REG - Crystal Amber Fund - Half-year Report
03/03/2022 07:00
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RNS Number : 4579D Crystal Amber Fund Limited 03 March 2022
3 March 2022
Crystal Amber Fund Limited
Interim results for the six months ended 31 December 2021
The Company announces its unaudited interim results for the six months ended
31 December 2021.
Key Points
· Net Asset Value ("NAV") per share fell by 2.5% over the period to
143.19p per share. Total returns, inclusive of the 2.5p dividend paid in July
2021 were -0.8%.
· The Fund's NAV per share return compares to a 4.7% increase in the
Numis Small Cap Index.
· Revenue upgrades at Equals Group with a strong growth trajectory.
Post period end, additional revenue and profit upgrades.
· GI Dynamics obtained permission to initiate a clinical trial in India
with its local partner, Apollo Sugar.
· Increased shareholding in Hurricane Energy from 23% to 29% of
Hurricane's issued share capital.
· On 22 December 2021 an interim dividend was declared of a further 10p
in addition to the 2.5p dividend declared in July 2021. The interim dividend
was paid on 9 February 2022.
· During the period, £0.4 million was allocated to share buybacks,
acquiring 372,000 shares at an average of 113.55p a share.
· Post period end, adjusting for the 10p dividend per share paid in
February 2022, NAV per share increased by 11.7% in the two months to 28
February 2022.
· A proposal to change the investment policy and amend the terms of the
Investment Management Agreement will be put to a shareholder vote at an EGM to
be held on 7 March 2022. Full details of the two proposals are contained in
the Board's letter to shareholders dated 15 February 2022.
For further enquiries please contact:
Crystal Amber Fund Limited
Christopher Waldron (Chairman) Tel: 01481 742 742
Allenby Capital Limited - Nominated Adviser
David Worlidge/Liz Kirchner 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
During the period from 30 June 2021 to 31 December 2021, net asset value fell
from £122.9 million (146.81 pence per share) to an unaudited NAV of £119.4
million (143.19 pence per share). The Fund's NAV per share total return over
the six months to 31 December 2021 of -0.8%, compares to a 4.7% increase in
the Numis Small Cap Index in the same period.
Shareholders are aware that the Fund's portfolio is highly concentrated: the
Fund's top four holdings comprise 74% of NAV. As previously stated, the Board
remains mindful that activist investing requires a focused portfolio, which
inevitably increases the concentration risk. During the period, there were no
changes in the composition of the Fund's core holdings.
Pleasingly, at Equals Group, the intense engagement and influence made
possible by the Fund as the largest shareholder was rewarded with a 34% share
price increase over the period. In January 2022, the share price rose by a
further 18%.
The most intense activism was at Hurricane Energy. The Fund's holding endured
a torrid time in the period up to 30 June 2021 as a result of Hurricane's
previous board embarking on a costly, futile and unsuccessful attempt to
deliver 95% of the equity to bondholders. Following the Fund's victory in the
High Court, the Fund was able to continue to promote the interests of all
shareholders and press the new Hurricane board to embark on a substantial,
albeit belated bond buyback programme. The Fund is proud of its activist
involvement and its work. Should oil production at Hurricane continue to meet
or exceed budget, the Fund's 29% shareholding should be extremely valuable.
Despite an excellent operational performance at Hurricane and a sharply higher
oil price, the Fund believes communication from Hurricane was overly
pessimistic during the period under review. As a result the share price rose
by just 5%, but since the period end, with balanced messaging, continued good
performance and a further increase in the price of oil, Hurricane's share
price has doubled.
During the period, the Fund declared dividends totalling 12.5p per share, with
2.5p in July 2021 and 10p in December 2021. The Fund also continued its
discount management policy through share buy-backs, aided by the Fund's share
price discount to NAV, which averaged 23.7% over the period.
Future Investment Policy
At the AGM in November 2021, the resolution that the Fund continue as
constituted received a majority of votes, but did not achieve the required 75%
majority to pass. Consequently, on 15 February 2022 the Board wrote to
shareholders proposing a change of investment policy and amendment to the
terms of the Investment Management Agreement.
The proposed policy change will see the Fund adopt a strategy of maximising
capital returns to shareholders through timely disposals of its strategic
holdings over the period to the end of 2023. In line with this, the Board
believes it is appropriate for the investment management fees to be aligned
with this policy and has also proposed a new reduced fee structure, comprising
a fixed fee that will decline over the realisation period. The existing
incentive fee arrangements will also be revised and will be based on realised
cash, rather than increases in NAV. Full details of the two proposals are
contained in the Board's circular of 15 February 2022 and will be put to a
shareholder vote at the forthcoming EGM on 7 March 2022.
The Board believes that the new strategy is in the best interests of
shareholders as it allows the Manager a reasonable time frame to make
disposals without compromising ongoing engagement with investee companies. We
have seen the benefits of this in the last few months and hope that this
measured policy will be reflected in shareholders' returns over the next
eighteen months.
Christopher Waldron
Chairman
2 March 2022
Investment Manager's Report
Strategy and performance
On 31 December 2021, equity investments in twelve companies represented 96% of
NAV. The Fund also held loan note instruments in GI Dynamics Inc, which
represent 4% of NAV. The Fund was fully invested at the end of the year. The
Fund's top four holdings represented 74% of NAV (2020: 83%).
During the period, the Fund reduced its positions in De La Rue, Allied Minds
and Equals Group, realising a combined loss of £2.8 million. Following the
High Court's refusal to sanction Hurricane Energy's financial restructuring,
the Fund significantly increased its holding in the Company from 23% to 29%.
These shares were acquired at an average cost of 3.8p. The Fund also continued
to support GI Dynamics with a £0.6 million investment and initiated a new
investment in an unlisted business.
Over the period, the key contributor to the Fund's performance was Equals
Group (5.2%) and the key detractor was De La Rue (-5.3%).
Investee companies
Our comments on some of our principal investments are as follows:
De La Rue Plc ("De La Rue")
During the period, De La Rue published its unaudited interim results for the
six months to 30 September 2021. Adjusted operating profits rose by 166% to
£17 million. Positive operating cash flow was £25.8 million.
The outlook for the full year at the time the results were published was
described as being in line with the board's expectations. In January 2022, De
La Rue released a trading update stating that, as a result of headwinds
relating to the Covid-19 pandemic employee absences at global manufacturing
facilities and supply chain shortages, operating profits are now expected to
be broadly similar to the previous year at between £36 million and £40
million, as against earlier market expectations of between £45 million and
£47 million.
Prior to the trading update, the Fund had been in discussion with De La Rue's
Chief Executive and Chairman regarding gross margins. The Fund conveyed its
view to De La Rue that its pricing has been on capacity utilisation rather
than maximising gross profit and that De La Rue could have taken better
advantage of buoyant demand.
In July 2020, De La Rue completed a £100 million fundraise which was priced
at 110p a share. Over the last eighteen months, the business has been
transformed, but, the share price has returned to 110p following the profit
warning. Furthermore, businesses with similar pension profiles are now
benefiting from rising interest rate expectations. The Fund believes that this
should result in a material reduction in future pension contributions for De
La Rue in the coming year and increase free cash flows accordingly.
Shares in De La Rue now trade on 9.7 times revised earnings per share to March
2022 and 8 times to March 2023. The Fund believes that following the
Covid-19 pandemic, the industry requires consolidation. Given its leading
market share in Currency and its 20%, margins in Authentication, De La Rue
should be ideally placed to be a part of that consolidation.
During 2021, the Fund reduced its shareholding in De La Rue from 15% to 10%.
Allied Minds
The Fund has been an investor in Allied Minds since November 2018, and
currently owns in excess of 18%. of its issued share capital. Since investing,
the Fund has secured a 70% reduction in the annual cost base.
In 2019, Allied Minds announced that it would focus on maximising returns and
shareholder distributions from its existing portfolio, rather than continuing
to invest in new businesses. Allied Minds has failed to provide market
participants with visibility as to the timing and quantum of shareholder
distributions. The portfolio contains three significant holdings: Federated
Wireless, BridgeComm and Orbital Sidekick.
In March 2020, Harry Rein was appointed Chairman of the Allied Minds board,
having joined the board in November 2017. In January 2021, following a
strategic review, Allied Minds introduced what it described as "a new form of
governance better suited to achieve value creation." With no Chief Executive,
Allied Minds is now managed by its three non-executive directors. The Fund
considers, in practical terms, that Harry Rein is the key decision maker. The
2020 Report and Accounts for Allied Minds states that "the Chairman is
responsible for the leadership and conduct of the board."
During the period, the Fund expressed several governance concerns to Allied
Minds, none of which were adequately resolved. On 18(th) February 2022,
Crystal Amber announced that it had sent to the board of Allied Minds a
requisition notice requiring Allied Minds to convene a general meeting at
which a resolution will be proposed to remove Harry Rein as a non-executive
director.
Harry Rein's record and responsibilities as Chairman (there is no Chief
Executive) include:
1. Appalling shareholder returns: since becoming Chairman, the share
price of Allied Minds has fallen by 40%. Over the same period, the NASDAQ US
Small Cap Index has risen by 85%. Over the last 12 months, the share price of
Allied Minds has fallen by 36%.
2. An egregious total expense ratio: Allied Minds is projecting annual
operating costs of $5.7 million. Net assets are currently estimated at $123
million including cash of $13 million. Adjusting for cash, the total expense
ratio is 5.2 per annum. Expenses relative to market capitalisation less cash
are 11.8%. per annum.
3. Withholding price sensitive information: In April 2021, at the
Capital Markets Day, it was disclosed that revenues for 2021 Federated
Wireless were forecast to be $17 million with $35 million to $45 million
expected for the year to December 2022. It was stated that during Q3 of 2021,
the company would have "a really good idea" of the 2021 outturn. In August
2021, Allied Minds reported that Federated Wireless had met its revenue
expectations for its first half and was on track to meet its full year plan.
In October 2021, house broker, Numis Securities wrote: "Federated Wireless
accounts for c.26p NAV per ALM share (but is likely worth a multiple of this)
in our view, and, most importantly, the company keeps producing more evidence
to assure that it is on track to turn over $17m in FY21 and $40m in FY22, and
earn high, SaaS-type, profit margins." Following Crystal Amber's requisition
notice being announced referring to this issue, on the following business day,
Allied Minds' announcement admitted that Federated Wireless revenues were
below expectations set out at Allied Minds' capital markets presentation in
April 2021.
4. Misleading and unbalanced regulatory news service announcements: on
21(st) February 2022, Allied Minds announced a $58 million fundraise at
Federated Wireless. This was presented as an "up round" referring to a $15
million increase in the pre-money value. However, adjusting for the $4.3
million of bridge funding, the like for like value of Allied Mind's
shareholding fell by 17%. This was not disclosed to market participants.
5. Governance concerns including:
i) Breach of provision 20 of the 2018 UK Corporate
Governance Code. No external search consultancy was used to identify and
recruit Bruce Failing. Bruce Failing, a non-executive director was proposed by
Harry Rein who advised the Fund that he had "persuaded Bruce Failing to join
the board."
ii) Bruce Failing acts as the Senior Independent Director but
the Fund does not believe he is independent: both Bruce Failing and Harry Rein
are directors of Delivery Care RX.
iii) Breach of provision 24 of the 2018 UK Corporate Governance
Code. Harry Rein is a member of the Audit Committee.
iv) Appointing Mark Pritchard, a 5.5% shareholder as a paid
consultant, further increasing the cost base.
6. Investor communication blunders including:
i) The publication of a "rogue" press release by Federated
Wireless, a company also chaired by Harry Rein. In November 2021, Federated
Wireless issued a press release stating that revenue growth was four times
higher than expected. When Crystal Amber wrote to Harry Rein to seek
clarification as to why this information had not been released to market
participants, he replied: " A marketing manager at Federated released the
initial Federated release without the Board of Federated's knowledge." The
release was subsequently amended to exclude any reference to revenue growth.
ii) Failure to invite investors to the 2021 Capital Markets
Day: invitations were sent to analysts, not to investors. The Fund was aware
of two (paid for) analysts who cover Allied Minds being sent invitations.
Subsequently, investors were made aware of the Capital Markets Day, with only
a few days' notice. The company's broker subsequently apologised to the Fund
for this error.
iii) Withdrawing of paid-for research from Edison, after the
Fund highlighted an error with the percentage holding in a portfolio company.
Edison also apologised for a previous error pointed out to Harry Rein by the
Fund: estimated net asset value had been materially overstated, as a result of
not deducting the special dividend paid to shareholders in February 2020. It
would appear there was a lack of oversight of these figures from Harry Rein.
Under Harry Rein's "stewardship," the Fund regards Allied Minds as rudderless
and guilty of serious and egregious corporate governance failings. To
safeguard against further erosion of shareholder value and to stop such
conduct continuing, the Fund is now seeking Harry Rein's removal.
The Fund estimates that net asset value per share at Allied Minds is
approximately 38p, placing the shares on a 50%. discount to net asset value.
In its engagement, the Fund has found Harry Rein to be a major impediment to
value protection and realisation. The Fund believes that Allied Minds must
communicate to market participants a timeline of cash realisations and return
of sale proceeds and this should materially assist in narrowing the share
price discount to net asset value.
Equals Group ("Equals")
During the period, Equals continued to demonstrate the payback from
substantial investments in product and marketing capabilities undertaken in
2019 and 2020. These have developed multi-currency capabilities for a range of
users, including larger businesses and other financial intermediaries.
Sales efficiency has also improved with the deployment of new tools. Since May
2021, growth in revenues across products has been aided by the launch of
Equals Solution. This is a new multicurrency product with own-name IBAN
capability targeted at larger corporations.
In the fourth quarter of 2020, the Fund took advantage of share price weakness
and increased its holding in Equals to 25.7% to become its largest
shareholder. The share price went into 2021 at 28.25p. Following several
positive trading updates during 2021, Equals reported unaudited revenues of
£44.1 million for 2021 in the pre-close announcement in January 2022.
(2020: £29 million, 2019: £30.9 million). Revenues from its retail
travel money product, which were most impacted by the pandemic, now represent
approximately 6%. of total revenues and should benefit from a normalisation of
leisure travel. Net cash increased to £13 million.
The January 2022 trading update resulted in strong institutional demand and
the Fund reduced its shareholding from just over 20% to 13%, achieving a sale
price of 77p per share. Having engaged intensively with management over the
last 18 months, it is pleasing to have converted this investment into
substantial realised profits.
The Fund expects Equals to continue to deliver strong top line growth and to
benefit from industry consolidation.
GI Dynamics Inc ("GI Dynamics")
After delays due to the COVID-19 surge in India, the I-STEP application for a
randomised clinical trial (to be conducted in conjunction with Apollo Sugar
Clinics) was reviewed by regulators in India in June 2021 and approved in
December 2021.
The global pandemic has reaffirmed the importance of gaining control of the
significant risk factors associated with Type II diabetes and obesity. More
than ever, medical professionals and patients alike are seeking minimally
invasive and effective therapies to help control and resolve these chronic
conditions. GI Dynamics is preparing to meet this large unmet clinical need.
The Fund believes that because of its intensive activism, the investment in GI
Dynamics now has considerable strategic value. This was evidenced over the
period by two approaches from US trade parties that have expressed an interest
in making a significant investment in GI Dynamics. The Fund looks forward to
continuing to work with the company to achieve its operational milestones and
to further develop the pathway to maximise shareholder value. In due course,
the Fund will consult with investors about the longer-term plans for GI
Dynamics to realise value for its shareholders. Given the anticipated value
accretive milestones, the Fund believes it is appropriate that it gives GI
Dynamics the time it requires to maximise shareholder returns.
Hurricane Energy plc (Hurricane)
In June 2021 at the High Court, Mr Justice Zacaroli refused to sanction the
Hurricane board's attempt to force through a highly dilutive debt for equity
swap. At the time, Hurricane claimed that without a debt for equity swap,
bondholders would not be able to recover more than 56% of their investment.
The board had proposed that $50 million of the $230 million repayable to
bondholders in July 2022 be converted into 95 % of Hurricane's equity, with
the remaining $180 million debt earning cash interest of 9.4 % per annum plus
payment in kind interest of 5% per annum.
In January 2022, Hurricane announced that net debt had reduced to $28.5
million at 31 December 2021. Net free cash of between $8 million and $38
million after repaying all outstanding bonds is expected by the end of July
2022. This is a remarkable transformation in just seven months. The Fund's
actions not only averted a wholly unnecessary 95% dilution but has positioned
the Fund to benefit from Hurricane's exciting prospects. In February 2022,
Hurricane announced that it had net free cash of $85 million against a
convertible bond liability of $78.5 million.
During the period, the Fund engaged with management regarding the utilisation
of tax losses. On 31 December 2020, Hurricane had ring-fenced trading losses
of $468.7 million and supplementary charge losses and investment allowances of
$707.8 million. In addition, capital allowance pools of $383.5 million were
available to be used against ring-fenced trading profits. In the event of a
corporate transaction, the Fund believes that the benefit arising to
Hurricane's shareholders could be very substantial.
In October 2021, the Fund reported that it had written to the Hurricane Board
under Article 94 of the company's articles of association to request that a
committee (comprising the non-executive directors) be established with a
mandate to investigate what happened and to engage external advisers (should
that be needed) for the investigation. The Fund believes that it, along with
all Hurricane shareholders, suffered considerable financial loss. In December
2021, Hurricane reported that it had completed a review of events leading up
to the restructuring and that no further action was necessary.
Following the period end, the Fund requested and took a position on the
Hurricane Board to enable Hurricance to fully realise its potential.
Therefore, the Fund is not able to comment on the company other than by
reference to public announcements made by Hurricane.
Having previously banked profits of £43 million on Hurricane, the average
cost of the Fund's current shareholding is 6.7p a share.
Leaf Clean Energy Company("Leaf")
Leaf Clean has received the withheld tax from the Invenergy disposal. In
February 2022, the Fund received notice of compulsory redemption of its
shares, as the company winds down. The Fund expects to realise £1.6 million
in the process, with 6117p per share being paid, compared with the suspension
price of 454p.
Hedging Activity
The Fund did not engage in hedging activity during the period.
Realisations
Over the period, the Fund realised losses of £3.1 million. These relate
mainly to the sales of Allied Minds and De La Rue, offset by the gains in
Equals Group.
Outlook
The Fund has accumulated strategic holdings in Hurricane Energy, Equals Group,
De La Rue and Allied Minds. At the appropriate time, these holdings will
enable the Fund to facilitate and benefit from corporate action. Despite the
current geopolitical uncertainties and general cost input inflation, the Fund
is well placed to continue its strong recovery.
Crystal Amber Asset Management (Guernsey) Limited
2 March 2022
Condensed Statement of Profit or Loss and Other Comprehensive Income (Unaudited)
For the six months ended 31 December 2021
Six months ended 31 December Six months ended 31 December
2021 2020
Revenue Capital Total Revenue Capital Total
Note £ £ £ £ £ £
Income
Dividend income from listed investments 20,311 - 20,311 269,645 - 269,645
20,311 - 20,311 269,645 - 269,645
Net (losses)/gains on financial assets designated at FVTPL and derivatives
held for trading
Equities
Net realised (losses) 4 - (3,103,595) (3,103,595) - (3,000,627) (3,000,627)
Movement in unrealised gains 4 - 2,564,126 2,564,126 - 30,709,787 30,709,787
Debt Instruments
Movement in unrealised gains 4 - 92,097 92,097 - 3,171,912 3,171,912
Money market investments
Net realised losses 4 - - - - (6,114,887) (6,114,887)
Movement in unrealised (losses) 4 - - - - (3,908,027) (3,908,027)
- (447,372) (447,372) - 20,858,158 20,858,158
Total income/(expense) 20,311 (447,372) (427,061) 269,645 20,858,158 21,127,803
Expenses
Transaction costs - 96,331 96,331 - 29,234 29,234
Exchange movements on revaluation of investments and working capital (83,682) (723,899) (807,581) 528,477 1,511,639 2,040,116
Management fees 10 880,981 - 880,981 737,204 - 737,204
Directors' remuneration 65,000 - 65,000 65,000 - 65,000
Administration fees 79,003 - 79,003 67,424 - 67,424
Custodian fees 91,301 - 91,301 30,297 - 30,297
Audit fees 17,755 - 17,755 17,550 - 17,550
Facility Fee 6 - - - 265,941 - 265,941
Other expenses 193,473 - 193,473 161,344 - 161,344
1,243,831 (627,568) 616,263 1,873,237 1,540,873 3,414,110
(Loss)/return for the period (1,223,520) 180,196 (1,043,324) (1,603,592) 19,317,285 17,713,693
Basic and diluted (loss)/earnings per share (pence) 2 (1.46) 0.22 (1.25) (1.80) 21.65 19.85
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 Unaudited Condensed Financial Statements form an integral
part of these Interim Financial Statements.
Condensed Statement of Financial Position (Unaudited)
As at 31 December 2021
As at As at As at
31 December 30 June 31 December
2021 2021 2020
(Unaudited) (Audited) (Unaudited)
Notes £ £ £
Assets
Cash and cash equivalents 106,075 5,447,571 237,957
Trade and other receivables 95,796 406,272 151,334
Financial assets designated at FVTPL and derivatives held for trading 4 119,352,781 121,642,713 111,889,639
Total assets 119,554,652 127,496,556 112,278,930
Liabilities
Trade and other payables 181,808 4,564,568 182,898
Loan facility 6 - - 3,205,825
Total liabilities 181,808 4,564,568 3,388,723
Equity
Capital and reserves attributable to the Company's equity shareholders
Share capital 7 997,498 997,498 997,498
Treasury shares reserve 8 (19,614,035) (19,191,639) (18,485,298)
Distributable reserve 86,378,909 88,472,333 90,579,709
Retained earnings 51,610,472 52,653,796 35,798,298
Total equity 119,372,844 122,931,988 108,890,207
Total liabilities and equity 119,554,652 127,496,556 112,278,930
NAV per share (pence) 3 143.19 146.81 128.99
The Interim Financial Statements were approved by the Board of Directors and
authorised for issue on 2 March 2022.
Christopher Waldron
Jane Le Maitre
Chairman
Director
2 March 2022
2 March 2022
The Notes to the Unaudited Condensed Financial Statements form an integral
part of these Interim Financial Statements.
Condensed Statement of Changes in Equity (Unaudited)
For the six months ended 31 December 2021
Share Treasury Distributable Retained earnings Total
Capital Shares Reserve Capital Revenue Total Equity
Note £ £ £ £ £ £ £
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 8 - (422,396) - - - - (422,396)
Dividends paid in the period 9 - - (2,093,424) - - - (2,093,424)
Return for the period - - - 180,196 (1,223,520) (1,043,324) (1,043,324)
Balance at 31 December 2021 997,498 (19,614,035) 86,378,909 58,165,180 (6,554,708) 51,610,472 119,372,844
For the six months ended 31 December 2020
Share Capital Treasury Distributable Reserve Retained earnings Capital Total Revenue Total Equity
shares
Notes £ £ £ £ £ £ £
Opening balance at 1 July 2020 996,248 (12,265,601) 90,579,709 20,511,896 (2,427,291) 18,084,605 97,394,961
Issue of Ordinary shares 7 1,250 - - - - - 1,250
Purchase of Ordinary shares into Treasury 8 - (6,219,697) - - - - (6,219,697)
Return for the period - - - 19,317,285 (1,603,592) 17,713,693 17,713,693
Balance at 31 December 2020 997,498 (18,485,298) 90,579,709 39,829,181 (4,030,883) 35,798,298 108,890,207
The Notes to the Unaudited Condensed Financial Statements form an integral
part of these Interim Financial Statements.
Condensed Statement of Cash Flows (Unaudited)
For the six months ended 31 December 2021
Six months Six months
ended ended
31 December 31 December
2021 2020
(Unaudited) (Unaudited)
£ £
Cash flows from operating activities
Dividend income received from listed investments 20,311 269,645
Management fees paid (880,981) (737,204)
Directors' fees paid (65,000) (65,000)
Other expenses paid (61,164) (341,248)
Net cash outflow from operating activities (986,834) (873,807)
Cash flows from investing activities
Purchase of equity investments (20,521,735) (28,684,716)
Sale of equity investments 23,716,999 50,502,804
Purchase of debt instruments (4,802,643) (385,683)
Purchase of derivative financial instruments - (32,222,870)
Sales of derivative financial instruments - 9,289,813
Transaction charges on purchase and sale of investments (118,813) (22,169)
Net cash outflow from investing activities (1,726,192) (1,522,821)
Cash flows from financing activities
Proceeds from loan facility (22,785,705) 12,370,000
Repayments of loan facility 23,125,126 (9,439,633)
Loan Facility Fees (316,925) -
Proceeds from issue of Company Shares - 1,250
Purchase of Company shares into Treasury (557,542) (6,213,187)
Dividends paid (2,093,424) -
Net cash outflow from financing activities (2,628,470) (3,281,570)
Net decrease in cash and cash equivalents during the period (5,341,496) (5,678,198)
Cash and cash equivalents at beginning of period 5,447,571 5,916,155
Cash and cash equivalents at end of period 106,075 237,957
The Notes to the Unaudited Condensed Financial Statements form an integral
part of these Interim Financial Statements.
Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 December 2021
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, GY1 4LY. The Company
was established to provide shareholders with an attractive total return which
is expected to comprise primarily capital growth with the potential for
distributions of up to 5 pence per share per annum following consideration of
the accumulated retained earnings as well as the unrealised gains and losses
at that time. The Company seeks to achieve this through investment in a
concentrated portfolio of undervalued companies, which are expected to be
predominantly, but not exclusively, listed or quoted on UK markets and which
have a typical market capitalisation of between £100 million and £1,000
million.
GI Dynamics Inc., is an unconsolidated subsidiary of the Company and was
incorporated in Delaware. As at 31 December 2021, it had five wholly-owned
subsidiaries and its principal place of business is Boston. Refer to Note 10
for further information.
The Company's Ordinary shares were 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
on pages • to • unless separately defined.
1. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these Interim
Financial Statements are set out below. These policies have been consistently
applied to those balances considered material to the Interim Financial
Statements throughout the current period, unless otherwise stated.
Basis of preparation
The Interim Financial Statements have been prepared in accordance with IAS 34,
Interim Financial Reporting.
The Interim Financial Statements do not include all the information and
disclosures required in the Annual Financial Statements and should be read in
conjunction with the Company's Annual Financial Statements for the year to 30
June 2021. The Annual Financial Statements have been prepared in accordance
with IFRS.
The same accounting policies and methods of computation are followed in the
Interim Financial Statements as in the Annual Financial Statements for the
year ended 30 June 2021.
The presentation of the Interim Financial Statements is consistent with the
Annual Financial Statements. Where presentational guidance set out in the SORP
"Financial Statements of Investment Trust Companies and Venture Capital
Trusts" (issued by the AIC in November 2014 and updated in February 2018 and
October 2019) is consistent with the requirements of IFRS, the Directors have
sought to prepare the Interim Financial Statements on a basis compliant with
the recommendations of the SORP. In particular, supplementary information
which analyses the Statement of Profit or Loss and Other Comprehensive Income
between items of a revenue and capital nature has been presented alongside the
total Statement of Profit or Loss and Comprehensive Income.
Going concern
As at 31 December 2021, the Company had net assets of £119.4 million (30 June
2021: £122.9 million) and cash balances of £0.1 million (30 June 2021: £5.4
million) which are sufficient to meet current obligations as they fall due.
In the period prior to 31 December 2021 and up to the date of this report, the
COVID-19 pandemic has continued to have a negative impact on the global
economy. As this situation is both unprecedented and evolving, it raises some
uncertainties and additional risks for the Company.
The Directors and Investment Manager are actively monitoring the potential
effect on the Company and its investment portfolio. In particular, they have
considered the potential impact of the following specific key matters:
• Unavailability of key personnel at the
Investment Manager or Administrator;
• Increased volatility in the fair value of
investments, including any potential impairment in value; and
• Increased uncertainty as to the timing and
quantum of dividend receipts.
• Russia's invasion of Ukraine. This has
potentially adverse consequences for investee companies as energy costs rise
but the effects of this are somewhat offset by increased revenue at
Hurricane..
In considering the potential impact of COVID-19 on the Company and its
investment portfolio, the Directors have taken account of the mitigation
measures already in place. At Company level, key personnel at the Investment
Manager and Administrator have successfully implemented business continuity
plans to ensure business disruption is minimised, including remote working
where required, and all staff are continuing to assume their day-to-day
responsibilities.
In relation to the Company's investment portfolio, 71% 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.
Based on the Board's assessment of those matters most likely to be affected by
COVID-19 and taking account of the various risk mitigation measures already in
place, the Directors do not consider that the effects of COVID-19 are likely
to create a material uncertainty over the assessment of the Company as a going
concern.
On the basis of this review, and after making due enquiries, including
consideration of the continuation vote
(as noted below), the Directors have a reasonable expectation that the Company
has adequate resources to continue in operational existence for at least 12
months from the date of approval of this report. Accordingly, they continue to
adopt the going concern basis of accounting in preparing these financial
statements.
Continuation vote
The continuation vote was proposed at the AGM on 22 November 2021. Subsequent
to the meeting the Company announced that the vote for the Company to continue
as constituted, which required a 75% majority of votes cast to pass, did not
pass, obtaining 51%.
The Company announced on 22 December 2021 that it would formulate proposals
for the future of the Fund and write to shareholders in January 2022 to
convene an EGM. The Board of Crystal Amber Fund Limited believes it is in the
interests of shareholders as a whole for the Fund to adopt a strategy of
maximising capital returned to shareholders by timely disposals, including
trade sales of the Fund's strategic holdings, where appropriate. The Fund
anticipates selling its holding in Board Intelligence plc, an unquoted company
of which it has been a shareholder since 2018. The Fund will not make any new
investments and will only make further opportunistic investments in existing
holdings where, in the view of the Board and Investment Manager, such
investment is 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.
The Fund believes that because of its intensive activism, the investment in GI
Dynamics now has considerable strategic value. This was recently evidenced by
two approaches from US trade parties that have expressed an interest in making
a significant investment in GI Dynamics. The Fund looks forward to continuing
to work with the company to achieve its operational milestones and to further
develop the pathway to maximise shareholder value.
On 15 February 2022 the Fund announced the posting of a circular with
proposals for a change of investment policy and new management and incentive
arrangements as discussed above which are subject to shareholder approval. The
Company has agreed to make amendments and enter into a new Investment
Management Agreement. The Proposals are subject to shareholder approval at a
Board Meeting on 7 March 2022 and if approved, are expected to result in the
realisation of predominantly all the Company's assets (with the possible
exception of GI Dynamics) by 31 December 2023 and the periodic return of
capital to shareholders. Following any material realisations of the Fund's
investments, the Directors intend to return cash to shareholders using
tax-efficient means such as redeemable shares and/or tender offers.
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, who 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 Interim 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 in UK equity instruments, and therefore the Company has only one
operating segment.
2. BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE
(Loss)/Earnings per share is based on the following data:
Six months Six months
ended ended
31 December 31 December
2021 2020
(Unaudited) (Unaudited)
(Loss)/return for the year £(1,043,324) £17,713,693
Weighted average number of issued Ordinary shares 83,600,951 89,227,868
Basic and diluted (loss)/earnings per share (pence) (1.25) 19.85
3. NAV PER SHARE
NAV per share is based on the following data:
As at As at As at
31 December 30 June 31 December
2021 2021 2020
(Unaudited) (Audited) (Unaudited)
NAV per Condensed Statement of Financial Position £119,372,844 £122,931,988 £108,890,207
Total number of issued Ordinary shares (excluding Treasury shares) 83,365,000 83,737,000 84,420,000
NAV per share (pence) 143.19 146.81 128.99
4. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS AND DERIVATIVES HELD FOR TRADING
1 July 2021 to 1 July 2020 to 1 July 2020 to
31 December 2021 30 June 2021 31 December 2020
(Unaudited) (Audited) (Unaudited)
£ £ £
Equity investments 114,931,234 117,965,568 95,312,797
Debt instruments 4,421,547 3,677,145 3,645,619
Financial assets designated at FVTPL 119,352,781 121,642,713 98,958,416
Derivative financial instruments held for trading - - 12,931,223
Total financial assets designated at FVTPL and derivatives held for trading 119,352,781 121,642,713 111,889,639
Equity investments
Cost brought forward 153,218,932 167,187,388 167,187,388
Purchases 20,521,735 11,184,002 36,502,739
Conversion of loans - 8,902,985 -
Sales (23,740,499) (28,890,455) (50,584,763)
Net realised losses (3,103,595) (5,164,988) (3,000,627)
Cost carried forward 146,896,573 153,218,932 150,104,737
Unrealised losses brought forward (33,410,174) (84,056,730) (84,056,730)
Movement in unrealised gains/(losses) 2,564,126 50,646,556 30,709,787
Unrealised losses carried forward (30,846,048) (33,410,174) (53,346,943)
Effect of exchange rate movements on revaluation (1,119,291) (1,843,190) (1,444,997)
Fair value of equity investments 114,931,234 117,965,568 95,312,797
Debt instruments
Cost brought forward 3,257,955 8,104,315 8,104,315
Purchases 568,612 4,056,625 4,056,625
Cost carried forward 3,826,567 3,257,955 3,257,954
Unrealised gains/(losses) brought forward 1,254,587 (2,004,674) (2,004,674)
Movement in unrealised gains 92,097 3,259,261 3,171,912
Unrealised gains carried forward 1,346,684 1,254,587 1,167,238
Effect of exchange rate movements (751,704) (835,397) (779,573)
Fair value of debt instruments 4,421,547 3,677,145 3,645,619
Total financial assets designated at FVTPL 119,352,781 121,642,713 98,958,416
Derivative financial instruments
Cost brought forward - - -
Purchases - 33,238,926 32,222,870
Sales - (23,991,363) (9,289,813)
Net realised losses - (9,247,563) (6,114,886)
Cost carried forward - - 16,818,170
Unrealised gains brought forward - 21,080 21,080
Movement in unrealised gains - (21,080) (3,908,028)
Fair value of derivative financial instruments - - 12,931,222
-
Total financial assets designated at FVTPL 119,352,781 121,642,713 111,889,639
5. FINANCIAL INSTRUMENTS
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 that are 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 if an asset was
sold or a liability transferred 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 31 December 2021 and 30 June 2021:
Level 1 Level 2 Level 3 Total
Unaudited Unaudited Unaudited Unaudited
31 December 2021 £ £ £ £
Financial assets designated at FVTPL and derivatives held for trading:
Equity instruments - listed equity investments 82,250,770 2,935,517 - 85,186,287
Equity instruments - unlisted equity investments - - 29,744,947 29,744,947
Debt instruments - loan notes - - 4,421,547 4,421,547
82,250,770 2,935,517 34,166,494 119,352,781
Level 1 Level 2 Level 3 Total
Audited Audited Audited Audited
30 June 2021 £ £ £ £
Financial assets designated at FVTPL and derivatives held for trading:
Equity Instruments - listed equity investments 89,741,685 2,868,699 - 92,610,384
Equity Instruments - unlisted equity investments - - 25,355,184 25,355,184
Debt - loan notes - - 3,677,145 3,677,145
89,741,685 2,868,699 29,032,329 121,642,713
The Level 1 equity investments were valued by reference to the closing bid
prices in each investee company on the reporting date.
The Level 3 equity investment in Board Intelligence was valued by reference to
the valuation multiples of publicly-listed cloud software companies, after
applying a discount equivalent to that which prevailed at the time of
investment in March 2018. The Level 3 equity investment in Leaf Clean Energy
Company was valued by reference to the expected proceeds from the company's
wind down, as guided by management in its last shareholder letter dated 17
February 2022. The Level 3 equity investment in GI Dynamics Inc was valued by
reference to its discounted cash flow valuation. The loan notes were
classified as Level 3 debt instruments as there was no observable market data.
The Board has concluded that the fair value of the loan note is approximate to
the loan principal plus accrued interest.
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:
Six months ended 31 December 2021 Year Ended Six months ended 31 December 2020
30 June 2021
Reconciliation in Level 3 (Unaudited) (Audited) (Unaudited)
£ £ £
Opening balance 29,032,329 11,684,980 11,684,980
GI Dynamics Inc - Transfer to Level 3 4,294,452 1,494,943
-
Purchases 5,568,613 15,776,344 11,784,561
Movement in unrealised (losses)/gains (1,244,298) 12,187,394 7,318,480
Conversion of loans (8,902,985) (11,149,307)
-
Sales (3,183,907) -
-
Net realised gain 1,830,764 1,830,764
-
Effect of exchange rate movements 809,850 (4,654,713) (2,272,004)
Closing balance 34,166,494 29,032,329 20,692,417
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 31 December 2021 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 31 December 2021 Unobservable inputs Factor Sensitivity to changes in significant unobservable inputs
Board Intelligence Discount to comparable company multiples 3,846,334 Comparable Revenue multiple 12.0x A 25% increase (decrease) in the revenue multiple would increase (decrease)
FV by £1.5m (£1.2m)
Discount to comparable multiple
A 25% decrease (increase) in the discount to the revenue multiple would
increase (decrease) FV by £1.4m (£1.1m)
52.7%
GI Dynamics Discounted cash flow 19,257,989 Discount rate 43% An increase (decrease) in the discount rate to 48% (38%) would reduce
(increase) FV by £7.5m (£11.4m)
A decrease (increase) in the near term growth rate to 58% (38%) would decrease
(increase) FV by £3.6m (£3.8m)
High growth rate over 9 year period 48% An increase (decrease) of the dilution discount to 30% (to 10%) would reduce
(increase) FV by £2.6m (£2.8m)
Dilution discount
20%
Leaf Clean Discounted cash flow on expected wind down proceeds 1,640,624 Discount rate 10% The Fund has received confirmation of the compulsory redemption value of Leaf
Clean (as noted in the investment manager's report) so that the sensitivity
analysis of Leaf Clean is not required.
Valuation Method Fair Value at 30 June 2021 Unobservable inputs Factor Sensitivity to changes in significant unobservable inputs
Board Intelligence Discount to comparable company multiples 4,004,233 Comparable Revenue multiple 13.8x A 25% increase (decrease) in the revenue multiple would increase (decrease)
FV by £1.6m (£1.2m)
Discount to comparable multiple
A 25% decrease (increase) in the discount to the revenue multiple would
increase (decrease) FV by £1.4m (£1.1m)
52.7%
GI Dynamics Discounted cash flow 20,000,283 Discount rate 43% An increase (decrease) in the discount rate to 48% (38%) would reduce
(increase) FV by £7.5m (£11.1m)
A decrease (increase) in the near term growth rate to 58% (38%) would
decrease (increase) FV by £3.6m
High growth rate over 9 year period 48% An increase (decrease) of the dilution discount to 30% (to 10%) would reduce
(increase) FV by £2.7 million
Dilution discount
20%
Leaf Clean Discounted cash flow on expected wind down proceeds 1,350,468 Discount rate 10% A 20% change to the discount rate
would impact FV by £0.02 million
6. LOAN FACILITY
On 1 July 2020, the Company entered into a loan facility with Intertrader
Limited whereby it transferred an amount of equity holdings with a value of
£19.1 million as at 1 July 2020 to Intertrader Limited to be held as
collateral for CFD instruments. The interest charged on the loan facility was
2% per annum of the daily overnight loan balance. The Company could draw on a
loan facility of up to 25% of the value of the initial equity holdings
transferred. The balance of this facility was as follows:
As at As at
31 December 30 June
2021 2021
(Unaudited) (Audited)
£ £
Opening balance - -
Drawdowns - 22,785,705
Repayments by way of sale of CFD instruments - (22,975,306)
Repayments by way of dividends receivable on CFD instruments - (149,820)
Facility fees payable - 316,925
Facility commissions payable - 22,496
Closing balance - -
As at the date of this report, the amount owed to Intertrader Limited under
the loan facility was £Nil (30 June 2020: £Nil). The loan facility remains
in place without incurring any costs.
7. 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, is
comprised as follows:
31 December 2021 30 June 2021
(Unaudited) (Audited)
Number £ Number £
Issued, called up and fully paid Ordinary shares of £0.01 each 99,749,762 997,498 99,749,762 997,498
During the period, the Company did not create or issue any Ordinary shares.
In the period to 31 December 2020, the Company issued 125,000 Shares of
£0.01 divided equally amongst five charitable organisations, the nominal
value of which was paid by Richard Bernstein, who is a shareholder of the
Company, a director and shareholder of the Investment Manager and a member of
the Investment Adviser.
8. TREASURY SHARES RESERVE
Six months ended Year ended
31 December 2021 30 June 2021
(Unaudited) (Audited)
Number £ Number £
Opening balance (16,012,762) (19,191,639) (7,763,195) (12,265,601)
Treasury shares purchased during the period/year (372,000) (422,396) (8,249,567) (6,926,038)
Closing balance (16,384,762) (19,614,035) (16,012,762) (19,191,639)
During the period ended 31 December 2021 372,000 (2020: 7,566,567) Treasury
shares were purchased at an average price of 113.55 pence per share (2020:
82.20 pence per share), representing an average discount to NAV at the time of
purchase of 24.9% (2021: 33.8%). No Treasury shares were sold during the
period ended 31 December 2021 or 31 December 2020.
9. DIVIDENDS
On 7 July 2021, the Company declared an interim dividend of £2,093,424 equating to 2.5 pence per Ordinary share, which was paid on 30 July 2021 to shareholders on the register on 16 July 2021.
10. 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 (30 June 2021: 10,000)
Ordinary shares in the Company, representing 0.01% (30 June 2021: 0.01%) of
the voting share capital of the Company at 31 December 2021.
During the period the Company incurred management fees of £880,981 (2020:
£737,204) none of which was outstanding at 31 December 2021 (30 June 2021:
£Nil). No performance fees were payable during the period (2020: £Nil) (30
June 2021: £Nil) and none outstanding at the period/year end.
As at 31 December 2021, the Company's investment in GI Dynamics Inc. is
treated as an unconsolidated subsidiary due to the Company's percentage
holding in the voting share capital of GID. As GID is a private company and
its shares are not listed on a stock exchange, the percentage held is not
disclosed.
There is no restriction on the ability of GID to pay cash dividends or repay
loans, but it is unlikely that GID 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 GID in pursuing its strategy.
GI Dynamics Inc. was incorporated in Delaware, had five wholly-owned
subsidiaries as at 31 December 2021 and its principal place of business is
Boston. The five subsidiaries were as follows:
· GI Dynamics Securities Corporation, a Massachusetts-incorporated
nontrading entity;
· GID Europe Holding B.V., a Netherlands-incorporated nontrading
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.
Under the terms of the IMA, the Investment Manager is entitled to a
performance fee in certain circumstances. This fee is calculated by reference
to the increase in NAV per Ordinary share over the course of each performance
period.
Payment of the performance fee is subject to:
1. the achievement of a performance hurdle condition: the NAV per
Ordinary share at the end of the relevant performance period must exceed an
amount equal to the placing price, increased at a rate of: (i) 7% per annum on
an annual compounding basis in respect of that part of the performance period
which falls from (and including) the date of Admission up to (but not
including) the date of the 2013 Admission; (ii) 8% per annum on an annual
compounding basis in respect of that part of the performance period which
falls from (and including) the date of the 2013 Admission up to (but not
including) the date of the 2015 Admission and (iii) 10% per annum on an annual
compounding basis in respect of that part of the performance period which
falls from (and including) the date of the 2015 Admission up to the end of the
relevant performance period with all dividends and other distributions paid in
respect of all outstanding Ordinary shares (on a per share basis) during any
performance period being deducted on their respective payment dates (and after
compounding the distribution amount per share at the relevant annual rate or
rates for the period from and including the payment date to the end of the
performance period) ("the Basic Performance Hurdle"). Such Basic Performance
Hurdle at the end of a performance period is compounded at the relevant annual
rate to calculate the initial per share hurdle level for the next performance
period, which will subsequently be adjusted for any dividends or other
distributions paid in respect of all outstanding Ordinary shares during that
performance period, and
2. the achievement of a "high-water mark": the NAV per Ordinary share
at the end of the relevant performance period must be higher than the highest
previously reported NAV per Ordinary share at the end of a performance period
in relation to which a performance fee, if any, was last earned (less any
dividends or other distributions in respect of all outstanding Ordinary shares
declared (on a per share basis) since the end of the performance period in
relation to which a performance fee was last earned).
As the NAV per share at 31 December 2021 did not exceed the Basic Performance
Hurdle of 2.72 pence per share at that date, a performance fee has not been
accrued in the Interim Financial Statements. In the event that, on 30 June
2022, the NAV per share exceeds both the performance hurdle and the high
watermark, the performance fee will be an amount equal to 20% of the excess of
the NAV per share at that date over the higher of these hurdles multiplied by
the time weighted average number of Ordinary shares in issue during the year
ending 30 June 2022.
At an EGM to be held on 7 March 2022 proposals will be put to shareholders to
enter into a new Investment Management Agreement incorporating revised
management and performance fee arrangements, together with changes to the
termination provisions to reflect the future strategy of the Company.
If approved by shareholders, the management fee will be reduced to £106,666
per month from 1 April 2022 until 30 June 2022, falling periodically to
£40,000 per month until 31 December 2023 (or if earlier, the date on which
all of the Fund's investments have been substantially realised) when the
management fee will cease:
- The performance fee will be calculated by reference to the
aggregate cash returned to shareholders after 1 January 2022 and the
Investment Manager will receive 20%. Of the aggregate return of cash paid to
shareholders after 1 January 2022 (including the interim dividend of 10 pence
per Ordinary Share declared on 22 December 2021) in excess of a threshold of
£216,000,000, being the Basic Performance Hurdle per share as at 31 December
2021 multiplied by the voting share capital.
Depending on whether the Ordinary shares are trading at a discount or a
premium to the Company's NAV per share at 30 June 2022, the performance fee
will be either payable in cash (subject to the Investment Manager being
required to use the cash payment to purchase Ordinary shares in the market) or
satisfied by the sale of Ordinary shares out of Treasury or by the issue of
new fully paid Ordinary shares at the mid-market closing price on 30 June
2022, respectively.
As at 31 December 2021, the Investment Manager held 6,899,031 Ordinary shares
(30 June 2021: 6,904,330) of the Company, representing 6.92% (30 June 2021:
6.92%) of the voting share capital.
The interests of the Directors in the share capital of the Company at the
period/year end, and as at the date of this report, are as follows:
31 December 2021 30 June 2021
Number of Ordinary shares Total voting rights Number of Ordinary shares Total voting rights
Christopher Waldron((1)) 30,000 0.04% 30,000 0.03%
Jane Le Maitre((2)) 13,500 0.02% 13,500 0.01%
Fred Hervouet 7,500 0.01% 7,500 0.01%
Total 51,000 0.07% 51,000 0.05%
( )
((1) )Chairman of the Company
((2) )Ordinary Shares held indirectly
All related party transactions are carried out on an arm's length basis.
11. POST BALANCE SHEET EVENTS
On 15 February 2022 the Company announced that an EGM will be held on 7 March 2022 in connection with the proposals for a change of investment policy and new management and incentive arrangements as set out in Note 10.
The Company declared an interim dividend of £8,338,000, equating to 10 pence per Ordinary share, which was paid on 9 February 2022 to shareholders on the register on 14 January 2022.
The Company purchased 84,000 of its own Ordinary Shares during the period between 1 January 2022 and 3 March 2022, which were held as Treasury shares. Following these purchases, the total number of Ordinary Shares held as Treasury shares by the Company is 16,468,762.
On 18 February 2022, the Company reported that its unaudited NAV at 31 January 2022 was 146.98 pence per Ordinary share.
12. AVAILABILITY OF INTERIM REPORT
Copies of the Interim Report will be available to download from the Company's website www.crystalamber.com.
Glossary of Capitalised Defined Terms
"AGM" means the annual general meeting of the Company;
"AIC" means the Association of Investment Companies;
"AIM" means the Alternative Investment Market of the London Stock Exchange;
"Annual 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;
"Board" or "Directors" or "Board of Directors" means the directors of the
Company;
"Brexit" means the departure of the UK from the European Union;
"CEO" means chief executive officer;
"CFD" means Contracts for Difference;
"CFO" means chief financial officer;
"Company" or "Fund" means Crystal Amber Fund Limited;
"Companies Law" means the Companies (Guernsey) Law, 2008, (as amended);
"DeFi" means Decentralised Finance;
"EBITDA" means earnings before interest, taxes, depreciation and amortisation;
"EPS" or "Early Production System" means producing oil through a temporary
processing system and exporting the processed crude to a storage vessel for
subsequent transport to market;
"Equals" means Equals Group plc;
"GM" or "General Meeting" means a general meeting of the Company;
"ESG" means Environmental, Social and Governance, referring to the three
central factors in measuring the sustainability and societal impact of an
investment in a company or business;
"FDA" means food and drug administration;
"FTSE" means Financial Times Stock Exchange;
"FVTPL" means Fair Value Through Profit or Loss;
"FY22" means the financial year 2022;
"GDP" means gross domestic product, a monetary measure of the market value of
all the final goods and services produced in a specific time period;
"GID" or "GI Dynamics" means GI Dynamics, Inc.;
"HQ" means headquarters;
"IAS" means international accounting standards as issued by the Board of the
International Accounting Standards Committee;
"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, as adopted
by the European Union;
"IMA" means the investment management 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;
"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;
"Lancaster EPS" means Lancaster Early Production System;
"Market Capitalisation" means the total number of Ordinary shares of the
Company multiplied by the closing share price;
"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;
"Ordinary share" means an allotted, called up and fully paid Ordinary share of
the Company of £0.01 each;
"Remuneration Report" means part of the Remuneration Statement
which provides information on the remuneration and other financial benefits
paid to the Board of Directors, the Group CEO and the Group Executive
Committee members during the previous financial period;
"Small Cap Index" means an index of small market capitalisation companies;
"SMEs" means small and medium-sized enterprises and businesses whose personnel
numbers fall below certain limits. The abbreviation "SME" is used by
international organizations such as the World Bank, the European Union, the
United Nations and the World Trade Organization;
"SORP" means Statement of Recommended Practice;
"SPAC" mean Special Purpose Acquisition Company;
"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;
"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; and
"£" or "Pounds Sterling" or "Sterling" means British pound sterling and
"pence" means British pence.
Directors and General Information
Directors Investment Manager
Christopher Waldron (Chairman) Crystal Amber Asset Management (Guernsey) Limited
Fred Hervouet (Chairman of Remuneration and Management Engagement Committee) PO Box 286
Jane Le Maitre (Chairman of Audit Committee) Floor 2, Trafalgar Court
Les Banques, St Peter Port
Investment Adviser Guernsey GY1 4LY
Crystal Amber Advisers (UK) LLP
17c Curzon Street Nominated Adviser
London W1J 5HU Allenby Capital Limited
5 St. Helen's Place
Administrator and Secretary London EC3A 6AB
Ocorian Administration (Guernsey) Limited
PO Box 286 Legal Advisers to the Company
Floor 2, Trafalgar Court As to English Law
Les Banques, St Peter Port Norton Rose Fulbright LLP
Guernsey GYI 4LY 3 More London Riverside
London SE1 2AQ
Broker
Winterflood Investment Trusts As to Guernsey Law
The Atrium Building Carey Olsen
Cannon Bridge House PO Box 98
25 Dowgate Hill Carey House
London EC4R 2GA Les Banques
St. Peter Port
Independent Auditor Guernsey GY1 4BZ
KPMG Channel Islands Limited
Glategny Court Custodian
Glategny Esplanade Butterfield Bank (Guernsey) Limited
St. Peter Port PO Box 25
Guernsey GY1 1WR Regency Court
Glategny Esplanade
Registered Office St. Peter Port
PO Box 286 Guernsey GY1 3AP
Floor 2, Trafalgar Court
Les Banques, St Peter Port Registrar
Guernsey GYI 4LY Link Asset Services
65 Gresham Street
Identifiers London EC2V 7NQ
ISIN: GG00B1Z2SL48
Sedol: B1Z2SL4
Ticker: CRS
Website: http://crystalamber.com (http://crystalamber.com)
LEI: 213800662E2XKP9JD811
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