The Company's name was changed to Duke Royalty Limited on 16 June 2015.

Directorate Changes

Nathan Steinberg and Kaare Foy both resigned with effect from 16 June 2015 as part of the restructuring and I would like to take this opportunity to thank both Nathan and Kaare for their support during the year and throughout the restructuring process.

Neil Johnson, Charles Cannon-Brookes, Nigel Birrell and James Ryan joined the Board on 16 June 2015 (the "New Directors"). Collectively the New Directors have a wealth of experience in the public company arena and I look forward to working with them in the coming months. I will remain as the Company's Chairman on an interim basis to ensure an orderly transition of directors and to help with implementation of the Company's new investing policy. 

Share consolidation on a 20-for-1 basis

On 16 June 2015, the Company undertook a share consolidation of 1 new ordinary share of no par value in the Company for every 20 existing ordinary shares of no par value in the Company (the "Share Consolidation"). The Company now has a total of 7,294,126 New Ordinary Shares in issue, which were admitted to trading on AIM on 17 June 2015. Of this total, 6,794,126 Ordinary Shares were issued in respect of the Share Consolidation and 500,000 Ordinary Shares were issued to Abingdon Capital Corporation as part of their appointment as a service provider to the Company. The New Ordinary Shares have been allocated stock identification codes as follows: SEDOL code BYZSSY6 and ISIN code GG00BYZSSY63.

Cancellation of Subscription Shares from trading on AIM

As part of the restructuring of the Company, the Subscription Shares, of which there were 23,324,433 quoted on AIM on 16 June 2015, were cancelled from trading on AIM with effect from 26 June 2015.

Web-site

The Company has a new web-site, available at www.dukeroyalty.com

Remaining Portfolio

As at the date of signing of these financial statements, the estimated asset value of the legacy resource investments stood at £3.6m and it is the Board's intention that these assets be disposed of in an orderly manner to ensure a maximum realisation value.

The Service Contracts with the members of the Advisory and Execution Team were terminated on 16 June 2015 and replaced with new Service Contracts with Arlington Group Asset Management Limited ("Arlington") and Abingdon Capital Corporation ("Abingdon") as set out in the circular to Shareholders dated 28 May 2015. It will be the responsibility of both Abingdon and Arlington to dispose of these legacy assets as well as search for new investment opportunities under the new investing policy.

Following the year end the Company repaid in full 1,500,000 unlisted, zero dividend preference shares issued at £1 per share to Damille Investments II Limited ("Damille"), issued on 30 October 2013. Including accrued interest and redemption fees, the Company repaid Damille £1,841,199.  As a result of this and some recent realisations made to the legacy portfolio, the Company currently has no debt, as at the date of signing of these financial statements, had cash resources of £1.63m.

Royalty Transactions

As at the date of these financial statements the Company has not undertaken any royalty transaction and continues to actively seek an exit for the residual assets.

Future Outlook

Our shareholders voted overwhelmingly in favour of our new corporate strategy at the EGM on 16 June 2015, which marks a new beginning for the Company.  We have completed the first step in our strategy to transform the Company into a diversified royalty company.   Royalty investing is an innovative alternative financing measure which has been used in the resource and healthcare sectors for many years, and has recently been adopted mainly in North America to finance other types of companies. Public investors of royalty companies are attracted to the stable and predictable cash flows of the businesses which pay dividends to them.  We believe strongly that the Company is positioned well to attract UK and European investors and there is a healthy pipeline of non-North American based companies for which royalty financing could be attractive. We are the first company listed in the UK with a policy of investing in diversified royalties, and we look forward to updating our shareholders on our progress in due course.

Robert King

Chairman

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2015

		Year ended 31 March 2015		Year ended 31 March 2014
		£		£
Income
Net capital loss on financial assets as fair value through profit or loss		(6,059,722)		(4,933,721)
Investment income		8,085		1,179
Net investment losses		(6,051,637)		(4,932,542)
Expenses
Support services administration fees		(290,000)		(162,791)
Consultancy fees		(120,645)		(134,000)
Other expenses		(74,202)		(110,624)
Directors' fees		(76,500)		(77,170)
Administration fees		(60,547)		(67,650)
Broker fees		(20,000)		(22,712)
Audit fees		(13,667)		(30,250)
Registrar fees		(5,500)		(9,495)
Custodian fees		(5,292)		(9,830)
Directors' expenses		(2,085)		(5,719)
Foreign currency loss		(358)		-
Total expenses		(668,796)		(630,241)
Operating loss		(6,720,433)		(5,562,783)
Finance income		185		1,163
Finance costs		(207,121)		(106,026)
Total comprehensive expense for the year		(6,927,369)		(5,667,646)
Basic and diluted deficit per share (pence) (restated)		(3.028)		(2.307)

All activities derive from continuing operations. 

All income is attributable to the holders of the Ordinary Shares of the Company.

Consolidated Statement of Changes in Equity

For the year ended 31 March 2015

		Shares Issued	Warrants Issued	Treasury Shares	Retained Earnings	Total Equity
		£	£	£	£	£
At 1 April 2014		24,677,936	72,454	(310,655)	(14,217,381)	10,222,354
Total comprehensive expense for the year		-	-	-	(6,927,369)	(6,927,369)
Transactions with owners
Shares issued		470,000	-	-	-	470,000
Share bought bank and cancelled		(939,296)	-	-	-	(939,296)
Treasury shares cancelled		-	-	310,655	-	310,655
Total transactions with owners		(469,296)	-	310,655	-	(158,641)
At 31 March 2015		24,208,640	72,454	-	(21,144,750)	3,136,344
At 1 April 2013		24,677,901	-	-	(8,549,735)	16,128,166
Total comprehensive expense for the year		-	-	-	(5,667,646)	(5,667,646)
Transactions with owners
Shares issued		35	-	-	-	35
Warrants issued		-	72,454	-	-	72,454
Share bought back		-	-	(310,000)	-	(310,000)
Share transaction costs		-	-	(655)	-	(655)
Total transactions with owners		35	72,454	(310,655)	-	(238,166)
At 31 March 2014		24,677,936	72,454	(310,655)	(14,217,381)	10,222,354

Consolidated Statement of Financial Position

As at 31 March 2015

		31 March 2015		31 March 2014
	Notes	£		£
ASSETS
Non-Current Assets
Investments at fair value through profit or loss		4,083,733		10,813,632
Total non-current assets		4,083,733		10,813,632
Current Assets
Trade and other receivables		7,280		60,433
Cash and cash equivalents		517,597		1,044,814
Restricted cash		257,080		-
Total current assets		781,957		1,105,247
Total Assets		4,865,690		11,918,879

EQUITY AND LIABILITIES
Equity
Shares issued		24,208,640		24,677,936
Warrants issued		72,454		72,454
Treasury shares		-		(310,655)
Retained earnings		(21,144,750)		(14,217,381)
Total Equity		3,136,344		10,222,354
Liabilities
Non-Current Liabilities
Loan payable		1,688,133		1,481,012
Total non-current liabilities		1,688,133		1,481,012
Current Liabilities
Loan payable		-		-
Trade and other payables		41,213		215,513
Total current liabilities		41,213		215,513
Total equity and liabilities		4,865,690		11,918,879

Net asset value per Ordinary Share (excluding
shares held in Treasury)		0.07		0.21

Consolidated Statement of Cash Flows

For the year ended 31 March 2015

		Year ended 31 March 2015		Year ended 31 March 2014
	Notes	£		£
Cash flows from operating activities
Purchase of investments		(431,337)		(1,279,845)
Proceeds from sale of investments		1,101,514		858,335
Interest and investment income		8,270		1,163
Operating expenses paid		(319,943)		(520,271)
Net cash inflow/(outflow) from operating activities		358,504		(940,618)
Cash flows from financing activities
Proceeds from issue of shares		-		35
Payment of redemption of shares		-		-
Share buybacks		(628,641)		(310,000)
Share transaction costs		-		(655)
Loan proceeds received		-		1,500,000
Loan facility issue costs		-		(30,000)
Escrow payments under loan agreement		(257,080)		-
Net cash (outflow)/inflow from financing activities		(885,721)		1,159,380
Net change in cash and cash equivalents		(527,217)		218,762
Cash and cash equivalents at beginning of year		1,044,814		826,052
Cash and cash equivalents at end of year		517,597		1,044,814

NOTES:

1.   GENERAL INFORMATION

Duke Royalty Limited (the "Company") is a closed-ended investment company with limited liability formed under the Companies (Guernsey) Law, 2008. The Company was incorporated in Guernsey on 22 February 2012 and its shares were admitted to trading on the London Stock Exchange's AIM on 9 July 2012. The Company's registered office is shown on page 49.

Following the results of an Extraordinary Meeting (the "EGM") held on 16 June 2015 the Company changed its name to Duke Royalty Limited. At the same EGM the Company changed its Investment Policy and Articles of Incorporation.

The Company's initial investment objective was to build a focused natural resource investment vehicle in order to generate positive returns to shareholders. As detailed in the investment policy on page 2 following the result of the EGM on 16 June 2015 the Company's Articles of Incorporation and Investment Policy were changed to that of investment in a diversified portfolio of royalty finance and related opportunities.

The Company's shares are traded on AIM, a market operated by the London Stock Exchange.

2.   SIGNIFICANT ACCOUNTING POLICIES

a)   Basis of preparation

The Consolidated Financial Statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") to the extent that they have been adopted by the European Union, and reflect the following policies, which have been adopted and applied consistently.

During the year, as disclosed in note 10, the Company bought back some of its own Ordinary Share Capital to be held as Treasury Shares which were then subsequently cancelled. Where the Company purchases its own share capital, the consideration paid, which includes any directly attributable costs, is recognised as a deduction from equity shareholders' funds through the Company reserves. When such shares are subsequently sold or re-issued to the market any consideration received, net of any directly attributable incremental costs, is recognised as an increase in equity shareholders' funds through the Share Capital account. Shares held in treasury are excluded from calculations when determining NAV per share as detailed in note 14.

b)   Basis of consolidation

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassured whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights.

In determining whether de-facto control exists the Company considers all relevant facts and circumstances, including:

-       The size of the Company's voting rights relative to both the size and dispersion of other parties who hold voting rights

-       Substantive potential voting rights held by the company and by other parties

-       Other contractual arrangements

-       Historic patterns in voting attendance

The Consolidated Financial Statements incorporate the Financial Statements of the Company and the subsidiary undertakings controlled by the Company, made up to 31 March each year.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

The "Group" is defined as the Company and its subsidiaries Praetorian Portfolio Holding L.P., Praetorian Resources (GP) Limited and Praetorian ZDP Limited.

c)   New and amended standards and interpretations

The accounting policies adopted in the year are consistent with those of the previous financial period, with the exception of new standards that have become effective during the year. Although there were a number of new standards and interpretations that apply for the first time in 2014, none of these had any significant impact on the Consolidated Financial Statements.

At the date of authorisation of these Consolidated Financial Statements, the following standards and interpretations, which will become relevant to the Group but have not been applied in these Consolidated Financial Statements, were in issue but not yet effective:

IFRS 9, "Financial Instruments - Classification and Measurement" (for accounting periods currently no sooner than 1 January 2018, though no effective date has been set by the ISAB).

IFRS 7, Financial Instruments Disclosures - Amendments regarding initial application of IFRS 9* - effective for periods commencing on or after 1 January 2015.

*still to be endorsed by the EU.

IFRS 15, Revenue from contracts with customers - effective for periods commencing on or after 1 January 2017.

This standard and interpretation will be adopted by the Group when it becomes effective. The Directors anticipate that, with the exception of IFRS 9, the adoption of these standards and interpretations in future period will not have a material impact on the Consolidated Financial Statements of the Group.

Given the post year end changes to the Company, the Directors have not yet considered what the impact of IFRS 9 will be on the Consolidated Statement of Financial Position but do not anticipate adopting the standard until the year ended March 2018.

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

d)   Foreign currency

Items included in the Consolidated Financial Statements of the Group are measured using the currency of the primary economic environment in which the entity operated ("the functional currency"). The Consolidated Financial Statements are presented in Pounds Sterling (£), which is the Group's functional and presentation currency.

Transactions in currencies other than Sterling are translated at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the date of the Consolidated Statement of Financial Position are retranslated into Sterling at the rate of exchange ruling at that date.

Foreign exchange differences arising on retranslation are recognised in the Consolidated Statement of Comprehensive Income.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the rate of exchange at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated into Sterling at foreign exchange rates ruling at the dates the fair value was determined.

e)   Financial instruments

Financial assets and financial liabilities are recognised in the Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are only offset and the net amount reported in the Consolidated Statement of Financial Position and Consolidated Statement of Comprehensive Income when there is a currently enforceable legal right to offset the recognised amounts and the Group intends to settle on a net basis or realise the asset and liability simultaneously.

Financial assets

The classification of financial assets at initial recognition depends on the purpose for which the financial asset was acquired and its characteristics. All financial assets are initially recognised at fair value. All purchases of financial assets are recorded at trade date, being the date on which the Group became party to the contractual requirements of the financial assets. The Group has not classified any of its financial assets as Held to Maturity or as Available for Sale. The Group's financial assets comprise loans and receivables and investments held at fair value through profit or loss.

Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They principally comprise other receivables and cash and cash equivalents. They are initially recognised at fair value on acquisition, and subsequently carried at amortised cost using the effective interest rate method, less provisions for impairment. The effect of discounting on these financial instruments is not considered to be material.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments with an original maturity of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial assets at fair value

Classification

The Group classifies its investments as "financial assets at fair value". These financial assets are designated by the Group at fair value through profit or loss at inception.

Recognition

Purchases and sales of investments are recognised on the trade date, the date on which the Group commits to purchase or sell the investment.

Measurement

Financial assets at fair value are initially recognised at cost, being the fair value of consideration given. Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the 'financial assets at fair value' category are presented in the Statement of Comprehensive Income in the period in which they arise.

Fair value estimation

Marketable (Listed) Securities - where an active market exists for the securities, the value is stated at the bid price on the last trading day in the period. Marketability discounts are not applied unless there is some contractual, governmental or other legally enforceable restriction preventing realisation at the reporting date.

Unlisted Investments - are carried at such fair value as the Directors consider appropriate given the performance of each investee company and after taking account of the effect of dilution, the exercise of ratchets, options or other incentive schemes. Warrants are carried at fair value using standard Black Scholes valuation models.

Fair value hierarchy

IFRS 13 required disclosure of fair value measurements by level of the following fair value hierarchy.

Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities that the entity can readily observe.

Level 2 - inputs are inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly.

Level 3 - inputs that are not based on observable market date (unobservable inputs).

Derecognition of financial assets

A financial asset (in whole or in part) is derecognised either (i) when the Group has transferred substantially all the risks and rewards of ownership; or (ii) when it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the assets or a portion of the asset; or (iii) when the contractual right to receive cash flow has expired. Any gain or loss on derecognition is taken to the Consolidated Statement of Comprehensive Income as appropriate.

Financial liabilities

The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its characteristics.

All financial liabilities are initially recognised at fair value. All purchases of financial liabilities are recorded on trade date, being the date on which the Group becomes party to the contractual requirements of the financial liability. Unless otherwise indicated the carrying amounts of the Group's financial liabilities approximate to their fair values.

The Group's financial liabilities consist of any financial liability measured at amortised cost.

Financial liabilities measured at amortised cost

These include loans and borrowings, payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.

Derecognition of financial liabilities

A financial liability (in whole or in part) is derecognised when the Group has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the Consolidated Statement of Comprehensive Income.

Capital

Financial instruments issued by the Group are treated as equity if the holder has only a residual interest in the assets of the Group after the deduction of all liabilities. The Company's Ordinary Shares and Warrants are classified as equity instruments.

The Group considers its capital to comprise its Ordinary Share Capital (including Treasury Shares), Warrants and retained earnings.

Equity instruments

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from proceeds.

Incremental costs include those incurred in connection with the placing and admission to AIM of new shares, which include fees payable under the Placing Agreement, legal costs and any other allocable expenses.

Where the Company purchases its own share capital, the consideration paid, which includes any directly attributable costs, is recognised as a deduction from equity shareholders' funds through the Company's reserves. If such shares are subsequently sold or re-issued to the market, any consideration received, net of any directly attributable incremental transactions costs, is recognised as an increase in equity shareholders' funds through the Share Capital account. Shares held in treasury are excluded from calculations when determining NAV per share as detailed in note 14.

e)   Income

Interest income is recognised on a time apportioned basis using the effective interest method. Investment income is recognised on an accrual basis in the Consolidated Statement of Comprehensive Income.

f)    Expenses

Expenses are accounted for on an accrual basis.

g)   Share issue expenses

Any share issue expenses will be treated as a deduction from equity in the Consolidated Statement of Changes in Equity. During the year there were no such expenses (2014: £nil).

h)   Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors, as a whole. The key measure of performance used by the Board to assess the Group's performance and to allocate resources is the total return on the Group's net asset value, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in these Financial Statements.

For management purposes, the Group is organised into one main operating segment, which invests in natural resources stocks. All of the Group's income is derived from its investments in natural resources stocks, which are located in various jurisdictions. Due to the Group's nature it has no customers.

3.    CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Consolidated Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of revision and future periods, if the revision affects both current and future periods.

In the process of applying the Group's accounting policies, management has made the following judgements, which had the most significant effects on the amounts recognised in the Consolidated Financial Statements:

Going concern

After making all reasonable enquiries the Directors believe that it is appropriate to adopt the going concern basis in preparing the Consolidated Financial Statements since the assets of the Group consist mainly of listed securities which are readily realisable and the short term liabilities of the Group are minimal, accordingly, the Group has adequate financial resources to continue in operational existence for the foreseeable future.

Fair value of unlisted investments 

The Group uses valuation techniques that include inputs that are not based on the observable market data to estimate the fair value of unlisted financial investments.

The Group uses valuation techniques that include inputs that are not based on the observable market data to estimate the fair value on two of its investments. Significant judgement has been applied by the directors when valuing these investments.

For one investment the directors have applied a full discount to unaudited NAV of US$484,455. In forming this conclusion, the Directors have taken into account all available information including; the NAV includes significant projects that have not been valued since 2011, the decline in the market since the latest audited values of 2012, projects not being able to be realised despite efforts to secure sales, the illiquidity of the investment and restriction over sale, given the entity is in a long standing breach of its debt terms which has security over all assets. In addition the projects are not income generating and there is a significant interest payable on the loan.

The Company's other unlisted investment was listed on the Toronto Stock Exchange until 17 September 2014 when the investment was suspended. The Directors have used the last traded price before the suspension and applied a discount of 50% for the illiquidity and the associated uncertainty attached. The last traded price gave a value of the holding of £176,652 to which the Directors have applied the 50% discount.

The Directors believe that the applied valuation techniques and assumptions used are appropriate in determining the fair value of unlisted financial investments. Further details are provided below in note 4.   

4.    INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

For the year ended 31 March 2015	Level 1	Level 2	Level 3	Total
	£	£	£	£
Opening Cost	21,235,890	108,679	339,499	21,684,068
Transfer to level 3	(2,754,849)	-	2,754,849	-
Additions at cost - cash	321,845	109,492	-	431,337
Disposals proceeds	(929,562)	(171,952)	-	(1,101,514)
Net realised (loss)/gain on disposal of investments	(241,926)	35,900	-	(206,026)
Closing portfolio cost	17,631,398	82,119	3,094,348	20,807,865
Net accumulated unrealised loss on investments	(13,715,843)	(2,267)	(3,006,022)	(16,724,132)
Closing valuation	3,915,555	79,852	88,326	4,083,733
Net unrealised loss on investments	(2,380,770)	(487,248)	(2,985,678)	(5,853,696)
Net realised (loss)/gain on disposal of investments	(241,926)	35,900	-	(206,026)
Net capital loss on fair value of financial assets designated at fair value through profit or loss	(2,622,696)	(451,348)	(2,985,678)	(6,059,722)
Investment income	8,085	-	-	8,085
Total losses on financial assets at fair value through profit or loss	(2,614,611)	(451,348)	(2,985,678)	(6,051,637)
For the year ended 31 March 2014	Level 1	Level 2	Level 3	Total
	£	£	£	£
Opening Cost	22,132,351	-	1,314,499	23,446,850
Additions at cost - cash	1,171,166	108,679	-	1,279,845
Disposals proceeds	(834,395)	-	(23,940)	(858,335)
Net realised loss on disposal of investments	(1,233,232)	-	(951,060)	(2,184,292)
Closing portfolio cost	21,235,890	108,679	339,499	21,684,068
Net unrealised (loss)/gain on investments	(11,335,073)	484,981	(20,344)	(10,870,436)
Closing valuation	9,900,817	593,660	319,155	10,813,632
Net unrealised (loss)/gain on investments	(4,126,293)	484,981	891,883	(2,749,429)
Net realised loss on disposal of investments	(1,233,232)	-	(951,060)	(2,184,292)
Net capital (loss)/gain on fair value of financial assets designated at fair value through profit or loss	(5,359,525)	484,981	(59,177)	(4,933,721)
Investment income	1,179	-	-	1,179
Total (losses)/gains on financial assets at fair value through profit or loss	(5,358,346)	484,981	(59,177)	(4,932,542)

The current strategy of the Group, as discussed in the 2013 Annual Report, was to concentrate the portfolio on six key positions where the Group can support and assist in management. As at the year end these key positions constitute 87.9% (31 March 2014: 83%) of the NAV of the Group.

Valuation techniques used in the determination of fair values, including the key inputs used, are as follows:

Fair value hierarchy level       Valuation techniques

Level 1                                Fair value is the quoted price.

Level 2                                            The debenture has been valued based on a precedent transaction in the year on the same investment for the same debenture. The fair value is deemed to be price received of the precedent transaction and accordingly has been included within Level 2.    

Level 3                                The  fair  value  of  investments  in  the two unlisted  entities  is  derived  by  applying  a discount rate, as deemed  appropriate by the  Board, to  in one case the latest unaudited NAV and in the other case to the latest traded price prior to suspension.

The  significant  unobservable  input  used  in  arriving  at  the  fair  value  is  the discount  rate  applied  by  the  Board.  The discount rate used is the best estimate   of   the   measure   of   the   impact   of   the   illiquid   nature   of   the investments together with the certain issues each investment is facing. More information is given on page 29.

If  the  discount  rates  used  in  the  valuation  of  financial  assets  classified  as Level 3 under the fair value hierarchy were to increase by 10%, with  all  other  variables  held  constant,  the  NAV  would  have   decreased by £17,665  (2014: £43,684) being 0.56% (2014: 0.42%) of NAV. If they were to decrease by 10% the NAV would by increase by £50,323 (2014: £42,964) being 1.6% (2014: 0.42%) of NAV.

For financial instruments that are recognised at fair value on a recurring basis, the Board determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

During the year to 31 March 2015 there was a transfer from Level 1 to Level 3. The investment was previously listed with quoted prices on an active market. At the year end the investments did not have an active market and were therefore valued by the Board using the Company's valuation policy for unquoted investments. This change caused the Company to reclassify the investments from Level 1 to Level 3.

5. MATERIAL AGREEMENTS

Support services and administration fees

Arlington Group Asset Management Limited ("AGAM") was appointed to provide day-to-day support services, including investor relations services, to the Group as set out in the Administration and Support Services Agreement. In consideration for its services, AGAM was entitled to receive a ratcheting quarterly administration fee based upon "Equity Funds" being the aggregate of (i) the Enlarged Share Capital, being the issued share capital of the Company on Admission to AIM, following completion of the Share Exchanges and the Cash Placing, multiplied by the Issue Price, (ii) in the event that the Company raises further funds through the issue of further Ordinary Shares, the gross proceeds of such further issues, and (iii) the resulting proceeds arising to the Company on the exercise of the Subscription Shares.

The ratcheting quarterly administration fee relates to the size of Equity Funds from time to time, ratcheting from a base fee of £40,000 per quarter where the value of the Equity Funds is £20,000,000 or less up to a maximum fee of £200,000 per quarter where the value of the Equity Funds is £100,000,000 or more. The fee was due to be increased yearly from the second anniversary of Admission in line with the percentage increase in the UK Retail Prices Index. The total charge to the Consolidated Statement of Comprehensive Income was £290,000 (2014: £162,791). As announced on 25 April 2014 the Company cancelled the service Agreement with AGAM and all outstanding fees under the terms of the service agreement were settled by the issuance of 2,400,000 Ordinary shares.

Administration fees

Legis Fund Services Limited was entitled to receive a fixed fee of £60,000 per annum, monthly in arrears, for administration of the Group commencing in July 2012, as set out in the Administration Agreement. With effect from October 2013, upon the addition of Praetorian ZDP Limited to the Group, the fixed fee increased to £67,000 per annum, with an additional £2,500 fee being charged for the set-up of Praetorian ZDP Limited. The total charge to the Consolidated Statement of Comprehensive Income was £45,654 (2014: £67,650) of which £nil was outstanding at the end of the year (2014: £15,000). Legis Fund Services Limited resigned on 31 October 2014.

R&H Fund Services (Guernsey) Limited were appointed as Administrator on 1 November 2014. They were entitled to receive a fixed fee of £36,000 per annum, quarterly in arrears, for administration of the Group, as set out in the Administration Agreement. The total charge to the Consolidated Statement of Comprehensive Income was £14,893 (2014: £nil), of which £9,310 (2014: £nil) was outstanding at the end of the year.

Custodian fees

The custodian, ABN AMRO (Guernsey) Limited, is entitled to receive a fee from the Group at the rate of 0.08 per cent of the net asset value of Praetorian Portfolio Holdings L.P, payable monthly in arrears commencing 26 June 2012, as set out in the Custodian Agreement. The total charge to the Consolidated Statement of Comprehensive Income was £5,292 (2014: £9,830), of which £903 was outstanding at the end of the year (2014: £2,238).

Corporate broker fees

On 4 July 2012 Pareto Securities Limited (previously Ocean Equities Limited) was appointed to act as the Company's Broker. The Broker was entitled to receive £30,000 per annum calculated from the date of Admission payable quarterly in advance. With effect from 8 July 2013 this fee was reduced to £20,000 per annum. The total charge to the Consolidated Statement of Comprehensive Income was £20,000 (2014: £22,712) there was no outstanding fees at the end of the year (2014: £4,525). 

Nominated adviser fees

On 24 March 2012 Westhouse Securities Limited was appointed by the Company to act as nominated adviser to the Company for the purpose of the AIM listing. The Company agreed to pay Westhouse Securities Limited an annual retainer fee of £20,000 calculated from the date of Admission (increasing to £40,000 when the Company's market capitalisation reaches £50 million) payable quarterly in advance. The total charge to the Consolidated Statement of Comprehensive Income was £8,597 which included a cancellation fee of £3,616 (2014: £20,000), there was no outstanding fees at the end of the year (2014: £nil). Westhouse Securities Limited resigned on 8 June 2014.

On 9 June 2014 Grant Thornton UK LLP ("Grant Thornton") was appointed by the Company to act as nominated adviser to the Company for the purpose of the AIM listing. Grant Thornton is entitled to an annual fee of £20,000, payable quarterly in advance and an initial commencement fee of £2,500. The total charge to the Consolidated Statement of Comprehensive Income was £15,513 (2014: £nil) there was no outstanding fees at the end of the year.

Registrar fees

The Company is party to an Offshore Registrar Agreement with Computershare Investor Services (Guernsey) Limited (the "Registrar") dated 30 March 2012, pursuant to which the Registrar will provide registration services to the Company which will entail, among other things, the Registrar having responsibility for the transfer of shares, maintenance of the share register and acting as transfer and paying agent. For the provision of such services, the Registrar is entitled to receive an initial set-up fee of £2,000 and a minimum annual fee of £5,500. The total charge to the Consolidated Statement of Comprehensive Income was £5,500 (2014: £9,495), there was no amount outstanding fees at the end of the year (2014: £nil).

Performance fee

Praetorian (Special Limited Partner) L.P. ("PSLP") is a special limited partner under the terms of the Limited Partnership Agreement of Praetorian Portfolio Holding L.P. PSLP has been established in order that the Advisory and Execution team may receive interests in any performance incentive fee.

Under the terms of the Limited Partnership Agreement, for any financial year (a "Performance Period"), PSLP is entitled to receive from Praetorian Portfolio Holding L.P. a performance incentive payment equal to 20 per cent of the aggregate return over the full or pro-rata (in the case of partial realisations) cost of investment (including all pro-rata-out-of-pocket costs relating to such investment) received by Praetorian Portfolio Holding L.P. and Praetorian Resources (GP) Limited following the full or partial cash realisation of an investment.

The payment of a performance incentive payment is conditional upon the net asset value per Ordinary Share of the Company at the end of the relevant Performance Period (as adjusted, inter alia, to add back the value of any distributions and accrued but unpaid performance incentive payments) being greater than the net asset value per Ordinary Share at Admission or, if a performance incentive payment has previously been paid, the net asset value per Ordinary Share when a performance incentive payment was last paid.

Performance incentive payments shall be distributed within 20 business days of completion of the audit for the relevant Performance Period. No such fee is payable for the current year (2014: £nil).

6.   OTHER EXPENSES

	Year ended 31 March 2015		Year ended 31 March 2014
	£		£
Nomad fees (note 5)	26,922		20,000
Legal and professional fees	16,102		36,265
Sundry expenses	16,999		35,648
Insurance premiums	9,193		11,255
Listing fees	4,986		7,456
	74,202		110,624

7.   TAXATION

The Company has been granted exemption from Guernsey taxation and is charged an annual exemption fee of £600 (with effect from 1 January 2015 this fee has increased to £1,200).

8.   DEFICIT PER SHARE

Basic and diluted deficit per ordinary share	Year ended 31 March 2015		Year ended 31 March 2014
	£		£
Loss for the year	(6,927,369)		(5,667,646)
Weighted average number of Ordinary Shares in issue	2,287,398		2,456,888
Deficit Per Share (pence)	(3.028)		(2.307)

The deficit per share is based on the Group loss for the year and on the weighted average number of Ordinary Shares in issue for the year. The weighted average number of shares has been adjusted for both years to reflect the post year end share consolidation.

 

END

 

 

FR RRMITMBITBRA