Baker Steel Regulatory News (BSRT)

BAKER STEEL RESOURCES TRUST LIMITED

(Incorporated in Guernsey with registered number 51576 under the provisions of The Companies (Guernsey) Law, 2008 as amended)

22 April 2016

BAKER STEEL RESOURCES TRUST LTD

(the "Company")

Annual Report and Audited Financial Statements

For the year ended 31 December 2015

The Company has today, in accordance with DTR 6.3.5, released its Annual Audited Financial Report for the year ended 31 December 2015. The Report is available via www.bakersteelresourcestrust.com and will shortly be submitted to the National Storage Mechanism.

Further details of the Company and its investments are available on the Company's website www.bakersteelresourcestrust.com 

Enquiries:

Baker Steel Resources Trust Limited +44 20 7389 8237

Francis JohnstoneTrevor Steel

Numis Securities Limited +44 20 7260 1000

David Benda (Corporate)

James Glass (sales)

HSBC Securities Services (Guernsey) Limited

Company Secretary + 44 (0)1481 717 851

\* The Investment Manager was authorised as an Alternative Investment Fund Manager ("AIFM") for the purposes of the Alternative Investment Fund Managers Directive ("AIFMD") on 22 July 2014.

CHAIRMAN'S STATEMENT

For the year ended 31 December 2015

Despite apparent green shoots in the mining sector at the beginning of 2015, hopes for improved conditions were disappointed as the bear market of the past five years continued unabated during the year, amid fears of a slowdown in demand for metals, in particular from China. This is illustrated by the Euromoney Global Mining Index which fell 39.3% in Sterling terms during the year and at 31 December 2015 was down 68.2% from the date of the Company's first Net Asset Value (NAV) on 30 April 2010. By comparison, the Company's NAV per share fell 25.4% during the year and has fallen 65.8% since 30 April 2010.

Mining shares have fallen in response to weak commodity prices which in turn have fallen owing to concerns over the level of global growth, and in particular the growth in China as it evolves from an infrastructure-led to a consumer-led economy. Iron ore companies continued to be hard hit with the price of iron ore trading a little above US$40 per tonne at the year end, less than a quarter of its price 5 years ago. The other main component of steel manufacture, coking coal, has similarly been hard hit and massive oversupply from the steel industry has seen dumping from Chinese manufacturers onto the world market. Most other major commodities have followed suit with copper down 26% and nickel down 42% during 2015.

One positive factor for the mining industry is that the two thirds fall in the oil price over the past eighteen months has led to a decrease in the operating costs of many mines where energy can be a major component of overall costs. This, together with the depreciation of the exchange rates of many producer economies, has improved operating margins.

Although this downturn in the mining industry is as severe as most people can remember, it should be borne in mind that mining is a cyclical business and the current lack of investment in both exploration and development is sowing the seeds for the next upturn. The resultant reduced interest in mining by investors has led to many stocks trading at large discounts to long-term value or, in some cases, at a discount to cash as exemplified by one of the Company's investments, Ivanhoe Mines, which sold half of one of its three Tier 1 projects for C$571.5 million in cash at the end of 2015 but at year end was still only capitalised at C$475 million. In markets such as these it is important for the Investment Manager to proactively manage the portfolio to defend the latent value in the Company's investee companies by assisting them to survive until the market recovers and prevent others from acquiring them cheaply. This is the strategy behind the Company's recent change to the Articles of Association to allow it to make a further investment in Polar Silver with a view to achieving greater control of the asset.

During 2015 the Company adopted a new buy-back policy seeking to address the large discount at which its shares trade. This commenced in August 2015 with the repurchase of 700,000 shares. The buy-back policy has been suspended whilst the Polar Silver offer is in process as the Board may be in possession of price sensitive information.

It is all but impossible to identify the precise bottom of any bear market at the time, but we know from experience that when the turn comes in the mining sector, the recovery is likely to be sharp. One sub-sector that has shown signs of recovery is the gold market with the gold price rising 18.9% during the first quarter of 2016 and the FTSE Gold Mines Index recovering 56.2% in Sterling terms. The gold and precious metals sector has often been a lead indicator for the general mining market and the Company's portfolio is currently over 50% invested in precious metals.

Finally I would like to pay tribute to Ed Flood, a director of the Company at listing, who sadly passed away in October last year. Despite battling with a long term illness, Ed continued to contribute actively to the Company right until the end. He will be sorely missed.

Howard Myles

Chairman

21 April 2016

INVESTMENT MANAGER'S REPORT

For the year ended 31 December 2015

Financial Performance

The audited undiluted Net Asset Value per Ordinary Share as at 31 December 2015 was 33.5 pence, a decrease of 25.4% in the year and a decrease of 65.8% from the Company's first NAV per Ordinary Share calculated on 30 April 2010. During the year the Euromoney Global Mining 100 Index was down 39.3% (down 68.2% since 30 April 2010).

For the purpose of calculating the Net Asset Value per Ordinary Share, unquoted investments are carried at fair value as at 31 December 2015 as determined by the Directors in accordance with the methodology set out in note 3 and quoted investments are carried at last quoted price as at 31 December 2015.

Net assets at 31 December 2015 comprised the following:

Investment Update

Investment Update

At the year end, the Company was fully invested, holding 19 investments of which the top 10 holdings comprised 94.6% of the portfolio by value. The portfolio is well diversified both in terms of commodity and geographical location of the deposits. In terms of commodity, the portfolio is concentrated on the large liquid markets of silver, gold, iron ore, coal, copper, platinum group metals, nickel and oil. Its projects are located in Australia, Canada, China, Democratic Republic of Congo, Indonesia, Mongolia, Morocco, Norway, the Philippines, Russia, South Africa, USA and Zimbabwe.

In February 2015, the Company increased its total assets by over 50%, through the acquisition of two portfolios of assets in exchange for the issue of new shares in the Company. 90% of these portfolios was in investments in which the Company already had an interest and the largest investment which was not common to the existing portfolio, Red 5 Limited, an Australian Stock Exchange listed gold producer, was subsequently sold, being non-core.

The recovery in the mining market, of which there were signs at the beginning of 2015, did not materialise during the year as demonstrated by the Euromoney Global Mining Index falling 39.3% and the FTSE Gold Mines Index falling 16.9% with the falls particularly high in the second half of the year. The Company's valuation policy for its unlisted investments takes into account general market movements in comparable listed mining shares and, largely as a result of this listed market weakness, the Net Asset Value per share fell 25.4% during the year. The values of iron ore and coking coal stocks were hit particularly hard following continued falls in the iron ore price and the oversupply of steel, particularly from China. Gobi Coal and Ironstone Resources were marked down 51% and 27% respectively during 2015.

Oil and energy was another badly-hit sector during 2015, with the price of the benchmark Brent Crude falling 35% during 2015 and off 67% since 30 June 2014. The Company has one investment in the energy sector, Cemos Group plc (formerly Global Oil Shale Group Limited) which has oil shale projects in Morocco and Australia. The investment in Cemos demonstrates the importance of investing in companies with good management as well as the quality of projects that they hold. Rather than slowing down their activities in response to the depressed oil price, the entrepreneurial management of Cemos has changed the focus of its development of its Tarfaya project in Morocco away from the production of oil and electricity generation, towards exploiting the cement potential of the project. The production of cement is highly energy intensive and the energy content of the oil shale will ensure a low cement production cost with a view to selling product throughout West Africa, where strong demand has been identified.

Metals Exploration plc is a good example of some of the pitfalls that mining companies have to contend with in developing their projects. Despite constructing the Runruno gold mine in the Philippines within budget it first suffered delays due to the bureaucratic permitting procedures in the Philippines and then, just as the final permits were being released, the mine was hit by super typhoon Lando, which although not inflicting any major structural damage, required Metals Exploration to suspend activities and rehabilitate the area. Once in full production, Runruno is scheduled to produce approximately 100,000 ounces of gold per annum.

Current market sentiment towards the mining sector is highlighted by Ivanhoe Mines Limited ("Ivanhoe") which is listed on the Toronto Stock Exchange. Ivanhoe continued to move forward strongly on all three of its main projects during 2015. In South Africa it has commenced shaft sinking on its Platreef Project where in the first phase it is planned to produce 433,000 ounces of platinum, palladium, rhodium and gold per annum, plus 31 million pounds of nickel and copper. In the Democratic Republic of Congo ("DRC"), Ivanhoe recently declared its first Mineral Resource estimate for its Kipushi zinc-copper-germanium-lead-silver mine with Measured and Indicated Mineral Resources totalling 10.2 million tonnes grading 34.9% Zinc containing 3.55 million tonnes of Zinc and completed a transaction to sell 49.5% of the Kamoa Copper Project for US$412 million (C$575 million) to Zijin Mining. Despite its remaining stakes in these three Tier 1 mining projects, with a market capitalisation of C$475 million at 31 December 2015 Ivanhoe was trading at a significant discount to the cash receivable from Zijin.

The sale of the Company's entire holding in Ferrous Resources Limited for US$2.06 million, following a tender offer from Icahn Enterprises Holdings L.P., was the Company's only significant realisation during 2015.

In order to protect its interest in its largest investment, the Prognoz Silver Project in Russia, which is held through convertible loans to Polar Silver Resources Ltd. and its 100% subsidiary ZAO Argentum ("the Polar Group"), the Company has amended its Articles to allow it to make a further investment in the Polar Group. At the date of this report negotiations with other Polar Group investors are ongoing but the Company expects to make an offer to gain control of the Polar Group in the second quarter of 2016.

Further details of each of these investments and the Company's other significant holdings are provided below.

Description of Largest Investments at 31 December 2015

Polar Silver Resources Limited ("Polar Silver")

Polar Silver is a private company which holds a 50% indirect interest in the Prognoz silver project ("Prognoz"), 444km north of Yakutsk in Russia. The Company's investments are in the form of shares in Polar Silver and loan notes in Polar Silver and its 100% owned subsidiary, Argentum, both of which are convertible into Polar Silver shares.

A NI 43-101 compliant report by independent consultant Micon International Limited ("Micon") in July 2009, estimated an Indicated Resource of 5.86 million tonnes of ore grading 773 g/t silver containing 146 million ounces of silver and Inferred Resources of 9.64 million tonnes of ore grading 473 g/t silver containing 147 million ounces of silver at Prognoz. A NI 43-101 compliant preliminary economic assessment (PEA) by Micon envisages a mine producing an average of 13 million ounces of silver per annum over a 16 year mine life.

Black Pearl Limited Partnership ("Black Pearl")

Black Pearl is a special purpose vehicle formed to invest in the Black Pearl beach placer iron sands project in West Java, Indonesia. The Company's investment is in the form of a limited partnership interest in Black Pearl. Black Pearl holds an exchangeable loan note issued by a holding company of the mine group, Rui Tong Limited.

The Black Pearl concession area is 15,000 ha of which 1,600 ha has been drilled. Australasian Joint Ore Reserves Committee ("JORC") compliant Mineral Resources stand at 572 million tonnes grading 10% iron. Black Pearl received the requisite export permit following changes to the Indonesian mining regulations at the beginning of December 2014 and made its first shipment of concentrate later that month. Off-take agreements have been signed with a number of Chinese steel mills for the full planned production of 20 million tonnes per annum. Due to the new mining regulations, the future for the project requires the further beneficiation of the product within Indonesia. Negotiations are ongoing for the Black Pearl project to form the base production for an integrated steel production facility.

Metals Exploration plc ("Metals Exploration")

Metals Exploration is an AIM listed company which owns the Runruno gold project in the Philippines. A JORC compliant report estimated mineral resources of 1.39 million ounces of gold, and 25.6 million pounds of molybdenum with 1,050,000oz gold reporting to the Measured and Indicated categories and 900,000oz gold within the Mining Proven & Probable Reserve category. Development of the Runruno mine was completed at the end of 2015. Commissioning of the mine was delayed following damage caused by super typhoon Lando. Remediation work was completed in early 2016 and awaits sign off by the Philippine authorities before the mine can commence production. Once in full production, the mine is scheduled to produce approximately 100,000 ounces of gold per annum.

Bilboes Gold Limited ("Bilboes")

Bilboes is a private Zimbabwean based gold mining company which owns four previously producing oxide mines in Zimbabwe. The oxide mines produced 9,160 ounces of gold in 2015.

In addition Bilboes has JORC compliant Indicated Mineral Resources of 29.3 million tonnes grading 2.12 g/t gold in the underlying sulphide mineralisation and Inferred Mineral Resource of 30.0 million tonnes grading 2.03 g/t gold. Contained gold in the combined Indicated and Inferred sulphide resources totals 3,964,000 ounces. The mineralisation is open along strike and at depth so there is good potential for these mineral resources to be increased. A pre-feasibility study is underway to investigate a mine producing 100,000 to 200,000 ounces per annum, initially from open pit.

Cemos Group plc (''Cemos'') (formerly Global Oil Shale Group Limited)

Cemos is a private cement and oil shale explorer and developer whose key assets are the Tarfaya project in Morocco containing JORC compliant Measured resources of 308 million barrels of shale oil and the Julia Creek oil shale project in Queensland Australia which has a JORC compliant Indicated Resource of 240 million barrels published in May 2013 and an Inferred Resource of 1.9 billion barrels of shale oil. Cemos is currently investigating the feasibility of constructing a cement plant at Tarfaya utilising the hydrocarbons from the oil shale as fuel for the process.

Ivanhoe Mines Limited (formerly Ivanplats Limited) ("Ivanhoe")

Ivanhoe is a company listed on the Toronto Stock Exchange which holds the Kamoa copper project (47% owned) and Kipushi zinc mine (68% owned) both in the Democratic Republic of Congo ("DRC") and the Platreef nickel, platinum, palladium, copper and gold project (64% owned) in South Africa.

The Kamoa Project is located in the Kolwezi District of Katanga Province, the DRC's copper mining hub. A NI 43-101 compliant report, using a 1% copper grade cut-off, estimated Indicated Mineral Resources at 739 million tonnes grading 2.67% copper containing 19.7 million tonnes of copper. The resource statement also included 4.4 million tonnes of copper in Inferred Mineral Resources providing combined contained copper of 24.1 million tonnes, establishing Kamoa as the largest high-grade copper discovery in Africa and one of the largest in the world.

The Platreef Project is located on the Northern Limb of the PGM-bearing Bushveld Complex in South Africa. NI 43-101 compliant Indicated Mineral Resources are estimated at 214 million tonnes grading 4.1 g/t 4PE (platinum, palladium, gold and rhodium), 0.34% nickel and 0.17% copper, at a 2.0 g/t 4PE cut-off grade and at a cumulative, average true thickness of 24 metres. In addition, the estimate included Inferred Mineral Resources of 415 million tonnes grading 3.5 g/t 4PE, 0.33% nickel and 0.16% copper, at an average true thickness of 18.0 metres. The combined Indicated and Inferred Resources amount to 75.7 million ounces of 4PE. A pre-feasibility study envisages a first phase development to produce 433,000 4PE plus 31 million pounds of nickel and copper per annum.

The Kipushi zinc/polymetallic mine in the DRC previously produced 60 million tonnes of ore at 11% zinc and 6% copper together with 120 tonnes of germanium from 1925-1993. Measured and Indicated Mineral Resources total 10.2 million tonnes grading 34.9% Zinc containing 3.55 million tonnes of Zinc.

Ironstone Resources Limited ("Ironstone")

Ironstone is a private Canadian company which owns the Clear Hills Iron Ore/Vanadium Project ("Clear Hills") in Alberta, Canada. Clear Hills currently has Indicated Resources of 557.7Mt at 33.3% iron and 0.2% vanadium and an Inferred Resource of 94.7Mt at 34.1% iron.

In conjunction with pyrotechnology experts Hatch of Toronto, Ironstone is developing a proprietary metallurgical process to refine the ore into direct reduced iron. Once demonstrated commercially, this process could be applied not only to Clear Hills, but also to other significant iron ore deposits globally.

Gobi Coal & Energy Limited ("Gobi")

Gobi is an emerging coking coal producer based in Mongolia, which owns 100% of three open-cut coal development projects in south western Mongolia. Gobi's projects contain approximately 322 million tonnes of JORC resources and include more than 500,000 hectares of tenements. Gobi's first project, Shinejinst, contains approximately 95 million tonnes of JORC reserves and 229 million tonnes of JORC resources and has completed site works in anticipation of the start of production which will depend on a recovery of the price of coking coal delivered to the Mongolian/Chinese border. At full production, Shinejinst is planned to produce approximately 5 million tonnes per annum of high quality, semi-soft coking coal product.

Archipelago Metals Limited ("Archipelago")

Archipelago is an Australian private company which holds a 50% joint venture interest in the Co Dinh chromite project in northern Vietnam which holds estimated JORC compliant resources containing 3.9Mt chromite. A pre-feasibility study has suggested pre-production capital costs of US$100 million for production rising to a rate of approximately 300,000 tonnes of chromite concentrate per annum with a mine life of 16 years. The partners are currently negotiating a formal joint venture agreement following which the mining licence will be issued and the partners will seek to install a pilot plant on site.

China Polymetallic Mining Limited ("CPM")

CPM is a Chinese mining company listed on the Hong Kong Stock Exchange. The Company's investment is via a special purpose vehicle, F.S.B.S. Limited Partnership. CPM has a number of development projects in the Yunan province of China. CPM's largest mine, the Shizishan Mine has JORC compliant resources totalling 8.1 million tonnes grading 256 g/t silver, 9.4% lead and 6.0% zinc for contained metal of 72 million ounces silver, 809,000 tonnes lead and 508,000 tonnes zinc. In 2015 Shizishan produced 289,000 ounces of silver, 3,679 tonnes lead and 3,087 tonnes zinc in concentrate. CPM's second project, the Dakuangshan silver lead-zinc mine, produced 35,000 ounces of silver, 764 tonnes lead and 1,450 tonnes zinc in concentrate in 2015.

Baker Steel Capital Managers LLP

Investment Manager

STRATEGIC REPORT

Company Structure

The Company is a closed-ended investment company registered with the Guernsey Financial Services Commission (the "Commission" or "GFSC") under the Registered Collective Investment Scheme Rules 2015 (previously 2008). The Company is not authorised or regulated as a collective investment scheme by the Financial Conduct Authority. The Company is subject to the Listing Rules and the Disclosure and Transparency Rules of the UK Listing Authority. The Articles of the Company contain provisions as to the life of the Company. At the Annual General Meeting ("AGM") falling in the year 2018 and at each third AGM convened by the Board thereafter, the Board shall propose a special resolution which if passed will require the Directors, within 6 months of the passing of the special resolution, to submit proposals to shareholders that will provide shareholders with an opportunity to realise the value of their Ordinary Shares.

Role and Composition of the Board

The Board is the Company's governing body; it sets the Company's strategy and is collectively responsible to shareholders for its long-term success. The Board, which is comprised entirely of independent Non-Executive Directors, is responsible for appointing and subsequently monitoring the activities of the Manager and other service providers to ensure that the investment objectives of the Company continue to be met. The Board also ensures that the Manager adheres to the investment restrictions set by the Board and acts within the parameters set by it in any other respect. It also identifies and monitors the key risks facing the Company.

Investment activities are predominantly monitored through quarterly Board meetings at which the Board receives detailed reports and updates from the Investment Manager, who attends each Board meeting. Services from other key service providers are reviewed as appropriate.

In August 2015, recognising the discount to NAV at which the Company's Ordinary Shares traded, the Board introduced a mechanism whereby, beginning from the publication of the Company's Net Asset Value as at 31 July 2015, the Company will on a monthly basis, following publication of its monthly Net Asset Value, calculate the aggregate net cash proceeds of disposals of investments over the immediately preceding six month period. Subject to meeting solvency requirements, if the Ordinary Shares are trading at a discount in excess of 15 per cent to their Net Asset Value, the Board intends to allocate at least 50 per cent. of such proceeds (less the aggregate value of any Ordinary Shares already bought back during the six month period) to buy back its own Ordinary Shares. As at 31 December 2015, the discount management mechanism is suspended until the proposed acquisition of a majority interest in Polar Silver is clarified as the Board may be in possession of price sensitive information. 

The Board continues to review the Company's ongoing charges to ensure that the total costs incurred by shareholders in the running of the Company remain competitive when measured against peers. An analysis of the Company's costs, including management fees (which are based on the market capitalisation of the Company), Directors' fees and general expenses, is submitted to each Board meeting.

As at 31 December 2015, the Board comprised four Directors. The Directors recognise the benefits of diversity in terms of gender and ethnicity and will take these into account when considering future appointments to the Board. However their principal criteria will remain skills and experience with the objective of maximising shareholder value.

Investment Management

The Manager was appointed pursuant to a management agreement with the Company dated 31 March 2010 (the Management Agreement). Under the Management Agreement, the Manager acts as manager of the Company, subject to the overall control and supervision of the Directors and was authorised to appoint the Investment Manager to manage and invest the assets of the Company. The Manager is responsible for the payment of the fees of the Investment Manager. The Manager is a company incorporated in the Cayman Islands on 10 April 2002 with registration number 117030 and is an affiliate of the Investment Manager.

Baker Steel Capital Managers LLP acts as Investment Manager of the Company and was incorporated in England and Wales on 19 December 2001. It is authorised and regulated by the Financial Conduct Authority in the United Kingdom. The Investment Manager is a limited liability partnership with registration number OC301191 and is an affiliate of the Manager. The Investment Manager has been appointed by the Company to act as its AIFM and is responsible for the portfolio management and risk management of the Company. The Investment Manager manages the Company in accordance with the AIFMD. The Investment Manager is a specialist natural resources asset management and advisory firm operating from its head office in London and its branch office in Sydney. It has an experienced team of fund managers covering the precious metals, base metals and minerals sectors worldwide, both in relation to commodity equities and the commodities themselves. 

The Directors formally review the performance of the Investment Manager on an annual basis and remain satisfied that the Investment Manager has the appropriate resources and expertise to manage the portfolio of the Company in the best interests of the Company and its shareholders.

Investment Objective

The Company's investment objective is to seek capital growth over the long-term through a focused, global portfolio consisting principally of the equities, loans or related instruments, of natural resources companies. The Company invests predominantly in unlisted companies (i.e. those companies that have not yet made an initial public offering ("IPO")) but also in listed securities (including special situations opportunities and less liquid securities) with a view to making attractive investment returns through uplift in value resulting from development progression of the investee companies' projects and through exploiting value inherent in market inefficiencies and pricing anomalies.

Investment Policy

The core of the Company's strategy is to invest in natural resources companies, predominantly unlisted, that the Investment Manager considers to be undervalued and that have strong fundamentals and attractive growth prospects. Natural resources companies, for the purposes of the investment policy, are those involved in the exploration for and production of base metals, precious metals, bulk commodities, thermal and metallurgical coals, industrial minerals, energy and uranium, and include single-asset as well as diversified natural resources companies.

It is intended that unlisted investments be realised through an IPO, trade sale, management repurchase or other methods.

The Company focuses primarily on making investments in companies with producing and/or tangible assets such as resources and reserves that have been verified under internationally recognised standards for reporting, such as those of the Australasian Joint Ore Reserves Committee ("JORC"). The Company may also invest from time to time in exploration companies whose activities are speculative by nature.

The Company has flexibility to invest in a wide range of investments in addition to unlisted and listed equities and equity-related securities, including but not limited to commodities, convertible bonds, debt securities, royalties, options, warrants and futures. Derivatives may be used for efficient portfolio management, hedging and for the purposes of obtaining investment exposure. The Company may also have exposure from time to time to other companies within the wider resources and materials sector, including services companies, transport and infrastructure companies, utilities and downstream processing companies.

The Company may take legal or management control of a company from time to time. The Company may invest in other investment funds or vehicles, including any managed by the Manager or Investment Manager, where such investment would be complementary to the Company's investment objective and policy.

Borrowing and Leverage

The Company may, at the discretion of the Investment Manager, incur leverage for liquidity purposes by borrowing funds from banks, broker-dealers or other financial institutions or entities. The costs of leverage will affect the operating results of the Company.

During the year, no leverage was used by the Company.

Investment Restrictions

There are no fixed limits on the allocation between unlisted and listed equities or equity-related securities and cash although, as a guideline, typically the Investment Manager will aim for the Company to be invested over the long-term as follows:

• between 40 and 100 per cent of the value of its gross assets in unlisted equities or equity-related securities;

• up to 50 per cent of the value of its gross assets in listed equities or equity-related securities;

• up to 10 per cent of the value of its gross assets in cash or cash-like holdings; and

• typically in 10 to 20 core positions to provide adequate diversification whilst retaining a focused core approach. Core positions will typically be between 5 per cent and 15 per cent of net asset value ("NAV") as at the date of acquisition.

The actual percentage of the Company's gross assets invested in listed and unlisted equities and equity-related securities and cash and cash-like holdings and the number of positions held may fall outside these ranges from time to time. For example, listed securities might exceed the above guideline following a significant number of IPOs or in certain market conditions and likewise cash balances may exceed the above guideline following the realisation of one or more investments or following the issue of new equity in the Company, pending investment of the proceeds.

The investment policy has the following limits:

• Save in respect of cash and cash-like holdings awaiting investment and except as set out below, the Company will invest or lend no more than 20 per cent in aggregate of the value of its gross assets in or to any one particular company or group of companies, as at the date of the relevant transaction.

• No more than 10 per cent in aggregate of the value of the gross assets of the Company may be invested in other listed closed-ended investment funds, except for those which themselves have stated investment strategies to invest no more than 15 per cent of their gross assets in other listed closed-ended investment funds.

At an Extraordinary General Meeting of the Company on 4 January 2016, shareholders resolved to allow the Company to increase the maximum investment in Polar Silver Resources Limited and / or any company within its group (the Polar Silver Group) from 20% to 35% of the NAV of the Company as at the date of the relevant transaction.

Where derivatives are used for investment exposure, these limits will be applied in respect of the investment exposures so obtained.

The Company will avoid (a) cross-financing between the businesses forming part of its investment portfolio and (b) the operation of common treasury functions between it and the investee companies.

When deemed appropriate, the Company may borrow up to 10 per cent of NAV for temporary purposes such as settlement mis-matches. Borrowings will not however be incurred for the purposes of any Share repurchases.

The Investment Manager will not normally hedge the exposure of the Company to currency fluctuations.

Any material change in the investment objective, investment policy or borrowing policy will only be made with the prior approval of holders of Ordinary Shares by Ordinary Resolution.

In the event of any breach of the investment restrictions the Investment Manager would report the breach to the Board and shareholders would be informed of any corrective action required. No breaches of these investment restrictions occurred during the year ended 31 December 2015.

Performance

An outline of performance, market background, investment activity and portfolio strategy during the year under review, as well as outlook, is provided in the Chairman's Statement on page 3 and the Investment Manager's Report on pages 4-7.

Principal risks and uncertainties

A summary of the principal risks and uncertainties faced by the Company is set out below.

Market and financial risks

Market risk arises from volatility in the prices of the Company's underlying investments which, in view of the Company's investment policy, are in turn particularly sensitive to commodity prices. Market risk represents the potential loss the Company might suffer through holding investments in the face of negative market movements. The Board has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager on a regular basis. Further details are disclosed in note 4 on pages 47 to 51.

The Company's investment activities also expose it to a variety of financial risks including in particular foreign currency risk.

Portfolio management and Performance risks

The Board is responsible for determining the investment strategy to allow the Company to fulfil its objectives and also for monitoring the performance of the Investment Manager which has been delegated day to day discretionary management of the Company's portfolio. An inappropriate strategy may lead to poor performance. The investment policy of the Company allows for a highly focused portfolio which can lead to a concentration of risk. To manage this risk the Investment Manager provides to the Board, on an ongoing basis, an explanation of the significant stock selection recommendations and the rationale for the composition of the investment portfolio. The Board mandates and monitors an adequate diversification of investments, both geographically and sectorally, in order to reduce the risks associated with particular sectors, based on the diversification requirements inherent in the Company's investment policy. 

The Company invests in companies whose projects are located in emerging markets. In such countries governments can exercise substantial influence over the private sector and political risk can be a significant factor. In adverse social and political circumstances, governments have been involved in policies of expropriation, confiscatory taxation, nationalisation, intervention in the securities markets and imposition of foreign exchange controls and investment restrictions. The Investment Manager and the Board take into account specific political risks when entering into an investment and seek to mitigate them by diversifying geographically. The mining sector is currently out of favour with investors and the Company currently trades at a significant discount to its Net Asset Value.

The Company's ability to implement its investment policy depends on the Investment Manager's ability to identify, analyse and invest in investments that meet the Company's investment criteria. Failure by the Investment Manager to find additional investment opportunities meeting the Company's investment objective and to manage investments effectively could have a material adverse effect on the Company's business, financial condition, and results of operations. The Company has no employees and, subject to oversight by the Board, is reliant on the Investment Manager, which has significant discretion as to the implementation of the Company's operating policies and strategies. The Company is subject to the risk that the Investment Manager will cease to be involved in the management of any part of the Company's assets and that no suitable replacement will be found. The Board regularly monitors the performance of the Investment Manager and the Company's NAV performance against its peers.

There is the risk that the market capitalisation of the Company (on which the Investment Manger's fee is calculated) falls to such extent that it will no longer be viable for the Investment Manager to provide the services that it currently provides.

Risk of a vote to wind-up the Company

The Articles currently contain provisions for a Shareholder resolution every three years on whether to discontinue the Company. The next vote is due at the AGM in 2018. Should there be a catastrophic loss of value in the Company's assets possibly as a result of the risks above, or merely a change in sentiment towards the mining sector generally by a sufficient proportion of shareholders, there is the risk of shareholders voting to wind-up the Company at that time. Because the Company's investments are largely unlisted it could then take a protracted amount of time to realise them or they might be sold at a discount to Fair Value if an accelerated timetable is required.

The Board has conducted sensitivity tests of future income and expenditure and the ability to realise assets, should assets fall in value by over 50% by 2018. The Board has concluded that, even in circumstances representing such further deterioration in markets, it can remain viable until the discontinuation vote and should there be a vote to continue, it can remain viable for at least a year beyond. To understand the requirements of the Company's major shareholders, the Investment Manager regularly liaises with the Company's broker and meets major shareholders. The Chairman is available to meet with shareholders should they express concerns.

In the event of a winding up of the Company, Shareholders will rank behind any creditors of the Company and, therefore, any positive return for Shareholders will depend on the Company's assets being sufficient to meet the prior entitlements of any creditors.

Viability Statement

In accordance with provision C.2.2 of the UK Corporate Governance Code, published by the Financial Reporting Council in September 2014 (the "Code"), the Directors have assessed the prospects of the Company over the period until the discontinuation vote at the AGM in June 2018 and, if shareholders decide the Company should continue, one year beyond that. The Directors consider that this is an appropriate timeframe to assess the viability of the Company.

The Directors have considered each of the principal risks and uncertainties detailed above individually and collectively and have taken into account in particular the impact of the shareholder vote on the viability of the Company.

The Company has already seen pressures from the fall in commodity prices and a move by its share price to a wide discount to its NAV, which itself has fallen significantly, albeit less than the Euromoney Global Mining Index. These trends reflect the underlying failure of the world's major economies to recover strongly from the global financial crisis of 2007-8 and the subsequent slowing down of growth of emerging markets, despite the unprecedented stimulus policies followed by governments of the major economies.

Notwithstanding this, it is a feature of closed-ended investment companies such as BSRT that the greatest risk to viability is that the investments lose value towards a point where the Board cannot ensure that assets continue to exceed liabilities or where expenses become excessive or cannot be met as they fall due.

In the case of the Company, which has no gearing, the Board has conducted stress and sensitivity tests of future income and expenditure and the ability to realise assets, and has concluded that based on the listed assets held, even in circumstances representing a further deterioration in value in excess of 50% of net assets, the Company can remain viable over the period to the 2018 AGM and, if shareholders decide the Company should continue, one year beyond that. The key factor in this assessment is that currently the Company's greatest expense is the Investment Management fee which is calculated on the market capitalisation of the Company. Should net assets fall, market capitalisation would be expected to fall in line, such that the costs of the Company would also fall.

It is the view of the Directors that, considering shareholders have already voted in 2015 to defer the next continuation vote until 2018 and barring a catastrophic further fall in the mining sector, there is currently no reason to suppose that the requisite majority of shareholders will vote to wind up the Company.

As a result the Board of Directors concludes that the Company is viable over the period of assessment.

Future Developments

The future performance of the Company depends upon the success of the Company's investment strategy and on investors' view of mining related investments as an asset class. Further comments on the outlook for the Company are discussed in the Chairman's statement on page 3 and the Investment Manager's Report on pages 4 to 7.

Signed on behalf of the Board of Directors by:

Howard Myles Christopher Sherwell 21 April 2016

BOARD OF DIRECTORS

The Board of Directors are presented below. Mr Sherwell was appointed on 9 March 2010; all other Directors were appointed on 12 March 2010. The Board's view on tenure is that continuity and experience are considered to add significantly to the strength of the Board and, as such, no limit on the overall length of service of any of the Company's Directors, including the Chairman, has been imposed. The Directors consider that their independence has not been impacted by their length of service.

Howard Myles (aged 66): Howard Myles currently acts as a non-executive director of a number of investment companies. Howard was a partner in Ernst & Young from 2001 until 2007 and was responsible for the Investment Funds Corporate Advisory team. He was previously with UBS Warburg from 1987 to 2001. Howard began his career in stockbroking in 1971 as an equity salesman and joined Touche Ross in 1975 where he qualified as a chartered accountant. In 1978 he joined W. Greenwell & Co. in the corporate broking team and in 1987 moved to SG Warburg Securities where he was involved in a wide range of commercial and industrial transactions in addition to leading UBS Warburg's corporate finance function for investment funds. He is a fellow of the Institute of Chartered Accountants and of The Chartered Institute for Securities and Investments.

Charles Hansard (aged 68): Charles Hansard has over 30 years' experience in the investment industry as a professional and in a non-executive capacity. He currently serves as a non-executive director on a number of boards which include the Moore Capital group of funds, AAA- rated Deutsche Bank Global Liquidity Fund, and Electrum Ltd., a privately owned gold exploration company. He formerly served as a director of Apex Silver Mines Ltd., where he chaired the finance committee during its capital raising phase and as chairman of the board of African Platinum Plc, which he led through reorganisation and feasibility prior to its sale to Impala Platinum. He commenced his career in South Africa with Anglo American Corporation and Fleming Martin as a mining analyst. He subsequently worked in New York as an investment banker for Hambros before returning to the UK to co-found IFM Ltd., one of the earliest European hedge fund managers. Charles holds a B.B.S. from Trinity College Dublin.

Clive Newall (aged 66): Clive Newall graduated from the Royal School of Mines, University of London, England in 1971 with an honours degree in Mining Geology, and was awarded an MBA from the Scottish Business School at Strathclyde University. He has worked in mining and exploration throughout his career, having held senior management positions with Amax Exploration Inc. and the Robertson Group plc. Clive has been a director of a number of public companies in the United Kingdom and Canada. He is the founder of First Quantum Minerals Ltd and has been its President and a director since its incorporation.

Christopher Sherwell (aged 68): Christopher Sherwell has worked since 2004 as a senior Non-Executive Director based in Guernsey with roles in the offshore finance industry and is a director of a number of listed investment companies. Prior to January 2004, Christopher was a Managing Director of Schroders' offshore investment and private banking operations in the Channel Islands. Christopher was previously Investment Director from 1993-2000 and also served on the boards of various Schroder group companies and funds during his period there. Prior to Schroders he worked at Smith New Court as a research analyst specialising in asset allocation for Asian markets. Christopher is a Rhodes Scholar with degrees in science and in economics and politics. He has worked as a university lecturer and was for sixteen years a journalist, most of them working for the Financial Times.

DIRECTORS' REPORT

For the year ended 31 December 2015

The Directors of the Company present their sixth annual report and the audited financial statements for the year ended 31 December 2015.

Baker Steel Resources Trust Limited (the "Company") is a closed-ended investment company with limited liability incorporated on 9 March 2010 in Guernsey under the Companies (Guernsey) Law, 2008 with registration number 51576. The Company is a registered closed-ended investment scheme registered pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended ("POI Law") and the Registered Collective Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission ("GFSC"). On 28 April 2010 the Ordinary Shares and Subscription Shares of the Company were admitted to the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange.

Details of the Company's investment objectives and policies are described in the Strategic Report.

In the year to 31 December 2015, the Company's NAV per Ordinary Share decreased by 25.4% (2014: decrease of 27.6%). This compares with a fall in the Euromoney Global Mining 100 Index (capital return in Sterling terms) of 39.3% (2014: fall of 15.4%). A more detailed explanation of the performance of the Company is provided within the Investment Manager's Report on pages 4 to 7.

The results for the year are shown in the Statement of Comprehensive Income on page 33 and 34 and the Company's financial position at the end of the year is shown in the Statement of Financial Position on page 32.

During the year ended 31 December 2015 the Board introduced a capital returns policy whereby, subject to applicable laws and regulations, it will allocate cash for distributions to shareholders. The amount to be distributed will be calculated following publication of the Company's audited financial statements for each year and will be no less than 15% of the aggregate net realised cash gains (after deducting losses) in that financial year. The Board will retain discretion for determining the most appropriate manner to make such distribution which may include share buybacks, tender offers and dividend payments.

The Directors of the Company who served during the year and subsequently to the date of this report were:

Biographical details of each of the Directors are presented on page 13.

Each of the Directors is considered to be independent in character and judgement, notwithstanding that they have each served on the Board since the inception of the Company.

The Directors' interests in the share capital of the Company were:

Mr Sherwell had an indirect interest in the shares of the Company through an investment in another Fund which is also managed by the Manager. This investment was compulsorily redeemed in February 2015 and Mr. Sherwell was issued with 71,821 Ordinary Shares of the Company in exchange. There were no changes occurring between year-end and one month prior to notice of the AGM for the approval of the financial statements.

 Each Director is asked to declare his interests at each Board Meeting. No Director has any material interest in any other contract which is significant to the Company's business.

The share capital of the Company on incorporation was represented by an unlimited number of Ordinary Shares of no par value. The Company may issue an unlimited number of shares of a nominal or par value and/or of no par value or a combination of both.

Issue of Shares

The Company was admitted to trading on the London Stock Exchange on 28 April 2010. On that date, 30,468,865 Ordinary Shares and 6,093,772 Subscription Shares were issued pursuant to a placing and offer for subscription and 35,554,224 Ordinary Shares and 7,110,822 Subscription Shares were issued pursuant to a Scheme of Reorganisation of Genus Capital Fund.

In addition 10,000 Management Ordinary Shares were issued.

Following the exercise of Subscription Shares at the end of September 2010, March 2011, March 2012, June 2012 and September 2012, a total of 119,444 Ordinary Shares were issued. The final exercise date for the Subscription Shares was 2 April 2013. No Subscription Shares were exercised at this time and all residual Subscription Shares were subsequently cancelled.

Following in specie transactions on 28 June 2014 and 1 July 2014, a total of 5,561,243 Ordinary Shares were issued and following in specie transactions on 25 February 2015 and 4 March 2015 40,196,071 Ordinary Shares were issued.

Of the 40,196,071 Ordinary Shares issued in 2015, 38,819,601 were issued to acquire two portfolios of investments with a total value of £12.66 million and 1,376,470 to acquire 1,462,500 ordinary shares of Global Oil Shale for a consideration of £0.45 million. In addition the Company issued a total of 3,368,488 new Ordinary Shares in respect of cash subscriptions under an Open Offer to all shareholders for a consideration of £1,219,393.

On 14 August 2015 and 20 August 2015 the Company bought back 200,000 and 500,000 Ordinary Shares respectively, both at an average price of 20 pence per share. The repurchased Ordinary Shares are held in Treasury.

Following the transactions noted above the Company has a total of 114,568,335 Ordinary and 10,000 Management Shares in issue as at 31 December 2015, of which 700,000 Ordinary Shares are held in Treasury.

As at 31 March 2016 the Company has received notifications in accordance with the FCA's Disclosure and Transparency Rule 5.1.2 R of the following interests in 3% of more of the voting rights attaching to the Company's issued share capital.

* Custodian accounts held on behalf of individual shareholders. These holdings are aggregated.

The Manager, Baker Steel Capital Managers (Cayman) Limited, had a direct interest in 504,832 Ordinary Shares. The Investment Manager, Baker Steel Capital Managers LLP had an interest in 10,000 Management Ordinary Shares at 31 December 2015 (31 December 2014: 10,000).

Following the introduction of the Discount Management Programme, 700,000 shares are held by the Company in the form of Treasury Shares.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the annual report and financial statements in accordance with applicable Guernsey law, Listing Rules, Disclosures and Transparency Rules, UK Corporate Governance Code and generally accepted accounting principles.

Guernsey Company Law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that year. In preparing these financial statements the Directors should:

- select suitable accounting policies and then apply them consistently;

- make judgments and estimates that are reasonable;

- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements and

- 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 proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and which enable the Directors to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008. The Directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that to the best of their knowledge:

- the financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and give a true and fair view of the assets, liabilities and financial position and profit or loss of the Company;

- the Annual Report includes a fair review of the development and performance of the business and position of the Company together with the description of the principal risks and uncertainties that the Company faces, as required by the Disclosure and Transparency Rules of the UK Listing Authority;

- the Directors confirm that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

The Directors at the date of approval of this Report confirm that, so far as each of the Directors is aware, there is no relevant audit information of which the Company's auditor is unaware and each Director has taken all the reasonable steps he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information. 

The Directors have made an assessment of the Company's ability to continue as a going concern and are satisfied that it has the resources to continue in business for a period of 12 months following the signing of these financial statements. The Company had net current assets at 31 December 2015 of £513,780 and it holds listed securities that can be realised to meet liabilities as they become due. As at 31 December 2015, approximately 22.2% of the Company's assets were represented by cash and unrestricted listed and quoted investments. The Directors are not aware of any material uncertainties that may cast significant doubt upon the Company's ability to continue as a going concern. 

The Board has considered the principles and recommendations set out in the UK Corporate Governance Code (September 2014) (the "UK Code") issued by the Financial Reporting Council (the "FRC"). The UK Code is available in the FRC's website, www.frc.org.uk and the Company has made its corporate governance practices publicly available and these can be found at www.bakersteelresourcestrust.com.

Throughout the year ended 31 December 2015, the Company has complied with the recommendations of the UK Code and Guernsey Financial Services Code of Corporate Governance ("GFSC Code"), except as set out below.  

The UK Code includes provisions relating to:

· The role of the Chief Executive,

· Executive Directors' remuneration

· The requirement for a Senior Independent Director

· Nomination, Remuneration and Management Engagement Committees

· The requirement for an internal audit function 

For the reasons set out in the Annual Report the Board considers these provisions are not relevant to the position of the Company as it is an externally managed investment entity. The Company has therefore not reported further in respect of these provisions. The Directors are all independent and non-executive and the Company does not have employees, hence no Chief Executive is required for the Company. The Board is satisfied that any relevant issues can be properly considered by the Board.

There have been no other instances of non-compliance, other than those noted above.

Details of the Company's corporate governance arrangements may be found on its website bakersteelresourcestrust.com. 

· Composition

The Board has no executive directors and has contractually delegated responsibility for the management of the Company's investment portfolio, the arrangement of custodial and cashflow monitoring and oversight services and the provision of accounting and company secretarial services. The Company has no employees.

· Independence

The Board consists entirely of independent non-executive Directors, of whom Howard Myles is the Chairman. Each of the Directors confirms that they have no other significant commitments that impact on their ability to act for the Company and its shareholders.

· Senior Independent Director

In view of its non-executive nature, the Board considers that it is not necessary for a Senior Independent Director to be appointed.

The Company has a transparent procedure for the appointment and re-election of the Directors. There are no service contracts in place for the Directors.

The Directors do not retire by rotation at each AGM; instead each director puts himself forward for re-election on an annual basis at the AGM. The AGM also includes a resolution whereby shareholders are able to approve the maximum cumulative remuneration for the Board.

All the Directors are responsible for reviewing the size, structure and skills of the Board and considering whether any changes are required or new appointments are necessary to meet the requirements of the Company's business or to maintain a balanced Board. The Directors are not required to retire by rotation at each annual general meeting of the Company.

The Board receives full details of the Company's assets, liabilities and other relevant information in advance of Board meetings. Typically, the Board meets formally four times a year; however, the Investment Manager and Company Secretary stay in more regular, less formal contact with the Directors. Individual Directors have direct access to the Company Secretary and may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties. New Directors will receive an induction from the Investment Manager and Company Secretary on joining the Board, and all Directors receive other relevant training as necessary.

The performance of the Board and the Audit Committee are evaluated through a formal and rigorous assessment process led by the Chairman. The performance of the Chairman is evaluated by the other Directors.

The Investment Manager was appointed pursuant to an investment management agreement with the Manager dated 31 March 2010 and which was amended and restated, with the Company joining as a party, on 14 November 2014 (the Investment Management Agreement). The Investment Manager is paid by the Manager and is not separately remunerated by the Company. The Investment Management Agreement pursuant to which the Company and the Manager have appointed the Investment Manager is terminable by any party giving the other parties not less than 12 months' written notice.

The Investment Manager prepares regular reports to the Board to allow it to review and assess the Company's activities and performance on an ongoing basis. The Board and the Investment Manager have agreed clearly defined investment criteria, exposure limits and specified levels of authority. The Board completes a formal assessment of the Investment Manager on an annual basis. The assessment covers such matters as the performance of the Company relative to its peers and sector, the management of investment relations and the reasonableness of fee arrangements. Based on its assessment it is the opinion of the Board that the continuation of the appointment of the Investment Manager is in the best interests of shareholders of the Company.

The Board generally meets at least four times a year, at which time the Directors review the management of the Company's assets and all other significant matters so as to ensure that the Directors maintain overall control and supervision of the Company's affairs. The Board is responsible for the appointment and monitoring of all service providers to the Company. Between these quarterly meetings there is regular contact with the Investment Manager. The Directors are kept fully informed of investment and financial controls and other matters which are relevant to the business of the Company and which should be brought to the attention of the Directors. The Directors also have access to the Company Secretary (through its appointed representatives who are responsible for ensuring that Board procedures are followed and that applicable rules and regulations are complied with) and, where necessary in the furtherance of their duties, to independent professional advice at the expense of the Company.

Attendance at the Board and Audit Committee meetings during the year was as follows;

In addition to formal meetings, all Directors contribute to a significant ad hoc exchange of views between the Directors and the Investment Manager on specific matters, in particular in relation to developments in the portfolio.

The Directors are remunerated for their services at such rate as the Directors determine provided that the aggregate amount of such fees may not exceed £200,000 per annum (or such sum as the Company in general meeting shall from time to time determine).

For the year ended 31 December 2015 the total remuneration of the Directors was £133,037 (2014: £140,000), with £28,750 (2014: £35,712) payable at year end. 

The Board believes that the maintenance of good relations with shareholders is vital for the long-term prospects of the Company. The Company's stockbrokers, Numis Securities Limited, and Investment Manager are responsible for managing relationships with shareholders and each provides the Board with feedback on a regular basis that includes a shareholder contact report and any concerns the shareholder has raised. The Chairman and the Board are also available to meet with shareholders at the Company's Annual General Meeting or otherwise.

· General Meetings

All meetings of the Company, including the Annual General Meeting, are held in Guernsey.

The Board has established an Audit Committee. The Audit Committee meets at least three times a year and is responsible for ensuring that the financial performance of the Company is properly reported on and monitored and provides a forum through which the Company's external auditor may report to the Board. The Audit Committee operates within established terms of reference. The Directors consider there is no need for an internal audit function because the Company operates through service providers and the Directors receive control reports on service providers.

Christopher Sherwell is Chairman of the Audit Committee.

Given the size and nature of the Company and the fact that all the Directors are independent and non-executive it is not deemed necessary to form separate Nomination, Remuneration, and Management Engagement Committees. The Board, as a whole, will consider new Board appointments, remuneration and the engagement of service providers. The Directors recognise the benefits of diversity in terms of gender and ethnicity and will take these into account when considering future appointments to the Board. However their principal criteria will remain skills and experience with the objective of maximising shareholder value.

The remuneration for the non- executive directors is capped by shareholder resolution at the AGM. There is no differential for payments of the non-executive directors except that the Chairman of the Board and the Chairman of the Audit Committee each receive additional payments for these roles.

The Board has delegated the day to day responsibilities for the management of the Company's investment portfolio, the provision of depositary services and administration, registrar and corporate secretarial functions including the independent calculation of the Company's NAV and the production of the Annual Report and Financial Statements which are independently audited.

Formal contractual agreements have been put in place between the Company and providers of these services.

Even though the Board has delegated responsibility for these functions, it retains accountability for these functions and is responsible for the systems of internal control. At each quarterly Board meeting, compliance reports are provided by the Administrator, Company Secretary and Investment Manager.

The Company's risk matrix continues to be the core element of the Company's risk management process in establishing the Company's system of internal financial and reporting control. The risk matrix is prepared and maintained by the Manager and reviewed regularly by the Board which initially identifies the risks facing the Company and then collectively assesses the likelihood of each risk, the impact of those risks and the strength of the controls operating over each risk. The system of internal financial and operating control is designed to manage rather than to eliminate the risk of failure to achieve business objectives and by its nature can only provide reasonable and not absolute assurance against misstatement and loss.

These controls aim to ensure that assets of the Company are safeguarded, proper accounting records are maintained and the financial information for publication is reliable. The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company.

This process has been in place for the year under review and up to the date of approval of this Annual Report and Financial Statements and is reviewed by the Board and is in accordance with the Internal Controls: Revised Guidance for Directors on the Combined Code issued by the FRC.

The Board therefore believes that the Company has adequate and effective systems in place to identify, mitigate and manage the risks to which it is exposed.

Internal Audit

The Company does not have an internal audit function; it delegates to third parties most of its operations and does not employ any staff. The Board will continue to review whether a function equivalent to internal audit is needed.

At the Extraordinary General Meeting ("EGM") on 4 January 2016 shareholders passed a resolution to amend the Company's investment policy in order to enable it to increase its existing investment in the Polar Silver Group so that such investment may represent up to 35 per cent in aggregate of the value of the Company's gross assets at the time of the relevant transaction. New Articles were adopted at the same EGM which provided the Company with additional flexibility with regard to the composition of the Board and the location of future Board meetings.

On 10 February 2016 Polar Acquisition Limited ("PAL") was incorporated. PAL is a wholly owned subsidiary of BSRT, incorporated in the British Virgin Islands. PAL has been dormant up to the date of this report.

Signed on behalf of the Board of Directors by:

Howard Myles Christopher Sherwell 21 April 2016

Report of the Audit CommitteE

For the year ended 31 December 2015

The function of the Audit Committee (the "Committee") as described in its Terms of Reference is to ensure that the Company maintains high standards of integrity in its financial reporting and internal controls.

The Board, as a whole, including the Audit Committee members, consider the nature and extent of the Company's risk management framework and the risk profile that is acceptable in order to achieve the Company's strategic objectives. As a result, it is considered that the Board has fulfilled its obligations under the Code.

The Audit Committee continues to be responsible for reviewing the adequacy and effectiveness of the Company's on-going risk management systems and processes. The Company's system of internal controls, along with its design and operating effectiveness, is subject to review by the Audit Committee through reports received from all service providers.

In the event of any deficiencies or breaches reported, the Board would consider the actions required to remedy and prevent significant failings or weaknesses.

Fraud, Bribery and Corruption

The Audit Committee continues to monitor the fraud, bribery and corruption policies of the Company. The Board receives a confirmation from all service providers that there have been no instances of fraud or bribery.

The Audit Committee considered the adequacy and security of the arrangements of its service providers to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The Committee is satisfied it has the ability and resources to investigate any such matters which may arise and to follow up on any conclusion reached by such investigation.

The function of the Audit Committee (the "Committee") as described in its Terms of Reference is to ensure that the Company maintains high standards of integrity in its financial reporting and internal controls.

The Audit Committee is appointed by the Board and all members are considered to be independent both of the Investment Manager and the external auditor. The Committee meets a minimum of three times a year to discuss the Interim and Annual Report and Financial Statements, the audit plan and engagement letter, and the Company's risks, via discussion of its risk matrix. The Board is satisfied that the Audit Committee is properly constituted with members having recent and relevant financial experience, including one member who is a chartered accountant.

Primary Areas of Judgement

As part of its review of the Company's financial statements, the Audit Committee takes account of the most significant issues and risks, both operational and financial, likely to impact on the financial statements and the mitigating controls to address these risks. The Audit Committee has determined that the key risk of misstatement is valuation of investments for which there is no readily observable market price. Such investments are recorded at fair value which is the price that would be expected to be received to sell an asset in an orderly transaction between market participants at the measurement date. Significant judgements are required in respect of the valuation of the Company's investments for which there is no observable market price. The Company bases most of its valuations on the most recent observable transactions for each investment and other comparable companies and adjusts these for changes in company specific performance and comparable company performance for which there is observable data. This performance information, by its nature, takes into account market expectations of future commodity prices. Further information on the Company's methodologies is provided in Note 3 to the financial statements.

The risk is mitigated through the review by the Board of detailed reports prepared by the Investment Manager on portfolio valuation including valuation methodology, the underlying assumptions and the valuation process. Corroborative evidence from the audit process is also available.

The Investment Manager also provides information to the Board on relevant market indices, recent transactions in similar assets and other relevant information to allow an assessment of appropriate carrying value having regard to the relevant factors.

The responsibility for ensuring that investments are carried at fair value lies with the Board.

Through its meetings during the year ended 31 December 2015 and its review of the Company's Annual Report and Financial Statements, the Committee considered the following significant risks as well as the principal risks and uncertainties described on pages 10 and 11.

The Audit Committee also provides a forum through which the Company's auditor reports to the Board. The Board, not the Audit Committee, approves all non-audit work carried out by the auditor in advance and the fees paid to the auditor in this respect.

External Audit

The Company's external auditor is Ernst & Young LLP ("EY"). EY has been the Company's auditor since its incorporation in 2010.

During 2015, the Audit Committee reviewed the services provided by the auditor, and the related fees, and concluded that it was not necessary to conduct a competitive tender at that stage. However, the Audit Committee does keep this matter under consideration and is cognisant of the Corporate Governance provisions relating to audit tenure.

The audit fees during the year were as follows:

The external auditor provides a planning report in advance of the annual audit, a report on the annual audit and an Agreed upon Procedures report in accordance with ISRS 4400 for the half year financial statements. In the prior year, due to the Acquisition of Additional Investments, the auditor issued an ISRE 2410 report. The Audit Committee has an opportunity to question and challenge the auditor in respect of each of these reports. Based on levels of interaction with the auditor, and the assessment of auditor reporting the Audit Committee is satisfied that the reappointment of the external auditor should be proposed at the Annual General Meeting of the Company. 

The Audit Committee confirms that it has reviewed the non-audit services provided by EY and received confirmation from EY that due to the type of services provided there was no risk or any threat to its independence and is satisfied that they do not compromise EY's independence or objectivity. The Audit Committee is also satisfied that fees for non-audit services are proportionate in relation to the fees for audit services. In conclusion, the Audit Committee is satisfied that EY remains independent. The Audit Committee has assessed the effectiveness of the external auditors, considering the audit planning, adherence to audit standards, competence of the audit team and feedback from the Investment Manager and concluded that it is appropriate to reappoint EY as external auditors.

Internal Audit

The Audit Committee believes that the Company does not require an internal audit function because it delegates its day to day functions to third party service providers although the Audit Committee oversees these operations and receives regular reports in this respect.

Risk Management and Internal Controls

The Board is responsible for the Company's system of internal controls and risk management. The Audit Committee has been delegated the responsibility for reviewing the ongoing effectiveness of the Company's internal controls and it discharges its duties in this area by assessing the nature and extent of the significant risks it is willing to accept in achieving the Company's objectives and ensuring that effective systems of risk identification, assessment and mitigation have been implemented.

The Company delegates its day to day operations to third parties and therefore relies on the internal control arrangements of its outsourced service providers in respect of a number of key controls. It is the Audit Committee's responsibility to ensure that suitable internal control systems are implemented by the Company's third party service providers and to review the effectiveness of these controls on an ongoing basis.

The key risks faced by the Company, and the controls in place to mitigate such risks, are set out in a Risk Matrix which is regularly reviewed by the Board. The Risk Matrix identifies the likelihood and severity of the impact of each identified risk factor and the mitigating controls in place to minimise the probability of such risks occurring. The Strategic Report outlines the principal risks and uncertainties affecting the Company.

By their nature, the control mechanisms can only provide reasonable rather than absolute assurance against misstatement or loss. The Board seeks continual improvement in its internal controls mechanisms. The Audit Committee is not aware of any significant failings or weaknesses in the Company's internal controls in the year under review.

Financial Reporting

The primary role of the Audit Committee in relation to financial reporting is to review the annual Financial Statements with the Administrator and the Investment Manager and assess their appropriateness. It focuses in this respect, amongst other matters, on:

· the clarity of the disclosures in the financial reporting and compliance with statutory, regulatory and other financial reporting requirements;

· the quality and acceptability of accounting policies and practices;

· material areas where significant judgements have been applied or where there has been discussion with the auditor; and 

· taken as a whole, whether the financial statements are fair, balanced and understandable and provide shareholders with the necessary information to assess the Company's performance and strategy although the Board retains overall responsibility in this respect.

Going Concern

The Audit Committee has made an assessment of the Company's ability to continue as a going concern. Particular regard has been given to the fact that the Company holds listed securities that can if necessary be realised to meet liabilities as they become due; as at 31 December 2015, approximately 22.2% of the Company's assets were represented by cash and unrestricted quoted investments.

On the basis of its review, the Audit Committee is satisfied that the Company has the resources to continue in business for a period longer than 12 months from the date of signing these financial statements and therefore is of the opinion that the financial statements should be prepared on a going concern basis and has accordingly recommended this opinion to the Board.

Christopher Sherwell

Audit Committee Chairman

21 April 2016

 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF BAKER STEEL RESOURCES TRUST LIMITED

Our opinion on the financial statements

In our opinion:

• Baker Steel Resources Trust Limited's (the "Company") financial statements (the "financial statements") give a true and fair view of the state of the company's affairs as at 31 December 2015 and of its loss for the year then ended;

• the financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"); and

• the financial statements have been prepared in accordance with the requirements of the Companies (Guernsey) Law 2008.

What we have audited

We have audited the financial statements of Baker Steel Resources Trust Limited for the year ended 31 December 2015, which comprise:

• the statement of financial position as at 31 December 2015;

• the statement of comprehensive income for the year ended 31 December 2015;

• the statement of changes in equity for the year ended 31 December 2015;

• the statement of cash flows for the year ended 31 December 2015; and

• related notes 1 to 15 to the financial statements.

The financial reporting framework that has been applied in their preparation is applicable law and IFRS.

Overview of our audit approach

Our assessment of risk of material misstatement

We identified the risk of material misstatement described below as that which had the greatest effect on our overall audit strategy, the allocation of resources in the audit and the direction of the efforts of the audit team. In addressing this risk, we have performed the procedures below which were designed in the context of the financial statements as a whole and, consequently, we do not express any opinion on this individual area.

The scope of our audit

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope. Taken together, this enables us to form an opinion on the financial statements.

Our application of materiality

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.

Materiality

This is the magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

We determined materiality for the Company to be £767k (2014: £643k), which is 2% (2014: 2%) of net asset value.

It was considered inappropriate to determine materiality based on Company profit before tax as the primary focus of the Company is the overall performance of investments held, which includes a significant asset revaluation component. In addition, profit is not a key metric reported upon by the Company, with the ability to make dividend payments not limited by the profitability of the Company in any particular period.

We believe that net asset value provides us with an appropriate basis for audit materiality as net asset value is a key published performance measure and is a key metric used by management in assessing and reporting on the overall performance of the Company.

During the course of our audit, we reassessed initial materiality and noted no factors leading us to amend materiality levels from those originally determined at the audit planning stage.

Performance materiality

This refers to the application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Company's overall control environment, our judgement was that performance materiality was 50% (2014: 50%) of our planning materiality, namely £383k (2014: £322k). We have set performance materiality at this percentage, because in the prior year we have identified audit differences which result in a higher risk of misstatements in the current year.

Reporting threshold

An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £38k (2014: £32k), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.

 Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements 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.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement set out on page 16, 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.

This report is made solely to the Company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law 2008. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Matters on which we are required to report by exception

Statement on the Directors' assessment of the principal risks that would threaten the solvency or liquidity of the entity

David Robert John Moore, ACA

for and on behalf of Ernst & Young LLP

Guernsey, Channel Islands

21 April 2016

Notes:

1. The maintenance and integrity of the Company web site is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site.

2. Legislation in the Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 FOR THE YEAR ENDED 31 DECEMBER 2015

Baker Steel Resources Trust Limited (the "Company") is a closed-ended investment company with limited liability incorporated and domiciled on 9 March 2010 in Guernsey under the Companies (Guernsey) Law, 2008 with registration number 51576. The Company is a registered closed-ended investment scheme registered pursuant to the POI Law and the Registered Collective Investment Scheme Rules 2015 issued by the Guernsey Financial Services Commission ("GFSC"). On 28 April 2010 the Ordinary Shares and Subscription Shares of the Company were admitted to the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange. The Company's Ordinary and Subscription Shares were admitted to the Premium Listing Segment of the Official List on 28 April 2010.

The final exercise date for the Subscription Shares was 2 April 2013. No Subscription Shares were exercised at this time and all residual/unexercised Subscription Shares were subsequently cancelled.

The Company's portfolio is managed by Baker Steel Capital Managers (Cayman) Limited (the "Manager"). The Manager has appointed Baker Steel Capital Managers LLP (the "Investment Manager") as the Investment Manager to carry out certain duties. The Company's investment objective is to seek capital growth over the long-term through a focused, global portfolio consisting principally of the equities, or related instruments, of natural resources companies. The Company invests predominantly in unlisted companies (i.e. those companies which have not yet made an Initial Public Offering ("IPO")) and also in listed securities (including special situations opportunities and less liquid securities) with a view to exploiting value inherent in market inefficiencies and pricing anomalies.

Baker Steel Capital Managers LLP (the "Investment Manager") was authorised to act as an Alternative Investment Fund Manager ("AIFM") of Alternative Investment Funds ("AIFs") on 22 July 2014. On 14 November 2014, the Investment Manager signed an amended Investment Management Agreement with the Company, to take into account AIFM regulations. AIFMD focuses on regulating the AIFM rather than the AIFs themselves, so the impact on the Company is limited.

a) Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The financial statements have been prepared on a historical cost basis except for financial assets at fair value through profit or loss, which are designated at fair value through profit or loss. The financial statements have been prepared on a going concern basis.

The Company's functional currency is the Great Britain pound Sterling ("£"), being the currency in which its Ordinary Shares are issued and in which returns are made to shareholders. The presentation currency is the same as the functional currency. The financial statements have been rounded to the nearest £. The Company invests in companies around the world whose shares are denominated in various currencies. Currently the majority of the portfolio is denominated in US Dollars but this will not necessarily remain the case as the portfolio develops.

The Statement of Comprehensive Income is presented in accordance with the Statement of Recommended Practice ("SORP") 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014 by the Association of Investment Companies. The Company has voluntarily adopted the SORP and only applied it to the Statement of Comprehensive Income, rather than to the entire financial statements.

Income encompasses both revenue and capital gains/losses. For a listed investment company it is necessary to distinguish revenue from capital for the purpose of determining the distribution. Revenue includes items such as dividends, interests, fees, rent and other equivalent items. Capital is the return, positive or negative, from holding investments other than that part of the return that is revenue. The SORP provides guidance on the items that should be recognised as capital/revenue. Where specific guidance is not given an item is recognised in accordance with its economic substance.

b) Significant accounting judgements and estimates

The preparation of the Company's financial statements requires the Directors to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements and disclosure of contingent liabilities. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability in future periods. 

(i) Judgements

In the process of applying the Company's accounting policies, the Directors have made the following judgements, which has the most significant effect on the amounts recognised in the financial statements:

Assessment as Investment Entity

As per IFRS 10, an entity shall determine whether it is an investment entity. An investment entity is an entity that fulfils the following criteria:

Ø It obtains funds from one or more investors for the purpose of providing those investors with investment services.

Ø It commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both.

Ø It measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Company meets the above criteria in and is therefore considered to be an investment entity and therefore all entities that qualify as subsidiaries or associates are carried at fair value through profit or loss.

Associates

The Directors consider that entities over which the Company exercises significant influence, including where it holds more than 20% of the voting rights, should be considered as associates of the Company and these are disclosed in Note 13 of the financial statements.

Going Concern

As described in the Director's Report the Directors have assessed the financial position of the Company and are satisfied that it can continue in operation for a period exceeding 12 months from the date of signing the financial statements, accordingly the financial statements have been prepared on a going concern basis.

(ii) Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets liabilities within the next financial year, are discussed below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur. Please refer to Note 3 for further information.

Fair value of financial instruments

When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. The estimates include considerations of liquidity and model inputs related to items such as credit risk, correlation and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments in the statement of financial position and the level where the instruments are disclosed in the fair value hierarchy. The models are tested for validity by calibrating to prices from any observable current market transactions in the same instrument (without modification or repackaging) when available. To assess the significance of a particular input to the entire measurement, the Company performs sensitivity analysis or stress testing techniques.

b) Financial assets at fair value through profit or loss

In accordance with IAS 39 the Company designates its investments as at fair value through profit or loss, at initial recognition. All derivatives are classified as held for trading and are included in financial assets at fair value through profit or loss. Designation of the investments in this way is consistent with the Company's documented risk management policy and investment strategy, and information about the investments is provided to the Board on this basis.

Recognition and derecognition

The Company recognises financial assets and financial liabilities on the date it becomes a party to the contractual provisions of the instruments. Routine purchases and sales of investments are accounted for on the trade date.

Financial assets at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed in the Statement of Comprehensive Income. Subsequent to initial recognition, all financial assets at fair value through profit or loss are re-measured at fair value. Gains and losses arising from changes in fair value are recognised in the Statement of Comprehensive Income in the year in which they arise.

A financial asset is derecognised when the Company no longer has control over the contractual rights that comprise that asset. This occurs when the rights are realised, expired or are surrendered. A financial liability is derecognised when it is extinguished or when the obligation specified in the contract is discharged, cancelled or expired.

Financial assets may be acquired for a consideration in the form of an issue of the Company's own shares.

A contract that will be settled by the entity (receiving or) delivering a fixed number of its own equity instruments in exchange for a fixed amount of cash or another financial asset is accounted for as an equity instrument.

The cost of the assets acquired is determined as at the fair value of the consideration given, being the fair value of the equity instruments issued or the asset received, if that is more easily measured, together with directly attributable transaction costs on the transaction date.

Subsequent measurement

After initial recognition, investments are measured at fair value, with unrealised gains and losses on investments recognised in the Statement of Comprehensive Income. Investments are derecognised on sale. Gains and losses on sale of investments are recognised in the Statement of Comprehensive Income.

Determination of fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value for financial instruments traded in active markets at the reporting date is based on their last quoted price or binding dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For all other financial instruments not traded in an active market, fair value is determined by using appropriate valuation techniques. Valuation techniques include: using recent arm's length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible. An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 3.

d) Other financial assets and liabilities

Other receivables, measured at amortised cost, include the contractual amounts for settlement of trades and other obligations due to the Company. Amount due to brokers, investment management fees payable, directors' fees payable, audit fees payable, administration fees payable and other payables represent the contractual amounts and obligations due by the Company for settlement for trades and expenses. Due to their short term maturities, their amortised cost is a reasonable approximation of fair value.

e) Interest income and expense

Bank interest income, interest income on convertible debt instruments and interest expense are recognised on an accruals basis based on the effective interest method.

f) Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash balances held at banks. Cash and cash equivalents are included in the financial statements at their principal amount.

g) Expenses

All expenses are recognised on an accruals basis. 

h) Translation of foreign currencies

Foreign currency transactions during the year are translated into Sterling at the rate of exchange ruling at the date of the transaction. Assets and liabilities denominated in foreign currencies are translated into Sterling at the rate of exchange ruling at the Statement of Financial Position date. Exchange differences including those arising from adjustment to fair value of financial instruments during the year, are included in the Statement of Comprehensive Income. The foreign exchange movements relating to financial assets form part of the fair value movement in the Statement of Comprehensive Income.

i) Segment information

The Directors are of the opinion that the Company is engaged in a single segment of business: investing in natural resources companies.

j) Net asset value per share

Net Asset Value per Ordinary Share disclosed on the face of the Statement of Financial Position is calculated in accordance with the Company's Prospectus by dividing the net assets of the Company on the Statement of Financial Position date by the number of Ordinary Shares (including the Management Ordinary Shares) outstanding at that date.

k) New accounting pronouncements

The following amendments were applicable for the first time this year but had no significant impact on the financial statements of the Company.

- Amendment to IAS 24, 'Related Party Disclosures' (effective 1 July 2014)

- IFRS 8 Operating Segments - Amendments (effective 1 July 2014)

- IFRS 13 Fair Value Measurement - Amendments (effective 1 January 2015)

l) New accounting pronouncements not yet effective

At the date of authorisation of these financial statements, the following standards and interpretations, which have not been applied, were in issue but not yet effective. There are other accounting pronouncements but the ones listed are most relevant to the financial statements of the Company and are therefore expanded on below.

- IFRS 9 Financial Instruments - Amendments (effective 1 January 2018)

- A finalised version of IFRS 9 has been issued which replaces IAS 39 Financial Instruments: Recognition and Measurement. The completed standard comprises guidance on Classification and Measurement, Impairment Hedge Accounting and Derecognition. IFRS 9 carries forward the derecognition requirements of financial assets and liabilities from IAS 39.

- IFRS 10 Consolidated Financial Statements - Amendments (effective 1 January 2016)

Narrow-scope amendments to IFRS 10, IFRS 12 and IAS 28 introduce clarifications to the requirements when accounting for investment entities. The amendments also provide relief in particular circumstances.

- IFRS 12 Disclosure of Interests in Other Entities - Amendments (effective 1 January 2016)

Narrow-scope amendments to IFRS 10, IFRS 12 and IAS 28 introduce clarifications to the requirements when accounting for investment entities. The amendments also provide relief in particular circumstances.

- IAS 1 Presentation of Financial Statements Disclosure Initiative (effective 1 January 2016)

This amendment is designed to encourage entities to apply professional judgement in determining what information to disclose in their financial statements. For example, the amendments make clear that materiality applies to the whole of financial statements and that the inclusion of immaterial information can inhibit the usefulness of financial disclosures. Furthermore, the amendments clarify that entities should use professional judgement in determining where and in what order information is presented in the financial disclosures.

IFRS 9, 10, 11 and 12 have not yet been endorsed by the European Union. The Board currently intends to adopt the standards on the mandatory adoption dates. The Board anticipates that the adoption of these standards and interpretations in the future period will not have a material impact on the financial statements of the Company.

3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

The following table analyses net (losses)/gains on financial assets at fair value through profit or loss for the years ended 31 December 2015 and 31 December 2014.

The following table analyses investments by type and by level within the fair valuation hierarchy at 31 December 2015.

The following table analyses investments by type and by level within the fair valuation hierarchy at 31 December 2014.

It is the Company's policy to recognise a change in hierarchy level when there is a change in the status of the investment, for example when a listed company delists or vice versa, or when shares previously subject to a restriction have that restriction released. The transfers between levels are recorded either on the value of the transaction (in the example of Ivanhoe below), the value of the investment immediately after the event (in the example of MagIndustries Corporation) or the carrying value of the investment at the beginning of the financial year.

During the year ended 31 December 2015 there were releases of previously "locked up" shares of Ivanhoe Mining Limited ("Ivanhoe"). The shares in Ivanhoe have been transferred from Level 2 to Level 1 as the locked up shares have been released. The total number of Ivanhoe shares released during the year was 4,527,524 shares (average of 1,131,881 shares per quarter) equivalent to £4,503,676. During January 2016, the final tranche of Ivanhoe shares was released.

Burrabulla Corporation Limited (formerly South American Ferro Metals Limited) has been transferred from Level 1 to Level 3 as it is no longer listed. The value of the investment has been written down to zero following it being placed into administration and delisted.

The Company acquired 3,531,000 shares in MagIndustries Corporation on 25 February 2015. At acquisition the investment was classified as Level 1 due to its listing on the Toronto Stock Exchange ("TSX"). On 19 August 2015 the company delisted from TSX and is therefore reflected within level 3 investments based on its value on delisting.

During the year ended 31 December 2014, the only transfer between levels related to the release of the locked up Ivanhoe shares, from Level 2 to Level 1. The total number of Ivanhoe shares released during the year was 3,131,996 (average of 782,999 per quarter) amounting to £2,371,125.

The table below shows a reconciliation of beginning to ending fair value balances for Level 3 investments and the amount of total gains or losses for the year included in net loss on financial assets and liabilities at fair value through profit or loss held at 31 December 2015 and at 31 December 2014. 

\* The only significant sale during the year was Ferrous Resources which was sold for £1,307,957. These proceeds represented a gain of £354,767 against the 31 December 2014 book value, but the investment had previously been written down substantially and a loss of £11,876,647 was realised against acquisition cost.

In determining an investment's position within the fair value hierarchy, the Directors take into consideration the following factors:

Investments whose values are based on quoted market prices in active markets are classified within Level 1. These include listed equities with observable market prices. The Directors do not adjust the quoted price for such instruments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

Investments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs, are classified within Level 2. These include certain less-liquid listed equities. Level 2 investments are valued with reference to the listed price of the shares should they be freely tradeable after applying a discount for liquidity if relevant. As Level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. The Company held such investments at 31 December 2015 amounting to £1,725,442 (31 December 2014: £3,910,401).

Investments classified within Level 3 have significant unobservable inputs. They include unlisted debt instruments, unlisted equity shares and warrants. Level 3 investments are valued using valuation techniques explained below. The inputs used by the Directors in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments if representative in volume and nature, completed or pending third-party transactions in the underlying investment of comparable issuers, subsequent rounds of financing, recapitalisations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Directors in the absence of market information. 

Valuation methodology of Level 3 investments

The default valuation technique is of Latest Recent Transaction. Where an unquoted investment has been acquired or where there has been a material arm's length transaction during the past six months it will be carried at cost unless there are changes or events which suggest cost is not equivalent to fair value.

Where there has been no Latest Recent Transaction the primary valuation driver is IndexVal. For each core unlisted investment, the Company maintains a weighted average basket of listed companies which are comparable to the investment in terms of commodity, stage of development and location ("IndexVal"). IndexVal is used as an indication of how an investment's share price might have moved had it been listed. Movements in commodity prices are deemed to have been taken into account by the movement of IndexVal.

A subsidiary driver of valuation is DRAV. The Investment Manager also prepares discounted cash flow models for the Company's core investments annually and also for significant new information and decision making purposes when required. From these, Development Risk Adjusted Values ("DRAVs") are derived. The computations are based on consensus forecasts for long term commodity prices and investee company management estimates of operating and capital costs. The Investment Manager takes account of market, country and development risks in its discount factors. The DRAVs are not a primary determinant of Fair Value but are instead a tool that the Investment Manager uses to evaluate potential investments as well as to provide underlying valuation references for the Fair Value already established.

The valuation technique for Level 3 investments can be divided into four groups:

i. Transactions

Where there have been transactions within the past 6 months either through a capital raising by the investee company or known secondary market transactions, representative in volume and nature and conducted on an arm's length basis, this is taken as the primary driver for valuing Level 3 investments.

ii. IndexVal

Where there have been no known transactions for 6 months, at the Company's half year and year end, movements in IndexVal will generally be taken into account in assessing Fair Value where there has been at least a 10% movement in IndexVal over at least a six month period. The IndexVal results are used as an indication of trend and are viewed in the context of investee company progress.

iii. Warrants

Warrants are valued using a simplified Black & Scholes model taking into account time to expiry, exercise price and volatility. Where there is no established market for the underlying shares an assumed volatility of 40% is used, due to the difficulty in establishing a sensible volatility for unlisted shares without giving distorted results.

iv. Convertible loans

Convertible loans are valued at principal plus accrued interest, taking into account credit risk and the value of the conversion aspect as related to the DRAV derived which relates to the valuation of the sub-sector of the equity, except when there is a clear path towards conditions for conversion such as an IPO, when the equity value of the investment on conversion is also taken into account when determining Fair Value.

Quantitative information of significant unobservable inputs - Level 3