Final Results

RNS Number : 0808O

Crystal Amber Fund Limited

12 September 2011

 



12 September 2011

Crystal Amber Fund Limited

(the 'Fund' or the 'Company')

Final results for the year ended 30 June 2011

The Company announces its final results for the year ended 30 June 2011.

Highlights:

·      Sale of investment in Pinewood Shepperton PLC ("Pinewood") yields £8.7m profit (realised post year-end)

·      Strong cash position post Pinewood leaves the Fund well placed to take advantage of recent market turbulence

·      Constructive activism in core investments

·      Realised profits of over £3.3m during the year, taking total (including Pinewood post year-end) to over £34m since flotation

·      Board representation secured at JJB Sports PLC ("JJB") to drive recovery strategy

·      Net asset value recovers in second half of the year and remains resilient despite recent market sell off

·      First dividend declared during the year

William Collins, Chairman, commented:

"The sale of the investment in Pinewood since the year end has generated a very acceptable £8.7m profit on the Fund's largest holding. This put the Fund in a very strong cash position, enabling it to take full advantage of the opportunities offered by the recent slump in markets. Nonetheless the sell-off has affected some of the Fund's core holdings and the overall NAV relatively modestly. We have taken determined action on JJB, including the securing of board representation, to help its recovery."

Enquiries

Crystal Amber Fund Limited
William Collins	Tel: [phone]
Merchant Securities Limited - Nominated Adviser
David Worlidge/Simon Clements	Tel: [phone]

Numis Securities Limited - Broker

Nathan Brown/Hugh Jonathan                                                                                 Tel: [phone]

Crystal Amber Advisers (UK) LLP - Investment Adviser

Richard Bernstein                                                                                                  Tel: [phone]

CHAIRMAN'S STATEMENT

I hereby present the fourth annual report of Crystal Amber Fund Limited ("the Company" or "the Fund") for the year to 30 June 2011.

For the world economy, it was a year of uneven growth with concerns remaining about the strength of the recovery in the UK and US, the US fiscal deficit, and the problems of the Eurozone countries. Financial markets were inevitably affected by these concerns and remain very volatile.

For the Fund, it was a year of intense and sustained engagement with our main portfolio companies. We secured an excellent outcome at Pinewood Shepperton, our largest holding, where the takeover by Peel Acquisitions resulted in an £8.7 million profit, realised on 15 July 2011.

Where necessary, the Fund took a public stance. Though our efforts have not always been as successful as we would wish, we are pursuing with vigour the brief set out in our admission document. This has resulted in growing recognition of Crystal Amber's role as an activist investor.

Net asset value ("NAV") at 30 June 2011 was £65.4 million, compared with an unaudited £61.2 million at 31 December 2010 and £69.3 million at 30 June 2010.  NAV per share was 109.01p, compared with 101.92p per share at 31 December 2010 and 115.50p at 30 June 2010. The fall in the first half of the year was mainly due to the performance of JJB, where recovery is taking longer than we expected and envisaged at the time of investment. However the Manager and Adviser have made concerted efforts to turn the JJB investment around and progress is in line with the turnaround plan. The welcome recovery of NAV in the second half of the year was led by Pinewood.

The Fund deployed its resources actively during the year.  At 30 June 2011 it was 93 per cent. invested, compared with 82 per cent. a year earlier. Cash and liquid resources were £4.3 million. Since the year end, cash resources have increased substantially - to more than 50p per share at the end of July, following the successful realisation of the Pinewood investment. This has put the Fund in a very strong position to exploit the opportunities thrown up by the slump in global share markets since the year end. Investment in carefully targeted companies has been achieved at attractive prices.

We welcome the growing awareness of the case for activism and the increasing discussion of management and governance issues. We are well aware that the activist route can be difficult and challenging, though we are greatly encouraged by the positive response of many companies and their managements to the issues we raise.

We are pleased to have paid our first dividend to shareholders in August 2011. We emerge from a challenging year in good shape and more determined than ever to deliver positive returns for our shareholders.

William Collins

Chairman

INVESTMENT MANAGER'S REPORT

Strategy and performance

The year under review has been one of intense activity for the Fund involving continuous activism in several of our core investments. This has resulted in several notable successes and a very healthy level of realised profits. Focus now moves on to realising shareholder value in core holdings and building positions in new companies.

The most notable success was the £8.7 million profit banked after the year end on the investment in Pinewood Shepperton, the Fund's largest holding. This followed more than two years of engagement, both public and private, with Pinewood's board and management.

The Pinewood proceeds took the Fund's total realised gains over the last three years to £34.7 million. This gives us some confidence that the intrinsic value in our other investments can be released over time and successful outcomes delivered for our investors.

While ready to take a public stance where necessary, we believe that activism can be constructive and co-operative in many cases. An example is PayPoint, where our active support for the management helped the company to deal with a very serious competitive challenge and this approach is reflected in the value of the holding.

Since the year end, markets have been turbulent with very sharp falls in prices of both strong and weak companies. Having banked profits on Pinewood, the Fund has been very well placed to take advantage of the opportunities offered. Purchases have been made at levels which, in our view, offer scope for attractive returns. The market slump has affected some of the Fund's core holdings and the total NAV relatively modestly.

Performance

In a portfolio where the top six holdings account for more than 75 per cent of the Fund's NAV, the underperformance of one holding can have a marked effect. In late 2010 and early 2011, a steep fall in the share price of JJB Sports had a material effect on the Fund's NAV. In the last four months of the year, this was offset by gains elsewhere in the portfolio, notably in the largest holding, Pinewood Shepperton, and, following a strengthening of JJB's share price, the NAV recovered.

Since the year end, market turbulence inevitably has affected NAV and the Fund's share price. The Fund, which was partly insulated by its strong cash position, has taken advantage of the opportunities offered to purchase targeted stocks at attractive levels.

LARGEST EQUITY HOLDINGS at 30 June 2011
	£m		% of NAV		% of Investee company held
Pinewood Shepperton	26.7		40.8		28.9
Omega Insurance	6.3		9.6		3.2
PayPoint	5.1		7.8		1.5
JJB	3.9		6.0		7.1
Sutton Harbour	3.6		5.5		13.6
N Brown Group	3.5		5.4		0.5
Other Equities	12.0		18.3
Total Equities	61.1		93.4
Cash & net current assets	4.3		6.6
Total Assets	65.4		100.0

Pinewood Shepperton PLC

We identified Pinewood's potential for value realisation from the outset and it was one of the Fund's first investments. Our view was based on the strength of the Pinewood brand, its leading role in the global film industry, and the asset backing provided by the group's properties. By the beginning of the year, the Fund held 18 per cent. of Pinewood and had engaged repeatedly with the board and management.

We urged it to improve the transparency of its reporting, clarify the value of its assets and strengthen the board. Having been disappointed at the lack of progress, we called publicly for the Chairman and Senior Independent Director of Pinewood to step down. The board rejected this. In the period to December 2010 the Fund increased its holding to 27.3 per cent. and increased the pressure to deliver value. We continued to purchase shares up to mid-March 2011, when the holding had been increased to 28.9 per cent.

In April 2011 Pinewood received an initial approach from Peel Holdings ("Peel") regarding a possible offer of 190p per share. Subsequently the Pinewood board recommended an increased offer from Peel at 200p cash per share. The Fund entered an irrevocable commitment with Peel to accept the offer, except in the event of a third party offer at not less than 250p.

Although there was other activity including the purchase of a substantial stake in Pinewood by Warren James Holdings at a higher price, no higher offer materialised and Peel's offer was declared unconditional on 21 June 2011. Since the year end, the Fund has realised a profit of £8.7 million on its investment of £18.0 million in Pinewood.

Omega Insurance Holdings Limited ("Omega")

Omega is a Lloyd's insurer and reinsurer with a strong profit record and balance sheet and an excellent underwriting record. The Fund built up its holding in mid-2010 having assessed the replacement cost of Omega's assets and its net asset backing. The markets in which Omega operates have become increasingly challenging over the last year due to a series of natural disasters including the New Zealand earthquake and the Japanese earthquake and tsunami. Against this background the company continued its discussions with potential acquirers. It is reassuring that, even in difficult markets, Omega continues to attract serious and reputable interest. It has been in an offer period since 10 January 2011.  Within the constraints imposed by this, we have met twice with management recently and expressed concern about how the offer timetable was being managed, and made clear our view that the process needs to be concluded expeditiously. If no discernible progress is made within a reasonable timeframe, further activism may be required. On 30 August 2011, Omega reported an interim loss before tax of USD 49.1m and said "that it remained in discussions with third parties regarding potential corporate activity with the aim to conclude the process shortly."

PayPoint PLC ("PayPoint")

PayPoint is a specialist payments company with a network of 22,000 terminals in UK and Irish retail outlets and a growing business in internet and mobile phone payment services. The Fund invested in the company because of the strength of its products and its innovative record, combined with good management and a strong balance sheet. Engagement has included helping its successful campaign to avert the threat of competition from lottery provider Camelot.

PayPoint continues to develop its product range and to trade strongly, handling a record number of payments in the year to 31 March 2011. With increased sales and profits, its shares have advanced considerably. During the quarter to June 2011 the Fund sold about 20 per cent. of its holding at 522p per share. The remaining holding is valued at substantially more than its cost of 315p per share. We continue to engage with PayPoint's management and to support its efforts to deliver further value.

JJB Sports PLC

Following pressure from major shareholders, led by the Company, JJB's management and board have been renewed and it continues its efforts to deliver recovery in a very challenging climate for sports retailers. The Fund through the Manager and Adviser has engaged intensely, being instrumental in helping to rescue the company through two rounds of fundraising. This gave JJB the opportunity to recover from the heavy operating losses it reported for the year to January 2011. The fundraising proceeds enabled JJB to repay £25million of bank debt, replenish stock and plan for recovery.

We continue to be very active operationally and in assisting JJB to implement a turnaround in its trading. Richard Bernstein, a Director of the Fund's Manager and Investment Adviser, was appointed as a non-executive Director of JJB in May 2011.

Having appointed a new chief executive in March 2010, JJB appointed a new chairman with turnaround experience in December 2010. The scale of the challenge at JJB is large but so are the opportunities for improvement on a substantial sales base.

It completed a Company Voluntary Arrangement enabling it to "right size" its store portfolio, closed underperforming stores and significantly reduced its headcount and operating costs. It plans to refresh or refit the majority of its stores in the current trading year. The willingness of the new management team to get to grips with the issues is encouraging. Though retail conditions remain very challenging, the group has considerable scope for the "self-help" measures which are crucial to a full recovery.

 
Sutton Harbour Holdings PLC ("SUH")

The Fund has increased its holding in SUH to 13.6 per cent. of the equity and it is the second largest shareholder.

Having disposed of its loss making airline Air Southwest, SUH accelerated plans to close Plymouth City Airport and return to its core property and marine activities. Losses on discontinued operations were £8.4 million in the year to 31 March 2011, resulting in net losses for SUH of £8.45 million and the omission of a final dividend. Net assets fell from 68.5 pence to 57.3 pence per share over the year.

The Fund has engaged actively with the board and management and made clear that this performance is unacceptable and a credible plan for the recovery of the business is needed. An activist strategy to enhance the long term value of the business will continue and intensify as necessary. At SUH's annual meeting on 24 August 2011, the Fund opposed a resolution empowering the SUH board to issue additional shares. The resolution was defeated.

N Brown Group PLC ("Brown")

The Fund has been an investor in Brown since 2008 and recently increased its holding. From its roots as a home shopping operation, Brown has expanded both geographically and through selective acquisitions, and has built a successful online business. The group has been managed prudently through the retail downturn and we believe it remains an undervalued business with good growth opportunities. In the year to February 2011 revenues rose 4.2 per cent. to £719 million and adjusted pretax profits rose 5.5 per cent. to £98.2 million. Online sales rose 19 per cent. to £324 million. We have engaged positively with the board and management and look forward to further engagement.

Other holdings

A 2.99 per cent. holding in Tribal Group PLC ("Tribal"), the public sector outsourcing consultant, was disclosed in December 2010 following a takeover approach for Tribal. Tribal subsequently sold its government and health divisions to focus on its successful educational business, and appointed a new chief operating officer. Following engagement, the holding was increased to 4.41 per cent. Approximately half the Fund's holding in Trading Emissions ("TRE"), which invests in tradeable carbon permits, was sold at a profit. TRE's plans to realise value from its portfolio, and the value of the Fund's remaining holding, have been affected by a sharp fall in traded carbon prices. The Fund continues to monitor this investment and the potential for further engagement.

The portfolio

At 30 June 2011 the Fund's equity portfolio had a market value of £61.1 million. The top six holdings listed above amounted to 80 per cent. of the portfolio, in line with the policy set out in the Admission Document. The Fund's cash holdings rose substantially after the year end, following the realisation of the Pinewood investment. Following sharp falls in share markets in August 2011, it took the opportunity to purchase targeted stocks at attractive levels. There is exciting and potentially rewarding work in progress within the portfolio. The focus continues to be on seeking ways to enhance and/or crystalise value, and on balance sheet strength and cash generation. The holdings listed in this report amount to more than 80 per cent of the Fund's equity portfolio.  Shareholders requiring further information about the portfolio should apply in writing to the Company's Registered Office.

Engagement
Engagement with the managements and boards of investee companies has been fundamental to the Fund's strategy since the beginning. Engagement has been intense in the period under review and where necessary, has been supported by the consultancy expertise available to Crystal Amber Advisers.  Where appropriate, independent research has been commissioned on companies' operations and markets. All these resources were deployed during the year at JJB, where engagement was particularly intensive.

In most cases, the response of management and boards to our suggestions has been very encouraging. Where this is not the case, we are ready to make our concerns public, and to call for changes where needed. This was demonstrated in the case of Pinewood. We are determined to ensure that our investments deliver their full potential for all shareholders, and remain committed to engage to the degree required to achieve this.

Realisations
During the year, the Fund has realised investment gains of approximately £3.3 million since July 2010, including a gain of £2.1m which was realised on part of the Fund's PayPoint holding. A substantial stake has been retained in PayPoint and at 30 June 2011 it was the Fund's third largest holding.

Among other gains, the holding in Forth Ports realised a profit of £0.45 million as a result of the cash offer from Otter Ports.

These gains follow the successful realisation in earlier years of the investments in 3i Quoted Private Equity, Delta, Tate & Lyle, Kentz, and Chloride.

Including the £8.7 million profit realised on Pinewood after the year end, total realised gains since inception now amount to over £34 million. This is a very satisfactory return achieved in a period of just over three years.

Profile
The Fund's activism has attracted attention and media coverage, particularly in respect of Pinewood, JJB and PayPoint. While our focus is on effective action rather than publicity, we welcome the increased understanding of the Fund and its role.

The Fund's NAV and largest equity holdings are announced monthly and published on our website www.crystalamber.com. 

The Fund is also listed on the Association of Investment Companies (AIC) website. This is an independent source and the information published does not always come from Crystal Amber - for example the AIC publishes daily net asset value estimates calculated by Fundamental Data Limited, an independent researcher.

 
Strategy and outlook

Economic recovery in the UK remains modest. Concerns about public spending cuts and inflation continue, and the Eurozone crisis has not yet abated. These issues continue to cause turbulence in financial markets.

In these conditions the Fund's current cash resources enable it to take advantage of suitable opportunities. These may include larger mid-cap companies, typically with market value of between £250 million and £1 billion, whose shares are more liquid and where it is easier to acquire holdings. The activist path continues to require a sustained determination to realise value, sometimes in the most challenging market conditions. We remain committed to pursue the Fund's strategy and convinced that it can deliver good returns.

 

Crystal Amber Asset Management (Guernsey) Limited

Investment Manager

 

 

INVESTING POLICY

 

Crystal Amber Fund Limited ("the Company" or "the Fund") is an activist fund which aims to identify and invest in undervalued companies and, where necessary, take steps to enhance their value. The Company aims to invest in a concentrated portfolio of undervalued companies which are expected to be predominantly, but not exclusively, listed or quoted on UK markets (usually the Official List or AIM) and which have a typical market capitalisation of between £100 million and £1,000 million. Following investment, the Fund and its advisers will also typically engage with the management of those companies with a view to enhancing value for all their shareholders.

Investment objective

The Fund's objective is to provide its shareholders with an attractive total return, which is expected to comprise primarily capital growth but with the potential for distributions, including distributions arising from the realisation of investments, if this is considered to be in the best interests of its shareholders.

Investment strategy

The Fund focuses on investing in companies which it considers to be undervalued, and aims to promote measures to correct the undervaluation. In particular, it aims to focus on companies which the Fund's investment manager and investment adviser believe may have been neglected by fund managers and investment funds due to their size or where analyst coverage is inadequate or where analysts have relied on traditional valuation techniques and/or not fully understood the underlying company. The Fund and its advisers seek the co-operation of the company's management in connection with such corrective measures as far as possible. Where a different ownership structure would enhance value, the Fund will seek to initiate changes to capture such value. The Fund may also seek to introduce measures to modify existing capital structures and introduce greater leverage and/or seek divestiture of certain businesses of the investee company.

Pending investment of the type referred to above, the Company's funds will be placed on deposit but the Company also has the flexibility to make other investments which are considered to be reasonably liquid in order to ensure that its funds are appropriately deployed. The Company may, in certain circumstances, acquire stakes in target companies from investors in exchange for shares in the Company.

Where it considers it to be appropriate the Fund may (i) utilise leverage for the purpose of investment and enhancing returns to its shareholders and (ii) enter into derivative transactions, for example in seeking to manage its exposure to interest rate and currency fluctuations through the use of currency and interest rate hedging arrangements or for the purposes of efficient portfolio management, and to acquire exposure to target companies through contracts for difference.

Investment restrictions

It is not intended that the Company will invest, save in exceptional circumstances, in:

·      companies with a market capitalisation of less than £100 million at the time of the investment;

·      pure technology-based businesses; or

·      unlisted companies or pre-IPO situations.

It is expected that no single investment in any one company will represent more than 30 per cent. of the gross asset value of the Company at the time of investment. However, there is no guarantee that this will be the case after any investment is made, particularly during the early life of the Company or where it is believed that an investment is particularly attractive.

Dividend Policy

The primary objective of the Company is to achieve an attractive total return primarily through capital growth. The Company's investment objective and strategy means that the timing and amount of investment income cannot be predicted. There can therefore be no guarantee as to the timing and amount of any distribution payable by the Company, although dividends will be paid if this is considered to be in the best interests of Shareholders. The Company will have the ability, in certain circumstances, to make distribution payments out of realized investments if considered to be in Shareholder's interests.

Composition of the portfolio

The Fund's board, investment manager and investment adviser believe that the number of potential target companies is high with more than 2,000 companies quoted on AIM or the Official List and they consider that a significant number of these are in the Fund's targeted range.

Target investee companies typically operate in one or more of the following sectors:

·      consumer products;

·      industrial products;

·      retail;

·      support services;

·      healthcare; or

·      financial services.

However, the Fund is in no way restricted to these sectors and investment decisions are taken based on market conditions and other investment considerations at the time.

Further information on the Company is set out in its AIM Admission Document, which is available to download from the Company's website www.crystalamber.com.

Statement of Comprehensive Income

For the year ended 30 June 2011

 

		2011				2010
		Revenue	Capital	Total		Revenue	Capital	Total
	Notes	£	£	£		£	£	£
Income
Dividend income from listed investments		2,024,736	-	2,024,736		1,948,124	-	1,948,124
Interest income from UK Government securities		-	-	-		492,678	-	492,678
Fixed deposit interest		6,526	-	6,526		37,038	-	37,038
Bank interest		9,570	-	9,570		8	-	8
		2,040,832	-	2,040,832		2,477,848	-	2,477,848
Net gains on financial assets at fair value through profit or loss
Realised gain	8	-	3,673,533	3,673,533		-	15,096,818	15,096,818
Movement in unrealised loss	8	-	(7,702,553)	(7,702,553)		-	(14,487,648)	(14,487,648)
Total income		2,040,832	(4,029,020)	(1,988,188)		2,477,848	609,170	3,087,018
Expenses
Transaction costs	4	-	230,285	230,285		-	464,679	464,679
Management fees	12,14	1,290,658	-	1,290,658		1,459,600	-	1,459,600
Directors' fees		95,000	-	95,000		95,000	-	95,000
Administration fees		83,604	-	83,604		82,876	-	82,876
Custodian fees		31,405	-	31,405		38,042	-	38,042
Audit fees		17,388	-	17,388		17,360	-	17,360
Other expenses		154,885	-	154,885		155,969	-	155,969
		1,672,940	230,285	1,903,225		1,848,847	464,679	2,313,526
Return for the year		367,892	(4,259,305)	(3,891,413)		629,001	144,491	773,492
Basic and diluted earnings per share  (pence)		0.61	(7.10)	(6.49)		1.05	0.24	1.29

All items in the above statement derive from continuing operations.

The total column of this statement represents the Company's Statement of Comprehensive Income prepared in accordance with International Financial Reporting Standards. The supplementary income return and capital return columns are presented under guidance published by the Association of Investment Companies.

The Notes to Financial Statements form an integral part of these financial statements.

 

Statement of Financial Position

as at 30 June 2011

		2011		2010
ASSETS	Notes	£		£
Cash and cash equivalents	6	4,067,541		12,419,482
Trade and other receivables	7	354,628		1,015,805
Financial assets designated at fair value through profit or loss	8	61,062,843		56,557,754
Total assets		65,485,012		69,993,041
LIABILITIES
Trade and other payables	9	77,926		694,542
Total liabilities		77,926		694,542
EQUITY
Capital and reserves attributable to the Company's equity shareholders
Share capital	10	600,000		600,000
Distributable reserve	10	56,447,261		56,447,261
Retained earnings	10	8,359,825		12,251,238
Total equity		65,407,086		69,298,499
Total liabilities and equity		65,485,012		69,993,041
Net asset value per share (pence)	5	109.01		115.50

The financial statements were approved by a committee of the Board of Directors and authorised for issue on 12 September 2011.

Statement of Changes in Equity

For the year ended 30 June 2011

2010		Share	Distributable	Retained earnings			Total
	Notes	Capital	Reserve	Capital	Revenue	Total	Equity
		£	£	£	£	£	£
Opening balance at 1 July 2009	10	600,000	56,447,261	10,929,368	548,378	11,477,746	68,525,007
Return for the year		-	-	144,491	629,001	773,492	773,492
Balance at 30 June 2010		600,000	56,447,261	11,073,859	1,177,379	12,251,238	69,298,499
2011		Share	Distributable	Retained earnings			Total
	Notes	Capital	Reserve	Capital	Revenue	Total	Equity
		£	£	£	£	£	£
Opening balance at 1 July 2010	10	600,000	56,447,261	11,073,859	1,177,379	12,251,238	69,298,499
Return for the year		-	-	(4,259,305)	367,892	(3,891,413)	(3,891,413)
Balance at 30 June 2011		600,000	56,447,261	6,814,554	1,545,271	8,359,825	65,407,086

Statement of Cash Flows

For the year ended 30 June 2011

	Notes	2011		2010
		£		£
Cashflows from operating activities
Dividend income received from listed investments		2,389,272		1,366,142
Interest income received from UK Government securities		-		563,500
Fixed deposit interest received		8,133		33,968
Bank interest received		9,570		1,050
Management fees paid		(1,290,658)		(1,459,600)
Performance fee paid		-		(1,040,581)
Directors' fees paid		(95,000)		(95,000)
Other expenses paid		(371,032)		(233,561)
Net cash inflow/(outflow) from operating activities		650,285		(864,082)
Cashflows from investing activities
Purchase of investments		(54,752,991)		(79,131,260)
Sale of investments		45,981,050		80,650,771
Transaction charges on purchase and sale of investments		(230,285)		(464,679)
Net cash (outflow)/inflow from investing activities		(9,002,226)		1,054,832
Net (decrease)/increase in cash and cash equivalents during the year		(8,351,941)		190,750
Cash and cash equivalents at beginning of year		12,419,482		12,228,732
Cash and cash equivalents at end of year	6	4,067,541		12,419,482

Notes to the Financial Statements

For the year ended 30 June 2011

General Information

Crystal Amber Fund Limited is a company incorporated and registered in Guernsey on 22 June 2007 and is governed under the provisions of the Companies (Guernsey) Law, 2008. The address of the registered office is given on page 2. The Company has been established to provide shareholders with an attractive total return which is expected to comprise primarily capital growth but with the potential for distributions. The Company will achieve this through the investment in a concentrated portfolio of undervalued companies which are expected to be predominantly, but not exclusively, listed or quoted on UK markets and which have a typical market capitalisation of between £100 million and £1,000 million.

The Company was listed and admitted to trading on AIM, the market of that name operated by the London Stock Exchange on 17 June 2008. The Company was also listed on the CISX on 17 June 2008. The Company is also a member of the AIC.

1.  SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied throughout the current period, unless otherwise stated.

Basis of preparation

The financial statements give a true and fair view, are in accordance with International Financial Reporting Standards ("IFRS") and the AIC's Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued in January 2009 and comply with the Companies (Guernsey) Law, 2008. The financial statements are presented in Sterling, the Company's functional currency.

These financial statements have been prepared under the historic cost convention with the exception of financial assets designated at fair value through profit or loss which are measured at fair value.

Use of estimates and judgements

The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of the reported amounts in these financial statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Segmental reporting

The Company has adopted IFRS 8, 'Operating Segments' as of 1 January 2009. This standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes.

The Board has considered the requirements of IFRS 8 'Operating Segments', and is of the view that the Company is domiciled in Guernsey and is engaged in a single segment of business, being investment in UK equity instruments, and in one geographical area, the United Kingdom, and therefore the Company has only a single operating segment.

The Board, as a whole, has been determined as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance and to allocate resources is the total return on the Company's net asset value, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in these financial statements.

The Board of Directors has overall management and control of the Company. Material changes to the investment objective or investment policy can only be made by Shareholders. The Board of Directors has delegated the day to day implementation of this strategy to its Investment Adviser but retain responsibility to ensure that adequate resources of the Company are directed in accordance with their decisions. The investment decisions of the Investment Adviser are reviewed on a regular basis to ensure compliance with the policies and legal responsibilities of the Board. The Investment Adviser has been given full authority to act on behalf of the Company, including the authority to purchase and sell securities and other investments on behalf of the Company and to carry out other actions as appropriate to give effect thereto. Whilst the Investment Adviser may make decisions on a day to day basis regarding the allocation of funds to different investments, any changes to the investment strategy or major allocation decisions have to be approved by Shareholders, even though they may be proposed by the Investment Adviser and Manager. The Board therefore retains full responsibility as to the major allocations decisions made on an ongoing basis. The Investment Adviser will always act in accordance with the investment policy and investment restrictions set out in the Company's latest Prospectus which cannot be radically changed without the approval of Shareholders.

The Company has a diversified portfolio of investments from which it receives dividends from time to time and no single investment accounts for more than 30 per cent. of the Fund's gross assets at the time of investment. However, there is no guarantee that this will be the case after any investment is made, particularly during the early life of the Company or where it is believed that an investment is particularly attractive. All the Fund's assets are classified as current assets.

The Company also has a diversified shareholder population.

Foreign currency translation

Monetary assets and liabilities are translated from currencies other than Sterling ("foreign currencies") to Sterling (the "functional currency") at the rate prevailing on the reporting date. Income and expenses are translated from foreign currencies to Sterling at the rate prevailing at the date of the transaction. Exchange differences are recognised in the Statement of Comprehensive Income.

Financial instruments

Financial instruments comprise investment in equity, trade and other receivables, cash and cash equivalents, and trade and other payables. Financial instruments are recognised initially at fair value. Subsequent to initial recognition financial instruments are measured as described below.

Investments

All the Company's investments are designated at fair value through profit or loss. They are initially recognised at fair value, being the cost incurred in their acquisition. Transaction costs are expensed in the Statement of Comprehensive Income. Gains and losses arising from changes in fair value are presented in the Statement of Comprehensive Income in the period in which they arise.

Purchases and sales of investments are recognised using trade date accounting. Quoted investments are valued at the bid price on the reporting date or at the realisable value if the Company has entered into an irrevocable commitment to sell the investment prior to the reporting date. Where investments are listed on more than one securities market, the price on the market on which the security was originally purchased is used. If the price is not available as at the accounting date, the last available price is used.

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of less than 90 days when acquired to be cash equivalents. 

Share issue expenses

Share issue expenses of the Company directly attributable to the issue and listing of the shares are charged to the share premium account.

Share capital

Ordinary shares are classified as equity where there is no obligation to transfer cash or other assets. 

Income

Investment income and interest income have been accounted for on an accruals basis using the effective interest method. Dividends receivable are taken to the Statement of Comprehensive Income when the relevant security is quoted ex-dividend.

Expenses

All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the statement of comprehensive income, all expenses have been presented as revenue items except as follows:

·      expenses which are incidental to the acquisition and disposal of an investment are charged to capital; and

·      expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated and accordingly the performance fee is charged to capital, in order to reflect the Directors' expected long-term view of the nature of the investment returns of the Company.

2.  NEW STANDARDS AND INTERPRETATIONS

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

				Effective for periods
New standards				beginning on or after
IFRS 10		Consolidated Financial Statements - includes the concept of 'de facto' control and replaces the consolidation guidance in IAS 27: Consolidated and Separate Financial Statements and SIC: Consolidation - Special Purpose Entities		1 January 2013
IFRS 11		Joint Arrangements - includes the concepts of joint operations (resulting in consolidation of entity's share of assets and liabilities) and joint ventures (resulting in equity method of accounting); the new standard replaces IAS 31: Interest in Joint Ventures		1 January 2013
IFRS 12		Disclosure of Interests in Other Entities - requires enhanced disclosures for related parties (consolidated and unconsolidated entities)		1 January 2013
IFRS 13		Fair Value Measurement		1 January 2013
				Effective for periods
Revised and amended standards				beginning on or after
IFRS 7		Financial Instruments: Disclosures - amendments enhancing disclosures about transfers of financial assets		1 July 2011
IFRS 9		Financial Instruments: classification and measurements		1 January 2013
IAS 24		Related Party Disclosures - revised definition of related parties		1 January 2011
IAS 27		Separate Financial Statements - the requirements for separate financial statements remain unchanged		1 January 2013
IAS 28		Investments in Associates and Joint Ventures - incorporates changes required due to IFRS 10, 11 and 12		1 January 2013

In addition, in May 2010, the IASB issued improvements to IFRS which affect seven IFRS. Most amendments are effective for annual periods beginning on or after 1 January 2011, although entities are generally permitted to adopt them earlier.

The Directors anticipate that the adoption of these standards and interpretations in future periods will not have a material impact on the Financial Statements of the Company.

IFRS 9 'Financial Instruments' was issued in December 2009. This addresses the classification and measurement of financial assets and is not likely to affect the Company's accounting for financial assets. The standard is not applicable until 1 January 2013 but it is available for early adoption. The standard is not expected to have a significant impact on the financial statements since the majority of the Company's financial assets are designated at fair value through profit or loss.

3.  TAXATION

The Company is exempt from taxation in Guernsey under the provisions of the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 2008 and is charged an annual fee of £600.

4.  TRANSACTION COSTS

The transaction charges incurred in relation to the acquisition and disposal of investments during the year were as follows:

	2011		2010
	£		£
Stamp duty	134,410		240,763
Commissions and custodian transaction charges	95,875		223,916
	230,285		464,679

5.  BASIC AND DILUTED EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE

Earnings per share is based on the following data:

		2011		2010
Return for the year		£ (3,891,413)		£ 773,492
Average number of issued Ordinary shares		60,000,000		60,000,000
Basic and diluted earnings per share (pence)		(6.49)		1.29
Net asset value per share is based on the following data:
		2011		2010
Net asset value per statement of financial position		£ 65,407,086		£ 69,298,499
Number of Ordinary shares outstanding		60,000,000		60,000,000
Net asset value per share (pence)		109.01		115.50

6.  CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash held by the Company available on demand and on deposit with maturities of less than 90 days. Cash and cash equivalents were as follows:

	2011		2010
	£		£
Cash available on demand	4,047,567		4,406,267
Cash on deposit with maturities of less than 90 days	19,974		8,013,215
	4,067,541		12,419,482

Cash available on demand earns interest at a rate based on the bank call deposit rate while short-term placements earned interest ranging from 0.38% to 0.40% per annum during the year.

7.  TRADE AND OTHER RECEIVABLES

	2011		2010
	£		£
Trade receivables	334,227		1,000,579
Prepayments	20,401		15,226
	354,628		1,015,805

There are no past due or impaired receivable balances outstanding at the year end.

8.  FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

	2011		2010
	£		£
Equity investments - UK equity securities	61,062,843		56,557,754
	61,062,843		56,557,754
Cost at beginning of year	65,840,714		53,670,914
Purchases	54,151,989		78,023,962
Sales	(45,680,841)		(80,950,980)
Realised gain	3,673,533		15,096,818
Cost at 30 June	77,985,395		65,840,714
Unrealised losses at beginning of year	(9,247,423)		5,240,225
Movement in unrealised losses	(7,702,553)		(14,487,648)
Unrealised losses carried forward	(16,949,976)		(9,247,423)
Effect of exchange rate movements	27,424		(35,537)
Fair value at 30 June	61,062,843		56,557,754

9.  TRADE AND OTHER PAYABLES

	2011		2010
	£		£
Accruals	77,926		93,542
Unsettled trade purchases	-		601,000
	77,926		694,542

The credit period taken for trade purchases is less than 30 days. The carrying amount of trade payables approximates to their fair value.

10.  SHARE CAPITAL AND RESERVES

Capital risk management

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns to shareholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets.

As per the Company's memorandum and articles of association the retained earnings are distributable by way of dividend in addition to distributable reserve held on the Company's statement of financial position at year end. The distributable reserve represents the amount transferred from the share premium account which was approved by the Royal Court of Guernsey on 18 July 2008.

Externally imposed capital requirement

There are no capital requirements imposed on the Company.

The authorised share capital of the Company is 300 million Ordinary Shares of £0.01 each.

The issued share capital of the Company is comprised as follows:

	2011			2010
	Number	£		Number	£
Allotted, called up and fully paid  Ordinary shares of £0.01 each	60,000,000	600,000		60,000,000	600,000

11.  FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS

Financial risk management objectives

The Manager, Crystal Amber Asset Management (Guernsey) Limited and the Administrator, Heritage International Fund Managers ("HIFM"), provide advice to the Company which allows it to monitor and manage financial risks relating to its operations through internal risk reports which analyse exposures by degree and magnitude of risks. The Manager and the Administrator report to the Board on a quarterly basis.

The risks relating to the Company's operations include credit risk, liquidity risk, and the market risks of interest rate risk, price risk and to a certain extent foreign currency risk.

Credit risk

Credit risk refers to the risk that the counterparty to a financial instrument will default on its contractual obligations that it has entered into with the Company resulting in financial loss to the Company. At 30 June 2011 the major financial assets which were exposed to credit risk included financial assets designated at fair value through profit or loss and cash and cash equivalents.

The carrying amounts of financial assets best represent the maximum credit risk exposure at 30 June 2011. The Company's credit risk on liquid funds is minimised because the counterparties are banks with high credit ratings assigned by an international credit-rating agency.

The table below shows the cash balances at the statement of financial position date and the Standard & Poor's credit rating for each counterparty.

	Location	Rating	Carrying Amount		Carrying Amount
			2011		2010
			£		£
ABN AMRO Bank NV	Guernsey	A	4,034,208		4,391,938
HSBC Bank Plc - Guernsey Branch	Guernsey	AA	29,974		8,023,215
Other			3,359		4,329
			4,067,541		12,419,482

The credit ratings disclosed above are the credit ratings of the parent entities of each of the counterparties namely ABN AMRO Bank N.V. and HSBC PLC.

The Company's credit risk on financial assets designated at fair value through profit or loss is considered minimal as these assets are quoted equities.

The Company is also exposed to credit risk on the financial assets with its brokers for unsettled transactions. This risk is considered minimal due to the short settlement period involved and the high credit quality of the brokers used.

At 30 June 2011 £65,097,051 (2010: £60,949,692) of the financial assets of the Company were held by the Custodian, ABN AMRO (Guernsey) Limited. Bankruptcy or insolvency of the Custodian may cause the Company's rights with respect to financial assets held by the Custodian to be delayed or limited. The Company monitors its risk by monitoring the credit quality and financial position of the Custodian. The Custodian has a Standard & Poor's credit rating of A.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting its obligations arising from financial liabilities. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate framework for the management of the Company's liquidity requirements.

The Company adopts a prudent approach to liquidity risk management and maintains sufficient cash reserves to meet its obligations. All the Company's investments are listed and are subject to a settlement period of three days.

The following tables detail the Company's expected maturity for its financial assets and liabilities:

2011	Weighted average interest rate	Less than 1 year	1-5 years	5+ years	Total
Assets		£	£	£	£
Non-interest bearing	-	61,417,471	-	-	61,417,471
Variable interest rate instruments	0.25%	4,067,541	-	-	4,067,541
Liabilities
Non-interest bearing	-	(77,926)	-	-	(77,926)
		65,407,086	-	-	65,407,086
2010	Weighted average interest rate	Less than 1 year	1-5 years	5+ years	Total
Assets		£	£	£	£
Non-interest bearing	-	57,573,559	-	-	57,573,559
Variable interest rate instruments	0.35%	12,419,482	-	-	12,419,482
Liabilities
Non-interest bearing	-	(694,542)	-	-	(694,542)
		69,298,499	-	-	69,298,499

Market risk

The Fund is exposed through its operations to market risk which encompasses interest rate risk, price risk and foreign exchange risk.

Interest rate risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Company is exposed to interest rate risk as it has funds held on deposit and current account balances. The Company's exposure to interest rates is detailed in the liquidity risk section of this note.

The Manager monitors market interest rates and will place interest bearing assets at best available rates but also taking into consideration the counterparty's credit rating and financial position.

Interest rate sensitivity analysis

The sensitivity analysis below has been based on the exposure to interest rates for financial assets held at the statement of financial position date. An increase/decrease of 0.15 per cent. represents management's assessment of a reasonably possible change in interest rates. If interest rates had been 0.15 per cent. (2010: 0.15 per cent.) higher/lower and all other variables were held constant:

·      the Company's return for the year ended 30 June 2011 would have increased/decreased by £8,427 (2010: £20,088);

·      there would have been no impact on the other equity reserves.

Price risk

Price risk is the risk that the fair value of investments will fluctuate as a result of changes in market prices. This risk is managed through diversification of the investment portfolio across business sectors. Generally the Company will seek not to invest more than 30 per cent. of the Company's gross assets in any single investment at the time of investment. However, there is no guarantee that this will be the case after any investment is made, particularly where it is believed that an investment is exceptionally attractive.

As at 30 June 2011, the fair value of the Company's investment in Pinewood Shepperton PLC represented 41 per cent. of the gross assets. The following tables detail the Company's investments:

2011
Equity Investments	Sector	Value £		Percentage of Gross Assets
Pinewood Shepperton PLC	Media	26,731,722		41
Omega Insurance Holdings Ltd	Insurance	6,266,414		10
Paypoint PLC	Support Services	5,095,000		8
JJB Sports PLC	Retail	3,864,595		6
Sutton Harbour Holdings PLC	Transportation Services	3,582,897		5
Brown N Group PLC	Retail	3,497,827		5
Tribal Group PLC	Consulting Services	2,057,163		3
Other	Various	9,967,225		15
Total		61,062,843		93
2010
Equity Investments	Sector	Value £		Percentage of Gross Assets
Pinewood Shepperton PLC	Media	13,065,411		19
JJB Sports PLC	Retail	12,112,500		17
Paypoint PLC	Support Services	8,820,792		13
Omega Insurance Holdings Ltd	Insurance	7,185,863		10
Trading Emissions PLC	Financial services	4,836,462		7
Sutton Harbour Holdings PLC	Transportation services	3,085,596		4
Conygar Investment Company PLC	Real estate	2,664,259		4
Other	Various	4,786,871		7
Total		56,557,754		81

If market prices had been 25 per cent. higher/lower at the statement of financial position date and all other variables were held constant:

·      the Company's profit and net assets for the year ended 30 June 2011 would have increased/decreased by £15,265,711 (2010: £14,139,438);

·      there would have been no impact on the other equity reserves.

Foreign Exchange Risk

The Company's exposure to foreign exchange risk was immaterial for the year ended 30 June 2011.

Fair value measurements

IFRS 7 establishes a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under IFRS 7 are as follows:

Level 1:      Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2:      Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (that is, as prices) or indirectly (that is, derived from prices);

Level 3:      Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The following tables analyse within the fair value hierarchy the Company's financial assets measured at fair value at 30 June 2011 and 30 June 2010:

	Level 1	Level 2	Level 3	Total
2011	£	£	£	£
Financial assets designated at fair value through profit and loss:
Equity investments - Listed equity securities	34,331,121	26,731,722	-	61,062,843
	Level 1	Level 2	Level 3	Total
2010	£	£	£	£
Financial assets designated at fair value through profit and loss:
Equity investments - Listed equity securities	56,557,754	-	-	56,557,754

The Level 1 equity investments were fair valued with reference to the closing bid prices of each investee company on the reporting date.

The Level 2 equity investment was fair valued with reference to the realisable value of an investee company on the reporting date.

Transfers between Level 1 and 2

The following table shows all transfers from Level 1 to Level 2 of the fair value hierarchy for financial assets recognised at fair value:

		2011	2010
		£	£
Financial assets designated at fair value through profit and loss:
Equity investments - Listed equity securities		26,731,722	-

Financial assets were transferred from Level 1 to Level 2 on 21 June 2011, on which date an agreement to sell the Company's entire holding of Pinewood Shepperton PLC became unconditional. Proceeds from this agreement were received in full following the reporting date, as detailed in note 16.

12.  RELATED PARTIES

Mark Huntley, Director of the Company, is also a Director of the Company's Administrator, Heritage International Fund Managers Limited and the Investment Manager. During the year the Company incurred administration fees of £83,604 (2010: £82,876) of which £18,750 (2010: £22,688) was outstanding at the year end. Mark Huntley also received a Director's fee of £20,000 (2010: £20,000) of which £5,000 (2010: £5,000) was outstanding at the year end.

Richard Bernstein is a Director of the Investment Manager and a holder of 780,000 Ordinary Shares, representing 1.30 per cent. (2010: 1.08 per cent.) of the issued share capital of the Company at the year end. On 6 May 2011, he was appointed as a non-executive Director of JJB Sports PLC, the Company's third largest holding as at 30 June 2011.

During the year the Company incurred management fees of £1,290,658 (2010: £1,459,600) all of which had been paid at the year ended 30 June 2011 and 2010. The Investment Manager did not earn a performance fee during the year and waived the performance fee amounting to £86,425 for the year ended 30 June 2010. On 3 May 2011 the Investment Manager purchased 763,000 shares in the Company, representing 1.27% of the issued share capital.

All related party transactions are carried out on an arm's length basis.

13.  DIRECTORS' REMUNERATION

		2011		2010
		£		£
William Collins		30,000		30,000
Sarah Evans		25,000		25,000
Mark Huntley		20,000		20,000
Nigel Ward		20,000		20,000
Total		95,000		95,000

14.   MATERIAL AGREEMENTS

The Company has entered into the following material agreements:

Crystal Amber Asset Management (Guernsey) Limited (the "Manager")

Under the management agreement, the Manager receives a management fee at the annual rate of 2 per cent. of the Net Asset Value ("NAV") of the Company payable quarterly in advance.

In addition, the Manager is entitled to a performance fee in certain circumstances. This fee is payable by reference to the increase in NAV per Ordinary Share over the course of each performance period. 

Payment of the performance fee is subject to:

1.   the achievement of a performance hurdle condition: the NAV per Ordinary Share at the end of the relevant performance period must exceed an amount equal to the placing price increased at a rate of 7 per cent. per annum on an annual compounding basis up to the end of the relevant performance period ("the Basic Performance Hurdle"); and

2.   the achievement of a "high watermark": the NAV per Ordinary Share at the end of the relevant performance period must be higher than the highest previously reported NAV per Ordinary Share at the end of a performance period in relation to which a performance fee, if any, was last earned. If no performance fee has been earned since admission, the NAV per Ordinary Share must be higher than the placing price.

If the Basic Performance Hurdle is met, and the high watermark exceeded, the performance fee is an amount equal to 20 per cent. of the excess of the NAV per Ordinary Share at the end of the relevant performance period over the higher of:

1.   the Basic Performance Hurdle;

2.   the NAV per Ordinary Share at the start of the relevant performance period; and

3.   the high water mark.

Heritage International Fund Managers Limited (the "Administrator")

The Administrator has been appointed to provide administration and company secretarial services to the Company. For these services, the Administrator will be paid an annual fee of 0.12 per cent. (2010: 0.12 per cent.) of the Net Asset Value (subject to a minimum of £75,000 per annum.)

ABN AMRO (Guernsey) Limited (formerly MeesPierson (C.I.) Limited) (the "Custodian")  

Under the custodian agreement, the Custodian receives a fee, calculated and payable quarterly in arrears at the annual rate of 0.05 per cent. of NAV per annum, subject to a minimum fee of £25,000 per annum. Transaction charges of £100 per trade for the first 200 trades processed in a calendar year and £75 per trade thereafter are also payable.

15.  ULTIMATE CONTROLLING PARTY

In the opinion of the Directors, on the basis of the shareholdings advised to them, the Company has no ultimate controlling party.

16.          POST BALANCE SHEET EVENTS                   

On 7 July 2011 the Company declared an interim dividend of £300,000, equating to 0.5p per share, to be paid on 12 August 2011 to shareholders on record on the register on 15 July 2011.

On 11 July 2011 the Company received proceeds of £26,731,722 from the sale of its holding in Pinewood Shepperton PLC.

On 5 August 2011 the Company reported that its unaudited NAV at 29 July 2011 was 108.38p per share.

On 7 September 2011 the Company reported that its unaudited NAV at 31 August 2011 was 104.75p per share.

17.        COPIES OF THE REPORT AND ACCOUNTS

Copies of the Report and Accounts will be posted to shareholders shortly and will be available from the Company's registered office at Heritage Hall, Le Marchant Street, St. Peter Port, Guernsey GY1 4HY and on its website www.crystalamber.com.

 

END

 

 

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