TIDMDIAM
RNS Number : 2925L
Diamond Circle Capital Plc
03 September 2012
DIAMOND CIRCLE CAPITAL PLC
Unaudited Condensed Half-Yearly Financial Statements
For the period from 1st January 2012 to 30th June 2012
Report of the Directors
For the period from 1st January 2012 to 30th June 2012
The Directors have pleasure in presenting the interim condensed
financial statements of Diamond Circle Capital PLC (the "Company")
for the period from 1st January 2012 to 30th June 2012.
The Company
The Company was registered on 29 May 2007 with the registration
number 119887C and was incorporated and is domiciled in the Isle of
Man. The Company was incorporated under the Companies Act 1931 to
2004 as a closed-ended investment Company. Its Ordinary Shares are
traded on the London Stock Exchange.
Investment Objective
The investment objective of the Company during the period was to
seek to produce long-term appreciation of its portfolio of diamonds
by creating a portfolio of polished diamonds for long-term
investment. It was intended that diamonds within the Company's
diamond portfolio would be traded only when the Investment Adviser
believes that there was a profitable opportunity to make a sale or
a purchase. Following the results of voting at an Extraordinary
General Meeting held on 12 July 2012, the investment objective and
policy has been amended, and the Company will now be managed with a
view to realising its existing portfolio of diamonds in an orderly
and timely manner and returning the net proceeds of sale to
Shareholders at such times and in such manner as the Board may in
its absolute discretion determine.
Results and dividends
The results for the period and the Company's financial position
at the end of the period are shown on page 9 and page 10
respectively.
The Directors expect to declare dividends in the near future, as
part of a overall strategy to return capital to shareholders as and
when sufficient reserves are available and in such manner as the
Board deem appropriate.
Directors
The Directors of the Company who served during the period and at
the period end is as follows: -
Patrick Rupert Cottrell (Chairman)
Jonathan David Clague (Chairman of Audit Committee)
Clive Parrish
Pavlo Protopapa Resigned 29 February 2012
The Directors interest in the share capital of the Company at 30
June 2012 were:
Number of Ordinary Shares
Patrick Rupert Cottrell 5,000
Substantial interest in share capital
As at 30 June 2012, the following holdings represented more than
3 per cent of the Company's issued share capital.
Number of Ordinary Percentage
Shares Held
Abdullah Chatila 4,629,500 62.3
Diapason Commodities Management
S.A. *1,003,867 13.5
UBS AG Zurich 664,150 8.9
Numis Securities 284,115 3.8
* Information provided by Diapason Commodities Management
S.A
The Investment Adviser
AUM Asset Management Limited were appointed as Investment
Adviser, effective from 20 July 2011.
Listing
On 25 June 2008, the Company's Ordinary Shares were admitted to
trading on the Main Market of the London Stock Exchange. Upon
incorporation 2 Ordinary Shares were issued at a price of $1 per
share. On 25 June 2008, the Company issued 7,432,398 Ordinary
Shares in its initial placing at an offer price of $10 per
share.
Going Concern
Following the result of the voting on the Company's investment
policy at an Extraordinary General Meeting held on 12 July 2012,
the Company is embarking on a managed realisation of its existing
portfolio in an orderly and timely manner, returning the net
proceeds to Shareholders, and accordingly the accounts have been
prepared on a break up basis.
The Directors consider that the Company has adequate resources
to continue to meet its liabilities as they fall due.
Corporate Governance Statement
The Company is a closed-ended investment Company registered and
incorporated in the Isle of Man on 29 May 2007. The Company
complies with the corporate governance obligations that are
applicable to it under Isle of Man Law. The Combined Code does not
directly apply to companies incorporated in the Isle of Man but the
Directors have complied with the relevant requirements of the
Combined Code to the extent that they consider it appropriate
having regard to the Company's size and nature of business. The
Board is not presently aware of any respects in which it will
depart from this approach and the Board considers that the Company
has complied with this approach to corporate governance throughout
this accounting period.
The Board of Diamond Circle Capital PLC has developed its
internal procedures to be in line with the recommendation of the
Combined Code where appropriate and these are monitored on a
regular basis. The Directors will continue to comply with the
relevant requirements of the Combined Code to the extent that they
consider it appropriate.
Responsibilities of the Board
The Board of Directors is responsible for the determination of
the investment policy of the Company and for its overall
supervision via the investment policy and objectives that it has
set out. The Board is also responsible for the Company's day-to-day
operations; however, since the Board members are all non-executive,
in order to fulfill these obligations, the Board has delegated
operations through arrangements with the Investment Adviser and
Administrator.
The Board intends to meet at least four times a year at which
time the Directors review the management of the Company's assets
and all other significant matters so as to ensure that the
Directors maintain overall control and supervision of the Company's
affairs. The Board is responsible for the appointment and
monitoring of all service providers to the Company. Between these
quarterly meetings there is regular contact with the Investment
Adviser and Administrator. The Directors are kept fully informed of
investment and financial controls and other matters that are
relevant to the business of the Company and should be brought to
the attention of the Directors. The Directors also have access to
the Secretary and, where necessary in the furtherance of their
duties, to independent professional advice at the expense of the
Company.
The Articles of Association provide that unless and until
otherwise determined by ordinary resolution of the Company, the
Directors (other than alternate Directors) shall be no less than
two and no greater than twelve in number. In addition the Directors
(other than alternate Directors) shall be entitled to receive by
way of fees for their services as Directors such sum as may be
determined from time to time by the Board, not exceeding, in
aggregate, $200,000 per annum or such other sum as the Company in
general meeting shall from time to time determine.
The Board and Committees
The Company has established an Audit Committee, which is due to
meet formally at least twice a year. The principal duties of the
Audit Committee are to:
- consider the appointment of external auditors;
- discuss and agree with the external auditors the nature and
scope of the audit;
- review the scope, results and cost effectiveness of the
audit;
- review the independence and objectivity of the auditors;
- review the external auditors' letter of engagement and
management letter;
- analyse the key procedures adopted by the Company's service
providers;
- review the annual financial statements and interim report and
recommend them to the Board for approval;
- consider the requirement of an internal audit function;
In addition where non-audit services are to be provided by the
auditors, full consideration of the financial and other
implications on the independence of the auditors arising from any
such engagement will be considered before proceeding.
The Audit Committee is due to meet twice a year. In addition,
there have been a small number of ad hoc meetings of the board to
review specific items between the regular scheduled quarterly
meetings.
All the Directors are non-executive and therefore a nomination
committee is not required. The Company has not established a
separate remuneration committee as the Board is satisfied that any
relevant issues can be properly considered by the Board or by the
established Audit Committee.
The Board has a breadth of experience relevant to the Company
and the Directors believe that any changes to the Board's
composition can be managed without undue disruption. With any new
Director appointment to the Board, consideration will be given as
to whether an induction process is appropriate.
Internal Controls
The Board recognises the need for effective high level internal
controls. High level controls in operation at the Company
include:
- Segregation of duties between relevant functions and
departments within the Administrator and the Investment
Adviser;
- consideration of administration reports and portfolio
valuations provided by the Administrator; and
- consideration of Investment Adviser reports and analysis.
The Company's administrator, IOMA Fund and Investment Management
Limited has a number of internal control functions including a
dedicated Compliance Officer whose role includes the maintenance of
a log of errors and breaches which are reported to the Board of
both the Company and Administrator at each quarterly board
meeting.
Relations with Shareholder
The Board believes that the maintenance of good relations with
Shareholders is important for the long term prospects of the
Company. The Board receives feedback on the views of Shareholders
from the corporate broker and the Investment Adviser.
All general meetings of the Company will be held in the Isle of
Man. The Company held its annual general meeting on 13 June 2012,
and an extraordinary general meeting on 12 July 2012 to consider
the proposed change to the investment strategy and policy.
Principal risks and uncertainties
The principal risks facing the Company relate to the Company's
investment activities. These risks are market risk (comprising of
price risk, interest rate risk, currency risk) liquidity risk,
credit risk and off-balance sheet risk.
An explanation of these risks and how they are managed is
contained in Company's Audited Financial Statements for the year
ended 31 December 2011. Other risk factors facing the Company
include the following: Capital Management Risk, Regulatory Risks
(including Listing Rules of the UK Listing Authority ("Listing
Rules") or Rules of the London Stock Exchange ('LSE Rules") and
Taxation. The principal risks and uncertainties have not changed
since the publication of the Annual Report.
Directors' Responsibility Statement
For the period from 1st January 2012 to 30th June 2012
To the best of the knowledge of the Directors:
The condensed half-yearly financial statements give a true and
fair view of the assets, liabilities, financial position and
comprehensive income of the Company and has been prepared in
accordance with International Accounting Standards (IAS) 34
'Interim Financial Reporting'.
The Interim Management Statement includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred in the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
For and on behalf of the Board of Directors
Rupert Cottrell
Director
Interim Management Report
For the period from 1st January 2012 to 30th June 2012
MARKET COMMENT
After a promising start, the first half of 2012 eventually
proved to be a challenging period for the diamond market.
The seeds of the current weakness had been planted a while ago
and are now well documented, e.g. the seemingly ever-worsening
European fiscal and banking situation, the protracted slowing down
of economic momentum in emerging markets in general and China in
particular, and the lack of significant job creation in the US.
Initially, its objectively sound fundamentals enabled the
diamond market to very convincingly absorb the aforementioned
shocks and to show a very good face against a background of
increasing weakness of all "risk assets". But there is no such
thing as complete decorrelation these days, and at some stage the
diamond market had to be mechanically contaminated by the plight of
commodities overall. Beyond exogenous stress, the diamond market
also suffered from more endogenous developments: the sharp fall of
the Indian rupee to new all-time lows, a dwindling trading
liquidity, and, more down to earth, the fact that rough prices
remained stubbornly high for too long, logically resulting in
excess supply down the line and therefore price pressure all along
the value chain from the very last days of spring onwards.
Over the period, the PolishedPrices Composite Rough Diamond
Index shed 11%. Polished diamonds demonstrated better resistance,
losing only 4.5% during the semester.
Meanwhile, top coloured diamonds continued to register prices
close to all-time highs at auctions. Highlights include a
3.54-carat fancy blue that sold for USD 2,434,500 at Sotheby's in
New York and a 12.04-carat fancy intense pink, known as the Martian
Pink, which sold for an impressive USD 1,452,267 per carat at
Christie's spring sale of Hong Kong Magnificent Jewels.
FUND ACTIVITY
Activity was severely hindered by the progressive evaporation of
liquidity on the trading front. DCC's Board decided to take some
profits in January 2012, subsequently increasing cash levels to
12%. But the sheer lack of momentum in the market place prevented
any kind of meaningful arbitrage thereafter. Net cash amounted to
9.94% of assets at the end of the period.
The Fund's NAV consolidated marginally from 7.20 to 7.02
(-2.5%)
Following the acquisition by Mr Chatila of 62.29% of the voting
of the company in June 2012, shareholders decided at an
Extraordinary General Meeting held on 12 July 2012 that "the
Company will now be managed with a view to realising its existing
portfolio of diamonds in an orderly and timely manner and returning
the net proceeds of sale to shareholders at such times and in such
manner as the Board may in its absolute discretion determine."
OUTLOOK
Short-term prospects remain somewhat challenging for the diamond
market and should remain so as long as risk aversion is clearly the
main topic on the agenda of markets and the industry overall. More
concretely, the market will therefore remain vulnerable until
liquidity resumes at normal levels. Arguably, the current policies
of central banks worldwide should help in that regard, but how long
will that process take?
In the meantime, cautiousness should continue to rule and
preference be given to the most liquid segments of the markets.
In the longer term, diamond fundamentals remain outstanding and
any consolidation on prices of gems, especially the top ones,
should therefore be seen as an investment opportunity on a
reasonable horizon. After the summer recess, the forthcoming Hong
Kong Gems and Jewellery Show will be the next moment of truth for
gems.
Diamond Circle Capital PLC
Half-Yearly Condensed Statement of Comprehensive Income
For the period from 1st January 2012 to 30th June 2012
6 month 6 month
to to Year ended
Note 30 Jun 2012 30 Jun 2011 31 Dec 2011
(Audited)
$ $ $
Income
Unrealised (loss)/gain on revaluation
of investment diamonds 3 (4,098,786) 2,634,114 5,658,240
Net loss on financial asset at fair value
through profit or loss - (414) (3,730)
Interest income on bank balances - 172 234
Net realised and unrealised foreign exchange
(losses)/gains (6,701) 1,898 (1,648)
Realised gain/(loss) on sale of investment
diamonds 130,200 - (289,146)
Realised (loss) on financial asset at
fair value through profit and loss - (3,316) -
------------ ------------ ------------
(3,975,287) 2,632,454 5,363,950
------------ ------------ ------------
Expenses
Investment adviser fees 8 (266,364) (370,051) (647,908)
Board of experts' fees 9 (100,000) (150,000) (250,000)
Valuators' fees 10 (121,409) (100,000) (200,000)
Directors' fees (69,623) (56,560) (122,370)
Administration fees 11 (57,000) (42,000) (84,000)
Safe custody fees (77,151) (65,745) (131,579)
Registrar and transfer agent fees (5,938) (9,000) (18,000)
Audit fees (14,456) (23,936) (40,780)
Professional fees (337,697) (103,341) (187,820)
Marketing expenses (75,000) - (80,086)
Other expenses (294,290) (54,806) (166,398)
(1,418,928) (975,439) (1,928,941)
------------ ------------ ------------
(Loss)/(Profit) for the period/year before
taxation (5,394,215) 1,657,015 3,435,009
Taxation - - -
Total comprehensive (loss)/income for
the period/year after taxation (5,394,215) 1,657,015 3,435,009
------------ ------------ ------------
Earnings per share - Basic and diluted
(cents) 12 (0.73) 0.22 0.46
============ ============ ============
There are no other items that require disclosure in the
Statement of Comprehensive Income.
All operating activities are discontinuing from 12 July
2012.
Half-Yearly Condensed Statement of Financial Position
As at 30th June 2012
30 June 31 December 30 June
Note 2012 2011 2011
(Audited)
$ $ $
Non-Current Assets
Investment diamonds 3 - 47,966,370 47,370,564
---------------------- --------------------- ---------------------
- 47,966,370 47,370,564
Current Assets
Assets held for resale 3 42,565,584 - -
Cash and cash equivalents 4 5,170,651 5,386,313 4,621,464
Prepayments and debtors 5 136,303 136,936 24,360
---------------------- --------------------- ---------------------
Total current assets 47,872,538 5,523,249 4,645,824
TOTAL ASSETS 47,872,538 53,489,619 52,016,388
Non-Current Liabilities
Preliminary expenses 6 - 339,716 631,945
Current Liabilities
Trade and other payables 6 951,210 834,360 846,894
TOTAL LIABILITIES 951,210 1,174,076 1,478,839
---------------------- --------------------- ---------------------
Capital and Reserves
Issued share capital 7 74,324 74,324 74,324
Share premium 74,249,676 74,249,676 74,249,676
Retained earnings (27,402,672) (22,008,457) (23,786,451)
---------------------- --------------------- ---------------------
46,921,328 52,315,543 50,537,549
---------------------- --------------------- ---------------------
TOTAL EQUITIES AND LIABILITIES 47,872,538 53,489,619 52,016,388
---------------------- --------------------- ---------------------
Net asset value per Ordinary
Share 6.31 7.04 7.01
====================== ===================== =====================
These financial statements were approved by the Board on 29
August 2012.
Half-Yearly Condensed Statement of Changes in Equity
For the period from 1st January 2012 to 30th June 2012
Share Share Retained
Capital Premium Earnings Total
$ $ $ $
Balance at 1(st) January 2011 74,324 74,249,676 (25,443,466) 48,880,534
Total comprehensive income
for the period - - 1,657,015 1,657,015
Balance at 30 June 2011 74,324 74,249,676 (23,786,451) 50,537,549
======== =========== ============= ============
Total comprehensive income
for the period - - 1,777,994 1,777,994
Balance at 31(st) December
2011 74,324 74,249,676 (22,008,457) 52,315,543
Total comprehensive income
for the period - - (5,394,215) (5,394,215)
Balance at 30 June 2012 74,324 74,249,676 (27,402,672) 46,921,328
======== =========== ============= ============
Half-Yearly Condensed Statement of Cash Flows
For the period from 1st January 2012 to 30th June 2012
6 months 6 months
to to Year ended
31 Dec
30 Jun 2012 30 Jun 2011 2011
(Audited)
Note $ $ $
Operating activities
Total comprehensive income for the period/year (5,394,215) 1,657,015 3,435,009
Adjustments to reconcile loss before
tax to net cash flows
Decrease/(increase) in value of investment
diamonds 4,098,786 (2,634,114) (5,658,239)
Decrease in value of financial assets - 3,730 414
Increase/(decrease) in prepaid expenses
and sundry debtors 633 22,538 (90,038)
Decrease in creditors and accruals (222,866) (311,885) (616,648)
Interest on bank balances - (172) (234)
Realised (gain)/loss on sale of investment
diamonds (130,200) - 292,461
-------------- ------------- ------------
Net cash flows from operating activities (1,647,862) (1,262,888) (2,637,275)
-------------- ------------- ------------
Investing activities
Purchase of investment diamonds - - (6,548,800)
Proceeds of financial assets designated
at fair value through the profit and
loss - 3,991,304 3,991,303
Proceeds from sale of investment diamonds 1,432,200 - 8,687,975
Receipt of interest on bank balances - 172 234
-------------- ------------- ------------
Net cash flows from investing activities 1,432,200 3,991,476 6,130,712
-------------- ------------- ------------
Changes in cash and cash equivalents (215,662) 2,728,588 3,493,437
Cash and cash equivalents as at period
start 5,386,313 1,892,876 1,892,876
Cash and cash equivalents as at period
end 4 5,170,651 4,621,464 5,386,313
-------------- ------------- ------------
Notes to the Condensed Half-Yearly Financial Statements
For the period from 1st January 2012 to 30th June 2012
1. General information
Diamond Circle Capital PLC, ("the Company") is a closed-ended
investment Company registered and incorporated in the Isle of Man
on 29 May 2007. The Company was formed to invest in polished
diamonds and has no fixed life. The Company was incorporated under
the Companies Act 1931 to 2004 and is a limited company. The
Company was launched on 29 May 2007 and commenced operations on 1
July 2008.
The investment objective of the Company during the period was to
seek to produce long-term appreciation of its portfolio of diamonds
by creating a portfolio of polished diamonds for long-term
investment. It was intended that diamonds within the Company's
diamond portfolio would be traded only when the Investment Adviser
believes that there was a profitable opportunity to make a sale or
a purchase. Following the results of voting at an Extraordinary
General Meeting held on 12 July 2012, the investment objective and
policy has been amended, and the Company will now be managed with a
view to realising its existing portfolio of diamonds in an orderly
and timely manner and returning the net proceeds of sale to
Shareholders at such times and in such manner as the Board may in
its absolute discretion determine.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
the financial statements are set out below.
2.1 Basis of preparation
The interim condensed consolidated financial statements for the
six months ended 30 June 2012 have been prepared in accordance with
IAS 34 - Interim Financial Reporting. The interim condensed
consolidated financial statements do not include all the
information and disclosures required in the annual financial
statements, and should be read in conjunction with the company's
annual financial statements as at 31 December 2011. Following the
result of the voting on the Company's investment policy at an
Extraordinary General Meeting held on 12 July 2012, the Company is
embarking on a managed realisation of its existing portfolio in an
orderly and timely manner, and returning the net proceeds to
Shareholders, the accounts have been prepared on a break up
basis.
2.2 Diamonds
Diamonds are initially recognised at cost; this is calculated as
the fair value of the consideration given including the transaction
costs associated with acquiring the diamonds.
Subsequent to initial recognition, the investment diamonds were
previously stated at fair values which reflected the market
conditions at the balance sheet date. Following the change to the
break up basis as described in note 2.1 the investment diamonds are
stated at net realisable value, which reflects the market
conditions and expected realisable value at the balance sheet date.
Gains or losses arising from changes in the values of the
investment diamonds are included in the Statement of Comprehensive
Income in the period in which they arise.
Following a sealed bid auction of the Company's portfolio on 6
August 2012 sales were agreed on 5 of Company's diamonds, as
detailed in the subsequent event note. These assets have been
valued at net realisable value being the total gross sales less
costs to sell.
The remaining stones that have not been sold post balance sheet
have been valued on the basis of a report issued on 31 May 2012 by
the Valuators (see Note 3), which projected the expected sales over
a 3, 6 and 12 month period. For the purposes of these interim
reports the Directors have elected to adopt the 3 month projection,
being the Directors best estimate of the realisable value of the
stones as at 30 June 2012.
2.3 Changes and future changes in accounting standards
The accounting policies adopted in the preparation of the
condensed financial statements are consistent with those followed
in the preparation of the Company's annual financial statements for
the year ended 31 December 2011, except for the adoption of
amended, improved and new standards and interpretations detailed
below.
Title New since Status Issue date Effective date
March 2011 of the original (annual periods
standard beginning on
or after)
Effective for annual periods (and interim periods therein)
ending 30 June 2012 and thereafter:
2010 Improvements to IFRSs No Mandatory May 2010 Various
IAS 24 Amendment - Related
Party Disclosures No Mandatory November 2009 1 January 2011
IFRIC 14 Amendment - Prepayments No Mandatory November 2009 1
January 2011
of a Minimum Funding Requirement
Amendments to IFRS 7 - Disclosures - No Mandatory October 2010 1
July 2011
Transfers of Financial Assets
Amendments to IFRS 1 - Severe No Mandatory December 2010 1 July
2011
Hyperinflation and Removal of
Fixed Dates for First-time Adopters
Amendments to IAS 12 - Deferred No Mandatory December 2010 1
January 2012
Tax: Recovery of Underlying Assets
Effective for annual periods (and interim periods therein)
ending 30 June 2013 or thereafter:
IFRS 9 - Financial Instruments: No May early adopt November 2009
1 January 2015
(issued in 2009)
IFRS 9 - Financial Instruments No May early adopt October 2010 1
January 2015
(issued in 2010)
IFRS 13 - Fair Value Measurement Yes May early adopt June 2011 1
January 2013
Title New since Status Issue date Effective date
March 2011 of the original (annual periods
standard beginning on
or after)
IAS 27 (Revised) - Separate Yes May early adopt May 2011 1
January 2013
Financial Statements
Amendment to IAS 1 - Presentation Yes May early adopt June 2011
1 July 2012
of Items of Other Comprehensive Income
Amendment to IAS ew - Offsetting Yes May early adopt December
2011 1 January 2014
Financial Assets and Financial Liabilities
Amendments to IFRS 7 - Disclosures - Yes December 2011 1 January
2013
Offsetting Financial Assets and
Financial Liabilities
Amendments to IFRS 7 and IFRS 9 - Yes May early adopt December
2011 1 January 2015
Mandatory Effective Date and
Transition Disclosures
2.4 Segment reporting
An operating segment is a component of an entity:
(a) that engages in business activities from which it may earn
revenues and incur expenses (including revenues and expenses
relating to transactions with other components of the same
entity);
(b) whose operating results are regularly reviewed by the Board
and along with the Investment Advisor to make decisions about
resources to be allocated to the segment and assess its
performance; and
(c) for which discrete financial information is available
A geographical segment is engaged in providing products or
services within a particular economic environment that are subject
to risks and returns that are different from those of segments
operating in other economic environments.
The Directors are of the opinion that the Company is engaged in
a single operating segment being investment in diamond assets in
one geographical area, being the Isle of Man.
2.5 Critical accounting estimates and assumptions
The key assumptions concerning the future and other key sources
or estimation of uncertainty at the period end, that have a
significant risk or causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are discussed below.
Valuation of investment diamonds
The realisable value of the Company's investment diamonds of
$42,565,584 (2011: $47,966,370) was determined by professionally
qualified independent Valuators, Mr Teakle and Mr. Block, acting in
their capacity as external Valuators, with the exception of the 5
stones sold as a result of the sealed bid auction on 6 August 2012,
which have been valued at the net realisable value being gross
sales less cost of sales totalling $9,695,584.
Each Valuator provided a portfolio valuation based on expected
sales over a 3, 6 and 12 month period to the Directors as at 31 May
2012 on a diamond-by-diamond basis, and the Directors agreed to
adopt the 3 month projection as the basis of valuation to prepare
the financial statements. The period end portfolio consists of both
colourless and coloured diamonds and each type is valued slightly
differently. Approximately 70% of the period end portfolio consists
of colourless diamonds and 30% of coloured diamonds.
The following significant assumptions and techniques are used by
the valuators in the valuation of colourless and coloured
investment diamonds:
Colourless diamonds
The valuation of the colourless diamonds is driven by the
Rapaport price guidance, market conditions, the uniqueness of each
diamond together with the knowledge and professional judgement of
the external valuators.
Coloured diamonds
There is no equivalent to the Rapaport price guidance for
coloured diamonds as these types of diamonds tend to more unique
and rarer than colourless diamonds. The assumptions, judgements and
estimates in the valuation of coloured diamonds takes account of
the following factors:
-- current valuations available for similar diamonds
-- recent agreed sales prices of diamonds sold on the open
market usually through public auction houses
-- market conditions and activity levels
-- knowledge, professional judgement and expertise of the external valuators.
Although transaction evidence underpins the valuation process,
the Valuators must also reflect the realities of the current
market. In this context Valuators must use their knowledge and
professional judgement and not rely upon historic market sentiment
based on historic transaction comparables. In these circumstances,
there is likely to be greater uncertainty in respect of the
valuations. There is no assurance that the estimated values
resulting from the valuation process would be reflected in the
actual sales proceeds, even if the sales occurred shortly after the
valuation date.
3. Assets held for resale
30 Jun 2012 31 Dec 2011 30 Jun
2011
$ $ $
Cost of diamonds on hand at
start of period 57,262,050 59,690,370 59,690,370
Cost of diamonds purchased - 6,548,800 -
Disposals at cost (1,302,000) (8,977,120) -
------------- ------------ -------------
Cost of diamonds on hand at
end of period 55,960,050 57,262,050 59,690,370
Unrealised loss on revaluation
of investment diamonds (13,394,466) (9,295,680) (12,319,806)
Market value of diamonds on
hand at end of period 42,565,584 47,966,370 47,370,564
------------- ------------ -------------
The diamonds sold as a result of the sealed bid auction on 6
August 2012, have been valued at the net realisable value being
gross sales less cost to sell, totaling $9,695,584.
The diamonds that were not sold post balance sheet were valued
as at the 31 May 2012 by two professionally qualified Valuators
acting in their capacity of independent, external Valuators. The
two Valuators used are Mr. Teakle and Mr. Block. Mr. Teakle is a
graduate gemologist with a diploma from the National Association of
Goldsmiths. Mr. Block attended New York University's Institute of
Fine Arts and has been a specialist and an auctioneer in the
diamond field since 1970. The report was commissioned by the Board
to establish the expected sales over a 3, 6 and 12 month period,
and for the purpose of the financial reports the Directors have
elected to adopt the 3 month projected sales as the basis of
valuation.
However, the Valuators have also used their market knowledge and
professional judgment and not simply relied upon historical
transactions for comparison. As a result of the level of
professional judgment used in preparing the valuations, the amounts
ultimately realised in respect of any given diamond may differ from
the valuations in the balance sheet.
The principal risk faced by the Company is the fluctuation in
the price of diamonds. The carrying value of the diamonds is based
on the valuation provided by independent Valuators and the fair
value includes an element of estimation on part of the
Valuations.
4. Cash and cash equivalents
30 Jun 2012 31 Dec 2011 30 Jun 2011
$ $ $
Cash and cash equivalents 5,170,651 5,386,313 4,621,464
Represented by:
Cash at bank 5,170,651 5,386,313 4,621,464
============ ============ ============
5. Prepayments and debtors
30 Jun 2012 31 Dec 2011 30 Jun 2011
$ $ $
Prepaid expenses - 23,604 9,216
Prepaid insurance - 96,314 -
Sundry debtors 53,943 - -
VAT receivable 82,360 17,018 15,144
136,303 136,936 24,360
============ ============ ============
6. Trade and other payables
30 Jun 2012 31 Dec 2011 30 Jun 2011
Non-current $ $ $
Preliminary expense payable - 339,716 631,945
------------ ------------ ------------
Current
Administration fees payable 26,340 24,824 21,000
Audit fees payable 12,743 24,869 11,275
Directors' fees payable 28,961 41,714 23,847
Shariah board fees 15,000 80,000 65,000
Investment adviser fee 42,942 45,689 63,754
Board of experts fees - - 25,000
Preliminary expense payable 631,839 584,172 584,172
Registrar fees and Agent
fees payable 4,656 4,240 4,219
Other professional fees 14,406 1,299 16,347
Safe custody fees payable 28,900 27,553 32,280
Insurance 145,423 - -
------------ ------------ ------------
951,210 834,360 846,894
951,210 1,174,076 1,478,839
============ ============ ============
7. Share capital
30 Jun 2012 31 Dec 2011 30 Jun 2011
$ $ $
Authorised share
capital
100,200,000 Ordinary Shares
of $0.01 each 1,002,000 1,002,000 1,002,000
1,002,000 1,002,000 1,002,000
============ ============ ============
Issued share capital
7,432,400 Ordinary Shares of
$0.01 each 74,324 74,324 74,324
74,324 74,324 74,324
============ ============ ============
The shareholders of the Company have the right to receive notice
of, and to attend and vote at, general meetings of the Company and
each holder of Ordinary Shares being present in person or by
attorney at a meeting upon a show of hands has one vote and upon a
poll each such holder present in person or by proxy or by attorney
has one vote in respect of each Ordinary Share held by him. On
winding up, the Shareholders have the right to receive a part of
the assets of the Company.
The Articles contains provisions as to the rights of pre-emption
on the allotment of Ordinary Shares, the Directors have obtained a
general authority, granted pursuant to a composite special
resolution passed by the members of the Company, to allot Ordinary
Shares for cash on a non-pre-emptive basis otherwise than in
connection with the Offer. The Directors will only consider issuing
further Ordinary Shares at or above the then prevailing estimated
Net Asset Value per Share.
8. Investment Adviser fees
The Company pays to the Investment Adviser an advisory fee equal
to a rate of 1.0%, (expressed annually) of net assets value (before
deduction of that months management fee and before the deduction of
any accrued performance fee). The advisory fee is payable monthly
in arrears.
The Investment Advisor is entitled to a Performance Fee to be
calculated in respect of each period of 3 years ending on 31 July
in each relevant year (a "Calculation Period"). The Performance Fee
is deemed to accrue on a monthly basis as at the calculation date
of each Net Asset Value.
For each Calculation Period, the Performance Fee will be an
amount equal to 11.5 per cent. of the increase in the Net Asset
Value as calculated at the end of the Calculation Period over the
Base Net Asset Value provided such increase is equal to or exceeds
6.5 per cent per annum. (the "Trigger Return") and will be paid net
of any Interim Payments (as defined below) that may have been paid
by the Fund in respect of the relevant Calculation Period. The
"Base Net Asset Value" is the highest Net Asset Value achieved as
at the end of any previous Calculation Period (if any), or, in the
case of the first Calculation Period, the Net Asset Value at the
Commencement Date. The Performance Fee in respect of each
Calculation Period will be calculated by reference to the Net Asset
Value before deduction of the Performance Fee save that any
Performance Fee will be reduced to the extent that payment would
cause the increase in Net Asset Value at the end of the relevant
Calculation Period to be equal to or less than the Trigger Return.
The Net Asset Value at the end of a Calculation Period will be
adjusted for any increases or decreases in Net Asset Value arising
from issues (including the sale or re-issue of ordinary shares held
in treasury), repurchases or redemptions of ordinary shares.
No Performance Fee is payable in respect of a Calculation Period
if the performance of the Fund is less than the Trigger Return. In
addition, if in any Calculation Period the performance of the Fund
is less than the Trigger Return, no Performance Fee will be payable
in subsequent Calculation Periods until the performance of the Fund
exceeds the amount by which the performance in such prior
Calculation Period is less than the Trigger Return.
9. Board of experts' fees
The Company pays to each Expert a fixed fee of $100,000 per year
in installments on a quarterly basis at the end of each quarter.
There were two Experts in the Board of Experts up to 30 June 2012
resulting in an interim charge of $100,000.
10. Valuators' fees
The Company pays to each Valuator a fixed fee of $100,000 per
year in installments on a monthly basis at the end of each month.
There are two Valuators resulting in a standard annual charge of
$200,000. During the period an additional $21,409 was charged in
relation to production of reports outside those prepared in the
normal course of business.
11. Administration fees
A per annum basis point fee is paid quarterly in arrears, to the
Administrator, based on the net asset value as of each valuation
day, in accordance with the following schedule
Amount Basis Points
$0 to $250,000,000 8
$250,000,001 to $500,000,000 6
$500,000,001 to $750,000,000 4
$750,000,001 and above 2
Administration fees are subject to a minimum monthly fee of
$7,000 or such other fees as may be agreed on normal commercial
terms between the Administrator and the Company from time to time.
The administration fees payable for the period were $57,000 (2011:
$42,000).
12. Earnings per share
Basic earnings per share is calculated by dividing the net
profit or loss attributable to shareholders by the weighted average
number of ordinary shares outstanding during the year.
30 Jun
2012 31 Dec 2011 30 Jun 2011
(Loss)/profit attributable to shareholders ($5,394,215) $3,435,009 $1,657,015
Weighted average number of ordinary
shares in issue 7,432,400 7,432,400 7,432,400
Basic and diluted earnings per share
(cents) (0.73c) 0.46c 0.22c
There are no dilutive instruments and therefore basic and
diluted earnings per share are identical.
13. Reconciliation of net asset value
30 Jun 2012 31 Dec 2011 30 Jun 2011
Published Net Asset Value attributable
to Ordinary Shareholders 52,203,414 53,538,448 52,269,535
Cumulative additional preliminary
expenses written off in accordance
with IAS 38. In accordance with the
Company's prospectus, the preliminary
expenses are charged to the Company
as an expense on a monthly basis over
a period of five years. (631,803) (923,888) (1,216,117)
Prepaid storage costs of CHF250,000
amortized over a period of five years
for valuation purposes and written
off in the financial statements (52,704) (77,700) (102,696)
Adjustments made to expense accruals (148,138) (9,841) 4,329
Adjustment to revalue the portfolio (4,031,941) - -
on net realisable basis from fair
value basis
Adjustment to performance fee - (211,476) -
Adjustment to revalue a diamond from
directors valuation to comply with
the accounting policy and the requirements
of IAS 40 (417,500) - (417,502)
============= ============ =============
Net assets attributable to Ordinary
Shareholders 46,921,328 52,315,543 50,537,549
============= ============ =============
14. Related party transactions
Directors' fees
During the period the fees of $69,623 (period ended 30 June 2011
$56,560 and year ended 31 December 2011 $120,630) were paid to the
Directors. As at 30 June 2012, $28,961 (period ended 30 June 2011
$23,847 and year ended 31 December 2011 $41,714) was outstanding
and included in accrued expenses.
Directors' interests
Rupert Cottrell has a total interest in 5,000 Ordinary Shares as
at 30 June 2012 (31 December 2011: 5,000 Ordinary Shares, 30 June
2011: 5,000 Ordinary Shares).
15. Subsequent Events
As at 31 July 2012 the published Net Asset Value was $6.82.
On the 6 August 2012, the Board unanimously agreed the sale of 5
diamonds by way of sealed bid auction. The net sales, calculated as
gross sales less cost to sell, totalled $9,695,584 representing a
realised loss of ($3,331,716)..
Portfolio Statement
As at 30th June 2012
Class of investments Market value % of
$ net assets
---------------------------- ------------- -----------
Diamonds
Diamond > 65 ct 13,200,000 28.13
Diamond > 50 ct 7,500,000 15.98
Diamond > 20 ct 5,232,388 11.15
Diamond > 10 ct 8,175,250 17.42
Diamond > 5 ct 7,600,000 16.20
Others * 857,946 1.83
Total investments 42,525,584 90.72
---------------------------- ------------- -----------
* No individual position is more than 5% of total portfolio.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DGGDCRXGBGDD
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