REG - Crystal Amber Fund - Proposed B share scheme and notice of GM

Crystal Amber FundAnnouncement

09/10/2024 07:00

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RNS Number : 4321H  Crystal Amber Fund Limited  09 October 2024

9 October 2024

CRYSTAL AMBER FUND LIMITED

("Crystal Amber Fund" the "Company" or the "Fund")

 

Proposal for adoption of B share scheme to permit returns of capital

and notice of General Meeting

 

Crystal Amber Fund announces that it has posted a circular to shareholders
(the Circular) in relation to the Board's proposal that a B Share Scheme be
adopted and implemented such that the Board can pursue returns of capital over
time to Shareholders by way of redemption of the B Shares following the full
or partial realisation of the Company's assets.

On 15 February 2022, the Company published a circular (the 2022 Circular)
containing proposals for a change of investment policy to allow for the
realisation of predominantly all of the Company's assets and the managed
wind-down of the portfolio (the 2022 Proposals). The 2022 Proposals were
approved by Shareholders in March 2022. The publication of the 2022 Circular
followed an announcement in December 2021 that the Company intended to adopt a
strategy of maximising capital returned to Shareholders through timely
disposals.

Since December 2021, the Company has returned £45.8 million through dividend
distributions and a further £9.6 million through a share repurchase programme
that commenced in December 2023. The Board considers that there is the
potential for further returns of capital to Shareholders as the Fund continues
to pursue the realisation of assets.  In particular, De La Rue plc (DLAR) has
announced that it is pursuing strategic options in relation to its operating
divisions and that discussions with parties for the disposal of either of such
divisions have progressed significantly with an expectation of a further
update announcement in the next few weeks.  In light of this and the
potential for corporate actions by this investee company, the Board has
considered that now would be an appropriate time to put in place an authority
and mechanism to be able to return capital to Shareholders in the context of
any potential transactions implemented by DLAR that afford a return on or
realisation of all or part of the investment in DLAR, as well as for potential
realisations of the Company's other holdings if and when the same shall occur.
Accordingly, the Company is now putting forward a proposal for adoption of the
B Share Scheme whereby the Company will be able to make successive bonus
issues of redeemable B Shares to Shareholders on a pro rata basis and to
redeem such B Shares for cash shortly thereafter without further action being
required by Shareholders (the Proposal).

The quantum and timing of any Return(s) of Capital to Shareholders under the B
Share Scheme will be at the discretion of the Board and will be dependent on
the realisation of the Company's assets, its liabilities and general working
capital requirements. The Company will announce details of each Return of
Capital, including the relevant Record Date, Redemption Price and Redemption
Date via a Regulatory Information Service.

The adoption of the B Share Scheme requires Shareholder approval, pursuant to
the Companies Law, and will be proposed as a special resolution. Therefore,
the Company is publishing the Circular to convene the Extraordinary General
Meeting at which it will seek approval from Shareholders to adopt the B Share
Scheme and related actions to permit returns of capital over time to
Shareholders in an efficient manner.

The Circular sets out details of, and seeks approval for, the Proposal and
explains why the Board is recommending that Shareholders vote in favour of the
Resolutions to be proposed at the Extraordinary General Meeting to be held at
2.00 p.m. on 28 October 2024.

It is emphasised that the Board is not proposing a Return of Capital at this
time, but only seeking to put in place a mechanism to do so should it be
appropriate in the future.

Background to, and reasons for, the Proposal

As noted above, the Company is pursuing an orderly realisation of its assets
over a period of time following the approval of the 2022 Proposals. The Board
is mindful of the fact that it has a range of institutional, corporate and
individual Shareholders and, as such, proposes a flexible mechanism by which
any realisation proceeds can be returned to Shareholders.

Following careful consideration of the available options, taking into account,
among other things, tax impact, effectiveness for a large capital return and
cost effectiveness, the Board believes that one of the fairest and most
efficient ways of returning substantial amounts of cash to Shareholders is by
means of a bonus issue of redeemable B Shares to Shareholders pro rata to
their holding of Ordinary Shares, which would then be immediately redeemed by
the Company in consideration for a cash payment equal to the amount treated as
paid up on the issue of the B Shares. This method of return allows
Shareholders to be treated equally on a pro rata basis.

B Share Scheme

Return of Capital via the B Share Scheme

Subject to the Resolutions being passed at the Extraordinary General Meeting,
the B Share Scheme will provide the Company with a mechanism to return cash to
Shareholders at such time or times as the Board may, at its absolute
discretion, determine. B Shares would be issued to Shareholders (at no cost to
Shareholders) pro rata to their holdings of Ordinary Shares at the time of
issue of the B Shares and, shortly thereafter, redeemed and cancelled in
accordance with their terms for a cash amount not exceeding the amount treated
as paid up on the issue of the B Shares. The Company will not allot any
fractions of B Shares and entitlements will be rounded down to the nearest
whole B Share.

Following the redemption and cancellation of the B Shares, the redemption
proceeds would be sent to Shareholders, either through CREST to uncertificated
Shareholders or via cheque to certificated Shareholders.

By implementing the B Share Scheme, the Company will be able to issue B Shares
from time to time and then redeem them for a cash consideration to enable one
or more capital returns to Shareholders as deemed appropriate by the Board.
Each issue and redemption of B Shares would be announced via a Regulatory
Information Service.

Further details of the B Share Scheme are set out in Part 2 of the Circular.

Taxation of the B Share Scheme

A summary of certain tax consequences of the Proposal for certain categories
of UK tax resident Shareholders is set out in Part 5 of the Circular.

Shareholders who are in any doubt as to their tax position should consult an
appropriate independent and authorised professional adviser.

Further information on the B Shares

No share certificates will be issued in relation to the B Shares and no CREST
accounts will be credited with any such shares. The B Shares will not be
listed or traded on any exchange, including AIM.

The B Shares will be non-transferable and will have limited rights. Given the
very short period of time for which any B Share would be in issue, it is
unlikely that any dividends would become payable on the B Shares. The rights
and restrictions attached to the B Shares are set out more fully in Part 3 of
the Circular.

Status of the portfolio of investments of the Company

De La Rue plc (DLAR)

Following a prolonged period of intense and successful activism at DLAR, the
Company purchased 15.3 million shares in DLAR during the summer of 2023 at a
cost of £6.3 million, equivalent to 41.2 pence per share.

On 25 September 2024, DLAR released a strategic update and stated that it is
pursuing various strategic options in relation to its operating divisions and
that discussions with parties in relation to the disposal of either of the
group's divisions have progressed significantly. Such announcement also stated
that DLAR expected to provide a further update within the next few weeks.

DLAR stated that it remained confident of achieving group adjusted operating
profit for FY25 significantly ahead of FY24, in the mid- to high- £20
million.

The Company is DLAR's largest shareholder, with a holding close to 17 per
cent. of its issued share capital. The Investment Manager remains of the view
that the strategic value of DLAR is substantially more than its operational
value and that it is also potentially a takeover target in an industry
requiring consolidation. The Company notes both the cross-selling revenue
benefits and the elimination of substantial plc and head office overheads that
should accrue to a trade acquiror.

Morphic Medical Inc (MMI) (formerly GI Dynamics Inc (GI Dynamics))

The Company holds 95.3 per cent. of the issued share capital of MMI, in
addition to interest bearing loan notes. Last summer, GI Dynamics changed its
name to Morphic Medical Inc. MMI is a privately held company, headquartered in
Boston, MA, that develops an endoscopically delivered medical device for
patients with Type 2 Diabetes and Obesity. The device is called RESET,
formerly known as the Endobarrier. RESET is a thin, flexible implant that
lines the proximal intestine and mimics gastric bypass bariatric surgery as
food bypasses the duodenum and the upper intestines. The Investment Manager
believes that MMI's RESET device can deliver superior and durable results
without change to the anatomy.

In June 2024, the Investment Manager reported that MMI had received approval
from the U.S. Food and Drug Administration (FDA) to MMI's application for
amendments to certain requirements for its pivotal study, which is approved as
a staged study. These protocol changes are expected to significantly
accelerate access to the key US markets for the treatments of diabetes and
obesity, subject to, inter alia, successful completion of the study and
trials.

MMI is currently in very advanced stages of securing CE Mark certification,
which is expected in the coming weeks.

Prax Exploration Deferred Consideration Units (DCUs)

In May 2024, the Fund disposed of its remaining holding in the DCUs, following
the acquisition of Hurricane Energy plc by Prax Exploration. This brought
total proceeds from the DCUs to £12.5 million, realising a profit of £2.3
million. In June 2021, in the High Court, the Fund successfully prevented a
debt for equity swap, which would have resulted in 95% dilution. Ahead of the
court case, shares in Hurricane Energy plc were trading at 1 penny per share.
Following the disposal in May, total proceeds received by the Fund were 8.65
pence per share on its holding of 575.6 million shares.

Other

The Fund's other holdings represent approximately 10 per cent. of the
Company's Net Asset Value. The Fund is in discussions in respect of all these
holdings with a view to securing transactions that will either result in a
cash exit or provide improved liquidity.

Benefits of the Proposal

The Board believes, having taken into account the views of certain
Shareholders and the Investment Manager, that the Proposal is in the best
interests of the Company and its Shareholders as a whole, and should deliver
the following principal benefits:

·    the Company will be able to return capital to Shareholders in a
cost-effective and timely manner through the proposed B Share Scheme (or by
way of such other mechanisms which the Directors consider in their discretion,
and are in the best interests of Shareholders from time to time); and

·    it is intended that the admission to trading on AIM of the Ordinary
Shares will be maintained for as long as practicable during the realisation
process subject to regulatory considerations, enabling Shareholders to
continue to trade their Ordinary Shares and thereby exit their investment
through the market from time to time.

Risk factors

The Directors have given consideration to the potential risks and
uncertainties relating to the Proposal.

For a discussion of certain risk factors which Shareholders should take into
account when considering whether to vote in favour of the Resolutions, please
refer to Part 4 of the Circular.

Extraordinary General Meeting

To implement the Proposal, an Extraordinary General Meeting of the Company is
to be held at Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey
GY1 4LY at 2.00 p.m. on 28 October 2024.

Resolution 1 will be proposed as a special resolution and the passing of such
Resolution will require a not less than 75 per cent. majority of the votes
cast in person or by proxy. Resolutions 2 and 3 will be proposed as ordinary
resolutions and the passing of such Resolutions will require a not less than
50 per cent. majority of the votes cast in person or by proxy. Together the
Resolutions seek approval for the adoption and implementation of the proposed
B Share Scheme.

Resolution 1 relates to the adoption of the New Articles that set out the
rights and restrictions attached to the B Shares and enable the Directors to
capitalise reserves from time to time for the purposes of the B Share Scheme
with the authority of a one-off ordinary resolution of the Company which will
be sought pursuant to Resolution 2.

Resolution 2 (which is conditional on Resolution 1 being passed) authorises
the Directors to capitalise from time to time any sums standing to the credit
of any reserve of the Company and to apply such sums for the purposes of
paying up in full up to 20,000,000,000 B Shares to be allotted and issued to
Shareholders pro rata to their holdings of Ordinary Shares at the Record Date
in respect of the relevant issue of B Shares.

Resolution 3 (which is conditional on Resolutions 1 and 2 being passed)
authorises the Directors to allot and issue B Shares from time to time up to
an aggregate nominal amount of £200 million on a pro rata basis to the
holders of Ordinary Shares by way of one or more bonus issues. If approved,
this authority to allot and issue B Shares will expire at 11.59 p.m. on 27
October 2029 (being the fifth anniversary of the date when Resolution 3 is
expected to be passed).

The full text of the Resolutions to be proposed at the Extraordinary General
Meeting is set out in the Notice of EGM at the end of the Circular. A draft of
the proposed New Articles (showing the full terms of the changes proposed to
be made) may be inspected at the registered office of the Company, Floor 2,
Trafalgar Court, Les Banques, St Peter Port, Guernsey  GY1 4LY, during usual
business hours on any weekday (Saturdays, Sundays and public holidays
excepted) from the date of the Circular up to and including the date of the
Extraordinary General Meeting and at the place of the Extraordinary General
Meeting for at least 15 minutes before and during the Extraordinary General
Meeting.

The implementation of the Proposal will require the approval of the
Resolutions.  If any of the Resolutions are not passed, then the provisions
in the Existing Articles will continue to apply and the Proposal will not
proceed.

Action to be taken by Shareholders

All Shareholders are encouraged to vote in favour of the Resolutions to be
proposed at the Extraordinary General Meeting and if the Ordinary Shares are
not held directly, to arrange for their nominee to vote on their behalf. In
line with the Company's ongoing paperless strategy Shareholders will not
receive a Form of Proxy with this document. Instead Shareholders are asked to
vote in one of the following ways:

a)    in the case of members holding share certificates, by utilising the
shareholder portal as set out in note 4 to the Notice of EGM; or

b)    in the case of CREST members, by utilising the CREST electronic proxy
appointment service in accordance with the procedures set out in note 5 to the
Notice of EGM; or

c)    by requesting a hard copy of the Form of Proxy from the Company's
registrar, Link Group, by emailing shareholderenquiries@linkgroup.co.uk, or by
calling 0371 664 0300 (calls are charged at the standard geographic rate and
will vary by provider. Calls outside the UK will be charged at the applicable
international rate. Lines are open 9:00 a.m. - 5:30 p.m. Monday - Friday) and
returning it to Link Group at the address shown on the Form of Proxy. Please
note that delivery using this service can take up to five Business Days; or

d)    if you are an institutional investor you may also be able to appoint
a proxy electronically via the Proxymity platform, a process which has been
agreed by the Company and approved by the Registrar. For further information
regarding Proxymity, please go to www.proxymity.io or refer to note 6 to the
Notice of EGM.

In each case the appointment of proxy must be received by the Company's
registrar, Link Group, by no later than 2.00 p.m. on 26 October 2024 or in the
case of any adjournment by no later than 48 hours before the time of the
adjourned meeting.

The appointment of a proxy will not preclude a Shareholder from attending the
Extraordinary General Meeting and voting in person if they wish to do so.

Circular and further information

A copy of the circular is available  on the Company's website at
www.crystalamber.com (http://www.crystalamber.com)

 

Shareholders' attention is drawn to the further information set out in Parts 2
to 5 of the Circular. Shareholders should read the whole of the Circular and,
in particular, the risk factors set out in Part 4, before deciding on the
course of action to take in respect of the Resolutions and the Proposal.

Recommendation

The Board considers the Proposal to be in the best interests of the Company
and Shareholders as a whole.

Accordingly, the Board recommends Shareholders vote in favour of the
Resolutions to be proposed at the Extraordinary General Meeting, as they
intend to do in respect of their own beneficial holdings which, as at 7
October 2024, being the latest practicable date prior to the publication of
the Circular, amount in aggregate to 41,000 Ordinary Shares, representing
approximately 0.07 per cent. of the Company's existing issued share capital.

 

Definitions used in this announcement are set out in the Appendix.

 

 

For further enquiries please contact:

 

Crystal Amber Fund Limited

Chris Waldron (Chairman)

Tel: 01481 742 742

www.crystalamber.com (http://www.crystalamber.com)

 

Allenby Capital Limited - Nominated Adviser

Jeremy Porter/ Dan Dearden-Williams

Tel: 020 3328 5656

 

Winterflood Investment Trusts - Broker

Joe Winkley/Neil Langford

Tel: 020 3100 0160

 

Crystal Amber Advisers (UK) LLP - Investment Adviser

Richard Bernstein

Tel: 020 7478 9080

 

Appendix

DEFINITIONS

The following definitions apply throughout this announcement, unless the
context requires otherwise:

 AIM                                         the AIM market, operated by the London Stock Exchange
 Articles                                    the articles of incorporation of the Company, as amended from time to time
 B Share                                     an unlisted, redeemable, fixed rate preference share having a nominal value of
                                             1 penny in the capital of the Company designated as a B Share having such
                                             rights and being subject to such restrictions as contained in the New Articles
 B Share Dividend                            the fixed rate dividend payable on B Shares in accordance with the rights
                                             described in Part 3 of the Circular
 B Share Scheme                              the proposed mechanism to enable returns of capital through the issue and
                                             redemption of B Shares
 Board or Directors                          the directors of the Company
 Business Day                                a day (excluding Saturdays and Sundays or public holidays in England and
                                             Guernsey) on which banks generally are open for business in London and
                                             Guernsey for the transaction of normal business
 certificated or in certificated form        not in uncertificated form
 Circular                                    the document to be posted to Shareholders on 8 October 2024 in relation to the
                                             Proposal
 Companies Law                               The Companies (Guernsey) Law 2008 (as amended)
 Company or Fund                             Crystal Amber Fund Limited
 CREST                                       the facilities and procedures for the time being of the relevant system of
                                             which Euroclear has been approved as operator pursuant to the CREST
                                             Regulations
 CREST Manual                                the compendium of documents entitled the "CREST Manual" issued by Euroclear
                                             from time to time
 CREST Regulations                           The Uncertificated Securities (Guernsey) Regulations, 2009 (SI 2009 No. 48),
                                             as amended
 Disclosure Guidance and Transparency Rules  the Disclosure Guidance and Transparency Rules of the FCA, as amended from
                                             time to time
 DLAR                                        De La Rue plc
 Euroclear                                   Euroclear UK & International Limited, the operator of CREST
 Existing Articles                           the existing Articles in force as that the date of this announcement
 Extraordinary General Meeting or EGM        the extraordinary general meeting of the Company to be convened for 2.00 p.m.
                                             on 28 October 2024 at Floor 2, Trafalgar Court, Les Banques, St Peter Port,
                                             Guernsey GY1 4LY (or any adjournment thereof)
 FCA or Financial Conduct Authority          the Financial Conduct Authority of the United Kingdom including any
                                             replacement or substitute therefor, and any regulatory body or person
                                             succeeding, in whole or in part, to the functions thereof
 Form of Proxy                               the form of proxy which may be requested from the Registrar for use in
                                             connection with the Extraordinary General Meeting
 FSMA                                        the Financial Services and Markets Act 2000, as amended from time to time
 Investment Manager                          Crystal Amber Asset Management (Guernsey) Limited
 Investment Policy                           the investment objective and investment policy of the Company from time to
                                             time
 London Stock Exchange                       London Stock Exchange plc
 Net Asset Value or NAV                      the value of the assets of the Company less its liabilities (including accrued
                                             but unpaid fees), or, where relevant, the assets attributable to that class of
                                             share (including accrued but unpaid fees), in each case determined (by the
                                             Directors in their absolute discretion) in accordance with the accounting
                                             principles adopted by the Company from time to time
 New Articles                                the new articles of incorporation of the Company proposed to be adopted by the
                                             passing of the Resolution 1 set out in the Notice of EGM
 Notice of EGM                               the notice of the Extraordinary General Meeting set out at the end of the
                                             Circular
 Ordinary Shares or Shares                   ordinary shares of no par value in the share capital of the Company
 Proposal                                    as defined in paragraph 3 of of this announcement
 Record Date                                 in respect of any Return of Capital, the date determined by the Board, at its
                                             absolute discretion, on which Shareholders' entitlements to B Shares under
                                             that Return of Capital will be calculated
 Redemption Date                             in respect of any Return of Capital, the date determined by the Board, at its
                                             absolute discretion, on which the B Shares allotted and issued under that
                                             Return of Capital will be redeemed
 Redemption Price                            in respect of any Return of Capital, the price at which B Shares allotted and
                                             issued under that Return of Capital are to be redeemed
 Register or Register of Members             the register of members of the Company
 Registrar                                   Link Group
 Regulatory Information Service              a primary information provider approved by the FCA under section 89P of FSMA
 Resolutions                                 the resolutions relating to the Proposal and set out in the Notice of EGM
 Return of Capital                           a return of capital pursuant to the allotment, issue and redemption of B
                                             Shares to be made at such time or times as determined by the Board, at its
                                             absolute discretion
 Shareholders                                the holders of Ordinary Shares
 Sterling or GBP or £                        the lawful currency of the UK
 UK                                          the United Kingdom of Great Britain and Northern Ireland
 uncertificated or in uncertificated form    recorded in the Register as being held in uncertificated form in CREST and
                                             title to which, by virtue of the CREST Regulations, may be transferred by
                                             means of CREST
 US Securities Act                           the United States Securities Act of 1933, as amended

 

 

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