Final Results

RNS Number : 7291Y

Crystal Amber Fund Limited

09 September 2009

 



9 September 2009

Crystal Amber Fund Limited

(the 'Fund' or the 'Company')

Final results for the year ended 30 June 2009

The Company announces its final results for the year ended 30 June 2009.

Highlights:

• Net assets up from £57.0 million to £68.5 million

• Net assets per share ahead 20 per cent. at 114.21p

• Total return of £11.5 million for the year

• Substantial positive performance in adverse market conditions

• Investment in 3i Quoted Private Equity realised profit of £3.9 million

• Focused portfolio of undervalued stocks with potential for activism

• First year return gives the Board confidence for future prospects

William Collins, Chairman, commented:

'This has been an excellent first full year for the Fund, with a 20 per cent gain in net assets per share achieved in adverse market conditions.

We are particularly pleased with the outcome at 3i Quoted Private Equity, where we realised a net return of 53 per cent on our investment.

While the economic outlook remains uncertain, our experience so far gives us confidence that the Fund's strategy will continue to deliver good returns'

Enquiries

Crystal Amber Fund Limited
William Collins	Tel: [phone]
John East & Partners Limited
Bidhi Bhoma	Tel: [phone]

CHAIRMAN'S STATEMENT

I am pleased to present the second annual report of Crystal Amber Fund Limited which covers the year from 1 July 2008 to 30 June 2009. As the initial annual report to 30 June 2008 covered only the two week period following the Company's admission to trading on AIM and the Channel Islands Stock Exchange ('CISX'), this is the first opportunity to report on a full year of activity.

For most of the year under review, economic and market conditions proved extremely challenging, as the world grappled with the credit crunch and the problems of failing banks and financial institutions. Despite a welcome recovery of financial markets in the early months of 2009, our view is that recovery and confidence remain fragile.

These conditions tested the cautious approach adopted by the Company, which proved effective in safeguarding shareholders' interests. Until March 2009, more than half of the Company's assets were held in cash or short dated government securities. 

As our Manager and Adviser progressively identified opportunities, the funds deployed in the equity market were gradually increased. By 30 June 2009 our equity holdings amounted to £38.9 million, representing 57 per cent. of the Company's net assets at that time. At the same time, we retained, and still retain, considerable cash resources which we have found to be of great advantage in current markets, where volatility and distress produce real opportunities. The cash reserves enable us to fulfil our objectives for target companies, including equity support where appropriate and justified by the potential returns.

The key for shareholders is how our assets have performed. I am pleased to report that net asset value, from an initial level after flotation of £57.0 million, had grown to £68.5 million as at 30 June 2009. Net assets per share grew from the initial 95.02p to 114.21p.

Against the economic and market background of the year under review, we believe that this represents a very satisfactory achievement. Although the Company does not attempt to track any particular index, the FTSE 250 index, which contains many of the companies in our target area, fell by 24 per cent. in the period from the Company's admission to AIM and CISX on 17 June 2008 to 30 June 2009.

In accordance with the objectives set out in the admission document, we have been building a carefully selected and targeted portfolio of investments where we see our involvement as having the capacity to enhance value. Value has already been realised from one of our first investments, 3i Quoted Private Equity, where a very satisfactory net return of 53 per cent. on capital invested was achieved over a six month period.

The process of engagement with the boards and management of investee companies is progressing well. We are encouraged that, in most cases, the managers and directors of these companies have been receptive to our approach. Inevitably, as we engage more closely, we may need to proceed with persistence and determination, and we are ready to do so where required. 

The economic outlook remains uncertain with the world economy expected to shrink in 2009. Many forecasters expect a recovery in 2010, but it remains to be seen how vigorous and robust the recovery will be. Until the problems of the financial sector are resolved, it is hard to see a return to growth.

Uncertain conditions, however, can produce opportunities. Our experience so far gives us confidence that the Fund's strategy will enable us to capture some of these opportunities, with the aim of continuing to deliver good returns to our shareholders.

William Collins

Chairman

INVESTMENT MANAGER'S REPORT

The first full financial year of the Fund was one of considerable difficulty for the world economy and, in particular, for the global banking and financial system. Governments have spent and borrowed enormous sums to underpin the banking system in an attempt to avert economic meltdown. By the second quarter of 2009, panic had receded and there were welcome signs that confidence was beginning to return. Stock markets rallied substantially from March onwards. But many of the underlying problems of the financial system remain unresolved and recovery remains febrile and fragile. Further ahead is the question of how the massive borrowings incurred by the public sector in rescuing the financial system will be reduced to more normal levels.

The latest official figures for the UK economy (for the quarter to June 2009) show a contraction of 5.5 per cent. year on year. Forecasts from independent economists suggest a return to very modest growth in 2010.  

To a considerable extent, governments and their economic advisers are in unknown territory, in which the threats of deflation and inflation appear to exist at the same time. Although some measures show negative inflation, the most widespread concern is that attempts by governments and central banks to provide a flood of cheap liquidity to financial markets will increase the risk of inflationary pressures in future. The mid-cap market, which is the Fund's territory, was volatile throughout the year. From a level of above 9,700 on June 17 2008, the FTSE 250 index fell below 5,500 in November, rallied to 7,870 in early May, fell back again and rallied again.

This volatility called for caution and selectivity in the Fund's approach and reminded us that the focus, under the Fund's brief, is on total return rather than on tracking the market in the short term. In the early months, a good deal of time was well invested on examining and getting to know target companies to assess their potential. More recently, the focus has been on active involvement with investee companies.

As at 30 June 2009 the top six investments - JJB Sports Plc, Tate & Lyle Plc, Pinewood Shepperton Plc, Chloride Group Plc, SSL International Plc and Kentz Corporation Ltd - accounted for 91 per cent. of the portfolio's equity investments. Although this inevitably involves greater concentration of specific stock risk than a more diversified portfolio and could cause some volatility in net asset values over short periods, it is in line with the mandate set out in the Fund's admission document and the focus on absolute return.  

LARGEST EQUITY HOLDINGS

The biggest equity holdings of the Fund at 30 June 2009 were as follows and are discussed individually below.

	£m	% held in Investee Co.
JJB	11.2	14.2
Tate & Lyle	8.4	0.6
Pinewood Shepperton	5.7	7.5
Chloride Group	4.3	1.1
SSL	3.0	0.3
Kentz	2.9	1.6
Total size of holdings	35.5
Other equities	3.4
Total equities	38.9
Cash & gilts less net current liabilities	29.6
Net assets	68.5

JJB SPORTS PLC

At 30 June 2009 the Fund's holding in JJB Sports Plc ('JJB') was valued at £11.2 million and the Fund was the biggest single shareholder in JJB.  

JJB has suffered severely both from operational issues and from credit concerns. The Fund's stake was purchased immediately after the company reached agreement with its creditors, giving it time to plan its recovery. We began an intensive engagement process with the JJB management in an attempt to ensure that it focused fully on the vital task of reviving and restocking its 253 stores. Our team has met the chairman and senior executives of JJB on a number of occasions. We have visited and assessed JJB stores, with the help of a highly experienced retailer on our team of consultants.

The recovery effort has not been helped by public questioning of JJB's strategy by supporters of a competitor and by controversies resulting from personal issues at board level. We have made vigorous efforts to ensure that JJB's executive team is fully focused on the recovery of the business and on delivering the returns of which we believe it is capable. This task requires diligence, focus and persistence. We remain fully committed to delivering significant value from this investment.

TATE & LYLE PLC

At 30 June 2009 the Fund's holding in Tate & Lyle Plc ('Tate') was valued at £8.4 million. Analysis of Tate's divisional and cash flow strengths suggested the potential to unlock value. With a market value of £1.4 billion it is at the top end of the Fund's target range and an activist strategy would succeed only with the support of other shareholders. Pressures for change are evident. Tate has appointed a new chief executive from outside the group, having already recruited a new chairman. We have met Tate's executives and further meetings are planned. In this case the engagement process is at an early stage.

PINEWOOD SHEPPERTON PLC

At 30 June 2009 the Fund was the fourth largest shareholder in Pinewood Shepperton Plc ('Pinewood') and its shareholding was valued at £5.7 million. We are encouraged that Pinewood is taking steps to unlock the potential value of its property, which we see as considerable though recognising that in current markets, crystallising value may be a long term process. Following consultation with local groups, Pinewood launched a planning application on 1 June 2009 for 'Project Pinewood' on 105 acres of green belt land adjoining its film studios. Though the film industry is affected by economic slowdown and by sporadic industrial disputes, Pinewood's trading has been resilient in the circumstances. We have held frequent meetings with Pinewood's executives as part of the engagement strategy. We have advanced our views on the realisation of property potential and on other aspects of delivering value. A useful and constructive dialogue has been established.

CHLORIDE GROUP PLC

At 30 June 2009 the Fund's holding in Chloride Group Plc ('Chloride') was valued at £4.3 million. The resilience of Chloride's power supply protection business has been demonstrated in difficult economic conditions. On 1 June 2009 it reported a 22 per cent. rise in sales for the year to March 2009, with pre-tax profits up 28 per cent. and dividends up 19 per cent. Emerson, which previously bid 270p per share for Chloride and was rejected, has commented that the downturn should provide it with good opportunities for selective acquisitions.

SSL INTERNATIONAL PLC

At 30 June 2009 the Fund's holding in SSL International Plc ('SSL') was valued at £3 million. Our belief that SSL is capable of rapid growth is clearly shared by its board, which set a target of growing earnings per share by 50 per cent. in the three years to March 2012. The undervaluation of this growth potential by the market raised the possibility of activism. Following a sharp rise in SSL's shares since the year end, the opportunity was taken to realise some profits on this investment. 

KENTZ CORPORATION LIMITED

At 30 June 2009 the Fund's holding in Kentz Corporation Ltd ('Kentz') was valued at £2.9 million. Kentz has an attractive oil services business based largely in the Middle East, where new developments are very resilient to lower oil prices. At the time of our initial investment, the company's market value was almost wholly underpinned by the cash in its balance sheet. We have engaged with Kentz management on a regular basis. We have proposed ideas to its board to improve the recognition and profile of the company with UK investors. A positive response has been received to our suggestions. Following a considerable rise in the share price, some profits were taken on part of the Fund's holding.

THE PORTFOLIO

At 30 June 2009 the total equity portfolio amounted to £38.9 million. Of this the six largest holdings accounted for £35.5 million, or 91 per cent. of the total. This concentration is in line with the policy set out in the admission document. In addition to the core activist situations, the Fund also invests in a limited number of stocks where it sees underlying value. While the focus remains firmly on our core brief, this strategy has helped to contribute to the good returns achieved in the first year of operation.

ENGAGEMENT

Engagement with the boards of investee companies is a key part of the Fund's strategy. Dialogue has now been established with most of companies in the portfolio. Lengthy and detailed meetings with their executive teams have been held. For example, in the four months to 30 June 2009, fourteen meetings were held with investee companies in addition to a large number of less formal discussions. 

Since many of the Fund's investments have been held for a relatively short time, it is still early to assess the overall results of engagement. We are encouraged by the response of several management teams to our suggestions. We recognise, however, that with companies which have more fundamental performance issues, the process may become more problematic. We remain committed to engaging and to giving managements all possible encouragement to deliver value for their shareholders and for ours.

Our experience with 3i Quoted Private Equity ('QPE') was particularly encouraging. Having identified and assessed it as a value opportunity, we held meetings with its management and urged them to take steps to resolve the undervaluation, which was particularly marked because of its large cash holding. The Fund built up a holding of 13.7 million shares at an average cost of 57p. In February 2009 3i Group Plc launched a cash and share offer bid for QPE at 88p. This enabled the Fund to sell its holding, realising a profit of £3.9 million and a net return of 53 per cent. on capital invested.

This was a very welcome result. We recognise, however, that the delivery of value in many cases is likely to take longer than the six month duration of the QPE investment.

PROSPECTIVE INVESTMENTS

The task of identifying prospective investments is being addressed on a continuous basis. A targeted and promising pipeline of potential investments has been identified and is undergoing further assessment. One of the issues that needs consideration is the potential exit routes from any investment, at a time when aversion to debt has made management buyouts much more difficult to finance. 

PROFILE/PUBLICITY

Under the guidance of the Board, we have taken initial steps to improve the visibility and recognition of the Fund and its performance. The Fund is now listed on the website of the Association of Investment Companies ('AIC') and the Trustnet website. These are independent sources and the information provided does not always come from Crystal Amber - for example, the AIC publishes daily estimates of net asset value, calculated by Fundamental Data Limited, an independent researcher. We remind investors that the Fund's net asset value figures are reported quarterly and shown on the Fund's website www.crystalamber.com. As the Fund's focus is on activism and engagement, it is inevitable that some of its actions will attract attention. The investment in JJB Sports, for example, has been extensively covered in the media. The Fund's focus will be on effective action, preferably achieved without the distraction of media excitement.

STRATEGY AND OUTLOOK

Stock markets have advanced considerably since March 2009 but it is by no means clear that confidence is soundly based. There are encouraging signs that the global economy may have bottomed out, but banks remain vulnerable as bad debts spread from property and investment banking to credit card and consumer lending. Commentators are eager to hail a recovery, yet the outlook remains uncertain.

In the quarter ended 30 June 2009, UK gross domestic product was 5.5 per cent. lower than a year ago. The deterioration in public sector finances is a severe constraint on any further effort to pump-prime the recovery. While 'lagging' indicators such as unemployment are likely to worsen for some time to come, confidence has improved since the cataclysmic events of autumn 2008. 

For the Fund, with more than half its resources now deployed in equities, the need for selectivity remains paramount. It is self-evident that some companies most in need of activism are not always the best run or the most soundly financed.

The economic background to the Fund's first year has been unstable and at times frightening, with the safety of some of the world's biggest financial institutions being questioned. As these fears receded, the challenge has been to ride the rollercoaster of recovery while maintaining a firm focus on the Fund's objectives. 

The challenges we face have changed rather than diminished. Our focus remains on delivering returns from the strategy set out in the admission document. The experience of the first year suggests that we can be quietly confident. 

Crystal Amber Asset Management (Guernsey) Limited

Investment Manager

INVESTING POLICY

Crystal Amber Fund Limited ('the Fund' or 'the Company') 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 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 will aim 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 will 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.

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.

Income Statement

For the year ended 30 June 2009

				Total	Total
		Revenue	Capital	2009	2008
	Notes	£	£	£	£
Income
Dividend income from listed investments		457,128	-	457,128	-
Interest income from UK Government securities		938,403	-	938,403	-
Fixed deposit interest		328,970	-	328,970	-
Bank interest		336,567	-	336,567	74,906
		2,061,068	-	2,061,068	74,906
Net gains on financial assets at fair value through profit or loss
Realised gain	8	-	7,202,801	7,202,801	-
Unrealised gain	8	-	5,240,225	5,240,225	-
Total income		2,061,068	12,443,026	14,504,094	74,906
Expenses
Transaction costs	4	-	473,077	473,077	-
Management fees	13,15	1,168,847	-	1,168,847	17,533
Performance fees	13,15	-	1,040,581	1,040,581	-
Directors' fees		95,000	-	95,000	76,658
Administration fees	13,15	74,735	-	74,735	2,877
Custodian fees	15	27,571	-	27,571	959
Audit fees		19,315	-	19,315	6,000
Other expenses		94,672	-	94,672	3,429
		1,480,140	1,513,658	2,993,798	107,456
Return for the year/period		580,928	10,929,368	11,510,296	(32,550)
Basic and diluted earnings/(loss) per share (pence)	5	0.97	18.21	19.18	(0.05)

All items in the above statement derive from continuing operations.

The total column of this statement represents the Company's Income Statement 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 2008 figures comprise revenue items only as there were no capital items.

Balance Sheet

as at 30 June 2009

	Notes	2009		2008
ASSETS		£		£
Cash and cash equivalents	6	12,228,732		54,616,689
Trade and other receivables	7	209,753		2,553,225
Financial assets designated at fair value through profit or loss	8	58,907,174		-
Total assets		71,345,659		57,169,914
LIABILITIES
Trade and other payables	9	2,820,652		155,203
Total liabilities		2,820,652		155,203
EQUITY
Capital and reserves attributable to the Company's equity shareholders
Share capital	10	600,000		600,000
Share premium	11	-		56,447,261
Distributable reserve	11	56,447,261		-
Retained earnings		11,477,746		(32,550)
Total equity		68,525,007		57,014,711
Total liabilities and equity		71,345,659		57,169,914
Net asset value per share (pence)	5	114.21		95.02

The financial statements were approved by a committee of the Board of Directors and authorised for issue on 8 September 2009.

Statement of Changes in Equity

For the year ended 30 June 2009

2008		Share	Share	Distributable	Retained earnings			Total
	Notes	Capital	Premium	Reserve	Capital	Revenue	Total	Equity
		£	£	£	£	£	£	£
Opening balance at 22 June 2007		-	-	-	-	-	-	-
Share capital issued	10	600,000	59,400,000	-	-	-	-	60,000,000
Share issue expenses		-	(2,952,739)	-	-	-	-	(2,952,739)
Revenue loss for the period		-	-	-	-	(32,550)	(32,550)	(32,550)
Balance at 30 June 2008		600,000	56,447,261	-	-	(32,550)	(32,550)	57,014,711
2009		Share	Share	Distributable	Retained earnings			Total
	Notes	Capital	Premium	Reserve	Capital	Revenue	Total	Equity
		£	£	£	£	£	£	£
Opening balance at 1 July 2008		600,000	56,447,261	-	-	(32,550)	(32,550)	57,014,711
Net realised gains on investments		-	-	-	7,202,801	-	7,202,801	7,202,801
Net unrealised gains on investments					5,240,225		5,240,225	5,240,225
Revenue profit for the year		-	-	-	-	580,928	580,928	580,928
Transaction costs		-	-	-	(473,077)	-	(473,077)	(473,077)
Performance fees		-	-	-	(1,040,581)	-	(1,040,581)	(1,040,581)
Transfer to distributable reserve	11	-	(56,447,261)	56,447,261	-	-	-	-
Balance at 30 June 2009		600,000	-	56,447,261	10,929,368	548,378	11,477,746	68,525,007

Statement of Cash Flows

For the year ended 30 June 2009

		2009		2008
	Notes	£		£
Cashflows from operating activities
Dividend income received from listed investments		343,561		-
Interest income received from UK Government securities		867,581		-
Fixed deposit interest received		376,625		-
Bank interest received		361,025		-
Management fees paid		(1,186,380)		-
Directors' fees paid		(147,908)		-
Other expenses paid		(180,844)		(19,300)
Net cash inflow/(outflow) from operating activities		433,660		(19,300)
Cashflows from financing activities
Proceeds from issuance of ordinary shares		2,462,075		57,537,925
Share issue expenses		(50,802)		(2,901,936)
Net cash inflow from financing activities		2,411,273		54,635,989
Cashflows from investing activities
Purchase of investments		(132,661,932)		-
Sale of investments		87,902,119		-
Transaction charges relating to the purchase and sale of investments		(473,077)		-
Net cash outflow from investing activities		(45,232,890)		-
Net (decrease)/increase in cash and cash equivalents during the year/period		(42,387,957)		54,616,689
Cash and cash equivalents at beginning of year/period		54,616,689		-
Cash and cash equivalents at end of year/period	6	12,228,732		54,616,689

Notes to the Financial Statements

For the year ended 30 June 2009

General Information

Crystal Amber Fund Limited is a company incorporated and registered in Guernsey on 22 June 2007 under The Companies (Guernsey) Law, 1994 which has been superseded by the Companies (Guernsey) Law 2008. 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 CISX on 17 June 2008. The Company is also a member of the AIC.

The comparative information for the period ending 30 June 2008 relates to the period from date of incorporation, 22 June 2007 to 30 June 2008.

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 and loss which are measured at fair value.

IFRS requires management to make judgments, 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.

The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the year ended 30 June 2009, but is derived from those accounts. The Auditors have reported on those accounts and their report was unqualified. 

Segmental reporting

The Company is organised and operates as one segment, both in terms of business and geography. Consequently, no segmental reporting is provided in the Company's financial statements.

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 balance sheet 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 Income Statement.

Financial instruments

Financial instruments comprise investment in equity and debt securities, 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 Income Statement. Gains and losses arising from changes in fair value are presented in the Income statement 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 balance sheet 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 income statement 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 income statement, 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 are 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 NOT APPLIED

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 30 June 2009, and have not been applied in preparing these financial statements. None of these will have an effect on the financial statements of the Company, except for: 

- IFRS 8 - Operating segments introduces the 'management approach' to segment reporting and it requires a change in the presentation and disclosure of segment information based on the internal reports regularly reviewed by the Company's Chief Operating Decision Maker in order to assess each segment's performance and to allocate resources to them. IFRS 8 which becomes mandatory for the Company's 2010 financial statements, is not expected to have a significant impact on the financial statements as the Company's Board is of the view that the Company is engaged in a single segment of business, being investment in UK equity instruments and also the Board, as a whole, has been determined as constituting the chief operating decision maker of the Company. 

- Revised IAS 1 Presentation of Financial Statements (2007) introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement and all non-owner changes in equity in a single statement), or in an income statement and a separate statement of comprehensive income. Revised IAS 1, which becomes mandatory for the Company's 2010 financial statements, is expected to have a significant impact on the presentation of the financial statements. 

- Amendments to IFRS 7 - Improving disclosures about financial instruments require enhanced disclosures about fair value measurements and liquidity risk and these amendments have been made to address application issues of IFRS 7 and provide useful information to users. These amendments which become mandatory for the Company's 2010 financial statements are expected to have impact on the financial instruments related disclosures in the financial statements.

3. TAXATION

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

4. TRANSACTION COSTS

During the year transaction charges relating to the acquisition and disposal of investments amounting to £473,077 were paid (2008: £nil). These are analysed as follows:

	2009		2008
	£		£
Stamp duty	252,908		-
Commissions and custodian transaction charges	220,169		-
	473,077		-

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

Basic and diluted earnings per share is based on the following data:
	2009		2008
	£		£
Return per income statement	11,510,296		(32,550)
Average number of issued Ordinary shares	60,000,000		60,000,000
Basic and diluted earnings per share (pence)	19.18		(0.05)
Net asset value per share is based on the following data:
	2009		2008
	£		£
Net asset value per balance sheet	68,525,007		57,014,711
Number of Ordinary shares outstanding	60,000,000		60,000,000
Net asset value per share (pence)	114.21		95.02

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 are analysed as follows:

	2009		2008
	£		£
Cash available on demand	5,514,335		24,616,689
Cash on deposit with maturities of less than 90 days	6,714,397		30,000,000
	12,228,732		54,616,689

Cash available on demand earns interest at a rate based on the bank call deposit rate while short-term placements earned interest ranging from 0.20 per cent. to 5.17 per cent. during the year.

7. TRADE AND OTHER RECEIVABLES

	2009		2008
	£		£
Trade receivables	187,183		91,150
Prepayments	22,570		-
Shareholder receivable	-		2,462,075
	209,753		2,553,225

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

	2009		2008
	£		£
Equity investments - UK listed equity securities	38,870,094		-
Bond investments - UK government bonds	20,037,080		-
	58,907,174		-
Opening balance	-		-
Purchases	134,370,232		-
Sales	(87,902,119)		-
Realised gain	7,202,801		-
Unrealised gain	5,240,225		-
Effect of exchange rate movements	(3,965)
Closing balance	58,907,174		-

9. TRADE AND OTHER PAYABLES

	2009		2008
	£		£
Accruals	1,112,352		155,203
Unsettled trade purchases	1,708,300		-
	2,820,652		155,203

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

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.

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:

	2009			2008
	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. SHARE PREMIUM AND SHARE ISSUE EXPENSES

The Company passed a special resolution cancelling the amount of £56,447,261 standing to the credit of the share premium account and transferring this to a distributable reserve. This was approved by the Royal Court of Guernsey on 18 July 2008.

12. 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 resulting in financial loss to the Company. At the balance sheet date 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 the balance sheet date. 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 balance sheet date and the Standard & Poor's credit rating for each counterparty.

	Location	Rating	Carrying Amount		Carrying Amount
			2009		2008
			£		£
MeesPierson (C.I.) Limited
(ultimately owned by Fortis Bank Nederland N.V.)	Guernsey	A-1	5,499,359		54,616,689
HSBC Bank Plc	Guernsey	AA	6,724,396		-
Other			4,977		-
			12,228,732		54,616,689

The above credit rating applies to Fortis Bank Nederland N.V and the HSBC Group.

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

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 the balance sheet date £64,406,533 (2008: £54,616,689) of the financial assets of the Company were held by the Custodian, MeesPierson (C.I.) 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.

Liquidity risk

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 table details the Company's expected maturity for its financial assets and liabilities:

2009	Weighted average interest rate	Less than 1 year	1-5 years	5+ years	Total
Assets
Non-interest bearing	-	39,079,847	-	-	39,079,847
Variable interest rate instruments	3.67%	32,265,812	-	-	32,265,812
Liabilities
Non-interest bearing	-	(2,820,652)	-	-	(2,820,652)
		68,525,007	-	-	68,525,007
2008	Weighted average interest rate	Less than 1 year	1-5 years	5+ years	Total
Assets
Non-interest bearing	-	91,150	-	-	91,150
Variable interest rate instruments	5.14%	57,078,764	-	-	57,078,764
Liabilities
Non-interest bearing	-	(155,203)	-	-	(155,203)
		57,014,711	-	-	57,014,711

Interest rate risk

The Company is exposed to interest rate risk as it has funds held on deposit, current account balances and UK Government bonds. 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 balance sheet date. An increase/decrease of 0.5 per cent. represents management's assessment of a reasonably possible change in interest rates.

If interest rates had been 0.5 per cent. higher/lower and all other variables were held constant:

• the Company's profit for the year ended 30 June 2009 would have increased/decreased by £197,329 (2008: £10,947)

• there would have been no impact on the other equity reserves

Price risk

The Company's exposure to market price risk arises from uncertainties about future prices of its investments. 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 to any single investment at the time of investment.

The following table details the Company's investments:

Equity Investments	Sector	Value £		Percentage of Gross Assets
JJB Sports Plc	Retail	11,236,307		16
Tate & Lyle Plc	Food producers	8,433,625		12
Pinewood Shepperton Plc	Media	5,653,529		8
Chloride Group Plc	Electronic & electrical equipment	4,318,543		6
SSL International Plc	Personal goods	2,968,944		4
Kentz Corporation Ltd	Oil Equipment & services	2,869,396		4
Other	Various	3,389,750		5
Total		38,870,094		55
Bond Investments
UK Treasury 5.75% - maturity: 7 December 2009		20,037,080		29

If market prices had been 25 per cent. higher/lower at the balance sheet date and all other variables were held constant:

• the Company's profit and net assets for the year ended 30 June 2009 would have increased/decreased by £14,726,794 (2008: £nil)

• 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 2009.

13. 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 £74,735 (2008: £2,877) of which £18,750 (2008: £nil) was outstanding at the year end. Mark Huntley also received a Director's fee of £20,000 (2008: £12,219) of which £5,000 (2008: 12,219) was outstanding at the year end.

Richard Bernstein is a director of the Investment Manager and a holder of 530,000 Ordinary Shares, representing 0.88 per cent. (2008: 0.58 per cent.) of the issued share capital of the Company at the year end. Subsequent to the year end he increased his holding to 600,000 Ordinary Shares representing 1.0 per cent. of the issued share capital. During the year the Company incurred management fees of £1,168,847 (2008: £17,533) all of which had been paid at the year end (2008: £17,533). The Company also incurred performance fees of £1,040,581 (2008: £nil) all of which were outstanding at the year end.

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

14. DIRECTORS' REMUNERATION

		2009		2008
		£		£
William Collins		30,000		18,329
Sarah Evans		25,000		25,617
Mark Huntley		20,000		12,219
Nigel Ward		20,000		20,493
Total		95,000		76,658

15.  MATERIAL AGREEMENTS

The Company has entered into the following material agreements:

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

The Company has entered into a management agreement with the Manager. 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:

• 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

• 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:

• the Basic Performance Hurdle;

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

• the high water mark.

Heritage International Fund Managers Limited (the 'Administrator')

The Company has entered into an administration agreement with the Administrator. The Administrator has been appointed to provide administration and secretarial services to the Company. For these services, the Administrator will be paid an annual fee of 0.1 per cent. of the Net Asset Value (subject to a minimum of £75,000 per annum.)

MeesPierson (C.I.) Limited (formerly Fortis Bank (C.I.) Limited) (the 'Custodian')   

The Company has entered into a custodian agreement with the Custodian which was updated during the year for fee changes taking effect from 1 January 2009. The Custodian will receive a fee, calculated and payable quarterly in arrears at the annual rate of 0.05 per cent. (2008: 0.03 per cent.) of NAV per annum, subject to a minimum fee of £25,000 per annum. Transaction charges of £100 (2008: £150) per trade for the first 200 trades processed in a calendar year and £75 (2008: n/a) per trade thereafter are also payable.

16. 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.

17.  DIVIDENDS

No dividends were paid or are proposed in respect of the year ended 30 June 2009.

18.  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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