REG - Crystal Amber Fund - Final Results
25/10/2023 07:00
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RNS Number : 1741R Crystal Amber Fund Limited 25 October 2023
25 October 2023
Crystal Amber Fund Limited
("Crystal Amber Fund" or the "Company")
Final results for the year ended 30 June 2023
The Company announces its final results for the year ended 30 June 2023.
Highlights
· Substantial return of capital with £37.5m paid during the year,
bringing total returns of capital to more than £100 million.
· Adjusting for the 45p a share of dividends paid, Net Asset Value
("NAV") per share decreased by 4.6% as at 30 June 2023 to 93.33p (145.03p at
30 June 2022 and 130.05p at 31 December 2022).
· Net asset value since the year end has increased over the three
months to 30 September 2023 by 6.8%.
· Fund performance according to Trustnet over the last six months is
first out of 26 peer group funds and over three years, third out of 25 peer
group funds.
· Completed successful exit of Equals Group plc at a significant
premium to 30 June 2022 valuation.
· Cash realisation during the year from acquisition of Hurricane Energy
plc of £34.7 million, with a further £1.8 million banked in September 2023.
· Successful intensive activism campaign at De La Rue plc, with De La
Rue now able to demonstrate its strategic value. De La Rue share price has
doubled since 23 June 2022.
· Significant strengthening of board at Morphic Medical Inc. (formerly
GI Dynamics Inc.) ahead of anticipated regulatory approval in current
financial year.
Contacts:
Crystal Amber Fund Limited
Chris Waldron (Chairman)
Tel: 01481 742 742
www.crystalamber.com (http://www.crystalamber.com)
Allenby Capital Limited - Nominated Adviser
Jeremy Porter/ Dan Dearden-Williams
Tel: 020 3328 5656
Winterflood Investment Trusts - Broker
Joe Winkley/Neil Langford
Tel: 020 3100 0160
Crystal Amber Advisers (UK) LLP - Investment Adviser
Richard Bernstein
Tel: 020 7478 9080
(1) All capitalised terms are defined in the Glossary of Capitalised Defined
Terms unless separately defined.
Chairman's Statement
I hereby present the sixteenth annual report of Crystal Amber Fund Limited
(the "Company" or the "Fund"), for the year to 30 June 2023. During this
period, by far the most significant impact on NAV was the return to
shareholders by means of cash dividends in aggregate of £37.5 million,
equivalent to 45p per share. This of course resulted in a commensurate 45p a
share fall in NAV.
To put this into context: despite a deteriorating macroeconomic backdrop with
worsening liquidity and rising interest rates, the payout comprised more than
one-third of NAV at the start of the year under review. This has brought total
returns of capital, including share buy backs to more than £100 million to
date.
Reflecting the £37.5 million dividend payments, at the year end, NAV was
£77.7 million, compared with an unaudited NAV of £108.2 million at 31
December 2022 and an audited NAV of £120.7 million at 30 June 2022. NAV per
share was 93.33p at 30 June 2023 compared with 130.05p at 31 December 2022 and
145.03p at 30 June 2022. Underlying NAV, reflecting dividends paid, decreased
by 4.6% over the year. This compares to the Numis Smaller Companies Index,
which fell by 2.5% in the same period.
The new investment policy, formally approved by shareholders in March 2022,
focuses on monetising the portfolio in an orderly manner, achieving an
appropriate balance between maximising value received and making timely
returns of capital. I believe that during the year, the Company achieved
considerable success in this objective. In summary, at the beginning of 2022,
the Fund had net assets of £119.4 million. Since then, the Investment Manager
has achieved realisations of £71.4 million. Having returned £45.8 million in
dividends, net assets at 30 September 2023 amounted to £83.0 million.
It would have been all too easy for the Investment Manager to have lost
patience and accepted below market bids for relatively illiquid holdings in
portfolio companies. It is all too common to see substantial stakes sold at
discounts to carrying values, but across the portfolio, the Investment Manager
has delivered premiums.
Two examples of this are the fintech payments platform Equals Group
("Equals.") and the oil and gas exploration and production company Hurricane
Energy plc ("Hurricane Energy"). At the beginning of 2022, the Fund owned 36.9
million shares in Equals. This represented a greater than one-fifth ownership
of Equals and had a carrying value of £28.4 million. Having reduced its
holding in early 2022, the Fund exited its remaining holding during the year
under review, realising £31.1million since the beginning of 2022. The Fund
initially became a shareholder in 2016 and worked intensively with management.
The Fund achieved a total profit on the holding of £22 million.
Since the adoption of the new investing policy, the most time consuming and
perhaps jointly, the most stressful holding for the Investment Manager was
Hurricane Energy. Nevertheless, despite the significant operational risk of
being a single oil well, single pump producer, a difficult executive team and
the imposition of the energy profits levy, the Manager succeeded in not only
significantly reducing the risk of the investment but achieved cash returns of
a magnitude that perhaps could have only been dreamt of at the beginning of
2022.
At the start of 2022, the Fund's holding of just over 575 million shares,
representing 28.9 per cent of Hurricane Energy's issued share capital, had a
carrying value of £23 million. In June 2023, following the acquisition of the
entire issued share capital by Prax Exploration, the Fund received cash
proceeds of £34.7 million. However, those proceeds are not the end of the
Hurricane Energy journey. The offer included a deferred consideration element
based on revenues from April 2023 until January 2026. Earlier this month, the
Fund received additional proceeds of £1.8 million from these deferred
consideration units. This equates to 2.1p a share to the Fund's shareholders.
Should the deferred consideration units achieve their maximum payout of £37.3
million, equivalent to 41.6p per Crystal Amber share, the total potential
consideration due relating to the sale of the Fund's shareholding in Hurricane
Energy would be £72 million. This compares very favourably with, the January
2022 stock market valuation of £23 million.
Hurricane Energy is an example of the Investment Manager's determination to
fight for Shareholders when necessary and the financial reward in doing
so. Shareholders will recall the 2021 judgement from the High Court which
prevented a 95% dilution for ordinary shareholders which the Hurricane Energy
management had sought to push through. Whilst market participants had written
off Hurricane Energy as little more than an embarrassment, the Investment
Manager, with its long standing and deep technical knowledge, fought and
succeeded in blocking the restructuring. Without the Company's intervention,
Shareholders would have been deprived of any meaningful exposure to this
improvement in the Company's fortunes.
The Investment Manager also secured sales of unquoted holdings at more than
their carrying values. The disposal of Board Intelligence generated £2
million and Leaf Clean Energy was sold at more than 13 times its carrying
value, realising £1.6 million.
Following the change of investment policy, some shareholders might prefer to
focus solely on accelerated cash returns. However, the Board and the
Investment Manager believes that this would be a short-sighted approach. The
new investment policy afforded the Fund the ability to make opportunistic
purchases in existing holdings and whilst intuitively, this might appear
contrary to returning funds, given the overall objective of balancing cash
returns with the maximisation of shareholder value, the Board and Investment
Manager are confident that this is the optimal course.
Specifically, in recent months, following a prolonged period of intense,
stressful, and ultimately successful activism, the Fund purchased 15.3 million
shares in De La Rue at a cost of £6.3 million. Whilst it remains the case
that profits remain unrealised until banked, in a few months, this purchase
has increased net assets by more than £3 million. It has resulted in the Fund
raising its holding in De La Rue to close to 17 per cent of its issued share
capital, up from less than 10 per cent at the beginning of June. Importantly,
at a time when the currency market cycle is improving, the Fund remains of the
view that the strategic value of De La Rue remains substantially more than its
operational value and that it is now an attractive takeover target in an
industry requiring consolidation. Long term shareholders will remember, the
strategic importance of the Fund's 18 per cent shareholding in Thorntons in
2015, ahead of Ferrero's takeover.
The other addition to the Fund's holdings is equally consistent with the new
investment policy and that is to support and enhance the value of its holding
in GI Dynamics Inc. During the summer, GI Dynamics Inc. changed its name to
Morphic Medical Inc. ("Morphic Medical"). Shareholders will be aware that the
Fund has always sought to patiently acquire significant holdings in scalable
businesses and following successful delivery on its activist strategy, to hold
the shares until value can be maximised. This is evidenced by the disposals
referred to above: the Fund commenced buying shares in Hurricane Energy in
2013 and in Equals in 2016. In 2014, the Fund made a toe-hold investment in
Morphic Medical, when it was listed on the Australian Stock Exchange,
following an IPO valuing the business at A$300 million. In 2020, Morphic
Medical delisted and the Fund has since invested directly in Morphic Medical.
By the end of 2021, the carrying value of the Fund's holding was valued at
£30 million. This represented around 17.5 per cent of the Fund's net asset
value.
Following further investment of £8.3 million in Morphic Medical since the
beginning of 2022 and combined with cash returns of 55p a share, Morphic
Medical now accounts for 40 per cent of net asset value. The Fund has a fully
diluted equity interest in Morphic Medical of 81.5 per cent in addition to
interest bearing loan notes. The importance of the future success of Morphic
Medical therefore cannot be underestimated. I am therefore pleased to report
that following a request by the Fund, in anticipation of the re-instatement of
the CE Mark, which will enable sales to re-commence, the board of Morphic
Medical has recently been significantly strengthened by the appointment of an
ex-Medtronic Executive and by the appointment of the former Chairman of Apollo
Endosurgery, which, last year, was acquired by Boston Scientific for an
enterprise value of $615 million.
The Company is mindful that the Company's shares trade at a substantial
discount to NAV. Whilst rising interest rates and poor liquidity in the
investment trust sector have resulted in a general widening of discounts, the
Board believes that the historically high level of the discount should be
addressed at the forthcoming Annual General Meeting, where a new share buyback
programme is to be proposed.
In a little over seven quarters and against a backdrop of poor equity markets,
rising interest rates and deteriorating liquidity, the Fund has realised more
than £71 million and exited from several seemingly wholly illiquid positions
at premiums to carrying value. While this difficult economic and geopolitical
background continues to challenge the realisation process, the work to date is
testament to the skill and perseverance of the Investment Manager.
When we look back at the last three years, we see that the UK Smaller
Companies investment companies has risen by 19 per cent. Over the same period,
the Fund has delivered a return of 55 per cent (source: Trustnet) and there
still remains substantial value within the portfolio. The Board is confident
that the Investment Manager, with its intimate and long acquired knowledge of
the portfolio, is ideally placed to continue to deliver impressive performance
and realisations.
Christopher Waldron
Chairman
24 October 2023
Investment Manager's Report
Performance
During the year, and reflecting the 45p per share dividend payments
(representing £27.5 million in aggregate), the Company's NAV per share fell
from 145.03p to 93.3p. Underlying net asset value, also reflecting dividend
payments, declined by 4.6%.
Portfolio and Strategy
At 30 June 2023, the Company held equity investments in six companies (2022:
nine). The Company also held debt instruments in Morphic Medical Inc (formerly
GI Dynamics Inc.) and Sigma Broking Limited.
The Company's strategy is to optimise realisations for a limited number of
special situations where the Company believes value can be realised regardless
of broad market direction. By its nature as an activist fund, the Company
needs to hold sufficiently large stakes to facilitate engagement as a
significant shareholder. Therefore, the Company is inevitably exposed to
concentration risk particularly as continuing realisations will increase the
weighting of the remaining holdings.
As at 30 June 2023, the weighted average market capitalisation of the
Company's listed investee companies was £83 million (30 June 2022: £129
million).
Hurricane Energy plc ("Hurricane")
The most significant monetisation during the year was that of Hurricane. After
a lengthy formal sales process and more than a year later, following an
initial expression of interest in May 2022 from another trade buyer, the
acquisition by Prax Exploration completed in June 2023. The Fund received
initial proceeds of £34.7 million from the acquisition. Against a backdrop at
the time of a harsh regulatory and taxation environment, several potential
purchasers concluded that despite the short-term "cash cow" attributes of this
asset and substantial available tax losses, the potential rewards did not
justify the risk. In addition to the formal sale process, the Fund had direct
discussions with three other potential buyers. Ultimately, they also were
unable to "pull the trigger." The Investment Manager was not prepared for
the Fund to continue to be at material risk of the uncertain outcomes of both
the stability of the single well method of extraction, the pump and the oil
price. The transaction with Prax was structured to deliver a very significant
monetisation together with equally significant potential upside. The first
tranche of this potential upside was received by the Fund at the beginning of
this month: £1.8 million from the Deferred Consideration Units.
Two years earlier, every other institutional investor had sold out of
Hurricane Energy. However, with its detailed knowledge and history of this
investment, the Fund was able to convince the High Court that management's
extremely dilutive proposal was plainly wrong. The Fund was able to
effectively double its shareholding at a level that represented emotional
distress rather than dispassionate analysis. For context, the Fund acquired
some of its holding at 1p a share. Given that in June 2023, the Fund received
over 6p a share in cash, the decision to average the cost of investment was
clearly the right one.
De La Rue plc ("De La Rue")
We have previously explained how De La Rue stands out as a case study of how
poor leadership is the ultimate destroyer of shareholder returns. The company
has a long and proud history, having been established in 1821 and has been
printing banknotes since 1860. In 1982, the share price was 617.5p. Forty-one
years later, it traded at below 30p. Ten years ago, De La Rue paid an annual
dividend of 42.3p a share. In 2019, the dividend was shelved.
In July 2020, De La Rue completed a £100 million fundraise which was priced
at 110p per share. The Fund was the largest investor in this raise and ended
up owning around 18% of De La Rue's issued share capital. Following a
significant rise in the share price, the Fund reduced its exposure and
reverted to being a 10% shareholder.
As early as January 2022, the Fund publicly highlighted operational and
strategic mistakes at De La Rue. Rather than engage constructively, management
was completely dismissive.
Last September, the Fund commented that it believed that De La Rue was in a
critical position, with essential strategic decisions required. In July 2022,
the Fund wrote to the Chairman and Chief Executive of De La Rue to request
that Crystal Amber, as a 10% shareholder, be invited to nominate a director in
a non-executive capacity. After more than two months of procrastination and
attendance at several meetings, the proposal was rejected. The board of De La
Rue then called a meeting of shareholders to vote on the Chairman's future. In
December 2022, the Chairman was re-elected. Following a profit warning in
January 2023, the Fund requisitioned a meeting of shareholders in March 2023
to remove Chairman Kevin Loosemore. Following a further profit warning in
April, his position became untenable and he resigned.
In May 2023, Clive Whiley was appointed Chairman. By the end of the following
month he was able to successfully negotiate a reduction in contributions to
the pension plan, revise and relax banking covenants and secure the removal of
the material uncertainty going concern audit qualification. Against this
improved backdrop and with increasing evidence of a cyclical upturn in the
currency market, the Fund substantially added to its holding. During the
summer, the Fund increased its shareholding from less than 10% of De La Rue's
issued capital to close to 17%. The average cost of these purchases was 41.2p
a share. The Fund remains of the view that the strategic value of De La Rue
continues to be substantially more than its operational value and that it is
now an attractive takeover target in an industry requiring consolidation.
Allied Minds Plc ("Allied Minds")
The Company has been an investor in Allied Minds since November 2018, and
currently owns more than 18% of its issued share capital. Engagement to date
has secured a 70% reduction in the annual cost base.
Allied Minds' portfolio contains three significant holdings: Federated
Wireless, BridgeComm and Orbital Sidekick.
As liquidity in Allied Minds has diminished, it has been necessary for the
Fund to seek board changes on two occasions, most recently in 2022, with the
necessary departure of then Chairman Harry Rein.
Last summer, Allied Minds announced that it considered that the costs of a
premium listing on the Main Market of the London Stock Exchange were
prohibitively high relative to Allied Minds' size and maintaining a public
listing was no longer in its best interests. Allied Minds delisted in November
2022 following shareholder approval.
Since delisting, the Fund's engagement with the two directors of Allied Minds,
Sam Dobbyn and Bruce Failing has been frustrating and unproductive. The Fund
has written to both Allied Minds and two of its largest shareholders
expressing concerns regarding the lack of governance and oversight.
Astonishingly, much of the board's focus at Allied Minds has been on securing
increased remuneration for its directors. The Fund has seen no evidence of
realising or monetising investments.
Without such evidence in the very near term, the Fund will take appropriate
action to protect its interests. Whilst this holding currently accounts for
less than 5% of net asset value, the Fund will take action to ensure that the
interests of those charged with the responsibility of delivering value from
Allied Minds for its owners are aligned with the interests of its owners. The
Fund is surprised and disappointed that to date, other institutional
shareholders have been prepared to condone this conduct, but the Fund will
continue to engage with them.
Morphic Medical Inc ("Morphic Medical") formerly GI Dynamics Inc ("GI
Dynamics")
GI Dynamics changed its name to Morphic Medical Inc in summer 2023. Morphic
Medical is a privately held company, headquartered in Boston, MA, that
develops an endoscopically delivered medical device indicated for patients
with Type 2 Diabetes and Obesity. The device is called the Endobarrier. The
Fund first took a toehold investment in 2014.
Morphic Medical had listed on the Australian stock exchange in 2011, raising
A$80m and commanded a market capitalisation of A$304m. The company's sales and
regulatory relationships were impacted by the negative developments in the US.
Relations with the CE Mark notified body were further impacted by the change
in regulatory framework in the EU. The latter created a much-increased
workload for notified bodies that oversee CE Mark compliance.
In 2017, the company received formal notification of CE Mark withdrawal,
preventing the sale of EndoBarrier in Europe and select Middle Eastern
countries.
Since Covid 19, the regulatory environment for obtaining regulatory approval
has seen lengthening cycles: a new EU directive (Medical Devices Regulation,
MDR) has increased the standard of clinical evidence required. MedTech Europe
has stated that 480,000 products require re-certification, with the majority
of devices requiring an approval process of a duration of 13-24 months.
Nevertheless, the company has made good progress towards recovery of its CE
Mark certification. The company is on track for completion of all filings by
December 2023, with approval expected in the first half of 2024. Thereafter,
sales can re-commence, with Germany being the first market. With that in mind,
the company has recruited a European Head of Sales and Marketing who started
in September 2023.
Last year, enrolment for the company's US trial restarted. It successfully
persuaded the FDA to ease some of the enrolment restrictions. Specifically, it
has reduced the stringent Vitamin D requirements that was screening out many
potential candidates for the trial.
Morphic Medical has added new sites to its US trial and improved its design in
a way that should facilitate patient enrolment. The US market opportunity is
substantial and can be an extremely large and lucrative market for the
company.
Following further investment of £8.3 million in Morphic Medical since the
beginning of 2022, combined with cash returns of 55p a share, Morphic Medical
now accounts for 40% of NAV. The Fund has a fully diluted equity interest of
81.5% in addition to interest bearing loan notes. The importance of its future
success therefore cannot be underestimated.
In anticipation of the re-instatement of the CE Mark, which will enable sales
to re-commence, the board of Morphic Medical has recently been significantly
strengthened by the appointment of an ex-Medtronic Executive and by the
appointment of the former Chairman of Apollo Endosurgery, which, last year,
was acquired by Boston Scientific for an enterprise value of $615 million.
Outlook
Following significant cash returns, the Manager remains mindful of the
concentration risk of the portfolio and the increasingly challenging
macro-economic backdrop, as long-term interest rates breach 15-year highs.
Nevertheless, the Fund's holdings offer significant upside, and this is
expected to convert into continuing to maximise returns of capital. The
Manager is optimistic that the strong relative performance of the last three
years can be repeated in the coming 12 months.
Crystal Amber Asset Management (Guernsey) Limited
24 October 2023
Investment Policy
The Company is an activist fund which aims to identify and invest in
undervalued companies and, where necessary, engage with management to take
steps to enhance their value. The Company's strategy is to optimise
realisations at a limited number of special situations where the Company
believes value can be realised regardless of market direction. By its nature
as an activist fund, the Company needs to hold sufficiently large stakes to
facilitate engagement as a significant shareholder. Therefore, the Company is
inevitably exposed to concentration risk particularly as continuing
realisations will increase the weighting of the remaining holdings.
Investment objective
The objective of the Company is to provide its Shareholders with an attractive
total return, which is expected to comprise primarily capital growth but with
the potential for distributions from realised distributable reserves,
including the realisation of investments, if this is considered to be in the
best interests of its Shareholders.
Investment strategy
On 7 March 2022 a revised investment policy to reflect a realisation strategy
was approved by Shareholders at an Extraordinary General Meeting. It was
agreed that the Fund would not make any new investments and would only make
further opportunistic investments in existing holdings where, in the view of
the Board and Investment Manager, such investment was considered necessary to
protect the interests of Shareholders and/or provide the Investment Manager
with additional influence to maximise value and facilitate and accelerate an
exit. Any such investment would require the prior approval of the Board and
would only be permitted where it was not expected to compromise the timescale
for realisations.
From 7th March 2022 the Company adopted a strategy of maximising capital
returned to Shareholders by way of timely disposals, including trade sales of
the Company's strategic holdings, where appropriate (with the potential
exception of Morphic Medical Inc.) and returns of cash to Shareholders. Whilst
it was initially intended to complete this process by 31 December 2023,
Shareholders were aware that this was a target rather than a deadline.
In seeking the realisation of predominantly all the Company's investments
(with the possible exception of Morphic Medical Inc.), it was agreed that the
Directors would aim to achieve a balance between maximising their net value
and progressively returning cash to Shareholders. In so doing, the Board would
take account of the continued costs of operating the Company. The Company's
admission to trading on AIM will be maintained for as long as the Directors
believe it to be practicable and cost-effective within the requirements of the
AIM Rules.
The Company has ceased to make any new investments except where, in the
opinion of the Investment Manager and with the approval of the Board, the
investment is considered necessary by the Board to protect or enhance the
value of any existing investments of the Company or to facilitate orderly
disposals of assets held by the Company. Any cash received by the Company as
part of the realisation process prior to its distribution to Shareholders will
be held by the Company, on behalf of the Shareholders, as cash on deposit
and/or as cash equivalents.
As it is probable that the Company will not have realised all of its
investments by 31 December 2023, it is intended that the Board will consult
Shareholders and/or make arrangements to seek Shareholder approval on the
future strategy of the Company, including steps that might be necessary to
maximise the opportunity to realise value from the remaining assets of the
Company.
Dividend Policy
Following any material realisations of the Company's investments, the
Directors intend to continue to return cash to Shareholders using
tax-efficient means such as redeemable shares, dividends and/or tender offers.
Crystal Amber Fund Limited
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2023
2023 2022
Revenue Capital Total Revenue Capital Total
Notes £ £ £ £ £ £
Income
Dividend income from listed investments - - - 20,311 - 20,311
Interest received 33,644 - 33,644 - - -
33,644 - 33,644 20,311 - 20,311
Net (losses)/gains on financial assets at FVTPL
Equities
Net realised gains/(losses) 9 - (2,934,478) (2,934,478)
- 10,736,035 10,736,035
Movement in unrealised (losses)/gains 9 - (13,535,808) (13,535,808) - 9,241,539 9,241,539
Debt instruments
Movement in unrealised gains 9 - 628,186 628,186 - 428,347 428,347
- (2,171,587) (2,171,587) - 6,735,408 6,735,408
Total (loss)/income 33,644 (2,171,587) (2,137,943) 20,311 6,735,408 6,755,719
Expenses
Transaction costs 4 - 72,199 72,199 - 299,972 299,972
Exchange movements on revaluation of investments and working capital 434,639 1,247,956 1,682,595 (847,496) (3,981,544) (4,829,040)
Management fees 15,17 960,000 - 960,000 1,649,299 - 1,649,299
Directors' remuneration 16 130,000 - 130,000 130,000 - 130,000
Administration fees 17 127,028 - 127,028 168,247 - 168,247
Custodian fees 17 51,497 - 51,497 124,454 - 124,454
Audit fees 57,025 - 57,025 56,255 - 56,255
Other expenses 357,636 - 357,636 375,053 - 375,053
2,117,825 1,320,155 3,437,980 1,655,812 (3,681,572) (2,025,760)
(Loss)/Return for the year (2,084,181) (3,491,742) (5,575,923) (1,635,501) 10,416,980 8,781,479
Basic and diluted (loss)/earnings per share (pence) 5 (1.95) 12.48 10.53
(2.51) (4.19) (6.70)
All items in the above statement derive from continuing operations.
The total column of this statement represents the Company's Statement of
Profit or Loss and Other Comprehensive Income prepared in accordance with
IFRS. The supplementary information on the allocation between revenue return
and capital return is presented under guidance published by the AIC.
The Notes to the Financial Statements form an integral part of these Financial
Statements.
Crystal Amber Fund Limited
Statement of Financial Position
As at 30 June 2023
2023 2022
Assets Notes £ £
Cash and cash equivalents 7 12,254,948 47,370
Trade and other receivables 8 71,338 70,728
Financial assets designated at FVTPL 9 69,859,825 120,862,525
Total assets 82,186,111 120,980,623
Liabilities
Trade and other payables 10 4,509,400 274,039
Total liabilities 4,509,400 274,039
Equity
Capital and reserves attributable to the Company's equity Shareholders
Share capital 11 997,498 997,498
Treasury shares 12 (19,767,097) (19,767,097)
Distributable reserve 40,586,958 78,040,908
Retained earnings 55,859,352 61,435,275
Total equity 77,676,711 120,706,584
Total liabilities and equity 82,186,111 120,980,623
NAV per share (pence) 6 93.33 145.03
The Financial Statements were approved by the Board of Directors and
authorised for issue on 24 October 2023.
Christopher Waldron
Jane Le Maitre
Chairman
Director
24 October 2023
24 October 2023
The Notes to the Financial Statements form an integral part of these Financial
Statements.
Crystal Amber Fund Limited
Statement of Changes in Equity
For the year ended 30 June 2023
Share Treasury Distributable Retained earnings Total
Notes capital shares reserve Capital Revenue Total equity
£ £ £ £ £ £ £
Opening balance at 1 July 2022 997,498 (19,767,097) 78,040,908 68,401,964 (6,966,689) 61,435,275 120,706,584
Dividends paid in the year 13 - - (37,453,950) - - - (37,453,950)
Loss for the year - - - (3,491,742) (2,084,181) (5,575,923) (5,575,923)
Balance at 30 June 2023 997,498 (19,767,097) 40,586,958 64,910,222 (9,050,870) 55,859,352 77,676,711
Share Treasury Distributable Retained earnings Total
Notes capital shares reserve Capital Revenue Total equity
£ £ £ £ £ £ £
Opening balance at 1 July 2021 997,498 (19,191,639) 88,472,333 57,984,984 (5,331,188) 52,653,796 122,931,988
Purchase of Ordinary shares into Treasury 12 - (575,458) - - - - (575,458)
Dividends paid in the year 13 - - (10,431,425) - - - (10,431,425)
Profit for the year - - - 10,416,980 (1,635,501) 8,781,479 8,781,479
Balance at 30 June 2022 997,498 (19,767,097) 78,040,908 68,401,964 (6,966,689) 61,435,275 120,706,584
Crystal Amber Fund Limited
Statement of Cash Flows
For the year ended 30 June 2023
2023 2022
Note £ £
Cashflows from operating activities
Dividend income received from listed investments - 20,311
Bank interest received 33,644 -
Management fees paid (960,000) (1,649,299)
Directors' fees paid 16 (130,000) (130,000)
Other expenses paid (542,128) (309,818)
Net cash outflow from operating activities (1,598,484) (2,068,806)
Cashflows from investing activities
Purchase of equity investments 9 (2,319,352) (47,581,132)
Sale of equity investments 9 55,399,271 61,399,209
Purchase of debt instruments 9 (3,867,708) (5,707,461)
Debt repayment 9 2,120,000 -
Purchase of money market investments 10 (72,199) -
Transaction charges on purchase and sale of investments - (299,972)
Net cash inflow from investing activities 51,260,012 7,810,644
Cashflows from financing activities
Purchase of Ordinary shares into Treasury - (710,614)
Dividends paid 13 (37,453,950) (10,431,425)
Net cash outflow from financing activities (37,453,950) (11,142,039)
Net increase/(decrease) in cash and cash equivalents during the year 12,207,578 (5,400,201)
Cash and cash equivalents at beginning of year 47,370 5,447,571
Cash and cash equivalents at end of year 7 12,254,948 47,370
The Notes to the Financial Statements form an integral part of these Financial
Statements.
Crystal Amber Fund Limited
Notes to the Financial Statements
For the year ended 30 June 2023
General information
Crystal Amber Fund Limited (the "Company") was incorporated and registered in
Guernsey on 22 June 2007 and is governed in accordance with the provisions of
the Companies Law. The registered office address is PO Box 286, Floor 2,
Trafalgar Court, Les Banques, St Peter Port, Guernsey, GYI 4LY. The Company
was established to provide Shareholders with an attractive total return, which
was expected to comprise primarily capital growth with the potential for
distributions of up to 5p per share per annum following consideration of the
accumulated retained earnings as well as the unrealised gains and losses at
that time. Following changes to the Company's investment policy, the Company's
strategy is now to optimise outcomes at a limited number of special situations
where the Company believes value can be realised regardless of market
direction.
Morphic Medical Inc is an unconsolidated subsidiary of the Company and was
incorporated in Delaware. As at 30 June 2023 it had 5 wholly-owned
subsidiaries and its principal place of business is Boston. Refer to Note 15
for further information.
The Company's Ordinary shares were listed and admitted to trading on AIM, on
17 June 2008. The Company is also a member of the AIC.
All capitalised terms are defined in the Glossary of Capitalised Defined Terms
unless separately defined.
1. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of the Financial
Statements are set out below. These policies have been consistently applied to
those balances considered material to the Financial Statements throughout the
current year, unless otherwise stated.
Basis of preparation
The Financial Statements have been prepared to give a true and fair view, are
in accordance with IFRS and the SORP "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" issued by the AIC in November 2014 and
updated in January 2017 to the extent to which it is consistent with IFRS and
comply with the Companies Law. The Financial Statements are presented in
Sterling, the Company's functional currency.
The Financial Statements have been prepared under the historical cost
convention with the exception of financial assets designated at fair value
through profit or loss ("FVTPL").
Investment Entities
To determine whether the Company meets the definition of an investment entity,
further consideration is given to the characteristics of an investment entity
that are demonstrated by the Company.
The Company meets the definition of an investment entity on the basis of the
following criteria:
· The Company obtains funds from multiple investors for the purpose of
providing those investors with investment management services;
· The Company commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation, investment income,
or both; and
· The Company measures and evaluates the performance of substantially
all its investments on a fair value basis.
As the Company has met the definition of an investment entity under IFRS 10,
it is exempt from preparing consolidated financial statements.
The Company has taken the exemption permitted by IAS 28 "Investments in
Associates and Joint Ventures" and IFRS 11 "Joint Arrangements" for entities
similar to investment entities and measures its investments in associates at
fair value. The Directors consider an associate to be an entity over which the
Group has significant influence by means of owning between 20% and 50% of the
entities' shares. The Company's associates are disclosed in Note 14.
The Company meets the definition of an investment entity and complies with
disclosure requirements in IFRS 10, IFRS 12 and IAS 27.
Going concern
As at 30 June 2023, the Company had net assets of £77.7 million (30 June
2022: £120.7 million) and cash balances of £12.25 million (30 June 2022:
£0.05 million) which are sufficient to meet current obligations as they fall
due.
The Directors are confident that the Company has adequate resources to
continue in operational existence for the foreseeable future and as a result
of this, do not consider there to be any threat to the going concern status of
the Company.
The Directors have considered the potential impact of the conflicts between
Russia and Ukraine, and Israel and Gaza which have both had a negative impact
on the global economy. This poses significant challenges and uncertainty
globally and continues to have potentially adverse consequences for investee
companies as energy costs rise. The Directors do not consider that this will
impact the Company's ability to continue as a going concern.
In relation to the Company's investment portfolio, 29% of the Company's
investments are valued by reference to the market bid price as at the date of
this report.
As these are quoted prices in an active market, any volatility in the global
economy is reflected within the value of the financial assets designated at
fair value through profit or loss. As such, the Company has not included any
fair value impairments in relation to its investments.
The Directors have also considered the result of the continuation vote which
occurred at the 2021 AGM and results of the subsequent EGM which did not
conclude that the Company should be wound up. Following extensive Shareholder
consultation, a new investment policy was put before Shareholders and approved
at the EGM in March 2022 which prioritised the Company's intention to maximise
the return of capital to Shareholders, representing a change of strategy.
The Board believed that it was in the interests of Shareholders as a whole for
the Company to adopt a strategy of maximising capital return to Shareholders
by way of timely disposals, including trade sales of the Company's mature
listed strategic holdings, where appropriate. The Company has a track record
of returning cash to Shareholders via share buybacks and dividends: since
2013, when the requirement for the continuation vote to be proposed at the
2021 AGM was introduced, £114.2 million has been returned to Shareholders via
such means.
In line with the change in strategy, the Company has sold investments in
Alquiber Quality S.A., Board Intelligence Limited and Equals Group Plc.
Hurricane Energy Plc was acquired by Prax Exploration & Production Plc and
realised a part disposal.
As the Company will not have realised all of its investments by 31 December
2023, it is intended that the Board will consult Shareholders and/or make
arrangements to seek Shareholder approval on the future strategy of the
Company, including steps that might be necessary to maximise the opportunity
to realise value from the remaining assets of the Company.
In 2014, the Company acquired an initial shareholding in Morphic Medical Inc.
The Company believes, it has been able to acquire majority ownership of a
valuable shareholding, which comprises 81.5% of Morphic Medical Inc 's diluted
share capital. With board representation, the Company is actively involved in
the management of Morphic Medical Inc.
The Company looks forward to continuing to work with Morphic Medical Inc to
achieve its operational milestones and to further develop the pathway to
maximise shareholder value. Given the anticipated value accretive milestones,
the Company believes it is appropriate that it gives Morphic Medical Inc the
time it requires to maximise shareholder returns.
In due course, the Company will consult with investors about the longer-term
plans for Morphic Medical Inc to realise value for the Company's Shareholders.
A trade sale is a potential crystallisation path. Alternatively, as the
Company continues a disposal programme of its listed investment portfolio, it
is possible that the Company's listing may provide a suitable and
cost-effective vehicle for Morphic Medical Inc to be listed, raise its profile
and potentially, following the achievement of milestones, provide the
Company's Shareholders with direct exposure to its growth prospects, as well
as liquidity.
The Directors have made a robust assessment of the prospects of the Company
over the two-year period ending 30 June 2025. The Directors consider that this
is an appropriate period to assess the viability of the Company given the new
investment policy agreed with Shareholders in March 2022 and the time horizon
over which investment decisions are made.
The Directors have also considered the Company's income and expenditure
projections over the two-year period ending 30 June 2025, the fact that the
Company currently has no borrowings and that most of its investments comprise
readily realisable securities which can be sold to meet funding requirements
if necessary.
Based on the results of this analysis, including the Investment Management
Agreement, change in investment strategy and future strategic plans involving
Morphic Medical Inc, the Directors have a reasonable expectation that the
Company will be able to continue in operation and meet its liabilities as they
fall due for the foreseeable future.
The Directors have considered the contributing factors set out above and are
confident that the Company has adequate resources to continue in operational
existence for the foreseeable future, and do not consider there to be any
threat to the going concern status of the Company. Accordingly, they continue
to adopt the going concern basis of accounting in preparing these financial
statements.
Use of estimates and judgements
The preparation of the Financial Statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of the reported amounts in these Financial Statements. The
determination that the Company is an investment entity is a critical
judgement, as set out above. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to
be reasonable in the circumstances. Actual results may differ from these
estimates. The unquoted equity and debt securities have been valued based on
unobservable inputs (see Note 14).
Segmental reporting
Operating segments are reported in a manner consistent with internal reporting
provided to the chief operating decision maker. The chief operating decision
maker, which is responsible for allocating resources and assessing performance
of the operating segments, has been identified as the Board as a whole. The
key measure of performance used by the Board to assess the Company's
performance and to allocate resources is the total return on the Company's
NAV, as calculated under IFRS, and therefore no reconciliation is required
between the measure of profit or loss used by the Board and that contained in
these Financial Statements.
For management purposes, the Company is domiciled in Guernsey and is engaged
in a single segment of business mainly in one geographical area, being
investment mainly in UK equity instruments, and therefore the Company has only
one single operating segment.
Foreign currency translation
Monetary assets and liabilities are translated from currencies other than
Sterling ('foreign currencies') to Sterling (the 'functional currency') at the
rate prevailing on the reporting date. Income and expenses are translated from
foreign currencies to Sterling at the rate prevailing at the date of the
transaction. Exchange differences are recognised in the profit or loss section
of the Statement of Profit or Loss and Other Comprehensive Income.
Financial instruments
Financial instruments comprise investments in equity, debt instruments,
derivatives, trade and other receivables, cash and cash equivalents, and trade
and other payables. Financial instruments are initially recognised at fair
value unless they are trade receivables. The cost of the instrument may be
indicative of the fair value. Subsequent to initial recognition financial
instruments are measured as described below.
Financial assets designated at FVTPL
All the Company's investments including equity, debt instruments and
derivative financial instruments are held at FVTPL. Financial instruments are
initially recognised at fair value. The cost of the instrument may be
indicative of the fair value. Transaction costs are expensed in the profit or
loss section of the Statement of Profit or Loss and Other Comprehensive
Income. Gains and losses arising from changes in fair value are presented in
the profit or loss section of the Statement of Profit or Loss and Other
Comprehensive Income in the period in which they arise.
Purchases and sales of investments are recognised using trade date accounting.
Quoted investments are valued at bid price on the reporting date or at
realisable value if the Company has entered into an irrevocable commitment
prior to the reporting date to sell the investment. Where investments are
listed on more than one securities market, the price used is that quoted on
the most advantageous market, which is deemed to be the market on which the
security was originally purchased. If the price is not available as at the
accounting date, the last available price is used. The valuation methodology
adopted is in accordance with IFRS 13.
Loan notes are classified as debt instruments and are initially recognised at
fair value. The cost of the instrument may be indicative of the FV. Subsequent
to initial recognition, loan notes are valued at fair value. In the absence of
an active market, the Company determines the fair value of its unquoted
investments by taking into account the International Private Equity and
Venture Capital ("IPEV") guidelines.
Derivatives held for trading
When considered appropriate the Company will enter into derivative contracts
to manage its price risk and provide protection against the volatility of the
market.
Quoted derivatives are valued at bid price on the reporting date. Where
derivatives are listed on more than one securities market, the price used is
that quoted on the most advantageous market, which is deemed to be the market
on which the security was originally purchased. If the price is not available
as at the accounting date, the last available price is used. Gains and losses
arising from changes in fair value are presented in the profit or loss section
of the Statement of Profit or Loss and Other Comprehensive Income in the
period in which they arise.
Trade and other receivables
The Company's trade and other receivables are classified as financial assets
at amortised cost. They are measured at amortised cost less impairment
assessed using the general approach of the expected credit loss model based on
experience of previous losses and expectations of future losses.
Trade and other payables
The Company's trade and other payables are measured at amortised cost and
include trade and other payables and other short term monetary liabilities
which are initially recognised at fair value and subsequently measured at
amortised cost using the effective interest rate method.
Derecognition of financial instruments
The Company derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or it transfers the rights to receive the
contractual cash flows in a transaction in which substantially all the risks
and rewards of ownership of the financial asset are transferred.
On derecognition of a financial asset, the difference between the carrying
amount of the asset (or the carrying amount allocated to the portion of the
asset derecognised), and consideration received (including any new asset
obtained less any new liability assumed) is recognised in the profit or loss
section of the Statement of Profit or Loss and Other Comprehensive Income.
The Company derecognises a financial liability when its contractual
obligations are discharged, cancelled or expire. Any gain or loss on
derecognition is recognised in the profit or loss section of the Statement of
Profit or Loss and Other Comprehensive Income.
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. Due to the credit
rating of the financial institutions holding the Company's cash and cash
equivalents, no impairment has been recognised.
Share issue expenses
Share issue expenses of the Company directly attributable to the issue and
listing of its own shares are charged to the distributable reserve.
Share capital
Ordinary shares are classified as equity where there is no obligation to
transfer cash or other assets.
Dividends
Dividends paid during the year from distributable reserves are disclosed in
the Statement of Changes in Equity. Dividends declared post year end are
disclosed in the Notes to the Financial Statements.
Distributable reserves
Distributable reserves represent the amount transferred from the share premium
account, approved by the Royal Court of Guernsey on 18 July 2008, and amounts
transferred to distributable reserves in relation to the sale of Treasury
shares above cost.
Income
Investment income and interest income have been accounted for on an accruals
basis using the effective interest method. Dividend income is recognised in
the profit or loss section of the Statement of Profit or Loss and Other
Comprehensive Income when the relevant security is quoted ex-dividend.
The Company currently incurs withholding tax imposed by countries other than
the UK on dividend income. These dividends are recorded gross of withholding
tax in the profit or loss section of the Statement of Profit or Loss and Other
Comprehensive Income.
Expenses
All expenses are accounted for on an accruals basis. In respect of the
analysis between revenue and capital items presented within the Statement of
Profit or Loss and Other Comprehensive Income, all expenses have been
presented as revenue items except as follows:
· expenses which are incidental to the acquisition and disposal of an
investment are charged to capital; and
· expenses are split and presented partly as capital items where a
connection with the maintenance or enhancement of the value of the investments
held can be demonstrated. Accordingly, the performance fee is charged to
capital, reflecting the Directors' expected long-term view of the nature of
the investment returns of the Company.
Treasury shares reserve
The Company has adopted the principles outlined in IAS 32 'Financial
Instruments: Presentation' and treats consideration paid including directly
attributable incremental cost for the repurchase of Company shares held in
Treasury as a deduction from equity attributable to the Company's equity
holders until the shares are cancelled, reissued or sold. No gain or loss is
recognised within the statement of Profit or Loss and Other Comprehensive
Income on the purchase, sale, issue or cancellation of the Company's own
equity investments.
Any consideration received, net of any directly attributable incremental
transaction costs upon sale or re-issue of such shares, is included in equity
attributable to the Company's equity holders.
2. NEW STANDARDS AND INTERPRETATIONS
New and amended standards and interpretations applied in these financial
statements
There were no new standards or interpretations effective for the first time
for periods beginning on or after 1 July 2022 that had a significant effect on
the Company's financial statements. Furthermore, none of the amendments to
standards that are effective from that date had a significant effect on the
financial statements.
New and amended standards and interpretations not applied in these financial
statements (issued but not yet effective)
Other accounting standards and interpretations have been published and will be
mandatory for the Company's accounting periods beginning on or after 1 January
2023 or later periods, but the impact of these standards is not expected to be
material to the reported results and financial position of the Company.
3. TAXATION
The Company is exempt from taxation in Guernsey under the provisions of the
Income Tax (Exempt Bodies) (Guernsey) Ordinance, 2008 and is charged an annual
fee of £1,200 (2022: £1,200).
4. TRANSACTION COSTS
The transaction charges incurred in relation to the acquisition and disposal
of investments during the year were as follows:
2023 2022
£ £
Stamp Duty 32,557 163,701
Commissions and custodian transaction charges:
In respect of purchases 7,232 51,976
In respect of sales 32,410 84,295
72,199 299,972
5. BASIC AND DILUTED (LOSS)/ EARNINGS PER SHARE
Earnings per share is based on the following data:
2023 2022
(Loss)/Return for the year (£5,575,923) £8,781,479
Weighted average number of issued Ordinary shares 83,231,000 83,430,611
Basic and diluted (loss)/earnings per share (pence) (6.70) 10.53
6. NAV PER SHARE
NAV per share is based on the following data:
2023 2022
NAV per Statement of Financial Position £77,676,711 £120,706,584
Total number of issued Ordinary shares (excluding Treasury shares) at 30 June 83,231,000 83,231,000
NAV per share (pence) 93.33 145.03
7. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash held by the Company available on
demand. Cash and cash equivalents were as follows:
2023 2022
£ £
Cash on demand 12,254,948 47,370
12,254,948 47,370
8. TRADE AND OTHER RECEIVABLES
2023 2022
£ £
Current assets:
Other receivables 56,557 56,958
Prepayments 14,781 13,770
71,338 70,728
There were no past due or impaired receivable balances outstanding at the year
end (2022: £Nil).
9. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
2023 2022
£ £
Equity investments 57,258,110 110,202,065
Debt instruments 12,601,715 10,660,460
Financial assets designated at FVTPL 69,859,825 120,862,525
Total financial assets designated at FVTPL 69,859,825 120,862,525
Equity investments
Cost brought forward 132,232,346 153,218,932
Purchases 16,692,050 43,347,101
Sales proceeds (65,588,276) (61,399,209)
Net realised gain / (losses) 10,736,035 (2,934,478)
Cost carried forward 94,072,155 132,232,346
Unrealised (losses) brought forward (24,168,635) (33,410,174)
Movement in unrealised losses/gains (13,535,808) 9,241,539
Unrealised losses carried forward (37,704,443) (24,168,635)
Effect of exchange rate movements 890,398 2,138,354
Fair value of equity investments 57,258,110 110,202,065
Debt instruments
Cost brought forward 8,965,416 3,257,955
Purchases 3,867,708 5,707,461
Repayment of Loans (2,120,000) -
Cost carried forward 10,713,124 8,965,416
Unrealised gains brought forward 1,682,934 1,254,587
Movement in unrealised gains 628,186 428,347
Unrealised gains carried forward 2,311,120 1,682,934
Effect of exchange rate movements (422,529) 12,110
Fair value of debt instruments 12,601,715 10,660,460
Total financial assets designated at FVTPL 69,859,825 120,862,525
Total realised gains and losses and unrealised gains and losses on the
Company's equity, debt and derivative financial instruments are made up of the
following gain and loss elements:
2023 2022
£ £
Realised gains 14,284,779 8,438,985
Realised losses (3,548,744) (11,373,463)
Net realised gains/(losses) in financial assets designated at FVTPL 10,736,035
(2,934,478)
Movement in unrealised gains (7,936,128) 6,270,840
Movement in unrealised losses (4,971,494) 3,399,046
Net movement in unrealised (losses)/gains in financial assets designated at (12,907,622) 9,669,886
FVTPL
On 8(th) June 2023, Hurricane Energy Plc was acquired by Prax Exploration
& Production Plc resulting in the Company receiving £34,654,130 and
575,649,999 Deferred Consideration Units (DCU) in Prax Exploration &
Production. The DCU's confer an entitlement for DCU Holders to receive 17.5%
of all future net revenues earned by Hurricane Energy from 1 March 2023 until
31 December 2026, including revenue from both the Lancaster oil field and from
any acquisition made by Prax Exploration via Hurricane Energy, capped at a
total of 6.48p per DCU. The DCU payments will be paid biannually in arrears,
approximately 90 days after 30 June and 31 December.
In the Statement of Cashflow the purchases and sales proceeds have been
adjusted by the valuation of Prax Exploration & Production Plc of
£10,189,005 to reflect that this was a non-cash transaction as part of the
acquisition of Hurricane Energy Plc.
10. TRADE AND OTHER PAYABLES
2023 2022
£ £
Current liabilities:
Accruals 325,706 274,039
Unsettled trade purchases 4,183,694 -
4,509,400 274,039
The carrying amount of trade payables approximates to their fair value.
11. SHARE CAPITAL AND RESERVES
The authorised share capital of the Company is £3,000,000 divided into 300
million Ordinary shares of £0.01 each.
The issued share capital of the Company, including Treasury shares (See note
12), is as follows:
2023 2022
Number £ Number £
Opening balance 99,749,762 997,498 99,749,762 997,498
Ordinary shares issued during the year - - - -
Issued, called up and fully paid Ordinary shares of £0.01 each 99,749,762 997,498
99,747,762 997,498
Capital risk management
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.
In accordance with the Company's Memorandum and Articles of Incorporation the
retained earnings and distributable reserve shown in the Company's Statement
of Financial Position at the year end are distributable by way of dividend.
The Company may carry the returns of the Company to the distributable reserve
or use them for any purpose to which the returns of the Company may be
properly applied and either employed in the business of the Company or be
invested, in accordance with applicable law. The distributable reserve
includes the amount transferred from the share premium account which was
approved by the Royal Court of Guernsey on 18 July 2008.
During the year ended 30 June 2023, the Company paid dividends of £37,453,950
(2022: £10,431,425) from distributable reserves, as disclosed in Note 13. On
8 June 2023, the Company declared an interim dividend of £20.8 million
equating to 25p per Ordinary share, which was paid on 30 June 2023.
Externally imposed capital requirement
There are no capital requirements imposed on the Company.
Rights attaching to shares
The Ordinary shares carry the right to vote at general meetings and the
entitlement to receive any dividends and surplus assets of the Company on a
winding up.
12. TREASURY SHARES RESERVE
2023 2022
Number £ Number £
Opening balance 16,518,762 19,767,097 16,012,762 19,191,639
Treasury shares purchased during the year - - 506,000 575,458
Closing balance 16,518,762 19,767,097 16,518,762 19,767,097
No Treasury shares were purchased during the year ended 30 June 2023 (2022:
506,000). Treasury shares purchased in 2022 had an average price of 113.73p
per share and represented an average discount to NAV at the time of purchase
of 42.1%.
13. DIVIDENDS
On 7 July 2022, the Company declared an interim dividend of £8,323,100
equating to 10p per Ordinary share, which was paid on 5 August 2022 to
Shareholders on the register on 15 July 2022.
On 11 November 2022, the Company declared an interim dividend of £8,323,100
equating to 10p per Ordinary share, which was paid on 23 December 2022 to
Shareholders on the register on 25 November 2022.
On 8 June 2023, the Company declared an interim dividend of £20,807,750
equating to 25p per Ordinary share, which was paid on 30 June 2023 to
Shareholders on the register on 16 June 2023.
14. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
Financial risk management objectives
The Investment Manager, Crystal Amber Asset Management (Guernsey) Limited and
the Administrator, Ocorian Administration (Guernsey) Limited 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 risk. The Investment 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 foreign currency risk. The Board has considered the
sensitivity of the Company's financial assets and monitors the range of
reasonably possible changes in significant observable inputs on a regular
basis and does not consider that any changes are required this year to the
categories used in prior years.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will
default on its contractual obligations with the Company, resulting in
financial loss to the Company. At 30 June 2023 the major financial assets
which were exposed to credit risk included financial assets designated at
FVTPL and cash and cash equivalents.
The carrying amounts of financial assets best represent the maximum credit
risk exposure at 30 June 2023. 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 accounting date and the S&P
credit rating for each counterparty at that date.
Location Rating Cash Balance Cash Balance
2023 2022
Butterfield Bank (Channel Islands) Limited Guernsey BBB+ 12,001,525 37,413
Barclays Bank PLC - Isle of Man Branch Isle of Man A 253,423 9,957
12,254,948 47,370
The credit ratings disclosed above are the credit ratings of the parent
entities of each of the counterparties being The Bank of N. T. Butterfield
& Son Limited and Barclays Bank Plc.
The Company's credit risk on financial assets designated at FVTPL arises on
debt instruments. The Company's credit risk on financial assets designated at
FVTPL is considered acceptable as debt instruments make up only a small
percentage of the financial assets. The Company is also exposed to credit risk
on 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. There are no credit ratings available for
the debt instruments held by the Company. At 30 June 2023, £69,259,635 (2022:
£110,239,478) of the financial assets of the Company were held by the
Custodian, Butterfield Bank (Guernsey) Limited.
Bankruptcy or insolvency of the Custodian may cause the Company's rights with
respect to financial assets held by the Custodian to be delayed or limited.
70% (2022: 91%) of the Company's financial assets are held by the Custodian in
segregated accounts. The Company monitors its risk by monitoring the credit
quality and financial position of the Custodian. The parent of the Custodian
has an S&P credit rating of BBB+ (2022: BBB+). The remaining balance of
financial assets of £12,926,476 (2022: £10,741,145) includes £253,423
(2022: £9,957) cash held by Barclays Bank Plc, £71,338 (2022: £70,728)
trade receivables and £11,888,484 (2022: £7,987,857) loan notes issued by
Morphic Medical Inc and £713,230 (2022: £2,672,603) loan notes issued by
Sigma Broking Limited.
Liquidity risk
Liquidity risk is the risk that the Company will be unable to meet its
obligations arising from financial liabilities. Ultimate responsibility for
liquidity risk management rests with the Board of Directors, which has built
an appropriate framework for the management of the Company's liquidity
requirements.
The Company adopts a prudent approach to liquidity risk management and
maintains sufficient cash reserves to meet its obligations. All the Company's
Level 1 investments are listed and are subject to a settlement period of three
days.
The following tables detail the Company's expected and contractual maturities
for its financial assets and liabilities:
2023 Weighted average interest rate Less than 1 year 1-5 years 5+ years Total
Assets £ £ £ £
Non-interest bearing - 57,582,871 - - 57,582,872
Variable interest rate instruments 0.29% 12,001,525 - - 12,001,525
Fixed interest rate instruments 5.00% 12,601,715 - - 12,601,715
Liabilities
Non-interest bearing - (4,509,400) - - (4,509,400)
77,676,711 - - 77,676,712
2022 Weighted average interest rate Less than 1 year 1-5 years 5+ years Total
Assets £ £ £ £
Non-interest bearing 110,282,750 - - 110,282,750
Variable interest rate instruments 37,413 - - 37,413
0.29%
Fixed interest rate instruments 10,660,460 - - 10,660,460
5.00%
Liabilities
Non-interest bearing (274,039) - - (274,039)
120,706,584 - - 120,706,584
Market risk
The Company is exposed through its operations to market risk which encompasses
interest rate risk, price risk and foreign exchange risk.
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will
fluctuate due to changes in market interest rates. The Company is exposed to
interest rate risk as it has current account balances with variable interest
rates and debt instruments at fair value through profit or loss. The Company's
exposure to interest rates is detailed in the liquidity risk section of this
note. Interest rate repricing dates are consistent with the maturities stated
in the liquidity risk section of this note. The Company is exposed to fixed
interest rate risk on the loans receivable as where an instrument is a fixed
rate security, the value of the Financial Instruments is expected to be
particularly affected by the current climate of rising interest rate.
The Investment Manager monitors market interest rates and will place interest
bearing assets at best available rates but will also take the counterparty's
credit rating and financial position into consideration.
The cash at hand balances are the only assets with variable interest rates and
the movement in variable interest rates is an immaterial amount, therefore, no
sensitivity analysis for the movement is disclosed.
Price risk
Price risk is the risk that the fair value of investments will fluctuate as a
result of changes in market prices. This risk is managed through
diversification of the investment portfolio across business sectors. However,
there is no guarantee that the value will not rise above 20% after any
investment is made, particularly where it is believed that an investment is
exceptionally attractive.
The following tables detail the Company's equity investments as at 30 June
2023:
Equity Investments Sector Value Percentage
£
of Gross Assets
Morphic Medical Inc Healthcare 19,165,077 23
De La Rue PLC Commercial Services 14,261,875 17
Prax Exploration & Production PLC (DCU 1) (formerly Hurricane Energy PLC) Oil and Gas 10,189,005 12
Sigma Broking Limited Financial Services 6,794,101 8
Allied Minds PLC Private Equity 4,471,681 5
Other Various 2,376,371 3
Total 57,258,110 70
2022 Percentage of Gross Assets
Equity Investments Sector Value
£
Hurricane Energy PLC Oil and Gas 40,583,325 34
Morphic Medical Inc Healthcare 23,057,072 19
De La Rue PLC Commercial Services 14,944,854 12
Equals Group PLC Financial Services 13,875,400 11
Allied Minds PLC Private Equity 7,938,679 7
Sigma Broking Limited Financial Services 5,664,818 5
Other Various 4,137,917 3
Total 110,202,065 91
The following tables detail the investments in which the Company holds more
than 20% of the relevant entities. These have been recognised at fair value as
the Company is regarded as an investment entity as set out in Note 1.
2023 Place of Business Place of Incorporation Percentage Ownership Interest
Equity Investments
Morphic Medical Inc United States United States 81.5
2022 Place of Business Place of Incorporation Percentage Ownership Interest
Equity Investments
Hurricane Energy PLC United Kingdom United Kingdom 28.9
Morphic Medical Inc. United States United States 81.5
The Company has assessed the price risk of the listed equity and debt based on
a potential 25% (2022: 25%) increase/decrease in market prices, which the
Company believes represents the effect of a possible change in market prices
and provides consistent analysis for Shareholders, as follows:
At the year end and assuming all other variables are held constant:
· If market prices of listed equity and debt had been 25% higher (2022:
25% higher), the Company's return and net assets for the year ended 30 June
2023 would have increased by £4,159,562, net of any impact on performance fee
accrual (2022: £20,058,562);
· If market prices of listed equity, debt and derivative financial
instruments had been 25% lower (2022: 25% lower), the Company's return and net
assets for the year ended 30 June 2023 would have decreased by £4,159,562,
net of any impact on performance fee accrual (2022: decreased by £20,058,562
reflecting the effect of the derivative financial instruments held at the
reporting date); and
· There would have been no impact on the other equity reserves.
Foreign exchange risk
Foreign exchange risk is the risk that the value of financial instruments will
fluctuate due to changes in foreign exchange rates and arises when the Company
invests in financial instruments and enters into transactions that are
denominated in currencies other than its functional currency. During the year,
the Company was exposed to foreign exchange risk arising from equity and debt
investments and financial instruments held in Euro and US Dollars (2022: Euro
and US Dollars).
The table below illustrates the Company's exposure to foreign exchange risk at
30 June 2023;
2023 2022
£ £
Financial assets designated at FVTPL:
Listed equity investments denominated in Euro - 96,261
Unlisted equity investments denominated in US Dollars 19,165,077 23,057,072
Debt instruments denominated in US Dollars 11,888,485 7,987,857
Total assets 31,053,562 31,141,190
If the Euro weakened/strengthened by 10% (2022: 10%) against Sterling with all
other variables held constant, the fair value of equity investments would
increase/decrease by £ Nil (2022: £9,626).
If the US Dollar weakened/strengthened by 10% (2022: 10%) against Sterling
with all other variables held constant, the fair value of debt instruments
would increase/decrease by £1,188,849 (2022: £798,796) and the fair value of
the unlisted equity investments would increase/decrease by £1,916,508 (2022:
£2,305,707).
Fair value measurements
The Company measures fair values using the following fair value hierarchy that
prioritises the inputs to valuation techniques used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The three
levels of the fair value hierarchy under IFRS 13 are as follows:
Level 1: Quoted price (unadjusted) in an active market for an
identical instrument.
Level 2: Valuation techniques based on observable inputs, either
directly (i.e. as prices) or indirectly (i.e. derived from prices). This
category includes instruments valued using quoted prices in active markets for
similar instruments; quoted prices for identical or similar instruments in
markets that are considered less than active; or other valuation techniques
for which all significant inputs are directly or indirectly observable from
market data.
Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments for which the valuation
technique includes inputs not based on observable data and the unobservable
inputs have a significant effect on the instrument's valuation. This category
includes instruments that are valued based on quoted prices for similar
instruments for which significant unobservable adjustments or assumptions are
required to reflect differences between the instruments.
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement. For this purpose, the
significance of an input is assessed against the fair value measurement in its
entirety. If a fair value measurement uses observable inputs that require
significant adjustment based on unobservable inputs, that measurement is a
Level 3 measurement. Assessing the significance of a particular input to the
fair value measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
The determination of what constitutes 'observable' requires significant
judgement by the Company. The Company considers observable data to be that
market data that is readily available, regularly distributed or updated,
reliable and verifiable, not proprietary, and provided by independent sources
that are actively involved in the relevant market.
The objective of the valuation techniques used is to arrive at a fair value
measurement that reflects the price that would be received to sell an asset or
transfer a liability in an orderly transaction between market participants at
the measurement date.
The following tables analyse within the fair value hierarchy the Company's
financial assets measured at fair value at 30 June 2023 and 30 June 2022:
Level 1 Level 2 Level 3 Total
2023 £ £ £ £
Financial assets designated at FVTPL and derivatives held for trading:
Equities - listed equity investments 14,261,875 2,376,371 - 16,638,246
Equities - unlisted equity investments - 10,189,005 30,430,859 40,619,864
Debt - loan notes - - 12,601,715 12,601,715
14,261,875 12,565,376 43,032,574 69,859,825
Level 1 Level 2 Level 3 Total
2022 £ £ £ £
Financial assets designated at FVTPL and derivatives held for trading:
Equities - listed equity investments 77,438,519 2,795,730 - 80,234,249
Equities - unlisted equity investments - - 29,967,816 29,967,816
Debt - loan notes - - 10,660,460 10,660,460
77,438,519 2,795,730 40,628,276 120,862,525
The Level 1 equity investments were valued by reference to the closing bid
prices in each investee company on the reporting date.
The Level 2 equity investments relates to Sutton Harbour due to the low volume
of trading activity in the market for this investment and has been valued by
reference to the closing bid price in the investee company on the reporting
date. Prax Exploration that has been recently listed on JP Jenkins and has
been valued by reference to the closing bid price in the investee company on
the reporting date.
The Level 3 equity investment in Allied Minds (which delisted on 30 November
2022) was valued at the Net Asset Value per share on 31 December 2022
converted at an exchange rate of $1.2699 to £1 and reduced by a 25% liquidity
discount. The Level 3 equity and debt investments in Morphic Medical Inc were
valued by reference to the discounted cash flow value of the company with an
additional discount for dilution risk. The total valuation was then allocated
through a waterfall to the loan note, Series A shares and common stock owned
by the Company. The Level 3 equity investment in Sigma Broking Limited was
valued by reference to a third party funding of the company. The third party
is an external investor buying into the investment for equity.
For financial instruments not measured at FVTPL, the carrying amount is
approximate to their fair value.
Fair value hierarchy - Level 3
The following table shows a reconciliation from the opening balances to the
closing balances for fair value measurements in Level 3 of the fair value
hierarchy:
2023 2022
£ £
Opening balance at 1 July 2022/1 July 2021 40,628,276 29,032,329
Purchases 3,867,708 10,707,462
Allied Minds transferred in from Level 1 15,007,031 -
Movement in unrealised (losses)/gains (10,315,139) (3,912,815)
Sales (2,000,000) (1,660,933)
Repayments of debt instruments (2,120,000) -
Net realised (loss)/ gain (352,974) 1,633,412
Effect of exchange rate movements (1,682,328) 4,828,821
Closing balance at 30 June 2023/2022 43,032,574 40,628,276
The Company recognises transfers between levels of the fair value hierarchy on
the date of the event of change in circumstances that caused the transfer.
The table below provides information on significant unobservable inputs used
at 30 June 2023 in measuring equity financial instruments categorised as Level
3 in the fair value hierarchy. It also details the sensitivity to changes in
significant unobservable inputs used to measure value in each case.
Valuation Method Fair Value at 30 June 2023 Unobservable inputs Factor Sensitivity to changes in significant unobservable inputs
Morphic Medical Inc (formerly GI Dynamics Inc) Discounted cash flow 19,165,077 Discount rate 43% An increase (decrease) in the discount rate to 48% (38%) would reduce
(increase) FV by £6.3m (£8.1m)
48%
High growth rate over 9 year period
A decrease (increase) in the near term growth rate to 38% (58%) would decrease
(increase) FV by £4.1m
Dilution discount An increase (decrease) in the dilution discount to 30% (to 10%) would reduce
(increase) FV by £3.6m
20%
Sigma Broking Limited Third party funding 6,794,101 N/A N/A N/A
Allied Minds NAV 4,471,681 Illiquidity discount 25% An increase (decrease) in the liquidity discount to 35% (to 15%) would reduce
(increase) FV by £0.6million.
Valuation Method Fair Value at 30 June 2022 Unobservable inputs Factor Sensitivity to changes in significant unobservable inputs
Board Intelligence Limited Discount to comparable company multiples 1,245,926 Comparable Revenue multiple 5.7x A 25% increase (decrease) in the revenue multiple would increase (decrease) FV
by £0.7m (£0.7m)
Discount to comparable multiple
A 25% decrease (increase) in the discount to the revenue multiple would
increase (decrease) FV by £0.7m (£0.6m)
52.7%
GI Dynamics Inc Discounted cash flow 23,057,072 Discount rate 43% An increase (decrease) in the discount rate to 48% (38%) would reduce
(increase) FV by £8.9m (£13m)
High growth rate over 9 year period 48%
A decrease (increase) in the near term growth rate to 38% (58%) would decrease
(increase) FV by £4.1m
Dilution discount An increase (decrease) in the dilution discount to 30% (to 10%) would reduce
(increase) FV by £3.6 million
20%
Sigma Broking Limited EBITDA Multiple 5,664,818 Discount rate 50% An increase (decrease) in the liquidity discount to 60% (to 40%) would reduce
(increase) FV by £0.9million
15. RELATED PARTIES
Richard Bernstein is a director and a member of the Investment Manager, a
member of the Investment Adviser and a holder of 10,000 (2022: 10,000)
Ordinary shares in the Company, representing 0.01% (2022: 0.01%) of the voting
share capital of the Company at the year end.
During the year, the Company incurred management fees of £960,000 (2022:
£1,649,299) none of which were outstanding at the year-end (2022: £Nil). No
performance fees were incurred in the year (2022: £Nil) and none were
outstanding at the year-end (30 June 2022: £Nil).
As at 30 June 2023, the Investment Manager held 6,899,031 Ordinary shares
(2022: 6,899,031) of the Company, representing 8.30% (2022: 8.29%) of the
voting share capital.
As at 30 June 2023, the Company's investment in Morphic Medical Inc is an
unconsolidated subsidiary due to the Company's percentage holding in the
voting share capital of Morphic Medical. There is no restriction on the
ability of MMI to pay cash dividends or repay loans, but it is unlikely that
MMI will make any distribution or loan repayments given its current strategy.
During the year, the Company purchased convertible loan notes (not driven by
any contractual obligation) for the purpose of supporting MMI in pursuing its
strategy.
Morphic Medical Inc was incorporated in Delaware, had five wholly owned
subsidiaries as at 30 June 2023 and its principal place of business is Boston.
The five subsidiaries were as follows:
· Morphic Medical Securities Corporation, a Massachusetts-incorporated
non-trading entity;
· GID Europe Holding B.V., a Netherlands-incorporated non-trading
holding company;
· GID Europe B.V., a Netherlands-incorporated company that conducts
certain European business operations;
· GID Germany GmbH, a German-incorporated company that conducts certain
European business operations; and
· GI Dynamics Australia Pty Ltd, an Australian-incorporated company
that conducts Australian business operations.
16. DIRECTORS' INTERESTS AND REMUNERATION
The interests of the Directors in the share capital of the Company at the year
end and as at the date of this report are as follows:
2023 2022
Number of Ordinary shares Total Number of Ordinary shares Total
voting rights voting rights
Christopher Waldron ((1)) 30,000 0.03% 30,000 0.03%
Jane Le Maitre ((1)) 13,500 0.01% 13,500 0.01%
Fred Hervouet 7,500 0.01% 7,500 0.01%
Total 51,000 0.05% 51,000 0.05%
((1)) Ordinary shares held indirectly
During the year, the Directors earned the following remuneration in the form
of Directors' fees from the Company:
2023
2022
£ £
Christopher Waldron((1)) 47,500 47,500
Jane Le Maitre((2)) 42,500 42,500
Fred Hervouet((3)) 40,000 40,000
Total 130,000 130,000
((1)) Chairman of the Company with effect from 23 November 2017.
((2)) Chairman of Audit Committee with effect from 4 January 2018.
((3)) Chairman of Remuneration and Management Engagement Committee with effect
from 22 November 2019.
At 30 June 2023, Directors' fees of £32,500 (2022: £32,500) were accrued
within trade and other payables.
17. MATERIAL AGREEMENTS
The Company was party to the following material agreements:
Crystal Amber Asset Management (Guernsey) Limited
Until 7(th) March 2022, the management agreement with the Investment Manager
provided for a management fee of 2% applied to the Market Capitalisation of
the Company at 30 June 2013 (£73.5 million) (the "Base Amount"). To the
extent that an amount equal to the lower of the Company's NAV and market
capitalisation, at the relevant time of calculation, exceeded the Base Amount
(the "Excess Amount"), the applicable fee rate on the Excess Amount would have
been 1.5%.
The Investment Manager was also entitled to a performance fee in certain
circumstances. The fee was originally calculated by reference to the increase
in NAV per Ordinary share over the course of each performance period.
At an EGM on 7 March 2022, Shareholders agreed with the Company's proposals to
enter into a new Investment Management Agreement incorporating revised
management and performance fee arrangements and to make changes to the
termination provisions to reflect the future strategy of the Company.
Accordingly, the management fee has been reduced to £106,666 per month from 1
April 2022 until 30 June 2022, £90,000 per month from 1 July 2022 to 31
December 2022, £70,000 per month from 1 January 2023 to 30 June 2023,
£50,000 per month from 1 July 2023 to 30 September 2023 and then to £40,000
per month until 31 December 2023 when the management fee was due to cease in
anticipation of the Company's investments having been substantially realised.
However, due to the requirement for the Fund to have active portfolio
management going into 2024, the Board has agreed that the Fund will continue
paying a monthly management fee to the Investment Manager on the basis of the
fees paid in 2023. Accordingly, the Investment Management Agreement will be
amended such that from 1 January 2024, a monthly management fee of £57,500
will be applied. This will be subject to revision by the Company on one
month's notice in the light of future realisations, but will in any event be
formally reviewed by the Board at the time of the next interim report.
The Investment Manager is also entitled to a performance fee in certain
circumstances. This fee was previously calculated by reference to the increase
in NAV per Ordinary share over the course of each performance period. In
accordance with the new Investment Management Agreement, the performance fee
will be calculated by reference to the aggregate cash returned to Shareholders
after 1 January 2022. The Investment Manager will receive 20% of the aggregate
cash paid to Shareholders after 1 January 2022 (including the interim dividend
of 10p per Ordinary Share declared on 22 December 2021) in excess of a
threshold of £216,000,000.
Depending on whether the Ordinary shares are trading at a discount or a
premium to the Company's NAV per share when the performance fee becomes
payable, the performance fee will be either payable in cash (subject to the
restrictions set out below) or satisfied by the sale of Ordinary shares out of
Treasury or by the issue of new fully paid Ordinary shares (the number of
which shall be calculated as set out below):
· If Ordinary shares are trading at a discount to the NAV per Ordinary
share when the performance fee becomes payable, the performance fee shall be
payable in cash. Within a period of one calendar month after receipt of such
cash payment, the Investment Manager shall be required to purchase Ordinary
shares in the market of a value equal to such cash payment.
· If Ordinary shares are trading at, or at a premium to, the NAV per
Ordinary share when the performance fee becomes payable, the performance fee
shall be satisfied by the sale of Ordinary shares out of Treasury or by the
issue of new fully paid Ordinary shares. The number of Ordinary shares that
shall become payable shall be a number equal to the performance fee payable
divided by the closing mid-market price per Ordinary share on the date on
which such performance fee became payable.
As at 30 June 2023, the Investment Manager held 6,899,031 Ordinary shares (30
June 2022: 6,899,031) of the Company, representing 8.29% (30 June 2022: 8.29%)
of the voting share capital.
Performance fee for year ended 30 June 2023
At 30 June 2023, the Basic Performance Hurdle was £216,000,000 (as adjusted
for all dividends paid during the performance period on their respective
payment dates, compounded at the applicable annual rate) (2022:
£216,000,000).
The aggregate cash returned to Shareholders after 1 January 2022 was
£45,791,950 (2022: £8,338,000). Accordingly, no performance fee was earned
during the year ended 30 June 2023 (2022: £Nil).
Ocorian Administration (Guernsey) Limited
The Administrator provides administration and company secretarial services to
the Company. For these services, the Administrator is paid an annual fee of
0.12% (2022: 0.12%) of that part of the NAV of the Company up to £150 million
and 0.1% (2022: 0.1%) of that part of the NAV over £150 million (subject to a
minimum of £75,000 per annum). During the year, the Company incurred
administration fees of £127,028 (2022: £168,247).
Butterfield Bank (Guernsey) Limited
Under the custodian agreement, the Custodian receives a fee, calculated and
payable quarterly in arrears at the annual rate of 0.05% (2022: 0.05%) of the
NAV per annum, subject to a minimum fee of £25,000 per annum. Transaction
charges of £100 per trade for the first 200 trades processed in a calendar
year and £75 per trade thereafter are also payable. During the year, the
Company incurred custodian fees of £51,497 (2022: £124,454).
18. ULTIMATE CONTROLLING PARTY
In the opinion of the Directors and on the basis of the shareholdings advised
to them, the Company has no ultimate controlling party.
19. OTHER INFORMATION
The Company reported that its unaudited NAV at 31 July 2023 was 92.63p per
Ordinary share.
The Company reported that its unaudited NAV at 31 August 2023 was 95.81p per
Ordinary share.
The Company reported that its unaudited NAV at 30 September 2023 was 99.75p
per Ordinary share.
20. POST BALANCE SHEET EVENTS
On August 9, 2023, Morphic Medical entered into a convertible note purchase
agreement with the Company to fund Morphic Medical to a total of $4.5 million.
Under this convertible note purchase agreement, the parties executed an
unsecured convertible promissory note for proceeds of $2.25 million which
accrues interest at 7.5% per annum. All principal and accrued unpaid interest
on this note will be due in January 2025. $2.25 million was paid on August 22,
2023.
On 24 October 2023, the Board agreed that the Fund will continue paying a
monthly management fee to the Investment Manager on the basis of the fees paid
in 2023. The Investment Management Agreement will be amended such that from 1
January 2024, a monthly management fee of £57,500 will be applied. This will
be subject to revision by the Company on one month's notice in the light of
future realisations, but will in any event be formally reviewed by the Board
at the time of the next interim report.
There were no other events subsequent to the reporting date, 30 June 2023.
Glossary of Capitalised Defined Terms
"Admission" means admission of the Ordinary shares on 17 June 2008, to the
Official List and/or admission to trading on the Alternative Investment Market
of the London Stock Exchange, as the context may require;
"AEOI Rules" means the Automatic Exchange of Information Rules;
"AGM" or "Annual General Meeting" means the annual general meeting of the
Company;
"AIF" means Alternative Investment Funds;
"AIFM" means AIF Manager;
"AIFM Directive" means the EU Alternative Investment Fund Managers Directive
(no. 2011/61/EU);
"AIC" means the Association of Investment Companies;
"AIC Code" means the AIC Code of Corporate Governance;
"AIM" means the Alternative Investment Market of the London Stock Exchange;
"Annual Report" means the annual publication of the Company to the
Shareholders to describe its operations and financial conditions, together
with the Company's financial statements;
"APMs" means Alternative Performance Measures.
"ARR" means annual recurring revenue;
"Articles of Incorporation" or "Articles" means the articles of incorporation
of the Company;
"Audited Financial Statements" or "Financial Statements" means the audited
annual financial statements of the Company, including the Statement of Profit
or Loss and Other Comprehensive Income, the Statement of Financial Position,
the Statement of Changes in Equity, the Statement of Cash Flows and associated
notes;
"Australian Stock Exchange" means the Australian Stock Exchange Limited;
"Bank of England" means the Bank of England, the central bank of the UK;
"Board" or "Directors" or "Board of Directors" means the directors of the
Company;
"Brexit" means the departure of the UK from the European Union;
"CBRS" means Citizens Broadband Radio Service;
"CEO" means chief executive officer;
"CE Mark" means a certification mark that indicates conformity with health,
safety, and environmental protection standards;
"CFD" means Contracts for Difference;
"Committee" means the Audit Committee of the Company;
"Company" or "Fund" means Crystal Amber Fund Limited;
"Companies Law" means the Companies (Guernsey) Law, 2008, (as amended);
"CRS" means Common Reporting Standard;
"EBITDA" means earnings before interest, taxes, depreciation and amortisation;
"EGM" or "Extraordinary General Meeting" means an extraordinary general
meeting of the Company;
"EndoBarrier" means a minimally invasive medical device for treatment of type
2 diabetes;
"Equals" means Equals Group Plc;
"FATCA" means Foreign Account Tax Compliance Act;
"FCA" means the Financial Conduct Authority;
"FDA" means the United States Food and Drug Administration;
"FRC" means the Financial Reporting Council;
"FRC Code" means the UK Corporate Governance Code published by the FRC;
"FTSE" means the Financial Times Stock Exchange;
"FV" means Fair Value;
"FVTPL" means Fair Value Through Profit or Loss;
"General Counsel" means the main lawyer who gives legal advice to a company;
"GFSC" means the Guernsey Financial Services Commission;
"GFSC Code" means the GFSC Finance Sector Code of Corporate Governance;
"GID" means GI Dynamics, Inc. now known as Morphic Medical Inc;
"Gross Asset Value" means the value of the assets of the Company, before
deducting its liabilities, and is expressed in Pounds Sterling;
"HQ" means headquarters;
"IAS" means international accounting standards as issued by the Board of the
International Accounting Standards Committee;
"IASB" means the International Accounting Standards Board;
"IFRIC" means the IFRS Interpretations Committee, which issues IFRIC
interpretations following approval by the IASB;
"IFRS" means the International Financial Reporting Standards, being the
principles-based accounting standards, interpretations and the framework by
that name issued by the International Accounting Standards Board;
"Interim Financial Statements" means the unaudited condensed interim financial
statements of the Company, including the Condensed Statement of Profit or Loss
and Other Comprehensive Income, the Condensed Statement of Financial Position,
the Condensed Statement of Changes in Equity, the Condensed Statement of Cash
Flows and associated notes;
"Interim Report" means the Company's interim report and unaudited condensed
financial statements for the period ended 31 December;
"Investment Management Agreement" means the agreement between the Company and
the Investment Manager, dated 16 June 2008, as amended on 21 August 2013,
further amended on 27 January 2015 and further amended on 12 June 2018.
Additionally, the Investment Management Agreement was further amended and
restated on 14 February 2022.
"IPEV Capital Valuation Guidelines" means the International Private Equity and
Venture Capital Valuation Guidelines on the valuation of financial assets;
"KPMG" means KPMG Channel Islands Limited;
"LSE" or "London Stock Exchange" means the London Stock Exchange Plc;
"Market Capitalisation" means the total number of Ordinary shares of the
Company multiplied by the closing share price;
"MMI" means Morphic Medical Inc.;
"MW" means megawatt;
"NAV" or "Net Asset Value" means the value of the assets of the Company less
its liabilities as calculated in accordance with the Company's valuation
policies and expressed in Pounds Sterling;
"NAV per share" means the Net Asset Value per Ordinary share of the Company
and is expressed in pence;
"NMPI" means Non-Mainstream Pooled Investments;
"Official List" is the list maintained by the Financial Conduct Authority
(acting in its capacity as the UK Listing Authority) in accordance with
Section 74(1) of the Financial Services and Markets Act 2000;
"Ordinary share" means an allotted, called up and fully paid Ordinary share of
the Company of £0.01 each;
"R&D" means research and development;
"Risk Committee" means the Risk Committee of the Investment Manager;
"S&P" means Standard & Poor's Credit Market Services Europe Limited, a
credit rating agency registered in accordance with Regulation (EC) No
1060/2009 with effect from 31 October 2011;
"Smaller Companies Index" means an index of small market capitalisation
companies;
"SME" means small and medium sized enterprises;
"SORP" means Statement of Recommended Practice;
"Stewardship Code" means the Stewardship Code of the Company adopted from 14
June 2016, as published on the Company's website www.crystalamber.com
(http://www.crystalamber.com) ;
"Supreme Court" means the highest court in the federal judiciary of the US;
"Target Multiple" means the maximum multiple of the original investment that
could be paid, given value drivers, and receive a desired return on
investment;
"TISE" means The International Stock Exchange;
"Treasury" means the reserve of Ordinary shares that have been repurchased by
the Company;
"Treasury shares" means Ordinary shares in the Company that have been
repurchased by the Company and are held as Treasury shares;
"UK" or "United Kingdom" means the United Kingdom of Great Britain and
Northern Ireland;
"UK Stewardship Code" means the UK Stewardship Code published by the FRC in
July 2010 and revised in September 2012;
"US" means the means the United States of America, its territories and
possessions, any state of the United States and the District of Columbia;
"US$" or "$" means United States dollars;
"US Federal Reserve" means the Federal Reserve System, the central banking
system of the US; and
"£" or "Pounds Sterling" or "Sterling" means British pounds sterling and
"pence" means British pence.
Alternative Performance Measures
ALTERNATIVE PERFORMANCE MEASURES ("APMs")
We assess our performance using a variety of measures that are not
specifically defined under IFRS and therefore termed APMs. The APMs that we
use may not be directly comparable with those used by other companies.
ONGOING CHARGES
Ongoing charges are calculated using the AIC Ongoing Charges methodology,
which was last updated in April 2022 and is available on the AIC website
(theaic.co.uk). They represent the Company's investment management fee and all
other operating expenses, excluding currency loss/profit, ad-hoc costs
associated with portfolio transactions, ad-hoc research expenses and
non-recurring legal and professional fees and are expressed as a percentage of
the average Net Asset Value for the year. The Board continues to be
conscious of expenses and works hard to maintain a sensible balance between
good quality service and cost. The ongoing charges calculation is shown below:
2023 2022
£ £
Average NAV for the year (a) 104,929,784 125,257,263
Investment management fee 960,000 1,649,299
Other company expenses 671,899 820,179
Total recurring company expenses (b) 1,631,899 2,469,478
Ongoing Charges Ratio (b/a) 1.56% 1.97%
NET ASSET VALUE ("NAV")
The NAV is the net assets attributable to shareholders that is, total assets
less total liabilities, expressed as an amount per individual share.
NAV PER SHARE INCLUDING DIVIDENDS
A measure showing how the NAV per share has performed in the year, taking into
account both capital returns and dividends paid to shareholders.
NAV total return is calculated by adjusting for dividends paid. It considers
the changes in market value as well as other surges of income such as
dividends expressed as a percentage. It shows a more accurate valuation of a
stock's return.
The AIC shows NAV total return as a percentage change from the start of the
year. It assumes that dividends
(https://www.theaic.co.uk/aic/glossary/D?item=989) paid to shareholders are
reinvested at NAV at the time the shares are quoted ex-dividend
(https://www.theaic.co.uk/aic/glossary/E?item=993) .
2023 2022
Pence Pence
NAV PER SHARE INCLUDING DIVIDENDS
Opening NAV per share (a) 145.03 146.81
Add Dividends for the year (b) 45 12.50
Opening NAV per share (c) 145.03 146.81
Closing NAV per share (d) 93.33 145.03
Movement in NAV per share in the year (e) = (d) - (c) (51.70) (1.78)
NAV per share including Dividends (f) = (a) + (b) + (e) 138.33 157.53
(Decrease)/Increase in NAV per share in the year (g) = (f) - (a) (6.70) 10.72
Percentage (decrease)/increase in NAV per share in the year (4.6)% 7.3%
(h) = (g) / (a) * 100
Net Asset Value ("NAV") per share including dividends paid decreased by 4.6%
(2022: increase 7.3%).
TOTAL RETURN
Total return is calculated by taking the difference between the number of
shares multiplied by NAV per share at both the start and end of the year. The
increase or decrease percentage is calculated based on the opening value.
Adjusting for dividends paid, the total loss in the Company's NAV per share
for the year was 35.68% (2022: return 8%)
2023 2022
Pence Pence
TOTAL RETURN
Number of shares (a) 1093.70 1000.00
Opening NAV for the year (pence) (b) 145.03 146.81
(c) = (a) + (b) 1,586.19 1468.10
Number of shares (d) 1093.70 1093.70
Closing NAV per share (e) 93.33 145.03
(f) = (d) + (e) 1020.75 1586.19
Movement in the year (pence) (g) = (c) + (f) (565.44) 118.09
Percentage Total Return (h) = (g) / (c) * 100 (35.65%) 8%
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