Grit Inv Tst Regulatory News (GRIT)

To: RNS and the Channel Islands Securities Exchange Authority Limited

From: Global Resources Investment Trust plc

Date: 29 April 2016

Audited results for the period ended 31 December 2015

Introduction

This is the second full Chairman's Statement that I have written, and it gives me no pleasure to report on what was a dreadful period for global commodity markets. The junior resource sector again proved to be especially vulnerable and illiquid. 2016 has, however, started more brightly with indications that the worst may, finally, be behind us.

On 31 July 2015, your Company announced that it had extended its accounting period from 31 August to 31 December. The rationale behind this move was to better align the Company's accounting period with those of the majority of its investee companies and also the payment periods attaching to its Convertible Unsecured Loan Stock "CULS". Your Company is therefore presenting this Annual Report covering the period from 1 September 2014 to 31 December 2015.

Investment and Share Price Performance

At 31 December 2015 your Company's NAV was 20.3 pence, down 60.8% since 31 August 2014. The NAV at 27 April 2016 was 25.7p, an increase of 27%.

The Company's ordinary share price continued to decline faster than the NAV, falling 81.3% to 6.4p during the sixteen month period to 31 December 2015. The share price has stabilised since the year end and is currently 6.1p, representing a discount to the prevailing NAV per share of 76%.

I said when I wrote to you in October 2015 that "there is no denying the funding problems that even robust projects have found themselves suffering". This funding crisis came to a head in the last quarter of 2015 and the Company has written down a number of unquoted investments which contributed significantly to the fall in NAV. You will find more on this in the Investment Manager's Review.

Sentiment has improved significantly since the year end, with precious metal producers a particular beneficiary. Concrete evidence of this can be seen in the Company's sale of NuLegacy Gold in April for £2.2m; this compared with a carrying value of £0.9m at 31 December 2015.

9% Cumulative Unsecured Loan Stock 2017 ('CULS') and Going Concern

The Company issued £5 million nominal of CULS in 2014 to provide working capital. The CULS provide a degree of structural gearing and the Company was 41.0% geared at 31 December 2015.

Under the terms of the CULS your Company gave an undertaking that the cover ratio (being the ratio of the value of its investment portfolio to the principal amount of the outstanding CULS) must be at all times no less than 4:1. The steep decline in NAV meant that this ceased to be the case and on 14 March 2016 LIM Asia Multi-Strategy Fund ("LIM"), the largest CULS holder (owning £3.5m of the £4.7m CULS still in issue) formally requested repayment of its CULS.

The Company does not have sufficient cash or liquid assets to repay the amount owed immediately. LIM and the other two CULS holders have all indicated in writing a current intention to support the Company through the realisation of assets over a longer period with the purpose of enabling the Company to repay the CULS. The ability of the Company to continue as a going concern is therefore dependent on the continued support of the CULS holders in not seeking immediate repayment which would result in a liquidation event.

As reported above, the Company sold its whole position in NuLegacy Gold in April, realising £2.2m, and the Manager has said that it expects to be able to realise sufficient proceeds from the sale of a small number of quoted positions over a period of 3-4 months to allow the CULS to be repaid.

Outlook and Future Plans

When I wrote to you in April 2015 I said that we were "considering several options both to support our portfolio of companies and to pro-actively rationalise and consolidate the portfolio in anticipation of a return to a growth cycle." The speed and depth of the summer retreat caused us to accelerate this process and proposals were announced on 26 January based around a proposed Subscription and Open Offer. The Board subsequently decided that it was not in the best interest of shareholders to proceed with these. I will be writing to you within the next six weeks giving notice of the Company's Second Annual General Meeting and will provide a further update at that time.

Lord St John

Chairman

29 April 2016

Investment Manager's Review

The past two years have been the most difficult for the resource markets since the latter stages of the 2000/01 commodity bear market. While commodity prices for the most part are higher in nominal terms than then, resource equities, especially the junior stocks, have experienced considerably greater falls in most cases. This is reflected in the 69.8% decline in the NAV over the period to 31st December 2015. Some further write-downs of the unquoted were made in the final quarter of 2015.

The dominant influence on the metal markets and resource equities during 2015 was undoubtedly the negative impact of the economic slowdown in China. The slump in the Shanghai Index in June wiped $2trillion off the Chinese equity market which had a severely depressing effect on bulk commodities, base metals and precious metals. The oil market came under pressure as well, as perceptions of a deal on Iran's nuclear programme, and lifting of sanctions, heightened the possibility of increased oil production, further depressing the price.

The slowdown in demand from China, with its manufacturing sector experiencing its largest decline in six years, took its toll on the metal markets. The Chinese devaluation had an unsettling effect on all financial markets, including commodities and currencies. Virtually all the gains from the so called commodity super cycle have been eroded since the 2008 peak, with the Bloomberg Commodity Index falling to a thirteen year low. In such volatile markets most resource stocks came under severe pressure, although many were already extremely depressed, trading at or close to all-time lows.

Amongst this market turmoil gold was a lone beneficiary, again demonstrating its safe haven status, rising from under $1100 to $1160, before giving up some of the gain. There was little response from the stocks however, with the XAU gold mines index at an all-time low relative to the gold price. Taking advantage of the depressed valuations there has been an increase in merger and takeover activity in the small to midsize gold sector. During the year there were over fifteen gold company deals, eight among producers, and seven among developers. At current valuations it is easier, and in some cases cheaper, to acquire resource ounces in the market, rather than through exploration. The gold industry has been quicker to respond to the decline in prices compared with the diversified mining companies.

The fund has over forty per cent exposure to developing gold companies all of which are making steady progress. Our largest listed gold holding, Merrex, and its joint venture partner, Iamgold, reported excellent results from the last phase of its 2015 drill programme, and a maiden resource statement recently disclosed an indicated and inferred resource of 1.2m ounces. Further drilling in the current year is likely to expand this highly promising project. Inca One, which is processing high grade gold ore from the artisanal miners in Peru, has embarked on an ambitious expansion programme to treble production over the next 2-3 years. NuLegacy Gold completed its fifth phase of drilling in the Cortez trend in Nevada, to earn a 70% working interest in the project from Barrick Gold. An initial estimate of the resource is put at over 100m tonnes at an average grade of 1g/t. It recently completed the acquisition of the remaining 30% for equity, with the result that Barrick now owns 16% of the company and also holds a 2% net profits royalty interest. Since the year end, the entire NuLegacy holding has been sold on market.

The distressed state of the global mining industry is partially one of its own making. Record metal prices and profitability in the latter stages of the super cycle boom resulted in over exuberance, with many acquisitions and expansion programmes being implemented near the peak of the cycle. Excessive debt taken on to finance acquisitions and expansions has resulted in oversupply and excess capacity, severely impacting the markets and the mining companies. Write-downs and impairments have exceeded $100bn to date. The industry is currently going through a period of painful adjustment to bring supply and demand back into balance, which will involve production cutbacks and mine closures, along with aggressive cost cutting. It is likely to be some time before base metals and bulk commodities have a meaningful recovery.

Prior to the year end, a decision was taken to write down to nil the Company's entire investment in Alhambra Resources Ltd, after the Specialised Interdistrict Economic Court of the Akmola Oblast in Kazakhstan ordered that Alhambra's wholly owned Kazakhstan subsidiary Saga Creek Gold Company JV LLP be declared bankrupt.

Another company to fall victim of the particularly difficult conditions in the natural resource sector and where the Company has had to take another major write down is Arakan Resources. Arakan's wholly owned subsidiary Posit Coal Pty Ltd had a joint venture to operate the Kara Keche Coal Mine in the Kyrgyz Republic. The Kara Keche contracts are now in dispute with the Kyrgyz Government and Posit Coal has engaged legal counsel to seek arbitration proceedings against the Government. As a result of the significant uncertainly that this legal action has created about Arakan's major asset, we have decided to write down to nil the Company's investment in Arakan. However, if over time, the company should be successful in its arbitration proceedings against the Kyrgyz Government we will have the ability to revalue the investment to reflect this success.

With an increasingly uncertain economic outlook and general financial instability, investment interest has returned to the gold market. Last year the price fell to a low of $1040, driven down by substantial ETF fund sales. Since the beginning of the year this trend has reversed with ETF's acquiring more gold than was sold during 2015, helping push the price up to a recent high of $1280. Negative interest rates in several countries have added to the appeal of diversifying into gold. This has generated a sharp recovery in gold stocks, particularly the producers.

In the meantime we continue to rationalise the portfolio, focussing on a smaller number of core holdings that are likely to generate positive returns when better economic conditions return.

David Hutchins and Kjeld Thygesen

RDP Fund Management LLP

29 April 2016

Enquiries:

RDP Fund Management LLP

David Hutchins

Tel +44 (0) 207 290 8541

Beaumont Cornish Limited

Roland Cornish

Tel: +44 (0) 207 628 3396

Felicity Geidt

Tel: +44 (0) 207 628 3396

R&H Fund Services Limited

Martin Cassels

Tel: +44 (0) 131 550 3760

Audited Income Statement

The 'total' column of this statement represents the Company's profit and loss account, prepared in accordance with IFRS. All revenue and capital items in this statement derive from continuing operations. All of the loss for the year is attributable to the owners of the Company.

No operations were acquired or discontinued in the year.

A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above Income Statement.

The accompanying notes are an integral part of the financial statements.

Reconciliation of Movement in Shareholders' Funds

Audited Balance Sheet

Audited Cash Flow Statement

Principal Risks and Uncertainties and Risk Mitigation

Risks are inherent in the investment process, but it is important that their nature and magnitude are understood so that risks, particularly those which the Company does not wish to take, can be identified and either avoided or controlled. The Board has established a detailed framework of the key risks that the business is exposed to, with associated policies and processes devised to mitigate or manage those risks. The principal risks faced by the Company are set out below.

Investment and Strategy Risk - The Board is responsible for deciding the investment strategy to fulfil the Company's objectives and monitoring the performance of the Investment Manager.

Inappropriate strategy, including country and sector allocation, stock selection and the use of gearing, could lead to poor returns for shareholders. To manage this risk the Board requires the Investment Manager to provide an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio at each Board meeting, when gearing levels are also reviewed. The Board monitors the spread of investments to ensure that it is adequate to minimise the risk associated with particular countries or factors specific to particular sectors. The Investment Manager also provides the Board and shareholders with monthly factsheets which include an investment commentary.

Market Risk - In addition to ordinary movements in the prices of the Company's investments and the loss that the Company might suffer through holding investments in the face of negative market movements, the Company's investment strategy necessarily amplifies this risk (see Sector Risk below). The Board seeks to mitigate this risk through the processes described in the paragraph above, monitoring the implementation and results of the investment process with the Investment Manager.

Sector Risk - The largest part of the Company's assets consist of equity-related investments in natural resources and mining companies, usually mid and small-cap companies, with a wide range of commodity exposures. The prices of the underlying commodities are often volatile and the companies can be located in countries at risk of political instability and vulnerable to natural disasters. The liquidity in the shares of the companies is often restricted, meaning that it can be difficult to buy or sell volumes of shares at the quoted price. The Board seeks to mitigate this risk through the processes described in the paragraph above on Investment and Strategy Risk. In addition, the closed-ended structure of the Company is an essential part of the Board's management of this risk, ensuring that parts of the portfolio do not have to be sold to raise liquidity to fund redemptions at short notice.

Financial Risk - The Company's investment activities expose it to a variety of financial risks that include market price risk, foreign currency risk, interest rate risk and liquidity and credit risk. Further details of these risks and the ways in which they are managed are disclosed in note 9.

Earnings Risk - Fluctuations in earnings resulting from changes to the underlying portfolio, currency movements, or changes in the tax treatment of the dividends or interest received by the Company could reduce the level of income earned by the Company. The Board monitors and manages this risk by considering detailed income and cash flow forecasts prepared by the Company Secretary at each Board meeting.

Operational Risk - The Company relies upon the services provided by third parties and is reliant on the control systems of the Investment Manager and the Company's other service providers. The security and/or maintenance of, inter alia, the Company's assets, dealing and settlement procedures, and accounting records depend on the effective operation of these systems. These are regularly tested and monitored and are reported on at each Board meeting. An internal control report, which includes an assessment of risks, together with the procedures to mitigate such risks, is prepared by the Investment Manager and the Company Secretary and reviewed by the Audit Committee at least once a year. The Custodian, BNP Paribas Securities Services, produces an internal control report each year which is reviewed by its auditors and gives assurance regarding the effective operation of controls. This is reviewed by the Audit Committee.

Regulatory Risk - A breach of regulatory rules could lead to the suspension of the Company's stock exchange listing or financial penalties. Breach of Sections 1158 to 1159 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on chargeable gains. The Company Secretary monitors the Company's compliance with the Listing Rules of the UK Listing Authority and the relevant regulations regarding maintenance of Investment Trust status. Compliance with the principal rules is reviewed by the Directors at each Board meeting.

Notes

1. Accounting Policies

(a) Basis of accounting

These financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the International Accounting Standards Board ('IASB') and in accordance with the guidance set out in the Statement of Recommended Practice ('SORP') for investment trust companies and venture capital trusts issued by the Association of Investment Companies ('AIC') in January 2009.

The functional and reporting currency of the Company is pounds sterling because that is the primary economic environment in which the Company operates. The notes and financial statements are presented in pounds sterling and are rounded to the nearest thousand except where otherwise indicated.

The financial statements has been prepared on the historical cost basis, except that investments are stated at fair value and categorised as financial assets at fair value through profit or loss.

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. Additionally, the net revenue of the Company is the measure the Directors believe appropriate in assessing its compliance with certain requirements set out in Sections 1158 - 1159 of the Corporation Tax Act 2010.

At the date of authorisation of these financial statements, the following Standards and Interpretations were effective for annual periods beginning on or after 1 January 2016:

-IFRS 14 - Regulatory Deferral Accounts

At the date of authorisation of these financial statements, the following Standards and Interpretations were effective for annual periods beginning on or after 1 January 2018:

-IFRS 9 - Financial Instruments (revised, early adoption permitted)

-IFRS 15 - Revenue from Contracts with Customers (early adoption permitted)

At the date of authorisation of these financial statements, the following Standards and Interpretations were effective for annual periods beginning on or after 1 January 2019:

-IFRS 16 - Leases (early adoption permitted)

The following amendments to Standards are all effective for annual periods beginning on or after 1 January 2016:

-IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

-IFRS 10, IFRS 12 and IAS 28 - Investment Entities: Applying the Consolidation Exception

-IFRS 11 - Accounting for Acquisitions of Interests in Joint Operations

-IAS 1 - Disclosure Initiative

-IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation

-IAS 27 - Equity Method in Separate Financial Statements

In addition, under the Annual Improvements to IFRSs 2012 - 2014 Cycle, a number of Standards are included for annual periods beginning on or after 1 January 2016.

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material financial impact on the financial statements of the Company. The Company concludes however that certain additional disclosures may be necessary on their application.

Going Concern basis of accounting

The Company's operations have been cash flow negative since its inception, the Company relying on the sale of investments to generate the cash needed to continue to operate. £1.9m was realised from the sale of investments during the period under review.

Due to factors detailed elsewhere in this report (especially in the Chairman's Statement and Investment Manager's Review) the carrying value of the investment portfolio reduced significantly from £30.4m to £12.3m during the sixteen months to 31 December 2015. As a result, the Company was at several points during the period and subsequent to the period end in breach of the coverage ratio required to be maintained under the terms of the Convertible Unsecured Loan Stock 2017 ("CULS"). There are three CULS holders: at 31 December 2015 LIM Asia Multi-Strategy Fund Inc ("LIM") owned (and continues to own) £3.5m of the £4.7m of CULS in issue. On 14 March 2016, LIM formally requested repayment of its CULS incorporating principal and accrued interest amounts. The Company does not have sufficient cash or liquid assets to repay the amount owed immediately. LIM confirmed to the Company in writing on 16 March 2016 that it was its current intention to support the Company through the realisation of assets over a longer period with the purpose of enabling the Company to repay the amounts owed to LIM. This continues to be the case, and the other two loan note holders have indicated ,in writing, their support for this process.

The ability of the Company to continue as a going concern is therefore dependent on the continued support of LIM and the two other CULS holders in not seeking immediate repayment which would result in a liquidation event.

In April 2016 the Company sold its whole position in Nulegacy Gold, realising £2.2m.

The Manager has said that it expects to be able to realise sufficient proceeds from the sale of a small number of quoted positions over a period of 3-4 months to satisfy the balance of debt payable to LIM. The Directors have carefully probed the Manager as to how realistic this assumption is; the sales will be of entire positions representing a significant interest in the investee companies concerned and, after close enquiry, the Directors have concluded that these sales are more likely than not to go ahead. Should these sales not go ahead over the timescale envisaged then the continued support of the CULS holders may be imperilled.

These matters indicate the existence of a material uncertainty which may cast significant doubt as to the Company's ability to continue as a going concern. Nevertheless, the Directors believe that the risks around the possible immediate repayment of the CULS amounts due being required have been appropriately taken into consideration and accordingly the financial statements have been prepared on a going concern basis and do not include the adjustments that would result if the Company were unable to continue as a going concern.

Critical accounting estimates and judgements

The preparation of the financial statements necessarily requires the exercise of judgement both in application of accounting policies which are set out below and in the selection of assumptions used in the calculation of estimates. These estimates and judgements are reviewed on an ongoing basis and are continually evaluated based on historical experience and other factors. However, actual results may differ from these estimates. The most significant judgements are the valuation of unlisted investments which is described in note 1(b) below and the adoption of the going concern basis of preparation which is discussed above.

A summary of the principal accounting policies which have been applied to all periods presented in these financial statements is set out below.

(b) Fixed asset investments

Purchases or sales of investments are recognised/derecognised on the date the Company commits to purchase/sell the investments. Investments are classified at fair value through profit and loss on initial recognition with any resultant gain or loss recognised in the Income Statement. Listed securities are valued at bid price or last traded price, depending on the convention of the exchange on which the investment is listed, adjusted for accrued income where it is reflected in the market price. Investments which are not listed or where trading in the securities of an investee company is suspended are valued at the Board's best estimate of fair value. Unlisted investments are valued by the Directors on the basis of all the information available to them at the time of valuation. This includes a review of: the financial and trading information of the Company, covenant compliance and ability to repay the interest and cash balances. Where no reliable fair value can be estimated, investments may be carried at cost less any provision for impairment.

Realised gains or losses on the disposal of investments and permanent impairments in the value of investments are taken to the capital reserve. Gains and losses arising from changes in the fair value of investments are included in the Income Statement as a capital item as per note (i).

(c) Income

Dividends receivable on equity shares are recognised as income on the date that the related investments are marked ex-dividend. Dividends receivable on equity shares where no ex-dividend date is quoted are recognised as income when the Company's right to receive payment is established.

Fixed returns on non-equity shares are recognised on a time apportioned basis so as, if material, to reflect the effective interest rate on those instruments. Other returns on non-equity shares are recognised when the right to the return is established. The fixed return on a debt security is recognised on a time apportioned basis so as to reflect the effective interest rate on each such security.

Income from deposit interest is recognised on an accruals basis.

Where the Company has elected to receive its dividends in the form of additional shares rather than cash, an amount equal to the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital reserves.

(d) Taxation

The charge for taxation is based on net revenue for the period. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue on the same basis as the particular item to which it relates.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of underlying timing differences can be deducted.

Because the Company intends each year to qualify as an investment trust under Chapter 4 of Part 24 of the Corporation Tax Act 2010 (previously S842 of the Income and Corporation Taxes Act 1988), no provision is made for deferred taxation in respect of the capital gains that have been realised, or are expected in the future to be realised, on the sale of fixed asset investments.

 (e) Expenses

All expenses are accounted for on an accruals basis. Expenses are charged through the Income Statement as a revenue item except as follows:

- expenses which are incidental to the acquisition of an investment are included within the cost of the investment;

- expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment;

- expenses connected with the maintenance or enhancement of the value of the investments.

(f) Foreign currency

Transactions denominated in foreign currencies are recorded in the local currency at actual exchange rates at the date of the transaction. Overseas assets and liabilities denominated in foreign currencies at the period end are reported at the rates of exchange prevailing at the period end. Any gain or loss arising from a change in exchange rates subsequent to the date of a transaction is included as an exchange gain or loss in capital reserves. The financial currency of the Company, being its statutory reporting currency, is sterling.

(g) Finance costs

Finance costs are accounted for on an accruals basis. Finance costs of debt, insofar as they relate to the financing of the Company's investments or to financing activities aimed at maintaining or enhancing the value of the Company's investments, are allocated between revenue and capital in accordance with the Board's expected long-term split of returns, in the form of income and capital gains respectively, from the Company's investment portfolio.

(h) 9% Convertible Unsecured Loan Stock 2017 ('CULS')

The CULS were unquoted and at the period end are valued at fair value by the Directors based upon all information available to them at the time of valuation. This includes consideration of the discounted cash flows of the interest and principal and underlying equity value.

Direct expenses associated with the CULS issue are allocated to the share premium account.

The interest expense on the CULS is recognised on an accruals basis.

(i) Reserves

(a) Share premium - the surplus of net proceeds received from the issuance of new shares over their par value is credited to this account and the related issue costs are deducted from this account. This reserve is non-distributable.

(b) Capital reserve - the following are accounted for in this reserve:

- gains and losses on the realisation of investments;

- realised and unrealised exchange differences on transactions of a capital nature;

- capitalised expenses and finance costs, together with the related taxation effect; and

- increases and decreases in the valuation of investments held.

(c) Revenue reserve - the net profit/(loss) arising in the revenue column of the Income Statement is added to or deducted from this reserve. This reserve is available for paying dividends.

(j) Segmental information

The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business.

2. Return per Ordinary Share

The revenue loss per ordinary share is based on a net loss after taxation of £1,850,000 (2014: £184,000) and on a weighted average of 39,631,340 ordinary shares in issue during the period.

The capital return per ordinary share is based on a net capital loss of £16,934,000 (2014: £10,117,000) and on a weighted average of 39,631,340 ordinary shares in issue during the period.

3. Net Asset Value per Ordinary Share

The net asset value per ordinary share is based on net assets of £8.1 million (2014: £26.6 million) and on 39,970,012 (2014: 39,570,012) ordinary shares, being the number of ordinary shares in issue at the period end.

4 . 9% Convertible Unsecured Loan Stock 2017

5. Reserves

6. Related Party Transactions

The following are considered related parties: the Board of Directors ('the Board') and RDP Fund Management LLP ('Investment Manager').

Mr N Paris is an employee of LIM Advisors which is a subsidiary of LIM Asia Multi-Strategy Fund ('LIM'). LIM are the largest holder of the Company's CULS and are authorised to appoint a director to the Board to represent their interest. Mr N Paris is the representative appointed on behalf of LIM.

The balance due to Directors for fees at the period end was £18,500.

7. Post Balance Sheet Events

As a result of a breach of the coverage ratio attaching to the CULS in March 2016, the CULS became immediately repayable at the request of the CULS holder on 14 March 2016. LIM Asia Multi-Strategy Fund Inc ("LIM") formally requested repayment of its CULS incorporating principal and accrued interest amounts on that date. The Company does not have sufficient cash or liquid assets to repay the amount owed immediately. LIM confirmed to the Company in writing on 16 March 2016 that it was its current intention to support the Company through the realisation of assets over a longer period with the purpose of enabling the Company to repay the amounts owed to LIM. This continues to be the case, and the other two loan note holders have indicated, in writing their support for this process.

On 14 March 2016 Mr N Paris resigned from the Board

On 19 April 2016 the Company sold 20,000,000 shares of Nulegacy Gold for net proceeds of £2.2m.

8. Financial Information

The financial information set out above does not constitute the Company's statutory accounts for the period ended 31 December 2015. The statutory accounts for 2015 are audited and the Auditors have issued an unqualified opinion. The statutory accounts for 2015 will be finalised on the basis of the financial information presented in this announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

9. Financial Instruments

The Company's financial instruments comprise its investment portfolio, cash balances, bank facilities and debtors and creditors that arise directly from its operations. As an investment trust the Company holds a portfolio of financial assets in pursuit of its investment objective. The Company can make use of flexible borrowings for short term purposes to achieve improved performance in rising markets and to seek to enhance the returns to shareholders, when considered appropriate by the Investment Manager. The downside risk of borrowings may be reduced by raising the level of cash balances held.

Listed fixed asset investments held are valued at fair value. For listed securities this is either bid price or the last traded price depending on the convention of the exchange on which the investment is listed. Unlisted investments are valued by the Directors on the basis of all the information available to them at the time of valuation. The fair value of all other financial assets and liabilities is represented by their carrying value in the Balance Sheet. The fair value of the 9% Convertible Unsecured Loan Stock 2017 is not materially different from its carrying value in the Balance Sheet.

The main risks that the Company faces arising from its financial instruments are:

(i) market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate or currency rate movements;

(ii) interest rate risk, being the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates;

(iii) foreign currency risk, being the risk that the value of investment holdings, investment purchases, investment sales and income will fluctuate because of movements in currency rates;

(iv) credit risk, being the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company; and

(v) liquidity risk, being the risk that the bank may demand re-payment of any loan or that the Company may not be able to liquidate quickly its investments. The Company's operations have been cash flow negative since its inception, the Company relying on the sale of investments to generate the cash needed to continue to operate. £1.9m was realised from the sale of investments during the period under review.

Market price risk

Market price risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. To mitigate the risk the Board's investment strategy is to select investments for their fundamental value. Stock selection is therefore based on disciplined accounting, market and sector analysis, with the emphasis on long term investments. An appropriate spread of investments is held in the portfolio in order to reduce both the statistical risk and the risk arising from factors specific to a country or sector. The Investment Manager actively monitors market prices throughout the period and reports to the Board, which meets regularly in order to consider investment strategy.

Investment and portfolio performance are discussed in more detail in the Investment Manager's Review.

If the investment portfolio valuation fell by 10 per cent at 31 December 2015, the impact on the profit or loss and the net asset value would have been negative £1.2 million. If the investment portfolio valuation rose by 10 per cent the impact would have been equal and opposite. The calculations are based on the portfolio valuation as at the balance sheet date and are not representative of the period as a whole, and may not be reflective of future market conditions.

Interest rate risk

Financial assets

Bond and preference share yields, and their prices, are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the Government's fiscal position, short term interest rates and international market comparisons. The Investment Manager takes all these factors into account when making any investment decisions as well as considering the financial standing of the potential investee company.

Returns from bonds and preference shares are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds. Consequentially, if a bond is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a bond the market price at any given time will depend on the market environment at that time. Therefore, a bond sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred.

Interest rate risk on fixed rate interest instruments is considered to be part of market price risk as disclosed above.

Floating rate

When the Company retains cash balances they are held in floating rate deposit accounts. The benchmark rate which determines the interest payments received on cash balances is the bank base rate for the relevant currency for each deposit.

Fixed rate

The Company holds fixed interest investments and has fixed interest liabilities.

Foreign currency risk

The Company invests in overseas securities and may hold foreign currency cash balances which give rise to currency risks. The Company does not hedge its currency exposure and as a result the movement of exchange rates between pounds sterling and the other currencies in which the Company's investments are denominated may have a material effect, unfavourable or favourable, on the returns otherwise experienced on the investments made by the Company. Although the Investment Manager may seek to manage all or part of the Company's foreign exchange exposure, there is no assurance that this can be performed effectively.

The Investment Manager does not intend to hedge the Company's foreign currency exposure at the present time.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represents the maximum credit risk exposure at the balance sheet date.

Credit risk on fixed interest investments is considered to be part of market price risk.

Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the high credit quality of the brokers used. The Board monitors the quality of service provided by the brokers used to further mitigate this risk.

The cash held by the Company and all the assets of the Company which are traded on a recognised exchange are held by BNP Paribas Security Services ('BNP'), the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed or limited. The Board monitors the Company's risk by reviewing the custodian's internal control reports. Should the credit quality or the financial position of BNP deteriorate significantly the Investment Manager will move the cash holdings to another bank.

There were no significant concentrations of credit risk to counterparties as at 31 December 2015. No individual investment exceeded 25.2 per cent of net assets as at 31 December 2015.

Liquidity risk

The Company's financial instruments include investments in unlisted investments which are not traded on an organised public market and which generally may be illiquid. As a result, the Company may not be able to liquidate these investments at an amount close to their fair value.

The Company's liquidity risk is managed on an ongoing basis by the Investment Manager in accordance with policies and procedures in place as described in the Directors' Report. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.

The Company maintains sufficient cash, has a short term bank facility and has identified securities that could be sold to pay accounts payable and accrued expenses.

As a result of the CULS coverage ratio being breached in March 2016, as noted earlier, the Company are realising investments to satisfy the amounts payable to CULS holders who have requested repayment.

Statement of Directors' Responsibilities in Respect of the Annual Financial Report

The Directors are responsible for preparing the Annual Report and the Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare company financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with applicable law and International Financial Reporting Standards ("IFRS") as adopted by the EU and applicable law.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the company for that period. In preparing the company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and estimates that are reasonable and prudent;

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

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm that to the best of our knowledge:

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

• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

On behalf of the Board

Lord St. John

Chairman

29 April 2016