TIDMCRS
RNS Number : 1741R
Crystal Amber Fund Limited
25 October 2023
25 October 2023
Crystal Amber Fund Limited
("Crystal Amber Fund" or the "Company")
Final results for the year ended 30 June 2023
The Company announces its final results for the year ended 30
June 2023.
Highlights
-- Substantial return of capital with GBP37.5m paid during the
year, bringing total returns of capital to more than GBP100
million.
-- Adjusting for the 45p a share of dividends paid, Net Asset
Value ("NAV") per share decreased by 4.6 % as at 30 June 2023 to
93.33p (145.03p at 30 June 2022 and 130.05p at 31 December
2022).
-- Net asset value since the year end has increased over the
three months to 30 September 2023 by 6.8%.
-- Fund performance according to Trustnet over the last six
months is first out of 26 peer group funds and over three years,
third out of 25 peer group funds.
-- Completed successful exit of Equals Group plc at a
significant premium to 30 June 2022 valuation.
-- Cash realisation during the year from acquisition of
Hurricane Energy plc of GBP34.7 million, with a further GBP1.8
million banked in September 2023.
-- Successful intensive activism campaign at De La Rue plc, with
De La Rue now able to demonstrate its strategic value. De La Rue
share price has doubled since 23 June 2022.
-- Significant strengthening of board at Morphic Medical Inc.
(formerly GI Dynamics Inc.) ahead of anticipated regulatory
approval in current financial year.
Contacts:
Crystal Amber Fund Limited
Chris Waldron (Chairman)
Tel: 01481 742 742
www.crystalamber.com
Allenby Capital Limited - Nominated Adviser
Jeremy Porter/ Dan Dearden-Williams
Tel: 020 3328 5656
Winterflood Investment Trusts - Broker
Joe Winkley/Neil Langford
Tel: 020 3100 0160
Crystal Amber Advisers (UK) LLP - Investment Adviser
Richard Bernstein
Tel: 020 7478 9080
(1) All capitalised terms are defined in the Glossary of
Capitalised Defined Terms unless separately defined.
Chairman's Statement
I hereby present the sixteenth annual report of Crystal Amber
Fund Limited (the "Company" or the "Fund"), for the year to 30 June
2023. During this period, by far the most significant impact on NAV
was the return to shareholders by means of cash dividends in
aggregate of GBP37.5 million, equivalent to 45p per share. This of
course resulted in a commensurate 45p a share fall in NAV.
To put this into context: despite a deteriorating macroeconomic
backdrop with worsening liquidity and rising interest rates, the
payout comprised more than one-third of NAV at the start of the
year under review. This has brought total returns of capital,
including share buy backs to more than GBP100 million to date.
Reflecting the GBP37.5 million dividend payments, at the year
end, NAV was GBP77.7 million, compared with an unaudited NAV of
GBP108.2 million at 31 December 2022 and an audited NAV of GBP120.7
million at 30 June 2022. NAV per share was 93.33p at 30 June 2023
compared with 130.05p at 31 December 2022 and 145.03p at 30 June
2022. Underlying NAV, reflecting dividends paid, decreased by 4.6%
over the year. This compares to the Numis Smaller Companies Index,
which fell by 2.5% in the same period.
The new investment policy, formally approved by shareholders in
March 2022, focuses on monetising the portfolio in an orderly
manner, achieving an appropriate balance between maximising value
received and making timely returns of capital. I believe that
during the year, the Company achieved considerable success in this
objective. In summary, at the beginning of 2022, the Fund had net
assets of GBP119.4 million. Since then, the Investment Manager has
achieved realisations of GBP71.4 million. Having returned GBP45.8
million in dividends, net assets at 30 September 2023 amounted to
GBP83.0 million.
It would have been all too easy for the Investment Manager to
have lost patience and accepted below market bids for relatively
illiquid holdings in portfolio companies. It is all too common to
see substantial stakes sold at discounts to carrying values, but
across the portfolio, the Investment Manager has delivered
premiums.
Two examples of this are the fintech payments platform Equals
Group ("Equals.") and the oil and gas exploration and production
company Hurricane Energy plc ("Hurricane Energy"). At the beginning
of 2022, the Fund owned 36.9 million shares in Equals. This
represented a greater than one-fifth ownership of Equals and had a
carrying value of GBP28.4 million. Having reduced its holding in
early 2022, the Fund exited its remaining holding during the year
under review, realising GBP31.1million since the beginning of 2022.
The Fund initially became a shareholder in 2016 and worked
intensively with management. The Fund achieved a total profit on
the holding of GBP22 million.
Since the adoption of the new investing policy, the most time
consuming and perhaps jointly, the most stressful holding for the
Investment Manager was Hurricane Energy. Nevertheless, despite the
significant operational risk of being a single oil well, single
pump producer, a difficult executive team and the imposition of the
energy profits levy, the Manager succeeded in not only
significantly reducing the risk of the investment but achieved cash
returns of a magnitude that perhaps could have only been dreamt of
at the beginning of 2022.
At the start of 2022, the Fund's holding of just over 575
million shares, representing 28.9 per cent of Hurricane Energy's
issued share capital, had a carrying value of GBP23 million. In
June 2023, following the acquisition of the entire issued share
capital by Prax Exploration, the Fund received cash proceeds of
GBP34.7 million. However, those proceeds are not the end of the
Hurricane Energy journey. The offer included a deferred
consideration element based on revenues from April 2023 until
January 2026. Earlier this month, the Fund received additional
proceeds of GBP1.8 million from these deferred consideration units.
This equates to 2.1p a share to the Fund's shareholders. Should the
deferred consideration units achieve their maximum payout of
GBP37.3 million, equivalent to 41.6p per Crystal Amber share, the
total potential consideration due relating to the sale of the
Fund's shareholding in Hurricane Energy would be GBP72 million.
This compares very favourably with, the January 2022 stock market
valuation of GBP23 million.
Hurricane Energy is an example of the Investment Manager's
determination to fight for Shareholders when necessary and the
financial reward in doing so. Shareholders will recall the 2021
judgement from the High Court which prevented a 95% dilution for
ordinary shareholders which the Hurricane Energy management had
sought to push through. Whilst market participants had written off
Hurricane Energy as little more than an embarrassment, the
Investment Manager, with its long standing and deep technical
knowledge, fought and succeeded in blocking the restructuring.
Without the Company's intervention, Shareholders would have been
deprived of any meaningful exposure to this improvement in the
Company's fortunes.
The Investment Manager also secured sales of unquoted holdings
at more than their carrying values. The disposal of Board
Intelligence generated GBP2 million and Leaf Clean Energy was sold
at more than 13 times its carrying value, realising GBP1.6
million.
Following the change of investment policy, some shareholders
might prefer to focus solely on accelerated cash returns. However,
the Board and the Investment Manager believes that this would be a
short-sighted approach. The new investment policy afforded the Fund
the ability to make opportunistic purchases in existing holdings
and whilst intuitively, this might appear contrary to returning
funds, given the overall objective of balancing cash returns with
the maximisation of shareholder value, the Board and Investment
Manager are confident that this is the optimal course.
Specifically, in recent months, following a prolonged period of
intense, stressful, and ultimately successful activism, the Fund
purchased 15.3 million shares in De La Rue at a cost of GBP6.3
million. Whilst it remains the case that profits remain unrealised
until banked, in a few months, this purchase has increased net
assets by more than GBP3 million. It has resulted in the Fund
raising its holding in De La Rue to close to 17 per cent of its
issued share capital, up from less than 10 per cent at the
beginning of June. Importantly, at a time when the currency market
cycle is improving, the Fund remains of the view that the strategic
value of De La Rue remains substantially more than its operational
value and that it is now an attractive takeover target in an
industry requiring consolidation. Long term shareholders will
remember, the strategic importance of the Fund's 18 per cent
shareholding in Thorntons in 2015, ahead of Ferrero's takeover.
The other addition to the Fund's holdings is equally consistent
with the new investment policy and that is to support and enhance
the value of its holding in GI Dynamics Inc. During the summer, GI
Dynamics Inc. changed its name to Morphic Medical Inc. ("Morphic
Medical"). Shareholders will be aware that the Fund has always
sought to patiently acquire significant holdings in scalable
businesses and following successful delivery on its activist
strategy, to hold the shares until value can be maximised. This is
evidenced by the disposals referred to above: the Fund commenced
buying shares in Hurricane Energy in 2013 and in Equals in 2016. In
2014, the Fund made a toe-hold investment in Morphic Medical, when
it was listed on the Australian Stock Exchange, following an IPO
valuing the business at A$300 million. In 2020, Morphic Medical
delisted and the Fund has since invested directly in Morphic
Medical. By the end of 2021, the carrying value of the Fund's
holding was valued at GBP30 million. This represented around 17.5
per cent of the Fund's net asset value.
Following further investment of GBP8.3 million in Morphic
Medical since the beginning of 2022 and combined with cash returns
of 55p a share, Morphic Medical now accounts for 40 per cent of net
asset value. The Fund has a fully diluted equity interest in
Morphic Medical of 81.5 per cent in addition to interest bearing
loan notes. The importance of the future success of Morphic Medical
therefore cannot be underestimated. I am therefore pleased to
report that following a request by the Fund, in anticipation of the
re-instatement of the CE Mark, which will enable sales to
re-commence, the board of Morphic Medical has recently been
significantly strengthened by the appointment of an ex-Medtronic
Executive and by the appointment of the former Chairman of Apollo
Endosurgery, which, last year, was acquired by Boston Scientific
for an enterprise value of $615 million.
The Company is mindful that the Company's shares trade at a
substantial discount to NAV. Whilst rising interest rates and poor
liquidity in the investment trust sector have resulted in a general
widening of discounts, the Board believes that the historically
high level of the discount should be addressed at the forthcoming
Annual General Meeting, where a new share buyback programme is to
be proposed.
In a little over seven quarters and against a backdrop of poor
equity markets, rising interest rates and deteriorating liquidity,
the Fund has realised more than GBP71 million and exited from
several seemingly wholly illiquid positions at premiums to carrying
value. While this difficult economic and geopolitical background
continues to challenge the realisation process, the work to date is
testament to the skill and perseverance of the Investment
Manager.
When we look back at the last three years, we see that the UK
Smaller Companies investment companies has risen by 19 per cent.
Over the same period, the Fund has delivered a return of 55 per
cent (source: Trustnet) and there still remains substantial value
within the portfolio. The Board is confident that the Investment
Manager, with its intimate and long acquired knowledge of the
portfolio, is ideally placed to continue to deliver impressive
performance and realisations.
Christopher Waldron
Chairman
24 October 2023
Investment Manager's Report
Performance
During the year, and reflecting the 45p per share dividend
payments (representing GBP27.5 million in aggregate), the Company's
NAV per share fell from 145.03p to 93.3p. Underlying net asset
value, also reflecting dividend payments, declined by 4.6%.
Portfolio and Strategy
At 30 June 2023, the Company held equity investments in six
companies (2022: nine). The Company also held debt instruments in
Morphic Medical Inc (formerly GI Dynamics Inc.) and Sigma Broking
Limited.
The Company's strategy is to optimise realisations for a limited
number of special situations where the Company believes value can
be realised regardless of broad market direction. By its nature as
an activist fund, the Company needs to hold sufficiently large
stakes to facilitate engagement as a significant shareholder.
Therefore, the Company is inevitably exposed to concentration risk
particularly as continuing realisations will increase the weighting
of the remaining holdings.
As at 30 June 2023, the weighted average market capitalisation
of the Company's listed investee companies was GBP83 million (30
June 2022: GBP129 million).
Hurricane Energy plc ("Hurricane")
The most significant monetisation during the year was that of
Hurricane. After a lengthy formal sales process and more than a
year later, following an initial expression of interest in May 2022
from another trade buyer, the acquisition by Prax Exploration
completed in June 2023. The Fund received initial proceeds of
GBP34.7 million from the acquisition. Against a backdrop at the
time of a harsh regulatory and taxation environment, several
potential purchasers concluded that despite the short-term "cash
cow" attributes of this asset and substantial available tax losses,
the potential rewards did not justify the risk. In addition to the
formal sale process, the Fund had direct discussions with three
other potential buyers. Ultimately, they also were unable to "pull
the trigger." The Investment Manager was not prepared for the Fund
to continue to be at material risk of the uncertain outcomes of
both the stability of the single well method of extraction, the
pump and the oil price. The transaction with Prax was structured to
deliver a very significant monetisation together with equally
significant potential upside. The first tranche of this potential
upside was received by the Fund at the beginning of this month:
GBP1.8 million from the Deferred Consideration Units.
Two years earlier, every other institutional investor had sold
out of Hurricane Energy. However, with its detailed knowledge and
history of this investment, the Fund was able to convince the High
Court that management's extremely dilutive proposal was plainly
wrong. The Fund was able to effectively double its shareholding at
a level that represented emotional distress rather than
dispassionate analysis. For context, the Fund acquired some of its
holding at 1p a share. Given that in June 2023, the Fund received
over 6p a share in cash, the decision to average the cost of
investment was clearly the right one.
De La Rue plc ("De La Rue")
We have previously explained how De La Rue stands out as a case
study of how poor leadership is the ultimate destroyer of
shareholder returns. The company has a long and proud history,
having been established in 1821 and has been printing banknotes
since 1860. In 1982, the share price was 617.5p. Forty-one years
later, it traded at below 30p. Ten years ago, De La Rue paid an
annual dividend of 42.3p a share. In 2019, the dividend was
shelved.
In July 2020, De La Rue completed a GBP100 million fundraise
which was priced at 110p per share. The Fund was the largest
investor in this raise and ended up owning around 18% of De La
Rue's issued share capital. Following a significant rise in the
share price, the Fund reduced its exposure and reverted to being a
10% shareholder.
As early as January 2022, the Fund publicly highlighted
operational and strategic mistakes at De La Rue. Rather than engage
constructively, management was completely dismissive.
Last September, the Fund commented that it believed that De La
Rue was in a critical position, with essential strategic decisions
required. In July 2022, the Fund wrote to the Chairman and Chief
Executive of De La Rue to request that Crystal Amber, as a 10%
shareholder, be invited to nominate a director in a non-executive
capacity. After more than two months of procrastination and
attendance at several meetings, the proposal was rejected. The
board of De La Rue then called a meeting of shareholders to vote on
the Chairman's future. In December 2022, the Chairman was
re-elected. Following a profit warning in January 2023, the Fund
requisitioned a meeting of shareholders in March 2023 to remove
Chairman Kevin Loosemore. Following a further profit warning in
April, his position became untenable and he resigned.
In May 2023, Clive Whiley was appointed Chairman. By the end of
the following month he was able to successfully negotiate a
reduction in contributions to the pension plan, revise and relax
banking covenants and secure the removal of the material
uncertainty going concern audit qualification. Against this
improved backdrop and with increasing evidence of a cyclical upturn
in the currency market, the Fund substantially added to its
holding. During the summer, the Fund increased its shareholding
from less than 10% of De La Rue's issued capital to close to 17%.
The average cost of these purchases was 41.2p a share. The Fund
remains of the view that the strategic value of De La Rue continues
to be substantially more than its operational value and that it is
now an attractive takeover target in an industry requiring
consolidation.
Allied Minds Plc ("Allied Minds")
The Company has been an investor in Allied Minds since November
2018, and currently owns more than 18% of its issued share capital.
Engagement to date has secured a 70% reduction in the annual cost
base.
Allied Minds' portfolio contains three significant holdings:
Federated Wireless, BridgeComm and Orbital Sidekick.
As liquidity in Allied Minds has diminished, it has been
necessary for the Fund to seek board changes on two occasions, most
recently in 2022, with the necessary departure of then Chairman
Harry Rein.
Last summer, Allied Minds announced that it considered that the
costs of a premium listing on the Main Market of the London Stock
Exchange were prohibitively high relative to Allied Minds' size and
maintaining a public listing was no longer in its best interests.
Allied Minds delisted in November 2022 following shareholder
approval.
Since delisting, the Fund's engagement with the two directors of
Allied Minds, Sam Dobbyn and Bruce Failing has been frustrating and
unproductive. The Fund has written to both Allied Minds and two of
its largest shareholders expressing concerns regarding the lack of
governance and oversight. Astonishingly, much of the board's focus
at Allied Minds has been on securing increased remuneration for its
directors. The Fund has seen no evidence of realising or monetising
investments.
Without such evidence in the very near term, the Fund will take
appropriate action to protect its interests. Whilst this holding
currently accounts for less than 5% of net asset value, the Fund
will take action to ensure that the interests of those charged with
the responsibility of delivering value from Allied Minds for its
owners are aligned with the interests of its owners. The Fund is
surprised and disappointed that to date, other institutional
shareholders have been prepared to condone this conduct, but the
Fund will continue to engage with them.
Morphic Medical Inc ("Morphic Medical") formerly GI Dynamics Inc
("GI Dynamics")
GI Dynamics changed its name to Morphic Medical Inc in summer
2023. Morphic Medical is a privately held company, headquartered in
Boston, MA, that develops an endoscopically delivered medical
device indicated for patients with Type 2 Diabetes and Obesity. The
device is called the Endobarrier. The Fund first took a toehold
investment in 2014.
Morphic Medical had listed on the Australian stock exchange in
2011, raising A$80m and commanded a market capitalisation of
A$304m. The company's sales and regulatory relationships were
impacted by the negative developments in the US. Relations with the
CE Mark notified body were further impacted by the change in
regulatory framework in the EU. The latter created a much-increased
workload for notified bodies that oversee CE Mark compliance.
In 2017, the company received formal notification of CE Mark
withdrawal, preventing the sale of EndoBarrier in Europe and select
Middle Eastern countries.
Since Covid 19, the regulatory environment for obtaining
regulatory approval has seen lengthening cycles: a new EU directive
(Medical Devices Regulation, MDR) has increased the standard of
clinical evidence required. MedTech Europe has stated that 480,000
products require re-certification, with the majority of devices
requiring an approval process of a duration of 13-24 months.
Nevertheless, the company has made good progress towards recovery
of its CE Mark certification. The company is on track for
completion of all filings by December 2023, with approval expected
in the first half of 2024. Thereafter, sales can re-commence, with
Germany being the first market. With that in mind, the company has
recruited a European Head of Sales and Marketing who started in
September 2023.
Last year, enrolment for the company's US trial restarted. It
successfully persuaded the FDA to ease some of the enrolment
restrictions. Specifically, it has reduced the stringent Vitamin D
requirements that was screening out many potential candidates for
the trial.
Morphic Medical has added new sites to its US trial and improved
its design in a way that should facilitate patient enrolment. The
US market opportunity is substantial and can be an extremely large
and lucrative market for the company.
Following further investment of GBP8.3 million in Morphic
Medical since the beginning of 2022, combined with cash returns of
55p a share, Morphic Medical now accounts for 40% of NAV. The Fund
has a fully diluted equity interest of 81.5% in addition to
interest bearing loan notes. The importance of its future success
therefore cannot be underestimated.
In anticipation of the re-instatement of the CE Mark, which will
enable sales to re-commence, the board of Morphic Medical has
recently been significantly strengthened by the appointment of an
ex-Medtronic Executive and by the appointment of the former
Chairman of Apollo Endosurgery, which, last year, was acquired by
Boston Scientific for an enterprise value of $615 million.
Outlook
Following significant cash returns, the Manager remains mindful
of the concentration risk of the portfolio and the increasingly
challenging macro-economic backdrop, as long-term interest rates
breach 15-year highs. Nevertheless, the Fund's holdings offer
significant upside, and this is expected to convert into continuing
to maximise returns of capital. The Manager is optimistic that the
strong relative performance of the last three years can be repeated
in the coming 12 months.
Crystal Amber Asset Management (Guernsey) Limited
24 October 2023
Investment Policy
The Company is an activist fund which aims to identify and
invest in undervalued companies and, where necessary, engage with
management to take steps to enhance their value. The Company's
strategy is to optimise realisations at a limited number of special
situations where the Company believes value can be realised
regardless of market direction. By its nature as an activist fund,
the Company needs to hold sufficiently large stakes to facilitate
engagement as a significant shareholder. Therefore, the Company is
inevitably exposed to concentration risk particularly as continuing
realisations will increase the weighting of the remaining
holdings.
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 the realisation of
investments, if this is considered to be in the best interests of
its Shareholders.
Investment strategy
On 7 March 2022 a revised investment policy to reflect a
realisation strategy was approved by Shareholders at an
Extraordinary General Meeting. It was agreed that the Fund would
not make any new investments and would only make further
opportunistic investments in existing holdings where, in the view
of the Board and Investment Manager, such investment was 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. Any such investment would
require the prior approval of the Board and would only be permitted
where it was not expected to compromise the timescale for
realisations.
From 7th March 2022 the Company adopted a strategy of maximising
capital returned to Shareholders by way of timely disposals,
including trade sales of the Company's strategic holdings, where
appropriate (with the potential exception of Morphic Medical Inc.)
and returns of cash to Shareholders. Whilst it was initially
intended to complete this process by 31 December 2023, Shareholders
were aware that this was a target rather than a deadline.
In seeking the realisation of predominantly all the Company's
investments (with the possible exception of Morphic Medical Inc.),
it was agreed that the Directors would aim to achieve a balance
between maximising their net value and progressively returning cash
to Shareholders. In so doing, the Board would take account of the
continued costs of operating the Company. The Company's admission
to trading on AIM will be maintained for as long as the Directors
believe it to be practicable and cost-effective within the
requirements of the AIM Rules.
The Company has ceased to make any new investments except where,
in the opinion of the Investment Manager and with the approval of
the Board, the investment is considered necessary by the Board to
protect or enhance the value of any existing investments of the
Company or to facilitate orderly disposals of assets held by the
Company. Any cash received by the Company as part of the
realisation process prior to its distribution to Shareholders will
be held by the Company, on behalf of the Shareholders, as cash on
deposit and/or as cash equivalents.
As it is probable that the Company will not have realised all of
its investments by 31 December 2023, it is intended that the Board
will consult Shareholders and/or make arrangements to seek
Shareholder approval on the future strategy of the Company,
including steps that might be necessary to maximise the opportunity
to realise value from the remaining assets of the Company.
Dividend Policy
Following any material realisations of the Company's
investments, the Directors intend to continue to return cash to
Shareholders using tax-efficient means such as redeemable shares,
dividends and/or tender offers.
Crystal Amber Fund Limited
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2023
2023 2022
Revenue Capital Total Revenue Capital Total
Notes GBP GBP GBP GBP GBP GBP
Income
Dividend income from
listed investments - - - 20,311 - 20,311
Interest received 33,644 - 33,644 - - -
---------------------- ------ ------------ ------------- ------------- ------------ ------------ ------------
33,644 - 33,644 20,311 - 20,311
Net (losses)/gains on
financial assets at
FVTPL
Equities
Net realised
gains/(losses) 9 - 10,736,035 10,736,035 - (2,934,478) (2,934,478)
Movement in
unrealised
(losses)/gains 9 - (13,535,808) (13,535,808) - 9,241,539 9,241,539
Debt instruments
Movement in
unrealised gains 9 - 628,186 628,186 - 428,347 428,347
---------------------- ------ ------------ ------------- ------------- ------------ ------------ ------------
- (2,171,587) (2,171,587) - 6,735,408 6,735,408
---------------------- ------ ------------ ------------- ------------- ------------ ------------ ------------
Total (loss)/income 33,644 (2,171,587) (2,137,943) 20,311 6,735,408 6,755,719
---------------------- ------ ------------ ------------- ------------- ------------ ------------ ------------
Expenses
Transaction costs 4 - 72,199 72,199 - 299,972 299,972
Exchange movements on
revaluation of
investments and
working capital 434,639 1,247,956 1,682,595 (847,496) (3,981,544) (4,829,040)
Management fees 15,17 960,000 - 960,000 1,649,299 - 1,649,299
Directors'
remuneration 16 130,000 - 130,000 130,000 - 130,000
Administration fees 17 127,028 - 127,028 168,247 - 168,247
Custodian fees 17 51,497 - 51,497 124,454 - 124,454
Audit fees 57,025 - 57,025 56,255 - 56,255
Other expenses 357,636 - 357,636 375,053 - 375,053
---------------------- ------ ------------ ------------- ------------- ------------
2,117,825 1,320,155 3,437,980 1,655,812 (3,681,572) (2,025,760)
---------------------- ------ ------------ ------------- ------------- ------------ ------------ ------------
(Loss)/Return for the
year (2,084,181) (3,491,742) (5,575,923 ) (1,635,501) 10,416,980 8,781,479
---------------------- ------ ------------ ------------- ------------- ------------ ------------ ------------
Basic and diluted
(loss)/earnings per
share (pence) 5 (2.51) (4.19) (6.70) (1.95) 12.48 10.53
---------------------- ------ ------------ ------------- ------------- ------------ ------------ ------------
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.
Crystal Amber Fund Limited
Statement of Financial Position
As at 30 June 2023
2023 2022
Assets Notes GBP GBP
Cash and cash equivalents 7 12,254,948 47,370
Trade and other receivables 8 71,338 70,728
Financial assets designated at FVTPL 9 69,859,825 120,862,525
Total assets 82,186,111 120,980,623
------------- -------------
Liabilities
Trade and other payables 10 4,509,400 274,039
Total liabilities 4,509,400 274,039
------------- -------------
Equity
Capital and reserves attributable to the Company's equity Shareholders
Share capital 11 997,498 997,498
Treasury shares 12 (19,767,097) (19,767,097)
Distributable reserve 40,586,958 78,040,908
Retained earnings 55,859,352 61,435,275
Total equity 77,676,711 120,706,584
------------- -------------
Total liabilities and equity 82,186,111 120,980,623
------------- -------------
NAV per share (pence) 6 93.33 145.03
------------- -------------
The Financial Statements were approved by the Board of Directors
and authorised for issue on 24 October 2023.
Christopher Waldron Jane Le Maitre
Chairman Director
24 October 2023 24 October 2023
The Notes to the Financial Statements form an integral part of
these Financial Statements.
Crystal Amber Fund Limited
Statement of Changes in Equity
For the year ended 30 June 2023
Share Treasury Distributable Retained earnings Total
Notes capital shares reserve Capital Revenue Total equity
GBP GBP GBP GBP GBP GBP GBP
Opening
balance
at 1 July
2022 997,498 (19,767,097) 78,040,908 68,401,964 (6,966,689) 61,435,275 120,706,584
Dividends
paid
in the
year 13 - - (37,453,950) - - - (37,453,950)
Loss for
the year - - - (3,491,742) (2,084,181) (5,575,923) (5,575,923)
Balance at
30
June 2023 997,498 (19,767,097) 40,586,958 64,910,222 (9,050,870) 55,859,352 77,676,711
------------ ------ -------- ------------- -------------- ------------ ------------ ------------ -------------
Share Treasury Distributable Retained earnings Total
Notes capital shares reserve Capital Revenue Total equity
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 12 - (575,458) - - - - (575,458)
Dividends
paid
in the year 13 - - (10,431,425) - - - (10,431,425)
Profit for
the
year - - - 10,416,980 (1,635,501) 8,781,479 8,781,479
Balance at 30
June 2022 997,498 (19,767,097) 78,040,908 68,401,964 (6,966,689) 61,435,275 120,706,584
-------------- ------ -------- ------------- -------------- ----------- ------------ ----------- -------------
Crystal Amber Fund Limited
Statement of Cash Flows
For the year ended 30 June 2023
2023 2022
Note GBP GBP
Cashflows from operating activities
Dividend income received from listed
investments - 20,311
Bank interest received 33,644 -
Management fees paid (960,000) (1,649,299)
Directors' fees paid 16 (130,000) (130,000)
Other expenses paid (542,128) (309,818)
------------- -------------
Net cash outflow from operating activities (1,598,484) (2,068,806)
Cashflows from investing activities
Purchase of equity investments 9 (2,319,352) (47,581,132)
Sale of equity investments 9 55,399,271 61,399,209
Purchase of debt instruments 9 (3,867,708) (5,707,461)
Debt repayment 9 2,120,000 -
Purchase of money market investments 10 (72,199) -
Transaction charges on purchase and sale
of investments - (299,972)
------------- -------------
Net cash inflow from investing activities 51,260,012 7,810,644
Cashflows from financing activities
Purchase of Ordinary shares into Treasury - (710,614)
Dividends paid 13 (37,453,950) (10,431,425)
------------- -------------
Net cash outflow from financing activities (37,453,950) (11,142,039)
Net increase/(decrease) in cash and
cash equivalents during the year 12,207,578 (5,400,201)
Cash and cash equivalents at beginning
of year 47,370 5,447,571
-------------
Cash and cash equivalents at end of
year 7 12,254,948 47,370
------------- -------------
The Notes to the Financial Statements form an integral part of
these Financial Statements.
Crystal Amber Fund Limited
Notes to the Financial Statements
For the year ended 30 June 2023
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, GYI 4LY. The Company was
established to provide Shareholders with an attractive total
return, which was expected to comprise primarily capital growth
with the potential for distributions of up to 5p per share per
annum following consideration of the accumulated retained earnings
as well as the unrealised gains and losses at that time. Following
changes to the Company's investment policy, the Company's strategy
is now to optimise outcomes at a limited number of special
situations where the Company believes value can be realised
regardless of market direction.
Morphic Medical Inc is an unconsolidated subsidiary of the
Company and was incorporated in Delaware. As at 30 June 2023 it had
5 wholly-owned subsidiaries and its principal place of business is
Boston. Refer to Note 15 for further information.
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 have been prepared to 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 currency.
The Financial Statements have been prepared under the historical
cost convention with the exception of financial assets designated
at fair value through profit or loss ("FVTPL").
Investment Entities
To determine whether 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 .
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 its investments on a fair value basis.
As the Company has met the definition of an investment entity
under IFRS 10, it is exempt from preparing consolidated financial
statements.
The Company has taken the exemption permitted by IAS 28
"Investments in Associates and Joint Ventures" and IFRS 11 "Joint
Arrangements" for entities similar to investment entities and
measures its investments in associates at fair value. The Directors
consider an associate to be an entity over which the Group has
significant influence by means of owning between 20% and 50% of the
entities' shares. The Company's associates are disclosed in Note
14.
The Company meets the definition of an investment entity and
complies with disclosure requirements in IFRS 10, IFRS 12 and IAS
27.
Going concern
As at 30 June 2023, the Company had net assets of GBP77.7
million (30 June 2022: GBP120.7 million) and cash balances of
GBP12.25 million (30 June 2022: GBP0.05 million) which are
sufficient to meet current obligations as they fall due.
The Directors are confident that the Company has adequate
resources to continue in operational existence for the foreseeable
future and as a result of this, do not consider there to be any
threat to the going concern status of the Company.
The Directors have considered the potential impact of the
conflicts between Russia and Ukraine, and Israel and Gaza which
have both had a negative impact on the global economy. This poses
significant challenges and uncertainty globally and continues to
have potentially adverse consequences for investee companies as
energy costs rise. The Directors do not consider that this will
impact the Company's ability to continue as a going concern.
In relation to the Company's investment portfolio, 29% 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.
The Directors have also considered the result of the
continuation vote which occurred at the 2021 AGM and results of the
subsequent EGM which did not conclude that the Company should be
wound up. Following extensive Shareholder consultation, a new
investment policy was put before Shareholders and approved at the
EGM in March 2022 which prioritised the Company's intention to
maximise the return of capital to Shareholders, representing a
change of strategy.
The Board believed that it was in the interests of Shareholders
as a whole for the Company to adopt a strategy of maximising
capital return to Shareholders by way of timely disposals,
including trade sales of the Company's mature listed strategic
holdings, where appropriate. The Company has a track record of
returning cash to Shareholders via share buybacks and dividends:
since 2013, when the requirement for the continuation vote to be
proposed at the 2021 AGM was introduced, GBP114.2 million has been
returned to Shareholders via such means.
In line with the change in strategy, the Company has sold
investments in Alquiber Quality S.A., Board Intelligence Limited
and Equals Group Plc. Hurricane Energy Plc was acquired by Prax
Exploration & Production Plc and realised a part disposal.
As the Company will not have realised all of its investments by
31 December 2023, it is intended that the Board will consult
Shareholders and/or make arrangements to seek Shareholder approval
on the future strategy of the Company, including steps that might
be necessary to maximise the opportunity to realise value from the
remaining assets of the Company.
In 2014, the Company acquired an initial shareholding in Morphic
Medical Inc. The Company believes, it has been able to acquire
majority ownership of a valuable shareholding, which comprises
81.5% of Morphic Medical Inc 's diluted share capital. With board
representation, the Company is actively involved in the management
of Morphic Medical Inc.
The Company looks forward to continuing to work with Morphic
Medical Inc to achieve its operational milestones and to further
develop the pathway to maximise shareholder value. Given the
anticipated value accretive milestones, the Company believes it is
appropriate that it gives Morphic Medical Inc the time it requires
to maximise shareholder returns.
In due course, the Company will consult with investors about the
longer-term plans for Morphic Medical Inc to realise value for the
Company's Shareholders. A trade sale is a potential crystallisation
path. Alternatively, as the Company continues a disposal programme
of its listed investment portfolio, it is possible that the
Company's listing may provide a suitable and cost-effective vehicle
for Morphic Medical Inc to be listed, raise its profile and
potentially, following the achievement of milestones, provide the
Company's Shareholders with direct exposure to its growth
prospects, as well as liquidity.
The Directors have made a robust assessment of the prospects of
the Company over the two-year period ending 30 June 2025. The
Directors consider that this is an appropriate period to assess the
viability of the Company given the new investment policy agreed
with Shareholders in March 2022 and the time horizon over which
investment decisions are made.
The Directors have also considered the Company's income and
expenditure projections over the two-year period ending 30 June
2025, the fact that the Company currently has no borrowings and
that most of its investments comprise readily realisable securities
which can be sold to meet funding requirements if necessary.
Based on the results of this analysis, including the Investment
Management Agreement, change in investment strategy and future
strategic plans involving Morphic Medical Inc, the Directors have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due for the
foreseeable future.
The Directors have considered the contributing factors set out
above and 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. Accordingly, they continue to adopt the going
concern basis of accounting in preparing these financial
statements.
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 is
an investment entity is a critical judgement, as set out above. The
estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable in the circumstances. Actual results may differ from
these estimates. The unquoted equity and debt securities have been
valued based on unobservable inputs (see Note 14).
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, which 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 initially recognised at fair value unless they are
trade receivables. The cost of the instrument may be indicative of
the fair value. Subsequent to initial recognition financial
instruments are measured as described below.
Financial assets designated at FVTPL
All the Company's investments including equity, debt instruments
and derivative financial instruments are held at FVTPL. Financial
instruments are initially recognised at fair value. The cost of the
instrument may be indicative of the 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 bid price on the
reporting date or at 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.
Loan notes are classified as debt instruments and are initially
recognised at fair value. The cost of the instrument may be
indicative of the FV. Subsequent to initial recognition, loan notes
are valued at fair value. In the absence of an active market, the
Company determines the fair value of its unquoted investments by
taking into account the International Private Equity and Venture
Capital ("IPEV") guidelines.
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 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.
Trade and other receivables
The Company's trade and other receivables are classified as
financial assets at amortised cost. They are measured at amortised
cost less impairment assessed using the general approach of the
expected credit loss model based on experience of previous losses
and expectations of future losses.
Trade and other payables
The Company's trade and other payables are measured at amortised
cost and include trade and other payables and other short term
monetary liabilities which are initially recognised at fair value
and subsequently measured at amortised cost using the effective
interest rate method.
Derecognition of financial instruments
The Company derecognises 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 derecognition of a financial asset, the difference between
the carrying amount of the asset (or the carrying amount allocated
to the portion of the asset derecognised), 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 derecognises a financial liability when its
contractual obligations are discharged, cancelled or expire. Any
gain or loss on derecognition 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. Due to the credit rating of the financial institutions
holding the Company's cash and cash equivalents, no impairment has
been recognised.
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. Dividend
income is 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
countries other than the UK 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.
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 treats 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 sold. 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
New and amended standards and interpretations applied in these
financial statements
There were no new standards or interpretations effective for the
first time for periods beginning on or after 1 July 2022 that had a
significant effect on the Company's financial statements.
Furthermore, none of the amendments to standards that are effective
from that date had a significant effect on the financial
statements.
New and amended standards and interpretations not applied in
these financial statements (issued but not yet effective)
Other accounting standards and interpretations have been
published and will be mandatory for the Company's accounting
periods beginning on or after 1 January 2023 or later periods, but
the impact of these standards is not expected to be material to the
reported results and financial position 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 GBP1,200 (2022: GBP1,200).
4. TRANSACTION COSTS
The transaction charges incurred in relation to the acquisition
and disposal of investments during the year were as follows:
2023 2022
GBP GBP
Stamp Duty 32,557 163,701
Commissions and custodian transaction charges:
In respect of purchases 7,232 51,976
In respect of sales 32,410 84,295
72,199 299,972
------------------------------------------------ ------- --------
5. BASIC AND DILUTED (LOSS)/ EARNINGS PER SHARE
Earnings per share is based on the following data:
2023 2022
(Loss)/Return for the year (GBP5,575,923) GBP8,781,479
Weighted average number of issued
Ordinary shares 83,231,000 83,430,611
Basic and diluted (loss)/earnings
per share (pence) (6.70) 10.53
------------------------------------ --------------- -------------
6. NAV PER SHARE
NAV per share is based on the following data:
2023 2022
NAV per Statement of Financial Position GBP77,676,711 GBP120,706,584
Total number of issued Ordinary shares (excluding Treasury shares) at 30 June 83,231,000 83,231,000
------------------------------------------------------------------------------- -------------- ---------------
NAV per share (pence) 93.33 145.03
------------------------------------------------------------------------------- -------------- ---------------
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:
2023 2022
GBP GBP
Cash on demand 12,254,948 47,370
---------------- ----------- -------
12,254,948 47,370
---------------- ----------- -------
8. TRADE AND OTHER RECEIVABLES
2023 2022
GBP GBP
Current assets:
Other receivables 56,557 56,958
Prepayments 14,781 13,770
------------------- ------- --------
71,338 70,728
------------------- ------- --------
There were no past due or impaired receivable balances
outstanding at the year end (2022: GBPNil).
9. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
2023 2022
GBP GBP
Equity investments 57,258,110 110,202,065
Debt instruments 12,601,715 10,660,460
-------------------------------------------- ------------- --------------
Financial assets designated at FVTPL 69,859,825 120,862,525
-------------------------------------------- ------------- --------------
Total financial assets designated at FVTPL 69,859,825 120,862,525
-------------------------------------------- ------------- --------------
Equity investments
Cost brought forward 132,232,346 153,218,932
Purchases 16,692,050 43,347,101
Sales proceeds (65,588,276) (61,399,209)
Net realised gain / (losses) 10,736,035 (2,934,478)
Cost carried forward 94,072,155 132,232,346
-------------------------------------------- ------------- --------------
Unrealised (losses) brought forward (24,168,635) (33,410,174)
Movement in unrealised losses/gains (13,535,808) 9,241,539
Unrealised losses carried forward (37,704,443) (24,168,635)
-------------------------------------------- ------------- --------------
Effect of exchange rate movements 890,398 2,138,354
-------------------------------------------- ------------- --------------
Fair value of equity investments 57,258,110 110,202,065
-------------------------------------------- ------------- --------------
Debt instruments
Cost brought forward 8,965,416 3,257,955
Purchases 3,867,708 5,707,461
Repayment of Loans (2,120,000) -
--------------------------------------------
Cost carried forward 10,713,124 8,965,416
-------------------------------------------- ------------- --------------
Unrealised gains brought forward 1,682,934 1,254,587
Movement in unrealised gains 628,186 428,347
-------------------------------------------- ------------- --------------
Unrealised gains carried forward 2,311,120 1,682,934
Effect of exchange rate movements (422,529) 12,110
Fair value of debt instruments 12,601,715 10,660,460
-------------------------------------------- ------------- --------------
Total financial assets designated at FVTPL 69,859,825 120,862,525
-------------------------------------------- ------------- --------------
Total realised gains and losses and unrealised gains and losses
on the Company's equity, debt and derivative financial instruments
are made up of the following gain and loss elements:
2023 2022
GBP GBP
Realised gains 14,284,779 8,438,985
Realised losses (3,548,744) (11,373,463)
-------------- --------------
Net realised gains/(losses) in financial
assets designated at FVTPL 10,736,035 (2,934,478)
------------------------------------------- -------------- --------------
Movement in unrealised gains (7,936,128) 6,270,840
Movement in unrealised losses (4,971,494) 3,399,046
-------------- --------------
Net movement in unrealised (losses)/gains
in financial assets designated at
FVTPL (12,907,622) 9,669,886
------------------------------------------- -------------- --------------
On 8(th) June 2023, Hurricane Energy Plc was acquired by Prax
Exploration & Production Plc resulting in the Company receiving
GBP34,654,130 and 575,649,999 Deferred Consideration Units (DCU) in
Prax Exploration & Production. The DCU's confer an entitlement
for DCU Holders to receive 17.5% of all future net revenues earned
by Hurricane Energy from 1 March 2023 until 31 December 2026,
including revenue from both the Lancaster oil field and from any
acquisition made by Prax Exploration via Hurricane Energy, capped
at a total of 6.48p per DCU. The DCU payments will be paid
biannually in arrears, approximately 90 days after 30 June and 31
December.
In the Statement of Cashflow the purchases and sales proceeds
have been adjusted by the valuation of Prax Exploration &
Production Plc of GBP10,189,005 to reflect that this was a non-cash
transaction as part of the acquisition of Hurricane Energy Plc.
10. TRADE AND OTHER PAYABLES
2023 2022
GBP GBP
Current liabilities:
Accruals 325,706 274,039
Unsettled trade purchases 4,183,694 -
---------- --------
4,509,400 274,039
---------- --------
The carrying amount of trade payables approximates to their fair
value.
11. 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 (See note 12), is as follows:
2023 2022
Number GBP Number GBP
Opening balance 99,749,762 997,498 99,749,762 997,498
Ordinary shares issued during the year - - - -
---------------------------------------------------------------- ------------ --------- ------------- ----------
Issued, called up and fully paid Ordinary shares of GBP0.01
each 99,749,762 997,498 99,747,762 997,498
---------------------------------------------------------------- ------------ --------- ------------- ----------
Capital risk management
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.
In accordance with the Company's Memorandum and Articles of
Incorporation the retained earnings and distributable reserve shown
in the Company's Statement of Financial Position at the year end
are distributable by way of dividend.
The Company may carry the returns of the Company to the
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 2023, the Company paid dividends
of GBP 37,453,950 (2022: GBP 10,431,425) from distributable
reserves, as disclosed in Note 13. On 8 June 2023, the Company
declared an interim dividend of GBP20.8 million equating to 25p per
Ordinary share, which was paid on 30 June 2023.
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
2023 2022
Number GBP Number GBP
Opening balance 16,518,762 19,767,097 16,012,762 19,191,639
Treasury shares purchased during the year - - 506,000 575,458
------------------------------------------- ----------- ----------- ----------- -----------
Closing balance 16,518,762 19,767,097 16,518,762 19,767,097
------------------------------------------- ----------- ----------- ----------- -----------
No Treasury shares were purchased during the year ended 30 June
2023 (2022: 506,000). Treasury shares purchased in 2022 had an
average price of 113.73p per share and represented an average
discount to NAV at the time of purchase of 42.1%.
13. DIVIDS
On 7 July 2022, the Company declared an interim dividend of
GBP8,323,100 equating to 10p per Ordinary share, which was paid on
5 August 2022 to Shareholders on the register on 15 July 2022.
On 11 November 2022, the Company declared an interim dividend of
GBP8,323,100 equating to 10p per Ordinary share, which was paid on
23 December 2022 to Shareholders on the register on 25 November
2022.
On 8 June 2023, the Company declared an interim dividend of
GBP20,807,750 equating to 25p per Ordinary share, which was paid on
30 June 2023 to Shareholders on the register on 16 June 2023.
14. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
Financial risk management objectives
The Investment Manager, Crystal Amber Asset Management
(Guernsey) Limited and the Administrator, Ocorian Administration
(Guernsey) 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 risk. 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 significant observable inputs on a regular basis and
does not consider that any changes are required this year to the
categories used in prior years.
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument will default on its contractual obligations with the
Company, resulting in financial loss to the Company. At 30 June
2023 the major financial assets which were exposed to credit risk
included financial assets designated at FVTPL and cash and cash
equivalents.
The carrying amounts of financial assets best represent the
maximum credit risk exposure at 30 June 2023. 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 accounting date
and the S&P credit rating for each counterparty at that
date.
Location Rating Cash Balance Cash Balance
2023 2022
Butterfield Bank (Channel
Islands) Limited Guernsey BBB+ 12,001,525 37,413
Barclays Bank PLC - Isle Isle of
of Man Branch Man A 253,423 9,957
--------------------------- ---------- -------- ------------- -------------
12,254,948 47,370
----------------------------------------------- ------------- -------------
The credit ratings disclosed above are the credit ratings of the
parent entities of each of the counterparties being The Bank of N.
T. Butterfield & Son Limited and Barclays Bank Plc.
The Company's credit risk on financial assets designated at
FVTPL arises on debt instruments. The Company's credit risk on
financial assets designated at FVTPL is considered acceptable as
debt instruments make up only a small percentage of the financial
assets. The Company is also exposed to credit risk on 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 credit
ratings available for the debt instruments held by the Company. At
30 June 2023, GBP 69,259,635 (2022: GBP110,239,478) of the
financial assets of the Company were held by the Custodian,
Butterfield Bank (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. 70% (2022: 91%) of the
Company's financial assets are held by the Custodian in segregated
accounts. 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 BBB+ (2022: BBB+). The
remaining balance of financial assets of GBP 12,926,476 (2022:
GBP10,741,145) includes GBP 253,423 (2022: GBP9,957) cash held by
Barclays Bank Plc, GBP 71,338 (2022: GBP70,728) trade receivables
and GBP 11,888,484 (2022: GBP7,987,857) loan notes issued by
Morphic Medical Inc and GBP 713,230 (2022: GBP2,672,603) loan notes
issued by Sigma Broking Limited.
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 and
contractual maturities for its financial assets and
liabilities:
2023 Weighted Less than 1 1-5 years 5+ years Total
average year
interest
rate
Assets GBP GBP GBP GBP
Non-interest
bearing - 57,582,871 - - 57,582,872
Variable
interest
rate
instruments 0.29% 12,001,525 - - 12,001,525
Fixed
interest
rate
instruments 5.00% 12,601,715 - - 12,601,715
Liabilities
Non-interest
bearing - (4,509,400) - - (4,509,400)
-------------- ----------- ------------- -------------
77,676,711 - - 77,676,712
-------------- ----------- ------------- ---------------------------- ----------------------------- -------------
2022 Weighted Less than 1 1-5 years 5+ years Total
average year
interest
rate
Assets GBP GBP GBP GBP
Non-interest
bearing 110,282,750 - - 110,282,750
Variable
interest
rate
instruments 0.29% 37,413 - - 37,413
Fixed
interest
rate
instruments 5.00% 10,660,460 - - 10,660,460
Liabilities
Non-interest
bearing (274,039) - - (274,039)
-------------- ------------ ------------- ------------
120,706,584 - - 120,706,584
-------------- ------------ ------------- ---------------------------- ----------------------------- ------------
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 and debt instruments
at fair value through profit or loss. 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
Company is exposed to fixed interest rate risk on the loans
receivable as where an instrument is a fixed rate security, the
value of the Financial Instruments is expected to be particularly
affected by the current climate of rising interest rate.
The Investment Manager monitors market interest rates and will
place interest bearing assets at best available rates but will also
take the counterparty's credit rating and financial position into
consideration.
The cash at hand balances are the only assets with variable
interest rates and the movement in variable interest rates is an
immaterial amount, therefore, no sensitivity analysis for the
movement is disclosed.
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. However, there is no guarantee that the value
will not rise above 20% after any investment is made, particularly
where it is believed that an investment is exceptionally
attractive.
The following tables detail the Company's equity investments as
at 30 June 2023:
Value Percentage
Equity Investments Sector GBP of Gross Assets
Morphic Medical Inc Healthcare 19,165,077 23
De La Rue PLC Commercial Services 14,261,875 17
Prax Exploration & Production PLC (DCU 1) (formerly Hurricane
Energy PLC) Oil and Gas 10,189,005 12
Sigma Broking Limited Financial Services 6,794,101 8
Allied Minds PLC Private Equity 4,471,681 5
Other Various 2,376,371 3
Total 57,258,110 70
-------------------------------------------------------------------------------------- ----------- -----------------
2022
Value
Equity Investments Sector GBP Percentage of Gross Assets
Hurricane Energy PLC Oil and Gas 40,583,325 34
Morphic Medical Inc Healthcare 23,057,072 19
De La Rue PLC Commercial Services 14,944,854 12
Equals Group PLC Financial Services 13,875,400 11
Allied Minds PLC Private Equity 7,938,679 7
Sigma Broking Limited Financial Services 5,664,818 5
Other Various 4,137,917 3
Total 110,202,065 91
---------------------- -------------------- ------------ ---------------------------
The following tables detail the investments in which the Company
holds more than 20% of the relevant entities. These have been
recognised at fair value as the Company is regarded as an
investment entity as set out in Note 1.
2023
Equity Investments Place of Business Place of Incorporation Percentage Ownership Interest
Morphic Medical Inc United States United States 81.5
2022
Equity Investments Place of Business Place of Incorporation Percentage Ownership Interest
Hurricane Energy PLC United Kingdom United Kingdom 28.9
Morphic Medical Inc. United States United States 81.5
The Company has assessed the price risk of the listed equity and
debt based on a potential 25% (2022: 25%) increase/decrease in
market prices, which the Company believes represents the effect of
a possible change in market prices and provides consistent analysis
for Shareholders, as follows:
At the year end and assuming all other variables are held
constant:
-- If market prices of listed equity and debt had been 25%
higher (2022: 25% higher), the Company's return and net assets for
the year ended 30 June 2023 would have increased by GBP4,159,562,
net of any impact on performance fee accrual (2022:
GBP20,058,562);
-- If market prices of listed equity, debt and derivative
financial instruments had been 25% lower (2022: 25% lower), the
Company's return and net assets for the year ended 30 June 2023
would have decreased by GBP4,159,562, net of any impact on
performance fee accrual (2022: decreased by GBP20,058,562
reflecting the effect of the derivative financial instruments held
at the reporting date); and
-- 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 and financial instruments held in Euro and US Dollars
(2022: Euro and US Dollars).
The table below illustrates the Company's exposure to foreign
exchange risk at 30 June 2023;
2023 2022
GBP GBP
Financial assets designated at FVTPL:
Listed equity investments denominated in Euro - 96,261
Unlisted equity investments denominated in US Dollars 19,165,077 23,057,072
Debt instruments denominated in US Dollars 11,888,485 7,987,857
Total assets 31,053,562 31,141,190
-------------------------------------------------------- ----------- -----------
If the Euro weakened/strengthened by 10% (2022: 10%) against
Sterling with all other variables held constant, the fair value of
equity investments would increase/decrease by GBP Nil (2022:
GBP9,626).
If the US Dollar weakened/strengthened by 10% (2022: 10%)
against Sterling with all other variables held constant, the fair
value of debt instruments would increase/decrease by GBP1,188,849
(2022: GBP798,796) and the fair value of the unlisted equity
investments would increase/decrease by GBP1,916,508 (2022:
GBP2,305,707).
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 2023
and 30 June 2022:
Level 1 Level 2 Level 3 Total
2023 GBP GBP GBP GBP
Financial assets designated at FVTPL and derivatives held for
trading:
Equities - listed equity investments 14,261,875 2,376,371 - 16,638,246
Equities - unlisted equity investments - 10,189,005 30,430,859 40,619,864
Debt - loan notes - - 12,601,715 12,601,715
14,261,875 12,565,376 43,032,574 69,859,825
------------------------------------------------------------------ ----------- ----------- ----------- -----------
Level 1 Level 2 Level 3 Total
2022 GBP GBP GBP GBP
Financial assets designated at FVTPL and derivatives held for
trading:
Equities - listed equity investments 77,438,519 2,795,730 - 80,234,249
Equities - unlisted equity investments - - 29,967,816 29,967,816
Debt - loan notes - - 10,660,460 10,660,460
77,438,519 2,795,730 40,628,276 120,862,525
------------------------------------------------------------------ ----------- ---------- ----------- ------------
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 equity investments relates to Sutton Harbour due to
the low volume of trading activity in the market for this
investment and has been valued by reference to the closing bid
price in the investee company on the reporting date. Prax
Exploration that has been recently listed on JP Jenkins and has
been valued by reference to the closing bid price in the investee
company on the reporting date.
The Level 3 equity investment in Allied Minds (which delisted on
30 November 2022) was valued at the Net Asset Value per share on 31
December 2022 converted at an exchange rate of $1.2699 to GBP1 and
reduced by a 25% liquidity discount. The Level 3 equity and debt
investments in Morphic Medical Inc were valued by reference to the
discounted cash flow value of the company with an additional
discount for dilution risk. The total valuation was then allocated
through a waterfall to the loan note, Series A shares and common
stock owned by the Company. The Level 3 equity investment in Sigma
Broking Limited was valued by reference to a third party funding of
the company. The third party is an external investor buying into
the investment for equity.
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:
2023 2022
GBP GBP
Opening balance at 1 July 2022/1 July 2021 40,628,276 29,032,329
Purchases 3,867,708 10,707,462
Allied Minds transferred in from Level 1 15,007,031 -
Movement in unrealised (losses)/gains (10,315,139) (3,912,815)
Sales (2,000,000) (1,660,933)
Repayments of debt instruments (2,120,000) -
Net realised (loss)/ gain (352,974) 1,633,412
Effect of exchange rate movements (1,682,328) 4,828,821
Closing balance at 30 June 2023/2022 43,032,574 40,628,276
-------------------------------------------- ------------- ------------
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 30 June 2023 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
significant
Fair Value at 30 unobservable
Valuation Method June 2023 Unobservable inputs Factor inputs
---------------------- -------------------- -------------------- -------------------- ------- -------------------
Morphic Medical Inc Discounted cash 19,165,077 Discount rate 43% An increase
(formerly GI Dynamics flow (decrease) in the
Inc) discount rate to
48% (38%) would
reduce (increase)
High growth rate 48% FV by GBP6.3m
over 9 year period (GBP8.1m)
A decrease
Dilution discount (increase) in the
20% near term growth
rate to 38% (58%)
would decrease
(increase)
FV by GBP4.1m
An increase
(decrease) in the
dilution discount
to 30% (to 10%)
would reduce
(increase) FV
by GBP3.6m
---------------------- -------------------- -------------------- -------------------- ------- -------------------
Sigma Broking Limited Third party funding 6,794,101 N/A N/A N/A
---------------------- -------------------- -------------------- -------------------- ------- -------------------
Allied Minds NAV 4,471,681 Illiquidity 25% An increase
discount (decrease) in the
liquidity discount
to 35% (to 15%)
would reduce
(increase) FV
by GBP0.6million.
---------------------- -------------------- -------------------- -------------------- ------- -------------------
Sensitivity to
changes in
Fair Value at 30 significant
Valuation Method June 2022 Unobservable inputs Factor unobservable inputs
-------------------- -------------------- --------------------- -------------------- ------- --------------------
Board Intelligence Discount to 1,245,926 Comparable Revenue 5.7x A 25% increase
Limited comparable company multiple (decrease) in the
multiples revenue multiple
Discount to would increase
comparable multiple 52.7% (decrease) FV by
GBP0.7m
(GBP0.7m)
A 25% decrease
(increase) in the
discount to the
revenue multiple
would increase
(decrease)
FV by GBP0.7m
(GBP0.6m)
-------------------- -------------------- --------------------- -------------------- ------- --------------------
GI Dynamics Inc Discounted cash 23,057,072 Discount rate 43% An increase
flow (decrease) in the
discount rate to
48% (38%) would
reduce (increase)
High growth rate 48% FV by GBP8.9m
over 9 year period (GBP13m)
A decrease
Dilution discount (increase) in the
20% near term growth
rate to 38% (58%)
would decrease
(increase)
FV by GBP4.1m
An increase
(decrease) in the
dilution discount
to 30% (to 10%)
would reduce
(increase) FV
by GBP3.6 million
-------------------- -------------------- --------------------- -------------------- ------- --------------------
Sigma Broking EBITDA Multiple 5,664,818 Discount rate 50% An increase
Limited (decrease) in the
liquidity discount
to 60% (to 40%)
would reduce
(increase) FV
by GBP0.9million
-------------------- -------------------- --------------------- -------------------- ------- --------------------
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
(2022: 10,000) Ordinary shares in the Company, representing 0.01%
(2022: 0.01%) of the voting share capital of the Company at the
year end.
During the year, the Company incurred management fees of
GBP960,000 (2022: GBP1,649,299) none of which were outstanding at
the year-end (2022: GBPNil). No performance fees were incurred in
the year (2022: GBPNil) and none were outstanding at the year-end
(30 June 2022: GBPNil).
As at 30 June 2023, the Investment Manager held 6,899,031
Ordinary shares (2022: 6,899,031) of the Company, representing
8.30% (2022: 8.29%) of the voting share capital.
As at 30 June 2023, the Company's investment in Morphic Medical
Inc is an unconsolidated subsidiary due to the Company's percentage
holding in the voting share capital of Morphic Medical. There is no
restriction on the ability of MMI to pay cash dividends or repay
loans, but it is unlikely that MMI 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 MMI in
pursuing its strategy.
Morphic Medical Inc was incorporated in Delaware, had five
wholly owned subsidiaries as at 30 June 2023 and its principal
place of business is Boston. The five subsidiaries were as
follows:
-- Morphic Medical Securities Corporation, a Massachusetts-incorporated non-trading entity;
-- GID Europe Holding B.V., a Netherlands-incorporated non-trading 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.
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:
2023 2022
Number of Total Number of Total
Ordinary shares voting Ordinary shares voting
rights rights
Christopher Waldron
(1) 30,000 0.03% 30,000 0.03%
Jane Le Maitre
(1) 13,500 0.01% 13,500 0.01%
Fred Hervouet 7,500 0.01% 7,500 0.01%
--------------------- ----------------- -------- ----------------- --------
Total 51,000 0.05% 51,000 0.05%
--------------------- ----------------- -------- ----------------- --------
(1) Ordinary shares held indirectly
During the year, the Directors earned the following remuneration
in the form of Directors' fees from the Company:
2023 2022
GBP GBP
Christopher Waldron(1) 47,500 47,500
Jane Le Maitre(2) 42,500 42,500
Fred Hervouet(3) 40,000 40,000
Total 130,000 130,000
------------------------ -------- --------
(1) Chairman of the Company with effect from 23 November
2017.
(2) Chairman of Audit Committee with effect from 4 January
2018.
(3) Chairman of Remuneration and Management Engagement Committee
with effect from 22 November 2019.
At 30 June 2023, Directors' fees of GBP32,500 (2022: GBP32,500)
were accrued within trade and other payables.
17. MATERIAL AGREEMENTS
The Company was party to the following material agreements:
Crystal Amber Asset Management (Guernsey) Limited
Until 7(th) March 2022, the management agreement with the
Investment Manager provided for a management fee of 2% applied to
the Market Capitalisation of the Company at 30 June 2013 (GBP73.5
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, exceeded the Base Amount (the "Excess
Amount"), the applicable fee rate on the Excess Amount would have
been 1.5%.
The Investment Manager was also entitled to a performance fee in
certain circumstances. The fee was originally calculated by
reference to the increase in NAV per Ordinary share over the course
of each performance period.
At an EGM on 7 March 2022, Shareholders agreed with the
Company's proposals to enter into a new Investment Management
Agreement incorporating revised management and performance fee
arrangements and to make changes to the termination provisions to
reflect the future strategy of the Company.
Accordingly, the management fee has been reduced to GBP106,666
per month from 1 April 2022 until 30 June 2022, GBP90,000 per month
from 1 July 2022 to 31 December 2022, GBP70,000 per month from 1
January 2023 to 30 June 2023, GBP50,000 per month from 1 July 2023
to 30 September 2023 and then to GBP40,000 per month until 31
December 2023 when the management fee was due to cease in
anticipation of the Company's investments having been substantially
realised.
However, due to the requirement for the Fund to have active
portfolio management going into 2024, the Board has agreed that the
Fund will continue paying a monthly management fee to the
Investment Manager on the basis of the fees paid in 2023.
Accordingly, the Investment Management Agreement will be amended
such that from 1 January 2024, a monthly management fee of
GBP57,500 will be applied. This will be subject to revision by the
Company on one month's notice in the light of future realisations,
but will in any event be formally reviewed by the Board at the time
of the next interim report.
The Investment Manager is also entitled to a performance fee in
certain circumstances. This fee was previously calculated by
reference to the increase in NAV per Ordinary share over the course
of each performance period. In accordance with the new Investment
Management Agreement, the performance fee will be calculated by
reference to the aggregate cash returned to Shareholders after 1
January 2022. The Investment Manager will receive 20% of the
aggregate cash paid to Shareholders after 1 January 2022 (including
the interim dividend of 10p per Ordinary Share declared on 22
December 2021) in excess of a threshold of GBP216,000,000.
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.
As at 30 June 2023, the Investment Manager held 6,899,031
Ordinary shares (30 June 2022: 6,899,031) of the Company,
representing 8.29% (30 June 2022: 8.29%) of the voting share
capital.
Performance fee for year ended 30 June 2023
At 30 June 2023, the Basic Performance Hurdle was GBP
216,000,000 (as adjusted for all dividends paid during the
performance period on their respective payment dates, compounded at
the applicable annual rate) (2022: GBP216,000,000).
The aggregate cash returned to Shareholders after 1 January 2022
was GBP45,791,950 (2022: GBP 8,338,000). Accordingly, no
performance fee was earned during the year ended 30 June 2023
(2022: GBPNil).
Ocorian Administration (Guernsey) 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% (2022: 0.12%) of that
part of the NAV of the Company up to GBP150 million and 0.1 %
(2022: 0.1%) of that part of the NAV over GBP150 million (subject
to a minimum of GBP75,000 per annum). During the year, the Company
incurred administration fees of GBP 127,028 (2022: GBP168,247).
Butterfield Bank (Guernsey) Limited
Under the custodian agreement, the Custodian receives a fee,
calculated and payable quarterly in arrears at the annual rate of
0.05% (2022: 0.05%) of the NAV per annum, subject to a minimum fee
of GBP25,000 per annum. Transaction charges of GBP100 per trade for
the first 200 trades processed in a calendar year and GBP75 per
trade thereafter are also payable. During the year, the Company
incurred custodian fees of GBP 51,497 (2022: GBP124,454).
18. ULTIMATE CONTROLLING PARTY
In the opinion of the Directors and on the basis of the
shareholdings advised to them, the Company has no ultimate
controlling party.
19. OTHER INFORMATION
The Company reported that its unaudited NAV at 31 July 2023 was
92.63p per Ordinary share.
The Company reported that its unaudited NAV at 31 August 2023
was 95.81p per Ordinary share.
The Company reported that its unaudited NAV at 30 September 2023
was 99.75p per Ordinary share.
20. POST BALANCE SHEET EVENTS
On August 9, 2023, Morphic Medical entered into a convertible
note purchase agreement with the Company to fund Morphic Medical to
a total of $4.5 million. Under this convertible note purchase
agreement, the parties executed an unsecured convertible promissory
note for proceeds of $2.25 million which accrues interest at 7.5%
per annum. All principal and accrued unpaid interest on this note
will be due in January 2025. $2.25 million was paid on August 22,
2023.
On 24 October 2023, the Board agreed that the Fund will continue
paying a monthly management fee to the Investment Manager on the
basis of the fees paid in 2023. The Investment Management Agreement
will be amended such that from 1 January 2024, a monthly management
fee of GBP57,500 will be applied. This will be subject to revision
by the Company on one month's notice in the light of future
realisations, but will in any event be formally reviewed by the
Board at the time of the next interim report.
There were no other events subsequent to the reporting date, 30
June 2023.
Glossary of Capitalised Defined Terms
"Admission" means admission of the Ordinary shares 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;
"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;
"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 its operations and financial
conditions, together with the Company's financial statements;
"APMs" means Alternative Performance Measures.
"ARR" means annual recurring revenue;
"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
Limited;
"Bank of England" means the Bank of England, the central bank of
the UK;
"Board" or "Directors" or "Board of Directors" means the
directors of the Company;
"Brexit" means the departure of the UK from the European
Union;
"CBRS" means Citizens Broadband Radio Service;
"CEO" means chief executive officer;
"CE Mark" means a certification mark that indicates conformity
with health, safety, and environmental protection standards;
"CFD" means Contracts for Difference;
"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;
"EndoBarrier" means a minimally invasive medical device for
treatment of type 2 diabetes;
"Equals" means Equals Group Plc;
"FATCA" means Foreign Account Tax Compliance Act;
"FCA" means the Financial Conduct Authority;
"FDA" means the United States Food and Drug Administration;
"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;
"FV" means Fair Value;
"FVTPL" means Fair Value Through Profit or Loss;
"General Counsel" means the main lawyer who gives legal advice
to a company;
"GFSC" means the Guernsey Financial Services Commission;
"GFSC Code" means the GFSC Finance Sector Code of Corporate
Governance;
"GID" means GI Dynamics, Inc. now known as Morphic Medical
Inc;
"Gross Asset Value" means the value of the assets of the
Company, before deducting its liabilities, and is expressed in
Pounds Sterling;
"HQ" means headquarters;
"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, 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, further amended on 27 January 2015 and
further amended on 12 June 2018. Additionally, the Investment
Management Agreement was further amended and restated on 14
February 2022.
"IPEV Capital Valuation Guidelines" means the International
Private Equity and Venture Capital Valuation Guidelines on the
valuation of financial assets;
"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;
"MMI" means Morphic Medical Inc.;
"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 GBP0.01 each;
"R&D" means research and development;
"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;
"Smaller Companies Index" means an index of small market
capitalisation companies;
"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 ;
"Supreme Court" means the highest court in the federal judiciary
of the US;
"Target Multiple" means the maximum multiple of the original
investment that could be paid, given value drivers, and receive a
desired return on investment;
"TISE" means The International Stock 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$" or "$" means United States dollars;
"US Federal Reserve" means the Federal Reserve System, the
central banking system of the US; and
"GBP" or "Pounds Sterling" or "Sterling" means British pounds
sterling and "pence" means British pence.
Alternative Performance Measures
ALTERNATIVE PERFORMANCE MEASURES ("APMs")
We assess our performance using a variety of measures that are
not specifically defined under IFRS and therefore termed APMs. The
APMs that we use may not be directly comparable with those used by
other companies.
ONGOING CHARGES
Ongoing charges are calculated using the AIC Ongoing Charges
methodology, which was last updated in April 2022 and is available
on the AIC website (theaic.co.uk). They represent the Company's
investment management fee and all other operating expenses,
excluding currency loss/profit, ad-hoc costs associated with
portfolio transactions, ad-hoc research expenses and non-recurring
legal and professional fees and are expressed as a percentage of
the average Net Asset Value for the year. The Board continues to be
conscious of expenses and works hard to maintain a sensible balance
between good quality service and cost. The ongoing charges
calculation is shown below:
2023 2022
GBP GBP
Average NAV for the year (a) 104,929,784 125,257,263
Investment management fee 960,000 1,649,299
Other company expenses 671,899 820,179
Total recurring company expenses (b) 1,631,899 2,469,478
------------
Ongoing Charges Ratio (b/a) 1.56% 1.97%
--------------------------------------- ------------ ------------
NET ASSET VALUE ("NAV")
The NAV is the net assets attributable to shareholders that is,
total assets less total liabilities, expressed as an amount per
individual share.
NAV PER SHARE INCLUDING DIVIDS
A measure showing how the NAV per share has performed in the
year, taking into account both capital returns and dividends paid
to shareholders.
NAV total return is calculated by adjusting for dividends paid.
It considers the changes in market value as well as other surges of
income such as dividends expressed as a percentage. It shows a more
accurate valuation of a stock's return.
The AIC shows NAV total return as a percentage change from the
start of the year. It assumes that dividends paid to shareholders
are reinvested at NAV at the time the shares are quoted ex-dividend
.
2023 2022
Pence Pence
NAV PER SHARE INCLUDING DIVIDS
Opening NAV per share (a) 145.03 146.81
Add Dividends for the year (b) 45 12.50
Opening NAV per share (c) 145.03 146.81
Closing NAV per share (d) 93.33 145.03
Movement in NAV per share in the year (e) = (d) - (c) (51.70) (1.78)
NAV per share including Dividends (f) = (a) + (b) + (e) 138.33 157.53
(Decrease)/Increase in NAV per share in the year (g) = (f) - (a) (6.70) 10.72
Percentage (decrease)/increase in NAV per share in the year
(h) = (g) / (a) * 100 (4.6)% 7.3%
------------------------------------------------------------------- -------- -------
Net Asset Value ("NAV") per share including dividends paid
decreased by 4.6% (2022: increase 7.3%).
TOTAL RETURN
Total return is calculated by taking the difference between the
number of shares multiplied by NAV per share at both the start and
end of the year. The increase or decrease percentage is calculated
based on the opening value. Adjusting for dividends paid, the total
loss in the Company's NAV per share for the year was 35.68% (2022:
return 8%)
2023 2022
Pence Pence
TOTAL RETURN
Number of shares (a) 1093.70 1000.00
Opening NAV for the year (pence) (b) 145.03 146.81
--------- --------
(c) = (a) + (b) 1,586.19 1468.10
Number of shares (d) 1093.70 1093.70
Closing NAV per share (e) 93.33 145.03
--------- --------
(f) = (d) + (e) 1020.75 1586.19
Movement in the year (pence) (g) = (c) + (f) (565.44) 118.09
Percentage Total Return (h) = (g) / (c) * 100 (35.65%) 8%
------------------------------------------------ --------- --------
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END
FR USSKROOURUAA
(END) Dow Jones Newswires
October 25, 2023 02:00 ET (06:00 GMT)
Crystal Amber (AQSE:CRS.GB)
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