13 September 2017
Crystal Amber Fund
Limited
Final results for
the year ended 30 June 2017
The Company announces its final results for the year ended
30 June 2017.
Highlights
- NAV (1) per share increased by 32.9 per cent over
the year to 204.37 pence
(153.79 pence per share at
30 June 2016). Including the
dividends paid during the period, NAV total return per share over
the year ended 30 June 2017 was 36.1
per cent. This performance makes the Company the seventh best
performing investment trust of Trustnet’s 119 UK Investment Trusts,
over the 12 months to 30 June
2017.
- Successful exits from investments in Grainger plc (“Grainger”),
Pinewood Group plc (“Pinewood”) and Restaurant Group plc
(“Restaurant Group”), realised gains of £6.1 million, £5.3 million
and £1.3 million, respectively. £15.7 million profit was realised
from Hurricane Energy plc (“Hurricane”) sales. Total net realised
gains for the year were £19.3 million, including realised losses on
derivatives.
- The buy-back programme helped to limit the average discount to
NAV of 5.7 per cent over the year, which compares to an average
discount of 7.7 per cent for the Company’s peer
group(2). Premium to NAV at 30
June 2017 was 3.5 per cent.
- New positions were initiated in NCC Group plc (“NCC”) and Ocado
Group plc (“Ocado”). The Company materially increased its position
in GI Dynamics Inc (“GI Dynamics”).
William
Collins, Chairman of the Company, commented: “It has been an
eventful year for global equity markets, which have faced a great
deal of uncertainty in the wake of the Brexit vote and the
beginnings of the Trump presidency. Despite this, the Company has
achieved exceptional performance thanks to its focus on undervalued
opportunities where it sees the potential to act as a catalyst for
change. The NAV total return per share of 36.1 per cent over the
year deepens our confidence in the Company’s activist investment
process. Going forward, the Company will continue to use its proven
screening process to identify activist
opportunities.”
For further enquiries please contact:
Crystal Amber Fund Limited |
|
William Collins (Chairman) |
Tel: 01481 716 000 |
|
|
Allenby Capital Limited - Nominated
Adviser |
|
David Worlidge/James Thomas |
Tel: 020 7167 6431 |
|
|
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.
(2) AIC UK Smaller Companies Peer Group:
Source: Thomson Reuters Datastream as at 30 June 2017.
Chairman’s
Statement
I hereby present the tenth Annual Report of the Company for the
year ended 30 June 2017.
Despite last year’s Brexit vote, the beginnings of the Trump
presidency, and the subsequent uncertainty these events created,
equity markets continued to push higher over the year to
30 June 2017.
Following the Brexit vote, the Bank of England cut interest rates from 0.5 to 0.25
per cent in August 2016, and
announced further stimulus measures. In December 2016 and March
2017, the US Federal Reserve raised interest rates by 0.25
per cent to 1.00 per cent and further increased the range to 1.00
to 1.25 per cent in June 2017.
NAV at 30 June 2017 was £201.0
million, compared with an unaudited NAV of £214.5 million at
31 December 2016 and £151.5 million
at 30 June 2016. NAV per share was
204.37 pence at 30 June 2017 compared with 218.02 pence at 31
December 2016 and 153.79 pence
at 30 June 2016.
NAV per share increased 32.9 per cent over the year to
204.37 pence. Including the dividends
paid during the year, NAV total return per share over the twelve
months ended 30 June 2017 was 36.1
per cent. This performance makes the Company the seventh best
performing investment trust of Trustnet’s 119 UK Investment Trusts,
over the 12 months to 30 June
2017.
During the year, the Company bought back 160,000 of its own
shares at an average price of 157.70
pence as part of its programme to eliminate any material
discount to NAV. Over the year, the shares traded at an average
discount to NAV of 5.7 per cent. At the year end the shares traded
at a premium to NAV of 3.5 per cent.
The Company declared interim dividends of 2.5 pence in both July
2016 and December 2016, in
line with the dividend policy of 5.0
pence per year. Guernsey registered companies are not
required to obtain shareholder approval in respect of interim
dividends and this has been the Company’s policy to date. However,
the Board wishes to afford shareholders the ability to approve the
interim dividends paid in this financial year and there will be an
ordinary resolution proposed at the forthcoming AGM in this
regard.
The Directors have specifically considered the implications of
the continuation vote to be proposed at the 2017 AGM on the
application of the going concern basis. The continuation vote
is scheduled to occur every two years. The Directors have no
reason to doubt that shareholders will vote for the Company to
continue as constituted at the 2017 AGM, given the positive
performance of the Company since the previous continuation vote at
the 2015 AGM.
The Company remains cautious on the overall outlook for markets
as uncertainty remains, not only about the implications of Brexit,
but underlying issues still facing the global economy. However, we
believe Brexit has created several activist opportunities:
Sterling’s weakness has made UK companies particularly attractive
to overseas acquirers. The Company remains committed to its
strategy of identifying opportunities in the market and working
with companies to realise shareholder value.
Finally, having served as a Director and Chairman of the Company
since 2008, I will be retiring from the Board at the AGM in
November this year. Christopher
Waldron, who was appointed as Director in July 2014, will succeed me as chairman and I wish
him every success in the role. I would like to thank my fellow
Directors for their support during the period of my chairmanship
and wish the Adviser, the Manager and the Board continuing success
in the future.
William Collins
Chairman
12 September 2017
Investment Manager’s
Report
Performance
The Fund’s NAV per share increased 32.9 per cent over the year
to 204.37 pence (153.79 pence at 30 June
2016, 218.02 pence at
31 December 2016). Including the
2.5 pence dividend paid in both
July 2016 and December 2016, the total return per share for the
year was 36.1 per cent. This compares to the FTSE 250 total return
of 18.9 per cent and FTSE Small Cap total return of 24.9 per cent.
Over the year, investments in equities represented an average 100.6
per cent of net assets. The purchase of FTSE put options in the
year resulted in a net decrease in NAV of £10.8 million. Whilst
impacting returns, the Fund’s exposure to broad market risk was
reduced.
The main performance contributors were Hurricane (19.5 per
cent), FairFX Group plc (“FairFX”) (5.1 per cent), Grainger (5.1
per cent) and Northgate plc (“Northgate”) (4.3 per cent). The main
performance detractors were Ocado (0.3 per cent), a recent
investment, Hansard Global plc (“Hansard”) (0.2 per cent) and
Sutton Harbour Holdings plc (“Sutton Harbour”) (0.2 per cent).
Portfolio
The table below lists the Fund’s top ten holdings at
30 June 2017. It details the stake
that those positions represent as a proportion of the Fund’s NAV
and their contribution to the Fund’s NAV performance over the
year.
Top ten
holdings |
Pence
per share |
Percentage of NAV |
Percentage of investee equity held |
Contribution to NAV performance |
Hurricane Energy
plc |
49.6 |
24.3% |
12.2% |
19.5% |
Northgate plc |
29.5 |
14.4% |
4.9% |
4.3% |
STV Group plc |
25.7 |
12.6% |
16.8% |
2.0% |
FairFX Group plc |
16.0 |
7.8% |
25.7% |
5.1% |
Leaf Clean Energy
Co. |
12.9 |
6.3% |
29.9% |
0.7% |
NCC Group plc |
11.6 |
5.7% |
2.5% |
2.3% |
Ocado Group plc |
9.6 |
4.7% |
0.5% |
(0.3%) |
GI Dynamics Inc |
9.4 |
4.6% |
46.1% |
3.0% |
Sutton Harbour
Holdings plc |
7.5 |
3.7% |
29.3% |
(0.2%) |
Johnston Press
plc |
3.3 |
1.6% |
21.4% |
0.0% |
Total of ten largest
holdings |
175.1 |
|
|
|
Other investments |
26.8 |
|
|
|
Cash and accruals |
2.5 |
|
|
|
Total NAV |
204.4 |
|
|
|
At the end of the year, the Fund’s top ten positions represented
85.7 per cent of NAV, compared with 87.8 per cent at 30 June 2016. The Fund’s total number of equity
positions was 17 (2016: 20). The cash and accruals position at 1.2
per cent of NAV had increased from 0.3 per cent at 30 June 2016.
Six of the Fund’s top ten positions at the end of the year,
Hurricane, Northgate, STV Group plc (“STV”), FairFX, Leaf Clean
Energy Co (“Leaf”) and Sutton Harbour were within the top ten
holdings at the beginning of the year. Over the year, the Fund
added to its investments in GI Dynamics, Johnston Press plc
(“Johnston Press”), Northgate and STV.
Over the year, the Fund increased its position in Northgate to
4.9 per cent of Northgate’s share capital and in STV to 16.8 per
cent of STV’s share capital. The Fund also increased its stakes in
FairFX to 25.7 per cent, in GI Dynamics to 46.1 per cent and in
Johnston Press to 21.4 per cent. The Fund has continued to engage
constructively with the management and board of each of these
companies.
The Fund continued to build its position in Hurricane, investing
a further £10.7 million at the company’s placing of shares in
October 2016 and taking the Fund’s
stake in Hurricane to 15.3 per cent. In April 2017, the Fund announced that it had
reduced its position in Hurricane into demand to manage its
exposure to this successful investment, realising gains of £15.7
million. In July 2017, Hurricane
completed a placement of ordinary shares to raise $300 million at a price of 32 pence per share. The company also raised an
additional $230 million via the
placement of convertible bonds. The Fund invested $10 million in this raising ($3 million equity and $7
million convertible bonds).
The Fund exited its position in Grainger, realising a total
profit of £6.1 million, (£7.1 million including dividends received
to date). Following engagement, and as recommended by the
Investment Adviser, Grainger undertook a strategic review,
streamlined the business, reduced its administrative and other
expenses from £42 million per year to £27.5 million per year and
reduced its cost of debt from 5.3 per cent to 3.6 per cent.
Following a significant share price re-rating, which saw its
discount to net assets narrow from 17.1 per cent at 31 December 2016 to 8.5 per cent in June 2017, the Fund exited its position in
Grainger, realising total sale proceeds of £37.3
million.
The Fund exited its position in Pinewood, realising a profit of
£5.3 million. Following the completion of a strategic review, the
Pinewood board received and recommended a takeover offer valuing
the company at £320 million. The offer was made by a real estate
fund, Aermont Capital, reinforcing the Fund’s view that Pinewood’s
real estate portfolio was undervalued. Taking into account all
realisations since the initial investment in July 2011, the total profit on the Fund’s
investment in Pinewood was £14.7 million.
The Fund also realised gains of £1.3 million on its holding in
Restaurant Group and received the final payment following the
closure of NBNK Investments plc (“NBNK”), realising a profit of
£0.6 million.
In addition, over the year, the Fund exited its investments in
Providence Resources (“Providence”) and San Leon Energy plc (“San
Leon”), realising losses of £0.6 million and £0.5 million
respectively.
Strategy
The Fund remains focused on special situations where the
Investment Manager believes value can be released regardless of the
market direction.
The Fund held 20 positions at the start of the period and 17
positions at the period end. The top 10 positions represented
85.7 per cent of NAV. By its nature as an activist fund, and to
ensure a sufficient stake so as to allow engagement as a major
shareholder, the Fund is exposed to concentration risk.
However, this is considered to be a necessary risk in order to
provide returns through the investment strategy. Levels of
investment in individual companies are monitored and parameters are
set to ensure this risk is kept to an acceptable
level.
Over the year to 30 June 2017, the
weighted average market capitalisation of the Fund’s investee
companies has increased from £346 million to £430 million
(30 June 2015: £372 million).
Activist Investment Process
The Fund originates ideas from its screening processes and its
network of contacts, including its shareholders. Companies are
valued with focus on their replacement value, cash generation
ability and balance sheet strength. During the process, the Fund’s
goal is to examine the company both ‘as it is’ and ‘as it could be’
to maximise shareholder value.
Investments are normally made after an initial engagement, which
in some cases may have been preceded by the purchase of a modest
position in the company, to allow the Investment Adviser to meet
the company as a shareholder. Engagement includes dialogue with the
company chairman, management and non-executive directors, as we
build a network of knowledge around our holdings. Where
appropriate, site visits are undertaken to deepen our research and
independent research is commissioned. Investee company annual
general meetings are often attended to maintain close contact with
the board and other stakeholders.
Wherever possible, the Fund strives to develop an activist angle
and aims to contribute to the companies’ strategy. Where value is
hidden, or trapped, the Fund looks for ways to release it. The
activist approach in some cases requires long holding periods,
which facilitate effective engagement.
Most of the Fund’s activism takes place in private, but we are
willing to make our concerns public, when appropriate. The response
of management and boards to our recommendations has generally been
encouraging. We remain determined to ensure that our investments
deliver their full potential for all shareholders, and we are
committed to engage to the degree required to achieve this.
The opportunities for engaged investment are supported by a
continued improvement in the corporate governance of UK listed
companies, and the positive perception of active ownership in
government reports such as the Kay Review.
Investee companies
Our comments on a number of our principal investments are as
follows;
Hurricane
Hurricane is an oil exploration company targeting naturally
fractured basement rock reservoirs in the West of Shetland.
Hurricane controls 728 million barrels of certified resources,
including 62 million barrels of reserves, in licences that are 100
per cent owned.
Since 2005, Hurricane has acquired and explored fractured
basement rock formations. Hurricane’s assets had, in the past,
proven to be oil bearing but had been abandoned due to the view
that those reservoirs were not commercial. According to GeoScience,
a research services firm, basement reservoirs could hold as much as
20 per cent of the world’s remaining oil and gas resources.
Naturally fractured rock with high permeability allows the oil
to rise and collect under a thick layer of shale rock and clay. The
fractures provide storage capacity and fluid pathways. This
source of oil has been successfully developed in locations in
countries such as Vietnam and
Yemen, but not yet in the UK.
In our view, Hurricane’s assets stand out due to the size of the
resources. In comparison to Hurricane’s resource size, the average
North Sea exploration target in 2014 was just over 30 million
barrels of oil equivalent (BOE), according to UK Oil and Gas. The
Fund’s previous annual reports include additional background
information on this investment.
The Fund initially invested in Hurricane at a pre-IPO stage,
helping the company secure an exploration rig to drill a horizontal
producing well on its core Lancaster licence. The company listed in
February 2014 with a valuation of
£272 million. Despite the success of the 2014 Lancaster exploration
campaign, the fall in oil prices from $109 at the time of the IPO to the
sub-$50 prices of the last two years
took a toll on the company’s share price. The oil price fall also
resulted in a dearth of capital for exploration.
Taking advantage of reduced exploration costs, in April 2016 the Fund and Kerogen Capital, an
energy investor, participated in a £52.1 million fund raising. This
allowed the company to drill two wells which increased the flow
rate and resource estimates of Lancaster. To retain the exploration rig at
its attractive rental rates the company raised £70 million in
October 2016, with our support. The
deal also included funds for long lead items necessary for an early
production system for Lancaster.
The early production system would target first oil production in
2019 and be the first step towards the full field development of
Lancaster. It would contribute to
the understanding of the reservoir and generate an attractive
investment return.
Funds raised also allowed the company to begin drilling at a new
licence, Halifax, which it was
awarded in November 2016. In
March 2017, Hurricane announced that
oil at Halifax was of a similar
quality to that encountered at Lancaster and was found at even greater depth,
indicating that Lancaster and
Halifax could form one large
structure. The Greater Lancaster
Area, which includes Lancaster and Halifax, is 30 kilometres long and, in our
estimates, could hold 2 billion barrels of oil.
The Fund sold stock into demand between January and April 2017, and in the process realised gains of
£15.7 million, whilst retaining a significant position.
In May 2017, Hurricane announced
that it was granting 25 million warrants to its Broker, Stifel
Nicolaus Europe Limited (SNEL). This had the effect of Hurricane
selling its own shares through a market maker, rather than placing
its shares with investors. The Fund remains baffled as to why
Hurricane embarked on this course and in particular, despite
regular dialogue and engagement with the Fund, which was and
remains its largest independent shareholder, why on this occasion,
it chose not to discuss or consult with the Fund. This, together
with an interview given by the company’s Finance Director
mentioning that he intended to “pass the begging bowl” to raise
funds for the early production system, led to retail investors
reducing their holdings and a significant increase in “short
interest” in Hurricane’s shares.
Combined with the uncertainty created regarding future funding,
Hurricane’s share price fell by more than 50 per cent. In
June 2017, the Fund released an
announcement expressing its disappointment at Hurricane’s poor
handling of the warrant issue and comments made at its AGM earlier
in that month.
On 29 June 2017, Hurricane
announced a proposed placement of ordinary shares to raise
$300 million at a price of
32 pence per share. The company also
announced its intention to raise $220
million via the placement of convertible bonds. Proceeds of
the placing are to be used to fund the early production system
development of the Lancaster
field. The early production system is expected to produce 17,000
barrels of oil per day and provide data required to plan a full
field development of Lancaster.
This project is currently scheduled to achieve first oil in the
first half of 2019. The placing was approved at the company’s AGM
on 21 July 2017. The Fund invested $3
million in this raising, taking its stake in the company to
8 per cent.
The Fund’s serious concerns regarding the fund raisings,
associated comments by Hurricane’s Finance Director and corporate
governance weaknesses remain. The Fund also notes that
despite an excellent exploration campaign over the last 18 months
following the latest fund raise, Hurricane’s enterprise value is
less than the amount it has raised from investors since inception.
The Fund is currently in dialogue with Hurricane regarding these
concerns and will update shareholders accordingly.
Notwithstanding management issues, the Fund maintains the view
that there remains a significant disconnect between the operational
value of Hurricane and its strategic value. Drilling results
over the 12 months to 30 June 2017
indicate that Hurricane holds a very large, quality asset, with a
resource that the Fund believes could be in excess of 1.6 billion
barrels of oil, significantly undervalued by the current market
capitalisation. Indeed, a recent statement from the Chief
Executive of BP, specifically mentioned “Hurricane Energy’s big
discovery opening the prospect of major new resources west of
Shetland.”
Northgate
Northgate is the leading light commercial vehicle hire business
in the UK, Ireland and
Spain. Its core product is
flexible rental, offering van hire without a long-term commitment
at a premium to the cost of fixed term contracts. The company has a
fleet of over 93,000 commercial vehicles, available from more than
100 sites across the UK, Ireland
and Spain. It currently generates
a return on capital employed of 10.5 per cent on £510 million of
net tangible assets.
Flexible rental is growing because customers can tailor their
vehicle fleets to their requirements and have the flexibility to
change vehicles as their needs evolve. Northgate primarily serves
businesses which vary in size from owner operators to corporate
customers. The company benefits from purchasing scale and service
capabilities from its own network of garages. Northgate also has
its own retail vehicle disposal channel, VanMonster, through which
it sells vehicles at the end of their useful rental life.
The Fund first invested in Northgate in 2012, when Bob Mackenzie and Bob
Contreras were chairman and CEO of the company,
respectively. They were in advanced stages of turning around the
company from its debt fuelled rollup strategy which resulted in a
rights issue. The Fund supported a re-financing of Northgate’s debt
that cut its interest cost from 7 per cent to 2.8 per cent.
Following a re-rating of the shares, the Fund had fully exited its
position by 2015 and realised a £3.5 million profit. In 2016, it
became apparent that Northgate’s turnaround had gone awry in the
UK: a planned roll-out into new sites was put on hold and turnover
of the sales team reached 40 per cent. As subsequently became
clear, Northgate was losing market share. Andrew Page, the new chairman, had to recruit a
new Finance Director and, by the end of 2016, a new CEO as
well.
The Fund re-invested in Northgate during 2016 in the belief that
Northgate’s share price failed to reflect the strategic value of
the company’s position at a time of growing industry consolidation.
In June 2016, following a meeting
with Northgate’s then CEO, Bob
Contreras, the Fund set out its assessment of the company’s
prospects with recommended actions, including a strategic review
that could result in a sale of all or part of the business.
At 443 pence at 30 June 2017, Northgate’s shares are trading at a
modest premium to the company’s net tangible asset value of
383 pence. The net tangible asset
value is roughly the liquidation value of Northgate’s fleet. Over
the next three years, we expect the 4 per cent dividend and the
return on capital to increase as its UK fleet returns to
growth.
STV
STV owns the leading commercial channel in Scotland, where it broadcasts free to air TV
through the Channel 3 licence. Following ITV plc’s (ITV)
acquisition of UTV Ireland in 2016, STV is the only Channel 3
business not owned by ITV. The channel’s broadcast business
generates 80 per cent of STV’s £120 million revenues. Other revenue
sources include digital advertising sales through the STV Player
and third-party programme making through STV Productions.
The company has exclusive access to the ITV Network’s content in
Scotland in return for an
affiliate fee that represents around 50 per cent of STV’s cost
base. While TV advertising revenues are cyclical, STV’s content
agreement with ITV cushions that impact on STV’s margins. Over the
last decade, and despite the rapid growth of digital advertising,
TV’s share of the advertising market has remained broadly stable at
40 per cent of total spend. Similarly, TV viewing has remained
stable at an average of around four hours per day. STV’s national
airtime is sold by ITV and represents 85 per cent of its
advertising revenues, with the balance being regional airtime.
STV’s peak time viewing figures have remained above ITV’s for seven
consecutive years, and this outperformance translates into higher
advertising rates.
The Fund initially invested in STV in 2013 when the company was
completing its turnaround, having already exited non-core assets
and brought net debt under control. During the Fund’s investment
period, management has avoided distractions and has delivered
consistently on its strategy to deepen the company’s reach within
Scotland. Non-broadcast revenues
have grown to 23 per cent in 2016, from 11 per cent in 2010.
Digital products have been the key contributor to this, in
particular “Video On Demand” revenues from STV Player, and they now
generate £7.9 million of revenues, with a margin of 52 per cent.
STV’s digital products have captured data insights from 2.1 million
Scottish viewers, a valuable resource for consumer services that
the company is only starting to monetise. STV has struggled to grow
external production revenues, and it is the consumer division that
generates all of STV’s £19.7 million operating profits.
In 2014 STV recommenced dividend payments and these have grown
seven-fold. Over the Fund’s holding period, net debt has halved and
at £26.4 million represents one times’ EBITDA. In 2016, the company
reached an agreement with its pension scheme trustees over the
future contributions to the scheme, clarifying the funding needs of
the company.
STV’s share price de-rated for a brief period following the
Brexit referendum results and the resulting weakness of advertising
markets. The Fund increased its stake over the period from 7.8 per
cent to 16.8 per cent and engaged with management over the use of
the company’s surplus cash. After the period end, STV announced a
buyback programme worth £10 million per annum, which the Fund
welcomes. Trading at 9 times current year earnings, STV can retire
substantial amounts of stock at an attractive price and accrue the
most value to its shareholders.
In April 2017, the company also
announced that its CEO, Rob
Woodward, would step down within 12 months. In August 2017, the company announced that
Simon Pitts will join the Board as
CEO in January 2018. Simon will join from ITV where he is a
member of the executive board, holding the position of Managing
Director, Online, Pay TV, Interactive & Technology. Over
a 17 year career at ITV, Simon has held a number of senior roles,
was central to the company’s recent transformation, and oversaw
strong growth in ITV’s digital
businesses.
FairFX
FairFX has been offering international payment services to
retail and corporate customers in the UK since 2007. Its payments
platform enables low-cost multi-currency accounts and pre-paid
cards in a market estimated to be worth £60 billion a year. FairFX
can deliver better value to consumers than full-service banks
burdened with regulation and legacy systems, or high street Bureaux
de Change providers that carry the cost of retail estates.
Unlike most in the FinTech space, the company grew until 2014 by
prudently re-investing profits in product and marketing
investments. But like others, it sought to secure funds at a high
valuation when it came to list in 2014. The IPO was however too
small at £2.6 million, providing the company with insufficient
growth capital in an increasingly competitive industry. Additional
fund raisings were completed in December of the same year and in
2015, but were also in aggregate insufficient to tackle FairFX’s
opportunities.
In March 2016, the Fund engaged
with the company’s board to undertake a placing at 20 pence per share that would fund materially
increased marketing expenditure for growth. In 2016, we saw a step
change at FairFX. Transaction revenues are up 28 per cent and
international payments turnover is up 49 per cent.
The acquisition of Q Money’s e-Money licence increased the
capabilities of FairFX. Additionally, the growth of the executive
team underpins FairFX’s move towards general SME banking services.
For corporates and SMEs, FairFX can deliver expense management
platforms, banking capabilities and payment services in a low-cost
environment. The opportunity there is compelling: banks are
unattractive to SMEs and offer expensive payment solutions.
The acquisition of CardOne, announced in July 2017, brings a full service digital banking
platform as a part of a £25 million fund raising which will also
help with overseas expansion, marketing and IT.
Leaf
Leaf is an investment company focused on clean energy, largely
in North America. As a consequence
of the Fund’s activism, Leaf has been in orderly realisation since
July 2014. It currently owns four
assets, the largest of which is an equity stake in Invenergy Wind
that represents 97 per cent of Leaf’s $102.2
million assets. The Fund’s previous annual reports provide
the background on our investment in Leaf and our engagement with
the company’s board.
Invenergy Wind is North America’s largest independent privately
held renewable energy provider. It has developed over 15,000 MW of
generation capacity in over 100 projects. Leaf initially invested
$40 million in convertible notes in
2008 and 2009. It elected to convert its interest into a 2.3 per
cent equity stake in June 2015. In
July 2015, TerraForm Power announced
the signing of definitive agreements for a proposed purchase from
Invenergy of 930 MW of contracted wind power generation facilities.
On 16 December 2015, the transaction
closed and on 21 December 2015, Leaf
filed a complaint against Invenergy for breach of contract. The
complaint alleges that Invenergy was required either to obtain
Leaf's consent to the sale prior to its consummation or, in the
absence of such consent, make a payment to Leaf upon the closing of
the sale. Leaf did not consent to the sale and Invenergy made no
payment to Leaf. The complaint sought payment of $126 million plus interest and the case will be
heard in October 2017.
After the filing of the complaint, Invenergy Wind exercised its
call option on Leaf’s stake, and Leaf followed by exercising its
put option. An appraisal process to determine the market value of
the investment resulted in valuations of $73
million from Leaf’s appraiser and $36
million from Invenergy Wind’s. On 30
June 2016, in a partial judgement on the case, the court
ruled that Invenergy Wind had breached the contract by not
obtaining Leaf’s consent to the transaction. Pending further
proceedings, the court has not yet determined the amount of
damages, which Leaf argues should be determined by applying the
target rate of return of 23 per cent, as agreed between Invenergy
Wind and Leaf. On 10 October 2016,
the court rejected Invenergy Wind’s argument that the exercise of a
put option voided Leaf’s claim for breach of contract.
Leaf is actively exploring its options to realise the value of
its other investments in VREC, Lehigh and Energia Escalona.
The full value of Leaf’s claim against Invenergy Wind, with
interest but net of tax, is over 95
cents (72 pence) per
share. This compares to Leaf’s share price at 30 June 2017 of 37.5
pence and its latest available NAV per share at 31 December 2016, of 77.65
cents (58.8 pence).
The Fund remains confident in the value underpinning the
Invenergy Wind investment and that Leaf will successfully realise
it.
NCC
NCC is an IT support services business with two divisions,
Assurance and Escrow, which generate revenues of £205 million and
£37 million respectively. In NCC's Assurance division, 'ethical
hackers' advise companies on their cybersecurity needs by
undertaking penetration testing, systems monitoring and governance
reviews. This breadth of capability is superior to most of its
competitors, which include professional service firms such as
Accenture and small niche players. In its Escrow division, NCC
provides a legal and technical framework to facilitate its
customers’ business continuity, should their independent software
vendors cease to exist. In the US, Escrow competes against safe
record-keeping company, Iron Mountain, but in the UK, its main
market, NCC's Escrow has a dominant position.
Operating in rapidly growing markets, NCC was able to grow
revenues by over 25 per cent per annum over the last ten years.
Earnings and the share price grew quickly until in 2016 the company
issued a profit warning. Conflicts of interest at board level,
together with the nature of certain payments made by the company
that the CEO later agreed to reimburse, proved to be the tip of the
iceberg, but this was sufficient to see the chairman stand down in
January 2017. A month later, the
company again warned on profits, cancelled a capital markets day
due to take place the following day and initiated a strategic
review. In February 2017, after three
profit warnings, the share price plunged to value the equity at
£243 million.
After the first profit warning, the Fund assessed the
attractiveness of NCC's markets and the company's position. The
investment was initiated after the February
2017 sell-off. We engaged with the company over the need to
replace the CEO, who resigned in March
2017.
During its growth phase, NCC had failed to put in place adequate
controls and procedures to monitor and forecast its performance,
collect cash promptly and generate business. 2015's Assurance
acquisitions had grown the cost base faster than revenues so that
profits were down by 36 per cent in 2017
After 30 June 2017, the Fund
expressed its support for the strategic review's findings. This
established the size of the Assurance division’s addressable market
at $38 billion and growing at double
digits over the next five years.
The process changes underway to improve its performance require
delicate management. However, they do not require cash investments
or risky acquisitions. In our view, as the turnaround benefits
accrue, Assurance margins should recover to the previous highs of
17 per cent. We believe that NCC's stock remains undervalued and
the company can rebuild its investor reputation. Cyber security is
an exceptionally attractive market, and NCC's position in it has a
strategic value not reflected in its share price.
Ocado
Ocado is the world’s largest dedicated online grocery retailer
with over 580,000 active customers and £1.3 billion of sales. It
was established in 2001 in the UK with a sourcing arrangement with
Waitrose and commenced deliveries to customers. The company’s
objective is to provide customers with the best online shopping
experience in terms of service, range and price. This has
contributed to revenue growth of 14 per cent per annum since its
2010 IPO. Ocado's performance metrics are outstanding, examples
being 99 per cent order accuracy and 95 per cent delivery
punctuality. To achieve this, the company has had to tackle the
most complex of consumer supply chains, one that mixes over 50,000
stock keeping units with different characteristics of temperature,
freshness, product size and weight.
As online sales grew, the UK's main grocers developed a
proposition utilising their stores. For example, Tesco's solution
includes sourcing goods from its supermarkets and from its
so-called "dark stores", which are not open to the public. This was
an efficient strategy when online sales were in their infancy.
However, we believe that it has prevented grocers such as Tesco
from successfully tackling the internal changes needed to deliver
the best customer proposition efficiently. Meanwhile, we believe
that as sales continue to move online, the economics of maintaining
a store estate from which to fulfil online orders are
deteriorating.
By 2013, Morrisons was the only big UK grocer without an online
offering. Its management turned to Ocado to set up its entire
service. Within six months, the first deliveries to customers
started, with the same excellent customer service standards. With
this deal, Ocado evolved its strategy: rather than launch sub-scale
retail operations abroad, the company decided to monetise its
expertise by becoming an enabler for other retailers such as
Morrisons. This became the Ocado Smart Platform (“OSP”), an
end-to-end operating solution for online grocery retail based on
proprietary technology and intellectual property, suitable for
operating its own business and those of commercial partners.
Judged solely on its price-earnings ratio, Ocado’s shares are
highly rated. However, the lack of free cash flows is the result of
heavy investment in developing a deep expertise in efficient online
grocery solutions. OSP has the potential to transform the economics
and generate material free cash flows over the next decade. While
the timing of partnerships is uncertain, the trajectory is visible
and we believe the current risk/reward profile to be extremely
favourable.
In June 2017, Ocado announced the
signing of an agreement with a regional European retailer, a
promising indicator. Just a month later, Amazon announced the
purchase of Whole Foods, sending tremors through the grocery
market. We believe that competing retailers are in a poor
position to develop an in-house solution on their own. We expect
this to be a game-changer, forcing incumbents to address their
online capability.
GI Dynamics
GI Dynamics is the developer of EndoBarrier, a minimally
invasive therapy for the treatment of Type 2 Diabetes and obesity.
EndoBarrier is a temporary bypass sleeve that is endoscopically
delivered to the duodenal intestine, offering similar effects to
the surgical gastric bypass. It received the safety approval CE
Mark in 2010, making it commercially available in Europe and several countries outside of the
US.
Founded in 2003 and headquartered in Boston, GI Dynamics listed in September 2011 on the Australian Stock Exchange,
with a share price of AU$1.10 and market capitalisation of AU$300
million. Following what the Fund considers to be several remarkable
operational failures by previous management, including a terminated
FDA trial, GI Dynamics’ share price stood at 6.2 cents at 30 June
2017, valuing the company at AU$34.6 million, approximately
£20.9 million. Shareholders since listing include Johnson &
Johnson and Medtronic Inc.
Since launch, the EndoBarrier therapy has been used in over
3,700 patients worldwide. In 2017, a meta-analysis presented at the
Digestive Disease Week meeting reviewed all clinical trials and
confirmed its safety and efficacy in reducing weight, HbA1c (blood
glucose) levels and the need for insulin and other prescribed
medications. EndoBarrier stands as a minimally invasive alternative
to bariatric surgery and pharmacotherapy, which have well
documented side effects and safety issues. The prevalence of Type 2
Diabetes and obesity present a market opportunity expected to reach
355 million patients in 2030.
The Fund supports the current management’s strategy to
commercialise the device in Europe, initiate a new FDA trial and continue
to gather clinical data. This would build on 2016’s successes,
including the 300 patient UK trials led by the Association of
British Clinical Diabetologists (ABCD) and the data announced from
the German registry, which included 243 patients. The company has
achieved partial reimbursement in Germany (NUB status 1) and Israel and has received preliminary
reimbursement codes in Holland and
Switzerland. Regulatory issues
from its mismanaged past haunt GI Dynamics: in May 2017, the company announced the suspension of
its CE Mark due to administrative failures by the company. We
believe that these issues are being corrected in a timely
manner.
The Fund first invested in GI Dynamics in 2014 and increased its
position in 2016. We have engaged with the company over the
strengthening of the board and the departure from its haphazard
strategy to focus on fewer, key objectives. We have also advocated
listing in London to increase the
company’s investor profile in its main European markets. On
3 May 2017, GI Dynamics announced
that it had selected Allenby Capital to explore this option. Over
the year, the Fund continued to build its position in GI Dynamics
and in June 2017, the Fund subscribed
to a $5 million convertible note.
The Fund believes that GI Dynamics has a world-class technology,
addressing an unmet clinical need, with its current share price a
function of shareholder disillusionment resulting from past
mismanagement. The Fund continues to work closely with the GI
Dynamics’ management and board to fully capitalise on what the Fund
believes is GI Dynamics’ highly scalable potential.
Sutton Harbour
Sutton Harbour owns and operates Sutton Harbour in the Barbican,
Plymouth’s historic old port. This includes a leisure marina, the
second largest fresh fish market in England and an estate of investment properties
around the harbour. The Marina at Sutton Harbour is a 5 Gold Anchor
rated facility, which can berth securely 523 vessels thanks to its
tidal lock that shelters them from the elements. It is considered
to be one of the best deep water harbours in the South West.
Ideally located to explore the world-class cruising waters around
the South West of England, the
Marina remains a popular choice with both regular berth holders and
visiting boat owners. In 2013, the company added capacity to its
estate by opening the King Point Marina in the neighbouring Millbay
site. King Point Marina now provides berthing for 171 boats. Sutton
Harbour also holds the lease to Plymouth’s 113-acre former airport
site, entitling it to 25 per cent of any disposal proceeds. Since
2013, Sutton Harbour has remained focused on its waterfront assets,
maintaining annuity revenues at its core marina and growing
revenues at King Point. The Fund’s previous annual reports provide
further background to this investment.
Since 2016, the company has been exploring options to realise
value from its assets, as part of a strategic review assisted by
Rothschild & Co.
In June 2017, Sutton Harbour made
a preliminary announcement of results for the year ended
31 March 2017. Highlights included a
Heads of Terms signed with a major developer for the company’s East
Quays site and a record year for the Plymouth Fisheries Hub with
£19.7 million of fish throughput. As at 30
June 2017, net assets were £40.1 million and the market cap
of the company was £26.5 million, representing a 33.9 per cent
discount to NAV.
Johnston Press
Johnston Press owns over 200 local newspapers and websites
around the UK, including the Yorkshire Post and the Scotsman and a
national publication, the i. The company grew by acquisition but
got into financial difficulty after the financial crisis due to its
heavy debt burden and the falling revenues from lower circulation
and reduced printed press advertising.
The current CEO, Ashley
Highfield, was appointed in 2011 and started transforming
the production process to reduce cost and increase digital
revenues. For example, all titles are now produced following the
same layout, and more content is either reader-generated or used
across titles (e.g. reviews).
In April 2016, Johnston Press
purchased the i newspaper, a UK national daily newspaper providing
concise quality editorial content. It has a 20 per cent market
share of the newspaper “quality market” and was named National
Newspaper of the Year in 2015 at the industry’s News Awards.
Investors’ concerns over declining advertising and circulation
revenues and questions over the company’s ability to refinance in
2019 might be behind the de-rating of the stock. In our view, the
measures put in place by management are slowing the fall in print
revenues and growing digital revenues but a timely restructuring of
the debt burden is essential and the earlier it is completed, the
more value will be preserved for all stakeholders. The strategic
review of financing options for the company is key at this stage
and continues to progress.
After the period end, in August
2017, Johnston Press reported its results for the first half
of the year, which were broadly in line with expectations:
highlights included revenues up 4.6 per cent (excluding
classifieds) compared to the same period last year, and a group
EBITDA of £19.7 million. Performance continues to be driven by the
i newspaper, which lifted earnings by 42 per cent, delivering
revenues of £14.5 million and EBITDA of £3.7 million in the first
half of the year and countering ongoing tough trading for
regionals, particularly in classified advertising. Digital
advertising also performed strongly with revenues (excluding
classifieds) growing nearly 15 per cent in the six months to
June.
The Fund maintains the view that Johnston Press has the
potential to benefit from further industry consolidation.
Realisations
Over the year, net realised gains, after taking into account
losses realised on put options purchased for portfolio insurance
purposes, amounted to £19.3 million.
The Fund’s total realised gains since inception now amount to
£72.7 million. Previous profitable exits include Dart Group plc,
Pinewood Group plc, 4imprint Group plc, Aer Lingus Group plc,
Thorntons plc, Norcros plc, 3i Quoted Limited Private Equity, Delta
plc, Kentz Corporation Limited, Tate & Lyle and Chloride Group
plc.
Outlook
Despite continued political uncertainty, global equity markets
have performed strongly over the year to 30 June 2017.
However, the Fund remains cautious on the overall outlook for
markets, as uncertainty remains not only about the implications of
Brexit but as regards the underlying issues still facing the global
economy.
Going forward, the Fund will continue to use its proven
screening process to identify activist investment opportunities
that it feels are less exposed to broader market conditions.
With its focus on UK companies, the Fund believes that Brexit has
created several activist opportunities with Sterling’s weakness
making UK companies particularly attractive to overseas
acquirers.
The Fund continues to follow its policy of purchasing put
options to provide some protection against a significant market
sell-off.
Crystal Amber Asset Management
(Guernsey) Limited
12 September 2017
Investing Policy
The Company is an activist fund which aims to identify and
invest in undervalued companies and, where necessary, take steps to
enhance their value. The Company aims to invest in a concentrated
portfolio of undervalued companies which are expected to be
predominantly, but not exclusively, listed or quoted on UK markets
(usually the Official List or AIM) and which have a typical market
capitalisation of between £100 million and £1,000 million.
Following investment, the Company and its advisers will also
typically engage with the management of those companies with a view
to enhancing value for all their shareholders.
Investment objective
The objective of the Company is to provide its shareholders with
an attractive total return, which is expected to comprise primarily
capital growth but with the potential for distributions from
realised distributable reserves, including distributions arising
from the realisation of investments, if this is considered to be in
the best interests of its shareholders.
At the date of signing of these Financial Statements the
investment strategy and investment restrictions which applied to
the Company following Admission and after the passing of Resolution
1 at the EGM held on 15 August 2013,
were as follows:
Investment strategy
The Company focuses on investing in companies which it considers
are undervalued and will aim to promote measures to correct the
undervaluation. In particular, it aims to focus on companies which
the Company’s Investment Manager and Investment Adviser believe may
have been neglected by fund managers and investment funds due to
their size; where analyst coverage is inadequate or where analysts
have relied on traditional valuation techniques and/or not fully
understood the underlying company. The Company and its advisers
seek the co-operation of the target company’s management in
connection with such corrective measures as far as possible. Where
a different ownership structure would enhance value, the Company
will seek to initiate changes to capture such value. The Company
may also seek to introduce measures to modify existing capital
structures and introduce greater leverage and/or seek sale of
certain businesses of the investee company.
Pending investment of the type referred to above, the Company’s
funds will be placed on deposit but the Company also has the
flexibility to make other investments which are considered to be
reasonably liquid in order to ensure that its funds are
appropriately deployed (including in money market instruments). The
Company may, in certain circumstances, acquire stakes in target
companies from investors in exchange for shares in the Company.
Where it considers it to be appropriate the Company may (i)
utilise leverage for the purpose of investment and enhancing
returns to shareholders and/or (ii) enter into derivative
transactions, for example to provide portfolio protection against
significant falls in the market or for the purposes of efficient
portfolio management, in seeking to manage its exposure to interest
rate and currency fluctuations through the use of currency and
interest rate hedging arrangements, and to acquire exposure to
target companies through contracts for difference.
Investment restrictions
It is not intended that the Company will invest, save in
exceptional circumstances, in:
- companies with a market capitalisation of less than £100
million at the time of investment;
- pure technology based businesses; or
- unlisted companies or companies in pre-IPO situations.
It is expected that no single investment in any one company will
represent more than 20 per cent of the Gross Asset Value of the
Company at the time of investment. However, there is no guarantee
that this will be the case after any investment is made, or where
the Investment Manager believes that an investment is particularly
attractive.
Dividend policy
With effect from 1 January 2015,
the annual target dividend was increased to 5 pence per share. The Company’s dividend
policy is to distribute to shareholders, as a dividend, a
proportion of the income received from the Company’s portfolio
holdings. In certain circumstances, the Company may make
distribution payments out of realised investments if it is
considered to be in the best interests of shareholders.
Due to the nature of the Company’s investment objective and
strategy, the timing and amount of investment income cannot be
predicted and is dependent on the composition of the Company’s
portfolio. Before recommending any dividend, the Board will
consider the capital and cash positions of the Company, and the
impact on such capital and cash by virtue of paying that dividend,
and will ensure that the Company will satisfy the solvency test, as
prescribed by the Law, immediately after payment of any
dividend. Therefore, there can be no guarantee as to the
timing and amount of any distribution payable by the Company.
The projected dividends set out above are intentions only and there
can be no assurance that these intentions can, or will, be met.
Composition of the portfolio
The Board, Investment Manager and Investment Adviser believe
that the number of potential target companies is high with more
than 2,000 companies quoted on AIM or the Official List and they
consider that a significant number of these are in the Company’s
targeted range.
Target investee companies typically operate in one or more of
the following sectors:
However, the Company is not restricted to these sectors and
investment decisions are taken based on market conditions and other
investment considerations at the time.
Report of the Directors
Incorporation
The Company was incorporated on 22 June
2007 and the Company was admitted to trading on AIM on
17 June 2008.
Principal activities
The Company is a Guernsey registered closed ended company
established to provide shareholders with an attractive total
return, which is expected to comprise primarily capital growth and
distributions from accumulated retained earnings taking into
consideration the unrealised gains and losses at that time. This
will be achieved 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 mostly
have a market capitalisation of between £100 million and £1,000
million.
The Company became a member of the AIC on 26 March 2009.
Business review
A review of the business together with the likely future
developments is contained in the Chairman’s Statement and the
Investment Manager’s Report.
Results and dividend
The results for the year are set out in the Statement of Profit
or Loss and Other Comprehensive Income.
On 14 July 2016, the Company
declared an interim dividend of £2,460,369, equating to
2.5 pence per Ordinary share, which
was paid on 19 August 2016 to
shareholders on the register on 22 July
2016.
On 14 December 2016, the Company
declared an interim dividend of £2,459,120, equating to
2.5 pence per Ordinary share, which
was paid on 19 January 2017 to
shareholders on the register on 22 December
2016.
Subsequent to the year end, on 11 July
2017, the Company declared an interim dividend of
£2,459,120, equating to 2.5 pence per
Ordinary share, which was paid on 18 August
2017 to shareholders on the register on 21 July 2017.
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 to be proposed at the 2017 AGM on the
application of the going concern basis. The continuation vote is
scheduled to occur every two years. The Directors have no reason to
doubt that shareholders will vote for the Company to continue as
constituted at the 2017 AGM, given the positive performance of the
Company since the previous continuation vote at the 2015 AGM.
Long term viability
The Company is a member of the AIC and complies with the AIC
Code. In accordance with the AIC Code, the Directors have made a
robust assessment of the prospects of the Company over the three
year period ending 30 June 2020. The
Directors consider that three years is an appropriate period to
assess the viability of the Company given the average length of
investment in each portfolio company and the time horizon over
which investment decisions are made.
In considering the prospects of the Company, the Directors have
considered the risks facing the Company, giving particular
attention to the principal risks identified below, the
effectiveness of controls over those risks, and have evaluated
the sensitivities of the portfolio to market volatility.
The Directors have also considered the Company’s income and
expenditure projections over the three year period, the fact that
the Company currently has no borrowings and that most of its
investments comprise readily realisable securities which can be
expected to be sold to meet funding requirements if necessary.
Based on the results of this analysis the Directors have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the three
year period of their assessment.
Principal risks and uncertainties
The Company has a rigorous risk management framework including a
comprehensive risk matrix that is reviewed and updated regularly.
The Investment Manager has created a Risk Committee from which the
Board receives quarterly reports. Nigel
Ward, one of the Directors, liaises with the Risk Committee
and attends its regular meetings to offer an independent view and
to enhance communication between the committee and the Board. The
Directors have carried out a robust assessment of the principal
risk areas relevant to the performance of the Company including
those that would threaten its business model, future performance,
solvency and liquidity and these are detailed below. As it is not
possible to eliminate risks completely, the purpose of the
Investment Manager’s risk management policies and procedures is to
reduce risk and to ensure that the Company is as adequately
prepared as reasonably possible to respond to such risks and to
minimise their impact should they occur.
Regulatory compliance risk
A breach of regulatory rules could lead to a suspension of the
Company’s stock exchange listing or financial penalties. The
Company Secretary monitors the Company’s compliance with the
Listing Rules in conjunction with the Nominated Adviser and
compliance with these rules is reviewed by the Directors at each
Board meeting.
One of the most significant regulatory risks for an activist
investor such as the Company is in relation to market abuse
provisions. The FCA has published guidance that in general it would
not consider an activist shareholder’s conduct to amount to market
abuse where the shareholder merely carried out acquisitions of the
target company’s securities on the basis of its intentions and
knowledge of its strategy.
However, the FCA has stated that if, for example, other
shareholders trade in the target’s shares on the basis of another
shareholder’s strategy, they may view such conduct as amounting to
market abuse. There is no guarantee that other shareholders will
not follow the Company’s strategy, and, in certain circumstances
the Company may act with, or be dependent upon, the support of
other shareholders to implement its strategies. There is also no
guarantee that the FCA’s guidance will not change. The Company and
the Advisers operate in a highly regulated environment and whilst
they will always seek to take appropriate professional advice,
there is a risk of an inadvertent breach of securities laws or
regulations, or allegations of such breach, taking place.
The following risks, whilst they may affect the performance of
the Company, will not in themselves affect the ability of the
Company to operate.
‘Key Man’ risk
The Investment Adviser and the Investment Manager rely heavily
on the expertise, knowledge and network of Richard Bernstein when sourcing investment
opportunities. He is a shareholder of the Company, a director and
shareholder of the Investment Manager and a member of the
Investment Adviser and the loss of him to these service providers
could have an adverse effect on the Company’s performance. In the
absence of Richard Bernstein, the
Board and Investment Manager have sufficient relevant experience to
manage the Company’s portfolio while considering the future of the
Company. Key Man risk is covered in the Investment Adviser’s
continuity plan. The Board is aware of this risk and continues to
discuss possible strategies to mitigate its impact.
Portfolio concentration risk
By its very nature as an activist fund, the Company is exposed
to the risk that its portfolio of investee companies is not
sufficiently diversified to absorb the impact of a major investment
falling in value. As noted in the Investment Policy, the Company
seeks to invest in companies and use activism to unlock value. An
inherent consequence of this policy is a portfolio concentrated on
a number of key investee companies. The Board is aware of this risk
and feel it is a necessary risk to take in order to provide returns
through the investment strategy. Levels of investment in individual
companies are monitored and parameters are set to ensure that the
risk is kept to an acceptable level, while also ensuring a
sufficiently high level of stock is purchased to allow engagement
as a major shareholder, if required.
Underlying investment performance
risk
The Company invests in underlying investee companies, the
securities of which are publicly traded or are offered to the
public. The performance of these companies is likely to fluctuate
due to a number of factors beyond the Company’s control. The
Investment Manager and Investment Adviser monitor investee company
performance on a daily basis and investigate returns of more or
less than 10 per cent based on weekly valuations prepared by the
Administrator. The Investment Adviser engages with investee
companies through regular meetings and reports to the Board. The
Investment Manager and Investment Adviser also compare the
Company’s performance to the Numis Small Companies Index and
investigate all underperformance and unrealised losses of the
Company.
Market risk
The Company’s investments include investments in companies the
securities of which are publicly traded or are offered to the
public. The market prices and values of these securities may be
volatile and are likely to fluctuate due to a number of factors
beyond the Company’s control. These include actual and
anticipated fluctuations in the quarterly, half yearly and annual
results of the companies in which investments are made and other
companies in the industries in which they operate, market
perceptions concerning the availability of additional securities
for sale, general economic, social or political developments,
changes in industry conditions, shortfalls in operating results
from levels forecast by securities analysts, the general state of
the securities markets and other material events, such as
significant management changes, refinancings, acquisitions and
disposals. Changes in the values of these investments may adversely
affect the Company’s NAV and cause the market price of the
Company’s shares to fluctuate. The Company hedges price risk by
holding put options linked to the FTSE index to provide some
protection against a significant market sell-off.
Shareholder concentration risk
A total of six investors with holdings of 3 per cent or more
each of the shares of the Company hold a combined 79.98 per cent of
the voting rights. A significant shareholder seeking liquidity
could have a negative impact on the Company through movements in
Company share price, through voting at an AGM, or by placing
pressure on the Board to act to realise value in the portfolio at a
time and value other than the optimum. To manage this risk the
Investment Manager maintains regular contact with significant
shareholders to discuss the performance of the Company and any
views the shareholder may have.
Liquidity risk
The Company’s ability to meet its obligations arising from
financial liabilities could be reliant on its ability to reduce or
exit investment holdings. This could be more difficult with the
Company’s less liquid portfolio holdings. To manage this risk, the
cash and trade positions are monitored on a daily basis by the
Investment Adviser and the Administrator. The liquidity of stocks
is also considered at the point of recommendation by the Investment
Adviser and prior to investment.
It is not intended that the Company will invest, save in
exceptional circumstances, in companies with a market
capitalisation of less than £100 million at the time of investment.
Companies with a market capitalisation of less than £100 million
are in many cases considered to be higher risk and may also be less
liquid than companies with a market capitalisation of more than
£100 million. However, the Investment Adviser may, from time to
time, identify exceptional investment opportunities with a market
capitalisation of less than £100 million.
The Company’s risk of investment in companies with market
capitalisation of less than £100 million is mitigated as all
investments are monitored by the Board on a quarterly basis. Any
proposals to invest in companies below £100 million market
capitalisation are considered in detail by the Investment Manager
and are recommended in exceptional circumstances only.
Inside information risk
The Company may, from time to time, be exposed to insider
information. A breach of insider trading rules could lead to
a suspension of the Company’s stock exchange listing or financial
penalties. This risk is mitigated and managed through continual
monitoring and policy setting, which ensures all employees of the
Investment Adviser are clear on insider trading rules and that all
procedures are adhered to.
Implementation risk
The Company’s ability to generate attractive returns for
shareholders depends upon the Investment Adviser’s ability to
assess future values that can be realised in connection with
investments. The ability to assess future values and the timing
thereof, whether in connection with the making of an investment or
exiting from an investment, may be particularly important in the
case of investments over which the Company has little or no control
on its own. The ability of the Company to exit certain investments
on favourable terms will be dependent (inter alia) upon the
successful implementation of the strategic plans for such investee
company and, in particular, the ability to persuade management to
adopt such strategic plans. It will also depend on the relative
liquidity of the stock of the investee company at that time.
In summary, the above risks are mitigated and managed by the
Board, the Investment Manager and Investment Adviser through
continual review of the portfolio, policy setting and updating of
the Company’s risk matrix to ensure that procedures are in place to
minimise the impact of the above mentioned risks.
Further detail on the Company’s risk factors is set out in the
Company’s prospectus, available on the Company’s website
(www.crystalamber.com) and should be reviewed by shareholders.
Details about the financial risks associated with the Company’s
investment portfolio and the way they are managed are given in note
14 to the Financial Statements.
Ongoing charges
The ongoing charges ratio of the Company is 1.88 per cent (2016:
2.07 per cent) for the year ended 30 June
2017. The ongoing charges ratio has been calculated using
the AIC recommended methodology.
Directors
The Directors of the Company who served during the year and up
to the date of this report are shown in the Directors and general
information section. Biographies of the Directors holding office as
at 30 June 2017 and at the date of
signing these Financial Statements are shown in the Directors
section.
Directors’ interests
The interests of the Directors in the share capital of the
Company at the year end and as at the date of this report are as
follows:
|
2017 |
|
2016 |
|
Number of Ordinary shares |
Total
voting rights |
|
Number of Ordinary shares |
Total
voting rights |
William Collins |
25,000 |
0.03% |
|
25,000 |
0.03% |
Sarah Evans |
25,000 |
0.03% |
|
25,000 |
0.03% |
Total |
50,000 |
0.06% |
|
50,000 |
0.06% |
Directors’ remuneration
During the year the Directors earned the following remuneration
in the form of Directors’ fees from the Company:
|
|
2017 |
|
2016 |
|
|
£ |
|
£ |
William
Collins(1) |
|
35,000 |
|
35,000 |
Sarah
Evans(2) |
|
30,000 |
|
30,000 |
Nigel Ward |
|
27,500 |
|
29,750 |
Christopher Waldron |
25,000 |
|
25,000 |
Jane Le
Maitre(3) |
3,630 |
|
- |
Total |
|
121,130 |
|
119,750 |
(1) Chairman of the Company
(2) Senior Independent Director of the Company and
Chairman of the Audit Committee
(3) Appointed as Director of the Company on
8 May 2017
During the year ended 30 June
2016, Nigel Ward received a
one-off fee of £3,500 for services undertaken in respect of
assisting the Investment Manager during 2015 to establish the Risk
Committee with the appropriate terms of reference. With effect from
1 January 2016, Nigel Ward received an increase in remuneration
of £2,500 to reflect additional services provided to the Company in
respect of managing risk.
Substantial interests
As at 15 August 2017, the Company
has been notified of the following voting rights of 3 per cent or
more of its total voting rights:
|
Number of Ordinary shares |
Total
voting rights |
Invesco Perpetual |
28,305,510 |
28.81% |
Woodford Investment
Management |
15,764,788 |
16.04% |
Wirral BC |
12,938,214 |
13.17% |
Baring Asset
Management |
10,969,839 |
11.16% |
Aviva Investors |
6,633,373 |
6.75% |
Crystal Amber Asset
Management (Guernsey) |
3,976,509 |
4.05% |
Total |
78,588,233 |
79.98% |
Statement of Directors’
responsibilities
The Directors are responsible for preparing the Report of the
Directors and the Financial Statements in accordance with
applicable law and regulations.
The Companies Law requires the Directors to prepare Financial
Statements for each financial year. Under the Companies Law, they
have elected to prepare the Financial Statements in accordance with
IFRS and applicable law.
The Financial Statements are required by law to give a true and
fair view of the state of affairs of the Company and of the profit
or loss of the Company for that period.
In preparing these Financial Statements, the Directors are
required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and
prudent;
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the Financial Statements; and
- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records, which disclose with reasonable accuracy at any time, the
financial position of the Company and to enable them to ensure that
the Financial Statements comply with the Companies Law. They have
general responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Company and to prevent and
detect fraud and other irregularities. The Directors are
responsible for ensuring that the Annual Report and Audited
Financial Statements, taken as a whole, are fair, balanced, and
understandable and provide the information necessary for
shareholders to assess the Company’s performance, business model
and strategy.
The Directors are also responsible for the maintenance and
integrity of the corporate and financial information included on
the Company’s website (www.crystalamber.com) and for the
preparation and dissemination of Financial Statements. Legislation
in the United Kingdom and Guernsey
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Disclosure of information to the
Auditor
The Directors each confirm that they have complied with the
above requirements in preparing the Financial Statements. They also
confirm that so far as they are each aware, there is no relevant
audit information of which the Company’s auditor is unaware and
that they have taken all the steps they ought to have taken as
Directors to make themselves aware of any relevant audit
information and to establish that the Company’s auditor is aware of
that information.
Corporate governance
As a Guernsey registered company, the share capital of which is
admitted to trading on AIM, the Company is not required to comply
with the FRC Code. The FRC Code became effective for reporting
periods beginning on or after 29 June
2010 and has been updated for periods beginning on or after
17 June 2016. However, the Directors
recognise the value of sound corporate governance and it is the
Company’s policy to comply with best practice on good corporate
governance that is applicable to investment companies.
The Board considered the principles and recommendations of the
AIC Code and decided to follow the AIC Guide. The AIC Code and AIC
Guide were updated in July 2016 to
take into account the updated FRC Code, and the Company has used
this revised AIC Code and AIC Guide for the financial year ended
30 June 2017. The AIC Code and the
AIC Guide are available on the AIC’s website, www.theaic.co.uk. The
FRC Code is available on the FRC’s website, www.frc.org.uk.
The GFSC Code came into force in
Guernsey on 1 January 2012. Under the
GFSC Code, the Company shall be deemed to satisfy the GFSC Code
provided that it continues to conduct its governance in accordance
with the requirements of the AIC Code.
The Company adheres to a Stewardship Code adopted from
14 June 2016. The Company’s
Stewardship Code incorporates the principles of the UK Stewardship
Code. A copy of the Stewardship Code is available through the
Company’s website www.crystalamber.com.
The Company is led and controlled by a
Board of Directors, which is collectively responsible for the
long-term success of the Company. The Company believes that the
composition of the Board is a fundamental driver of its success as
the Board must provide strong and effective leadership of the
Company. The current Board was selected, as their biographies
illustrate, to bring a breadth of knowledge, skills and business
experience to the Company.
The Board comprises five Non-Executive
Directors (2016: four), all of whom are considered to be
independent of the Investment Manager and Investment Adviser and
free from any business or other relationship that could materially
interfere with the exercise of their independent judgement. Board
appointments are considered by all members of the Board and have
been made based on merit, against objective criteria. Jane Le Maitre was appointed to the Board on
8 May 2017, following a comprehensive
recruitment process conducted by the Board, in conjunction with an
external search consultancy.
The Board monitors developments in corporate governance to
ensure the Board remains aligned with best practice especially with
respect to the increased focus on diversity. The Board acknowledges
the importance of diversity, including gender, for the effective
functioning of the Board and commits to supporting diversity in the
boardroom. It is the Board’s ongoing aspiration to have a well
diversified membership; in addition to gender diversity, the Board
also values diversity of business skills and experience which bring
a wide range of perspectives to the Company.
The Chairman of the Board is William
Collins. In considering the independence of the Chairman,
the Board has taken note of the provisions of the AIC Code relating
to independence, and has determined that Mr Collins is an
independent director. The Company has no employees and therefore
there is no requirement for a Chief Executive.
A biography for the Chairman and all the other Directors follows
in the next section, which sets out the range of investment,
financial and business skills and experience represented. The
Directors believe that the current mix of skills, experience, ages
and length of service represented on the Board are appropriate to
the requirements of the Company.
Internal evaluation of the Board, the Committee and individual
Directors is undertaken on an annual basis in the form of peer
appraisal, questionnaires and discussions to determine the
effectiveness and performance in various areas as well as the
Directors’ continued independence.
The AIC Code recommends that a board should appoint one
independent Non Executive Director to be the Senior Independent
Director. Sarah Evans is the Senior
Independent Director to the Company and fulfils the role of deputy
chairman and takes the lead in the annual evaluation of the
Chairman.
In view of the Board’s non-executive nature and the requirement
of the Articles of Incorporation that one third of Directors retire
by rotation at least every three years, the Board considers that it
is not appropriate for the Directors to be appointed for a
specified term as recommended by principle 3 of the AIC Code. At
the forthcoming AGM, William Collins
will be retiring after nine years as a Director and Chairman of the
Company. At the same time, Sarah
Evans and Nigel Ward will be
retiring and offering themselves for re-election, having served on
the Board for nine years. On 8 May
2017, Jane Le Maitre was
appointed as a Director of the Company. In accordance with the
Company’s Articles, Jane Le Maitre
will also be retiring and offering herself for re-election at the
forthcoming Annual General Meeting of the Company.
Any Director who has held office with the Company, for a
continuous period of nine years or more at the date of the Annual
General Meeting, shall retire from office and may offer themselves
for re-appointment by the members. The Company will consider
whether there is any risk that such a Director might reasonably be
deemed to have lost independence through such long service. The
Board considers its composition and succession planning on an
ongoing basis. As two Directors were appointed, and the Company
commenced operations, over nine years ago, the nine year tenure
point has been reached. We confirm that any Directors intending to
continue after their nine year anniversary will put themselves
forward for re-election then and annually thereafter if
appropriate. Sarah Evans and
Nigel Ward will therefore be
retiring and offering themselves for re-election at the forthcoming
Annual General Meeting and on an annual basis if appropriate.
None of the Directors has a contract of service with the
Company. The Company has no executive Directors and no employees.
However, the Board has engaged external companies to undertake the
investment management, administrative and custodial activities of
the Company. Clearly documented contractual arrangements are in
place with these companies which define the areas where the Board
has delegated certain responsibilities to them, but the Board
retains accountability for all delegated responsibilities.
Board responsibilities
The Board is responsible to shareholders for the overall
management of the Company. The Board has adopted a set of reserved
powers which set out the particular duties of the Board. Such
reserved powers include decisions relating to the determination of
investment policy and oversight of the Investment Manager and their
advisers, strategy, risk assessment, Board composition, capital
raising, statutory obligations and public disclosure, financial
reporting and entering into any material contracts by the
Company.
The Directors have access to the advice and services of the
Administrator and Secretary, who are responsible to the Board for
ensuring that Board procedures are followed and that it complies
with the Companies Law and applicable rules and regulations of the
GFSC and the London Stock Exchange. Where necessary, in carrying
out their duties, the Directors may seek independent professional
advice at the expense of the Company.
The Company maintains appropriate directors’ and officers’
liability insurance in respect of legal action against its
Directors on an ongoing basis. Investment Advisory services are
provided to the Company by Crystal Amber Advisers (UK) LLP through
the Investment Manager. The Board is responsible for setting the
overall investment policy and has delegated day to day
implementation of the Company’s strategy to the Investment Manager
but retains responsibility to ensure that adequate resources of the
Company are directed in accordance with their decisions. The Board
monitors the actions of the Investment Adviser and Investment
Manager at regular Board meetings. The Board has also delegated
administration and company secretarial services to Heritage
International Fund Managers Limited but retains accountability for
all functions it delegates.
The Directors are responsible for ensuring the effectiveness of
the internal controls of the Company which are designed to ensure
that: proper accounting records are maintained; the financial
information on which business decisions are made and which is
issued for publication is reliable; and the assets of the Company
are safeguarded. A formal review of the effectiveness of the
Company’s risk management and internal control systems is conducted
at least once a year and this was completed successfully during the
year under review. The Investment Manager has established a Risk
Committee to monitor and manage risks faced by the Company, these
committee meetings are attended by Nigel
Ward.
The Board meets at least four times a year for regular,
scheduled meetings and should the nature of the Company require it,
additional meetings may be held, some at short notice. Prior to
each of its quarterly meetings, the Board receives reports from the
Investment Adviser and Administrator covering: activities during
the period; performance of relevant markets; performance of the
Company’s assets; finance; compliance matters; working capital
position; and other areas of relevance to the Board. The Board also
considers from time to time reports provided by the Investment
Manager and other service providers. The Board also receives
quarterly reports from the Risk Committee. There is regular contact
between the Board, the Investment Manager and the Administrator.
The Directors maintain overall control and supervision of the
Company’s affairs.
Between meetings there is regular contact with the Investment
Manager and the Administrator, and the Board requires to be
supplied in a timely manner with information by the Investment
Manager, the Company Secretary and other advisers in a form and of
a quality to enable it to discharge its duties.
The Board, through the Remuneration and Management Engagement
Committee established on 27 March
2017, is responsible for the appointment and monitoring of
all service providers, including the Investment Manager, and
conducts a formal review of them on an annual basis and confirms
that such a review has taken place during the year.
There may be a requirement to hold Board meetings outside the
scheduled quarterly meetings in order to review and consider
investment opportunities and/or formal execution of documents and
to consider ad hoc business.
New Directors receive an induction on joining the Board, and all
Directors receive other relevant training as necessary. Directors
have regular contact with the Investment Manager to ensure that the
Board remains regularly updated on all issues. All members of the
Board are members of professional bodies and serve on other Boards,
which ensures they are kept abreast of the latest technical
developments in their areas of expertise.
Audit committee
Due to the size of the Board, all Directors are members of the
Audit Committee. Sarah Evans acts as
Chairman of the Committee. The responsibilities of the Committee
include reviewing: the Annual Report and Audited Financial
Statements; the Interim Report and Financial Statements; the system
of internal controls and risk management; and the terms of the
appointment of the Auditor, together with their remuneration. It is
also the forum through which the Auditor reports to the Board.
The Committee met twice in the year ended 30 June 2017. Matters considered at these
meetings included but were not limited to:
- review of the accounting policies and format of the financial
statements;
- review of the Annual Report and Audited Financial Statements
for the year ended 30 June 2016;
- review of the Interim Report and Unaudited Interim Condensed
Financial Statements for the six months ended 31 December 2016;
- review of the audit plan and timetable for the preparation of
the Annual Report and Audited Financial Statements for the year
ended 30 June 2017;
- discussions and approval of the fee for the external
audit;
- assessment of the effectiveness of the external audit process
as described below;
- review of the Company’s significant risks and internal
controls;
- review and consideration of the AIC Code, the GFSC Code and the
Stewardship Code;
- detailed review of the 2017 Annual Report in relation to the
AIC Code including the period of assessment and long term viability
of the Company; and
- consideration of putting the Company’s audit out to
tender.
The Committee considered the following significant issue in
relation to these Financial Statements:
Valuation of assets
The Company’s accounting policy is to value investments as
designated at fair value through profit or loss or as derivatives
held for trading, and to recognise sales and purchases of those
investments using trade date accounting. The Committee has
satisfied itself that the sources used for pricing the Company’s
investments are appropriate and reliable.
The Committee also reviews the objectivity and independence of
the Auditor. The Board considers KPMG to be independent of the
Company. The audit fees disclosed in the profit or loss section of
the Statement of Profit or Loss and Other Comprehensive Income are
in relation to the audit of the Financial Statements. During the
year, KPMG did not receive any remuneration from the Company for
non-audit services.
The Committee assessed the effectiveness of the audit process by
considering KPMG’s fulfilment of the agreed audit plan through the
reporting presented to the Committee by KPMG and the discussions at
the Committee meeting, which highlighted the major issues that
arose during the course of the audit. In addition, the Committee
also sought feedback from the Investment Manager and the
Administrator on the effectiveness of the audit process. For this
financial year, the Committee was satisfied that there had been
appropriate focus and challenge on the primary areas of audit risk
and assessed the quality of the audit process to be good.
The external audit was put out to tender in 2008 when the
Company’s shares were listed and admitted to trading on AIM and
KPMG was appointed. The lead audit partner was changed in 2010 and
changed again by rotation in 2015. There are no obligations to
restrict the Company’s choice of external auditor.
The Company is committed to the highest standards of corporate
governance and, whilst not mandatory, the Committee decided to put
the audit out to tender during the year. The tender process
commenced in the second half of the financial year with the
identification of three suitably experienced audit firms, including
the current incumbent, KPMG.
The three candidate firms were interviewed by members of the
Audit Committee and asked to present detailed written proposals to
the Committee. Following consideration of these proposals, the
Committee concluded that the interests of the Company and its
shareholders would be best served by retaining the services of
KPMG.
The Board considers that an internal audit function specific to
the Company is unnecessary and that the systems and procedures
employed by the Investment Manager and the Administrator, including
their own internal control functions, provide sufficient assurance
that a sound system of internal control is maintained, which
safeguards the Company’s assets. Formal terms of reference for the
Committee are available on the Company website
www.crystalamber.com.
Other committees
Although the AIC Code recommends that companies appoint a
Nomination Committee, the Board has not deemed this necessary, as
being wholly comprised of non-executive Directors, the full Board
considers these matters.
On 27 March 2017, the Board
resolved to establish a Remuneration and Management Engagement
Committee. Due to the size of the Board, all Directors are members
of the Remuneration and Management Engagement Committee.
Nigel Ward acts as Chairman of the
committee. The Remuneration and Management Engagement Committee
meets at least once year pursuant to its terms of reference. The
Remuneration and Management Engagement Committee provides a formal
mechanism for the review of the remuneration of the Chairman and
Directors and the review of the performance and remuneration of the
Investment Manager, Investment Adviser and other service providers.
The Remuneration and Management Committee held its first meeting
following the year end on 7 September
2017.
Remuneration policy
The Company aims to ensure remuneration is competitive, aligned
with shareholder interests, relatively simple and transparent, and
compatible with the aim of attracting, recruiting and retaining
suitably qualified and experienced directors.
In addition, the Board reviews the arrangements for the
provision of management and other services to the Company on an
ongoing basis. The Company receives regular reporting from the
Investment Adviser and regular valuations of the Company’s
investments, which allows the Board to form a judgement as to the
performance of its portfolio.
Board meetings, Committee meetings
and Directors’ attendance
One of the key criteria the Company uses when selecting
Directors is their confirmation prior to their appointment that
they will be able to allocate sufficient time to the Company to
discharge their responsibilities in a timely and effective
manner.
The Board formally met four times during the year and other ad
hoc Board committee meetings were called in relation to specific
events or to issue approvals, often at short notice and did not
necessarily require full attendance. Directors are encouraged when
they are unable to attend a meeting to give the Chairman their
views and comments on matters to be discussed, in advance.
Attendance at the quarterly Board meetings is further set out
below:
|
Board |
|
Audit Committee |
|
Scheduled |
Attended |
|
Scheduled |
Attended |
William Collins |
4 |
4 |
|
2 |
2 |
Sarah Evans |
4 |
4 |
|
2 |
2 |
Nigel Ward |
4 |
4 |
|
2 |
2 |
Christopher
Waldron |
4 |
4 |
|
2 |
2 |
Jane Le
Maitre(1) |
1 |
1 |
|
- |
- |
(1) Appointed as Director of the Company on
8 May 2017, at which point 3 Board
meetings and 2 Audit Committee meetings had already taken place
In addition to the above, there were four additional ad hoc
Board meetings and one additional Board committee meeting during
the year.
Relations with shareholders
The Board welcomes the views of shareholders and places great
importance on communication with its shareholders. Senior members
of the Investment Adviser make themselves available to meet with
principal shareholders and key sector analysts. The Chairman and
other Directors are also available to meet with shareholders, if
required.
All shareholders have the opportunity to raise questions to the
Company at its registered office. The Annual General Meeting of the
Company provides a forum for shareholders to meet and discuss
issues with the Directors and Investment Adviser. Company
information is also available to the shareholders through the
Company’s website www.crystalamber.com.
The Board regularly monitors the shareholder profile of the
Company and receives comprehensive shareholder reports from the
Company’s Broker at all quarterly board meetings. A post-results
programme of visits to major shareholders is conducted by the
Company’s Broker and Investment Adviser.
AIFM Directive
The Company is categorised as an externally managed non-EU AIF
under the AIFM Directive. The Investment Manager of the Company is
its non-EU AIFM. The Investment Manager as the AIFM has created a
Risk Committee which meets at least quarterly to consider the risks
faced by the Company and the investment process, consistent with
the requirements of the AIFM Directive. The AIFM has adopted a
remuneration policy which accords with the principles established
by the AIFM Directive. The remuneration policy is in compliance
with the requirements of the AIFM Directive and the guidance issued
by the FCA. The Investment Manager as the AIFM does not have any
employees. The Directors of the AIFM received total aggregate
remuneration of £20,000 by way of a fixed fee for the year ended
30 June 2017. No variable fee
elements of remuneration were paid to the Directors of the
AIFM.
The AIFM Directive outlines the required information which has
to be made available to investors in an AIF and directs that
material changes to this information be disclosed in the Annual
Report of the AIF. All information required to be disclosed under
the AIFM Directive is either disclosed in this Annual Report or
through the Company’s website www.crystalamber.com.
AEOI Rules
Under AEOI Rules, the Company is registered under FATCA and
continues to comply with both FATCA and CRS requirements to the
extent relevant to the Company.
NMPI
The Board has been advised that the Company would satisfy the
criteria for being an investment trust if it was resident in the
UK. Accordingly, the Board has concluded that the Company’s
Ordinary shares are not non-mainstream pooled investments for the
purposes of the FCA rules regarding the restrictions on the
promotion to retail investors of unregulated collective investment
schemes and close substitutes. This means that the restrictions on
promotion imposed by the FCA rules do not apply to the Company. It
is the Board’s intention that the Company conducts its affairs so
that these restrictions will continue to remain inapplicable.
Independent auditor
Following the conclusion of the audit tender process described
above, KPMG has agreed to offer itself for re-appointment as
Auditor of the Company and a resolution proposing re-appointment
and authorising the Directors to determine remuneration will be
presented at the Annual General Meeting.
Annual General Meeting
The Annual General Meeting of the Company will be held at
10.00am on 23
November 2017 at Lefebvre Place, Lefebvre Street, St. Peter Port, Guernsey.
On behalf of the Board
Sarah
Evans
Director
12 September 2017 |
Nigel
Ward
Director
12 September 2017 |
Directors
William
Collins (aged 68), Guernsey Resident, Non-Executive Chairman
(appointed 20 November 2007)
William Collins has over 40
years’ experience in banking and investment. From September 2007 he was employed by Bank J. Safra
Sarasin (formerly Bank Sarasin) in Guernsey as Director - Private
Clients, retiring at the end of December
2014. Prior to that he worked for Barings in Guernsey for
over 18 years. In 1995 he was appointed a Director and from 2003 to
August 2007 was Managing Director of
Baring Asset Management (C.I.) Limited. Mr Collins is an Associate
of the Institute of Financial Services, a Chartered Member of the
Chartered Institute for Securities and Investment, and a member of
the Institute of Directors.
Sarah
Evans (aged 62), Guernsey Resident, Senior Independent
Director (appointed 22 June
2007*)
Sarah Evans is a chartered
accountant and is a non-executive Director of several listed
investment funds and the Association of Investment Companies. She
is a member of the Institute of Directors and has been resident in
Guernsey for over twelve years. Whilst in the UK she spent six
years with the Barclays Group, firstly as a treasury director. From
1996 to 1998 she was finance director of Barclays Mercantile (a
Barclays Bank subsidiary providing large and middle ticket leasing
finance). Prior to joining Barclays she ran her own consultancy
business advising UK financial institutions on all aspects of
securitisation. From 1982 to 1988, she worked at Kleinwort Benson
Limited latterly as head of group finance.
Nigel
Ward (aged 60), Guernsey Resident, Non-Executive Director
(appointed 22 June 2007*)
Nigel Ward is currently an
independent non-executive Director on the board of several offshore
funds and companies, including London and TISE listings. Investment mandates
include property, agricultural land, student accommodation, UK
equities, European SME credit, and distressed debt. He has
over 40 years’ experience of international investment markets,
credit and risk analysis, corporate and retail banking, corporate
governance, compliance and the managed funds industry. He spent 20
years at Baring Asset Management, and also at TSB Bank, National
Westminster Bank and Bank Sarasin. He is a founding Commissioner of
the Guernsey Police Complaints Commission, an Associate of the
Institute of Financial Services, a member of the Institute of
Directors and holds the IoD Diploma in Company Direction.
Christopher
Waldron (aged 53), Guernsey Resident, Non-Executive Director
(appointed 1 July 2014)
Christopher Waldron has over 30
years' experience as an investment manager, specialising in fixed
income, hedging strategies and alternative investment mandates and
until 2013 was Chief Executive of the Edmond de Rothschild Group in
the Channel Islands. Prior to
joining the Edmond de Rothschild Group in 1999, Mr Waldron held
investment management positions with Bank of Bermuda, the Jardine Matheson Group and Fortis
but he is now primarily an independent non-executive director of a
number of listed funds and investment companies. He is also a
member of the States of Guernsey’s Policy and Resources Investment
and Bond Sub-Committee. He is a Fellow of the Chartered
Institute of Securities and Investment.
Jane Le
Maitre (aged 57), Guernsey Resident, Non-Executive Director
(appointed 8 May 2017)
Jane Le Maitre is a Fellow of the
Institute of Chartered Accountants in England & Wales, a Chartered Tax Adviser and a member of
the Institute of Directors. She started her career with Coopers
& Lybrand in the UK and has been resident in Guernsey for more
than 25 years. She joined KPMG (Channel
Islands) in 1989 and became a Partner in 1995 where she
remained until 2000 before becoming a director in the fiduciary
division at Kleinwort Benson. After 5 years with Kleinwort Benson,
she joined the Intertrust Group in Guernsey. She became Managing
Director of Intertrust Reads Private Clients Limited in
January 2007 before stepping down in
2013 to concentrate on client matters and continues to hold a
number of executive positions in unlisted property and investment
related entities.
In addition to their directorships of the Company, the Directors
currently hold the following directorships of listed companies;
William
Collins |
|
Sarah
Evans |
Aberdeen Emerging
Markets Investment |
|
Apax Global Alpha
Limited |
Company Limited |
|
NB Distressed Debt
Investment Fund Limited |
|
|
Real
Estate Credit Investments PCC Limited
Ruffer Investment Company Limited |
|
|
|
Nigel Ward |
|
Christopher
Waldron |
Acorn Income Fund
Limited |
|
JZ Capital Partners
Limited |
Fair Oaks Income Fund
Limited |
|
Ranger Direct Lending
Fund plc |
Hadrian’s Wall Secured
Investments Limited |
|
Ranger Direct Lending
ZDP plc |
|
|
UK Mortgages
Limited |
|
|
|
*Please refer to The Report of the Directors for clarification
regarding tenure.
Independent Auditor’s Report
to the Members of Crystal Amber Fund
Limited
Our opinion is unmodified
We have audited the financial statements of Crystal Amber Fund
Limited (the “Company”), which comprise the statement of financial
position as at 30 June 2017, the
statements of profit or loss and other comprehensive income,
changes in equity and cash flows for the year then ended, and
notes, comprising significant accounting policies and other
explanatory information.
In our opinion, the accompanying financial statements:
- give a true and fair view of the financial position of the
Company as at 30 June 2017; and of
the Company’s financial performance and cash flows for the year
then ended;
- are prepared in accordance with International Financial
Reporting Standards; and
- comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Company in
accordance with, UK ethical requirements including FRC Ethical
Standards as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
Key audit matters: our assessment of
the risks of material misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In arriving at
our audit opinion above, the key audit matters, were as
follows:
|
The risk |
Our
response |
Valuation of financial assets at fair value through profit or
loss
£202,370,814;
(2016: £151,090,246)
Refer the Report of the Directors, note 1 significant accounting
policies and notes 9 and 14 |
Basis:
The Company has invested 101% of its net assets as at 30 June 2017
into equity, debt and derivative financial instruments
(collectively known as “the investments”)
The Company’s listed or quoted equity and debt investments are
valued based on market prices obtained from a third party pricing
provider while its unlisted derivative financial instruments (3% of
investments) are valued using a Black Scholes option
valuation technique
Risk:
The valuation of the Company’s investments, given that they
represent the majority of the net assets of the Company is
considered to be a significant area of our audit |
Our
audit procedures included, but were not limited to:
Use of KPMG specialists:
Our valuation specialist independently priced the listed equity and
debt investments using a third party source and assessed the
trading volumes of such prices
For derivative financial instruments, our valuation specialist
derived valuations using a Black Scholes Option model to evaluate
against the valuation used by the Company
Assessing disclosures:
We also considered the Company’s disclosures (see Note 1) in
relation to the use of estimates and judgments regarding the
valuation of investments and the Company’s valuation policies
adopted and fair value disclosures in Notes 9 and 14 for compliance
with IFRS |
Our application of materiality and an
overview of the scope audit
Materiality for the financial statements as a whole was set at
£6,030,000, determined with reference to a benchmark of the
Company’s Net Assets of £201,023,805, of which it represents
approximately 3%.
We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding £301,500, in addition to other
identified misstatements that warranted reporting on qualitative
grounds.
We have nothing to report on going
concern
We are required to report to you if we have concluded that the
use of the going concern basis of accounting is inappropriate or
there is an undisclosed material uncertainty that may cast
significant doubt over the use of that basis for a period of at
least twelve months from the date of approval of the financial
statements. We have nothing to report in these respects.
We have nothing to report on the
other information in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and we do not express an audit opinion or any
form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
We have nothing to report on other
matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
- the Company has not kept proper accounting records; or
- the financial statements are not in agreement with the
accounting records; or
- we have not received all the information and explanations,
which to the best of our knowledge and belief are necessary for the
purpose of our audit.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement, the Directors are
responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such
internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the
Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor’s report. Reasonable assurance is a
high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and
restrictions on its use by persons other than the Company’s members
as a body.
This report is made solely to the Company’s members, as a body,
in accordance with section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s
members, as a body, for our audit work, for this report, or for the
opinions we have formed.
KPMG Channel Islands Limited
Chartered Accountants, Guernsey
Statement of Profit or Loss and Other
Comprehensive Income
For the year ended
30 June 2017
|
|
2017 |
|
2016 |
|
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
Notes |
£ |
£ |
£ |
|
£ |
£ |
£ |
Income |
|
|
|
|
|
|
|
|
Dividend income from
listed investments |
|
2,708,065 |
- |
2,708,065 |
|
1,945,040 |
- |
1,945,040 |
Other income |
|
- |
- |
- |
|
25,000 |
- |
25,000 |
Interest received |
|
253 |
- |
253 |
|
18,306 |
- |
18,306 |
|
|
2,708,318 |
- |
2,708,318 |
|
1,988,346 |
- |
1,988,346 |
Net gains on
financial assets designated at FVTPL and derivatives held for
trading |
|
|
|
|
|
|
|
|
Equities |
|
|
|
|
|
|
|
|
Net realised
gains/(losses) |
9 |
- |
29,991,758 |
29,991,758 |
|
- |
(18,643,875) |
(18,643,875) |
Movement in unrealised
gains |
9 |
- |
35,560,845 |
35,560,845 |
|
- |
14,319,109 |
14,319,109 |
Debt
instruments |
|
|
|
- |
|
|
|
|
Movement in unrealised
gains |
9 |
- |
290,017 |
290,017 |
|
- |
- |
- |
Derivative
financial instruments |
|
|
|
|
|
|
|
|
Realised losses |
9 |
- |
(10,675,030) |
(10,675,030) |
|
- |
(2,984,294) |
(2,984,294) |
Movement in unrealised
gains/(losses) |
9 |
- |
4,095,788 |
4,095,788 |
|
- |
(254,277) |
(254,277) |
|
|
- |
59,263,378 |
59,263,378 |
|
- |
(7,563,337) |
(7,563,337) |
Total
income |
|
2,708,318 |
59,263,378 |
61,971,696 |
|
1,988,346 |
(7,563,337) |
(5,574,991) |
Expenses |
|
|
|
|
|
|
|
|
Transaction costs |
4 |
- |
597,327 |
597,327 |
|
- |
544,681 |
544,681 |
Exchange movements on
revaluation of investments |
|
- |
245,911 |
245,911 |
|
- |
(653,049) |
(653,049) |
Management fees |
15,17 |
3,232,888 |
- |
3,232,888 |
|
2,617,425 |
- |
2,617,425 |
Performance fees |
15,17 |
- |
2,354,752 |
2,354,752 |
|
- |
- |
- |
Directors'
remuneration |
16 |
121,130 |
- |
121,130 |
|
119,750 |
- |
119,750 |
Administration
fees |
17 |
251,064 |
- |
251,064 |
|
188,411 |
- |
188,411 |
Custodian fees |
17 |
107,604 |
- |
107,604 |
|
77,868 |
- |
77,868 |
Audit fees |
|
22,683 |
- |
22,683 |
|
19,826 |
- |
19,826 |
Other expenses |
|
366,792 |
- |
366,792 |
|
277,888 |
- |
277,888 |
|
|
4,102,161 |
3,197,990 |
7,300,151 |
|
3,301,168 |
(108,368) |
3,192,800 |
Return/(loss) for
the year |
|
(1,393,843) |
56,065,388 |
54,671,545 |
|
(1,312,822) |
(7,454,969) |
(8,767,791) |
Basic and diluted
earnings/(loss) per share (pence) |
5 |
(1.42) |
56.99 |
55.57 |
|
(1.37) |
(7.81) |
(9.18) |
All items in the above statement derive from continuing
operations.
The total column of this statement represents the Company’s
Statement of Profit or Loss and Other Comprehensive Income prepared
in accordance with IFRS. The supplementary information on the
allocation between revenue return and capital return is presented
under guidance published by the AIC.
The Notes to the Financial Statements form an integral part of
these Financial Statements.
Statement of
Financial Position
As at 30 June 2017
|
|
2017 |
|
2016 |
Assets |
Notes |
£ |
|
£ |
Cash and cash
equivalents |
7 |
7,957,943 |
|
1,317,389 |
Trade and other
receivables |
8 |
48,468 |
|
463,510 |
Financial assets
designated at FVTPL and derivatives held for trading |
9 |
202,370,814 |
|
151,090,246 |
Total
assets |
|
210,377,225 |
|
152,871,145 |
|
|
|
|
|
Liabilities |
|
|
|
|
Trade and other
payables |
10 |
9,353,420 |
|
1,347,074 |
Total
liabilities |
|
9,353,420 |
|
1,347,074 |
|
|
|
|
|
Equity |
|
|
|
|
Capital and
reserves attributable to the Company’s equity shareholders |
|
|
|
|
Share capital |
11 |
989,998 |
|
989,998 |
Treasury shares
reserve |
12 |
(972,800) |
|
(720,478) |
Distributable
reserve |
|
105,058,397 |
|
109,977,886 |
Retained earnings |
|
95,948,210 |
|
41,276,665 |
Total
equity |
|
201,023,805 |
|
151,524,071 |
Total liabilities
and equity |
|
210,377,225 |
|
152,871,145 |
NAV per share
(pence) |
6 |
204.37 |
|
153.79 |
The Financial Statements were approved by the Board of Directors
and authorised for issue on 12 September
2017.
Sarah
Evans
Director
12 September 2017 |
Nigel
Ward
Director
12 September 2017 |
Statement of Changes
in Equity
For the year ended
30 June 2017
|
|
Share |
Treasury shares |
Distributable |
|
Retained earnings |
|
Total |
|
Notes |
capital |
reserve |
reserve |
|
Capital |
Revenue |
Total |
|
equity |
|
|
£ |
£ |
£ |
|
£ |
£ |
£ |
|
£ |
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 |
12 |
- |
(252,322) |
- |
|
- |
- |
- |
|
(252,322) |
Dividends paid in the
year |
13 |
- |
- |
(4,919,489) |
|
- |
- |
- |
|
(4,919,489) |
Return for the
year |
|
- |
- |
- |
|
56,065,388 |
(1,393,843) |
54,671,545 |
|
54,671,545 |
Balance at
30 June 2017 |
989,998 |
(972,800) |
105,058,397 |
|
98,217,020 |
(2,268,810) |
95,948,210 |
|
201,023,805 |
|
|
Share |
Treasury shares |
Distributable |
|
Retained earnings |
|
Total |
|
Notes |
capital |
reserve |
reserve |
|
Capital |
Revenue |
Total |
|
equity |
|
|
£ |
£ |
£ |
|
£ |
£ |
£ |
|
£ |
Opening balance at 1
July 2015 |
|
989,998 |
(9,009,985) |
114,181,017 |
|
49,606,601 |
437,855 |
50,044,456 |
|
156,205,486 |
Purchase of Ordinary
shares into Treasury |
12 |
- |
(1,113,539) |
- |
|
- |
- |
- |
|
(1,113,539) |
Sale of Ordinary
shares from Treasury |
12 |
- |
9,989,766 |
- |
|
- |
- |
- |
|
9,989,766 |
Premium on sale of
Ordinary shares from Treasury |
12 |
- |
(586,720) |
586,720 |
|
- |
- |
- |
|
- |
Dividends paid in the
year |
|
- |
- |
(4,789,851) |
|
- |
- |
- |
|
(4,789,851) |
Loss for the year |
|
- |
- |
- |
|
(7,454,969) |
(1,312,822) |
(8,767,791) |
|
(8,767,791) |
Balance at
30 June 2016 |
989,998 |
(720,478) |
109,977,886 |
|
42,151,632 |
(874,967) |
41,276,665 |
|
151,524,071 |
Statement of Cash Flows
For the year ended
30 June 2017
|
|
2017 |
|
2016 |
|
Notes |
£ |
|
£ |
Cash flows from
operating activities |
|
|
|
|
Dividend income
received from listed investments |
|
3,121,215 |
|
1,585,052 |
Bank interest
received |
|
2,286 |
|
20,140 |
Other income
received |
|
- |
|
25,000 |
Management fees
paid |
|
(3,232,888) |
|
(2,617,425) |
Performance fees
paid |
|
- |
|
(653,962) |
Directors’ fees
paid |
|
(117,500) |
|
(119,125) |
Other expenses
paid |
|
(678,869) |
|
(557,586) |
Net cash outflow
from operating activities |
|
(905,756) |
|
(2,317,906) |
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
Purchase of Ordinary
shares into Treasury |
|
(252,322) |
|
(1,113,539) |
Sale of Ordinary
shares from Treasury |
|
- |
|
9,989,766 |
Dividends paid |
|
(4,919,489) |
|
(4,789,851) |
Net cash
(outflow)/inflow from financing activities |
|
(5,171,811) |
|
4,086,376 |
|
|
|
|
|
Cash flows from
investing activities |
|
|
|
|
Purchase of equity
investments |
|
(82,415,871) |
|
(85,356,749) |
Sale of equity
investments |
|
109,680,734 |
|
68,746,091 |
Purchase of debt
instruments |
|
(3,945,084) |
|
- |
Purchase of derivative
financial instruments |
|
(10,098,112) |
|
(11,773,346) |
Sale of derivative
financial instruments |
|
86,082 |
|
8,977,557 |
Transaction charges on
purchase and sale of investments |
|
(589,628) |
|
(544,681) |
Net cash
inflow/(outflow) from investing activities |
|
12,718,121 |
|
(19,951,128) |
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents during the
year |
|
6,640,554 |
|
(18,182,658) |
Cash and cash
equivalents at beginning of year |
|
1,317,389 |
|
19,500,047 |
Cash and cash
equivalents at end of year |
7 |
7,957,943 |
|
1,317,389 |
Notes to the Financial Statements
For the year ended
30 June 2017
General
information
Crystal Amber Fund Limited (the “Company”) was incorporated and
registered in Guernsey on 22 June
2007 and is governed under the provisions of the Companies
Law. 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
the Financial Statements are set out below. These policies have
been consistently applied to those balances considered material to
the Financial Statements throughout the current year, unless
otherwise stated.
Basis of preparation
The Financial Statements give a true and fair view, are in
accordance with IFRS and the SORP “Financial Statements of
Investment Trust Companies and Venture Capital Trusts” issued by
the AIC in November 2014 and updated
in January 2017 to the extent to
which it is consistent with IFRS, and comply with the Companies
Law. The Financial Statements are presented in Sterling, the
Company’s functional and presentational currency.
The Financial Statements have been prepared under the historic
cost convention with the exception of financial assets designated
at fair value through profit or loss (“FVTPL”) and derivatives held
for trading which are measured at fair value.
The Company has adopted the Investment Entity Amendments to IFRS
10, IFRS 12 and IAS 27 which define investment entities together
with disclosure requirements.
Investment Entities (Amendments to
IFRS 10, IFRS 12 and IAS 27)
The Company meets the definition of an investment entity on the
basis of the following criteria.
- The Company obtains funds from multiple investors for the
purpose of providing those investors with investment management
services;
- The Company commits to its investors that its business purpose
is to invest funds solely for returns from capital appreciation,
investment income, or both; and
- The Company measures and evaluates the performance of
substantially all of its investments on a fair value basis.
To determine that the Company meets the definition of an
investment entity, further consideration is given to the
characteristics of an investment entity that are demonstrated by
the Company.
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 to be proposed at the 2017 AGM on the
application of the going concern basis. The continuation vote is
scheduled to occur every two years. The Directors have no reason to
doubt that shareholders will vote for the Company to continue as
constituted at the AGM, scheduled for November 2017, given the positive performance of
the Company since the previous continuation vote at the 2015
AGM.
Use of estimates and judgements
The preparation of the Financial Statements in conformity with
IFRS requires management to make judgements, estimates and
assumptions that affect the application of the reported amounts in
these Financial Statements. The determination that the Company as
an investment entity is a critical judgement, as discussed above.
The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances. Actual results may differ from
these estimates. The Black Scholes option valuation technique has
been utilised to value warrant instruments which uses certain
assumptions related to risk-free interest rates, expected
volatility, expected life and future dividends as disclosed below.
The loan notes have been valued based on cost plus accrued interest
which is approximate to fair value.
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 Financial
Statements.
For management purposes, the Company is domiciled in Guernsey
and is engaged in a single segment of business mainly in one
geographical area, being investment mainly in UK equity
instruments, and therefore the Company has only one single
operating segment.
Foreign currency translation
Monetary assets and liabilities are translated from currencies
other than Sterling (‘foreign currencies’) to Sterling (the
‘functional currency’) at the rate prevailing on the reporting
date. Income and expenses are translated from foreign currencies to
Sterling at the rate prevailing at the date of the transaction.
Exchange differences are recognised in the profit or loss section
of the Statement of Profit or Loss and Other Comprehensive
Income.
Financial instruments
Financial instruments comprise investments in equity, debt
instruments, derivatives, trade and other receivables, cash and
cash equivalents, and trade and other payables. Financial
instruments are recognised initially at cost, which is deemed to be
fair value. Subsequent to initial recognition financial instruments
are measured as described below.
Financial assets designated at FVTPL
and derivatives held for trading
All the Company’s investments including debt instruments and
derivative financial instruments are held at FVTPL. They are
initially recognised at cost at acquisition, which is deemed to be
their fair value. Transaction costs are expensed in the profit or
loss section of the Statement of Profit or Loss and Other
Comprehensive Income. Gains and losses arising from changes in fair
value are presented in the profit or loss section of the Statement
of Profit or Loss and Other Comprehensive Income in the period in
which they arise.
Purchases and sales of investments are recognised using trade
date accounting. Quoted investments are valued at the bid price on
the reporting date or at the realisable value if the Company has
entered into an irrevocable commitment prior to the reporting date
to sell the investment. Where investments are listed on more than
one securities market, the price used is that quoted on the most
advantageous market, which is deemed to be the market on which the
security was originally purchased. If the price is not available as
at the accounting date, the last available price is used. The
valuation methodology adopted is in accordance with IFRS 13.
Debt
instruments
Loan notes are classified as debt instruments and are recognised
initially at cost incurred in their acquisition, which is deemed to
be their fair value. Subsequent to initial recognition, loan notes
are valued based on cost plus accrued interest outstanding at the
year end. The Board has concluded that fair value is approximate to
cost plus accrued interest.
Convertible bonds are classified as debt instruments and are
recognised initially at cost incurred in their acquisition, which
is deemed to be their fair value. Subsequent to initial
recognition, quoted convertible bonds are valued at the bid price
on the reporting date. If the price is not available as at the
accounting date, the last available price is used.
Gains and losses arising from changes in fair value are
presented in the profit or loss section of the Statement of Profit
or Loss and Other Comprehensive Income in the period in which they
arise.
Derivatives held
for trading
When considered appropriate the Company will enter into
derivative contracts to manage its price risk and provide
protection against the volatility of the market.
Quoted derivatives are valued at the bid price on the reporting
date. Where derivatives are listed on more than one securities
market, the price used is that quoted on the most advantageous
market, which is deemed to be the market on which the security was
originally purchased. If the price is not available as at the
accounting date, the last available price is used. Gains and losses
arising from changes in fair value are presented in the profit or
loss section of the Statement of Profit or Loss and Other
Comprehensive Income in the period in which they arise.
Warrant instruments which are unlisted are valued at the
reporting date using a Black Scholes option valuation technique,
which uses certain assumptions related to risk-free interest rates,
expected volatility, expected life and future dividends. Gains and
losses arising from changes in fair value are presented in the
profit or loss section of the Statement of Profit or Loss and Other
Comprehensive Income in the period in which they arise.
De-recognition of financial
instruments
The Company de-recognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows in a transaction in
which substantially all the risks and rewards of ownership of the
financial asset are transferred.
On de-recognition of a financial asset, the difference between
the carrying amount of the asset (or the carrying amount allocated
to the portion of the asset de-recognised), and consideration
received (including any new asset obtained less any new liability
assumed) is recognised in the profit or loss section of the
Statement of Profit or Loss and Other Comprehensive Income.
The Company de-recognises a financial liability when its
contractual obligations are discharged, cancelled or expire. Any
gain or loss on de-recognition is recognised in the profit or loss
section of the Statement of Profit or Loss and Other Comprehensive
Income.
Cash and cash equivalents
The Company considers all highly liquid investments with
original maturities of less than 90 days when acquired to be cash
equivalents.
Share issue expenses
Share issue expenses of the Company directly attributable to the
issue and listing of its own shares are charged to the
distributable reserve.
Share capital
Ordinary shares are classified as equity where there is no
obligation to transfer cash or other assets.
Dividends
Dividends paid during the year from distributable reserves are
disclosed in the Statement of Changes in Equity. Dividends declared
post year end are disclosed in the Notes to the Financial
Statements.
Distributable reserves
Distributable reserves represent the amount transferred from the
share premium account, approved by the Royal Court of Guernsey on
18 July 2008, and amounts transferred
to distributable reserves in relation to the sale of Treasury
shares above cost.
Income
Investment income and interest income have been accounted for on
an accruals basis using the effective interest method. Dividends
receivable are recognised in the profit or loss section of the
Statement of Profit or Loss and Other Comprehensive Income when the
relevant security is quoted ex-dividend. The Company currently
incurs withholding tax imposed by non-UK countries on dividend
income; these dividends are recorded gross of withholding tax in
the profit or loss section of the Statement of Profit or Loss and
Other Comprehensive Income. Withholding tax is recorded in ‘other
expenses’ in the Statement of Profit or Loss and Other
Comprehensive Income.
Expenses
All expenses are accounted for on an accruals basis. In respect
of the analysis between revenue and capital items presented within
the Statement of Profit or Loss and Other Comprehensive Income, all
expenses have been presented as revenue items except as
follows:
- expenses which are incidental to the acquisition and disposal
of an investment are charged to capital; and
- expenses are split and presented partly as capital items where
a connection with the maintenance or enhancement of the value of
the investments held can be demonstrated. Accordingly the
performance fee is charged to capital, reflecting the Directors’
expected long-term view of the nature of the investment returns of
the Company.
Treasury shares reserve
The Company has adopted the principles outlined in IAS 32
‘Financial Instruments: Presentation’ and has treated the
consideration paid including directly attributable incremental cost
for the repurchase of Company shares held in Treasury as a
deduction from equity attributable to the Company’s equity holders
until the shares are cancelled, reissued or disposed of. No gain or
loss is recognised within the statement of Profit or Loss and Other
Comprehensive Income on the purchase, sale, issue or cancellation
of the Company’s own equity investments.
Any consideration received, net of any directly attributable
incremental transaction costs upon sale or re-issue of such shares,
is included in equity attributable to the Company’s equity
holders.
2. NEW STANDARDS AND
INTERPRETATIONS
In the preparation of these Financial Statements, the Company
followed the same accounting policies and methods of computation as
compared with those applied in the previous year.
None of the new standards or amendments to existing standards
and interpretations, effective from 1
January 2016, had a material impact on the Company’s
Financial Statements. As disclosed in Note 1, the Company has
adopted the Investment Entity Amendments to IFRS 10, IFRS 12 and
IAS 27.
At the date of authorisation of these Financial Statements, the
following standards and interpretations, which have not been
applied in these Financial Statements, were issued but not yet
effective:
New
standards |
Effective for periods beginning on or after |
IFRS 9 |
Financial Instruments |
1 January 2018 |
IFRS 15 |
Revenue from Contracts with
Customers |
1 January 2018 |
The Company has not early adopted IFRS 9 and IFRS 15. The impact
of these standards is not expected to be significant.
IFRS 9 – Financial Instruments: As the majority of the Company’s
financial assets are held at FVTPL, this treatment, and the related
measurement methods, will not change after implementing IFRS 9.
Accordingly, the Company does not expect that the implementation of
IFRS 9 will have any material impact on its Financial
Statements.
Amended
standards and interpretations |
Effective for periods beginning on or after |
IFRS 1 |
First time Adoption of IFRS -
Amendments as a result of Annual Improvements: 2014 - 2016
cycle |
1 January 2018 |
IFRS 12 |
Disclosure of Interests in Other
Entities - Amendments as a result of Annual Improvements: 2014 -
2016 cycle |
1 January 2017 |
IAS 7 |
Statement of Cash Flows - Amendments
as a result of the Disclosure Initiative – January 2016 |
1 January 2017 |
IAS 28 |
Investments in Associates and Joint
Ventures - Amendments as a result of Annual Improvements: 2014 -
2016 cycle |
1 January 2018 |
IFRIC 22 |
Foreign Currency Transactions and
Advance Consideration |
1 January 2018 |
The Directors anticipate that the adoption of the amended
standards and interpretations in future periods will not have a
material impact on the Financial Statements of the Company.
3. TAXATION
The Company is exempt from taxation in Guernsey under the
provisions of the Income Tax (Exempt Bodies) (Guernsey) Ordinance,
2008 and is charged an annual fee of £1,200 (2016: £1,200).
4. TRANSACTION COSTS
The transaction charges incurred in relation to the acquisition
and disposal of investments during the year were as follows:
|
2017 |
|
2016 |
|
£ |
|
£ |
Stamp duty |
262,933 |
|
201,631 |
Commissions and
custodian transaction charges: |
|
|
|
In respect of
purchases |
245,825 |
|
133,937 |
In respect of
sales |
88,569 |
|
209,113 |
|
597,327 |
|
544,681 |
5. BASIC AND DILUTED
EARNINGS/(LOSS) PER SHARE
Earnings/(loss) per share is based on the following data:
|
2017 |
|
2016 |
Return/(loss) for the
year |
£54,671,545 |
|
(£8,767,791) |
Weighted average
number of issued Ordinary shares |
98,380,022 |
|
95,504,794 |
Basic and diluted
earnings/(loss) per share (pence) |
55.57 |
|
(9.18) |
6. NAV PER SHARE
NAV per share is based on the following data:
|
2017 |
|
2016 |
NAV per Statement of
Financial Position |
£201,023,805 |
|
£151,524,071 |
Total number of issued
Ordinary shares (excluding Treasury shares) at 30 June |
98,364,762 |
|
98,524,762 |
NAV per share
(pence) |
204.37 |
|
153.79 |
7. CASH AND CASH
EQUIVALENTS
Cash and cash equivalents comprise cash held by the Company
available on demand. Cash and cash equivalents were as follows:
|
2017 |
|
2016 |
|
£ |
|
£ |
Cash available on
demand |
7,957,943 |
|
1,317,389 |
|
7,957,943 |
|
1,317,389 |
8. TRADE AND OTHER RECEIVABLES
|
2017 |
|
2016 |
|
£ |
|
£ |
Current
assets: |
|
|
|
Trade receivables |
23,038 |
|
438,221 |
Prepayments |
25,430 |
|
25,289 |
|
48,468 |
|
463,510 |
There are no past due or impaired receivable balances
outstanding at the year end (2016: £Nil).
9. FINANCIAL ASSETS
DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS AND DERIVATIVES
HELD FOR TRADING
|
2017 |
|
2016 |
|
£ |
|
£ |
Equity
investments |
186,431,885 |
|
148,086,522 |
Debt instruments |
9,502,417 |
|
- |
Financial assets
designated at FVTPL |
195,934,302 |
|
211,706,765 |
Derivative
financial instruments held for trading |
6,436,512 |
|
3,003,724 |
|
202,370,814 |
|
151,090,246 |
|
|
|
|
Equity
investments |
|
|
|
Cost brought
forward |
153,875,142 |
|
160,110,908 |
Purchases |
82,612,821 |
|
81,096,969 |
Sales |
(109,680,734) |
|
(68,688,860) |
Net realised
gains/(losses) |
29,991,758 |
|
(18,643,875) |
Cost carried
forward |
156,798,987 |
|
153,875,142 |
Unrealised losses
brought forward |
(5,852,434) |
|
(20,171,543) |
Movement in unrealised
gains/(losses) |
35,560,845 |
|
14,319,109 |
Unrealised
gains/(losses) carried forward |
29,708,411 |
|
(5,852,434) |
Effect of exchange
rate movements |
(75,513) |
|
63,814 |
Fair value of
equity investments |
186,431,885 |
|
148,086,522 |
Debt
instruments |
|
|
|
Cost brought
forward |
- |
|
- |
Purchases |
9,318,984 |
|
- |
Cost carried
forward |
9,318,984 |
|
- |
Unrealised gains
brought forward |
- |
|
- |
Movement in unrealised
gains |
290,017 |
|
- |
Unrealised gains
carried forward |
290,017 |
|
- |
Effect of exchange
rate movements |
(106,584) |
|
- |
Fair value of debt
instruments |
9,502,417 |
|
- |
Total financial
assets designated at FVTPL |
202,370,814 |
|
151,090,246 |
|
|
|
|
Derivative
financial instruments held for trading |
|
|
|
Cost brought
forward |
1,023,001 |
|
1,078,000 |
Purchases |
10,098,112 |
|
11,773,346 |
Sales |
(86,082) |
|
(8,844,051) |
Net realised
losses |
(10,675,030) |
|
(2,984,294) |
Cost carried
forward |
360,001 |
|
1,023,001 |
Unrealised gains
brought forward |
1,980,723 |
|
2,235,000 |
Movement in unrealised
gains |
4,095,788 |
|
(254,277) |
Unrealised gains
carried forward |
6,076,511 |
|
1,980,723 |
Fair value of
derivatives held for trading |
6,436,512 |
|
3,003,724 |
Total derivative
financial instruments held for trading |
6,436,512 |
|
3,003,724 |
|
|
|
|
Total financial
assets designated at FVTPL and derivatives held for
trading |
202,370,814 |
|
151,090,246 |
Total realised gains and losses and unrealised gains and losses
in the Company’s equity, debt and derivatives are made up of the
following gain and loss elements:
|
2017 |
|
2016 |
|
£ |
|
£ |
Realised gains |
31,290,256 |
|
19,025,712 |
Realised losses |
(11,973,528) |
|
(40,653,881) |
Net realised
gains/(losses) in financial assets designated at FVTPL and
derivatives held for trading |
19,316,728 |
|
(21,628,169) |
|
|
|
|
Movement in unrealised
gains |
32,274,263 |
|
(8,601,122) |
Movement in unrealised
losses |
7,672,387 |
|
22,665,954 |
Net movement in
unrealised gains in financial assets designated at FVTPL and
derivatives held for trading |
39,946,650 |
|
14,064,832 |
On 15 June 2017, the Company
purchased $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. 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 $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 one (2016: two) FTSE 100 Index Put Option
position, purchased as protection against a significant market
sell-off and two warrant instruments in FairFX and Hurricane (2016:
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 |
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 |
|
Nominal amount |
|
Value |
30 June
2016 |
|
|
£ |
Derivative
financial instruments |
|
|
|
Puts on UKX P5800
(expiry: July 2016) |
700 |
|
49,000 |
Puts on UKX P6000
(expiry: August 2016) |
1,000 |
|
665,000 |
FairFX warrant
instrument |
7,500,000 |
|
734,370 |
Hurricane warrant
instrument |
23,333,333 |
|
1,555,354 |
|
30,835,033 |
|
3,003,724 |
10. TRADE AND OTHER
PAYABLES
|
2017 |
|
2016 |
|
£ |
|
£ |
Current
liabilities: |
|
|
|
Accruals |
199,137 |
|
126,092 |
Unsettled trade
purchases |
6,799,531 |
|
1,220,982 |
Performance fee
accrual |
2,354,752 |
|
- |
|
9,353,420 |
|
1,347,074 |
The carrying amount of trade payables approximates to their fair
value.
11. SHARE CAPITAL AND
RESERVES
The authorised share capital of the Company is £3,000,000
divided into 300 million Ordinary shares of £0.01 each.
The issued share capital of the Company, including Treasury
shares, is comprised as follows:
|
2017 |
|
2016 |
|
Number |
£ |
|
Number |
£ |
Issued, called up and
fully paid Ordinary shares of £0.01 each |
98,999,762 |
989,998 |
|
98,999,762 |
989,998 |
Capital risk management
The Company’s objectives when managing capital are to safeguard
the Company’s ability to continue as a going concern in order to
provide returns to shareholders and to maintain an optimal capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell
assets.
As per the Company’s Memorandum and Articles of Incorporation
the retained earnings are distributable by way of dividend in
addition to distributable reserve held on the Company’s Statement
of Financial Position at the year end.
The Company may carry the returns of the Company to
distributable reserve or use them for any purpose to which the
returns of the Company may be properly applied and either employed
in the business of the Company or be invested, in accordance with
applicable law. The distributable reserve includes the amount
transferred from the share premium account which was approved by
the Royal Court of Guernsey on 18 July
2008.
During the year ended 30 June
2017, the Company paid dividends of £4,919,489 (2016:
£4,789,851) from distributable reserves, as disclosed in Note 13,
and transferred the premium of £Nil (2016: £586,720) received on
the sale of Treasury shares to distributable reserves, as disclosed
in Note 12.
Externally imposed capital
requirement
There are no capital requirements imposed on the Company.
Rights attaching to shares
The Ordinary shares carry the right to vote at general meetings
and the entitlement to receive any dividends and surplus assets of
the Company on a winding up.
12. TREASURY SHARES
RESERVE
|
2017 |
|
2016 |
|
Number |
£ |
|
Number |
£ |
Opening balance |
(475,000) |
(720,478) |
|
(6,163,486) |
(9,009,985) |
Treasury shares
purchased during the year |
(160,000) |
(252,322) |
|
(725,000) |
(1,113,539) |
Treasury shares sold
during the year |
- |
- |
|
6,413,486 |
9,989,766 |
Premium transferred to
distributable reserve |
- |
- |
|
- |
(586,720) |
Closing balance |
(635,000) |
(972,800) |
|
(475,000) |
(720,478) |
During the year ended 30 June
2017, 160,000 (2016: 725,000) Treasury shares were purchased
at an average price of 157.70 pence
per share (2016: 153.59 pence per
share), representing an average discount to NAV at the time of
purchase of 4.5 per cent (2016: 3.4 per cent). During the year
ended 30 June 2017, Nil (2016:
6,413,486) Treasury shares were sold, representing a premium above
cost of £Nil (2016: £586,720). The Company purchased 290,000 of its
own Ordinary shares during the period between 1 July 2017 and 12
September 2017, which were held as Treasury shares.
Following these purchases, the total number of Ordinary shares held
as Treasury shares by the Company was 925,000.
13. DIVIDENDS
On 14 July 2016, the Company
declared an interim dividend of £2,460,369, equating to
2.5 pence per Ordinary share, which
was paid on 19 August 2016 to
shareholders on the register on 22 July
2016.
On 14 December 2016, the Company
declared an interim dividend of £2,459,120, equating to
2.5 pence per Ordinary share, which
was paid on 19 January 2017 to
shareholders on the register on 22 December
2016.
Subsequent to the year end, on 11 July
2017, the Company declared an interim dividend of
£2,459,120, equating to 2.5 pence per
Ordinary share, which was paid on 18 August
2017 to shareholders on the register on 21 July 2017.
14. FINANCIAL INSTRUMENTS
AND ASSOCIATED RISKS
Financial risk management
objectives
The Investment Manager, Crystal Amber Asset Management
(Guernsey) Limited and the Administrator, Heritage International
Fund Managers Limited provide advice to the Company which allows it
to monitor and manage financial risks relating to its operations
through internal risk reports which analyse exposures by degree and
magnitude of risks. The Investment Manager and the Administrator
report to the Board on a quarterly basis. The risks relating to the
Company’s operations include credit risk, liquidity risk, and the
market risks of interest rate risk, price risk and foreign currency
risk. The Board has considered the sensitivity of the Company’s
financial assets and monitors the range of reasonably possible
changes in the significant observable inputs on a regular basis and
has deemed no changes are required from prior years.
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument will default on its contractual obligations that it has
with the Company, resulting in financial loss to the Company. At
30 June 2017 the major financial
assets which were exposed to credit risk included financial assets
designated at FVTPL and derivatives held for trading and cash and
cash equivalents.
The carrying amounts of financial assets best represent the
maximum credit risk exposure at 30 June
2017. The Company’s credit risk on liquid funds is minimised
because the counterparties are banks with high credit ratings
assigned by an international credit-rating agency.
The table below shows the cash balances at the Statement of
Financial Position date and the S&P’s credit rating for each
counterparty at that date.
|
Location |
Rating |
Cash
Balance |
|
Cash
Balance |
|
|
|
2017 |
|
2016 |
|
|
|
£ |
|
£ |
ABN AMRO (Guernsey)
Limited |
Guernsey |
A |
7,895,397 |
|
867,364 |
Barclays Bank plc -
Isle of Man Branch |
Isle of Man |
A- |
62,546 |
|
450,025 |
|
|
|
7,957,943 |
|
1,317,389 |
The credit ratings disclosed above are the credit ratings of the
parent entities of each of the counterparties namely ABN AMRO Bank
N.V. and Barclays Bank plc.
The Company’s credit risk on financial assets designated at
FVTPL and derivatives held for trading is considered minimal as
these assets consist mainly of quoted equities. The Company is also
exposed to credit risk on the financial assets with its brokers for
unsettled transactions. This risk is considered minimal due to the
short settlement period involved and the high credit quality of the
brokers used. There are no available credit ratings for the debt
instruments held by the Company. At 30 June
2017 £199,983,312 (2016: £148,953,886) of the financial
assets of the Company were held by the Custodian, ABN AMRO (Guernsey) Limited.
Bankruptcy or insolvency of the Custodian may cause the
Company’s rights with respect to financial assets held by the
Custodian to be delayed or limited. The Company monitors its risk
by monitoring the credit quality and financial position of the
Custodian. The parent of the Custodian has an S&P credit rating
of A (2016: A). The remaining balance of £10,393,913 (2016:
£3,917,259) includes £6,146,512 (2016: £2,289,724) warrant
instruments, £3,846,387 (2016: £Nil) loan notes held directly with
GI Dynamics Inc, £290,000 (2016: £714,000) put derivative options
held with the option broker, £62,546 (2016: £450,025) cash held
with Barclays Bank plc and the remaining £48,468 (2016: £463,510)
held as trade receivables.
Liquidity risk
Liquidity risk is the risk that the Company will be unable to
meet its obligations arising from financial liabilities. Ultimate
responsibility for liquidity risk management rests with the Board
of Directors, which has built an appropriate framework for the
management of the Company’s liquidity requirements.
The Company adopts a prudent approach to liquidity risk
management and maintains sufficient cash reserves to meet its
obligations. All the Company’s Level 1 investments are listed and
are subject to a settlement period of three days.
The following tables detail the Company’s expected maturity for
its financial assets and liabilities:
2017 |
Weighted average interest rate |
Less
than 1 year |
1-5
years |
5+
years |
Total |
Assets |
|
£ |
£ |
£ |
£ |
Non-interest
bearing |
|
192,979,411 |
- |
- |
192,979,411 |
Variable interest rate
instruments |
0.01% |
7,895,397 |
- |
- |
7,895,397 |
Fixed interest rate
instruments |
5.00% |
- |
3,846,387 |
- |
3,846,387 |
Fixed interest rate
instruments |
7.50% |
5,656,030 |
- |
- |
5,656,030 |
Liabilities |
|
|
|
|
|
Non-interest
bearing |
|
(9,353,420) |
- |
- |
(9,353,420) |
|
|
197,177,418 |
3,846,387 |
- |
201,023,805 |
2016 |
Weighted average interest rate |
Less
than 1 year |
1-5
years |
5+
years |
Total |
Assets |
|
£ |
£ |
£ |
£ |
Non-interest
bearing |
|
151,553,756 |
- |
- |
151,553,756 |
Variable interest rate
instruments |
0.23% |
1,317,389 |
- |
- |
1,317,389 |
Liabilities |
|
|
|
|
|
Non-interest
bearing |
|
(1,347,074) |
- |
- |
(1,347,074) |
|
|
151,524,071 |
- |
- |
151,524,071 |
Market risk
The Company is exposed through its operations to market risk
which encompasses interest rate risk, price risk and foreign
exchange risk.
Interest rate risk
Interest rate risk is the risk that the value of financial
instruments will fluctuate due to changes in market interest rates.
The Company is exposed to interest rate risk as it has current
account balances with variable interest rates. The Company’s
exposure to interest rates is detailed in the liquidity risk
section of this note. Interest rate repricing dates are consistent
with the maturities stated in the liquidity risk section of this
note.
The Investment Manager monitors market interest rates and will
place interest bearing assets at best available rates but also
taking into consideration the counterparty’s credit rating and
financial position.
Interest rate sensitivity analysis
The sensitivity analysis below has been based on the exposure to
interest rates for financial assets held at the Statement of
Financial Position date. An increase/decrease of 0.01 percentage
points (2016: 0.15 percentage points) represents management’s
assessment of the effect of a possible change in interest rates due
to the weighted average interest rate for variable interest rate
instruments decreasing from 0.23 per cent to 0.01 per cent for the
year ended 30 June 2017. If interest
rates had been 0.01 percentage points (2016: 0.15 percentage
points) higher/lower and all other variables were held
constant:
- the Company’s return for the year ended 30 June 2017 would have increased by £659 (2016:
£6,238);
- the Company’s return for the year ended 30 June 2017 would have decreased by £Nil (2016:
£6,238);
- there would have been no impact on equity reserves other than
retained earnings.
Price risk
Price risk is the risk that the fair value of investments will
fluctuate as a result of changes in market prices. This risk is
managed through diversification of the investment portfolio across
business sectors. Generally the Company will seek not to invest
more than 20 per cent of the Company’s gross assets in any single
investment at the time of investment. However, there is no
guarantee that this will be the case after any investment is made,
particularly where it is believed that an investment is
exceptionally attractive.
During the year to 30 June 2017
the Company entered into various index put derivative option
contracts to protect the Company’s value against a significant fall
in the market. At 30 June 2017,
£290,000 (2016: £714,000) of these contracts were outstanding.
The following tables detail the Company’s positions in
derivative financial instruments:
2017 Derivative
financial instruments |
|
Nominal Amount |
Value |
Options |
|
|
£ |
Puts on UKX P7100
(Expiry: July 2017) |
|
1,000 |
290,000 |
|
|
1,000 |
290,000 |
|
|
No.
of warrants |
Value |
Warrant
instruments |
|
|
£ |
FairFX plc (Expiry:
May 2019) |
|
6,000,000 |
2,001,252 |
Hurricane Energy plc
(Expiry: March 2019) |
|
23,333,333 |
4,145,260 |
|
|
29,333,333 |
6,146,512 |
2016 Derivative
financial instruments |
|
Nominal Amount |
Value |
Options |
|
|
£ |
Puts on UKX P5800
(expiry: July 2016) |
|
700 |
49,000 |
Puts on UKX P6000
(expiry: August 2016) |
|
1,000 |
665,000 |
|
|
1,700 |
714,000 |
|
|
No.
of warrants |
Value |
Warrant
instruments |
|
|
£ |
FairFX plc (Expiry:
May 2019) |
|
7,500,000 |
734,370 |
Hurricane Energy plc
(Expiry: March 2019) |
|
23,333,333 |
1,555,354 |
|
|
30,833,333 |
2,289,724 |
As at 30 June 2017, the following
tables detail the Company’s equity investments.
2017
Equity Investments |
Sector |
Value
£ |
|
Percentage of Company’s
Gross Assets |
Hurricane Energy
plc |
Oil and Gas |
48,750,000 |
|
23 |
Northgate plc |
Transportation
Services |
28,999,626 |
|
14 |
STV Group plc |
Media |
25,279,105 |
|
12 |
FairFX Group plc |
Financial
Services |
15,762,816 |
|
7 |
Leaf Clean Energy
Company |
Financial
Services |
12,717,526 |
|
6 |
NCC Group plc |
Technology |
11,426,577 |
|
5 |
Ocado Group plc |
Retail |
9,402,233 |
|
4 |
GI Dynamics Inc |
Medical
Technology |
9,250,854 |
|
4 |
Sutton Harbour
Holdings plc |
Transportation
Services |
7,327,886 |
|
3 |
Other |
Various |
17,515,262 |
|
8 |
Total |
|
186,431,885 |
|
86 |
2016
Equity Investments |
Sector |
Value
£ |
|
Percentage of Company’s
Gross Assets |
Grainger plc |
Property |
30,061,400 |
|
20 |
Hurricane Energy
plc |
Oil and Gas |
25,967,783 |
|
17 |
Pinewood Group
plc |
Media |
16,881,800 |
|
11 |
Northgate plc |
Transportation
Services |
13,000,000 |
|
9 |
Leaf Clean Energy
Company |
Renewable Energy |
11,657,732 |
|
8 |
STV Group plc |
Media |
9,342,455 |
|
6 |
FairFX Group plc |
Financial
Services |
7,701,900 |
|
5 |
Sutton Harbour
Holdings plc |
Transportation
Services |
7,609,728 |
|
5 |
Restaurant Group
plc |
Food and Beverage |
6,218,801 |
|
4 |
Hansard Global
plc |
Financial
Services |
4,688,716 |
|
3 |
NBNK Investments
plc |
Financial
Services |
4,600,631 |
|
3 |
Coats Group plc |
Textiles |
3,977,180 |
|
3 |
Other |
Various |
6,378,396 |
|
4 |
Total |
|
148,086,522 |
|
98 |
The following tables detail the investments in which the Company
holds a greater than 20 per cent holding in the underlying
entities. These have been recognised at fair value as the Company
is regarded as an investment entity as referred to in Note 1.
2017
Equity Investments |
Place of
Business |
Place of
Incorporation |
Percentage Ownership Interest |
GI Dynamics Inc |
United States |
United States |
46.1 |
Leaf Clean Energy
Company |
United States |
Cayman Islands |
29.9 |
Sutton Harbour
Holdings plc |
United Kingdom |
United Kingdom |
29.3 |
FairFX Group plc |
United Kingdom |
United Kingdom |
25.7 |
Johnston Press
plc |
United Kingdom |
United Kingdom |
21.4 |
2016
Equity Investments |
Place of
Business |
Place of
Incorporation |
Percentage Ownership Interest |
Leaf Clean Energy
Company |
United States |
Cayman Islands |
29.9 |
Sutton Harbour
Holdings plc |
United Kingdom |
United Kingdom |
29.3 |
FairFX Group plc |
United Kingdom |
United Kingdom |
24.9 |
NBNK Investments
plc |
United Kingdom |
United Kingdom |
28.5 |
At the year end and assuming all other variables are held
constant:
- If market prices of listed equity, debt and derivative
financial instruments had been 25 per cent higher (2016: 25 per
cent higher), the Company’s return and net assets for the year
ended 30 June 2017 would have
increased by £47,731,979 (2016: £36,309,140);
- If market prices of listed equity, debt and derivative
financial instruments had been 25 per cent lower (2016: 25 per cent
lower), the Company’s return and net assets for the year ended
30 June 2017 would have decreased by
£32,161,979 (2016: £19,519,031), reflecting the effect of the
derivative financial instruments held at the reporting date.
- There would have been no impact on the other equity
reserves.
Foreign exchange risk
Foreign exchange risk is the risk that the value of financial
instruments will fluctuate due to changes in foreign exchange rates
and arises when the Company invests in financial instruments and
enters into transactions that are denominated in currencies other
than its functional currency. During the year the Company was
exposed to foreign exchange risk arising from equity and debt
investments held in Australian Dollars, Euro and US Dollars (2016:
Australian Dollars and New Zealand Dollars).
The table below illustrates the Company’s exposure to foreign
exchange risk at 30 June 2017:
|
|
2017 |
2016 |
|
|
£ |
£ |
Financial assets
designated at FVTPL: |
|
|
|
Listed equity
investments denominated in Australian Dollars |
|
9,250,855 |
804,878 |
Listed equity
investments denominated in Euro |
|
189,383 |
- |
Listed equity
investments denominated in US Dollars |
|
3,039,519 |
- |
Debt instruments
denominated in US Dollars |
|
9,502,417 |
- |
Total
assets |
|
21,982,174 |
804,878 |
If the Australian Dollar weakened/strengthened by 10 per cent
(2016: 10 per cent) against Sterling with all other variables held
constant, the fair value of equity investments would
increase/decrease by £925,086 (2016: £80,488).
If the Euro weakened/strengthened by 10 per cent (2016: 10 per
cent) against Sterling with all other variables held constant, the
fair value of equity investments would increase/decrease by £18,938
(2016: £Nil).
If the US Dollar weakened/strengthened by 10 per cent (2016: 10
per cent) against Sterling with all other variables held constant,
the fair value of equity investments would increase/decrease by
£303,952 (2016: £Nil) and the fair value of debt instruments would
increase/decrease by £950,242 (2016: £Nil).
Fair value measurements
The Company measures fair values using the following fair value
hierarchy that prioritises the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements). The three levels of the
fair value hierarchy under IFRS 13 are as follows:
Level 1: Quoted price (unadjusted) in an active
market for an identical instrument.
Level 2: Valuation techniques based on observable
inputs, either directly (i.e. as prices) or indirectly (i.e.
derived from prices). This category includes instruments valued
using: quoted prices in active markets for similar instruments;
quoted prices for identical or similar instruments in markets that
are considered less than active; or other valuation techniques for
which all significant inputs are directly or indirectly observable
from market data.
Level 3: Valuation techniques using significant
unobservable inputs. This category includes all instruments for
which the valuation technique includes inputs not based on
observable data and the unobservable inputs have a significant
effect on the instrument’s valuation. This category includes
instruments that are valued based on quoted prices for similar
instruments for which significant unobservable adjustments or
assumptions are required to reflect differences between the
instruments.
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement. For this purpose, the significance of an input
is assessed against the fair value measurement in its entirety. If
a fair value measurement uses observable inputs that require
significant adjustment based on unobservable inputs, that
measurement is a Level 3 measurement. Assessing the significance of
a particular input to the fair value measurement in its entirety
requires judgement, considering factors specific to the asset or
liability.
The determination of what constitutes ‘observable’ requires
significant judgement by the Company. The Company considers
observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
The objective of the valuation techniques used is to arrive at a
fair value measurement that reflects the price that would be
received to sell an asset or transfer a liability in an orderly
transaction between market participants at the measurement
date.
The following tables analyse within the fair value hierarchy the
Company’s financial assets measured at fair value at 30 June 2017 and 30 June
2016:
|
Level
1 |
Level
2 |
Level
3 |
Total |
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 |
|
Level
1 |
Level
2 |
Level
3 |
Total |
2016 |
£ |
£ |
£ |
£ |
Financial assets
designated at FVTPL and derivatives held for trading: |
|
|
|
|
Equities – listed
equity investments |
143,406,419 |
- |
4,680,103 |
148,086,522 |
Derivatives – listed
derivative instruments |
714,000 |
- |
- |
714,000 |
Derivatives – warrant
instruments |
- |
2,289,724 |
- |
2,289,724 |
|
144,120,419 |
2,289,724 |
4,680,103 |
151,090,246 |
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 Level 3 equity investments were valued by reference to the
last available price of the shares in each investee company on the
reporting date. 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:
|
|
2017 |
2016 |
|
|
£ |
£ |
Opening balance at 1
July |
|
4,680,103 |
- |
San Leon
Energy plc - Transfer to Level 3 on 21 January 2016 |
- |
79,471 |
NBNK
Investments plc - Transfer to Level 3 on 20 June 2016 |
- |
4,600,632 |
Purchases |
3,945,084 |
- |
Movement
in unrealised gain |
912,103 |
- |
Sales |
(5,607,825) |
- |
Net
realised gain |
23,506 |
- |
Effect of
exchange rate movements |
(106,584) |
- |
Closing balance at 30
June |
|
3,846,387 |
4,680,103 |
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 investment in San Leon Energy plc was transferred from Level
1 to Level 3 on 21 January 2016, when
its shares were suspended from trading on the LSE. As no quoted
price was available at 30 June 2016,
the valuation was determined using unobservable inputs. During the
year ended 30 June 2017, the Company
sold its entire holding in San Leon Energy plc, realising a loss of
£549,193.
The investment in NBNK Investments plc was transferred from
Level 1 to Level 3 on 20 June 2016,
when its shares were de-listed from trading on the LSE. As no
quoted price was available at 30 June
2016, the valuation was determined using unobservable
inputs. During the year ended 30 June
2017, the Company received two distributions totalling £5.5
million with respect to its entire holding in NBNK, realising a
gain of £572,699.
At the year 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 year ended 30
June 2017 would have increased/decreased by £192,319 (2016:
£234,005); and
- There would have been no impact on the other equity
reserves.
15. RELATED PARTIES
Richard Bernstein is a director
and a member of the Investment Manager, a member of the Investment
Adviser and a holder of 10,000 (2016: 10,000) Ordinary shares in
the Company, representing 0.01 per cent (2016: 0.01 per cent) of
the voting share capital of the Company at the year end.
During the year the Company incurred management fees of
£3,232,888 (2016: £2,617,425) none of which were outstanding at the
year end. The Company also accrued performance fees of £2,354,752
(2016: £Nil) all of which were outstanding and are included in
trade and other payables as at 30 June
2017 (2016: £Nil). A further £983,000 performance fee is
payable in respect of the year ended 30 June
2017 and has been accrued and recognised in the August 2017 NAV.
As at 30 June 2017 the Investment
Manager held 4,015,606 Ordinary shares (2016: 4,015,606) of the
Company, representing 4.08 per cent (2016: 4.08 per cent) of the
voting share capital. Subsequent to the year end, the Investment
Manager held 3,976,509 Ordinary shares of the Company, following a
transfer of 39,097 Ordinary shares of the Company to an employee of
the Investment Adviser on 10 July 2017.
16. DIRECTORS’ INTERESTS
AND REMUNERATION
The interests of the Directors in the share capital of the
Company at the year end and as at the date of this report are as
follows:
|
2017 |
|
2016 |
|
Number of
Ordinary shares |
Total
Voting Rights |
|
Number of Ordinary shares |
Total
Voting Rights |
William Collins |
25,000 |
0.03% |
|
25,000 |
0.03% |
Sarah Evans |
25,000 |
0.03% |
|
25,000 |
0.03% |
Total |
50,000 |
0.06% |
|
50,000 |
0.06% |
During the year the Directors earned the following remuneration
in the form of Directors’ fees from the Company:
|
|
2017 |
|
2016 |
|
|
£ |
|
£ |
William
Collins(1) |
|
35,000 |
|
35,000 |
Sarah
Evans(2) |
|
30,000 |
|
30,000 |
Nigel Ward |
|
27,500 |
|
29,750 |
Christopher Waldron |
25,000 |
|
25,000 |
Jane Le
Maitre(3) |
3,630 |
|
- |
Total |
|
121,130 |
|
119,750 |
(1) Chairman of the Company
(2) Senior Independent Director of the Company and
Chairman of the Audit Committee
(3) Appointed as Director of the Company on
8 May 2017
At 30 June 2017, directors’ fees
of £33,005 (2016: £29,375) were accrued within trade and other
payables.
During the year ended 30 June
2016, Nigel Ward received a
one-off fee of £3,500 for services undertaken in respect of
assisting the Investment Manager during 2015 to establish the Risk
Committee with the appropriate terms of reference. With effect from
1 January 2016, Nigel Ward received an increase in remuneration
of £2,500 to reflect additional services provided to the Company in
respect of managing risk.
17. MATERIAL
AGREEMENTS
The Company has entered into the following material
agreements:
Crystal Amber Asset Management
(Guernsey) Limited
With effect from 27 January 2015,
under the addendum to the management agreement, the Investment
Manager receives a management fee of 2 per cent applied to the
Market Capitalisation of the Company at 30
June 2013 (£73.5 million) (the “Base Amount”). To the extent
that an amount equal to the lower of the Company's NAV and market
capitalisation, at the relevant time of calculation, exceeds the
Base Amount (the “Excess Amount”), the applicable fee rate on the
Excess Amount will be 1.5 per cent.
In addition, 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:
- the achievement of a performance hurdle condition: the NAV per
Ordinary share at the end of the relevant performance period
(adding back for this purpose the aggregate amount of any dividends
per share paid to shareholders since payment of the last
performance fee) must exceed an amount equal to the placing price,
increased at a rate of; (i) 7 per cent 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 cent 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 cent 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 (“the Basic Performance
Hurdle”); and
- the achievement of a “high watermark”: 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.
If the Basic Performance Hurdle is met, and the high watermark
exceeded, the performance fee is an amount equal to 20 per cent of
the excess of the NAV per Ordinary share at the end of the relevant
performance period over the higher of:
- the Basic Performance Hurdle;
- the NAV per Ordinary share at the start of the relevant
performance period; and
- the high water mark.
Depending on whether the Ordinary shares are trading at a
discount or a premium to the Company’s NAV per share when the
performance fee becomes payable, the performance fee will be either
payable in cash (subject to the restrictions set out below) or
satisfied by the sale of Ordinary shares out of Treasury or by the
issue of new fully paid Ordinary shares (the number of which shall
be calculated as set out below):
- If Ordinary shares are trading at a discount to the NAV per
Ordinary share when the performance fee becomes payable, the
performance fee shall be payable in cash. Within a period of one
calendar month after receipt of such cash payment, the Investment
Manager shall be required to purchase Ordinary shares in the market
of a value equal to such cash payment.
- If Ordinary shares are trading at, or at a premium to, the NAV
per Ordinary share when the performance fee becomes payable, the
performance fee shall be satisfied by the sale of Ordinary shares
out of Treasury or by the issue of new fully paid Ordinary shares.
The number of Ordinary shares that shall become payable shall be a
number equal to the performance fee payable divided by the closing
mid-market price per Ordinary share on the date on which such
performance fee became payable.
Performance fee for year ended
30 June 2017
At 30 June 2017, the Basic
Performance Hurdle was 194.79 pence
(2016: 176.62 pence) and the NAV per
share before any accrual for any performance fee payable in respect
of the year then ended was 206.76
pence (2016: 153.79
pence). Accordingly, a performance fee was payable
equating to 20 per cent of the excess NAV per share and is adjusted
for dividends declared since payment of the last performance fee,
over the respective Basic Performance Hurdle multiplied by the
weighted average number of shares. The performance fee for the year
ended 30 June 2017 amounted, in
aggregate, to £3,338,552 of which £2,354,752 was accrued at
30 June 2017 (2016: £Nil). The
remaining £983,800 has been accrued and recognised in the
August 2017 NAV.
Heritage International Fund Managers
Limited
The Administrator provides administration and company
secretarial services to the Company. For these services, the
Administrator is paid an annual fee of 0.12 per cent (2016: 0.12
per cent) of that part of the NAV of the Company up to £150 million
and 0.1 per cent (2016: 0.1 per cent) of that part of the NAV over
£150 million (subject to a minimum of £75,000 per annum).
ABN
AMRO (Guernsey) Limited
Under the custodian agreement, the Custodian receives a fee,
calculated and payable quarterly in arrears at the annual rate of
0.05 per cent (2016: 0.05 per cent) of the NAV per annum, subject
to a minimum fee of £25,000 per annum. Transaction charges of £100
per trade for the first 200 trades processed in a calendar year and
£75 per trade thereafter are also payable.
18. ULTIMATE CONTROLLING
PARTY
In the opinion of the Directors, on the basis of the
shareholdings advised to them, the Company has no ultimate
controlling party.
19. POST BALANCE SHEET
EVENTS
On 10 July 2017, the Investment
Manager transferred 39,097 Ordinary shares of the Company to an
employee of the Investment Adviser. Following the transfer, the
Investment Manager held 3,976,509 Ordinary shares of the
Company.
On 11 July 2017, the Company
declared an interim dividend of £2,459,120, equating to
2.5 pence per Ordinary share, which
was paid on 18 August 2017 to
shareholders on the register on 21 July
2017.
The Company purchased 290,000 of its own Ordinary shares during
the period between 1 July 2017 and
12 September 2017, which were held as
Treasury shares. Following these purchases, the total number of
Ordinary shares held as Treasury shares by the Company is
925,000.
On 4 August 2017, the Company
reported that its unaudited NAV at 31 July
2017 was 196.71 pence per
share.
On 8 September 2017, the Company
reported that its unaudited NAV at 31 August
2017 was 191.79 pence per
share.
Glossary of Capitalised Defined
Terms
“Admission” means admission, on 17
June 2008, to the Official List and/or admission to trading
on the Alternative Investment Market of the London Stock Exchange,
as the context may require, of the Ordinary shares;
“AEOI Rules” means the Automatic Exchange of Information
Rules;
“AGM” or “Annual General Meeting” means the annual
general meeting of the Company;
“AIF” means Alternative Investment Funds;
“AIFM” means AIF Manager;
“AIFM Directive” means the EU Alternative Investment Fund
Managers Directive (no. 2011/61/EU);
“AIC” means the Association of Investment Companies;
“AIC Code” means the AIC Code of Corporate
Governance;
“AIC Guide” means the AIC’s Corporate Governance Guide
for Investment Companies, dated July
2016;
“AIM” means the Alternative Investment Market of the
London Stock Exchange;
“Annual Report” means the annual publication of the
Company to the shareholders to describe their operations and
financial conditions, together with the Company’s financial
statements;
“Articles of Incorporation” or “Articles” means
the articles of incorporation of the Company;
“Audited Financial Statements” or “Financial
Statements” means the audited annual financial statements of
the Company, including the Statement of Profit or Loss and Other
Comprehensive Income, the Statement of Financial Position, the
Statement of Changes in Equity, the Statement of Cash Flows and
associated notes;
“Australian Stock Exchange” means the Australian Stock
Exchange Ltd;
“Bank of England” means the Bank of England, the central bank of the UK;
“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;
“Committee” means the Audit Committee of the Company;
“Company” or “Fund” means Crystal Amber Fund
Limited;
“Companies Law” means the Companies (Guernsey) Law, 2008,
(as amended);
“CRS” means Common Reporting Standard;
“EBITDA” means earnings before interest, taxes,
depreciation and amortisation;
“EGM” or “Extraordinary General Meeting” means an
extraordinary general meeting of the Company;
“FATCA” means Foreign Account Tax Compliance Act;
“FCA” means the Financial Conduct Authority;
“FRC” means the Financial Reporting Council;
“FRC Code” means the UK Corporate Governance Code
published by the FRC;
“FTSE” means the Financial Times Stock Exchange;
“FVTPL” means Fair Value Through Profit or Loss;
“GFSC” means the Guernsey Financial Services
Commission;
“GFSC Code” means the GFSC Finance Sector Code of
Corporate Governance;
“Gross Asset Value” means the value of the assets of the
Company, before deducting its liabilities, and is expressed in
Pounds Sterling;
“IAS” means international accounting standards as issued
by the Board of the International Accounting Standards
Committee;
“IASB” means the International Accounting Standards
Board;
“IFRIC” means the IFRS Interpretations Committee,
formerly the International Financial Reporting Interpretations
Committee, which issues IFRIC interpretations following approval by
the IASB;
“IFRS” means the International Financial Reporting
Standards, being the principles-based accounting standards,
interpretations and the framework by that name issued by the
International Accounting Standards Board;
“Interim Financial Statements” means the unaudited
condensed interim financial statements of the Company, including
the Condensed Statement of Profit or Loss and Other Comprehensive
Income, the Condensed Statement of Financial Position, the
Condensed Statement of Changes in Equity, the Condensed Statement
of Cash Flows and associated notes;
“Interim Report” means the Company’s interim report and
unaudited condensed financial statements for the period ended 31
December;
“Investment Management Agreement” means the agreement
between the Company and the Investment Manager, dated 16 June 2008, as amended on 21 August 2013 and further amended on
27 January 2015;
“Kay Review” means the Kay Review of UK equity markets
and long-term decision making as published by the UK Government’s
Department for Business, Innovation and Skills;
“KPMG” means KPMG Channel Islands Limited;
“LSE” or “London Stock Exchange” means the London Stock
Exchange plc;
“Market Capitalisation” means the total number of
Ordinary shares of the Company multiplied by the closing share
price;
“MW” means megawatt;
“NAV” or “Net Asset Value” means the value of the
assets of the Company less its liabilities as calculated in
accordance with the Company’s valuation policies and expressed in
Pounds Sterling;
“NAV per share” means the Net Asset Value per Ordinary
share of the Company and is expressed in pence;
“NMPI” means Non-Mainstream Pooled Investments;
“Official List” is the list maintained by the Financial
Conduct Authority (acting in its capacity as the UK Listing
Authority) in accordance with Section 74(1) of the Financial
Services and Markets Act 2000;
“Ordinary share” means an allotted, called up and fully
paid Ordinary share of the Company of £0.01 each;
“Risk Committee” means the Risk Committee of the
Investment Manager;
“S&P” means Standard & Poor’s Credit Market
Services Europe Limited, a credit rating agency registered in
accordance with Regulation (EC) No 1060/2009 with effect from
31 October 2011;
“SME” means small and medium sized enterprises;
“SORP” means Statement of Recommended Practice;
“Stewardship Code” means the Stewardship Code of the
Company adopted from 14 June 2016, as
published on the Company’s website www.crystalamber.com;
“TISE” means The International Stock Exchange, formerly
the Channel Islands Securities Exchange;
“Treasury” means the reserve of Ordinary shares that have
been repurchased by the Company;
“Treasury shares” means Ordinary shares in the Company
that have been repurchased by the Company and are held as Treasury
shares;
“UK” or “United Kingdom” means the United Kingdom of Great Britain and Northern Ireland;
“UK Stewardship Code” means the UK Stewardship Code
published by the FRC in July 2010 and
revised in September 2012;
“US” means the means the United
States of America, its territories and possessions, any
state of the United States and the
District of Columbia;
“US Federal Reserve” means the Federal Reserve System,
the central banking system of the US; and
“£” or “Pounds Sterling” or “Sterling”
means British pound sterling and “pence” means British
pence.
Directors and General Information
Directors
William Collins (Chairman)
Sarah Evans (Senior Independent Director)
Nigel Ward
Christopher Waldron
Jane Le Maitre (Appointed 8 May 2017)
Investment Adviser
Crystal Amber Advisers (UK) LLP
17c Curzon Street
London W1J 5HU
Administrator and Secretary
Heritage International Fund Managers Limited
Heritage Hall
Le Marchant Street
St. Peter Port
Guernsey GY1 4HY
Broker
Pre 09/09/2016:
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Post 09/09/2016:
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: www.crystalamber.com |
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
Capita Registrars (Guernsey) Limited
Longue Hougue House
St Sampson
Guernsey GY2 4JN |