REG-Crystal Amber Fund Limited: Half-year Report
19/03/2018 14:16
5 March 2018
Crystal Amber Fund Limited
Interim results for the period ended 31 December 2017
The Company announces its interim results for the six months ended 31 December
2017.
Highlights
* NAV((1)) per share fell by 6.7 per cent over the six-month period or 4.2 per
cent after adjusting for dividends declared in the period. Over the 2017
calendar year, NAV per share fell by 12.5 per cent or 10.2 per cent after
adjusting for dividends declared in the year.
* NAV per share of 190.69 pence at 31 December 2017 (204.37 pence at 30 June
2017, 218.02 pence at 31 December 2016). NAV per share of 201.29 pence at 31
January 2018.
* Dividends of 2.5 pence per share were declared in July 2017 and December
2017. The 5 pence dividend paid in respect of calendar 2017 represents a 2.6
per cent dividend yield on the 31 December 2017 NAV.
* Significant contributions to NAV performance from FairFX Group plc
(“FairFX”), NCC Group plc (“NCC”) and Ocado Group plc (“Ocado”),
offset by the price weakness of GI Dynamics Inc (“GI Dynamics”), STV Group
plc (“STV”) and Northgate plc (“Northgate”).
* Successful partial exit from Sutton Harbour Holdings plc (“Sutton
Harbour”) to regeneration specialists FB Investors LLP, which the Fund is
pleased to support by retaining an investment in the company. £0.9 million
gain booked in January 2018 from the partial exit.
* Active engagement with Hurricane Energy plc (“Hurricane”) on the
appointment of a credible Chairman, exploring strategic alternatives with
Northgate and promoting the Ocado Smart Platform.
* The share buyback programme has continued and contributed to maintaining a
low average discount to NAV of 1.8 per cent over the period.
Christopher Waldron, Chairman of the Company, commented: “I am pleased to
report good progress on our engagement with key Fund holdings in my first
Interim Report as Chairman. This engagement has continued to bear fruit in the
first months of 2018, as we have seen with Ocado and Sutton Harbour, and we
are confident that this will continue for the remainder of the year.”
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
I hereby present the interim results of the Company for the six month period
to 31 December 2017.
The UK economy decelerated over the period, finishing 2017 with a 1.8 per cent
annual growth rate, the slowest since 2012. Disposable consumer income has
been under pressure from increased price inflation, partially caused by the
weakening of Sterling in the aftermath of the Brexit referendum. The impact of
Brexit remains unclear: the economy has continued to grow, but it does so now
at the slowest pace of the G7 Group of wealthy countries.
NAV fell from £201.0 million (204.37 pence per share) at 30 June 2017 to an
unaudited £186.3 million (190.69 pence per share) at 31 December 2017. The
Fund’s negative return (including dividends) of 4.2 per cent compares to an
8.5 per cent return on the FTSE 250 and a 7.2 per cent return on the FTSE
Small Cap Index.
Taken in isolation, this serves as a reminder that the Fund’s performance is
driven by a relatively small number of carefully researched positions and does
not seek to match any particular index. This focus on absolute return will
continue to produce results that vary from passive investment. A key component
of the Fund’s absolute return strategy has been the consistent purchase of
FTSE put options as insurance against a potential significant market sell-off.
The net cost of these options amounted to 1.8 per cent of NAV over the period
to 31 December 2017. However, in February 2018, as equity markets declined,
and volatility rose, the value of this protection was clearly shown as the
Fund realised gains on FTSE put options of £6.8 million, equivalent to 6.9
pence per share.
The buyback programme has continued with 652,482 Ordinary shares purchased
during the period at an average price of 185.36 pence per share. The programme
contributed to a low 1.8 per cent average share price to NAV discount over the
period and an increase in NAV per share of 0.025 per cent. At 31 December
2017, the Fund held 1,287,482 Ordinary shares in Treasury.
In July 2017 and December 2017 the Fund declared interim dividends of 2.5
pence per share continuing the Fund’s policy of making distributions from
income and net realised gains from investments. Based on the NAV at 31
December 2017, this represents a dividend yield of 2.6 per cent.
Despite the general uncertainty over the UK economy, I am encouraged by the
Fund’s progress on its engagement with several investee companies and this
is discussed in greater detail in the Investment Manager’s Report.
Finally, as anticipated in the last Annual Report, Bill Collins retired as
Chairman at the November AGM. Unfortunately, in early January Sarah Evans
also stepped down as a Director due to ill health. Bill and Sarah had both
served on the Board of Crystal Amber since its launch in 2008 and I’d like
to take this opportunity thank them for their invaluable contributions
over the years.
Christopher Waldron
Chairman
2 March 2018
Investment Manager’s Report
Strategy and performance
The Fund continues to engage closely with the management and boards of its
major holdings.
At 31 December 2017, equity investments in 17 companies represented 91.4 per
cent of NAV. The Fund also held other investments, including warrants, loan
notes and convertible instruments that accounted for 9.1 per cent of the NAV.
The Fund’s net cash and accruals position came to negative £1.3 million,
including £2.4 million accrued for the dividend paid in January 2018.
The Fund participated in the July 2017 fundraising for Hurricane with a US$10
million investment, having previously realised a profit of £15 million from
its holding in the company. In September 2017, the Fund subscribed to a loan
note issued by Leaf Clean Energy Company (“Leaf”) with a commitment of up
to US$2.5 million. Three new investments were initiated and three were exited.
The latter include previously disclosed holdings in Shepherd Neame Limited and
Montanaro UK Smaller Companies Investment Trust plc. The position in Johnston
Press plc (“Johnston Press”), a top ten holding at the beginning of the
period, was reduced by 51 per cent. The Fund also reduced its positions in
FairFX and NCC, realising £1.9 million and £1.2 million of profits from each
respectively. Following the period end, the Fund sold its holding in
Hurricane’s convertible bond, purchased at the company’s fundraising, and
realised a £0.9 million profit.
Portfolio
The table below lists the top ten holdings at 31 December 2017, showing the
performance contribution of each during the period. The principal positive
contributions came from FairFX (2.5 per cent), NCC (2.3 per cent) and Ocado
(1.7 per cent). The main negative contributions came from GI Dynamics (2.6 per
cent), STV (1.6 per cent) and Northgate (1.5 per cent).
Top ten shareholdings Pence per share Percentage of investee equity held Total return over the period Contribution to NAV performance
Hurricane Energy plc 49.9 8.0% (5%) (1.2%)
Northgate plc 26.9 5.2% (10%) (1.5%)
FairFX Group plc 19.0 15.3% 34% 2.5%
STV Group plc 18.4 14.5% (14%) (1.6%)
NCC Group plc 13.4 2.0% 45% 2.3%
Ocado Group plc 13.2 0.5% 37% 1.7%
Leaf Clean Energy Company 10.1 29.9% (21%) (1.4%)
Sutton Harbour Holdings plc 7.9 29.3% 3% 0.2%
GI Dynamics Inc 4.3 46.7% (56%) (2.6%)
Camellia plc 2.9 0.9% 14% 0.2%
Total of ten largest holdings 166.0
Other investments 26.1
Cash and accruals (1.4)
Total NAV 190.7
Investee companies
Our comments on a number of our principal investments are as follows:
Hurricane
In July 2017, Hurricane completed a US$530 million deal to fully fund an early
production system for its Lancaster asset. The company proceeded to take the
final investment decision and received development and production consent in
September 2017. In December 2017, it hosted a site visit to Drydocks World,
Dubai where it is upgrading the floating production storage and offloading
vessel as well as fabricating a new buoy. The early production system remains
on time and on budget for first oil in the first half of 2019.
The early production system is expected to de-risk the company’s assets as
it demonstrates that basement reservoirs in the West of Shetland can become
commercially productive. In addition, Hurricane estimates that at a US$60
barrel of oil equivalent (“BOE”), the early production system base case of
17,000 BOE produced per day should generate an annual cash flow of US$190
million.
In December 2017, Hurricane published a Competent Person’s Report
(“CPR”), increasing its combined resource estimate to 2.6 billion BOE.
Together with the previously published CPR for Lancaster, Hurricane now has an
updated assessment of its licences that incorporates the results of its
exploration efforts since its initial public offering. The December 2017
assessment included the Halifax prospect for the first time, which holds an
estimated 1.2 billion BOE. The company believes this is part of the Greater
Lancaster structure, which is targeted by the early production system under
construction, and could be monetised together with Lancaster.
In November 2017, Robert Arnott resigned as chairman of the board with
immediate effect, criticising the company’s corporate governance standards,
a concern publicly shared by the Fund. The company instituted a board
committee to address these issues and has subsequently been engaging with the
Fund.
Northgate
At its capital markets day in October 2017, the company’s new management
team detailed its strategy to return the UK business to growth and presented
its three-year growth and margin expectations for the UK and Spain. However,
following interim results in December 2017, analysts downgraded earnings
forecasts due to lower expectations of profit from the sale of vehicles,
despite residual values having remained stable to date.
The Fund supports management’s efforts to arrest market share losses in the
UK, optimise the vehicle hire site network, and maximise the opportunity
presented by the Van Monster retail network and brand. In Spain, Northgate is
the clear leader in the van flexible hire market, with a strong brand, good
geographic coverage and attractive return on assets. Management expects to
achieve more than 10 per cent annualised growth in vehicles-on-hire in Spain
over the next three years, together with a consequent further improvement in
margins.
However, the Fund believes that the considerable value of Northgate’s
Spanish business is not reflected in its share price. It has engaged with
management over Northgate’s options to realise the value of this asset. This
includes ways that could preserve procurement synergies with the UK, such as a
partial listing of its Spanish business in Spain.
Ocado
In November 2017, Ocado announced its first international deal for its
technology solution, Ocado Smart Platform (“OSP”), with French grocer
Groupe Casino. After the period end, in January 2018, Ocado announced a second
deal for its OSP with Sobeys Inc. of Canada.
The Fund invested in Ocado in spring 2017 on the basis that the market was not
ascribing any value to its technology platform. Ocado’s OSP has now been
validated by two leading international grocers and by Morrisons in the UK.
With those three deals, Ocado’s partners have been able to leapfrog the
competition in terms of capability and service levels and are ready to defend
themselves from competitors like Amazon. As more grocers offer online shopping
convenience to consumers, more deals are expected to follow. We project
significant scale benefits will accrue to Ocado long-term. In our opinion, the
replacement value of Ocado’s market leading capabilities and know-how
continues to be well above its market valuation and the company remains a
potential takeover candidate.
Leaf
In September 2017, the Fund provided a commitment of up to US$2.5 million in
an issue of up to US$5 million of loan notes by Leaf, of which US$1 million
has been drawn down from the Fund by Leaf to date. This facility will support
the company’s ongoing litigation with Invenergy Wind.
GI Dynamics
In October 2017, GI Dynamics was audited by SGS SA to assess the company’s
compliance with CE Mark requirements and quality management. Despite the
favourable result of those inspections, SGS SA decided to withdraw the CE Mark
certification in November 2017 based on a negative scientific assessment of
patient risks and benefits. As a result, the company is currently precluded
from selling the EndoBarrier in Europe, its primary market, and will focus on
gaining approval for an FDA clinical trial.
This assessment contrasts with the favourable conclusions from scientific
research that have been reported throughout the year and have continued over
the period. For example, favourable clinical evidence from an NHS trial of the
ongoing benefits of EndoBarrier after the device’s removal was presented at
the European Association for the Study of Diabetes conference in Lisbon in
September 2017.
In January 2018, the Fund participated in a US$1.6 million fundraising to
support the company in its application for a new clinical trial with the US
Food and Drugs Administration. The application is expected to be submitted in
the first half of 2018.
Sutton Harbour
In December 2017, Sutton Harbour announced a recommended cash offer from FB
Investors LLP for up to 70 per cent of its capital at 29.5 pence per share. FB
Investors LLP also agreed to subscribe for £2.8 million worth of new shares
at the same price to strengthen the company’s balance sheet and bring its
Sugar House development in house.
The Fund engaged with FB Investors LLP prior to the announcement of the deal.
We were impressed by chairman Philip Beinhaker’s vision for the company and
his track record of urban regeneration projects. The Fund agreed to tender its
holding in full, as that was a prerequisite for the offer. Since the offer was
oversubscribed, the Fund’s tender was scaled back and the Fund is content to
retain a position of 7.2 per cent in the company and has purchased further
shares since the period end.
The Fund is pleased that as a result of its engagement with the company,
Sutton Harbour can now benefit from strengthened leadership with ambitious
plans to unlock value for the company and the city of Plymouth.
Realisations
Net realised losses after accounting for put option insurance amounted to
£2.8 million. This figure includes gains of £1.9 million on FairFX and £1.2
million on NCC, and a loss of £3.1 million on Johnston Press.
Following the period end, the Fund realised £0.9 million of gains from the
partial offer for Sutton Harbour, and £0.9 million from its investment in
Hurricane’s convertible bond.
Hedging activity
The Fund continues to purchase FTSE put options as an insurance against a
potential significant market sell-off. The net cost of these options amounted
to 1.8 per cent of NAV over the period. In February, as equity markets
declined and volatility rose, the Fund realised gains on FTSE put options of
£6.8 million, equivalent to 6.9 pence per share.
Outlook
We are encouraged that our work and engagement with Sutton Harbour in the
first half has proven to be successful with both a partial realisation and the
introduction of an impressive and experienced majority shareholder.
Our analysis of Ocado also bore fruit. We are confident that our extensive
recent work with other portfolio companies will achieve a positive outcome and
are excited by our prospects.
Crystal Amber Asset Management (Guernsey) Limited
2 March 2018
Condensed Statement of Profit or Loss and Other Comprehensive Income
(Unaudited)
For the six months ended 31 December 2017
Six months ended 31 December Six months ended 31 December
2017 2016
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
Notes £ £ £ £ £ £
Income
Dividend income from listed equity investments 1,980,590 - 1,980,590 1,861,886 - 1,861,886
Interest income from listed debt instruments 99,072 - 99,072 - - -
Arrangement fee received from debt instruments 4 46,531 - 46,531 - - -
Interest received - - - 252 - 252
2,126,193 - 2,126,193 1,862,138 - 1,862,138
Net gains on financial assets designated at FVTPL and derivatives held for trading
Equities
Net realised gains 4 - 202,555 202,555 - 8,832,775 8,832,775
Movement in unrealised (losses)/gains 4 - (4,348,174) (4,348,174) - 64,123,866 64,123,866
Debt instruments
Movement in unrealised gains 4 - 381,233 381,233 - - -
Derivative financial instruments
Realised losses 4 - (3,045,990) (3,045,990) - (4,973,571) (4,973,571)
Movement in unrealised (losses)/gains 4 - (227,407) (227,407) - 5,887,194 5,887,194
- (7,037,783) (7,037,783) - 73,870,264 73,870,264
Total income/(loss) 2,126,193 (7,037,783) (4,911,590) 1,862,138 73,870,264 75,732,402
Expenses
Transaction costs - 119,851 119,851 - 214,538 214,538
Foreign exchange movements on revaluation of investments - 518,127 518,127 - (76,135) (76,135)
Management fees 9 1,649,074 - 1,649,074 1,438,909 - 1,438,909
Performance fees 9 - 983,800 983,800 - 5,714,940 5,714,940
Directors' remuneration 81,232 - 81,232 58,914 - 58,914
Administration fees 106,441 - 106,441 111,783 - 111,783
Custodian fees 45,091 - 45,091 47,655 - 47,655
Audit fees 12,320 - 12,320 10,920 - 10,920
Other expenses 154,426 - 154,426 105,546 - 105,546
2,048,584 1,621,778 3,670,362 1,773,727 5,853,343 7,627,070
Return/(loss) for the period 77,609 (8,659,561) (8,581,952) 88,411 68,016,921 68,105,332
Basic and diluted earnings/(loss) per share (pence) 2 0.08 (8.83) (8.75) 0.09 68.70 68.79
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 2017
As at As at As at
31 December 30 June 31 December
2017 2017 2016
(Unaudited) (Audited) (Unaudited)
Assets Notes £ £ £
Cash and cash equivalents 835,330 7,957,943 764,000
Trade and other receivables 448,599 48,468 797,806
Financial assets designated at FVTPL and derivatives held for trading 4 187,669,649 202,370,814 221,451,533
Total assets 188,953,578 210,377,225 223,013,339
Liabilities
Trade and other payables 2,623,425 9,353,420 8,555,747
Total liabilities 2,623,425 9,353,420 8,555,747
Equity
Capital and reserves attributable to the Company’s equity shareholders
Share capital 6 989,998 989,998 989,998
Treasury shares reserve 7 (2,182,262) (972,800) (972,800)
Distributable reserve 100,156,159 105,058,397 105,058,397
Retained earnings 87,366,258 95,948,210 109,381,997
Total equity 186,330,153 201,023,805 214,457,592
Total liabilities and equity 188,953,578 210,377,225 223,013,339
NAV per share (pence) 3 190.69 204.37 218.02
The Interim Financial Statements were approved by the Board of Directors and
authorised for issue on 2 March 2018.
Christopher Waldron
Jane Le Maitre
Chairman
Director
2 March
2018
2 March 2018
Condensed Statement of Changes in Equity (Unaudited)
For the six months ended 31 December 2017
Share Treasury shares Distributable Retained earnings Total
Notes capital reserve reserve Capital Revenue Total equity
£ £ £ £ £ £ £
Opening balance at 1 July 2017 989,998 (972,800) 105,058,397 98,217,020 (2,268,810) 95,948,210 201,023,805
Purchase of Ordinary shares into Treasury 7 - (1,209,462) - - - - (1,209,462)
Dividends paid in the period 8 - - (4,902,238) - - - (4,902,238)
(Loss)/return for the period - - - (8,659,561) 77,609 (8,581,952) (8,581,952)
Balance at 31 December 2017 989,998 (2,182,262) 100,156,159 89,557,459 (2,191,201) 87,366,258 186,330,153
For the six months ended 31 December 2016
Share Treasury shares Distributable Retained earnings Total
Notes capital reserve reserve Capital Revenue Total capital
£ £ £ £ £ £ £
Opening balance at 1 July 2016 989,998 (720,478) 109,977,886 42,151,632 (874,967) 41,276,665 151,524,071
Purchase of Ordinary shares into Treasury 7 - (252,322) - - - - (252,322)
Dividends paid in the period - - (4,919,489) - - - (4,919,489)
Return for the period - - - 68,016,921 88,411 68,105,332 68,105,332
Balance at 31 December 2016 989,998 (972,800) 105,058,397 110,168,553 (786,556) 109,381,997 214,457,592
Condensed Statement of Cash Flows (Unaudited)
For the six months ended 31 December 2017
Six months Six months
ended ended
31 December 31 December
2017 2016
(Unaudited) (Unaudited)
£ £
Cash flows from operating activities
Dividend income received from listed equity investments 1,584,253 1,519,269
Interest income received from listed debt instruments 99,072 -
Arrangement fee received from debt instruments 46,531 -
Bank interest received - 2,285
Management fees paid (1,649,074) (1,438,909)
Performance fee paid (3,338,552) -
Directors’ fees paid (73,834) (58,914)
Other expenses paid (374,690) (248,542)
Net cash outflow from operating activities (3,706,294) (224,811)
Cash flows from financing activities
Purchase of Ordinary shares into Treasury (1,185,573) (252,322)
Dividends paid (2,456,619) (2,460,370)
Net cash outflow from financing activities (3,642,192) (2,712,692)
Cash flows from investing activities
Purchase of equity investments (9,957,618) (35,322,456)
Sale of equity investments 20,359,191 43,748,529
Purchase of debt instruments (6,178,430) -
Purchase of derivative financial instruments (3,869,720) (5,913,500)
Sale of derivative financial instruments - 86,079
Transaction charges on purchase and sale of investments (127,550) (214,538)
Net cash inflow from investing activities 225,873 2,384,114
Net decrease in cash and cash equivalents during the period (7,122,613) (553,389)
Cash and cash equivalents at beginning of period 7,957,943 1,317,389
Cash and cash equivalents at end of period 835,330 764,000
Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 December 2017
General Information
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
Company’s registration number is 47213 and it is regulated by the GFSC as an
authorised closed ended investment scheme. The registered office address is
Heritage Hall, Le Marchant Street, St. Peter Port, Guernsey, GYI 4HY. 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.
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 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 2017. 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 2017.
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 January 2017, 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.
The Company does not operate in an industry where significant or cyclical
variations as a result of seasonal activity are experienced during the
financial year. Income and dividends from investments will vary according to
the construction of the portfolio from time to time.
Going concern
The Directors 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.
Continuation vote
The Directors have specifically considered the implications of the
continuation vote scheduled to occur every two years on the application of the
going concern basis. At the AGM held on 23 November 2017, an extraordinary
resolution was proposed and passed, that the Company continue as constituted.
Therefore, the Directors conclude that there is no material uncertainty which
may cast significant doubt on the ability of the Company to continue as a
going concern. For this reason, they continue to adopt the going concern basis
in preparing the Interim Financial Statements. The next continuation vote will
be proposed at the 2019 AGM.
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
2017 2016
(Unaudited) (Unaudited)
(Loss)/return for the period £(8,581,952) £68,105,332
Weighted average number of issued Ordinary shares 98,071,325 98,999,762
Basic and diluted (loss)/earnings per share (pence) (8.75) 68.79
3. NET ASSET VALUE PER SHARE
NAV per share is based on the following data:
As at As at As at
31 December 30 June 31 December
2017 2017 2016
(Unaudited) (Audited) (Unaudited)
NAV per Condensed Statement of Financial Position £186,330,153 £201,023,805 £214,457,592
Total number of issued Ordinary shares (excluding Treasury shares) 97,712,280 98,364,762 98,364,762
NAV per share (pence) 190.69 204.37 218.02
4. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH
PROFIT OR LOSS AND DERIVATIVES HELD FOR TRADING
1 July 1 July 1 July
2017 to 2016 to 2016 to
31 December 30 June 31 December
2017 2017 2016
(Unaudited) (Audited) (Unaudited)
£ £ £
Equity investments 170,344,729 186,431,885 211,706,765
Debt instruments 10,292,085 9,502,417 -
Financial assets designated at FVTPL 180,636,814 195,934,302 211,706,765
Derivative financial instruments held for trading 7,032,835 6,436,512 9,744,768
Total financial assets designated at FVTPL and derivatives held for trading 187,669,649 202,370,814 221,451,533
Equity investments
Cost brought forward 156,798,987 153,875,142 153,875,142
Purchases 8,539,686 82,612,821 34,335,995
Sales (20,359,191) (109,680,734) (43,748,529)
Net realised gains 202,555 29,991,758 8,832,775
Cost carried forward 145,182,037 156,798,987 153,295,383
Unrealised gains/(losses) brought forward 29,708,411 (5,852,434) (5,852,434)
Movement in unrealised (losses)/ gains (4,348,174) 35,560,845 64,123,866
Unrealised gains carried forward 25,360,237 29,708,411 58,271,432
Effect of exchange rate movements on revaluation (197,545) (75,513) 139,950
Fair value of equity investments 170,344,729 186,431,885 211,706,765
Debt instruments
Cost brought forward 9,318,984 - -
Purchases 804,530 9,318,984 -
Cost carried forward 10,123,514 9,318,984 -
Unrealised gains brought forward 290,017 - -
Movement in unrealised gains 381,233 290,017 -
Unrealised gains carried forward 671,250 290,017 -
Effect of exchange rate movements on revaluation (502,679) (106,584) -
Fair value of debt instruments 10,292,085 9,502,417 -
Total financial assets designated at FVTPL 180,636,814 195,934,302 211,706,765
Derivative financial instruments held for trading
Cost brought forward 360,001 1,023,001 1,023,001
Purchases 3,869,720 10,098,112 5,913,500
Sales - (86,082) (86,079)
Net realised losses (3,045,990) (10,675,030) (4,973,571)
Cost carried forward 1,183,731 360,001 1,876,851
Unrealised gains brought forward 6,076,511 1,980,723 1,980,723
Movement in unrealised (losses)/gains (227,407) 4,095,788 5,887,194
Unrealised gains carried forward 5,849,104 6,076,511 7,867,917
Fair value of derivatives held for trading 7,032,835 6,436,512 9,744,768
Total derivative financial instruments held for trading 7,032,835 6,436,512 9,744,768
Total financial assets designated at FVTPL and derivatives held for trading 187,669,649 202,370,814 221,451,533
On 15 June 2017, the Company purchased US$5 million of convertible loan notes
from GI Dynamics. Interest on these loan notes is accrued at a rate equal to 5
per cent per annum, compounded annually. On 20 September 2017, the Company
purchased US$1 million of loan notes from Leaf. The Company received an
arrangement fee of US$62,500, which was deducted from the advance of US$1
million loan notes to Leaf. Interest on these loan notes is accrued at a rate
equal to 12 per cent per annum, compounded annually. At the reporting date,
the Company’s loan notes were classified as debt instruments and measured at
FVTPL.
On 30 June 2017, the Company purchased 7 million shares of quoted convertible
bonds issued by Hurricane for US$7 million. The convertible bonds have a
coupon rate of 7.5 per cent per annum and mature on 24 July 2022. At the
reporting date, the Company’s convertible bond shares were classified as
debt instruments and measured at FVTPL.
At the reporting date the Company’s derivative financial instruments
consisted of two (30 June 2017: one) FTSE 100 Index Put Option positions,
purchased as protection against a significant market sell-off and two warrant
instruments in FairFX and Hurricane (30 June 2017: two) for the purchase of
ordinary shares.
At the reporting date, the warrant instruments in FairFX and Hurricane were
valued using a Black Scholes valuation technique.
The following table details the Company’s positions in derivative financial
instruments:
Nominal amount Value
(Unaudited) (Unaudited)
31 December 2017 £
Derivative financial instruments
Puts on UKX P7100 (expiry: January 2018) 2,000 70,000
Puts on UKX P7300 (expiry: February 2018) 2,000 380,000
FairFX warrant instrument 6,000,000 3,165,762
Hurricane warrant instrument 23,333,333 3,417,073
29,337,333 7,032,835
Nominal amount Value
(Audited) (Audited)
30 June 2017 £
Derivative financial instruments
Puts on UKX P7100 (expiry: July 2017) 1,000 290,000
FairFX warrant instrument 6,000,000 2,001,252
Hurricane warrant instrument 23,333,333 4,145,260
29,334,333 6,436,512
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 2017 and 30 June 2017:
Level 1 Level 2 Level 3 Total
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
31 December 2017 £ £ £ £
Financial assets designated at FVTPL and derivatives held for trading:
Equities – listed equity investments 170,344,729 - - 170,344,729
Debt – listed debt instruments - 5,724,929 - 5,724,929
Debt – loan notes - - 4,567,156 4,567,156
Derivatives – listed derivative instruments 450,000 - - 450,000
Derivatives – warrant instruments - 6,582,835 - 6,582,835
170,794,729 12,307,764 4,567,156 187,669,649
Level 1 Level 2 Level 3 Total
(Audited) (Audited) (Audited) (Audited)
30 June 2017 £ £ £ £
Financial assets designated at FVTPL and derivatives held for trading:
Equities – listed equity investments 186,431,885 - - 186,431,885
Debt – listed debt instruments - 5,656,030 - 5,656,030
Debt – loan notes - - 3,846,387 3,846,387
Derivatives – listed derivative instruments 290,000 - - 290,000
Derivatives – warrant instruments - 6,146,512 - 6,146,512
186,721,885 11,802,542 3,846,387 202,370,814
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 derivative investments were valued using a Black Scholes valuation
technique. The listed debt instruments were valued with reference to the last
available bid price of the convertible bond on the reporting date, which are
considered to be Level 2 investments due to the level of trading activity of
the bond.
The loan notes were classified as Level 3 debt instruments as there was no
observable market data. The Board has concluded that fair value is approximate
to cost plus accumulated 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 Six months
ended ended
31 December 31 December
2017 2016
(Unaudited) (Unaudited)
£ £
Opening balance at 1 July 3,846,387 4,680,103
Purchases 744,491 -
Movement in unrealised gain 119,834 1,410,007
Sales - (5,272,547)
Net realised loss - (549,193)
Effect of exchange rate movements (143,556) -
Closing balance at 31 December 4,567,156 268,370
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.
At the period end and assuming all other variables are held constant:
* If unobservable inputs in Level 3 investments had been 5 per cent
higher/lower (2016: 5 per cent higher/lower), the Company’s return and net
assets for the six months ended 31 December 2017 would have
increased/decreased by £228,358 (2016: £13,419); and
* There would have been no impact on the other equity reserves.
6. 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 is comprised as follows:
31 December 2017 30 June 2017
(Unaudited) (Audited)
Number £ Number £
Issued, called up and fully paid Ordinary shares of £0.01 each 98,999,762 989,998 98,999,762 989,998
7. TREASURY SHARES RESERVE
Six months ended Year ended
31 December 2017 30 June 2017
(Unaudited) (Audited)
Number £ Number £
Opening balance (635,000) (972,800) (475,000) (720,478)
Treasury shares purchased during the period/year (652,482) (1,209,462) (160,000) (252,322)
Closing balance (1,287,482) (2,182,262) (635,000) (972,800)
During the period ended 31 December 2017, 652,482 (2016: 160,000) Treasury
shares were purchased at an average price of 185.4 pence per share (2016:
157.7 pence per share), representing an average discount to NAV at the time of
purchase of 5.2 per cent (2016: 4.5 per cent). During the period ended 31
December 2017, Nil (2016: Nil) Treasury shares were sold.
The Company purchased 136,500 of its own Ordinary shares during the period
between 1 January 2018 and 2 March 2018, which were held as Treasury shares.
Following these purchases, the total number of Ordinary shares held as
Treasury shares by the Company was 1,423,982.
8. DIVIDENDS
On 11 July 2017, the Company declared an interim dividend of £2,456,619,
equating to 2.5 pence per Ordinary share, which was paid on 18 August 2017 to
shareholders on the register as at 21 July 2017.
On 12 December 2017, the Company declared an interim dividend of £2,445,619,
equating to 2.5 pence per Ordinary share, which was paid on 18 January 2018 to
shareholders on the register as at 22 December 2017.
9. 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 2017: 10,000)
Ordinary shares in the Company, representing 0.01 per cent (30 June 2017: 0.01
per cent) of the voting share capital of the Company at 31 December 2017.
During the period, the Company incurred management fees of £1,649,074 (2016:
£1,438,909) none of which was outstanding at 31 December 2017 (30 June 2017:
£Nil). The Company also accrued performance fees of £Nil (2016: £5,714,940)
none of which was outstanding or included in trade and other payables as at 31
December 2017 (30 June 2017: £2,354,752 was outstanding and included in trade
and other payables). A performance fee of £983,800 was payable in respect of
the year ended 30 June 2017 as accrued in the August 2017 NAV and paid during
the period.
Under the terms of the IMA between the Company and the Investment Manager, if
the NAV per share at 30 June 2018 exceeds the 2018 performance hurdle, a
performance fee will be payable to the Investment Manager. The performance
hurdle represents an expected return on share capital since placing compounded
at a rate of 7 per cent up to 20 August 2013, 8 per cent up to 27 January 2015
and 10 per cent after that date.
As the NAV per share at 31 December 2017 did not exceed the performance hurdle
at that date, a performance fee has not been accrued in the Interim Financial
Statements. In the event that, on 30 June 2018, the NAV per share exceeds the
2018 performance hurdle, the performance fee will be an amount equal to 20 per
cent of the excess of the NAV per share at that date and is adjusted for
dividends declared since payment of the last performance fee, over the 2018
performance hurdle multiplied by the time weighted average number of Ordinary
shares in issue during the year ending 30 June 2018. Depending on whether the
Ordinary shares are trading at a discount or a premium to the Company’s NAV
per share at 30 June 2018, 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 closing mid-market closing price on 30 June 2018, respectively.
As at 31 December 2017, the Investment Manager held 4,205,287 Ordinary shares
(30 June 2017: 4,015,606) of the Company, representing 4.30 per cent (30 June
2017: 4.08 per cent) of the voting share capital. Subsequent to the period
end, the Investment Manager sold 800,000 Ordinary shares of the Company on 16
January 2018 and now holds 3,405,287 Ordinary shares of the Company.
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 2017 30 June 2017
Number of Ordinary shares Total voting rights Number of Ordinary shares Total voting rights
William Collins ((1)) 25,000 0.03% 25,000 0.03%
Sarah Evans ((2)) 25,000 0.03% 25,000 0.03%
Christopher Waldron ((3)) 10,000 0.01% - -
Total 60,000 0.07% 50,000 0.06%
((1) Resigned as Chairman and Director of the Company on 23 November 2017)
((2) Resigned as Chairman of the Audit Committee and Senior Independent
Director of the Company on 3 January 2018)
((3) Ordinary shares held indirectly by Mr Waldron)
All related party transactions are carried out on an arm’s length basis.
10. POST BALANCE SHEET
EVENTS
On 4 January 2018, Sarah Evans resigned as Chairman of the Audit Committee and
Senior Independent Director of the Company. Jane Le Maitre was appointed as
Chairman of the Audit Committee with effect from 4 January 2018.
On 18 January 2018, the Investment Manager sold 800,000 Ordinary shares of the
Company and now holds 3,405,287 Ordinary shares of the Company.
On 7 February 2018, the Company reported that its unaudited NAV at 31 January
2018 was 201.29 pence per share.
The Company purchased 136,500 of its own Ordinary shares during the period
between 1 January 2018 and 2 March 2018, which were held as Treasury shares.
Following these purchases, the total number of Ordinary shares held as
Treasury shares by the Company is 1,423,982.
On 2 March 2018, the Directors approved the issue of an aggregate 125,000
Ordinary shares of £0.01 divided equally amongst five charitable
organisations, the nominal value of which has been paid by Richard Bernstein.
Application will be made for these shares to be admitted to trading on the AIM
market and dealings are expected to commence on 9 March 2018.
11. 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;
“Annual Report” means the annual publication of the Company to the
shareholders to describe their operations and financial conditions, together
with the Company’s financial statements;
“Black Scholes” means the Black Scholes model, a mathematical model of a
financial market containing derivative instruments;
“Board” or “Directors” or “Board of Directors” means the directors
of the Company;
“Brexit” means the departure of the UK from the European Union;
“Company” or “Fund” means Crystal Amber Fund Limited;
“Companies Law” means the Companies (Guernsey) Law, 2008, (as amended);
“EGM” or “Extraordinary General Meeting” means an extraordinary
general meeting of the Company;
“FDA” means the Food and Drug Administration, a federal agency of the US
Department of Health and Human Services;
“FTSE” means the Financial Times Stock Exchange;
“FVTPL” means Fair Value Through Profit or Loss;
“G7 Group” means a group consisting of Canada, France, Germany, Italy,
Japan, the UK and the US;
“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;
“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;
“IMA” means the investment management agreement between the Company and
the Investment Manager, dated 16 June 2008, as amended on 21 August 2013 and
further amended on 27 January 2015;
“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;
“NHS” means the National Health Service;
“Ordinary share” means an allotted, called up and fully paid Ordinary
share of the Company of £0.01 each;
“SORP” means Statement of Recommended Practice;
“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$” means United States dollars; and
“£” or “Pounds Sterling” or “Sterling” means British pound
sterling and “pence” means British pence.
Directors and General Information
Directors Christopher Waldron (Chairman with effect from 23 November 2017) Fred Hervouet (Appointed 6 December 2017) Jane Le Maitre (Chairman of Audit Committee with effect from 4 January 2018) Nigel Ward (Chairman of Remuneration and Management Registered Office Heritage Hall Le Marchant Street St. Peter Port Guernsey GY1 4HY Investment Manager Crystal Amber Asset Management (Guernsey) Limited Heritage Hall Le Marchant Street St. Peter Port Guernsey GY1 4HY Nominated Adviser Allenby Capital Limited 5 St. Helen’s Place London EC3A 6AB Legal Advisers to the Company As to English Law Norton Rose Fulbright LLP 3 More London Riverside London SE1 2AQ As to Guernsey Law Carey Olsen PO Box 98 Carey House Les Banques St. Peter Port Guernsey GY1 4BZ Custodian ABN AMRO (Guernsey) Limited PO Box 253 Martello Court Admiral Park St. Peter Port Guernsey GY1 3QJ Registrar Link Asset Services (formerly Capita Registrars (Guernsey) Limited) 65 Gresham Street London EC2V 7NQ
Engagement Committee) William Collins ( Resigned 23 November 2017 ) Sarah Evans ( Resigned 4 January 2018 ) Investment Adviser Crystal Amber Advisers (UK) LLP 17c Curzon Street London W1J 5HU Administrator and Secretary Estera International Fund
Managers (Guernsey) Limited (formerly Heritage International Fund Managers Limited) Heritage Hall Le Marchant Street St. Peter Port Guernsey GY1 4HY Broker Winterflood Investment Trusts The Atrium Building Cannon Bridge House 25 Dowgate Hill London EC4R
2GA Independent Auditor KPMG Channel Islands Limited Glategny Court Glategny Esplanade St. Peter Port Guernsey GY1 1WR Identifiers ISIN: GG00B1Z2SL48 Sedol: B1Z2SL4 Ticker: CRS Website: crystalamber.com
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