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)

19 April 2013

BAKER STEEL RESOURCES TRUST LTD

(the "Company")

Annual Report and Audited Financial Statements

For the year to 31 December 2012

The Company has today, in accordance with DTR 6.3.5, released its Annual Audited Financial Report for the year ended 31 December 2012. The Report is available via www.bakersteelresourcestrust.com and will shortly be submitted to the National Storage Mechanism and will also shortly be available for inspection at www.hemscott.com/nsm.do

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

RBC Capital Markets +44 20 7653 4000

Martin Eales

Winterflood Investment Trusts +44 20 3100 0250

James Moseley

Pelham Bell Pottinger

Lorna Spears +44 20 7861 3883

Joanna Boon +44 20 7861 3867 

HSBC Securities Services (Guernsey) Limited

Company Secretary + 44 (0)1481 707 000

MANAGEMENT AND ADMINISTRATION

INVESTMENT OBJECTIVES AND POLICIES

Investment objective 

Baker Steel Resources Trust Limited's (the "Company") investment objective is to seek capital growth over the long-term through a focused, global portfolio consisting principally of the equities, or related instruments, of natural resources companies. The Company will invest predominantly in unlisted companies (i.e. those companies that have not yet made an initial public offering or "IPO") but also in listed securities (including special situations opportunities and less liquid securities) with a view to exploiting value inherent in market inefficiencies and pricing anomalies.

Investment policy

The core of the Company's strategy is to invest in natural resources companies, predominantly unlisted, that the Investment Manager considers to be undervalued and have strong fundamentals and attractive growth prospects. Natural resources companies, for the purposes of the investment policy, are those involved in the exploration for and 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 will focus 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. The Company may also invest from time to time in exploration companies whose activities are speculative by nature.

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

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

There 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 15 core positions to provide adequate diversification whilst retaining a focused core approach. Core positions will typically be between 5 per cent and 15 per cent of 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, 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.

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.

CHAIRMAN'S STATEMENT

For the year ended 31 December 2012

I am pleased to present the Company's third annual report. 2012 was a difficult year for the Company like many other resource sector investment companies, with the NAV falling 16.9%. The Company seeks performance primarily from the uplift in value through monetisation via an Initial Public Offering ("IPO"). Since its admission to listing on 28 April 2010, the IPO market has effectively been closed. This has not only resulted in a drag on performance but has limited cash available for reinvestment in new opportunities. Despite this, since 30 April 2010, the date of the Company's first NAV, the undiluted NAV per share has increased by 11.4% (to 31/12/2012) compared to a broader market as represented by the HSBC Global Mining Index which has fallen by 16.2%.

One company which bucked the trend was Ivanplats, having successfully completed an IPO and listing on the Toronto Stock Exchange ("TSX") in October 2012, raising approximately C$300 million. However it took a company with first class projects in three separate commodities and the investor following of Ivanplats' founder Robert Friedland to achieve this.

At the year end, the Company was fully invested, holding 16 investments of which the top 10 holdings comprised 96.5% by value of the portfolio. Despite this strong focus on high conviction investments, in line with the Company's investment objective, the Investment Manager has established a diversified portfolio of commodities concentrating on the large markets of iron ore, coal, copper, platinum group metals, nickel, silver and gold and eschewing the more exotic speciality metals where markets can often become distorted.

Inevitably, mining projects are often found in emerging countries which carry a higher political risk. The Board has therefore focussed also on ensuring that the Company's portfolio has geographic diversity and its investments are currently in Democratic Republic of Congo, South Africa, Mongolia, China, Brazil, Zimbabwe, Canada, Indonesia, Russia, and the Philippines. One risk that has become more prevalent in recent years is that of "resource nationalism" and, all too often, creeping nationalisation whereby governments are seeking a greater slice of the "mining pie" be it from royalties or direct stakes. It must be hoped that governments, both in emerging nations such as Mongolia or more established ones such as Australia, will come to realise that in a world where investors are increasingly risk averse, erecting barriers such as this will prove counter-productive to the development of their mineral industries with the employment, foreign exchange and taxes that they bring.

I would again like to thank all our shareholders for their continuing support of the Company and am confident that their patience will bear fruit once the market for mining IPOs recovers.

Howard Myles

Chairman

19 April 2013

INVESTMENT MANAGER'S REPORT

For the year ended 31 December 2012

Financial Performance

The audited undiluted Net Asset Value per ordinary share as at 31 December 2012 was 109.1 pence, a decrease of 16.9% in the year and an increase of 11.4% from the Company's first net asset value ("NAV") calculated on 30 April 2010. During the year the HSBC Global Mining Index was down 4.6% (down 16.2% since 30 April 2010).

For the purpose of calculating the net asset value per share, unquoted investments are carried at fair value as at 31 December 2012 as determined by the Directors and quoted investments are carried at last quoted price as at 31 December 2012.

Net assets at 31 December 2012 comprised the following:

Investment Update

* represented less than 20% in aggregate of the value of gross assets as at the date of the last relevant acquisition

Investment Update

At the beginning of the year, the Company was fully invested and the lack of a meaningful re-opening of the Initial Public Offering ("IPO") market meant that there were no significant realisations or new investments made during the year. The Investment Manager's efforts were therefore concentrated on husbanding the existing core portfolio.

Good progress was made on a number of the Company's investments, in particular Ivanplats, the Company's largest position. Despite a market which was generally unreceptive to new issues, Ivanplats successfully completed an IPO and listing on the Toronto Stock Exchange ("TSX") in October 2012, raising approximately C$300 million. As part of the IPO arrangements, a phased lock-up of up to 39 months was imposed on all shareholders prior to the IPO and accordingly the Company has decided to carry its Ivanplats position at a 10% discount to the market price on the TSX. At 31 December 2012, the carrying value of Ivanplats comprised 37.7% of the Company's NAV, representing a 23.6% uplift on the year and a 141% unrealised return on the Company's investment.

Since the year end Ivanplats has announced significant resource upgrades to its two main projects, the Kamoa copper project in the Democratic Republic of Congo and the Platreef platinum/palladium/nickel/copper project in South Africa. The revised resource totalling 24.1 million tonnes of contained copper already puts Kamoa amongst the top copper discoveries ever made with considerable scope for this to be expanded further. The revised resource containing 79 million ounces of 4PE (platinum, palladium, gold and rhodium) more than doubled the previously declared resource at Platreef. The key to the Platreef project is that its average true thickness of 24 metres and the flat lying geometry of the reef compares to around the more common 1 metre thick dipping reefs currently being mined in South Africa. As a result Ivanplats will be able to employ mechanised mining techniques rather than the highly labour intensive methods required for the thin reef mines which make up the majority of the platinum mines in South Africa and thereby could largely avoid the labour disputes which appear to be an increasing problem to operations in South Africa. Kamoa and Platreef together with its third project, the Kipushi lead zinc mine, gives Ivanplats three tier 1 projects and a strong foundation to become a major mining company.

Although Gobi Coal & Energy ("Gobi") commenced development of its Shinejinst coking coal project in Mongolia in early 2012, a significant fall in the price of coal paid by Chinese buyers at the border led Gobi to suspend development mid year. Market sentiment towards Mongolian companies has fallen sharply as a result of "resource nationalism" rhetoric which was prevalent around the time of the parliamentary elections in 2012. This sentiment is unlikely to improve in 2013 with mid year presidential elections in Mongolia, and an IPO for Gobi is therefore likely to be postponed until at least 2014. The Company decided to mark down its carrying value of Gobi in line with listed shares with Mongolian coal projects.

Bilboes Gold Ltd made excellent progress during 2012, increasing contained gold in sulphide resources at its Isabella/McCays/Bubi gold complex from 534,000 ounces to 3,964,000 ounces of gold. Since year end Bilboes has raised equity of US$10 million from a new investor which will be used to complete a definitive feasibility study on a mine producing 100,000 to 200,000 ounces per annum, initially from open pit. Following this new investment Bilboes remains over 51% owned by indigenous Zimbabweans and accordingly is in full compliance with local indigenisation laws. In addition, towards the end of 2012, Bilboes raised US$7 million through a loan from Industrial Development Bank of South Africa. This is being utilised to bring back into production the previously producing oxide heap leach operations which are planned to be producing at the rate of 12,000 ounces per annum by the end of 2013.

Operational progress was also made at two of the Company's listed investments during the year: China Polymetallic Mining ("CPM") and South American Ferro Metals ("SAFM"). CPM achieved its full targeted production rate for its first mine, the Shizishan lead-zinc-silver mine in China, as did SAFM at its Ponto Verde iron ore project in Brazil. Both these companies are now scheduled to produce strong cashflows in 2013.

Ferrous Resources ("Ferrous") also made good operational progress under its new management team, achieving budgeted production of 3 million tonnes of iron ore during the year and it remains confident that this will increase to 5 million tonnes in 2013. It also received licences to increase production to 25 million tonnes per annum. Despite this, Ferrous continues to be held back by the volatility of its shareholder list with several shareholders appearing to be forced sellers during the year. The Company decided to write down its carrying value of Ferrous following significant trading on the "grey market". Until a firm base of shareholders committed to developing the company's project can be forged, it will be difficult for Ferrous' management to achieve its ambitions for its high quality projects.

In August 2012 Copperbelt Minerals signed a conditional Settlement Agreement with its joint venture partner Gécamines whereby Copperbelt would exit its Deziwa copper joint venture in the Democratic Republic of Congo. This transaction closed in January 2013 and Copperbelt has returned the majority of the capital received from the sale to shareholders through a share buyback, representing a 100% uplift on the Company's carrying value at December 2012. The transaction was therefore reflected in the published unaudited NAV at 31 January 2013.

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

Description of Largest Investments

Ivanplats Limited ("Ivanplats")

Ivanplats is a company listed on the Toronto Stock Exchange which holds the Kamoa copper project (95% 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 (90% owned) in South Africa.

The Kamoa Project is located in the Kolwezi District of Katanga Province, approximately 25 kilometres west of the town of Kolwezi, the DRC's copper mining hub. A revised Canadian National Instrument 43-101 ("NI 43-101") compliant report by independent technical consultants AMEC was announced in January 2013. Indicated Mineral Resources were estimated at 739 million tonnes grading 2.67% copper containing 19.7 million tonnes of copper. The revised resource statement also included 4.4 million tonnes of copper in Inferred Mineral Resources so that the combined contained copper of 24.1 million tonnes establishes Kamoa as the largest high-grade copper discovery in Africa and one of the largest in the world. Ivanplats intends to use the new resource estimate as the basis for an updated Preliminary Economic Assessment to be released later in the first half of 2013.

The Platreef Project is on the Northern Limb of the PGM-bearing Bushveld Complex, north of the town of Mokopane and approximately 280 kilometres northeast of Johannesburg. A revised NI 43-101 compliant report by independent technical consultants AMEC, was announced in February 2013. Indicated Mineral Resources were estimated at 223 million tonnes grading 4.1 grams per tonne (g/t) 4PE (platinum, palladium, gold and rhodium), 0.34% nickel and 0.16% copper, at a 2.0 g/t 4PE cut-off grade and at a cumulative, average true thickness of 24.3 metres. In addition, the estimate includes Inferred Mineral Resources of 410 million tonnes grading 3.3 g/t 4PE, 0.32% nickel and 0.18% copper, at an average true thickness of 18.0 metres. The combined Indicated and Inferred resources contain 73.2 million ounces of 4PE.

The previously producing Kipushi zinc/polymetallic mine in the DRC was acquired by Ivanplats in late 2011. From 1925-1993, Kipushi produced 60 million tonnes of ore at 11% zinc and 7% copper. It also produced 12,673 tonnes of lead and approximately 278 tonnes of germanium between 1956 and 1978. The shaft is planned to be dewatered by mid 2013 prior to the commencement of underground drilling to define the mineral resources to NI 43-101 standards.

Gobi Coal & Energy Limited ("Gobi")

Gobi is an emerging coking coal producer based in Mongolia. Gobi Coal owns 100% of three open cut coal development projects in south western Mongolia. The Company's projects contain approximately 322 million tonnes of Joint Ore Resource Committee ("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 it 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.

China Polymetallic Mining Company Limited ("CPM")

CPM is an emerging Chinese mining company listed on the Hong Kong Stock Exchange. The Company's investment is via a special purpose vehicle, Five Stars B.S. Limited Partnership. CPM has a number of development projects in the Yunan province of China. The first of these, the Shizishan lead-zinc-silver mine, started production in 2011 and reached its full production rate of 2,000 tonnes per day in December 2012. The Shizishan Mine has JORC compliant resources totalling 9.3 million tonnes grading 256g/t silver, 9.4% lead and 6.0% zinc for contained metal of 77 million ounces silver, 878,500 tonnes lead and 563,000 tonnes zinc. It is planned to produce an average of 5 million ounces of silver, 57,000 tonnes lead and 35,000 tonnes zinc per annum over an expected mine life of 15 years.

CPM's second project, the Dakuangshan silver lead-zinc mine, started commercial production in December 2012 and will ramp up to full production in 2013. CPM is also developing the Liziping Mine, a large-scale lead-zinc project and the Menghu Mine, a high-grade oxidized lead mine. It has also secured exclusive long-term, low-cost polymetallic raw ore supply from Lushan, a tungsten-tin mine.

Bilboes Gold Limited/Bilboes Holdings (pvt) Limited ("Bilboes")

Bilboes is a private Zimbabwean gold mining company which owns four previously producing oxide mines in Zimbabwe. The oxide mines are in the process of being restarted and are scheduled to produce at the rate of approximately 12,000 ounces per annum by December 2013.

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

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 an NI 43-101 compliant Indicated Mineral Resource of 557.7Mt at 33.3% iron and 0.2% vanadium and an Inferred Mineral Resource of 94.7Mt at 34.1% iron.

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

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 Black Pearl concession area is 15,000 ha of which 1,600 ha has been drilled. JORC compliant mineral resources stand at 572 million tonnes grading 11% Fe .

The first dredges arrived on site in January 2013 and commercial production commenced in March 2013. The mine is planned to reach a capacity of 10 million tonnes per annum of iron ore concentrate grading 58-60% Fe by the end of 2013 with a further expansion up to 20 million tonnes per annum by the end of 2014. Off-take agreements have been signed with a number of Chinese steel mills for the full planned production of 20 million tonnes per annum.

Ferrous Resources Limited("Ferrous")

Ferrous is a private company with five iron-ore projects in the iron quadrilateral region in Minas Gerais state and one in Bahia state in Brazil. It has JORC compliant resources of 5.1 billion tonnes of iron ore.

Production of iron ore totalled 3.2 million tonnes in 2012 from two of its mines, Emesa and Viga, with output of 5 million tonnes planned for 2013. In December 2012 Ferrous received the requisite permits to expand production at Viga to 25 million tonnes per annum.

Polar Silver Resources Limited/ZAO Argentum ("Polar Silver")

Polar Silver is a private company which holds a 50% indirect interest in the Prognoz silver project, 444km north of Yakutsk in Russia ("Prognoz"). 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 silver and inferred resources of 9.64 million tonnes of ore grading 473g/t silver containing 147 million ounces silver at Prognoz. A NI 43-101 compliant preliminary economic assessment by Micon envisages a mine producing an average of 13 million ounces of silver per annum over a 16 year mine life.

Metals Exploration plc ("Metals Exploration")

Metals Exploration is an AIM listed company which owns the Runruno gold project in the Philippines. This investment was part of a larger strategic interest totalling approximately 24% of Metals Exploration acquired by the Company and other funds managed by the Investment Manager. Site works for a mine producing approximately 100,000 ounces of gold per annum at Runruno commenced during 2012.

Copperbelt Minerals Limited ("Copperbelt")

Copperbelt is a private company which at 31 December 2012 had a 68% interest in the Deziwa Copper Project, one of the largest copper oxide deposits in the DRC. Gecamines, a state owned mining and exploration enterprise that holds most of the DRC's state mining activities, held the remaining 32%.

In January 2013 Gecamines acquired Copperbelt's interest in Deziwa, following which Copperbelt returned to shareholders the majority of the capital received from the sale through a share buyback.

South American Ferro Metals Limited("SAFM")

SAFM is a company listed on the Australian Stock Exchange whose main asset is the Ponto Verde iron ore project in Minas Gerais in Brazil. The property contains a JORC compliant Mineral Resource estimated at 277.9 million tonnes ore grading 41.3% Fe.

During 2012 Ponto Verde achieved its full licenced production rate of 1.5 million tonnes run of mine ("ROM") ore for the year. SAFM is undertaking a feasibility study to increase the mining rate to 8 million tonnes of ore per annum which is expected to be completed during the fourth quarter 2013.

Market Outlook

China Growth

The IMF forecast a higher global growth rate in 2013, as fears of faltering growth in the U.S and a Chinese hard-landing receded. Chinese growth did slow in 2012, but the size of the Chinese economy today means that even moderate growth in China is significant for global growth and swings in China's performance increasingly impact the rest of the world's economy. China's economy is moving into a new phase of development with the twelfth five year plan bringing economic restructuring and a new domestic demand expansion policy. As GDP increases, infrastructure construction investment and accelerated consumption of retail goods will shift the emphasis of commodity demand away from steel raw materials and into base and precious metals.

Rest of the World Growth

There are continued positive signs for economic growth in the U.S. Capital deficiencies have been reduced and the economy appears to be rebalancing; bank recapitalisation and deleveraging programmes are reaching completion and institutions have begun increasing lending, the effects of which are being observed in job creation, and domestic consumption is rising. In Europe, progress has been slower due to the inefficiency of the currency union and compounded by a general deterioration in economic conditions. The European Central Bank's pledge to do "whatever it takes" to save the Euro has not eliminated anxiety and it is unlikely the Euro Zone will return to sustained growth in the near term.

Mining Industry / Supply

The outlook for the mining sector in 2013 is mixed; many companies are reining in capital expenditure in the face of escalating costs and softening commodity prices. Mining companies are less focused on growth through investment and more focused on cost reduction and operational efficiency. This greater capital discipline and the cancellation of marginal projects will reduce supply side cost pressure and assist in sustaining commodity prices at current levels.

Demand

The outlook for base and precious metals has become increasingly positive, with growing industrial usage of lead, zinc, copper and silver adding to consumption in China and the rest of the world. Monetary easing policies, particularly those being pursued by the U.S and Japan, should provide support for gold and silver prices. The fundamentals for steel raw materials deteriorated in 2012, as Chinese steel mills slowed down production in response to poor demand. However, following the collective re-stocking, the market for iron ore recovered in late 2012 and coking coal prices are expected to follow.

Capital Markets

Access to capital through debt and equity markets has become increasingly constrained since the financial crisis. While general equity markets have strengthened, mining equities have underperformed, partially due to volatility in prices and uncertainty over the longevity of the commodities cycle. The upward trend in the equities market is expected to continue as investors shift asset allocation away from bonds and into equities, and potentially increase allocation into the mining sector as risk appetite increases. Ernst & Young, in its quarterly outlook on Mergers, Acquisitions and Capital Raisings, predict an increase in the number and value of mining and metals transactions in 2013 driven by parastatal organisations and multinational industrial firms seeking to secure access to long-term sources of mineral supply. M&A activity should increase as opportunistic companies seek to take advantage of depressed market valuations.

Impact for BSRT investments

Stabilising prices for iron ore and metallurgical coal augurs well for the Company's investments in companies with exposure to these commodities, certain of which lost significant value in 2012. Concurrently, increasing equity market activity bodes well for privately held companies planning IPOs and a planned secondary listing for Ivanplats. The outlook for copper and platinum group metals appear positive; Ivanplats is well placed to benefit from any uplift in the price of these metals.

DIRECTORS' REPORT

For the year ended 31 December 2012

The Directors of the Company present their third annual report and the audited financial statements for the year ended 31 December 2012.

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

The Ordinary Shares are currently admitted to the Premium Listing segment of the Official List. Following the expiry of the Transitional Provision contained in Listing, Prospectus, Disclosure and Transparency Rules 7 of the Listing Rules, effective 1 June 2012 Subscription Shares of no par value are assigned to the Standard Segment of the Official List.

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

The Company's investment policy is detailed on pages 3 and 4.

A detailed analysis of the Portfolio has been provided on pages 18 and 19.

The Investment Manager's report on pages 6 to 10 includes a review of the main developments during the year together with information on investment activity within the Company's Portfolio and on the market outlook.

In the year to 31 December 2012, the Company's undiluted NAV per Ordinary Share decreased by 16.9% (2011: increase of 27.0%). This compares with a fall in the HSBC Global Mining Index (capital return in Sterling terms) of 4.6% (2011:fall of 28.4%).

The results for the year are shown in the Statement of Comprehensive Income on page 22 and the Company's financial position at the end of the year is shown in the Statement of Financial Position on page 21.

Dividend policy

It is not currently envisaged that any income or gains will be distributed by the Company by way of dividend. This does not preclude the Directors from declaring a dividend at any time in the future if they consider it appropriate to do so. To the extent that any dividends are paid they will be paid in accordance with any applicable laws and the regulations of the UK Listing Authority.

The Directors of the Company who served during the year were:

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 2012 the total remuneration of the Directors was £140,000 (2011: £140,000), with £36,000 (2011: £36,000) payable at year end.

The Directors' interests in the share capital of the Company at both 31 December 2012 and 31 December 2011 were:

Mr Sherwell also has an indirect interest in the shares of the Company through an investment in another fund managed by the Manager.

The significant shareholdings in the Company at 31 December 2012 were:

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

CF Ruffer Baker Steel Gold Fund ("CFRBSGF") had an interest in 6,080,000 Ordinary Shares and 1,420,000 Subscription Shares in the Company at 31 December 2012. These shares are held in a custodian account with The Bank of New York (Nominees) Limited. CFRBSGF shares a common Investment Manager with the Company.

The Manager, Baker Steel Capital Managers (Cayman) Limited, had an interest in 504,832 Ordinary Shares and 100,876 Subscription Shares at 31 December 2012.

The Investment Manager, Baker Steel Capital Managers LLP, had an interest in 10,000 Management Ordinary Shares at 31 December 2012.

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. The Company raised £30,468,865 (before costs) through the issue of 30,468,865 Ordinary Shares and 6,093,772 Subscription Shares via a Placing and Offer. In addition, the Company issued 35,554,224 Ordinary Shares and 7,110,822 Subscription Shares to the holders of shares in Genus Capital Fund pursuant to a scheme of reorganisation of Genus Capital Fund, in exchange for substantially all the non-cash assets of Genus Capital Fund. With effect from 30 September 2010, 7,543 Ordinary Shares were issued as a result of the exercise of Subscription Shares. With effect from 31 March 2011, 2,429 Ordinary Shares were issued as a result of the exercise of Subscription Shares. With effect from 2 April 2012, 107,549 Ordinary Shares were issued as a result of the exercise of Subscription Shares. With effect from 1 October 2012, 1,923 Ordinary Shares were issued as a result of the exercise of Subscription Shares.

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, 7,543 Ordinary Shares were issued and as a result, the Company had 66,030,632 Ordinary Shares and 13,197,051 Subscription Shares in issue at 31 December 2010.

Following the exercise of Subscription Shares at the end of March 2011, 2,429 Ordinary Shares were issued and as a result, the Company had 66,033,061 Ordinary Shares and 13,194,622 Subscription Shares in issue at 31 December 2011.

Following the exercise of Subscription Shares at the end of March 2012 and September 2012, 109,472 Ordinary Shares were issued and as a result, the Company had 66,142,533 Ordinary Shares, 13,085,150 Subscription Shares and 10,000 Management Shares in issue at 31 December 2012. The final exercise date for Subscription Shares was 2 April 2013. No Subscription Shares were exercised at this time and the Company is in the process of cancelling all remaining Subscription Shares.

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 the foreseeable future. Although there was insufficient cash at the year end to settle the current payables and the Company had net current liabilities, this was due to the accrual of the performance fee to the Manager in 2011. The Manager has agreed not to seek payment of the performance fee until the Company has sufficient cash. During January 2013, the Company received £3.3m from the sale of Copperbelt Minerals and paid the Manager £2,500,000, in part settlement of the outstanding performance fee. The Company also holds listed securities that can if necessary, be realised to meet liabilities, including shares in Ivanplats Limited for which the lock-up applying to the shares will start to be released at 8% on a quarterly basis from April 2013. Taking these factors into account, 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. Therefore, the financial statements have been prepared on a going concern basis.

The Company is committed to maintaining high standards of corporate governance. The Board has put in place a framework for corporate governance which it believes is suitable for an investment company and which enables the Company to comply with the relevant provisions of the UK Corporate Governance Code issued by the Financial Reporting Council in June 2010. There was a new UK Corporate Governance Code released in September 2012 which will be effective after 1 Jan 2013.

The Board has made the appropriate disclosures in this report to ensure that the Company meets its continuing obligations. The Company considers that it has complied with the provisions of the UK Corporate Governance Code throughout the accounting year, except where disclosed below.

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 Board consists solely of non-executive Directors of whom Howard Myles is Chairman. All directors are deemed as independent under the UK Corporate Governance Code. Charles Hansard has informed the Board that he no longer has a commercial relationship with the Manager, Baker Steel Capital Managers (Cayman) Limited.

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

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's policy on tenure is that continuity and experience are considered to add significantly to the strength of the Board and, as such, no limit on the overall length of service of any of the Company's Directors, including the Chairman, has been imposed.

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

The Board has established an Audit Committee. The Audit Committee meets at least twice a year and is responsible for ensuring that the financial performance of the Company is properly reported on and monitored and provides a forum through which the Company's external auditors may report to the Board. The Audit Committee operates within established terms of reference. These are available on the Company's website www.bakersteelresourcestrust.com. 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 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, although in view of Charles Hansard's commercial relationship with the Manager, he will not participate in Board discussions in relation to the Manager's appointment.

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.

The Board recognises the need for effective high-level internal controls. The principal controls to address financial, operational and compliance risks are embedded in the operational procedures of the Investment Manager, the Administrator and the Custodian.

High-level controls in operation in relation to the Company include segregation of duties between relevant functions and departments within the Administrator and the Investment Manager. At every quarterly meeting, the Board considers the compliance reports, administration reports, and portfolio valuations provided by the Administrator, and the Investment Manager's reports and analyses.

The Administrator has a number of internal control functions including a dedicated Compliance Officer who is appointed as a statutory requirement and whose role is determined by the Guernsey Financial Services Commission which includes the maintenance of a log of errors and breaches which are reported to the Board at each quarterly Board meeting. The Administrator also undertakes an independent annual review of its internal control functions in accordance with International Standard on Assurance Engagements 3402, "Assurance Reports on Controls at a Service Organisation", issued by the International Auditing and Assurance Standards Board. The Administrator makes this report available to the Board for review and assessment of the control objectives and activities in place.

The Board reviews the effectiveness of the Company's internal control systems on an ongoing basis. Procedures are in place to ensure that necessary action is taken to address any significant weaknesses identified in the control framework. The Board is not aware of any significant failings or weaknesses in the Company's internal controls in the year under review. The Board recognises that the internal controls framework is designed to manage rather than to eliminate relevant risks. The key risks faced by the Company are set out below. The Board reviews the policies for managing each of these principal risks as summarised below. Please also refer to note 5 on pages 31 to 35.

The Investment Manager prepares regular reports to the Board to allow it to review and assess the Company's activities and performance on an ongoing basis. The Board and the Investment Manager have agreed clearly defined investment criteria, exposure limits and specified levels of authority. Regular reports on these matters, including performance information and portfolio valuations, are submitted to the Board at each meeting.

The Board believes that the maintenance of good relations with shareholders is vital for the long-term prospects of the Company. The Board receives feedback on the views of shareholders from the Company's brokers, RBC Capital Markets and Winterflood Securities Limited, and from the Investment Manager.

General Meetings

All general meetings of the Company are held in Guernsey. The Company holds an Annual General Meeting each year.

Principal risks & uncertainties

Performance risk

The Board is responsible for determining the investment strategy to allow the Company to fulfil its objectives and also for monitoring the performance of the Investment Manager 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 is 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.

Market risk

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

Financial risk 

The Company's investment activities expose it to a variety of financial risks that include foreign currency risk and interest rate risk. Further details are disclosed in note 5 on pages 31 to 35.

Operational risk

In common with most other investment vehicles, the Company has no employees. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Investment Manager and the Company's other service providers. For example, the security of the Company's assets, dealing procedures, accounting records and compliance with regulatory and legal requirements depend on the effective operation of these systems.

Business/Other risks

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.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the financial statements in accordance with applicable Guernsey law and generally accepted accounting principles.

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

- select suitable accounting policies and then apply them consistently;

- make judgments and estimates that are reasonable and prudent;

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

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;

- confirm that there is no relevant audit information of which the Company's auditor is unaware; and

- confirm that they have taken reasonable steps they ought to have taken as directors to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

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

The Directors confirm that to the best of their knowledge:

- The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU);

- The financial statements have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities and financial position and profit or loss of the Company;

- The Chairman's Statement, Directors' Report and Investment Manager's Report include a fair review of the development and performance of the business and position of the Company together with the description of the principal risks and uncertainties that the Company faces, as required by the Disclosure and Transparency Rules of the UK Listing Authority; and

- So far as each of the Directors is aware, there is no relevant audit information of which the Company's auditors are unaware and each Director has taken all 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 auditors are aware of that information.

Signed on behalf of the Board of Directors by:

Howard Myles Christopher Sherwell

19 April 2013

BOARD OF DIRECTORS

Howard Myles (aged 63): 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.

R. Edward Flood (aged 67): In March 2007, Edward Flood was appointed Managing Director of Investment Banking at Haywood Securities (UK) Limited. Following graduation from university Edward enjoyed a career as an economic geologist with several different companies in the mining industry over a 20-year period. At Nerco Minerals he was head of the Company's acquisition team during a period of rapid growth fuelled by the purchase of a number of operating precious metal mines. This experience enabled him to make a transition to the financial community as a principal at Robertson Stephens investment bank in San Francisco in 1992. He initially worked as a securities analyst following the gold mining industry before becoming a member of the firm's investment management team for the Contrarian Fund, a public mutual fund concentrated on natural resource opportunities in emerging markets around the world and the Orphan Fund, a similarly structured hedge fund. The funds managed a portfolio of approximately US$2 billion. Edward became Ivanhoe Mines' founding President in 1995 and served in that capacity until 1999. He has been a member of the board of directors since Ivanhoe was formed. Between 1999 and 2001, Edward held the position of senior mining analyst with Haywood Securities in Vancouver before returning to Ivanhoe Mines as deputy chairman, a position held until joining Haywood Securities (UK) Limited in March 2007. He is also the Chairman of Western Uranium Corporation and a director of several mineral exploration and development companies. Edward holds a Masters of Science (Geology) degree from the University of Montana and is a member of the Geological Society of London.

Charles Hansard (aged 64): 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 63): Clive Newall graduated from the Royal School of Mines, University of London, England in 1971 with an honours degree in Mining Geology, and was awarded an MBA from the Scottish Business School at Strathclyde University. He has worked in mining and exploration throughout his career, having held senior management positions with Amax Exploration Inc. and the Robertson Group plc. Clive has been a director of a number of public companies in the United Kingdom and Canada.

Christopher Sherwell (aged 65): 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.

INDEPENDENT AUDITOR'S REPORT

For the year ended 31 December 2012

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

We have audited the financial statements of Baker Steel Resources Trust Limited for the year ended 31 December 2012 which comprise the Statement of Financial Position, Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows, and the related notes 1 to 14. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union.

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

Respective responsibilities of directors and auditors

As explained more fully in the Statement of Directors' Responsibilities set out on page 16 of the Directors' Report, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the financial statements

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

Opinion on financial statements

In our opinion the financial statements:

·; give a true and fair view of the state of the Company's affairs as at 31 December 2012, and of its comprehensive loss for the year then ended;

·; have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union; and

·; have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies (Guernsey) Law, 2008, we are required to report to you, if in our opinion:

·; proper accounting records have not been kept; or

·; the financial statements are not in agreement with the accounting records; or

·; we have not received all the information and explanations we require for our audit.

Under the Listing Rules, we are required to review the parts of the Corporate Governance disclosures in the Director's Report relating to the Company's compliance with the nine provisions of the UK Corporate Governance Code specified for our review.

Michael Bane

For and on behalf of Ernst & Young LLP

Recognised Auditors

Guernsey, Channel Islands

19 April 2013

Insofar as the financial statements are published on the company website, the maintenance and integrity of the Baker Steel Resources Trust Limited website 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 website.

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2011

.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2012

Baker Steel Resources Trust Limited (the "Company") is a closed-ended investment company with limited liability incorporated on 9 March 2010 in Guernsey under the Companies (Guernsey) Law, 2008 with registration number 51576. The Company is a registered closed-ended investment scheme registered pursuant to the POI Law and the Registered Collective Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission (GFSC). On 28 April 2010 the Ordinary Shares and Subscription Shares of the Company were admitted to the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange. The Company's Ordinary and Subscription Shares were admitted to the Premium Listing Segment of the Official List on 28 April 2010. Effective 1 June 2012 the Subscription Shares are assigned to the Standard Segment of the Official List.

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 or "IPO") and also in listed securities (including special situations opportunities and less liquid securities) with a view to exploiting value inherent in market inefficiencies and pricing anomalies.

a) Basis of preparation

The financial statements have been prepared on a historic cost basis except for financial assets at fair value through profit or loss, which are designated at fair value through profit or loss.

The Company's functional currency is the Great Britain pound sterling ("£"), being the currency in which its Ordinary Shares and Subscription Shares are issued and in which returns are made to shareholders. The presentation currency is the same as the functional currency. 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 January 2009 by the Association of Investment Companies, to the extent that it does not conflict with International Financial Reporting Standards ("IFRS").

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. 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.

Statement of Compliance

These financial statements have been prepared in accordance with IFRS as adopted by the European Union.

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 amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. The most significant judgement relates to the valuation of the Company's unlisted investments which are valued by the Board at fair value in accordance with IFRS having regard to such factors as they deem relevant. This may include information received from market and other sources as to trading on unofficial or "grey" markets requiring a judgement on whether a particular transactions represents fair value and the appropriate timing for recognising fair value changes when information about a transaction is incomplete or unclear. It may also include using industry specific models which require judgement about the investee Company's resources, reserve estimates and associated operating and cost projections. Judgement is also required regarding the long term market prices for relevant commodities produced and comparison with comparable transactions and listed company multiples.

c) Financial assets at fair value through profit or loss

The Company designates its investments, other than derivatives, as at fair value through profit or loss, at initial recognition. All derivatives are classified as held for trading and are included in financial assets at fair value through profit or loss.

Recognition and derecognition

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

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.

Basis of designation of fair value

Designation of the investments in this way is consistent with the Company's documented risk management policy and investment strategy, and information about the investments is provided to the Board on this basis.

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

Determination of fair value

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.

The fair value for financial instruments traded in active markets at the reporting date is based on their 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) Interest income and expense

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

e) Cash and cash equivalents, margin accounts with brokers and cash overdrawn

Cash and cash equivalents in the statement of financial position comprise cash balances held at banks.

f) Expenses

All expenses are recognised on an accruals basis.

g) Translation of foreign currencies

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

h) Segment information

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

i) Net asset value per share

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

j) New accounting pronouncements

The following standards, amendments and interpretations are effective for the current year:

IFRS 1: First time Adoption of IFRS - amended by Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters- for accounting periods commencing on or after 1 July 2011

IFRS 7: Disclosures - Transfer of financial assets- for accounting periods commencing on or after 1 July 2011

IAS 12: Income Taxes - amended in Deferred Tax: Recovery of Underlying Assets

These standards have been adopted in the Company's accounting policies but had no material impact on these financial statements.

k) New accounting pronouncements not yet effective

At the date of authorisation of these financial statements, the following standards and interpretations, which have not been applied, were in issue but not yet effective:

IFRS 9 : Financial Instruments - for accounting periods commencing on or after 1 January 2015

IFRS 10 : Consolidated Financial Statements - for accounting periods commencing on or after 1 January 2013*

IFRS 11 : Joint Arrangements - for accounting periods commencing on or after 1 January 2013*

IFRS 12 : Disclosure of Interests in Other Entities - for accounting periods commencing on or after 1 January 2013*

IFRS 13 : Fair value measurement - for accounting periods commencing on or after 1 January 2013**

IAS 1 : Presentation of Financial Statements - for annual periods beginning on or after 1 July 2012, with early adoption permitted.

IAS 19 : Employee Benefits (as amended in 2011) - applicable on a modified retrospective basis to annual periods beginning on or after 1 January 2013, with early adoption permitted.

IAS 27 : Consolidated and Separate Financial Statements (as amended in 2011) - applicable to annual reporting periods beginning on or after 1 January 2014

*partially endorsed by the EU from 1 January 2014.

**endorsed by the EU from 1 January 2013.

The Directors have not yet assessed the impact that the adoption of these standards and interpretations in future periods will have on the financial statements of the Company. These standards and interpretations will be adopted when they become effective.

The following table analyses net (losses)/gains on financial assets at fair value through profit or loss for the year ended 31 December 2012 and 31 December 2011.

The following table analyses investments by type and by level within the fair valuation hierarchy at 31 December 2012.

The following table analyses investments by type and by level within the fair valuation hierarchy at 31 December 2011.

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 earnings attributable to the change in unrealised gains or losses relating to assets and liabilities held at 31 December 2012.

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 earnings attributable to the change in unrealised gains or losses relating to assets and liabilities held at 31 December 2011.

The Company did not hold any Level 2 investments in the prior period.

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. 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.

Investments classified within Level 3 have significant unobservable inputs. They include unlisted fixed income instruments, unlisted equity shares and warrants. Level 3 investments are valued using valuation techniques explained in the Company's accounting policies. The inputs used by the Directors in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments 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. In cases where there have been no relevant transactions during the year, the Directors will take due consideration of the change in Development Risk Adjusted Net Present Values of the assets underlying the investments, prepared by the Investment Manager, since the last change in valuation and of whether such change is indicative of a change in fair value.

Basic net asset value per share is based on the net assets of £72,199,655 (31 December 2011: £86,723,650) and 66,152,333 (31 December 2011: 66,043,061) Ordinary Shares, being the number of shares in issue at the year end. The Subscription Shares are entitled to be converted to Ordinary Shares at 100p per share. The calculation for basic net asset value is as below:-

The basic and diluted expense per share is based on the net loss for the year of the Company of £14,633,467 (2011: gain of £18,446,923) and on 66,124,204 (2011: 66,042,454) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year. In addition, the average market share price during the year of 95.8p is lower than the exercise price of 100p. Basic and diluted earnings per share are the same due to the fact that the conversion of Subscription Shares to Ordinary Shares would decrease the loss per share, hence subscription shares are anti-dilutive. This calculation is prepared in accordance with IFRS.

The Company's principal financial instruments comprise financial assets, primarily unlisted equity investments in natural resources companies. These investments reflect the core of the Company's investment strategy.

The Company's financial liabilities principally comprise fees payable to various parties and arise directly from its operations.

Risk exposures and responses

The Company manages its exposure to key financial risks in accordance with the Company's financial risk management policy. The objective of the policy is to support the delivery of the Company's core investment objective whilst maintaining future financial security. The main risks that could adversely affect the Company's financial assets, or future cash flows are market risk (comprising market price risk, currency risk and interest rate risk), commodity price risk, liquidity risk and credit risk.

The Company's Board of Directors oversees the management of financial risks, each of which is summarised below.

a) Market risk

Market risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: market price risk, currency risk and interest rate risk.

i. Market Price risk

Market price risk is the risk that the fair value of future cash flows will fluctuate because of changes in the market prices of the Company's investment portfolio.

The following illustrates the sensitivity of the income to an increase or decrease of 10% in the fair value of the Company's investment portfolio. The level of change is considered to be reasonably possible based on observations of current market conditions in 2012. The sensitivity analysis assumes all other variables are held constant.

The impact of a 10% decrease in the value of investments on the net assets and income of the Company as at 31 December 2012 would have been a decrease of £7,535,949 (31 December 2011: £8,754,048). An increase of 10% would increase the net asset value by £7,535,949. In practice, the actual results may differ from the sensitivity analysis above and the difference could be material.

ii. Currency risk

The majority of the Company's financial assets and liabilities are denominated in US dollars. The functional currency of the Company is sterling. Currency risk is the risk that the value of non-£ denominated financial instruments will fluctuate due to changes in foreign exchange rates. The table below shows the currencies and amounts the Company was exposed to at 31 December 2012 and 31 December 2011.

31 December 2012

31 December 2011

At 31 December 2012 and 31 December 2011, had any foreign currencies strengthened by 10% relative to sterling, with all other variables held constant, total equity would have increased by the amounts shown below.

A 10% decrease in foreign currencies relative to sterling, with all other variables held constant, would lead to a corresponding decrease in the total equity by equal but opposite amounts as shown in the above tables. The estimated movement is based on management's determination of a reasonably possible change in foreign exchange rates. In practice, the actual results may differ from the sensitivity analysis above and the difference could be material.

iii. Interest rate risk

Although the Company's interest-bearing financial assets and liabilities expose it indirectly to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows, it is subject to little direct exposure to interest rate fluctuations as the majority of the financial assets are equity investments which do not pay interest. Any excess cash and cash equivalents are invested at short-term market interest rates which exposes the Company, to a limited extent, to interest rate risk and corresponding gains/losses from a change in the fair value of these financial instruments.

The table below summarises the Company's exposure to interest rate risk. It includes the Company's assets and liabilities at fair values, categorised by the earlier of contractual re-pricing or maturity dates.