Duke Capital Regulatory News (DUKE)

Duke Royalty Limited

("Duke Royalty" or the "Company")

Unaudited Interim results

Duke Royalty (AIM: DUKE) announces its unaudited interim results for the six months ended 30 September 2015.

An extract from the interim report appears below and the full version can be viewed on the Company's website at www.dukeroyalty.com.

For further information, please contact:-

Chairman's Report

For the period ended 30 September 2015

The interim period ending 30 September 2015 has seen much change in the operations of the Company.

As previously reported, following the results of an Extraordinary General Meeting (the "EGM") held on 16 June 2015, the Company changed its name from Praetorian Resources Limited to Duke Royalty Limited. At the same EGM, the shareholders approved an amendment to the Company's Investment Policy and Articles of Incorporation to permit the Company to invest in a diversified portfolio of royalty finance and related opportunities. Following this change in investment policy, the Directors believe Duke Royalty has become Europe's only publicly traded diversified royalty Investment Company and is now actively searching for suitable investment opportunities to implement this new investment mandate.

The Company's new objective is to build a stable and reliable income for shareholders by seeking to invest in, without limitation and restrictions (including geographical restrictions):

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

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

In order to capitalise on the opportunity, the Company has assembled a high quality Board and set of advisers with substantial experience and a long term track record within a range of commercial businesses. The Company had been structured as an investment holding company in order to give the Board maximum flexibility to achieve its goals, and is domiciled in a tax efficient jurisdiction to ensure shareholders receive the benefit from any realised profits. The Company, including Management, the Board and its advisors, will utilise its contacts and skill to attract and carry out appropriate due diligence on portfolio opportunities and to source new opportunities.

Support Service Contracts

In order to effectively implement its business strategy, Duke Royalty has entered into support services contracts with both Abingdon Capital Corporation ('Abingdon') and with Arlington Group Asset Management Limited ('Arlington'). Both Abingdon and Arlington are financial advisory companies and they provide a variety of support services to Duke Royalty in respect of global deal origination, vertical partner relationships and on-going investment management, including preparation of investment reports, performance data and compliance with the Company's investing policy. Any recommendations made by the service providers are reviewed by the Board of Duke Royalty, with all final investment decisions being made by the Company's Board in Guernsey.

Oliver Wyman Agreement

On 7 September 2015, it was particularly pleasing to be able to report on the signing of an exclusive pharmaceutical and healthcare royalty financing collaboration with Oliver Wyman, a management consultancy wholly owned by Marsh & McLennan Companies. This agreement is a significant milestone for the Company and brings together a global, respected source of healthcare knowledge with a publicly-quoted royalty company in order to create a unique offering to healthcare companies and public investors alike. Under the agreement, Duke Royalty will be responsible for capital raising, the structuring of definitive agreements and the acquisition of each royalty interest originating from the collaboration. I look forward to being able to report progress from this partnership in the coming quarters.

Investment Committee

On 17 September 2015, the Company announced the formation and appointment of a specialised healthcare investment committee that will assist the Company in analysing and recommending potential healthcare royalty transactions. Collectively, the committee members have advised on over US$ 2 billion of healthcare royalty transactions and have over one hundred years combined experience. The Investment Committee will have access to all due diligence material in connection with any proposed investments. Once it has analysed the merits of a particular transaction, it will provide an investment recommendation to the Board of Duke Royalty with all final investment decisions being made by the Company's Board in Guernsey.

Balance Sheet

As at period end, the Company's Net Asset Value stood at £4,000,726. This was split between the net current asset position of £1,669,985 and the value of the remaining legacy investment portfolio of £2,330,741. It is the Company's intention to dispose of this legacy investment portfolio in due course when suitable bids are found. However I am pleased to report that the Company remains well capitalised during the current transitional period while it actively searches for suitable investment opportunities to implement its new investment mandate.

Robert King

Chairman

Consolidated Statement of Comprehensive Income

For the period ended 30 September 2015

All activities derive from continuing operations.

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

Consolidated Statement of Changes in Equity

For the period ended 30 September 2015

Consolidated Statement of Financial Position

As at 30 September 2015

Consolidated Statement of Cash Flows

For the period ended 30 September 2015

Notes to the Consolidated Financial Statements

For the period ended 30 September 2015

1. GENERAL INFORMATION

Duke Royalty Limited ("Duke Royalty" or the "Company") is an investment company with limited liability formed under the Companies (Guernsey) Law, 2008. The Company was incorporated in Guernsey on 22 February 2012 and its shares were admitted to trading on the London Stock Exchange's AIM on 9 July 2012. The Company's registered office is shown on page 23.

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

The Company's initial investment objective was to build a focused natural resource investment vehicle in order to generate positive returns to shareholders. As detailed in the investment policy on page 3 following the result of the EGM on 16 June 2015 the Company's Articles of Incorporation and Investment Policy were changed to that of investment in a diversified portfolio of royalty finance and related opportunities.

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

2. SIGNIFICANT ACCOUNTING POLICIES

a) Basis of preparation

The Unaudited Condensed Financial Statements ("Interim Statements") have been prepared in accordance with International Accounting Standard ("IAS") 34: Interim Financial Reporting. The Interim Statements do not include all the information and disclosures required in annual financial statements, and should be read in conjunction with the Company's Annual Report and Consolidated Financial Statements for the year ended 31 March 2015 (2015 "Annual Report"), which were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and applicable Guernsey law.

During the previous period, as disclosed in note 7, the Company bought back some of its own Ordinary Share Capital to be held as Treasury Shares which were then subsequently cancelled. Where the Company purchases its own share capital, the consideration paid, which includes any directly attributable costs, is recognised as a deduction from equity shareholders' funds through the Company reserves. When such shares are subsequently sold or re-issued to the market any consideration received, net of any directly attributable incremental costs, is recognised as an increase in equity shareholders' funds through the Share Capital account. Shares held in treasury are excluded from calculations when determining NAV per share as detailed in note 7.

b) Basis of consolidation

The Interim Statements incorporate the Financial Statements of the Company and the subsidiary undertakings controlled by the Company. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

The "Group" is defined as the Company and its subsidiaries Praetorian Portfolio Holding L.P., Praetorian Resources (GP) Limited and Praetorian ZDP Limited. The assets of Praetorian Portfolio Holding L.P. and Praetorian Resources (GP) Limited were transferred into the Company on 11 May 2015.

c) New and amended standards and interpretations

The same accounting policies, presentation and methods of computation are followed in these Interim Statements as were followed in the preparation of the 2015 Annual Report.

There were a number of new standards and interpretations that apply for the first time in 2015, none of these had any significant impact on the Interim Statements.

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

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

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

*still to be endorsed by the EU.

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

3. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Fair Value Hierarchy

Financial assets designated at fair value through profit or loss ("financial assets"), are analysed by using a fair value hierarchy that reflects the significance of inputs. The fair value hierarchy has the following levels:

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

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

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

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

Fair value hierarchy level Valuation techniques

Level 1 Fair value is the quoted price.

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

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

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

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

During the year to 31 March 2015 there was a transfer from Level 1 to Level 3. The investment was previously listed with quoted prices on an active market. At the year end the investments did not have an active market and were therefore valued by the Board using the Company's valuation policy for unquoted investments. This change caused the Company to reclassify the investments from Level 1 to Level 3. There have been no transfers during the period ended 30 September 2015.

4. OTHER EXPENSES

5. TAXATION

The Company has been granted exemption from Guernsey taxation and is charged an annual exemption fee of £1,200.

6. DIVIDENDS

No dividend was declared or paid in respect of the period ended 30 September 2015 (period ended 30 September 2014: £nil).

7. SHARES ISSUED

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

On 16 June 2015 the Company undertook a share consolidation of 1 new ordinary share of no par value in the Company for every 20 existing ordinary shares of no par value in the Company. At the time the Company had a total of 7,294,126 New Ordinary Shares which were admitted for trading on AIM on 17 June 2015.

Of this total, 6,794,126 Ordinary Shares were issued in respect of the share consolidation and 500,000 Ordinary Shares were issued to Abinvest Corporation a wholly owned subsidiary of Abingdon Capital Corporation. The New Ordinary Shares have been allocated stock identification codes as follows: SEDOL code BYZSSY6 and ISIN code GG00BYZSSY63. Pursuant to the Companies (Guernsey) Law, 2008 (as amended), all reserves (including share capital) can be designated as distributable. However, in accordance with the Admission Document, the Company shall not make any distribution of capital profits or capital reserves except by means of capitalisation issues in the form of fully paid Ordinary Shares or issue securities by way of capitalisation of profits or reserves except fully paid Ordinary Shares issued to the holders of its Ordinary Shares.

On 7 September 2015 the Company announced that 333,333 new Ordinary Shares had been issued with new investors at sixty pence per Ordinary Share enlarging the issued share capital of the Company to 7,627,459 Ordinary Shares. The proceeds from the issuance of these new ordinary shares provided additional working capital for the Company.

The Company had a line of AIM quoted subscription shares of no par value in the capital of the Company (the "Subscription Shares"). As set out in its announcement on 28 May 2015, the final subscription date of the Company's Subscription Shares was 16 June 2015. Following which, all outstanding Subscription Shares (that is, those that have not converted into ordinary shares following the exercise of a subscription right) were cancelled. 

Following the passage of the resolutions at the EGM, the Subscription Shares, of which there were 23,205,393 quoted on AIM, were cancelled from trading on AIM with effect from 8.00 am on 26 June 2015.

In addition the Company consolidated the 7,263,922 unlisted warrants at a price of £0.2065 per warrant to 363,196 unlisted warrants at a price of £4.13 per warrant. The warrants were cancelled on 22 May 2015.

On 7 September 2015 the Company announced that a new share option scheme ("the Scheme") has been adopted by the Board of the Company, together with the initial grants made under the share option scheme.

The Scheme has been established to incentivise directors, staff and certain key advisers and consultants to deliver long-term value creation for shareholders.

Under the Scheme, the Board of the Company will award, at its sole discretion, options to subscribe for Ordinary Shares of the Company on terms and at exercise prices and with vesting and exercise periods to be determined at the time. However, the Board of the Company has agreed not to grant options such that the total number of unexercised options represents more than 10 per cent of the Company's Ordinary Shares in issue from time to time. The Board also expects that the exercise price will be at a premium to the mid-market share price at the date of granting the options. Total number of options awarded to Directors, Consultants and advisors amount to 760,000, further information can be found in note 10. The options vest with immediate effect, have an exercise price of 75 pence and expire five years after the date of issuance.

8. LOAN

On 22 May 2015, the Company repaid its 1,500,000, unlisted, zero dividend preference shares issued to Damille Investments II Limited. The total amount paid to Damille Investments II Limited was £1,841,199 which included all accrued interest and redemption charges. As a result, the Company has no loans outstanding.

As part of the Agreement, the Company issued 7,263,922 unlisted warrants to Damille with an exercise price of £0.2065 per warrant (to subscribe for Ordinary Shares in the Company on a 1:1 basis). Following the 20:1 Share Consolidation on 16 June 2015 there were 363,196 unlisted warrants with an exercise price of £4.13 (to subscribe for Ordinary Shares in the Company on a 1:1 basis). The warrants were cancelled on the repayment of the zero dividend preference shares.

The warrants were exercisable immediately and for a period of three years from the date of the Agreement. The £1,500,000 proceeds were allocated between the loan and the warrants using a Black Scholes model and this was the basis of the cost prescribed to the warrants at the date of their issue. Given the warrants were not material no further disclosure regarding the inputs have been provided here.

Damille also had the right to appoint one director to the Board of both the Company and Praetorian ZDP so long as they continue to hold 75% of the voting Shares (excluding any Praetorian ZDP Shares redeemed by the Company). No directors were appointed.

9. TRADE AND OTHER PAYABLES

10. RELATED PARTIES

Charles Cannon-Brookes was an investment manager of the Company until 16 June 2015. He was appointed as a Director of the Company on 16 June 2015 and continues to be a shareholder of the Company.

Directors were entitled to the following remuneration during the year;

Total payments of £78,715 regarding Company Directors fees were made during the period to Messrs King, Johnson, Cannon-Brookes, Birrell and Ryan.

Directors were also reimbursed for £14,666 (30 September 2014: £292) of expenses incurred on business on behalf of the Company.

Robert King has waived his entitlement to a fee in relation to Praetorian Resources (GP) Limited with effect from 1 April 2013.

Mr John Butler Gareth Smith, a Director of R&H Fund Services (Guernsey) Limited was appointed as Director of Praetorian Resources (GP) Limited on 1 November 2014. Mr Smith has waived his entitlement to a fee in relation to Praetorian Resources (GP) Limited.

On 4 July 2012 the Company had entered into service agreements with the Advisory and Execution team members, to provide investment advice for the Board to consider, and general investment assistance to the Board as and when requested. The agreement was terminated on 16 June 2015 following the change in the Company's Investment Policy.

Prior to the termination of the Advisory and Execution team agreements on 16 June 2015 the members of the Advisory and Execution team were entitled to receive fees monthly in arrears as per below.

Praetorian (Special Limited Partner) L.P. ("PSLP") is a special limited partner under the terms of the Limited Partnership Agreement of Praetorian Portfolio Holding L.P. PSLP was established in order that the Advisory and Execution team may receive interests in any performance incentive fee. The basis of the performance incentive fee was laid out in the AIM admission document. No such fee was payable during the period (2014: £nil). PSLP was in the process of dissolution at the date of signing these financial statements.

During the period the Company announced the formation of its Healthcare Investment Committee who will assist the Company in analysing and recommending potential healthcare royalty transactions. Along with Neil Johnson the Investment Committee is made up of members of Oliver Wyman and independent representatives. During the period there were no fees paid to any of the committee members.

The related parties' interests in the share capital of the Company are as follows:

Charles Cannon-Brookes is a Director and shareholder of Arlington Group Asset Management Limited which owns 250,000 Ordinary Shares and is therefore interested in 408,517 Ordinary Shares representing 5.36 per cent of the total voting rights.

Neil Johnson is a Director of Abinvest Corporation and Abingdon Capital Corporation. Abinvest Corporation is a wholly owned subsidiary of Abingdon Capital Corporation. He owns 500,000 Ordinary Shares through Abinvest Corporation and 10,000 Ordinary Shares through RBK&C Trust and therefore has an overall interest in the Ordinary Shares of the Company of 910,000 Ordinary Shares representing 11.93 per cent of the total voting rights.

As detailed in note 7 the Company has adopted a new share option scheme ("the Scheme") to incentivise Directors, staff and certain key advisers and consultants to deliver long-term value creation for shareholders. Awards have been approved for the following individuals, as follows:

The options have an exercise price of 75 pence and expire five years after the date of issuance.

Support Service Agreements with Abingdon Capital Corporation ("Abingdon") and Arlington Group Asset Management Limited ("Arlington") were signed on 16 June 2015. The services to be provided by both Abingdon and Arlington include global deal origination, vertical partner relationships and on-going investment management, including preparation of investment reports, performance data and compliance with the Company's investing policy.

Abingdon is entitled to an annual service fee of £120,000 per annum and Arlington is entitled to an annual service fee of £95,000 per annum. In addition to the Service Fee, Abingdon shall have the right from time to time to be issued and allotted up to 1,500,000 ordinary shares of no par value in the capital of the Company following the conditions noted in section 8 of the Support Service Agreement.

For their significant contributions of efforts in and incurred costs and expenses towards the elaboration, development and implementation of the Company's new investment policy and underlying business model, Abinvest Corporation, a wholly owned subsidiary of Abingdon, received an allotment of 500,000 ordinary shares of not par value in the capital of the Company as bonus shares, equating to a value of £250,000. This is accounted for in the Consolidated Statement of Comprehensive Income under expenses / support services fees (£250,000 of the total support service fee of £356,708).

The Directors are not aware of any ultimate controlling party.

11. CONTINGENT LIABILITIES

At 30 September 2015 there were no contingent liabilities (2014: £nil).

12. EVENTS AFTER THE FINANCIAL REPORTING DATE

Justin Cochrane, a current member of the Company's Healthcare Investment Committee, has agreed to join Abingdon Capital Corporation ("Abingdon") as Executive Vice President, Corporate Development on a full time basis. Through his position at Abingdon, Mr Cochrane will play a pivotal role in the roll-out and execution of the Company's business plan and will bring significant royalty based experience to the operational team. Mr Cochrane will have an active involvement in the due diligence of prospective investment opportunities for the Company; assisting in the execution of royalty transactions approved by the Company's Board and in the monitoring of royalty investments made by the Company.

On 23 October 2015, the Board approved the issue of 250,000 new Ordinary Shares of no par value each in the Company to Mr Cochrane as a signing bonus, further cementing his alignment with shareholders.

Following this issue, the total number of shares with voting rights in the Company is 7,877,459 of which 300,000 Ordinary Shares are held by Mr Cochrane, representing 3.81 per cent of the entire issued share capital.

The assets of Praetorian Portfolio Holding L.P., Praetorian Resources (GP) Limited, Praetorian ZDP Limited and Praetorian (Special Limited Partner) L.P. were all transferred to Duke Royalty and the companies were put into members voluntary liquidation on 23 October 2015.