TIDMCRS
RNS Number : 4579D
Crystal Amber Fund Limited
03 March 2022
3 March 2022
Crystal Amber Fund Limited
Interim results for the six months ended 31 December 2021
The Company announces its unaudited interim results for the six
months ended 31 December 2021.
Key Points
-- Net Asset Value ("NAV") per share fell by 2.5% over the
period to 143.19p per share. Total returns, inclusive of the 2.5p
dividend paid in July 2021 were -0.8%.
-- The Fund's NAV per share return compares to a 4.7% increase in the Numis Small Cap Index.
-- Revenue upgrades at Equals Group with a strong growth
trajectory. Post period end, additional revenue and profit
upgrades.
-- GI Dynamics obtained permission to initiate a clinical trial
in India with its local partner, Apollo Sugar.
-- Increased shareholding in Hurricane Energy from 23% to 29% of
Hurricane's issued share capital.
-- On 22 December 2021 an interim dividend was declared of a
further 10p in addition to the 2.5p dividend declared in July 2021.
The interim dividend was paid on 9 February 2022.
-- During the period, GBP0.4 million was allocated to share
buybacks, acquiring 372,000 shares at an average of 113.55p a
share.
-- Post period end, adjusting for the 10p dividend per share
paid in February 2022, NAV per share increased by 11.7% in the two
months to 28 February 2022.
-- A proposal to change the investment policy and amend the
terms of the Investment Management Agreement will be put to a
shareholder vote at an EGM to be held on 7 March 2022. Full details
of the two proposals are contained in the Board's letter to
shareholders dated 15 February 2022.
For further enquiries please contact:
Crystal Amber Fund Limited
Christopher Waldron (Chairman) Tel: 01481 742
742
Allenby Capital Limited - Nominated Adviser
David Worlidge/Liz Kirchner Tel: 020 3328
5656
Winterflood Investment Trusts - Broker
Joe Winkley/Neil Langford Tel: 020 3100
0160
Crystal Amber Advisers (UK) LLP - Investment
Adviser
Richard Bernstein Tel: 020 7478
9080
(1) All capitalised terms are defined in the Glossary of
Capitalised Defined Terms unless separately defined.
Chairman's Statement
During the period from 30 June 2021 to 31 December 2021, net
asset value fell from GBP122.9 million (146.81 pence per share) to
an unaudited NAV of GBP119.4 million (143.19 pence per share). The
Fund's NAV per share total return over the six months to 31
December 2021 of -0.8%, compares to a 4.7% increase in the Numis
Small Cap Index in the same period.
Shareholders are aware that the Fund's portfolio is highly
concentrated: the Fund's top four holdings comprise 74% of NAV. As
previously stated, the Board remains mindful that activist
investing requires a focused portfolio, which inevitably increases
the concentration risk. During the period, there were no changes in
the composition of the Fund's core holdings.
Pleasingly, at Equals Group, the intense engagement and
influence made possible by the Fund as the largest shareholder was
rewarded with a 34% share price increase over the period. In
January 2022, the share price rose by a further 18%.
The most intense activism was at Hurricane Energy. The Fund's
holding endured a torrid time in the period up to 30 June 2021 as a
result of Hurricane's previous board embarking on a costly, futile
and unsuccessful attempt to deliver 95% of the equity to
bondholders. Following the Fund's victory in the High Court, the
Fund was able to continue to promote the interests of all
shareholders and press the new Hurricane board to embark on a
substantial, albeit belated bond buyback programme. The Fund is
proud of its activist involvement and its work. Should oil
production at Hurricane continue to meet or exceed budget, the
Fund's 29% shareholding should be extremely valuable.
Despite an excellent operational performance at Hurricane and a
sharply higher oil price, the Fund believes communication from
Hurricane was overly pessimistic during the period under review. As
a result the share price rose by just 5%, but since the period end,
with balanced messaging, continued good performance and a further
increase in the price of oil, Hurricane's share price has
doubled.
During the period, the Fund declared dividends totalling 12.5p
per share, with 2.5p in July 2021 and 10p in December 2021. The
Fund also continued its discount management policy through share
buy-backs, aided by the Fund's share price discount to NAV, which
averaged 23.7% over the period.
Future Investment Policy
At the AGM in November 2021, the resolution that the Fund
continue as constituted received a majority of votes, but did not
achieve the required 75% majority to pass. Consequently, on 15
February 2022 the Board wrote to shareholders proposing a change of
investment policy and amendment to the terms of the Investment
Management Agreement.
The proposed policy change will see the Fund adopt a strategy of
maximising capital returns to shareholders through timely disposals
of its strategic holdings over the period to the end of 2023. In
line with this, the Board believes it is appropriate for the
investment management fees to be aligned with this policy and has
also proposed a new reduced fee structure, comprising a fixed fee
that will decline over the realisation period. The existing
incentive fee arrangements will also be revised and will be based
on realised cash, rather than increases in NAV. Full details of the
two proposals are contained in the Board's circular of 15 February
2022 and will be put to a shareholder vote at the forthcoming EGM
on 7 March 2022.
The Board believes that the new strategy is in the best
interests of shareholders as it allows the Manager a reasonable
time frame to make disposals without compromising ongoing
engagement with investee companies. We have seen the benefits of
this in the last few months and hope that this measured policy will
be reflected in shareholders' returns over the next eighteen
months.
Christopher Waldron
Chairman
2 March 2022
Investment Manager's Report
Strategy and performance
On 31 December 2021, equity investments in twelve companies
represented 96% of NAV. The Fund also held loan note instruments in
GI Dynamics Inc, which represent 4% of NAV. The Fund was fully
invested at the end of the year. The Fund's top four holdings
represented 74% of NAV (2020: 83%).
During the period, the Fund reduced its positions in De La Rue,
Allied Minds and Equals Group, realising a combined loss of GBP2.8
million. Following the High Court's refusal to sanction Hurricane
Energy's financial restructuring, the Fund significantly increased
its holding in the Company from 23% to 29%. These shares were
acquired at an average cost of 3.8p. The Fund also continued to
support GI Dynamics with a GBP0.6 million investment and initiated
a new investment in an unlisted business.
Over the period, the key contributor to the Fund's performance
was Equals Group (5.2%) and the key detractor was De La Rue
(-5.3%).
Investee companies
Our comments on some of our principal investments are as
follows:
De La Rue Plc ("De La Rue")
During the period, De La Rue published its unaudited interim
results for the six months to 30 September 2021. Adjusted operating
profits rose by 166% to GBP17 million. Positive operating cash flow
was GBP25.8 million.
The outlook for the full year at the time the results were
published was described as being in line with the board's
expectations. In January 2022, De La Rue released a trading update
stating that, as a result of headwinds relating to the Covid-19
pandemic employee absences at global manufacturing facilities and
supply chain shortages, operating profits are now expected to be
broadly similar to the previous year at between GBP36 million and
GBP40 million, as against earlier market expectations of between
GBP45 million and GBP47 million.
Prior to the trading update, the Fund had been in discussion
with De La Rue's Chief Executive and Chairman regarding gross
margins. The Fund conveyed its view to De La Rue that its pricing
has been on capacity utilisation rather than maximising gross
profit and that De La Rue could have taken better advantage of
buoyant demand.
In July 2020, De La Rue completed a GBP100 million fundraise
which was priced at 110p a share. Over the last eighteen months,
the business has been transformed, but, the share price has
returned to 110p following the profit warning. Furthermore,
businesses with similar pension profiles are now benefiting from
rising interest rate expectations. The Fund believes that this
should result in a material reduction in future pension
contributions for De La Rue in the coming year and increase free
cash flows accordingly.
Shares in De La Rue now trade on 9.7 times revised earnings per
share to March 2022 and 8 times to March 2023. The Fund believes
that following the Covid-19 pandemic, the industry requires
consolidation. Given its leading market share in Currency and its
20%, margins in Authentication, De La Rue should be ideally placed
to be a part of that consolidation.
During 2021, the Fund reduced its shareholding in De La Rue from
15% to 10%.
Allied Minds
The Fund has been an investor in Allied Minds since November
2018, and currently owns in excess of 18% . of its issued share
capital. Since investing, the Fund has secured a 70% reduction in
the annual cost base.
In 2019, Allied Minds announced that it would focus on
maximising returns and shareholder distributions from its existing
portfolio, rather than continuing to invest in new businesses.
Allied Minds has failed to provide market participants with
visibility as to the timing and quantum of shareholder
distributions. The portfolio contains three significant holdings:
Federated Wireless, BridgeComm and Orbital Sidekick.
In March 2020, Harry Rein was appointed Chairman of the Allied
Minds board, having joined the board in November 2017. In January
2021, following a strategic review, Allied Minds introduced what it
described as "a new form of governance better suited to achieve
value creation." With no Chief Executive, Allied Minds is now
managed by its three non-executive directors. The Fund considers,
in practical terms, that Harry Rein is the key decision maker. The
2020 Report and Accounts for Allied Minds states that "the Chairman
is responsible for the leadership and conduct of the board."
During the period, the Fund expressed several governance
concerns to Allied Minds, none of which were adequately resolved.
On 18(th) February 2022, Crystal Amber announced that it had sent
to the board of Allied Minds a requisition notice requiring Allied
Minds to convene a general meeting at which a resolution will be
proposed to remove Harry Rein as a non-executive director.
Harry Rein's record and responsibilities as Chairman (there is
no Chief Executive) include:
1. Appalling shareholder returns: since becoming Chairman, the
share price of Allied Minds has fallen by 40%. Over the same
period, the NASDAQ US Small Cap Index has risen by 85%. Over the
last 12 months, the share price of Allied Minds has fallen by
36%.
2. An egregious total expense ratio: Allied Minds is projecting
annual operating costs of $5.7 million. Net assets are currently
estimated at $123 million including cash of $13 million. Adjusting
for cash, the total expense ratio is 5.2 per annum. Expenses
relative to market capitalisation less cash are 11.8%. per
annum.
3. Withholding price sensitive information: In April 2021, at
the Capital Markets Day, it was disclosed that revenues for 2021
Federated Wireless were forecast to be $17 million with $35 million
to $45 million expected for the year to December 2022. It was
stated that during Q3 of 2021, the company would have "a really
good idea" of the 2021 outturn. In August 2021, Allied Minds
reported that Federated Wireless had met its revenue expectations
for its first half and was on track to meet its full year plan. In
October 2021, house broker, Numis Securities wrote: "Federated
Wireless accounts for c.26p NAV per ALM share (but is likely worth
a multiple of this) in our view, and, most importantly, the company
keeps producing more evidence to assure that it is on track to turn
over $17m in FY21 and $40m in FY22, and earn high, SaaS-type,
profit margins." Following Crystal Amber's requisition notice being
announced referring to this issue, on the following business day,
Allied Minds' announcement admitted that Federated Wireless
revenues were below expectations set out at Allied Minds' capital
markets presentation in April 2021.
4. Misleading and unbalanced regulatory news service
announcements: on 21(st) February 2022, Allied Minds announced a
$58 million fundraise at Federated Wireless. This was presented as
an "up round" referring to a $15 million increase in the pre-money
value. However, adjusting for the $4.3 million of bridge funding,
the like for like value of Allied Mind's shareholding fell by 17%.
This was not disclosed to market participants.
5. Governance concerns including:
i) Breach of provision 20 of the 2018 UK Corporate Governance
Code. No external search consultancy was used to identify and
recruit Bruce Failing. Bruce Failing, a non-executive director was
proposed by Harry Rein who advised the Fund that he had "persuaded
Bruce Failing to join the board."
ii) Bruce Failing acts as the Senior Independent Director but
the Fund does not believe he is independent: both Bruce Failing and
Harry Rein are directors of Delivery Care RX.
iii) Breach of provision 24 of the 2018 UK Corporate Governance
Code. Harry Rein is a member of the Audit Committee.
iv) Appointing Mark Pritchard, a 5.5% shareholder as a paid
consultant, further increasing the cost base.
6. Investor communication blunders including:
i) The publication of a "rogue" press release by Federated
Wireless, a company also chaired by Harry Rein. In November 2021,
Federated Wireless issued a press release stating that revenue
growth was four times higher than expected. When Crystal Amber
wrote to Harry Rein to seek clarification as to why this
information had not been released to market participants, he
replied: " A marketing manager at Federated released the initial
Federated release without the Board of Federated's knowledge." The
release was subsequently amended to exclude any reference to
revenue growth.
ii) Failure to invite investors to the 2021 Capital Markets Day:
invitations were sent to analysts, not to investors. The Fund was
aware of two (paid for) analysts who cover Allied Minds being sent
invitations. Subsequently, investors were made aware of the Capital
Markets Day, with only a few days' notice. The company's broker
subsequently apologised to the Fund for this error.
iii) Withdrawing of paid-for research from Edison, after the
Fund highlighted an error with the percentage holding in a
portfolio company. Edison also apologised for a previous error
pointed out to Harry Rein by the Fund: estimated net asset value
had been materially overstated, as a result of not deducting the
special dividend paid to shareholders in February 2020. It would
appear there was a lack of oversight of these figures from Harry
Rein.
Under Harry Rein's "stewardship," the Fund regards Allied Minds
as rudderless and guilty of serious and egregious corporate
governance failings. To safeguard against further erosion of
shareholder value and to stop such conduct continuing, the Fund is
now seeking Harry Rein's removal.
The Fund estimates that net asset value per share at Allied
Minds is approximately 38p, placing the shares on a 50%. discount
to net asset value. In its engagement, the Fund has found Harry
Rein to be a major impediment to value protection and realisation.
The Fund believes that Allied Minds must communicate to market
participants a timeline of cash realisations and return of sale
proceeds and this should materially assist in narrowing the share
price discount to net asset value.
Equals Group ("Equals")
During the period , Equals continued to demonstrate the payback
from substantial investments in product and marketing capabilities
undertaken in 2019 and 2020. These have developed multi-currency
capabilities for a range of users , including larger businesses and
other financial intermediaries.
Sales efficiency has also improved with the deployment of new
tools. Since May 2021, growth in revenues across products has been
aided by the launch of Equals Solution. This is a new multicurrency
product with own - name IBAN capability targeted at larger
corporations.
In the fourth quarter of 2020, the Fund took advantage of share
price weakness and increased its holding in Equals to 25.7% to
become its largest shareholder. The share price went into 2021 at
28.25p. Following several positive trading updates during 2021 ,
Equals reported unaudited revenues of GBP44.1 million for 2021 in
the pre-close announcement in January 2022. (2020: GBP29 million,
2019: GBP30.9 million ). Revenues from its retail travel money
product, which were most impacted by the pandemic, now represent
approximately 6%. of total revenues and should benefit from a
normalisation of leisure travel. Net cash increased to GBP13
million.
The January 2022 trading update resulted in strong institutional
demand and the Fund reduced its shareholding from just over 20 % to
13 %, achieving a sale price of 77p per share. Having engaged
intensively with management over the last 18 months, it is pleasing
to have converted this investment into substantial realised
profits.
The Fund expects Equals to continue to deliver strong top line
growth and to benefit from industry consolidation.
GI Dynamics Inc ("GI Dynamics")
After delays due to the COVID-19 surge in India, the I-STEP
application for a randomised clinical trial (to be conducted in
conjunction with Apollo Sugar Clinics) was reviewed by regulators
in India in June 2021 and approved in December 2021.
The global pandemic has reaffirmed the importance of gaining
control of the significant risk factors associated with Type II
diabetes and obesity. More than ever, medical professionals and
patients alike are seeking minimally invasive and effective
therapies to help control and resolve these chronic conditions. GI
Dynamics is preparing to meet this large unmet clinical need.
The Fund believes that because of its intensive activism, the
investment in GI Dynamics now has considerable strategic value.
This was evidenced over the period by two approaches from US trade
parties that have expressed an interest in making a significant
investment in GI Dynamics. The Fund looks forward to continuing to
work with the company to achieve its operational milestones and to
further develop the pathway to maximise shareholder value. In due
course, the Fund will consult with investors about the longer-term
plans for GI Dynamics to realise value for its shareholders. Given
the anticipated value accretive milestones, the Fund believes it is
appropriate that it gives GI Dynamics the time it requires to
maximise shareholder returns.
Hurricane Energy plc (Hurricane)
In June 2021 at the High Court, Mr Justice Zacaroli refused to
sanction the Hurricane board's attempt to force through a highly
dilutive debt for equity swap. At the time, Hurricane claimed that
without a debt for equity swap, bondholders would not be able to
recover more than 56% of their investment. The board had proposed
that $50 million of the $230 million repayable to bondholders in
July 2022 be converted into 95 % of Hurricane's equity, with the
remaining $180 million debt earning cash interest of 9.4 % per
annum plus payment in kind interest of 5% per annum.
In January 2022, Hurricane announced that net debt had reduced
to $28.5 million at 31 December 2021. Net free cash of between $8
million and $38 million after repaying all outstanding bonds is
expected by the end of July 2022. This is a remarkable
transformation in just seven months. The Fund's actions not only
averted a wholly unnecessary 95% dilution but has positioned the
Fund to benefit from Hurricane's exciting prospects. In February
2022, Hurricane announced that it had net free cash of $85 million
against a convertible bond liability of $78.5 million.
During the period, the Fund engaged with management regarding
the utilisation of tax losses. On 31 December 2020, Hurricane had
ring-fenced trading losses of $468.7 million and supplementary
charge losses and investment allowances of $707.8 million. In
addition, capital allowance pools of $383.5 million were available
to be used against ring-fenced trading profits. In the event of a
corporate transaction, the Fund believes that the benefit arising
to Hurricane's shareholders could be very substantial.
In October 2021, the Fund reported that it had written to the
Hurricane Board under Article 94 of the company's articles of
association to request that a committee (comprising the
non-executive directors) be established with a mandate to
investigate what happened and to engage external advisers (should
that be needed) for the investigation. The Fund believes that it,
along with all Hurricane shareholders, suffered considerable
financial loss. In December 2021, Hurricane reported that it had
completed a review of events leading up to the restructuring and
that no further action was necessary.
Following the period end, the Fund requested and took a position
on the Hurricane Board to enable Hurricance to fully realise its
potential. Therefore, the Fund is not able to comment on the
company other than by reference to public announcements made by
Hurricane.
Having previously banked profits of GBP43 million on Hurricane,
the average cost of the Fund's current shareholding is 6.7p a
share.
Leaf Clean Energy Company("Leaf")
Leaf Clean has received the withheld tax from the Invenergy
disposal. In February 2022, the Fund received notice of compulsory
redemption of its shares, as the company winds down. The Fund
expects to realise GBP1.6 million in the process, with 6117p per
share being paid, compared with the suspension price of 454p.
Hedging Activity
The Fund did not engage in hedging activity during the
period.
Realisations
Over the period, the Fund realised losses of GBP3.1 million.
These relate mainly to the sales of Allied Minds and De La Rue,
offset by the gains in Equals Group.
Outlook
The Fund has accumulated strategic holdings in Hurricane Energy,
Equals Group, De La Rue and Allied Minds. At the appropriate time,
these holdings will enable the Fund to facilitate and benefit from
corporate action. Despite the current geopolitical uncertainties
and general cost input inflation, the Fund is well placed to
continue its strong recovery.
Crystal Amber Asset Management (Guernsey) Limited
2 March 2022
Condensed Statement of Profit or Loss and Other Comprehensive
Income (Unaudited)
For the six months ended 31 December 2021
Six months ended 31 December Six months ended 31 December
2021 2020
Revenue Capital Total Revenue Capital Total
Note GBP GBP GBP GBP GBP GBP
Income
Dividend income from
listed investments 20,311 - 20,311 269,645 - 269,645
------------ ------------ ------------ ------------
20,311 - 20,311 269,645 - 269,645
Net (losses)/gains on financial
assets designated at FVTPL and
derivatives held for trading
Equities
Net realised (losses) 4 - (3,103,595) (3,103,595) - (3,000,627) (3,000,627)
Movement in unrealised
gains 4 - 2,564,126 2,564,126 - 30,709,787 30,709,787
Debt Instruments
Movement in unrealised
gains 4 - 92,097 92,097 - 3,171,912 3,171,912
Money market
investments
Net realised losses 4 - - - - (6,114,887) (6,114,887)
Movement in unrealised
(losses) 4 - - - - (3,908,027) (3,908,027)
- (447,372) (447,372) - 20,858,158 20,858,158
------------ ------------ ------------ ------------ ------------ ------------
Total income/(expense) 20,311 (447,372) (427,061) 269,645 20,858,158 21,127,803
------------ ------------ ------------ ------------ ------------ ------------
Expenses
Transaction costs - 96,331 96,331 - 29,234 29,234
Exchange movements on
revaluation of
investments and
working capital (83,682) (723,899) (807,581) 528,477 1,511,639 2,040,116
Management fees 10 880,981 - 880,981 737,204 - 737,204
Directors' remuneration 65,000 - 65,000 65,000 - 65,000
Administration fees 79,003 - 79,003 67,424 - 67,424
Custodian fees 91,301 - 91,301 30,297 - 30,297
Audit fees 17,755 - 17,755 17,550 - 17,550
Facility Fee 6 - - - 265,941 - 265,941
Other expenses 193,473 - 193,473 161,344 - 161,344
------------ ------------ ------------ ------------
1,243,831 (627,568) 616,263 1,873,237 1,540,873 3,414,110
------------ ------------
(Loss)/return for the
period (1,223,520) 180,196 (1,043,324) (1,603,592) 19,317,285 17,713,693
============ ============ ============ ============ ============ ============
Basic and diluted
(loss)/earnings per
share (pence) 2 (1.46) 0.22 (1.25) (1.80) 21.65 19.85
============ ============ ============ ============ ============ ============
All items in the above statement derive from continuing
operations.
The total column of this statement represents the Company's
Statement of Profit or Loss and Other Comprehensive Income prepared
in accordance with IFRS. The supplementary information on the
allocation between revenue return and capital return is presented
under guidance published by the AIC.
The Notes to the Unaudited Condensed Financial Statements form
an integral part of these Interim Financial Statements.
Condensed Statement of Financial Position (Unaudited)
As at 31 December 2021
As at As at As at
31 December 30 June 31 December
2021 2021 2020
(Unaudited) (Audited) (Unaudited)
Notes GBP GBP GBP
Assets
Cash and cash equivalents 106,075 5,447,571 237,957
Trade and other receivables 95,796 406,272 151,334
Financial assets designated
at FVTPL and derivatives
held for trading 4 119,352,781 121,642,713 111,889,639
Total assets 119,554,652 127,496,556 112,278,930
--------------------------- ----------------------- --------------------
Liabilities
Trade and other payables 181,808 4,564,568 182,898
Loan facility 6 - - 3,205,825
Total liabilities 181,808 4,564,568 3,388,723
--------------------------- ----------------------- --------------------
Equity
Capital and reserves attributable
to the Company's equity
shareholders
Share capital 7 997,498 997,498 997,498
Treasury shares reserve 8 (19,614,035) (19,191,639) (18,485,298)
Distributable reserve 86,378,909 88,472,333 90,579,709
Retained earnings 51,610,472 52,653,796 35,798,298
Total equity 119,372,844 122,931,988 108,890,207
--------------------------- ----------------------- --------------------
Total liabilities and
equity 119,554,652 127,496,556 112,278,930
--------------------------- ----------------------- --------------------
NAV per share (pence) 3 143.19 146.81 128.99
=========================== ======================= ====================
The Interim Financial Statements were approved by the Board of
Directors and authorised for issue on 2 March 2022.
Christopher Waldron Jane Le Maitre
Chairman Director
2 March 2022 2 March 2022
The Notes to the Unaudited Condensed Financial Statements form
an integral part of these Interim Financial Statements.
Condensed Statement of Changes in Equity (Unaudited)
For the six months ended 31 December 2021
Retained
Share Treasury Distributable earnings Total
Capital Shares Reserve Capital Revenue Total Equity
Note GBP GBP GBP GBP GBP GBP GBP
Opening
balance at
1 July 2021 997,498 (19,191,639) 88,472,333 57,984,984 (5,331,188) 52,653,796 122,931,988
Purchase of
Ordinary
shares into
Treasury 8 - (422,396) - - - - (422,396)
Dividends
paid in the
period 9 - - (2,093,424) - - - (2,093,424)
Return for
the period - - - 180,196 (1,223,520) (1,043,324) (1,043,324)
Balance at
31 December
2021 997,498 (19,614,035) 86,378,909 58,165,180 (6,554,708) 51,610,472 119,372,844
======== ============= ============== ============= ============ ============ ============
For the six months ended 31 December 2020
Retained
Share Treasury Distributable earnings Total
Capital shares Reserve Capital Revenue Total Equity
Notes GBP GBP GBP GBP GBP GBP GBP
Opening
balance at
1 July
2020 996,248 (12,265,601) 90,579,709 20,511,896 (2,427,291) 18,084,605 97,394,961
Issue of
Ordinary
shares 7 1,250 - - - - - 1,250
Purchase of
Ordinary
shares
into
Treasury 8 - (6,219,697) - - - - (6,219,697)
Return for
the period - - - 19,317,285 (1,603,592) 17,713,693 17,713,693
Balance at
31
December
2020 997,498 (18,485,298) 90,579,709 39,829,181 (4,030,883) 35,798,298 108,890,207
=========== ============= ============== =========== ============ =========== ============
The Notes to the Unaudited Condensed Financial Statements form
an integral part of these Interim Financial Statements.
Condensed Statement of Cash Flows (Unaudited)
For the six months ended 31 December 2021
Six months Six months
ended ended
31 December 31 December
2021 2020
(Unaudited) (Unaudited)
GBP GBP
Cash flows from operating activities
Dividend income received from listed
investments 20,311 269,645
Management fees paid (880,981) (737,204)
Directors' fees paid (65,000) (65,000)
Other expenses paid (61,164) (341,248)
Net cash outflow from operating activities (986,834) (873,807)
Cash flows from investing activities
Purchase of equity investments (20,521,735) (28,684,716)
Sale of equity investments 23,716,999 50,502,804
Purchase of debt instruments (4,802,643) (385,683)
Purchase of derivative financial instruments - (32,222,870)
Sales of derivative financial instruments - 9,289,813
Transaction charges on purchase and sale
of investments (118,813) (22,169)
------------- -------------
Net cash outflow from investing activities (1,726,192) (1,522,821)
Cash flows from financing activities
Proceeds from loan facility (22,785,705) 12,370,000
Repayments of loan facility 23,125,126 (9,439,633)
Loan Facility Fees (316,925) -
Proceeds from issue of Company Shares - 1,250
Purchase of Company shares into Treasury (557,542) (6,213,187)
Dividends paid (2,093,424) -
------------- -------------
Net cash outflow from financing activities (2,628,470) (3,281,570)
Net decrease in cash and cash equivalents
during the period (5,341,496) (5,678,198)
Cash and cash equivalents at beginning
of period 5,447,571 5,916,155
Cash and cash equivalents at end of period 106,075 237,957
============= =============
The Notes to the Unaudited Condensed Financial Statements form
an integral part of these Interim Financial Statements.
Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 December 2021
General Information
Crystal Amber Fund Limited (the "Company") was incorporated and
registered in Guernsey on 22 June 2007 and is governed in
accordance with the provisions of the Companies Law. The registered
office address is PO Box 286, Floor 2, Trafalgar Court, Les
Banques, St Peter Port, Guernsey, GY1 4LY. The Company was
established to provide shareholders with an attractive total return
which is expected to comprise primarily capital growth with the
potential for distributions of up to 5 pence per share per annum
following consideration of the accumulated retained earnings as
well as the unrealised gains and losses at that time. The Company
seeks to achieve this through investment in a concentrated
portfolio of undervalued companies, which are expected to be
predominantly, but not exclusively, listed or quoted on UK markets
and which have a typical market capitalisation of between GBP100
million and GBP1,000 million.
GI Dynamics Inc., is an unconsolidated subsidiary of the Company
and was incorporated in Delaware. As at 31 December 2021, it had
five wholly-owned subsidiaries and its principal place of business
is Boston. Refer to Note 10 for further information.
The Company's Ordinary shares were admitted to trading on AIM,
on 17 June 2008. The Company is also a member of the AIC.
All capitalised terms are defined in the Glossary of Capitalised
Defined Terms on pages [--] to [--] unless separately defined.
1. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these Interim Financial Statements are set out below. These
policies have been consistently applied to those balances
considered material to the Interim Financial Statements throughout
the current period, unless otherwise stated.
Basis of preparation
The Interim Financial Statements have been prepared in
accordance with IAS 34, Interim Financial Reporting.
The Interim Financial Statements do not include all the
information and disclosures required in the Annual Financial
Statements and should be read in conjunction with the Company's
Annual Financial Statements for the year to 30 June 2021. The
Annual Financial Statements have been prepared in accordance with
IFRS.
The same accounting policies and methods of computation are
followed in the Interim Financial Statements as in the Annual
Financial Statements for the year ended 30 June 2021.
The presentation of the Interim Financial Statements is
consistent with the Annual Financial Statements. Where
presentational guidance set out in the SORP "Financial Statements
of Investment Trust Companies and Venture Capital Trusts" (issued
by the AIC in November 2014 and updated in February 2018 and
October 2019) is consistent with the requirements of IFRS, the
Directors have sought to prepare the Interim Financial Statements
on a basis compliant with the recommendations of the SORP. In
particular, supplementary information which analyses the Statement
of Profit or Loss and Other Comprehensive Income between items of a
revenue and capital nature has been presented alongside the total
Statement of Profit or Loss and Comprehensive Income.
Going concern
As at 31 December 2021, the Company had net assets of GBP119.4
million (30 June 2021: GBP122.9 million) and cash balances of
GBP0.1 million (30 June 2021: GBP5.4 million) which are sufficient
to meet current obligations as they fall due.
In the period prior to 31 December 2021 and up to the date of
this report, the COVID-19 pandemic has continued to have a negative
impact on the global economy. As this situation is both
unprecedented and evolving, it raises some uncertainties and
additional risks for the Company.
The Directors and Investment Manager are actively monitoring the
potential effect on the Company and its investment portfolio. In
particular, they have considered the potential impact of the
following specific key matters:
-- Unavailability of key personnel at the Investment Manager or Administrator;
-- Increased volatility in the fair value of investments,
including any potential impairment in value; and
-- Increased uncertainty as to the timing and quantum of dividend receipts.
-- Russia's invasion of Ukraine. This has potentially adverse
consequences for investee companies as energy costs rise but the
effects of this are somewhat offset by increased revenue at
Hurricane..
In considering the potential impact of COVID-19 on the Company
and its investment portfolio, the Directors have taken account of
the mitigation measures already in place. At Company level, key
personnel at the Investment Manager and Administrator have
successfully implemented business continuity plans to ensure
business disruption is minimised, including remote working where
required, and all staff are continuing to assume their day-to-day
responsibilities.
In relation to the Company's investment portfolio, 71% of the
Company's investments are valued by reference to the market bid
price as at the date of this report. As these are quoted prices in
an active market, any volatility in the global economy is reflected
within the value of the financial assets designated at fair value
through profit or loss. As such, the Company has not included any
fair value impairments in relation to its investments.
Based on the Board's assessment of those matters most likely to
be affected by COVID-19 and taking account of the various risk
mitigation measures already in place, the Directors do not consider
that the effects of COVID-19 are likely to create a material
uncertainty over the assessment of the Company as a going
concern.
On the basis of this review, and after making due enquiries,
including consideration of the continuation vote
(as noted below), the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for at least 12 months from the date of approval of this
report. Accordingly, they continue to adopt the going concern basis
of accounting in preparing these financial statements.
Continuation vote
The continuation vote was proposed at the AGM on 22 November
2021. Subsequent to the meeting the Company announced that the vote
for the Company to continue as constituted, which required a 75%
majority of votes cast to pass, did not pass, obtaining 51%.
The Company announced on 22 December 2021 that it would
formulate proposals for the future of the Fund and write to
shareholders in January 2022 to convene an EGM. The Board of
Crystal Amber Fund Limited believes it is in the interests of
shareholders as a whole for the Fund to adopt a strategy of
maximising capital returned to shareholders by timely disposals,
including trade sales of the Fund's strategic holdings, where
appropriate. The Fund anticipates selling its holding in Board
Intelligence plc, an unquoted company of which it has been a
shareholder since 2018. The Fund will not make any new investments
and will only make further opportunistic investments in existing
holdings where, in the view of the Board and Investment Manager,
such investment is considered necessary to protect the interests of
shareholders and/or provide the Investment Manager with additional
influence to maximise value and facilitate and accelerate an
exit.
The Fund believes that because of its intensive activism, the
investment in GI Dynamics now has considerable strategic value.
This was recently evidenced by two approaches from US trade parties
that have expressed an interest in making a significant investment
in GI Dynamics. The Fund looks forward to continuing to work with
the company to achieve its operational milestones and to further
develop the pathway to maximise shareholder value.
On 15 February 2022 the Fund announced the posting of a circular
with proposals for a change of investment policy and new management
and incentive arrangements as discussed above which are subject to
shareholder approval. The Company has agreed to make amendments and
enter into a new Investment Management Agreement. The Proposals are
subject to shareholder approval at a Board Meeting on 7 March 2022
and if approved, are expected to result in the realisation of
predominantly all the Company's assets (with the possible exception
of GI Dynamics) by 31 December 2023 and the periodic return of
capital to shareholders. Following any material realisations of the
Fund's investments, the Directors intend to return cash to
shareholders using tax-efficient means such as redeemable shares
and/or tender offers.
Segmental reporting
Operating segments are reported in a manner consistent with
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board as a whole. The key
measure of performance used by the Board to assess the Company's
performance and to allocate resources is the total return on the
Company's NAV, as calculated under IFRS, and therefore no
reconciliation is required between the measure of profit or loss
used by the Board and that contained in these Interim Financial
Statements.
For management purposes, the Company is domiciled in Guernsey
and is engaged in a single segment of business mainly in one
geographical area, being investment in UK equity instruments, and
therefore the Company has only one operating segment.
2. BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE
(Loss)/Earnings per share is based on the following data:
Six months Six months
ended ended
31 December 31 December
2021 2020
(Unaudited) (Unaudited)
(Loss)/return for the year GBP(1,043,324) GBP17,713,693
Weighted average number of issued
Ordinary shares 83,600,951 89,227,868
Basic and diluted (loss)/earnings per
share (pence) (1.25) 19.85
-------------------------------------- -------------------------------------- ------------------------------------
3. NAV PER SHARE
NAV per share is based on the following data:
As at As at As at
31 December 30 June 31 December
2021 2021 2020
(Unaudited) (Audited) (Unaudited)
NAV per Condensed Statement
of Financial Position GBP119,372,844 GBP122,931,988 GBP108,890,207
Total number of issued Ordinary
shares (excluding Treasury shares) 83,365,000 83,737,000 84,420,000
NAV per share (pence) 143.19 146.81 128.99
------------------------------------- ------------------ ------------------ ------------------
4. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR
LOSS AND DERIVATIVES HELD FOR TRADING
1 July 2021 to 1 July 2020 to 1 July 2020 to
31 December 2021 30 June 2021 31 December 2020
(Unaudited) (Audited) (Unaudited)
GBP GBP GBP
Equity
investments 114,931,234 117,965,568 95,312,797
Debt
instruments 4,421,547 3,677,145 3,645,619
---------------- ----------------------------------- --------------------------------- -----------------------------------
Financial
assets
designated at
FVTPL 119,352,781 121,642,713 98,958,416
Derivative
financial
instruments
held for
trading - - 12,931,223
-----------------------------------
Total financial
assets
designated at
FVTPL and
derivatives
held for
trading 119,352,781 121,642,713 111,889,639
---------------- ----------------------------------- --------------------------------- -----------------------------------
Equity
investments
Cost brought
forward 153,218,932 167,187,388 167,187,388
Purchases 20,521,735 11,184,002 36,502,739
Conversion of
loans - 8,902,985 -
Sales (23,740,499) (28,890,455) (50,584,763)
Net realised
losses (3,103,595) (5,164,988) (3,000,627)
Cost carried
forward 146,896,573 153,218,932 150,104,737
Unrealised
losses brought
forward (33,410,174) (84,056,730) (84,056,730)
Movement in
unrealised
gains/(losses) 2,564,126 50,646,556 30,709,787
---------------- ----------------------------------- --------------------------------- -----------------------------------
Unrealised
losses carried
forward (30,846,048) (33,410,174) (53,346,943)
Effect of
exchange rate
movements on
revaluation (1,119,291) (1,843,190) (1,444,997)
---------------- ----------------------------------- --------------------------------- -----------------------------------
Fair value of
equity
investments 114,931,234 117,965,568 95,312,797
---------------- ----------------------------------- --------------------------------- -----------------------------------
Debt
instruments
Cost brought
forward 3,257,955 8,104,315 8,104,315
Purchases 568,612 4,056,625 4,056,625
----------------
Cost carried
forward 3,826,567 3,257,955 3,257,954
Unrealised
gains/(losses)
brought
forward 1,254,587 (2,004,674) (2,004,674)
Movement in
unrealised
gains 92,097 3,259,261 3,171,912
---------------- ----------------------------------- --------------------------------- -----------------------------------
Unrealised
gains carried
forward 1,346,684 1,254,587 1,167,238
Effect of
exchange rate
movements (751,704) (835,397) (779,573)
Fair value of
debt
instruments 4,421,547 3,677,145 3,645,619
---------------- ----------------------------------- --------------------------------- -----------------------------------
Total financial
assets
designated at
FVTPL 119,352,781 121,642,713 98,958,416
---------------- ----------------------------------- --------------------------------- -----------------------------------
Derivative
financial
instruments
Cost brought
forward - - -
Purchases - 33,238,926 32,222,870
Sales - (23,991,363) (9,289,813)
Net realised
losses - (9,247,563) (6,114,886)
---------------- ----------------------------------- --------------------------------- -----------------------------------
Cost carried
forward - - 16,818,170
Unrealised
gains brought
forward - 21,080 21,080
Movement in
unrealised
gains - (21,080) (3,908,028)
---------------- ----------------------------------- --------------------------------- -----------------------------------
Fair value of
derivative
financial
instruments - - 12,931,222
---------------- ----------------------------------- --------------------------------- -----------------------------------
-
Total financial
assets
designated at
FVTPL 119,352,781 121,642,713 111,889,639
---------------- ----------------------------------- --------------------------------- -----------------------------------
5. FINANCIAL INSTRUMENTS
Fair value measurements
The Company measures fair values using the following fair value
hierarchy that prioritises the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements). The three levels of the
fair value hierarchy under IFRS 13 are as follows:
Level 1: Quoted price (unadjusted) in an active market for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
This category includes instruments valued using: quoted prices in
active markets for similar instruments; quoted prices for identical
or similar instruments in markets that are considered less than
active; or other valuation techniques for which all significant
inputs are directly or indirectly observable from market data.
Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments for which the
valuation technique includes inputs that are not based on
observable data, and the unobservable inputs have a significant
effect on the instrument's valuation. This category includes
instruments that are valued based on quoted prices for similar
instruments for which significant unobservable adjustments or
assumptions are required to reflect differences between the
instruments.
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement. For this purpose, the significance of an input
is assessed against the fair value measurement in its entirety. If
a fair value measurement uses observable inputs that require
significant adjustment based on unobservable inputs, that
measurement is a Level 3 measurement. Assessing the significance of
a particular input to the fair value measurement in its entirety
requires judgement, considering factors specific to the asset or
liability.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
The objective of the valuation techniques used is to arrive at a
fair value measurement that reflects the price that would be
received if an asset was sold or a liability transferred in an
orderly transaction between market participants at the measurement
date.
The following tables analyse, within the fair value hierarchy,
the Company's financial assets measured at fair value at 31
December 2021 and 30 June 2021:
Level 1 Level 2 Level 3 Total
Unaudited Unaudited Unaudited Unaudited
31 December 2021 GBP GBP GBP GBP
Financial assets designated at FVTPL and derivatives held for
trading:
Equity instruments - listed equity investments 82,250,770 2,935,517 - 85,186,287
Equity instruments - unlisted equity investments - - 29,744,947 29,744,947
Debt instruments - loan notes - - 4,421,547 4,421,547
82,250,770 2,935,517 34,166,494 119,352,781
----------------------------------------------------------------- ----------- ----------- ----------- ------------
Level 1 Level 2 Level 3 Total
Audited Audited Audited Audited
30 June 2021 GBP GBP GBP GBP
Financial assets designated at FVTPL and derivatives held for
trading:
Equity Instruments - listed equity investments 89,741,685 2,868,699 - 92,610,384
Equity Instruments - unlisted equity investments - - 25,355,184 25,355,184
Debt - loan notes - - 3,677,145 3,677,145
89,741,685 2,868,699 29,032,329 121,642,713
------------------------------------------------------------------ ----------- ---------- ----------- ------------
The Level 1 equity investments were valued by reference to the
closing bid prices in each investee company on the reporting
date.
The Level 3 equity investment in Board Intelligence was valued
by reference to the valuation multiples of publicly-listed cloud
software companies, after applying a discount equivalent to that
which prevailed at the time of investment in March 2018. The Level
3 equity investment in Leaf Clean Energy Company was valued by
reference to the expected proceeds from the company's wind down, as
guided by management in its last shareholder letter dated 17
February 2022. The Level 3 equity investment in GI Dynamics Inc was
valued by reference to its discounted cash flow valuation. The loan
notes were classified as Level 3 debt instruments as there was no
observable market data. The Board has concluded that the fair value
of the loan note is approximate to the loan principal plus accrued
interest.
For financial instruments not measured at FVTPL, the carrying
amount is approximate to their fair value.
Fair value hierarchy - Level 3
The following table shows a reconciliation from the opening
balances to the closing balances for fair value measurements in
Level 3 of the fair value hierarchy:
Year Ended
Six months ended 31 December 2021 30 June 2021 Six months ended 31 December 2020
Reconciliation
in Level 3 (Unaudited) (Audited) (Unaudited)
GBP GBP GBP
Opening balance 29,032,329 11,684,980 11,684,980
GI Dynamics Inc
- Transfer to
Level 3 - 4,294,452 1,494,943
Purchases 5,568,613 15,776,344 11,784,561
Movement in
unrealised
(losses)/gains (1,244,298) 12,187,394 7,318,480
Conversion of
loans - (8,902,985) (11,149,307)
Sales - (3,183,907) -
Net realised
gain - 1,830,764 1,830,764
Effect of
exchange rate
movements 809,850 (4,654,713) (2,272,004)
Closing balance 34,166,494 29,032,329 20,692,417
---------------- ------------------------------------------ ------------------------- -------------------------------------
The Company recognises transfers between levels of the fair
value hierarchy on the date of the event of change in circumstances
that caused the transfer.
The table below provides information on significant unobservable
inputs used at 31 December 2021 in measuring equity financial
instruments categorised as Level 3 in the fair value hierarchy. It
also details the sensitivity to changes in significant unobservable
inputs used to measure value in each case.
Sensitivity to
changes in
Fair Value at 31 significant
Valuation Method December 2021 Unobservable inputs Factor unobservable inputs
------------------- -------------------- --------------------- --------------------- ------- --------------------
Board Intelligence Discount to 3,846,334 Comparable Revenue 12.0x A 25% increase
comparable company multiple (decrease) in the
multiples revenue multiple
Discount to would increase
comparable multiple 52.7% (decrease) FV by
GBP1.5m
(GBP1.2m)
A 25% decrease
(increase) in the
discount to the
revenue multiple
would increase
(decrease)
FV by GBP1.4m
(GBP1.1m)
------------------- -------------------- --------------------- --------------------- ------- --------------------
GI Dynamics Discounted cash 19,257,989 Discount rate 43% An increase
flow (decrease) in the
discount rate to
48% (38%) would
reduce (increase)
High growth rate 48% FV by GBP7.5m
over 9 year period (GBP11.4m)
A decrease
Dilution discount (increase) in the
20% near term growth
rate to 58% (38%)
would decrease
(increase)
FV by GBP3.6m
(GBP3.8m)
An increase
(decrease) of the
dilution discount
to 30% (to 10%)
would reduce
(increase) FV
by GBP2.6m
(GBP2.8m)
------------------- -------------------- --------------------- --------------------- ------- --------------------
Leaf Clean Discounted cash 1,640,624 Discount rate 10% The Fund has
flow on expected received
wind down proceeds confirmation of the
compulsory
redemption value of
Leaf Clean (as
noted
in the investment
manager's report)
so that the
sensitivity
analysis of Leaf
Clean is not
required.
------------------- -------------------- --------------------- --------------------- ------- --------------------
Sensitivity to
changes in
Fair Value at 30 significant
Valuation Method June 2021 Unobservable inputs Factor unobservable inputs
-------------------- --------------------- -------------------- -------------------- ------- --------------------
Board Intelligence Discount to 4,004,233 Comparable Revenue 13.8x A 25% increase
comparable company multiple (decrease) in the
multiples revenue multiple
Discount to would increase
comparable multiple 52.7% (decrease) FV by
GBP1.6m
(GBP1.2m)
A 25% decrease
(increase) in the
discount to the
revenue multiple
would increase
(decrease)
FV by GBP1.4m
(GBP1.1m)
-------------------- --------------------- -------------------- -------------------- ------- --------------------
GI Dynamics Discounted cash flow 20,000,283 Discount rate 43% An increase
(decrease) in the
discount rate to
48% (38%) would
reduce (increase)
High growth rate 48% FV by GBP7.5m
over 9 year period (GBP11.1m)
Dilution discount A decrease
20% (increase) in the
near term growth
rate to 58% (38%)
would decrease
(increase)
FV by GBP3.6m
An increase
(decrease) of the
dilution discount
to 30% (to 10%)
would reduce
(increase) FV
by GBP2.7 million
-------------------- --------------------- -------------------- -------------------- ------- --------------------
A 20% change to the
Discounted cash flow discount rate
on expected wind would impact FV by
Leaf Clean down proceeds 1,350,468 Discount rate 10% GBP0.02 million
-------------------- --------------------- -------------------- -------------------- ------- --------------------
6. LOAN FACILITY
On 1 July 2020, the Company entered into a loan facility with
Intertrader Limited whereby it transferred an amount of equity
holdings with a value of GBP19.1 million as at 1 July 2020 to
Intertrader Limited to be held as collateral for CFD instruments.
The interest charged on the loan facility was 2% per annum of the
daily overnight loan balance. The Company could draw on a loan
facility of up to 25% of the value of the initial equity holdings
transferred. The balance of this facility was as follows:
As at As at
31 December 30 June
2021 2021
(Unaudited) (Audited)
GBP GBP
Opening balance - -
Drawdowns - 22,785,705
Repayments by way of sale of CFD instruments - (22,975,306)
Repayments by way of dividends receivable on CFD instruments - (149,820)
Facility fees payable - 316,925
Facility commissions payable - 22,496
Closing balance - -
-------------------------------------------------------------- ----------------------- ----------------------
As at the date of this report, the amount owed to Intertrader
Limited under the loan facility was GBPNil (30 June 2020: GBPNil).
The loan facility remains in place without incurring any costs.
7. SHARE CAPITAL AND RESERVES
The authorised share capital of the Company is GBP3,000,000
divided into 300 million Ordinary shares of GBP0.01 each.
The issued share capital of the Company, including Treasury
shares, is comprised as follows:
31 December 2021 30 June 2021
(Unaudited) (Audited)
Number GBP Number GBP
Issued, called up and fully paid Ordinary shares of GBP0.01 each 99,749,762 997,498 99,749,762 997,498
================================================================== =========== ======== =========== ========
During the period, the Company did not create or issue any
Ordinary shares. In the period to 31 December 2020, the Company
issued 125,000 Shares of GBP0.01 divided equally amongst five
charitable organisations, the nominal value of which was paid by
Richard Bernstein, who is a shareholder of the Company, a director
and shareholder of the Investment Manager and a member of the
Investment Adviser.
8. TREASURY SHARES RESERVE
Six months ended Year ended
31 December 2021 30 June 2021
(Unaudited) (Audited)
Number GBP Number GBP
Opening balance (16,012,762) (19,191,639) (7,763,195) (12,265,601)
Treasury shares purchased
during the period/year (372,000) (422,396) (8,249,567) (6,926,038)
Closing balance (16,384,762) (19,614,035) (16,012,762) (19,191,639)
During the period ended 31 December 2021 372,000 (2020:
7,566,567) Treasury shares were purchased at an average price of
113.55 pence per share (2020: 82.20 pence per share), representing
an average discount to NAV at the time of purchase of 24.9% (2021:
33.8%). No Treasury shares were sold during the period ended 31
December 2021 or 31 December 2020.
9. DIVIDS
On 7 July 2021, the Company declared an interim dividend of
GBP2,093,424 equating to 2.5 pence per Ordinary share, which was
paid on 30 July 2021 to shareholders on the register on 16 July
2021.
10. RELATED PARTIES
Richard Bernstein is a director and a member of the Investment
Manager, a member of the Investment Adviser and a holder of 10,000
(30 June 2021: 10,000) Ordinary shares in the Company, representing
0.01% (30 June 2021: 0.01%) of the voting share capital of the
Company at 31 December 2021.
During the period the Company incurred management fees of
GBP880,981 (2020: GBP737,204) none of which was outstanding at 31
December 2021 (30 June 2021: GBPNil). No performance fees were
payable during the period (2020: GBPNil) (30 June 2021: GBPNil) and
none outstanding at the period/year end.
As at 31 December 2021, the Company's investment in GI Dynamics
Inc. is treated as an unconsolidated subsidiary due to the
Company's percentage holding in the voting share capital of GID. As
GID is a private company and its shares are not listed on a stock
exchange, the percentage held is not disclosed.
There is no restriction on the ability of GID to pay cash
dividends or repay loans, but it is unlikely that GID will make any
distribution or loan repayments given its current strategy. During
the year the Company purchased convertible loan notes (not driven
by any contractual obligation) for the purpose of supporting GID in
pursuing its strategy.
GI Dynamics Inc. was incorporated in Delaware, had five
wholly-owned subsidiaries as at 31 December 2021 and its principal
place of business is Boston. The five subsidiaries were as
follows:
-- GI Dynamics Securities Corporation, a Massachusetts-incorporated nontrading entity;
-- GID Europe Holding B.V., a Netherlands-incorporated nontrading holding company;
-- GID Europe B.V., a Netherlands-incorporated company that
conducts certain European business operations;
-- GID Germany GmbH, a German-incorporated company that conducts
certain European business operations; and
-- GI Dynamics Australia Pty Ltd, an Australian-incorporated
company that conducts Australian business operations.
Under the terms of the IMA, the Investment Manager is entitled
to a performance fee in certain circumstances. This fee is
calculated by reference to the increase in NAV per Ordinary share
over the course of each performance period.
Payment of the performance fee is subject to:
1. the achievement of a performance hurdle condition: the NAV
per Ordinary share at the end of the relevant performance period
must exceed an amount equal to the placing price, increased at a
rate of: (i) 7% per annum on an annual compounding basis in respect
of that part of the performance period which falls from (and
including) the date of Admission up to (but not including) the date
of the 2013 Admission; (ii) 8% per annum on an annual compounding
basis in respect of that part of the performance period which falls
from (and including) the date of the 2013 Admission up to (but not
including) the date of the 2015 Admission and (iii) 10% per annum
on an annual compounding basis in respect of that part of the
performance period which falls from (and including) the date of the
2015 Admission up to the end of the relevant performance period
with all dividends and other distributions paid in respect of all
outstanding Ordinary shares (on a per share basis) during any
performance period being deducted on their respective payment dates
(and after compounding the distribution amount per share at the
relevant annual rate or rates for the period from and including the
payment date to the end of the performance period) ("the Basic
Performance Hurdle"). Such Basic Performance Hurdle at the end of a
performance period is compounded at the relevant annual rate to
calculate the initial per share hurdle level for the next
performance period, which will subsequently be adjusted for any
dividends or other distributions paid in respect of all outstanding
Ordinary shares during that performance period, and
2. the achievement of a "high-water mark": the NAV per Ordinary
share at the end of the relevant performance period must be higher
than the highest previously reported NAV per Ordinary share at the
end of a performance period in relation to which a performance fee,
if any, was last earned (less any dividends or other distributions
in respect of all outstanding Ordinary shares declared (on a per
share basis) since the end of the performance period in relation to
which a performance fee was last earned).
As the NAV per share at 31 December 2021 did not exceed the
Basic Performance Hurdle of 2.72 pence per share at that date, a
performance fee has not been accrued in the Interim Financial
Statements. In the event that, on 30 June 2022, the NAV per share
exceeds both the performance hurdle and the high watermark, the
performance fee will be an amount equal to 20% of the excess of the
NAV per share at that date over the higher of these hurdles
multiplied by the time weighted average number of Ordinary shares
in issue during the year ending 30 June 2022.
At an EGM to be held on 7 March 2022 proposals will be put to
shareholders to enter into a new Investment Management Agreement
incorporating revised management and performance fee arrangements,
together with changes to the termination provisions to reflect the
future strategy of the Company.
If approved by shareholders, the management fee will be reduced
to GBP106,666 per month from 1 April 2022 until 30 June 2022,
falling periodically to GBP40,000 per month until 31 December 2023
(or if earlier, the date on which all of the Fund's investments
have been substantially realised) when the management fee will
cease:
- The performance fee will be calculated by reference to the
aggregate cash returned to shareholders after 1 January 2022 and
the Investment Manager will receive 20%. Of the aggregate return of
cash paid to shareholders after 1 January 2022 (including the
interim dividend of 10 pence per Ordinary Share declared on 22
December 2021) in excess of a threshold of GBP216,000,000, being
the Basic Performance Hurdle per share as at 31 December 2021
multiplied by the voting share capital.
Depending on whether the Ordinary shares are trading at a
discount or a premium to the Company's NAV per share at 30 June
2022, the performance fee will be either payable in cash (subject
to the Investment Manager being required to use the cash payment to
purchase Ordinary shares in the market) or satisfied by the sale of
Ordinary shares out of Treasury or by the issue of new fully paid
Ordinary shares at the mid-market closing price on 30 June 2022,
respectively.
As at 31 December 2021, the Investment Manager held 6,899,031
Ordinary shares (30 June 2021: 6,904,330) of the Company,
representing 6.92% (30 June 2021: 6.92%) of the voting share
capital.
The interests of the Directors in the share capital of the
Company at the period/year end, and as at the date of this report,
are as follows:
31 December 2021 30 June 2021
Number of Ordinary Total voting rights Number of Ordinary Total voting rights
shares shares
Christopher Waldron(1) 30,000 0.04% 30,000 0.03%
Jane Le Maitre(2) 13,500 0.02% 13,500 0.01%
Fred Hervouet 7,500 0.01% 7,500 0.01%
------------------------ ---------------------- -------------------- ---------------------- --------------------
Total 51,000 0.07% 51,000 0.05%
------------------------ ---------------------- -------------------- ---------------------- --------------------
(1) Chairman of the Company
(2) Ordinary Shares held indirectly
All related party transactions are carried out on an arm's
length basis.
11. POST BALANCE SHEET EVENTS
On 15 February 2022 the Company announced that an EGM will be
held on 7 March 2022 in connection with the proposals for a change
of investment policy and new management and incentive arrangements
as set out in Note 10.
The Company declared an interim dividend of GBP8,338,000,
equating to 10 pence per Ordinary share, which was paid on 9
February 2022 to shareholders on the register on 14 January
2022.
The Company purchased 84,000 of its own Ordinary Shares during
the period between 1 January 2022 and 3 March 2022, which were held
as Treasury shares. Following these purchases, the total number of
Ordinary Shares held as Treasury shares by the Company is
16,468,762 .
On 18 February 2022, the Company reported that its unaudited NAV
at 31 January 2022 was 146.98 pence per Ordinary share.
12. AVAILABILITY OF INTERIM REPORT
Copies of the Interim Report will be available to download from
the Company's website www.crystalamber.com.
Glossary of Capitalised Defined Terms
"AGM" means the annual general meeting of the Company;
"AIC" means the Association of Investment Companies;
"AIM" means the Alternative Investment Market of the London
Stock Exchange;
"Annual Financial Statements" means the audited annual financial
statements of the Company, including the Statement of Profit or
Loss and Other Comprehensive Income, the Statement of Financial
Position, the Statement of Changes in Equity, the Statement of Cash
Flows and associated notes;
"Board" or "Directors" or "Board of Directors" means the
directors of the Company;
"Brexit" means the departure of the UK from the European
Union;
"CEO" means chief executive officer;
"CFD" means Contracts for Difference;
"CFO" means chief financial officer;
"Company" or "Fund" means Crystal Amber Fund Limited;
"Companies Law" means the Companies (Guernsey) Law, 2008, (as
amended);
"DeFi" means D ecentralised Finance;
"EBITDA" means earnings before interest, taxes, depreciation and
amortisation;
"EPS" or "Early Production System" means producing oil through a
temporary processing system and exporting the processed crude to a
storage vessel for subsequent transport to market;
"Equals" means Equals Group plc;
"GM" or "General Meeting" means a general meeting of the
Company;
"ESG" means Environmental, Social and Governance, referring to
the three central factors in measuring the sustainability and
societal impact of an investment in a company or business;
"FDA" means food and drug administration;
"FTSE" means Financial Times Stock Exchange;
"FVTPL" means Fair Value Through Profit or Loss;
"FY22" means the financial year 2022;
"GDP" means gross domestic product, a monetary measure of the
market value of all the final goods and services produced in a
specific time period;
"GID" or "GI Dynamics" means GI Dynamics, Inc.;
"HQ" means headquarters;
"IAS" means international accounting standards as issued by the
Board of the International Accounting Standards Committee;
"IFRS" means the International Financial Reporting Standards,
being the principles-based accounting standards, interpretations
and the framework by that name issued by the International
Accounting Standards Board, as adopted by the European Union;
"IMA" means the investment management agreement between the
Company and the Investment Manager dated 16 June 2008, as amended
on 21 August 2013, further amended on 27 January 2015 and further
amended on 12 June 2018;
"Interim Financial Statements" means the unaudited condensed
interim financial statements of the Company, including the
Condensed Statement of Profit or Loss and Other Comprehensive
Income, the Condensed Statement of Financial Position, the
Condensed Statement of Changes in Equity, the Condensed Statement
of Cash Flows and associated notes;
"Interim Report" means the Company's interim report and
unaudited condensed financial statements for the period ended 31
December;
"Lancaster EPS" means Lancaster Early Production System;
"Market Capitalisation" means the total number of Ordinary
shares of the Company multiplied by the closing share price;
"NAV" or "Net Asset Value" means the value of the assets of the
Company less its liabilities as calculated in accordance with the
Company's valuation policies and expressed in Pounds Sterling;
"NAV per share" means the Net Asset Value per Ordinary share of
the Company and is expressed in pence;
"Ordinary share" means an allotted, called up and fully paid
Ordinary share of the Company of GBP0.01 each;
"Remuneration Report" means part of the Remuneration Statement
which provides information on the remuneration and other financial
benefits paid to the Board of Directors, the Group CEO and the
Group Executive Committee members during the previous financial
period;
"Small Cap Index" means an index of small market capitalisation
companies;
"SMEs" means small and medium-sized enterprises and businesses
whose personnel numbers fall below certain limits. The abbreviation
"SME" is used by international organizations such as the World
Bank, the European Union, the United Nations and the World Trade
Organization;
"SORP" means Statement of Recommended Practice;
"SPAC" mean Special Purpose Acquisition Company;
"Treasury" means the reserve of Ordinary shares that have been
repurchased by the Company;
"Treasury shares" means Ordinary shares in the Company that have
been repurchased by the Company and are held as Treasury
shares;
"UK" or "United Kingdom" means the United Kingdom of Great
Britain and Northern Ireland;
"US" means the means the United States of America, its
territories and possessions, any state of the United States and the
District of Columbia;
"US$" or "$" means United States dollars; and
"GBP" or "Pounds Sterling" or "Sterling" means British pound
sterling and "pence" means British pence.
Directors and General Information
Directors Investment Manager
Christopher Waldron (Chairman) Crystal Amber Asset Management (Guernsey) Limited
Fred Hervouet (Chairman of Remuneration and Management PO Box 286
Engagement Committee) Floor 2, Trafalgar Court
Jane Le Maitre (Chairman of Audit Committee) Les Banques, St Peter Port
Guernsey GY1 4LY
Investment Adviser
Crystal Amber Advisers (UK) LLP Nominated Adviser
17c Curzon Street Allenby Capital Limited
London W1J 5HU 5 St. Helen's Place
London EC3A 6AB
Administrator and Secretary
Ocorian Administration (Guernsey) Limited Legal Advisers to the Company
PO Box 286 As to English Law
Floor 2, Trafalgar Court Norton Rose Fulbright LLP
Les Banques, St Peter Port 3 More London Riverside
Guernsey GYI 4LY London SE1 2AQ
Broker As to Guernsey Law
Winterflood Investment Trusts Carey Olsen
The Atrium Building PO Box 98
Cannon Bridge House Carey House
25 Dowgate Hill Les Banques
London EC4R 2GA St. Peter Port
Guernsey GY1 4BZ
Independent Auditor
KPMG Channel Islands Limited Custodian
Glategny Court Butterfield Bank (Guernsey) Limited
Glategny Esplanade PO Box 25
St. Peter Port Regency Court
Guernsey GY1 1WR Glategny Esplanade
St. Peter Port
Registered Office Guernsey GY1 3AP
PO Box 286
Floor 2, Trafalgar Court Registrar
Les Banques, St Peter Port Link Asset Services
Guernsey GYI 4LY 65 Gresham Street
London EC2V 7NQ
Identifiers
ISIN: GG00B1Z2SL48
Sedol: B1Z2SL4
Ticker: CRS
Website: http://crystalamber.com
LEI: 213800662E2XKP9JD811
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END
IR FFFLLVTIFIIF
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