TIDMCRS
RNS Number : 5012Z
Crystal Amber Fund Limited
21 September 2020
21 September 2020
Crystal Amber Fund Limited
Final results for the year ended 30 June 2020
The Company announces its final results for the year ended 30
June 2020.
Key Points
-- Net Asset Value ("NAV")(1) per share fell by 57.4% to 106.02
pence (249.12 pence at 30 June 2019, 179.21 pence at 31 December
2019) or 55.4% after adjusting for dividends paid.
-- NAV has continued to recover - up 31.6% since 31 March and up
11.2% to 117.90 pence since the year end.
-- Instrumental in advancing the turnarounds at De La Rue and
Allied Minds, including board and management changes.
-- Realised gains of GBP14.3 million from Leaf Clean, an
investment that has returned GBP29.9 million cash to the Fund so
far.
-- Reduced holding in Northgate following its merger with Redde,
realising a loss of GBP6.3 million.
-- COVID-19 highlights medical need for GI Dynamics' treatment for diabetes and obesity.
-- Share buy-back programme maintained, with average share price
discount to month end NAV through the year of 20.4% (2019:
7.8%).
Posting of Annual Report and Notice of AGM
Copies of the Company's Annual Report and Accounts for the year
ended 30 June 2020, along with notice of its 2020 Annual General
Meeting ("AGM"), will be posted to Shareholders on 22 September
2020. Copies of these documents will be made available on the
Company's website https://www.crystalamber.com/ shortly
thereafter.
The 2020 AGM will take place at 10.30 a.m. on 20 November
2020.
The Board of Directors is mindful of the impact of the COVID-19
pandemic on the Annual General Meeting and the current restrictions
on travel to Guernsey which require a mandatory 7 or 14 day
quarantine period upon arrival dependent upon where you have
travelled from. Therefore, shareholders not already in Guernsey and
contemplating attendance in person are urged instead to submit
their Proxy instruction appointing the Chair of the meeting as
their proxy as they, or any non-Guernsey based third party proxies,
may not be able to attend the Annual General Meeting and cast a
vote on the shareholder's behalf.
For further enquiries please contact:
Crystal Amber Fund Limited
Christopher Waldron (Chairman) Tel: 01481 742
742
Allenby Capital Limited - Nominated Adviser
David Worlidge/Liz Kirchner Tel: 020 3328
5656
Winterflood Investment Trusts - Broker
Joe Winkley/Neil Langford Tel: 020 3100
0160
Crystal Amber Advisers (UK) LLP - Investment
Adviser
Richard Bernstein Tel: 020 7478
9080
(1) All capitalised terms are defined in the Glossary of
Capitalised Defined Terms unless separately defined.
Chairman's Statement
I hereby present the thirteenth annual report of Crystal Amber
Fund Limited ("the Fund"), for the year to 30 June 2020. At that
point, NAV was GBP97.4 million, compared with an unaudited NAV of
GBP167.9 million at 31 December 2019 and an audited NAV of GBP238.8
million at 30 June 2019. NAV per share was 106.02 pence at 30 June
2020 compared with 179.21 pence at 31 December 2019 and 249.12
pence at 30 June 2019.
The word 'unprecedented' should be used sparingly, but the
events of this year merit this description. The COVID-19 pandemic
has severely impacted the Fund's portfolio, coming at a time when
the UK's small cap sector was already struggling with the
uncertainties of Brexit and the significant increase in redemption
pressure suffered by several small and mid cap fund managers. This
has resulted in many traditional institutional buyers of small cap
investments withdrawing their support for the sector as their
overriding priority became liquidity rather than value.
As a result, the sector's weakness relative to broader and more
growth-oriented indices increased during the period, to the extent
that the Numis Smaller Companies Index fell by over 25% in the
first six months of 2020. By contrast, large cap indices
experienced smaller, single digit falls and technology heavy
indices, such as the NASDAQ, actually posted rises.
The effect of COVID-19 on certain sectors was pronounced, with
travel and oil, amongst others, particularly badly hit. This was
seen in the dramatic decline in the value of the Fund's holdings of
Hurricane Energy and Equals Group. Whilst Hurricane has had to cope
with company specific issues, as detailed below in the Investment
Adviser's report, it has also had to contend with very weak oil
prices, which in April turned negative for a short period. Truly
unprecedented.
In my last statement at the end of February, I noted the
inevitable concentration risk inherent in a focussed activist
portfolio and the volatility of the last year has certainly
reflected this. However, the Board has been encouraged by the
progress made by the Investment Adviser in its interactions with
portfolio companies, even if the valuation background has remained
bleak.
A good example, typical of the Fund's patient approach, is De La
Rue, whose prospects are now much brighter following the management
changes long encouraged by the Fund and its recent equity fund
raising, also supported by the Fund. The process of change has
taken longer than we might have hoped, but De La Rue now has a
solid platform for growth, which we hope to see reflected in its
valuation.
The same strategy of constructive engagement to unlock value
continues in particular at Hurricane, Allied Minds, Equals Group
and GI Dynamics, all of which are trading at significant discounts
to what the Fund considers to be fair value. The specific
approaches to these and other investee companies are set out in
more detail in the Investment Adviser's report, but the Board
continues to believe that these initiatives will bear fruit and
that we will see meaningful progress this year.
At the time of writing, the pace and timing of the economic
recovery from the COVID-19 pandemic is a matter of debate, but it
is encouraging that the NAV has continued its rise from below 90p
in March and had reached 117.90p at the end of August.. There is
still a long way to go to recoup the falls of the past year, but
the portfolio has the potential to deliver this.
During the year, the Fund bought back 4,235,413 of its own
shares at an average price of 126.67 pence as part of its strategy
to limit any substantial discount of the Fund's share price to NAV.
Over the year, the Fund's shares traded at an average month-end
discount to NAV of 20.4%. At the year end, the shares traded at a
discount of 15.6% to NAV. The share buyback programme had a cost of
0.5% to NAV per share during the year.
The Fund declared interim dividends of 2.5 pence in July 2019
and December 2019, in line with the dividend policy of paying 5.0
pence per year. At the 2019 AGM, interim dividends previously paid
were ratified by shareholders. The Fund did not declare an interim
dividend in July 2020, in light of the emergence of COVID-19;
further explanation can be found in the body of the Annual
Report.
During the year, the Fund created and issued 250,000 shares to
ten charities. Today, it has issued an additional 125,000 shares,
split equally amongst the following five charitable organisations:
St Andrews Clinic for Children, Cancer Research UK, Feis Ceoil,
James' Place and Sentable.
The Fund is delighted to assist so many worthy causes and always
seeks to make a positive difference, particularly at a time when
the global community needs to come together.
Christopher Waldron
Chairman
18 September 2020
Investment Manager's Report
Performance
The Fund's NAV per share decreased by 57.4% during the year.
Adjusting for dividends paid, the decrease in the Fund's NAV per
share for the year was 55.4%. This compares to the Numis Smaller
Companies Index which suffered a decrease of 15.0% over the same
period.
Positive contributors to performance were Leaf Clean Energy
Company (0.7%), STV Group (0.6%), Board Intelligence (0.3%) and
Kenmare Resources (0.2%). The main drivers of the Fund's negative
return were Hurricane Energy (20.4%), Equals Group (15.2%), GI
Dynamics (11.1%), De la Rue (4.6%) and Redde Northgate (4.4%).
The Fund's performance is calculated after taking into account
the result of portfolio protection through the purchase of FTSE put
options. Over the period, this improved the NAV performance by
3.1%.
Portfolio and Strategy
At 30 June 2020, the Fund held equity investments in 15
companies (2019: 18), including two unlisted companies. The Fund
also held warrants and debt instruments in GI Dynamics.
Taking account of all investment instruments, the Fund's
exposure to its top ten investee companies amounted to 90.1% of NAV
at 30 June 2020 (2019: 96.8%). The Fund's month-end average net
cash and accruals position was 2.0% of NAV (2019: -0.8%), meaning
that it has remained fully invested throughout the year.
The Fund's strategy remains focused on a limited number of
special situations where value can be realised regardless of market
direction. By its nature as an activist fund, the Fund needs to
hold sufficiently large stakes to facilitate engagement as a
significant shareholder. Therefore, the Fund is exposed to
concentration risk but levels of investment in individual companies
are closely monitored and parameters are set to ensure this risk is
managed and kept to an appropriate level.
At 30 June 2020, the weighted average market capitalisation of
the Fund's listed investee companies was GBP171 million (30 June
2019: GBP420 million).
The table below lists the Fund's top ten shareholdings as at 30
June 2020, the equity stake that those positions represent in the
investee company and their percentage contribution to NAV
performance over the year.
Percentage of investee Contribution to NAV
Ten largest shareholdings Pence per share Percentage of NAV equity held performance(1)
-------------------------- ---------------- ------------------ ------------------------- -------------------------
De La Rue plc 26.5 25.0% 18.3% (4.6%)
Allied Minds plc 19.7 19.0% 22.5% (1.4%)
Equals Group plc 12.1 11.0% 21.4% (15.2%)
Redde Northgate plc 8.8 8.0% 2.0% (4.4%)
Hurricane Energy plc 8.2 8.0% 6.6% (20.4%)
*Board Intelligence Ltd 6.9 7.0% N/A 0.3%
Camellia plc 2.3 2.0% 1.1% (0.4%)
Sutton Harbour Group plc 2.2 2.0% 10.8% (0.5%)
GI Dynamics Inc. 1.6 2.0% 73.1% (10.2%)
Kenmare Resources 1.3 1.0% 0.6% 0.2%
Total of ten largest
shareholdings 89.6
-------------------------- ----------------
Other investments 7.3
Cash and accruals 9.1
-------------------------- ----------------
Total NAV 106.0
-------------------------- ----------------
(1) Percentage contribution stated for equity holdings only.
Other instruments such as outstanding warrants and debt are
included in the performance contribution calculation of the prior
section of this report.
(* Board Intelligence Ltd is a private company and its shares
are not listed on a stock exchange. Therefore, the percentage held
is not disclosed.)
Eight of the Fund's top ten positions at 30 June 2020 were
amongst the top ten at 30 June 2019. Over the year, the position in
De la Rue increased from 6.4% to 18.3% of the company. Similarly,
the holding in Allied Minds increased from 5% to 22.5% of the
company. The stake in GI Dynamics increased from 65.1% to 73.1%,
mainly through the exercise of warrants. The Fund remains a
shareholder in STV Group despite a significant reduction in the
position. Holdings in Camellia and Kenmare Resources were acquired
in prior financial years.
The Leaf Clean position reduced in value as the company effected
a compulsory capital redemption as a means to return capital to
shareholders. Leaf Clean subsequently delisted and is in the
process of winding up. To date, the Fund has received GBP29.9
million, realising gains of GBP16.1 million on its GBP13.8 million
investment. A final distribution is expected in 2021 from tax
withheld, once the relevant returns have been completed. Since the
year end, Leaf Clean has reported that it is expecting to return
approximately $8.5 million to shareholders. Should the tax withheld
be released, as the Fund owns 23.7% of Leaf Clean's share capital,
this should add around 1.7p per share to the Fund's net asset
value.
Investee companies
Our comments on a number of our principal investments are as
follows:
De La Rue plc ("De la Rue")
De La Rue's Currency division designs and prints banknotes and
produces related components, including security features. The
Authentication division supplies tax stamps and products and
software to authenticate and track individual products throughout
their supply chains, and it produces components for inclusion
within individual identity documents such as passports.
The Fund is pleased to note that, by exposing and highlighting
the failures of prior management, it accelerated the departures of
the former Chief Executive Officer and Chairman and enabled the new
leadership to take decisive actions to maximise growth
opportunities in both the Currency and Authentication divisions and
to remove excess cost from the business. In the Fund's view, De La
Rue has suffered from very poor leadership and oversight, which has
resulted in an unacceptable financial performance over many years,
despite tailwinds from most of the company's end-markets and the
consequent benefits evidently enjoyed by its competitors.
In July 2019, the UK Serious Fraud Office announced the
commencement of an investigation into De La Rue and its associates
in relation to suspected corruption in the conduct of business in
South Sudan. This caused the share price to fall by 22% over the
subsequent two days. In June 2020, the Serious Fraud Office closed
its investigation into De La Rue and its announcement included no
fines or censures against the company.
Within its interim results announcement in November 2019, De La
Rue pointed to full-year adjusted operating profits significantly
below sell-side analyst forecasts. In response to the cash outflow
experienced during the first half of 2019/20, the company sensibly
decided to suspend its dividend. The company's auditors required De
La Rue to characterise as a "material uncertainty" the risk that,
in a multiple-downside scenario and if no mitigating action was
taken, the company might breach bank debt covenants. This attracted
significant press coverage and contributed to the 23.5% stock price
fall on the day of the interim results announcement. Despite this,
our analysis indicated that the company was unlikely to breach its
covenants.
In February 2020, De La Rue announced that it expected to
operate within its banking covenants for the financial year 2020.
It also expanded its cost-cutting target to GBP35 million and
accelerated its completion to the second half of 2020/21. This
would return the Currency division to significant profitability
even if the banknote printing cycle did not improve. Furthermore,
the company expanded its growth target for the Authentication
division and now aims to achieve revenue of GBP100 million by
2021/22, up from GBP39 million in financial year 2019.
In June, De La Rue announced a GBP100 million equity fundraise,
supported by the Fund, and released its results for the year ended
31 March 2020 along with further detail about the new management
team's turnaround plan. The company was able to deleverage
materially during the second half of its financial year, and
comfortably met its banking covenants. This was due to the disposal
of its International Identity Solutions business combined with a
stronger underlying free cash flow performance than in the first
half. De La Rue's defined benefit pension scheme also achieved an
accounting surplus of GBP65 million as of the end of March
2020.
The full-year results announcement made clear that underlying
demand for De La Rue's key products and services in both the
Currency and Authentication divisions has remained strong
throughout the period when the broader economy has been adversely
affected by the coronavirus pandemic. Indeed, the company has
identified new areas of opportunity in this environment, such as
the authentication of COVID-19 protection kits and the development
of its own proprietary immunity certification scheme. The company
has recently confirmed that it is in discussions with governments
to sell these solutions. Between the start of its new financial
year and the results announcement on 17 June 2020, the
Authentication division won contracts with a combined lifetime
value in excess of GBP100 million.
Notwithstanding these positive developments, an equity fundraise
was ultimately required as a direct consequence of the "material
uncertainty" noted in the interim results. Whilst the scale of the
fundraise has arguably left the company with an under-geared
balance sheet, it has resulted in several positive developments
including an improved pension funding schedule, an extension of its
financing facilities until December 2023 and, most significantly, a
fully funded three-year turnaround plan.
De La Rue has now emerged with an almost debt-free balance
sheet. The Fund continues to believe that it enjoys a combination
of strong competitive positions in high return businesses and
attractive growth opportunities backed by a capacity for both
significant organic investment and the acquisition of further
technological competencies. It controls a 30% market share of
global commercial banknote printing, which enables the Currency
division to accelerate and fully capitalise on the structural shift
towards polymer notes. The higher-margin Authentication business
grew organically by 60% during the last financial year.
We believe that De La Rue's current valuation of less than one
times revenue does not reflect either the operational upside set
out in its detailed disclosure of the three-year turnaround plan,
or its strategic value when compared to previous deals within the
sector priced at around twice expected revenue.
Allied Minds plc ("Allied Minds")
Allied Minds is an IP commercialisation business focused on
early-stage company development within the US technology sector. It
announced in April 2019 that it would henceforth focus on
maximising returns and shareholder distributions from its existing
portfolio, rather than continuing to invest in new businesses. The
portfolio now contains three significant holdings: Federated
Wireless, Spin Memory and BridgeComm, all of which have raised
capital from third parties including strategic investors. Allied
Minds also has an estimated cash balance of between US$25-27
million after announced follow-on commitments, plus three smaller
stakes in other technology companies and a written-down
life-sciences holding.
Based on the disclosure regarding individual investee company
holding values, we estimate that Allied Minds' net asset value
currently stands at between 64p and 75p per share. The Fund
initiated its investment during Autumn 2018 and the average cost of
its holding is 37p per share, adjusted for the special dividend
paid in February 2020.
Following its initial investment, the Fund expressed concerns to
Allied Minds regarding its excessive parent company costs and the
urgent need to realign its cost base. The company's ongoing HQ
expenses were running at an estimated US$17-20 million in 2018. In
response to concerted pressure exerted by the Fund, ongoing central
costs have so far been reduced to around US$6 million per annum.
The Fund has also consistently objected to the extraordinary
practice of paying management 10% of gains arising from any
successful individual investment, independent of the losses
incurred on other investments in the portfolio (the "Phantom
Plan").
In August 2019, HawkEye 360 (one of Allied Minds' top three
holdings by value at the time) announced it had raised US$70
million at a valuation more than double its September 2018 funding
round. In September 2019, Allied Minds then achieved its first-ever
successful exit, with the sale of its stake in HawkEye 360 for
US$65.6 million. This triggered a cash pay-out of US$4.9 million
under the Phantom Plan, despite a drop of around 90% in the share
price for Allied Minds' shareholders over the four years since it
first invested in HawkEye 360. Allied Minds announced that it would
make an initial cash return to its shareholders equating to only
half of the gross sale proceeds.
In September 2019, Federated Wireless raised US$51 million at a
valuation more than 20% higher than its prior round, of which US$10
million was invested by Allied Minds. Subsequently, Federated
Wireless received US regulatory approval for both the initial and
full-scale commercial deployments of its Citizens Broadband Radio
Service ("CBRS") system, enabling it to begin generating recurring
revenues.
In November 2019, the Fund requisitioned a General Meeting
("GM") of Allied Minds with the aim of changing the composition of
its board to help accelerate and maximise both cost reductions and
cash distributions. In December, Allied Minds announced a range of
developments including a US$1.5 million reduction in recurring HQ
expenses, an increase in the Q1 2020 initial cash return from the
sale of the HawkEye 360 stake, the introduction of a cumulative
cash returns threshold before any further payments can be made
under the Phantom Plan, and the appointment of a new non-executive
director proposed by the Fund, Mark Lerdal. Based on this package
of changes, the Fund agreed to withdraw its GM requisition.
In January 2020, Allied Minds declared a special dividend of $40
million (12.62p per share), equating to two-thirds of the proceeds
from the HawkEye 360 stake disposal net of transaction fees and the
Phantom Plan pay-out.
During March, the Fund significantly increased its holding in
Allied Minds. The Fund firmly believes that there remains scope for
the company to cut its overheads of US$6 million per annum and
that, in the current climate, it should take quick and decisive
action to reduce its cost base further.
The Fund notes that Allied Minds' shares trade at a discount of
over 45% to its estimated NAV per share. The current market
capitalisation, excluding estimated parent-level cash and the value
of the stake in Federated Wireless (implied by that company's
latest fundraising round), attributes no value to the rest of the
portfolio.
Equals Group plc ("Equals")
Equals is an e-banking and international payment services
provider. It serves retail and business customers mainly in the
United Kingdom under an e-money licence. Equals provides faster,
cheaper and more convenient money management than traditional
banking services with bank-grade UK domestic clearance. In June
2019, the company rebranded from FairFX to Equals to reflect the
broader range of services it now offers that go beyond foreign
currency. The Fund's previous annual reports include additional
background to this investment.
Over the period, Equals continued its transition toward B2B, a
strategic move that partially insulated it from the impact of
COVID-19 on leisure travel. Prior to the pandemic, most revenues
already came from the corporate segment, and with the pandemic this
shift accelerated. In 2019, B2B revenues grew by 19% and
represented 56% of the group's GBP30.9 million revenue. Corporate
revenue growth continued over the first half of 2020, with B2B
revenues growing by 30% which now represents 66% of group revenue.
B2C revenues fell by 29% due to the pandemic impact on travel.
However, investment during 2019 to rebrand, enhance the
technology platform and hire personnel was a drag on cashflows. In
addition, mismanagement of market forecasts for 2019 understandably
damaged investor confidence. Whilst the appointment of Richard
Cooper as CFO has brought increased disclosure of the company's
finances, investor confidence has been dented by the pandemic's
impact on international travel. With the investment phase
completed, sensible cost cutting measures are under way to realign
the cost base to the business's needs. The Fund is determined to
see Equals deliver positive cash flows.
Equals' proposition to SMEs is compelling relative to that
offered by legacy banks. The Fund believes that better
understanding of the economics of higher lifetime value business
customers will improve perceptions of Equals' prospects. The
company's assets include over one million customers, an upgraded
technology platform and licences and industry relationships built
over many years. With larger players keen to acquire fintech
capabilities, the Fund believes Equals would be an attractive
takeover candidate.
Redde Northgate plc ("Northgate")
Northgate is the leading light commercial vehicle flexible hire
business in the UK, Spain and Ireland, helping its customers
accelerate their switch away from vehicle ownership. On 29 November
2019, it announced the acquisition of Redde plc ("Redde"), the UK
provider of replacement vehicle, repair and recovery services to
insurance company customers, as well as accident and incident
support services to private and public organisations.
Northgate's share price has fallen by 33% since it announced the
acquisition of Redde in November 2019, adjusting for the interim
dividend. This compares to a -8% total return from the Numis Small
Cap Index over the same period. At 228p, the shares trade at just
over half of Northgate's last-reported net tangible assets per
share of 414p as at 31 October 2019.
The Fund notes that combined fees payable by both Northgate and
Redde to professional advisers in relation to the deal were more
than GBP25 million. This is equivalent to more than 8% of the
market capitalisation of Redde prior to completion of the
acquisition. The Fund was deeply disappointed by the quantum of
these fees, particularly as the transaction was an all-share deal,
with no costs incurred in raising capital.
The Fund, together with a total of 40% of the company's
shareholders, successfully objected to the company's proposal to
base its new senior executive incentive plan (the "Value Creation
Plan") on total shareholder returns delivered above the share price
following shareholder approval of the Redde acquisition. The basis
for the scheme was consequently changed, to be struck at the
pre-deal announcement share price of 350p.
The company issued trading updates during March and May 2020.
Performance had been running in line with management's expectations
until the end of February. Management then initiated cash
preservation measures, including minimising new vehicle capex.
Bank facility headroom had increased to GBP234 million by end of
April, despite the ex-rental vehicle disposal market being closed
during the coronavirus lockdown. Management stated that it did not
expect to have to raise additional funding even in a downside-case
COVID-impact scenario.
On 4 September 2020, Redde Northgate announced the acquisition
of UK bodyshop network Nationwide Accident Repair Services, to
broaden its offering and bring some of its vehicle repair work
in-house. Results for the full year to April 2020 were announced on
16 September. Trading has improved as COVID-related lockdowns have
eased, vehicle residual values have increased significantly
year-on-year, and management is making "excellent" progress on the
merger integration, with the original GBP10 million cost synergy
target already achieved and now raised to GBP15 million.
As previously stated, the Fund believes that Northgate's
well-managed Spanish business would be an attractive acquisition
candidate for several multinationals that have been attempting to
increase their presence within the European flexible vehicle rental
market. These larger and more diversified peers operate with
greater leverage and lower costs of capital than Redde Northgate
and would be able to realise multiple synergies unavailable to
Northgate.
The Fund hopes that the company's ongoing review of Northgate's
strategy will conclude that it is in shareholders' interests to
initiate an auction of the Spanish business.
The Fund believes that Northgate had long suffered from
inadequate strategic leadership, overseen by a board lacking in
direct experience within hire industries. This was addressed by the
appointment of Avril Palmer-Baunack as chair in August 2019. She
has also previously served as chair of the standalone Redde
business.
Hurricane Energy ("Hurricane")
Hurricane is an oil exploration and production company targeting
naturally fractured basement reservoirs in the West of Shetland.
The Fund's previous annual reports include background information
on this investment.
This was a very challenging year for Hurricane: its Lancaster
Early Production System ("EPS") failed to deliver the targeted 20k
barrels a day due to an increased water cut. The regulator rejected
Hurricane's application to tie back an additional production well
to its EPS vessel, which would have been funded by its JV partner
Spirit Energy. As a condition to extending its licences, the
regulator requested that it should drill two sub-vertical
commitment wells over the next two years. Shareholders lost
confidence in management as a result of perceived missed
expectations and perplexing regulatory signals. The weak oil price
environment, exacerbated by COVID-19, reduced operating cash flows
and compounded negative investor sentiment. Despite its $106
million cash balance, investors continue to question the ability of
Hurricane to meet regulatory commitments, undertake necessary
remediation and appraisal work and address the maturity of its $230
million convertible bond by July 2022.
In June 2020, the CEO resigned. The company set up a technical
committee to re-examine the full range of possible geological and
reservoir models for the Lancaster field which reached initial
conclusions in September. These suggest that the oil - water
contacts at Lancaster, Lincoln and Halifax are significantly
shallower than previously determined. Estimated recoverable
reserves, assuming no remedial action, have been reduced from 37.3
million barrels to 16 million, of which 6.6 million have already
been produced.
The Fund is pleased with the appointment of the new CEO, Antony
Maris, who brings relevant experience in developing and operating
fractured basement reservoirs.
In the second half of 2020, production is expected to continue
from a single well at a range of 12,800 to 14,200 barrels per day.
A number of remediation options are available to increase the EPS'
production. However, in the current oil price environment and with
a reduced production outlook, cash generation is expected to be
insufficient to both fund additional well stock and to repay the
bond. Nevertheless, as the convertible bond now trades at less than
half its repayment value, there is currently an opportunity for
Hurricane to utilise some of its $106 million cash to buy in some
bonds in order to materially reduce its indebtedness.
The Fund finds the conclusions of the technical committee
persuasive but not conclusive. Fractured reservoirs commonly
exhibit rapid initial pressure decline and we note at Lancaster
that the rate of pressure decline has in fact slowed. Moreover, the
zone now believed to contain residual oil below the oil water
contact is very thick, whereas we would have expected an abrupt
change in oil saturation at the free water level. Therefore, the
Fund believes that significant volumes of oil may be present below
the revised oil water contact at 1,330 metres.
Following the publication of the report the shares are trading
at little more than option money and the Fund has increased its
holding. Despite these uncertainties, the company has stressed
there are currently no going concern issues and it has ruled out an
equity raise at this time.
Since investing in Hurricane, the Fund has realised profits of
GBP43 million.
Board Intelligence Limited ("BI")
BI is a privately-owned UK company with a mission to make
governance the most powerful driver of performance for
organisations, to include improving the quality of board
decision-making. The company offers cloud-based board-pack tools on
a Software-as-a-Service (SaaS) basis. The product encompasses
workflow management for the drafting of meeting packs, structured
board reporting templates to improve the effectiveness of meetings,
and an app-based portal allowing meeting participants to access
information securely. The primary audience is corporate boards, but
the tools can also be used by other committees.
SaaS products have high contribution margins: platform costs are
relatively fixed, so they experience significant operating leverage
as volumes increase - profit margins are anticipated to be higher
than is evident during the growth phase. BI's customer acquisition
cost is low relative to customer lifetime value, so growth in the
client base increases the company's enterprise value. The price of
the service is a secondary consideration for customers relative to
the high value attributed to any improvement in board meeting
productivity and data security. Furthermore, once a solution has
been adopted by a company there are switching costs to change to
another provider, which contributes to low organic churn.
BI has a very impressive client list including UK large-caps and
government departments, and has emphatic public testimonials from
leading companies such as Rolls Royce and National Grid. The Fund
invests in unquoted companies only in exceptional circumstances but
was attracted by the economics and mission of this business and the
many growth opportunities amongst the 9,350 organisations in the UK
that employ over 250 people. BI also has options to expand the
product internationally and/or to provide services to smaller
organisations.
The Fund invested in BI in 2018 at a significant discount to the
valuation multiples of listed cloud/SaaS companies. The company's
Annual Recurring Revenue (ARR) has subsequently continued to grow
at an impressive rate without the cash burn shown by many high
growth companies. BI has a dynamic entrepreneurial management team
who have used our investment to strengthen the organisation and
enhance the product. The Fund continues to engage with management
on how to maximise long-term value.
In response to the COVID-19 pandemic, the company cut operating
costs and also rapidly integrated video conferencing into the app,
which has helped to secure new sales.
During August 2020, BI closed a fundraising deal with a new
investor, which enabled the Fund to sell over a third of its
holding and to recoup over 85% of its investment in the company.
The term sheet for this deal was signed in late June 2020, and the
resulting uplift to fair value of this holding has been included
within the Fund's NAV at 30 June 2020.
Sutton Harbour Group plc ("Sutton Harbour")
Sutton Harbour owns and operates Sutton Harbour in the Barbican,
Plymouth's historic old port, and holds the lease to Plymouth's
113-acre former airport site. Sutton Harbour includes a leisure
marina, the second largest fresh fish market in England and an
estate of investment properties around the harbour. The marina is a
5 Gold Anchor rated facility and considered to be one of the best
deep-water harbours in the South West. The Fund's previous annual
reports provide further background to this investment.
From the beginning of 2018, FB Investors LLP has been the
majority shareholder in the company and has been shaping Sutton
Harbour's new strategy.
During the year, Sutton Harbour continued with pre-construction
work for the two major consented schemes around Sutton Harbour.
Harbour Arch Quay, the smaller 14 apartment building, is close to
starting construction subject to finalising contracts and
financing, which is expected later this year. The much larger 170
apartment Sugar Quay development is subject to approval of planning
consent variations and work is targeted to start on site in
2021.
Final results to the end of March 2020 reported NAV of 39.7
pence per share versus a then share price of 16 pence. The company
secured additional banking facilities of GBP2 million in May
2020.
The Fund maintains an open dialogue with the company and remains
supportive of its new management strategy.
GI Dynamics Inc ("GI Dynamics")
GI Dynamics is the developer of the EndoBarrier, a minimally
invasive therapy for the treatment of Type 2 diabetes and obesity.
EndoBarrier is a temporary bypass sleeve that is endoscopically
delivered to the duodenal intestine. It offers similar effects to
the surgical gastric bypass, without the risks of a major surgical
procedure. The Fund's previous annual reports contain the
background to the company and the Fund's investment.
During the period, the company initiated its USD FDA approved
clinical trial, continued steps toward regaining its CE Mark and
continued regulatory work to obtain approval for a trial in India
in partnership with Apollo Sugar. The Fund backed these efforts
with a $10 million investment in August 2019.
In January 2020, GI Dynamics announced the enrolment of the
first patient on its US trial. While enrolment was halted shortly
afterwards by the COVID-19 pandemic, this has placed the need to
tackle obesity and diabetes at the top of the public health agenda.
These two conditions appear to be increased contributors to
mortality outcomes in COVID-19 patients. Both obesity and diabetes
remain poorly treated by pharmacotherapy and invasive bariatric
surgery. GI Dynamics brings a treatment with a wealth of data
confirming efficacy and safety.
As the company continued to progress its key strategic
initiatives, the Fund engaged with the GI Dynamics board to
restructure the company. In June 2020, the company voted to delist
from the Australian Stock Exchange and this was completed in July
2020. The Fund believes that GI Dynamics' should operate as a
private company at this stage of its development. In July, the Fund
converted its 2017 senior secured loan note into equity, with a
principal and accrued interest value of US$5.4 million, increasing
its equity position. The Fund agreed an additional investment, and
the board restructured with the arrival of a new director proposed
by the Fund. A simplified corporate structure should reduce the
company's cost base and facilitate third party investment.
The Fund has held a board observer position in GI Dynamics since
November 2019.
Outlook
Events during the year to 30 June 2020 were unprecedented. Prior
to the pandemic, and aside from the already well documented effects
of COVID-19, many UK domestically focussed businesses suffered from
Brexit related uncertainties. This also adversely affected the
appetite of potential corporate acquirers. Increased redemption
pressure also affected several small and mid-cap fund managers and
resulted in reduced demand for, and a surge in the supply of shares
in many listed companies
Huge central bank stimulus has injected liquidity into global
equity markets. Despite this, some institutional investors, who had
pulled back from smaller companies prior to the pandemic have not
returned. Despite uncertainties around COVID-19, the Fund's major
holdings in De La Rue and Allied Minds have demonstrated their
resilience. Moreover, GI Dynamics has a clinically proven product
that can meet a huge unmet clinical need in the fight against
diabetes and obesity, both contributors to increased risk of death
from COVID-19.
Crystal Amber Asset Management (Guernsey) Limited
18 September 2020
Investment Policy
The Company is an activist fund which aims to identify and
invest in undervalued companies and, where necessary, take steps to
enhance their value. The Company aims to invest in a concentrated
portfolio of undervalued companies which are expected to be
predominantly, but not exclusively, listed or quoted on UK markets
(usually the Official List or AIM) and which have a typical market
capitalisation of between GBP100 million and GBP1 billion.
Following investment, the Company and its advisers will also
typically engage with the management of those companies with a view
to enhancing value for all their shareholders.
Investment objective
The objective of the Company is to provide its shareholders with
an attractive total return, which is expected to comprise primarily
capital growth but with the potential for distributions from
realised distributable reserves, including distributions arising
from the realisation of investments, if this is considered to be in
the best interests of its shareholders.
At the date of signing these Financial Statements, the
investment strategy and investment restrictions which applied to
the Company following Admission and after the passing of Resolution
1 at the EGM held on 15 August 2013, were as follows:
Investment strategy
The Company focuses on investing in companies which it considers
are undervalued and will aim to promote measures to correct the
undervaluation. In particular, it aims to focus on companies which
the Company's Investment Manager and Investment Adviser believe may
have been neglected by fund managers and investment funds due to
their size; where analyst coverage is inadequate or where analysts
have relied on traditional valuation techniques and/or not fully
understood the underlying business. The Company and its advisers
seek the co-operation of the target company's management in
connection with such corrective measures as far as possible. Where
a different ownership structure would enhance value, the Company
will seek to initiate changes to capture such value. The Company
may also seek to introduce measures to modify existing capital
structures and introduce greater leverage and/or seek the sale of
certain businesses or assets of the investee company.
Pending investment of the type referred to above, the Company's
funds will be placed on deposit but the Company also has the
flexibility to make other investments (including money market
instruments) which are considered to be reasonably liquid in order
to ensure that its funds are appropriately deployed. The Company
may, in certain circumstances, acquire stakes in target companies
from investors in exchange for shares in the Company.
Where it considers it to be appropriate, the Company may (i)
utilise leverage for the purpose of investment and enhancing
returns to shareholders and/or (ii) enter into derivative
transactions, for example to provide portfolio protection against
significant falls in the market or for the purposes of efficient
portfolio management, in seeking to manage its exposure to interest
rate and currency fluctuations through the use of currency and
interest rate hedging arrangements, and to acquire exposure to
target companies through contracts for difference.
Investment restrictions
It is not intended that the Company will invest, save in
exceptional circumstances, in:
-- companies with a market capitalisation of less than GBP100 million at the time of investment;
-- pure technology based businesses; or
-- unlisted companies or companies in pre-IPO situations.
It is expected that no single investment in any one company will
represent more than 20% of the Gross Asset Value of the Company at
the time of investment. However, there is no guarantee that this
will be the case after any investment is made, or where the
Investment Manager believes that an investment is particularly
attractive.
Dividend policy
With effect from 1 January 2015, the annual target dividend was
increased to 5 pence per share. The Company's dividend policy is to
distribute to shareholders, as a dividend, a proportion of the
income received from the Company's portfolio holdings. In certain
circumstances, the Company may make distribution payments out of
realised investments if it is considered to be in the best
interests of shareholders.
Due to the nature of the Company's investment objectives and
strategy, the timing and amount of investment income cannot be
predicted and is dependent on the composition of the Company's
portfolio. Before recommending any dividend, the Board will
consider the capital and cash positions of the Company, and the
impact on such capital and cash by virtue of paying that dividend,
and will ensure that the Company will satisfy the solvency test, as
prescribed by the Companies Law, immediately after payment of any
dividend. Therefore, there can be no guarantee as to the timing and
amount of any distribution payable by the Company. The projected
dividends set out above are targets only and there can be no
assurance that these targets can, or will, be met. In view of the
effects of COVID-19, the Directors have concluded that a decision
on whether to pay an interim dividend in this financial year should
be deferred until later in the year, as further disclosed in the
Report of the Directors.
Composition of the portfolio
The Board, Investment Manager and Investment Adviser believe
that the number of potential target companies is high with more
than 2,000 companies quoted on AIM or the Official List and they
consider that a significant number of these are in the Company's
targeted range.
Target investee companies typically operate in one or more of
the following sectors:
-- consumer products;
-- industrial products;
-- retail;
-- support services;
-- healthcare; or
-- financial services.
However, the Company is not restricted to these sectors and
investment decisions are taken based on market conditions and other
investment considerations at the time.
Report of the Directors
Incorporation
The Company was incorporated on 22 June 2007 and was admitted to
trading on AIM on 17 June 2008.
Principal activities
The Company is a Guernsey registered closed ended company
established to provide shareholders with an attractive total
return, which is expected to comprise primarily capital growth and
distributions from accumulated retained earnings taking into
consideration unrealised gains and losses at that time. This will
be achieved through investment in a concentrated portfolio of
companies that are considered to be undervalued and which are
expected to be predominantly, but not exclusively, listed or quoted
on UK markets and which mostly have a market capitalisation of
between GBP100 million and GBP1 billion.
The Company became a member of the AIC on 26 March 2009.
Business review
A review of the business together with likely future
developments is contained in the Chairman's Statement and the
Investment Manager's Report.
Results and dividend
The results for the year are set out in the Statement of Profit
or Loss and Other Comprehensive Income.
On 10 July 2019, the Company declared an interim dividend of
GBP2,381,425 equating to 2.5 pence per Ordinary share, which was
paid on 19 August 2019 to shareholders on the register on 19 July
2019.
On 10 December 2019, the Company declared an interim dividend of
GBP2,349,048 equating to 2.5 pence per Ordinary share, which was
paid on 13 January 2020 to shareholders on the register on 20
December 2019.
The Company has declared dividends twice yearly in the sum of
2.5 pence per share totalling 25 pence per share over the last five
years. Traditionally, the dividends have been largely funded by
dividends received from portfolio companies.
In view of the effects of COVID-19, there is significant
uncertainty as to the timing and quantum of dividend receipts from
the Company's portfolio companies. The Directors are also mindful
that changes in the composition of the portfolio could mean that
there will be lower dividend receipts than in past years.
Accordingly, the Directors have concluded that a decision on
whether to pay an interim dividend in this financial year should be
deferred until later in the year.
Continuation vote
The Company is subject to a continuation vote scheduled to occur
every two years. The next continuation vote will be proposed at the
2021 AGM.
Going concern
The Directors are confident that the Company has adequate
resources to continue in operational existence for the foreseeable
future and do not consider there to be any threat to the going
concern status of the Company. As disclosed further in Note 1, the
Directors have considered the potential impact of the effects of
COVID-19 on the Company's activities and do not consider this to
have had an impact on their assessment of the Company as a going
concern.
Long term viability
As further disclosed in the corporate governance note in the
Report of the Directors, the Company is a member of the AIC and
complies with the AIC Code. In accordance with the AIC Code, the
Directors have made a robust assessment of the prospects of the
Company over the three year period ending 30 June 2023. The
Directors consider that three years is an appropriate period to
assess the viability of the Company given the average length of
investment in each portfolio company and the time horizon over
which investment decisions are made.
In considering the prospects of the Company, the Directors have
considered the risks facing the Company, giving particular
attention to the principal risks identified below, the
effectiveness of controls over those risks, the process in place
for identifying emerging risks and have evaluated the sensitivities
of the portfolio to market volatility.
The Directors have also considered the Company's income and
expenditure projections over the three year period, the fact that
the Company currently has no borrowings and that most of its
investments comprise readily realisable securities which can be
expected to be sold to meet funding requirements if necessary.
Based on the results of this analysis and mindful of the
continuation vote to take place at the 2021 AGM, the Directors have
a reasonable expectation that the Company will be able to continue
in operation and meet its liabilities as they fall due over the
three year period of their assessment.
Principal risks and uncertainties
The Company has implemented a rigorous risk management framework
including a comprehensive risk matrix that is reviewed and updated
regularly. This ensures that procedures are in place to identify
principal risks, mitigate and minimise the impact of those risks
should they crystallise, and to identify emerging risks and
determine whether any action is required. The Investment Manager
has created a Risk Committee from which the Board receives
quarterly reports. With effect from 22 November 2019, Fred
Hervouet, one of the Board Directors (previously Nigel Ward who
retired from the Board with effect from 22 November 2019), liaises
with the Risk Committee and attends its regular meetings to offer
an independent view and to enhance communication between the
committee and the Board. The Directors have carried out a robust
assessment of the principal risk areas relevant to the performance
of the Company including those that would threaten its business
model, future performance, solvency and liquidity and these are
detailed below. As it is not possible to eliminate risks
completely, the purpose of the Investment Manager's risk management
policies and procedures is to reduce and manage risk and to ensure
that the Company is as adequately prepared as reasonably possible
to respond to such risks and to minimise their impact should they
occur.
Regulatory compliance risk
A breach of regulatory rules could lead to a suspension of the
Company's stock exchange listing or financial penalties. The
Company Secretary monitors the Company's compliance with the AIM
Rules in conjunction with the Nominated Adviser and compliance with
these rules is reviewed by the Directors at each Board meeting.
One of the most significant regulatory risks for an activist
investor such as the Company is in relation to market abuse
provisions. The FCA has published guidance stating that in general
it would not consider an activist shareholder's conduct to amount
to market abuse where the shareholder merely carried out
acquisitions of a target company's securities on the basis of the
target company's intentions and the Company's knowledge of the
target company's strategy.
However, the FCA has stated that if, for example, other
shareholders trade in the target's shares on the basis of another
shareholder's strategy, they may view such conduct as amounting to
market abuse. There is no guarantee that other shareholders will
not follow the Company's strategy, and, in certain circumstances
the Company may act with, or be dependent upon, the support of
other shareholders to implement its strategies. There is also no
guarantee that the FCA's guidance will not change. The Company and
its Advisers operate in a highly regulated environment and whilst
they will always seek to take appropriate professional advice,
there is a risk of an inadvertent breach of securities laws or
regulations, or allegations of such breach, taking place.
The following risks, whilst they may affect the performance of
the Company, will not in themselves affect the ability of the
Company to operate.
'Key Man' risk
The Investment Adviser and the Investment Manager rely heavily
on the expertise, knowledge and network of Richard Bernstein when
sourcing investment opportunities. He is a shareholder of the
Company, a director and shareholder of the Investment Manager and a
member of the Investment Adviser and his loss to these service
providers could have an adverse effect on the Company's
performance. In the absence of Richard Bernstein, the Board and
Investment Manager have sufficient relevant experience to manage
the Company's portfolio while considering the future of the
Company.
Portfolio concentration risk
By its very nature as an activist fund, the Company is exposed
to the risk that its portfolio of investee companies is not
sufficiently diversified to absorb the impact of a fall in value of
some of its major investments. As noted in the Investment Policy,
the Company seeks to invest in companies and use activism to unlock
value. An inherent consequence of this policy is a portfolio
concentrated on a number of key investee companies. The Board is
aware of this risk and feels it is a necessary risk to take in
order to provide returns through the investment strategy. Levels of
investment in individual companies are monitored and parameters are
set to ensure that the risk is kept to an acceptable level, while
also ensuring a sufficiently high level of stock is purchased to
allow engagement as a major shareholder, if required.
Underlying investment performance risk
The Company invests in underlying investee companies, the
securities of which are publicly traded or are offered to the
public. The performance of these companies is likely to fluctuate
due to a number of factors beyond the Company's control. The
Investment Manager and Investment Adviser monitor investee company
performance and share price movements on a daily basis. The
Administrator prepares weekly portfolio valuation reports. The
Investment Adviser engages with investee companies through regular
meetings and reports to the Board. The Investment Manager and
Investment Adviser also compare the Company's performance to the
Numis Smaller Companies Index and investigate all underperformance
and unrealised losses of the Company.
Market risk
The Company's investments include investments in companies the
securities of which are publicly traded or are offered to the
public and investments in unlisted companies. The market prices and
values of these securities may be volatile and are likely to
fluctuate due to a number of factors beyond the Company's control.
These include actual and anticipated fluctuations in the quarterly,
half yearly and annual results of the companies in which
investments are made and other companies in the industries in which
they operate and market perceptions concerning the availability of
additional securities for sale.
They also include general economic, social or political
developments, changes in industry conditions, shortfalls in
operating results from levels forecast by securities analysts, the
general state of the securities markets and other material events,
such as significant management changes, refinancings, acquisitions
and disposals. Changes in the values of these investments may
adversely affect the Company's NAV and cause the market price of
the Company's shares to fluctuate. The Company periodically hedges
price risk by holding put options linked to the FTSE index to
provide some protection against a significant market sell-off.
Shareholder concentration risk
A total of 8 investors with holdings of 3% or more each of the
shares of the Company hold a combined 72.21% of the voting rights.
A significant shareholder seeking liquidity could have a negative
impact on the Company causing movements in Company share price
through voting at an AGM, or by placing pressure on the Board to
act to realise value in the portfolio at a sub-optimal time and
value. To manage this risk the Investment Manager maintains regular
contact with significant shareholders to discuss the performance of
the Company and any views the shareholder may have.
Liquidity risk
The Company's ability to meet its obligations arising from
financial liabilities could be reliant on its ability to reduce or
exit investment holdings. This could be more difficult with the
Company's less liquid portfolio holdings. To manage this risk, the
cash and trade positions are monitored on a daily basis by the
Investment Adviser and the Administrator. The liquidity of stocks
is also considered at the point of recommendation by the Investment
Adviser and prior to investment.
It is not intended that the Company will invest, save in
exceptional circumstances, in companies with a market
capitalisation of less than GBP100 million at the time of
investment. Companies with a market capitalisation of less than
GBP100 million are in many cases considered to be higher risk and
may also be less liquid than companies with a market capitalisation
of more than GBP100 million. However, the Investment Adviser may,
from time to time, identify exceptional investment opportunities
with a market capitalisation of less than GBP100 million.
The Company's risk of investment in companies with market
capitalisation of less than GBP100 million is mitigated as all
investments are monitored by the Board on a quarterly basis. Any
proposals to invest in companies below GBP100 million market
capitalisation are considered in detail by the Investment Manager
and are recommended in exceptional circumstances only.
Inside information risk
The Company may, from time to time, be exposed to insider
information. A breach of insider trading rules could lead to a
suspension of the Company's stock exchange listing or financial
penalties. This risk is mitigated and managed through continual
monitoring and policy setting, which ensures all employees of the
Investment Adviser clearly understand insider trading rules and
adhere to all relevant procedures.
Implementation risk
The Company's ability to generate attractive returns for
shareholders depends upon the Investment Adviser's ability to
assess future values that may be realised in connection with
investments. The ability to assess future values and the timing
thereof, whether in connection with the making of an investment or
exiting from an investment, may be particularly important in the
case of investments over which the Company has little or no control
on its own. The ability of the Company to exit certain investments
on favourable terms will be dependent (inter alia) upon the
successful implementation of the strategic plans for such investee
company and, in particular, the ability to persuade management to
adopt such strategic plans. It will also depend on the relative
liquidity of the stock of the investee company at that time.
During the year, additional risks were identified in relation to
the ongoing COVID-19 pandemic. Further details including mitigation
strategies, are included within the going concern section of Note 1
to the Financial Statements.
In summary, the above risks are mitigated and managed by the
Board, the Investment Manager and Investment Adviser through
continual review of the portfolio, policy setting and updating the
Company's risk matrix to ensure that procedures are in place to
minimise the impact of the above mentioned risks.
Further detail on the Company's risk factors is set out in the
Company's admission document, available on the Company's website
(www.crystalamber.com) and should be reviewed by shareholders.
Details about the financial risks associated with the Company's
investment portfolio and the way they are managed are given in Note
14 to the Financial Statements.
Ongoing charges
For the year ended 30 June 2020 the ongoing charges ratio of the
Company was 2.13% (2019: 1.93%). The ongoing charges ratio has been
calculated using AIC recommended methodology and is made up as
follows:
2020 2019
-----------------------
GBP GBP
----------------------- ------------------------------------------ ----------------------------------
Ongoing expenses 3,223,790 4,326,511
Weighted average NAV 151,011,706 224,197,528
Ongoing charges ratio 2.13% 1.93%
----------------------- ------------------------------------------ ----------------------------------
Ongoing charges are those expenses of a type which are likely to
recur in the foreseeable future, whether charged to capital or
revenue, and which relate to the operation of the Company as a
collective fund, excluding the costs of acquisition/disposal of
investments, performance fees, financing charges and gains/losses
arising on investments. Ongoing charges are based on costs incurred
in the year as being the best estimate of future costs. The ongoing
charges ratio is calculated by dividing the annualised ongoing
charges by the average NAV for the financial year.
Directors
The Directors of the Company who served during the year and up
to the date of this report are shown on the Directors section.
During the year, Nigel Ward retired as Director of the Company with
effect from 22 November 2019. Biographies of the Directors holding
office as at 30 June 2020 and at the date of signing these
Financial Statements are shown on the Directors section.
Directors' interests
The interests of the Directors in the share capital of the
Company at the year-end are disclosed in Note 16.
Directors' remuneration
The remuneration of the Directors during the year is disclosed
in Note 16.
Directors' responsibilities to stakeholders
Section 172 of the UK Companies Act 2006 applies directly to UK
domiciled companies. Nonetheless the AIC Code requires that the
matters set out in Section 172 are reported by all companies,
irrespective of domicile. This requirement does not conflict with
the Companies Law in Guernsey.
Section 172 recognises that Directors are responsible for acting
in a way that they consider, in good faith, is most likely to
promote the success of the Company for the benefit of its
shareholders as a whole. In doing so, they are also required to
consider the broader implications of their decisions and operations
on other key stakeholders and their impact on the wider community
and the environment.
Key decisions are defined as those that are material to the
Company, but also those that are significant to any of the
Company's key stakeholder groups. The Company's engagement with its
key stakeholders is discussed further in the corporate governance
section of this report.
The Directors made or approved the following key decisions
during the year, with the overall aim of promoting the success of
the Company taking into account the likely impact on its members
and wider stakeholders;
Dividends
In view of the effects of COVID-19, the Directors have concluded
that a decision on whether to pay an interim dividend in this
financial year should be deferred until later in the year, as
further disclosed in the Report of the Directors.
Board composition
Nigel Ward retired as a Director of the Company with effect from
the Company's Annual General Meeting on 22 November 2019. Fred
Hervouet was appointed as Chairman of the Remuneration and
Management Engagement Committee with effect from 22 November 2019.
Given the nature of the Company's business, the active involvement
of both the Investment Manager and Investment Adviser, and in order
to reduce the overall operating expenses of the Company, the Board
decided not to appoint a replacement Director for Mr Ward upon his
retirement in 2019.
Charitable shares
During the year, the Company approved the issue of 250,000
shares to ten separate charitable organisations in accordance with
the authority granted to the Company by shareholders at the 2019
AGM. As disclosed within the Chairman's Statement, as at the date
of this report, the Company has issued a further 125,000 shares
split equally amongst the following five charitable organisations:
St Andrews Clinic for Children, Cancer Research UK, Feis Ceoil,
James' Place and Sentable.
Substantial interests
As at 24 August 2020, the Company had been notified of the
following voting rights of 3% or more of its total voting
rights:
Number of Ordinary shares Total
voting rights
Invesco Perpetual 18,734,226 20.59%
Wirral BC 12,938,214 14.22%
1607 Capital Partners 11,313,627 12.43%
Crystal Amber Asset Management (Guernsey) 7,037,991 7.73%
Almitas Capital 5,457,000 6.00%
Noble Grossart Investments 4,000,000 4.40%
Rath Dhu 3,330,000 3.66%
Aviva Investors 2,896,440 3.18%
Total 65,707,498 72.21%
------------------------------------------- -------------------------- ---------------
Statement of Directors' responsibilities
The Directors are responsible for preparing the Directors'
Report and the Financial Statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they have
elected to prepare the Financial Statements in accordance with
International Financial Reporting Standards, as issued by the IASB,
and applicable law.
The financial statements are required by law to give a true and
fair view of the state of affairs of the Company and of the profit
or loss of the Company for that period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies (Guernsey) Law,
2008. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Company and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website (www.crystalamber.com), and for the preparation
and dissemination of financial statements. Legislation in the
United Kingdom and Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Disclosure of information to the Auditor
The Directors each confirm that they have complied with the
above requirements in preparing the Financial Statements. They also
confirm that so far as they are each aware, there is no relevant
audit information of which the Company's auditor is unaware and
that they have taken all the steps they ought to have taken as
Directors to make themselves aware of any relevant audit
information and to establish that the Company's auditor is aware of
that information.
Corporate governance
As a Guernsey registered company, the share capital of which is
admitted to trading on AIM, the Company is not required to comply
with the FRC Code. However, the Directors recognise the value of
sound corporate governance and it is the Company's policy to comply
with best practice on good corporate governance that is applicable
to investment companies.
The Board has considered the principles and provisions of the
AIC Code. The AIC addresses the principles and provisions set out
in the FRC Code and includes additional provisions on issues that
are of specific relevance to the Company. The Board considers that
reporting against the principles and provisions of the AIC Code,
which has been endorsed by the Financial Reporting Council and the
Guernsey Financial Services Commission, provides more relevant
information to shareholders. The Company has complied with the
principles and provisions of the AIC Code. The AIC Code is
available on the AIC's website, www.theaic.co.uk , which includes
an explanation of how the AIC Code adapts the principles and
provisions set out in the FRC Code to make them relevant for
investment companies. The FRC Code is available on the FRC's
website, www.frc.org.uk .
The GFSC Code came into force in Guernsey on 1 January 2012.
Under the GFSC Code, the Company is deemed to satisfy the GFSC Code
provided that it continues to conduct its governance in accordance
with the requirements of the AIC Code.
The Company adheres to a Stewardship Code adopted from 14 June
2016. The Company's Stewardship Code incorporates the principles of
the UK Stewardship Code. A copy of the Stewardship Code is
available on the Company's website www.crystalamber.com .
Environmental, social and governance report
As an investment company, the Company's activities only have a
limited impact on the environment in which it operates. The Company
has no employees and its registered office is based in Guernsey,
where all of the Directors reside, thus minimising the need for
extensive travel to attend Board or other meetings, with associated
environmental impact.
Responsible investment principles have been applied to each of
the investments made. These policies require the Company to make
reasonable endeavours to procure the ongoing compliance of its
portfolio companies with its own policies on responsible
investment. The Company is an activist fund which aims to identify
and invest in undervalued companies and, where necessary, take
steps to enhance their value. Following investment, the Company and
its advisers will also typically engage with the management of
those companies with a view to enhancing value for all their
shareholders, in line with the UK Stewardship Code.
Purpose, culture and values
The Company's purpose remains clear: to provide its shareholders
with an attractive total return, which is expected to arise
primarily from capital growth but with the potential for
distributions from realised distributable reserves, including
distributions arising from the realisation of investments, if this
is considered to be in the best interests of its shareholders.
The Board has considered the Company's culture and values. As an
investment company with no employees, it is considered that the
culture and values of the Board are aligned with those of the
Investment Manager and Investment Adviser, with a focus on long
term relationships with the Company's key stakeholders.
The Board
The Company is led and controlled by a Board of Directors, which
is collectively responsible for the long-term success of the
Company. The Company believes that the composition of the Board is
a fundamental driver of its success as the Board must provide
strong and effective leadership of the Company. The current Board
was selected, as their biographies illustrate, to bring a breadth
of knowledge, skills and business experience to the Company.
As at the date of this report, the Board comprises three
Non-Executive Directors (2019: four), all of whom are considered to
be independent of the Investment Manager and Investment Adviser and
free from any business or other relationship that could materially
interfere with the exercise of their judgement. Board appointments
are considered by all members of the Board and have been made based
on merit against objective criteria. Nigel Ward retired as a
Director of the Company with effect from 22 November 2019. At the
same time, Fred Hervouet was appointed as Chairman of the
Remuneration and Management Engagement Committee and attends the
meetings of the Risk Committee of the Investment Manager.
The Chairman of the Board is Christopher Waldron. The Board has
taken note of the provisions of the AIC Code relating to
independence and has determined that Mr Waldron is an independent
director. The Company has no employees and therefore there is no
requirement for a Chief Executive, nor has it established a Senior
Independent Director due to the size of the Board and the Company.
The Board is satisfied that any relevant issues that arise can be
properly considered by the Board.
A biography for the Chairman and all the other Directors follows
in the next section, which sets out the range of investment,
financial and business skills and experience they bring to the
Board. The Directors believe that the current mix of skills,
experience and length of service represented on the Board are
appropriate for the requirements of the Company.
In view of the Board's non-executive nature and the requirement
of the Articles of Incorporation that one third of Directors retire
by rotation at least every three years, the Board considers that it
is not appropriate for Directors to be appointed for a specified
term as recommended by principle 3 of the AIC Code. In accordance
with the recent publication of the 2019 AIC Code, which the Board
adopted from 1 July 2019, all Directors will be subject to annual
re-election.
None of the Directors has a contract of service with the
Company. The Company has no executive Directors and no employees.
However, the Board has engaged external companies to undertake the
investment management, administrative and custodial activities of
the Company. Clearly documented contractual arrangements are in
place with these companies which define the areas where the Board
has delegated certain responsibilities to them, but the Board
retains accountability for all delegated responsibilities.
Chair tenure policy
The Company has adopted a chair tenure policy, whereby the Chair
should normally serve no longer than nine years as a Director and
Chair but, where it is considered to be in the best interests of
the Company, its shareholders and stakeholders, the Chair may serve
for a limited time beyond that. In such circumstances, the
independence of the other Directors will ensure that the Board as a
whole remains independent.
The Company's view is that the continuity and experience of its
Directors are important and that a suitable balance needs to be
struck between the need for independence and refreshing the skills
and expertise of the Board. The Company believes that some limited
flexibility in its approach to Chair tenure will enable it to
manage succession planning more effectively.
Diversity policy
The Company monitors developments in corporate governance to
ensure the Board remains aligned with best practice with respect to
the increased focus on diversity. The Company has a Board diversity
policy, which acknowledges the importance of diversity, including
gender, for the effective functioning of the Board and commits to
supporting diversity in the boardroom. It is the Board's ongoing
aspiration to have a well-diversified membership. In addition to
gender diversity, the Board also values diversity of business
skills, knowledge and experience which bring a wide range of
perspectives to the Company.
Performance and evaluation
Internal evaluation of the Board, the Committees and individual
Directors is undertaken on an annual basis in the form of
questionnaires, peer appraisal, and discussions to determine
effectiveness and performance in various areas as well as the
Directors' continued independence.
New Directors receive an induction on joining the Board, and all
Directors receive other relevant training as necessary. Directors
have regular contact with the Investment Manager to ensure that the
Board remains regularly updated on all issues. All members of the
Board are members of professional bodies and serve on other Boards,
which ensures they are kept abreast of the latest technical
developments in their areas of expertise.
Board responsibilities
The Board is responsible to shareholders for the overall
management of the Company. The Board has adopted a set of reserved
powers which set out the particular duties of the Board. Such
reserved powers include decisions relating to the determination of
investment policy and oversight of the Investment Manager and their
advisers, strategy, risk assessment, Board composition, capital
raising, statutory obligations and public disclosure, financial
reporting and entering into any material contracts by the
Company.
The Directors have access to the advice and services of the
Administrator and Secretary, who are responsible to the Board for
ensuring that Board procedures are followed and that it complies
with the Companies Law and applicable rules and regulations of the
GFSC and the London Stock Exchange. Where necessary, in carrying
out their duties, the Directors may seek independent professional
advice at the expense of the Company.
The Company maintains appropriate directors' and officers'
liability insurance in respect of legal action against its
Directors on an ongoing basis. Investment Advisory services are
provided to the Company by Crystal Amber Advisers (UK) LLP through
the Investment Manager. The Board is responsible for setting the
overall investment policy and has delegated day to day
implementation of the Company's strategy to the Investment Manager
but retains responsibility to ensure that adequate resources of the
Company are directed in accordance with their decisions. The Board
monitors the actions of the Investment Adviser and Investment
Manager at regular Board meetings. The Board has also delegated
administration and company secretarial services to Ocorian
Administration (Guernsey) Limited but retains accountability for
all functions it delegates.
The Directors are responsible for ensuring the effectiveness of
the internal controls of the Company which are designed to ensure
that proper accounting records are maintained, the financial
information on which business decisions are made and which is
issued for publication is reliable, and the assets of the Company
are safeguarded. A formal review of the effectiveness of the
Company's risk management and internal control systems is conducted
at least once a year and this was completed successfully during the
year under review. The Investment Manager has established a Risk
Committee to monitor and manage risks faced by the Company. With
effect from 22 November 2019, these committee meetings are attended
by Fred Hervouet (previously Nigel Ward who retired from the Board
with effect from 22 November 2019), as disclosed the Directors
section.
The Board meets at least four times a year for regular,
scheduled meetings and should the nature of the business of the
Company require it, additional meetings may be held, some at short
notice. Prior to each of its quarterly meetings, the Board receives
reports from the Investment Adviser and Administrator covering
activities during the period, performance of relevant markets,
performance of the Company's assets, finance, compliance matters,
working capital position and other areas of relevance to the Board.
The Board also considers from time to time reports provided by the
Investment Manager and other service providers. The Board also
receives quarterly reports from the Risk Committee. There is
regular contact between the Board, the Investment Manager and the
Administrator. The Directors maintain overall control and
supervision of the Company's affairs.
There may be a requirement to hold Board meetings outside the
scheduled quarterly meetings in order to review and consider
investment opportunities and/or formal execution of documents and
to consider ad hoc business.
Between meetings there is regular contact with the Investment
Manager and the Administrator, and the Board requires information
to be supplied in a timely manner from the Investment Manager, the
Company Secretary and other advisers in a form and of a quality to
enable it to discharge its duties.
The Board, through the Remuneration and Management Engagement
Committee, is responsible for the appointment and monitoring of all
service providers including the Investment Manager. It conducts a
formal review of all service providers on an annual basis and
confirms that such a review has taken place during the year.
Audit committee
Due to the size of the Board, all Directors are members of the
Audit Committee. Jane Le Maitre acts as Chairman of the Committee.
The responsibilities of the Committee include reviewing the Annual
Report and Audited Financial Statements, the Interim Report and
Financial Statements, the system of internal controls and risk
management, and the terms of appointment and remuneration of the
Auditor. It is also the forum through which the Auditor reports to
the Board.
The Committee met three times in the year ended 30 June 2020.
Matters considered at these meetings included but were not limited
to:
-- review of the accounting policies and format of the financial statements;
-- review of the Annual Report and Audited Financial Statements
for the year ended 30 June 2019;
-- review of the Interim Report and Unaudited Interim Condensed
Financial Statements for the six months ended 31 December 2019;
-- review of the audit plan and timetable for the preparation of
the Annual Report and Audited Financial Statements for the year
ended 30 June 2020;
-- discussions and approval of the fee for the external audit;
-- assessment of the effectiveness of the external audit process as described below;
-- review of the Company's significant risks and internal controls;
-- review and consideration of the AIC Code, the GFSC Code and the Stewardship Code; and
-- detailed review of the 2020 Annual Report in relation to the
AIC Code and determining the period of assessment for the long term
viability of the Company.
The Committee considers the valuation of investments to be a
significant matter in relation to these Financial Statements. The
Company's accounting policy is to value investments as designated
at fair value through profit or loss or as derivatives held for
trading, and to recognise sales and purchases of those investments
using trade date accounting. This is significant as the Company's
investments and derivatives amount to 91.4% (30 June 2019: 101.1%)
of the NAV. The Committee has satisfied itself that the sources
used for pricing the Company's investments are appropriate and
reliable.
The Committee also reviews the objectivity and independence of
the Auditor. The Board considers KPMG Channel Islands Limited
("KPMG") to be independent of the Company. The audit fees disclosed
in the profit or loss section of the Statement of Profit or Loss
and Other Comprehensive Income are in relation to the audit of the
Financial Statements. During the year, KPMG did not receive any
remuneration from the Company for non-audit services.
The Committee assessed the effectiveness of the audit process by
considering KPMG's fulfilment of the agreed audit plan through the
reporting presented to the Committee by KPMG and discussions at
Committee meetings which highlighted the major issues that arose
during the course of the audit. In addition, the Committee also
sought feedback from the Investment Manager and the Administrator
on the effectiveness of the audit process. The Committee was
satisfied that there had been appropriate focus and challenge on
the primary areas of audit risk and assessed the quality of the
audit process to be good.
The external audit was initially put out to tender in 2008 when
the Company's shares were listed and admitted to trading on AIM and
KPMG was appointed. The lead audit partner previously changed in
2010 and 2015. The current lead audit partner started tenure in
2020, and will change again by rotation in 2025. There are no
obligations to restrict the Company's choice of external auditor.
The external audit was put out to tender in 2017. Following a
robust competitive tender process, the Committee concluded that the
interests of the Company and its shareholders would be best served
by retaining the services of KPMG to provide a consistent audit
approach.
The Board considers that an internal audit function specific to
the Company is unnecessary and that the systems and procedures
employed by the Investment Manager and the Administrator, including
their own internal control functions, provide sufficient assurance
that a sound system of internal control is maintained, which
safeguards the Company's assets. Formal terms of reference for the
Committee are available on the Company's website
www.crystalamber.com .
Other committees
Although the AIC Code recommends that companies appoint a
Nomination Committee, as the Board is wholly comprised of
non-executive Directors the Board has not deemed this necessary and
as such all matters are considered by the full Board. The Board has
adopted a succession plan, which is monitored and reviewed by the
Board at least annually.
The Board has established a Remuneration and Management
Engagement Committee. Due to the size of the Board, all Directors
are members of this committee. With effect from 22 November 2019,
Fred Hervouet (previously Nigel Ward who retired from the Board
with effect from 22 November 2019) acts as Chairman of the
committee. The Remuneration and Management Engagement Committee
meets at least once a year pursuant to its terms of reference. It
provides a formal mechanism for the review of the remuneration of
the Chairman and Directors and review of the performance and
remuneration of the Investment Manager, Investment Adviser and
other service providers.
Remuneration policy
The Company aims to ensure remuneration is competitive, aligned
with shareholder interests, relatively simple and transparent, and
compatible with the aim of attracting, recruiting and retaining
suitably qualified and experienced directors.
In addition, the Board reviews the arrangements for the
provision of management and other services to the Company on an
ongoing basis. The Company receives regular reporting from the
Investment Adviser and regular valuations of the Company's
investments, which allows the Board to form a judgement as to the
performance of its portfolio.
Board meetings, Committee meetings and Directors' attendance
One of the key criteria the Company uses when selecting
Directors is their confirmation prior to their appointment that
they will be able to allocate sufficient time to the Company to
discharge their responsibilities in a timely and effective
manner.
The Board formally met four times during the year and other ad
hoc Board committee meetings were called in relation to specific
events or to issue approvals, often at short notice and did not
necessarily require full attendance. Directors are encouraged when
they are unable to attend a meeting to give the Chairman their
views and comments on matters to be discussed, in advance.
Attendance at the quarterly Board meetings is further set out
below:
Remuneration and Management Engagement
Board Audit Committee Committee Tenure as at 30 June 2020
-------------------- ------- ---------------- ----------------------------------------- --------------------------
Christopher Waldron 4 of 4 2 of 3 1 of 1 6 years
Jane Le Maitre 4 of 4 3 of 3 1 of 1 3 years, 2 months
Fred Hervouet 4 of 4 3 of 3 1 of 1 2 years, 7 months
Nigel Ward(1) 1 of 1 2 of 2 1 of 1 n/a
(1) Retired with effect from 22 November 2019, at which point 1
scheduled Board meeting, 2 scheduled Audit Committee meetings and 1
scheduled Remuneration and Management Engagement Committee meeting
had taken place.
In addition to the above, there were two additional Board
committee meetings during the year.
Engagement with stakeholders
The Company is committed to maintaining good communications and
building positive relationships with all stakeholders, including
shareholders, suppliers, investee companies, and the wider
community and environment in which the Company and its investee
companies operate. This includes regular engagement with the
Company's shareholders and other stakeholders by the Board, the
Investment Manager, Investment Adviser and the Administrator.
Regular feedback is provided to Board members to ensure they
understand the views of stakeholders.
Relations with shareholders
The Board welcomes the views of shareholders and places great
importance on communication with its shareholders. Senior members
of the Investment Adviser make themselves available to meet with
principal shareholders and key sector analysts. The Chairman and
other Directors are also available to meet with shareholders, if
required.
All shareholders have the opportunity to ask questions of the
Company at its registered office. The Annual General Meeting of the
Company provides a forum for shareholders to meet and discuss
issues with the Directors and Investment Adviser. Company
information is also available to shareholders on the Company's
website www.crystalamber.com .
The Board regularly monitors the shareholder profile of the
Company and receives comprehensive shareholder reports from the
Company's Broker at all quarterly board meetings.
Relations with other stakeholders
The Company recognises that relationships with suppliers are
enhanced by prompt payment and the Company's Administrator ensures
all payments are processed within the contractual terms agreed with
individual suppliers.
During the year, the Company created and issued 250,000 shares
to ten charities. As disclosed in the Chairman's Statement, on 17
September 2020, the Company has issued an additional 125,000
shares, split equally amongst the following five charitable
organisations: St Andrews Clinic for Children, Cancer Research UK,
Feis Ceoil, James' Place and Sentable. The Directors are delighted
to assist so many worthy causes and always seek to make a positive
difference, particularly at a time when the global community needs
to come together.
Key decisions made or approved by the Directors during the year
and the impact of those decisions on the Company's shareholders and
wider stakeholders is disclosed further above.
Whistleblowing
The Board has considered the AIC Code recommendations in respect
of arrangements by which staff of the Investment Adviser or
Administrator may, in confidence, raise concerns within their
respective organisations about possible improprieties in matters of
financial reporting or other issues. It has concluded that adequate
arrangements are in place for the proportionate and independent
investigation of such matters and, where necessary, for appropriate
follow up action to be taken within their respective
organisations.
AIFM Directive
The Company is categorised as an externally managed non-EU AIF
under the AIFM Directive. The Investment Manager of the Company is
its non-EU AIFM. The Investment Manager as the AIFM has created a
Risk Committee which meets at least quarterly to consider the risks
faced by the Company and the investment process, consistent with
the requirements of the AIFM Directive. The AIFM has adopted a
remuneration policy which accords with the principles established
by the AIFM Directive. The remuneration policy is in compliance
with the requirements of the AIFM Directive and the guidance issued
by the FCA. The Investment Manager as the AIFM does not have any
employees. Mark Huntley and Laurence McNairn of Crystal Amber Asset
Management (Guernsey) Limited and as directors of the AIFM received
total aggregate remuneration of GBP20,000 by way of a fixed fee for
the year ended 30 June 2020. No variable fee elements of
remuneration were paid to the Directors of the AIFM.
The AIFM Directive outlines the information which has to be made
available to investors in an AIF and directs that material changes
to this information be disclosed in the Annual Report of the AIF.
All information required to be disclosed under the AIFM Directive
is either disclosed in this Annual Report or on the Company's
website www.crystalamber.com.
AEOI Rules
Under AEOI Rules, the Company is registered under FATCA and
continues to comply with both FATCA and CRS requirements to the
extent relevant to the Company.
NMPI
The Board has been advised that the Company would satisfy the
criteria for being an investment trust if it was resident in the
UK. Accordingly, the Board has concluded that the Company's
Ordinary shares are not non-mainstream pooled investments for the
purposes of the FCA rules regarding the restrictions on the
promotion to retail investors of unregulated collective investment
schemes and close substitutes. This means that the restrictions on
promotion imposed by the FCA rules do not apply to the Company. It
is the Board's intention that the Company conducts its affairs so
that these restrictions will continue to remain inapplicable.
Independent auditor
KPMG has agreed to offer itself for re-appointment as Auditor of
the Company and a resolution proposing re-appointment and
authorising the Directors to determine remuneration will be
presented at the Annual General Meeting.
Annual General Meeting
The Annual General Meeting of the Company will be held at
10:30am on 20 November 2020 at the offices of Ocorian
Administration (Guernsey) Limited, Floor 2, Trafalgar Court, Les
Banques, St Peter Port, Guernsey.
On behalf of the Board
Christopher Waldron Jane Le Maitre
Chairman Director
18 September 2020 18 September 2020
Directors
Christopher Waldron Guernsey Resident, (appointed 1 July
2014)
Non-Executive Chairman (with effect from 23 November 2017)
Christopher Waldron has over 30 years' experience as an
investment manager, specialising in fixed income, hedging
strategies and alternative investment mandates and until 2013 was
Chief Executive of the Edmond de Rothschild Group in the Channel
Islands. Prior to joining the Edmond de Rothschild Group in 1999,
Mr Waldron held investment management positions with Bank of
Bermuda, the Jardine Matheson Group and Fortis but he is now
primarily an independent non-executive director of a number of
listed funds and investment companies. He is also a member of the
States of Guernsey's Policy and Resources Investment and Bond
Sub-Committee. He is a Fellow of the Chartered Institute of
Securities and Investment.
Jane Le Maitre, Guernsey Resident, Non-Executive Director
(appointed 8 May 2017)
Jane Le Maitre has over 30 years' experience in the Finance
Industry in the UK and Guernsey. She is a Fellow of the Institute
of Chartered Accountants in England & Wales, a Chartered Tax
Adviser and a member of the Institute of Directors. She trained in
audit with Coopers & Lybrand in the UK and joined the tax and
fiduciary division of KPMG (Channel Islands) in 1989. She became a
Partner in 1995 where she remained until 2000 before becoming a
director in the fiduciary division at Kleinwort Benson. After 5
years with Kleinwort Benson, she joined the Intertrust Group in
Guernsey becoming Managing Director of Intertrust Reads Private
Clients Limited for a period of 6 years. She continues to hold a
number of executive positions in unlisted property and investment
holding entities.
Fred Hervouet, Guernsey Resident, Non-Executive Director
(appointed 6 December 2017)
Fred Hervouet has over 20 years' experience of working in
different areas of the Financial Markets and Asset Management
Industry. His experience includes Fixed Income and Derivatives
Markets, Structured Finance, Structured Products, Trading and Risk
Management. Prior to moving to Guernsey in December 2013, he was
Managing Director and Head of Commodity Derivatives Asia for BNP
Paribas. He holds a number of non-executive director positions on
LSE listed funds and Private Equity funds including Chenavari Toro
Income Fund Limited, where he is chairman. He holds a Master Degree
in Financial Markets, Commodity Markets and Risk Management from
University Paris Dauphine and an MSc in Applied Mathematics and
International Finance. He is a member of the UK Institute of
Directors and the UK Association of Investment Companies.
In addition to their directorships of the Company, the Directors
currently hold the following directorships of listed companies;
Christopher Waldron Jane Le Maitre
UK Mortgages Limited None at present
Fred Hervouet
Chenavari Toro Income Fund Limited
SCRF SME Income Fund Limited
Independent Auditor's Report
to the Members of Crystal Amber Fund Limited
Our opinion is unmodified
We have audited the financial statements of Crystal Amber Fund
Limited (the "Company"), which comprise the statement of financial
position as at 30 June 2020, the statements of profit or loss and
other comprehensive income, changes in equity and cash flows for
the year then ended, and notes, comprising significant accounting
policies and other explanatory information.
In our opinion, the accompanying financial statements:
1. give a true and fair view of the financial position of the
Company as at 30 June 2020, and of the Company's financial
performance and cash flows for the year then ended;
1. are prepared in accordance with International Financial
Reporting Standards ("IFRS"); and
-- comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Company in
accordance with, UK ethical requirements including FRC Ethical
Standards, as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
Key audit matters: our assessment of the risks of material
misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In arriving at our
audit opinion above, the key audit matter was as follows (unchanged
from 2019):
Our response
------------------------------------------------- ------------------------------------------------ -----------------
Valuation of financial assets designated at fair Basis: Our
value through profit and loss The Company has invested 91.4% of its net audit
GBP89,066,925; (2019: GBP241,366,149) assets as at 30 June 2020 into equity procedures
Refer to the Report of the Directors, note 1 investments included
accounting policies and note 9 and 14 (GBP83,197,300), debt investments but
disclosures (GBP5,848,545) and derivative financial were
instruments (GBP21,080) noted
(together, the "investments") limited
The Company's listed or quoted equities to:
(GBP76,750,450) are valued based on market Internal
prices Controls:
obtained from a third-party pricing provider We
while the Company's unlisted derivative tested
financial the
instruments are valued using a Black Scholes design
Option valuation technique (GBP21,080). and
The Company's unlisted equity investment implementation
(GBP6,446,850) is valued at 30 June 2020 based of
on controls
reference to a recent transaction price. over
Of the debt investments held at 30 June 2020, the
GBP2,663,990 was valued using a discounted cash valuation
flow model approach with reference to of
comparable instruments for parameters such as investments.
yields. Challenging
An amount of GBP2,574,140 was valued with managements'
reference to the market price of the issuer's assumptions
equity and
had the debt investment been converted to inputs
equity and valued at the closing bid price on including
the use
reporting date and an amount of GBP610,415 was of
valued based on the principal value plus a
accrued KPMG
interest. valuation
Risk: specialist:
The valuation of the investments, given that For
they represent the majority of the net assets listed
of the Company, is considered to be a or
significant area of our audit. quoted
Of the investments which are unlisted investments,
(representing 12.6% of net assets), these we
investment used
valuations are subject to a risk of fraud and our
error given the high level of subjectivity, own
estimation uncertainty and complexity when valuation
deriving a fair value. specialist
to
independently
price
all
fair
values
to
a
third
party
source.
We
compared
our
independent
price
to
the
price
as
utilised
by
the
Company.
For
the
unlisted
investments
we
assessed
the
appropriateness
of
the
valuation
methodology
applied
against
our
own
expectations
based
on
our
knowledge
of
the
asset
class
and
experience
in
the
industry.
We
compared
key
underlying
financial
information
to
external
sources
and
assessed
the
validity
of
the
recent
transaction
price
and
corroborated
to
supporting
agreements.
For
the
debt
investments,
our
own
valuation
specialist
derived
independent
reference
prices
using
either
a
discounted
cash
flow
model
approach
or
expected
recovery
approach,
adjusted
for
conversion
options.
These
models
utilised
externally
sourced
parameters
(such
as
yields
and
prepayment
rates)
derived
from
market
information,
rating
agencies
and
investment
banks.
Assessing
disclosures:
We
also
considered
the
Company's
disclosures
(see
note
1)
in
relation
to
the
use
of
estimates
and
judgments
regarding
the
valuation
of
investments
and
the
Company's
valuation
policies
adopted
and
fair
value
disclosures
in
notes
9
and
14
for
compliance
with
IFRS.
------------------------------------------------- ------------------------------------------------ -----------------
Our application of materiality and an overview of the scope of
our audit
Materiality for the financial statements as a whole was set at
GBP1,947,000, determined with reference to a benchmark of net
assets of GBP97,394,961, of which it represents approximately 2.0%
(2019: 3.0%).
We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding GBP97,000, in addition to other
identified misstatements that warranted reporting on qualitative
grounds.
Our audit of the Company was undertaken to the materiality level
specified above, which has informed our identification of
significant risks of material misstatement and the associated audit
procedures performed in those areas as detailed above.
We have nothing to report on going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or to cease its operations, and as they have concluded that the
Company's financial position means that this is realistic. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue as a
going concern for at least a year from the date of approval of the
financial statements ("the going concern period").
In our evaluation of the directors' conclusions, we considered
the inherent risks to the Company's activities including where
relevant the impact of the COVID-19 pandemic and the requirements
of the applicable financial reporting framework. We analysed how
those risks might affect the Company's financial resources or
ability to continue operations over the going concern period,
including challenging the underlying data and key assumptions used
to make the assessment, and evaluated the directors' plans for
future actions in relation to their going concern assessment.
Based on this work, we are required to report to you if we have
concluded that the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material uncertainty that
may cast significant doubt over the use of that basis for a period
of at least a year from the date of approval of the financial
statements. We have nothing to report in these respects.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report but does not include the financial statements and our
auditor's report thereon. Our opinion on the financial statements
does not cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
We have nothing to report on other matters on which we are
required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
1. the Company has not kept proper accounting records; or
-- the financial statements are not in agreement with the accounting records; or
-- we have not received all the information and explanations,
which to the best of our knowledge and belief are necessary for the
purpose of our audit.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out above, the
directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and restrictions on its use by
persons other than the Company's members, as a body
This report is made solely to the Company's members, as a body,
in accordance with section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members, as a body, for our audit work, for this report, or for the
opinions we have formed.
Rachid Frihmat
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
18 September 2020
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2020
2020 2019
Revenue Capital Total Revenue Capital Total
Notes GBP GBP GBP GBP GBP GBP
Income
Dividend income
from listed
investments 3,274,032 - 3,274,032 4,177,239 - 4,177,239
Interest received 6,563 - 6,563 315,953 - 315,953
------------------ ------ ---------- --------------- -------------- ---------- ----------------- -------------
3,280,595 - 3,280,595 4,493,192 - 4,493,192
Net
(losses)/gains on
financial assets
designated at
FVTPL and
derivatives held
for trading
Equities
Net realised
gains 9 - 1,870,189 1,870,189 - 29,985,091 29,985,091
Movement in
unrealised
(losses)/gains 9 - (131,440,682) (131,440,682) - (10,119,377) (10,119,377)
Debt instruments
Net realised
gains 9 - - - - 2,540,559 2,540,559
Movement in
unrealised
(losses)/gains 9 - (2,665,613) (2,665,613) - 457,706 457,706
Derivative
financial
instruments
Net realised
gains/(losses) 9 - 7,142,026 7,142,026 - (7,015,764) (7,015,764)
Movement in
unrealised gains 9 - (6,267,293) (6,267,293) - (3,830,544) (3,830,544)
------------------ ------ ---------- --------------- -------------- ---------- ----------------- -------------
- (131,361,373) (131,361,373) - 12,017,671 12,017,671
------------------ ------ ---------- --------------- -------------- ---------- ----------------- -------------
Total
(expense)/income 3,280,595 (131,361,373) (128,080,778) 4,493,192 12,017,671 16,510,863
------------------ ------ ---------- --------------- -------------- ---------- ----------------- -------------
Expenses
Transaction costs 4 - 489,012 489,012 - 545,479 545,479
Foreign exchange
movements on
revaluation of
investments and
working capital (325,282) (217,697) (542,979) (247,085) 147,999 (99,086)
Management fees 15,17 2,489,201 - 2,489,201 3,476,006 - 3,476,006
Performance fees 15,17 - - - - 2,456,957 2,456,957
Directors'
remuneration 16 143,809 - 143,809 155,000 - 155,000
Administration
fees 17 157,059 - 157,059 267,031 - 267,031
Custodian fees 17 69,696 - 69,696 114,705 - 114,705
Audit fees 30,975 - 30,975 25,889 - 25,889
Other expenses 365,151 - 365,151 344,100 - 344,100
2,930,609 271,315 3,201,924 4,135,646 3,150,435 7,286,081
------------------ ------ ---------- --------------- -------------- ---------- ----------------- -------------
(Loss)/return for
the year 349,986 (131,632,688) (131,282,702) 49,950 9,174,832 9,224,782
------------------ ------ ---------- --------------- -------------- ---------- ----------------- -------------
Basic and diluted
(loss)/earnings
per share
(pence) 5 0.38 (140.38) (140.00) 0.05 9.49 9.54
------------------ ------ ---------- --------------- -------------- ---------- ----------------- -------------
All items in the above statement derive from continuing
operations.
The total column of this statement represents the Company's
Statement of Profit or Loss and Other Comprehensive Income prepared
in accordance with IFRS. The supplementary information on the
allocation between revenue return and capital return is presented
under guidance published by the AIC.
The Notes to the Financial Statements form an integral part of
these Financial Statements.
Statement of Financial Position
As at 30 June 2020
2020 2019
Assets Notes GBP GBP
Cash and cash equivalents 7 5,916,155 931,915
Trade and other receivables 8 2,610,053 1,971,390
Financial assets designated at FVTPL
and derivatives held for trading 9 89,066,925 241,366,149
Total assets 97,593,133 244,269,454
--------------------------------------- ------ ------------- -----------------------------
Liabilities
Trade and other payables 10 198,172 5,493,857
Total liabilities 198,172 5,493,857
--------------------------------------- ------ ------------- -----------------------------
Equity
Capital and reserves attributable
to the Company's equity shareholders
Share capital 11 996,248 993,748
Treasury shares reserve 12 (12,265,601) (6,895,640)
Distributable reserve 90,579,709 95,310,182
Retained earnings 18,084,605 149,367,307
Total equity 97,394,961 238,775,597
--------------------------------------- ------ ------------- -----------------------------
Total liabilities and equity 97,593,133 244,269,454
--------------------------------------- ------ ------------- -----------------------------
NAV per share (pence) 6 106.02 249.12
--------------------------------------- ------ ------------- -----------------------------
The Financial Statements were approved by the Board of Directors
and authorised for issue on 18 September 2020.
Christopher Waldron Jane Le Maitre
Chairman Director
18 September 2020 18 September 2020
The Notes to the Financial Statements form an integral part of
these Financial Statements.
Statement of Changes in Equity
For the year ended 30 June 2020
Treasury
Share shares Distributable Retained earnings Total
Notes capital reserve reserve Capital Revenue Total equity
GBP GBP GBP GBP GBP GBP GBP
Opening
balance
at 1 July
2019 993,748 (6,895,640) 95,310,182 152,144,584 (2,777,277) 149,367,307 238,775,597
Issue of
Ordinary
shares 2,500 - - - - - 2,500
Purchase
of
Ordinary
shares
into
Treasury 12 - (5,369,961) - - - - (5,369,961)
Dividends
paid
in the
year 13 - - (4,730,473) - - - (4,730,473)
Loss for
the
year - - - (131,632,688) 349,986 (131,282,702) (131,282,702)
Balance at 30 June
2020 996,248 (12,265,601) 90,579,709 20,511,896 (2,427,291) 18,084,605 97,394,961
------------------- -------- ------------- -------------- -------------- ------------ -------------- --------------
Treasury
Share shares Distributable Retained earnings Total
Notes capital reserve reserve Capital Revenue Total equity
GBP GBP GBP GBP GBP GBP GBP
Opening
balance
at 1 July
2018 991,248 (3,212,448) 100,156,159 143,277,348 (3,134,823) 140,142,525 238,077,484
Issue of
Ordinary
shares 2,500 - - - - - 2,500
Purchase
of
Ordinary
shares
into
Treasury 12 - (3,683,192) - - - - (3,683,192)
Dividends
paid
in the
year 13 - - (4,845,977) - - - (4,845,977)
Return for
the
year - - - 8,867,236 357,546 9,224,782 9,224,782
Balance at 30 June
2019 993,748 (6,895,640) 95,310,182 152,144,584 (2,777,277) 149,367,307 238,775,597
------------------- -------- ------------- -------------- -------------- ------------ -------------- --------------
The Notes to the Financial Statements form an integral part of
these Financial Statements.
Statement of Cash Flows
For the year ended 30 June 2020
2020 2019
Notes GBP GBP
Cash flows from operating activities
Dividend income received from listed
investments 3,298,767 4,176,269
Bank interest received 7,565 9,681
Interest received - 307,596
Management fees paid (3,319,023) (2,646,184)
Performance fees paid (2,456,957) (10,964,740)
Directors' fees paid (152,559) (150,000)
Other expenses paid (680,398) (713,956)
------------------------------------------- ------ ------------- -------------
Net cash outflow from operating
activities (3,302,605) (9,981,334)
Cash flows from investing activities
Purchase of equity investments (61,373,003) (62,884,085)
Sale of equity investments 76,560,511 88,632,836
Purchase of debt instruments (4,153,747) (3,120,419)
Purchase of derivative financial
instruments (6,237,568) (11,742,025)
Sale of derivative financial instruments 14,091,736 7,902,140
Transaction charges on purchase
and sale of investments (517,258) (517,258)
------------------------------------------- ------ ------------- -------------
Net cash inflow from investing activities 18,370,671 18,271,189
Cash flows from financing activities
Proceeds from issuance of Ordinary
shares 2,500 2,500
Purchase of Ordinary shares into
Treasury (5,355,853) (3,683,192)
Dividends paid (4,730,473) (4,845,977)
------------------------------------------- ------ ------------- -------------
Net cash outflow from financing
activities (10,083,826) (8,526,669)
Net increase/(decrease) in cash
and cash equivalents during the
year 4,984,240 (236,814)
Cash and cash equivalents at beginning
of year 931,915 1,168,729
Cash and cash equivalents at end
of year 7 5,916,155 931,915
------------------------------------------- ------ ------------- -------------
The Notes to the Financial Statements form an integral part of
these Financial Statements.
Notes to the Financial Statements
For the year ended 30 June 2020
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 is expected to comprise primarily capital growth with
the potential for distributions of up to 5 pence per share per
annum following consideration of the accumulated retained earnings
as well as the unrealised gains and losses at that time. The
Company seeks to achieve this through investment in a concentrated
portfolio of undervalued companies, which are expected to be
predominantly, but not exclusively, listed or quoted on UK markets
and which have a typical market capitalisation of between GBP100
million and GBP1,000 million.
GI Dynamics Inc. ("GID"), is a subsidiary of the Company and was
incorporated in Delaware. As at 30 June 2020, it had five
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") and derivatives held
for trading which are measured at fair value.
The Company has adopted the Investment Entity Amendments to IFRS
10, IFRS 12 and IAS 27 which define investment entities together
with disclosure requirements.
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS
27)
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 of 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.
Going concern
As at 30 June 2020, the Company had net assets of GBP97.4
million (30 June 2019: GBP238.8 million) and cash balances of
GBP5.9 million (30 June 2019: GBP0.9 million) which are sufficient
to meet current obligations as they fall due.
In the period prior to 30 June 2020 and up to the date of this
report, the COVID-19 pandemic has had a negative impact on the
global economy. As this situation is both unprecedented and
evolving, it raises some uncertainties and additional risks for the
Company.
The Directors and Investment Manager are actively monitoring the
potential effect on the Company and its investment portfolio. In
particular, they have considered the following specific key
potential impacts:
-- Unavailability of key personnel at the Investment Manager or Administrator;
-- Increased volatility in the fair value of investments,
including any potential impairment in value; and
-- Increased uncertainty as to the timing and quantum of dividend receipts.
In considering the key potential impacts of COVID-19 on the
Company and its investment portfolio outlined above, the Directors
have taken account of the mitigation measures already in place. At
Company level, key personnel at the Investment Manager and
Administrator have successfully implemented business continuity
plans to ensure business disruption is minimised, including remote
working where required, and all staff are continuing to assume
their day-today responsibilities.
As further detailed in Note 14, 86% 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 therefore 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.
As noted further in the Report of the Directors, in view of the
effects of COVID-19, there is currently uncertainty as to the
timing and quantum of dividend receipts from the Company's
portfolio companies. The Directors are also mindful that changes in
the composition of the portfolio could mean that there will be
lower dividend receipts than in past years. Accordingly, the
Directors have concluded that a decision on whether to pay an
interim dividend in this financial year should be deferred until
later in the year in order to preserve cashflow.
Based on the Board's assessment of those matters most likely to
be affected by COVID-19 and taking account of the various risk
mitigation measures already in place, the Directors do not consider
that the effects of COVID-19 are likely to create a material
uncertainty over the assessment of the Company as a going
concern.
On the basis of this review, and after making due enquiries, the
Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for at
least 12 months from the date of approval of this report.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing these financial statements.
Continuation vote
The Company is subject to a continuation vote scheduled to occur
every two years. The next continuation vote will be proposed at the
2021 AGM.
Use of estimates and judgements
The preparation of the Financial Statements in conformity with
IFRS requires management to make judgements, estimates and
assumptions that affect the application of the reported amounts in
these Financial Statements. The determination that the Company 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 Black Scholes option valuation technique has
been utilised to value warrant instruments and uses certain
assumptions related to risk-free interest rates, expected
volatility, expected life and future dividends as disclosed below.
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, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board as a whole. The key
measure of performance used by the Board to assess the Company's
performance and to allocate resources is the total return on the
Company's NAV, as calculated under IFRS, and therefore no
reconciliation is required between the measure of profit or loss
used by the Board and that contained in these Financial
Statements.
For management purposes, the Company is domiciled in Guernsey
and is engaged in a single segment of business mainly in one
geographical area, being investment mainly in UK equity
instruments, and therefore the Company has only one single
operating segment.
Foreign currency translation
Monetary assets and liabilities are translated from currencies
other than Sterling ('foreign currencies') to Sterling (the
'functional currency') at the rate prevailing on the reporting
date. Income and expenses are translated from foreign currencies to
Sterling at the rate prevailing at the date of the transaction.
Exchange differences are recognised in the profit or loss section
of the Statement of Profit or Loss and Other Comprehensive
Income.
Financial instruments
Financial instruments comprise investments in equity, debt
instruments, derivatives, trade and other receivables, cash and
cash equivalents, and trade and other payables. Financial
instruments are recognised initially at cost, which is deemed to be
fair value. Subsequent to initial recognition financial instruments
are measured as described below.
Financial assets designated at FVTPL
All the Company's investments including debt instruments and
derivative financial instruments are held at FVTPL. They are
initially recognised at cost at acquisition, which is deemed to be
their fair value. Transaction costs are expensed in the profit or
loss section of the Statement of Profit or Loss and Other
Comprehensive Income. Gains and losses arising from changes in fair
value are presented in the profit or loss section of the Statement
of Profit or Loss and Other Comprehensive Income in the period in
which they arise.
Purchases and sales of investments are recognised using trade
date accounting. Quoted investments are valued at 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 recognised
initially at cost incurred in their acquisition. 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.
Warrant instruments which are unlisted are valued at the
reporting date using a Black Scholes option valuation technique,
which uses certain assumptions related to risk-free interest rates,
expected volatility, expected life and future dividends. Gains and
losses arising from changes in fair value are presented in the
profit or loss section of the Statement of Profit or Loss and Other
Comprehensive Income in the period in which they arise.
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.
Share issue expenses
Share issue expenses of the Company directly attributable to the
issue and listing of its own shares are charged to the
distributable reserve.
Share capital
Ordinary shares are classified as equity where there is no
obligation to transfer cash or other assets.
Dividends
Dividends paid during the year from distributable reserves are
disclosed in the Statement of Changes in Equity. Dividends declared
post year end are disclosed in the Notes to the Financial
Statements.
Distributable reserves
Distributable reserves represent the amount transferred from the
share premium account, approved by the Royal Court of Guernsey on
18 July 2008, and amounts transferred to distributable reserves in
relation to the sale of Treasury shares above cost.
Income
Investment income and interest income have been accounted for on
an accruals basis using the effective interest method. Dividends
receivable are recognised in the profit or loss section of the
Statement of Profit or Loss and Other Comprehensive Income when the
relevant security is quoted ex-dividend. The Company currently
incurs withholding tax imposed by 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 disposed of. No gain or loss is recognised
within the statement of Profit or Loss and Other Comprehensive
Income on the purchase, sale, issue or cancellation of the
Company's own equity investments.
Any consideration received, net of any directly attributable
incremental transaction costs upon sale or re-issue of such shares,
is included in equity attributable to the Company's equity
holders.
2. NEW STANDARDS AND INTERPRETATIONS
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 January 2019 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 2020 or later periods. 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 (2019: GBP1,200
).
4. TRANSACTION COSTS
The transaction charges incurred in relation to the acquisition
and disposal of investments during the year were as follows:
2020 2019
GBP GBP
Stamp duty 220,933 199,715
Commissions and custodian transaction charges:
In respect of purchases 183,823 233,483
In respect of sales 84,256 112,281
489,012 545,479
------------------------------------------------ -------- --------
5. BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE
(Loss)/earnings per share is based on the following data:
2020 2019
(Loss)/return for the year GBP(131,282,702) GBP9,224,782
Weighted average number of issued Ordinary shares 93,771,223 96,693,152
Basic and diluted (loss)/earnings per share (pence) (140.00) 9.54
----------------------------------------------------- ----------------- -------------
6. NAV PER SHARE
NAV per share is based on the following data:
2020 2019
NAV per Statement of Financial Position GBP97,394,961 GBP238,775,597
Total number of issued Ordinary shares (excluding Treasury shares) at 30 June 91,861,567 95,846,980
------------------------------------------------------------------------------- -------------- ---------------
NAV per share (pence) 106.02 249.12
------------------------------------------------------------------------------- -------------- ---------------
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:
2020 2019
GBP GBP
Cash available on demand 5,916,155 931,915
-------------------------- ---------- --------
5,916,155 931,915
-------------------------- ---------- --------
8. TRADE AND OTHER RECEIVABLES
2020 2019
GBP GBP
Current assets:
Unsettled trade sales 2,583,444 1,923,459
Trade receivables - 25,737
Prepayments 26,609 22,194
----------------------- ---------- ----------
2,610,053 1,971,390
----------------------- ---------- ----------
There were no past due or impaired receivable balances
outstanding at the year end (2019: GBPNil).
9. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR
LOSS AND DERIVATIVES HELD FOR TRADING
2020 2019
GBP GBP
Equity investments 83,197,300 230,330,507
Debt instruments 5,848,545 4,035,127
----------------------------------------------------------------------------- ------------------- -------------
Financial assets designated at FVTPL 89,045,845 234,365,634
Derivative financial instruments held for trading 21,080 7,000,515
Total financial assets designated at FVTPL and derivatives held for trading 89,066,925 241,366,149
----------------------------------------------------------------------------- ------------------- -------------
Equity investments
Cost brought forward 183,283,825 172,761,740
Purchases 59,441,534 71,094,830
Sales (77,221,490) (90,557,836)
Net realised gains 1,870,189 29,985,091
Adjustment to cost brought forward (186,670) -
----------------------------------------------------------------------------- ------------------- -------------
Cost carried forward 167,187,388 183,283,825
Unrealised gains brought forward 47,197,282 57,316,659
Movement in unrealised (losses)/gains (131,440,682) (10,119,377)
Adjustment to unrealised gains brought forward 186,670 -
----------------------------------------------------------------------------- ------------------- -------------
Unrealised (losses)/gains carried forward (84,056,730) 47,197,282
Effect of exchange rate movements on revaluation 66,642 (150,600)
----------------------------------------------------------------------------- ------------------- -------------
Fair value of equity investments 83,197,300 230,330,507
----------------------------------------------------------------------------- ------------------- -------------
Debt instruments
Cost brought forward 3,950,568 5,547,350
Purchases 4,153,747 3,120,419
Conversion of loans - (7,257,760)
Net realised gains - 2,540,559
----------------------------------------------------------------------------- ------------------- -------------
Cost carried forward 8,104,315 3,950,568
Unrealised gains brought forward 660,939 203,233
Movement in unrealised (losses)/gains (2,665,613) 457,706
----------------------------------------------------------------------------- ------------------- -------------
Unrealised (losses)/gains carried forward (2,004,674) 660,939
Effect of exchange rate movements on revaluation (251,096) (576,380)
----------------------------------------------------------------------------- ------------------- -------------
Fair value of debt instruments 5,848,545 4,035,127
----------------------------------------------------------------------------- ------------------- -------------
Total financial assets designated at FVTPL 89,045,845 234,365,634
----------------------------------------------------------------------------- ------------------- -------------
Derivative financial instruments held for trading
Cost brought forward 712,142 3,888,021
Purchases 6,237,568 11,742,025
Sales (14,091,736) (7,902,140)
Net realised gains/(losses) 7,142,026 (7,015,764)
----------------------------------------------------------------------------- ------------------- -------------
Cost carried forward - 712,142
----------------------------------------------------------------------------- ------------------- -------------
Unrealised gains brought forward 6,288,373 10,118,917
Movement in unrealised gains (6,267,293) (3,830,544)
----------------------------------------------------------------------------- ------------------- -------------
Unrealised gains carried forward 21,080 6,288,373
----------------------------------------------------------------------------- ------------------- -------------
Fair value of derivatives held for trading 21,080 7,000,515
----------------------------------------------------------------------------- ------------------- -------------
Total derivative financial instruments held for trading 21,080 7,000,515
----------------------------------------------------------------------------- ------------------- -------------
Total financial assets designated at FVTPL and derivatives held for trading 89,066,925 241,366,149
----------------------------------------------------------------------------- ------------------- -------------
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:
2020 2019
GBP GBP
Realised gains 29,509,499 37,215,339
Realised losses (20,497,284) (11,705,453)
Net realised gains in financial assets designated at FVTPL and derivatives held for
trading 9,012,215 25,509,886
------------------------------------------------------------------------------------- -------------- -------------
Movement in unrealised gains (76,243,496) (2,438,355)
Movement in unrealised losses (64,130,092) (11,053,860)
Net movement in unrealised losses in financial assets designated at FVTPL and
derivatives
held for trading (140,373,588) (13,492,215)
------------------------------------------------------------------------------------- -------------- -------------
The following table details the Company's positions in
derivative financial instruments:
Nominal amount Value
30 June 2020 GBP
Derivative financial instruments
GI Dynamics Inc. warrant (Expiry: January 2025) 229,844,650 21,080
229,844,650 21,080
------------------------------------------------- --------------- -------
Nominal amount Value
30 June 2019 GBP
Derivative financial instruments
Puts on FTSE100 Index P7100 (expiry: July 2019) 5,000 225,000
Puts on FTSE100 Index P7000 (expiry: August 2019) 1,000 190,000
GI Dynamics Inc. warrant (Expiry: May 2023) 97,222,200 1,546,564
GI Dynamics Inc. warrant (Expiry: June 2024) 78,984,823 1,262,671
GI Dynamics Inc. warrant (Expiry: July 2024) 236,220,480 3,776,280
412,433,503 7,000,515
--------------------------------------------------- --------------- ----------
10. TRADE AND OTHER PAYABLES
2020 2019
GBP GBP
Current liabilities:
Accruals 184,063 1,076,190
Unsettled trade purchases 14,109 1,960,710
Performance fee accrual - 2,456,957
--------------------------- --------- ----------
198,172 5,493,857
--------------------------- --------- ----------
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, is comprised as follows:
2020 2019
Number GBP Number GBP
Opening balance 99,374,762 993,748 99,124,762 991,248
Ordinary shares issued
during the year 250,000 2,500 250,000 2,500
----------------------------- ----------- --------- ----------- --------
Issued, called up and fully
paid Ordinary shares of
GBP0.01 each 99,624,762 996,248 99,374,762 993,748
----------------------------- ----------- --------- ----------- --------
Capital risk management
The Company's objectives when managing capital are to safeguard
the Company's ability to continue as a going concern in order to
provide returns to shareholders and to maintain an optimal capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell
assets.
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 2020, the Company paid dividends
of GBP4,730,473 (2019: GBP4,845,977) from distributable reserves,
as disclosed in Note 13.
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
2020 2019
Number GBP Number GBP
Opening balance (3,527,782) (6,895,640) (1,798,982) (3,212,448)
Treasury shares purchased during the year (4,235,413) (5,369,961) (1,728,800) (3,683,192)
------------------------------------------- ------------- -------------- ------------ -------------
Closing balance (7,763,195) (12,265,601) (3,527,782) (6,895,640)
------------------------------------------- ------------- -------------- ------------ -------------
During the year ended 30 June 2020, 4,235,413 (2019: 1,728,800)
Treasury shares were purchased at an average price of 126.79 pence
per share (2019: 213.05 pence per share), representing an average
discount to NAV at the time of purchase of 28.5% (2019: 9.6%).
13. DIVIDS
On 10 July 2019, the Company declared an interim dividend of
GBP2,381,425, equating to 2.5 pence per Ordinary share, which was
paid on 19 August 2019 to shareholders on the register on 19 July
2019.
On 10 December 2019, the Company declared an interim dividend of
GBP2,349,048 equating to 2.5 pence per Ordinary share, which was
paid on 13 January 2020 to shareholders on the register on 20
December 2019.
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
2020 the major financial assets which were exposed to credit risk
included financial assets designated at FVTPL, derivatives held for
trading and cash and cash equivalents.
The carrying amounts of financial assets best represent the
maximum credit risk exposure at 30 June 2020. 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.
Cash Balance Cash Balance
2020 2019
Location Rating GBP GBP
Butterfield Bank (Guernsey) Limited(*) Guernsey BBB+ 5,766,126 920,009
Barclays Bank plc - Isle of Man Branch Isle of Man A- 150,029 11,906
---------------------------------------- ------------- -------- ------------- -------------
5,916,155 931,915
--------------------------------------------------------------- ------------- -------------
(*) Effective from 15 July 2019, Butterfield Bank (Guernsey)
Limited acquired ABN AMRO (Guernsey) Limited.
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 and derivatives held for trading is considered acceptable as
these assets consist mainly of quoted equities or are linked to
quoted equities. 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 2020, GBP88,963,426 (2019: GBP231,250,515) 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. 85% (2019: 94%) 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+ (2019: A). The
remaining balance of financial assets of GBP8,629,707 (2019:
GBP13,018,939) includes GBP21,080 (2019: GBP6,585,515) warrant
instruments, GBP 5,848,545 (2019: GBP 4,035,128 ) loan notes issued
by GI Dynamics Inc., GBPNil (2019: GBP415,000) put derivative
options held by the option broker, GBP150,029 (2019: GBP11,906)
cash held by Barclays Bank plc and GBP2,610,053 (2019:
GBP1,971,390) are trade receivables.
Liquidity risk
Liquidity risk is the risk that the Company will be unable to
meet its obligations arising from financial liabilities. Ultimate
responsibility for liquidity risk management rests with the Board
of Directors, which has built an appropriate framework for the
management of the Company's liquidity requirements.
The Company adopts a prudent approach to liquidity risk
management and maintains sufficient cash reserves to meet its
obligations. All the Company's Level 1 investments are listed and
are subject to a settlement period of three days.
The following tables detail the Company's expected maturity for
its financial assets and liabilities:
2020 Weighted average interest Less than 1 year 1-5 years 5+ years Total
rate
Assets GBP GBP GBP GBP
Non-interest bearing 85,978,462 - - 85,978,462
Variable interest rate
instruments 0.29% 5,766,126 - - 5,766,126
Fixed interest rate
instruments 5.00% 3,184,555 - - 3,184,555
Fixed interest rate
instruments 10.00% - 2,663,990 - 2,663,990
Liabilities
Non-interest bearing (198,172) - - (198,172)
------------------------------- ------------------------------ ----------------- -----------
94,730,971 2,663,990 - 97,394,961
------------------------------- ------------------------------ ----------------- ---------- --------- -----------
2019 Weighted average interest Less than 1 year 1-5 years 5+ years Total
rate
Assets GBP GBP GBP GBP
Non-interest bearing 239,314,317 - - 239,314,317
Variable interest rate
instruments 0.45% 920,009 - - 920,009
Fixed interest rate
instruments 5.00% 4,035,128 - - 4,035,128
Liabilities
Non-interest bearing (5,493,857) - - (5,493,857)
---------------------------- ---------------------------- ----------------- ---------- --------- --------------
238,775,597 - - 238,775,597
---------------------------- ---------------------------- ----------------- ---------- --------- --------------
Market risk
The Company is exposed through its operations to market risk
which encompasses interest rate risk, price risk and foreign
exchange risk.
Interest rate risk
Interest rate risk is the risk that the value of financial
instruments will fluctuate due to changes in market interest rates.
The Company is exposed to interest rate risk as it has current
account balances with variable interest rates. The Company's
exposure to interest rates is detailed in the liquidity risk
section of this note. Interest rate repricing dates are consistent
with the maturities stated in the liquidity risk section of this
note.
The Investment Manager monitors market interest rates and will
place interest bearing assets at best available rates but also
taking into consideration the counterparty's credit rating and
financial position.
Interest rate sensitivity analysis
The sensitivity analysis below has been based on the exposure to
interest rates for financial assets held at the accounting date. An
increase/decrease of 0.29 percentage points (2019: 0.45 percentage
points) represents management's assessment of the effect of a
possible change in interest rates if the weighted average interest
rate for variable interest rate instruments decreased from 0.45% to
0.29% for the year ended 30 June 2020. If interest rates had been
0.29 percentage points (2019: 0.45 percentage points) higher/lower
and all other variables were held constant:
-- the Company's return for the year ended 30 June 2020 would
have increased by GBP13,126 (2019: GBP16,714);
-- the Company's return for the year ended 30 June 2020 would
have decreased by GBPnil (2019: GBPNil);
-- there would have been no impact on equity reserves other than retained earnings.
Price risk
Price risk is the risk that the fair value of investments will
fluctuate as a result of changes in market prices. This risk is
managed through diversification of the investment portfolio across
business sectors. Generally the Company will not invest more than
20% of the Company's gross assets in any single investment at the
time of investment. However, there is no guarantee that this will
be the case after any investment is made, particularly where it is
believed that an investment is exceptionally attractive.
During the year to 30 June 2020, the Company entered into
various index put derivative option contracts to protect the
Company's value against a significant fall in the market. At 30
June 2020, GBPNil (2019: GBP415,000) of these contracts were
outstanding.
The Company's positions in derivative financial instruments are
set out in Note 9.
The following tables detail the Company's equity investments as
at 30 June 2020.
2020 Value Percentage of Company's
Equity Investments Sector GBP Gross Assets
De La Rue plc Commercial Services 24,370,625 25
Allied Minds plc Private Equity 18,069,240 19
Equals Group plc Financial Services 11,070,749 11
Redde Northgate plc (formerly Northgate plc) Commercial Services 8,048,247 8
Hurricane Energy plc Oil and Gas 7,558,259 8
Board Intelligence Ltd Commercial Services 6,340,942 6
Other Various 7,739,238 8
Total 83,197,300 85
--------------------------------------------------------------------- ----------- ------------------------
2019 Value Percentage of Company's
Equity Investments Sector GBP Gross Assets
Hurricane Energy plc Oil and Gas 52,610,205 22
Equals Group plc (formerly 'FairFX Group plc') Financial Services 47,702,796 20
Northgate plc Commercial Services 35,199,130 14
De La Rue plc Commercial Services 20,071,111 8
Leaf Clean Energy Company Private Equity 17,286,537 7
STV Group plc Media 15,417,505 6
GI Dynamics Inc. Healthcare 14,799,550 6
Allied Minds plc Private Equity 8,735,787 4
Other Various 18,507,886 8
------------------------------------------------ --------------------- ------------ ------------------------
Total 230,330,507 95
----------------------------------------------------------------------- ------------ ------------------------
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.
2020
Equity Investments Place of Business Place of Incorporation Percentage Ownership Interest
GI Dynamics Inc. United States United States 73.1
Allied Minds plc United States United States 22.5
Equals Group plc United Kingdom United Kingdom 21.4
2019
Equity Investments Place of Business Place of Incorporation Percentage Ownership Interest
GI Dynamics Inc. United States United States 65.1
Leaf Clean Energy Company United States Cayman Islands 25.3
Equals Group plc United Kingdom United Kingdom 23.5
The Company has assessed the price risk of the listed equity,
debt and derivative financial instruments based on a potential 25%
(2019: 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, debt and derivative
financial instruments had been 25% higher (2019: 25% higher), the
Company's return and net assets for the year ended 30 June 2020
would have increased by GBP19,187,613, net of any impact on
performance fee accrual (2019: GBP44,628,853);
-- If market prices of listed equity, debt and derivative
financial instruments had been 25% lower (2019: 25% lower), the
Company's return and net assets for the year ended 30 June 2020
would have decreased by GBP19,187,613, net of any impact on
performance fee accrual (2019: increased by GBP27,395,147
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 derivative financial instruments held in Australian
Dollars, Euro and US Dollars (2019: Australian Dollars, Euro and US
Dollars).
The table below illustrates the Company's exposure to foreign
exchange risk at 30 June 2020:
2020 2019
GBP GBP
Financial assets designated at FVTPL:
Listed equity investments denominated in Australian Dollars 1,494,943 14,799,550
Listed equity investments denominated in Euro 367,864 874,281
Debt instruments denominated in US Dollars 5,848,545 4,035,127
Warrant instruments denominated in US Dollars 21,080 6,585,514
-----------
Total assets 7,732,432 26,294,472
-------------------------------------------------------------- ---------- -----------
If the Australian Dollar weakened/strengthened by 10% (2019:
10%) against Sterling with all other variables held constant, the
fair value of equity investments would increase/decrease by
GBP149,494 (2019: GBP1,479,955).
If the Euro weakened/strengthened by 10% against Sterling with
all other variables held constant, the fair value of equity
investments would increase/decrease by GBP36,786 (2019:
GBP87,428).
If the US Dollar weakened/strengthened by 10% (2019: 10%)
against Sterling with all other variables held constant, the fair
value of debt instruments would increase/decrease by GBP584,855
(2019: GBP403,513) and the fair value of the derivative financial
instruments would increase/decrease by GBP2,108 (2019:
GBP658,551).
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 2020
and 30 June 2019:
Level 1 Level 2 Level 3 Total
2020 GBP GBP GBP GBP
Financial assets designated at FVTPL and derivatives held for
trading:
Equities - listed equity investments 74,747,380 2,003,070 - 76,750,450
Equities - unlisted equity investments - - 6,446,850 6,446,850
Debt - loan notes - 610,415 5,238,130 5,848,545
Derivatives - warrant instruments - 21,080 - 21,080
---------------------------------------------------------------- ------------ ---------- ------------ ------------
74,747,380 2,634,565 11,684,980 89,066,925
---------------------------------------------------------------- ------------ ---------- ------------ ------------
Level 1 Level 2 Level 3 Total
2019 GBP GBP GBP GBP
Financial assets designated at FVTPL and derivatives held for
trading:
Equities - listed equity investments 224,804,265 - - 224,804,265
Equities - unlisted equity investments - - 5,526,242 5,526,242
Debt - loan notes - - 4,035,127 4,035,127
Derivatives - listed derivative instruments 415,000 - - 415,000
Derivatives - warrant instruments - 6,585,515 - 6,585,515
------------------------------------------------------------------ ------------ ---------- ---------- ------------
225,219,265 6,585,515 9,561,369 241,366,149
------------------------------------------------------------------ ------------ ---------- ---------- ------------
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 comprise Sutton Harbour and STV
Group due to the low volume of trading activity in the market for
these investments and have been valued by reference to the closing
bid prices in each investee company on the reporting date. The
Level 2 debt comprises the GID unsecured convertible loan note
purchased during June 2020 and maturing in December 2020. The Board
has concluded that its fair value is approximate to its principal
value plus accrued interest. The Level 2 derivative instruments
were valued using a Black Scholes valuation technique.
The Level 3 equity investment in Board Intelligence was valued
by reference to a substantial proposed investment in the entity by
an independent unconnected investor, for which a term sheet was
signed by both parties on 24 June 2020 and which completed during
August 2020. During the year, the Company's equity investment in
Leaf Clean Energy Company was transferred to Level 3 following the
delisting of the investee company and the investment was valued by
reference to the latest available closing bid price prior to
delisting. The loan notes were classified as Level 3 debt
instruments as there was no observable market data. The Board has
concluded that the fair value of the GID secured convertible loan
note is approximate to the market value of shares had the loan
notes been converted into equity and valued at the closing bid
price on the reporting date. The secured convertible loan note was
subsequently converted into equity during July 2020.
The Board has concluded that the fair value of the GID unsecured
convertible loan note maturing in January 2025 is approximate to
the value of an equivalent non-convertible loan note yielding 20%
per annum, plus the value of the conversion features.
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:
2020 2019
GBP GBP
Opening balance at 1 July 9,561,369 9,026,303
Leaf Clean Energy Company - Transfer to Level 3 on 30 January 2020 105,908 -
Purchases 3,551,095 3,120,419
Movement in unrealised (losses)/gains (1,851,998) 2,585,427
Conversion of loans - (7,257,760)
Net realised gain - 2,540,559
Effect of exchange rate movements 318,606 (453,579)
Closing balance at 30 June 11,684,980 9,561,369
--------------------------------------------------------------------- ------------ ------------
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.
During the year, the Company's investment in Leaf Clean Energy
Company equity was transferred to Level 3 following the delisting
of the investee company on 30 January 2020.
Assuming all other variables are held constant:
-- If unobservable inputs in Level 3 debt investments had been
5% higher/lower (2019: 5% higher/lower), the Company's return and
net assets for the year ended 30 June 2020 would have
increased/decreased by GBP261,907 (2019: GBP161,405, net of any
impact on performance fee accrual in each case);
-- If unobservable inputs in Level 3 equity investments at 30
June 2020 had been 25% higher/lower, the Company's return and net
assets for the year ended 30 June 2020 would have
increased/decreased by GBP1,611,713. If the comparable revenue
multiples used in the valuation of Level 3 equity investments at 30
June 2019 had been 25% higher/lower, while all other inputs
remained constant, the Company's return and net assets for the year
ended 30 June 2019 would have increased/decreased by GBP971,387,
net of any impact on performance fee accrual in each case. If the
discount to comparable multiples used in the valuation of Level 3
equity investments at 30 June 2019 had been 25% lower/higher, while
all other inputs remained constant, the Company's return and net
assets for the year ended 30 June 2019 would have
increased/decreased by GBP995,617, net of any impact on performance
fee accrual in each case; and
-- There would have been no impact on the other equity reserves.
The table below sets out information about significant
unobservable inputs used at 30 June 2020 in measuring equity
financial instruments categorised as Level 3 in the fair value
hierarchy.
Sensitivity to changes in
significant unobservable
Valuation Method Fair Value at 30 June 2020 Unobservable inputs Factor inputs
---------------------------- --------------------------- -------------------- ------- ----------------------------
Blended value implied by 6,446,850 n/a n/a n/a
proposed substantial
investment from an
independent unconnected
investor
---------------------------- --------------------------- -------------------- ------- ----------------------------
Valuation Fair Value at Unobservable Sensitivity to changes in significant unobservable
Method 30 June 2019 inputs Factor inputs
--------------- ---------------- --------------- ------- ---------------------------------------------------------
Discount to 5,526,242 Comparable 9.2x The estimated fair value would increase if:
Comparable Revenue * the Comparable Revenue multiple was increased
Company multiple
Multiples
Discount to 50.5% * the Discount was decreased
comparable
multiple
--------------- ---------------- --------------- ------- ---------------------------------------------------------
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
(2019: 10,000) Ordinary shares in the Company, representing 0.01%
(2019: 0.01%) of the voting share capital of the Company at the
year end.
During the year the Company incurred management fees of
GBP2,489,201 (2019: GBP3,476,006) of which GBPNil were outstanding
at the year end (2019: GBP829,822). There were no performance fees
incurred in the year (2019: GBP2,456,957) and none outstanding at
the year end. Performance fees outstanding at 30 June 2019 were
included in trade and other payables.
As at 30 June 2020 the Investment Manager held 7,037,991
Ordinary shares (2019: 6,313,326) of the Company, representing
7.66% (2019: 6.54%) of the voting share capital.
As at 30 June 2020, the Company held 73.1% (2019: 65.1%) of the
voting rights of GI Dynamics Inc., meaning that GID is an
unconsolidated subsidiary. There is no restriction on the ability
of GID to pay cash dividends or repay loans, but it is unlikely
that GID will make any distribution or loan repayments given its
current strategy. During the year the Company purchased convertible
loan notes (not driven by any contractual obligation) for the
purpose of supporting GID in pursuing its strategy. Subsequent to
the year end, the Fund committed to an investment of $10 million in
Series A preferred shares of GI Dynamics, which included conversion
of the$750,000 loan note that was provided to the company during
June 2020.
GI Dynamics Inc. was incorporated in Delaware, had five
wholly-owned subsidiaries as at 30 June 2020 and its principal
place of business is Boston. The five subsidiaries were as
follows:
-- GI Dynamics 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 Australia-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:
2020 2019
Number of Total Number of Total
Ordinary shares voting rights Ordinary shares voting rights
Christopher Waldron 30,000 0.03% 15,000 0.02%
Jane Le Maitre(1) 13,500 0.01% 6,000 0.01%
Fred Hervouet 7,500 0.01% - -
--------------------- ----------------- --------------- ----------------- ---------------
Total 51,000 0.05% 21,000 0.03%
--------------------- ----------------- --------------- ----------------- ---------------
(1) Ordinary shares held indirectly
During the year, the Directors earned the following remuneration
in the form of Directors' fees from the Company:
2020 2019
GBP GBP
Christopher Waldron(1) 47,500 45,000
Jane Le Maitre(2) 42,500 40,000
Fred Hervouet(3) 38,048 32,500
Nigel Ward(4) 15,761 37,500
Total 143,809 155,000
------------------------- -------- --------
(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
(4) Retired with effect from 22 November 2019
The level of remuneration of the Directors reflects the time
commitment and responsibilities of their roles. With effect from 1
January 2019, the Chairman is entitled to annual remuneration of
GBP47,500 (2019: GBP47,500), the Chairman of the Audit Committee is
entitled to annual remuneration of GBP42,500 (2019: GBP42,500) and
the Chairman of the Remuneration and Management Engagement
Committee is entitled to annual remuneration of GBP40,000 (2019:
GBP40,000), of which GBP2,500 (2019: GBP2,500) relates to
representing the Board at the Risk Committee meetings of the
Investment Manager. Independent Directors are entitled to annual
remuneration of GBP35,000 (2019: GBP35,000).
At 30 June 2020, Directors' fees of GBP32,500 (2019: GBP41,250)
were accrued within trade and other payables.
17. MATERIAL AGREEMENTS
The Company has entered into the following material
agreements:
Crystal Amber Asset Management (Guernsey) Limited
Under the management agreement, the Investment Manager receives
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,
exceeds the Base Amount (the "Excess Amount"), the applicable fee
rate on the Excess Amount will be 1.5%.
The Investment Manager is entitled to a performance fee in
certain circumstances. This fee is calculated by reference to the
increase in NAV per Ordinary share over the course of each
performance period.
Payment of the performance fee is subject to:
1. the achievement of a performance hurdle condition: the NAV
per Ordinary share at the end of the relevant performance period
must exceed an amount equal to the placing price, increased at a
rate of; (i) 7% per annum on an annual compounding basis in respect
of that part of the performance period which falls from (and
including) the date of Admission up to (but not including) the date
of the 2013 Admission; (ii) 8% per annum on an annual compounding
basis in respect of that part of the performance period which falls
from (and including) the date of the 2013 Admission up to (but not
including) the date of the 2015 Admission; and (iii) 10% per annum
on an annual compounding basis in respect of that part of the
performance period which falls from (and including) the date of the
2015 Admission up to the end of the relevant performance period
(with all dividends and other distributions paid in respect of all
outstanding Ordinary shares (on a per share basis) during any
performance period being deducted on their respective payment dates
(and after compounding the distribution amount per share at the
relevant annual rate or rates for the period from and including the
payment date to the end of the performance period) ("the Basic
Performance Hurdle"). Such Basic Performance Hurdle at the end of a
Performance Period is compounded at the relevant annual rate to
calculate the initial per share hurdle level for the next
performance period, which will subsequently be adjusted for any
dividends or other distributions paid in respect of all outstanding
Ordinary shares during that performance period; and
2. the achievement of a "high-water mark": the NAV per Ordinary
share at the end of the relevant performance period must be higher
than the highest previously reported NAV per Ordinary share at the
end of a performance period in relation to which a performance fee,
if any, was last earned (less any dividends or other distributions
in respect of all outstanding Ordinary shares declared (on a per
share basis) since the end of the performance period in relation to
which a performance fee was last earned).
If the Basic Performance Hurdle is met, and the high-water mark
exceeded, the performance fee is an amount equal to 20% of the
excess of the NAV per Ordinary share at the end of the relevant
performance period over the higher of:
1. the Basic Performance Hurdle;
2. the NAV per Ordinary share at the start of the relevant
performance period (less any dividends or other distributions in
respect of all outstanding Ordinary shares declared (on a per share
basis) since then; and
3. the high-water mark (in each case on a per Ordinary share
basis) multiplied by the time weighted average of the number of
Ordinary Shares in issue in the Performance Period.
The excess is multiplied by the time weighted average of the
number of Ordinary shares in issue in the performance period, which
shall only include such number of Ordinary shares as reduced by the
number of any Ordinary shares redeemed or repurchased by the
Company. If the Company issues new shares during a relevant
performance period, the performance fee in respect of that period
shall be adjusted in such manner to be fair and reasonable to take
account of the new issue of shares. If a time-weighted number of
shares calculation is applied to a new pot of shares issued, then
the denominator for the calculation shall be the number of days
from the date of such issuance until the end of the relevant
Performance Period, inclusive. During 2019, the Company agreed that
performance fees accruing in respect of the current year be
calculated as if no charitable shares had been issued during that
year.
Depending on whether the Ordinary shares are trading at a
discount or a premium to the Company's NAV per share when the
performance fee becomes payable, the performance fee will be either
payable in cash (subject to the restrictions set out below) or
satisfied by the sale of Ordinary shares out of Treasury or by the
issue of new fully paid Ordinary shares (the number of which shall
be calculated as set out below):
-- If Ordinary shares are trading at a discount to the NAV per
Ordinary share when the performance fee becomes payable, the
performance fee shall be payable in cash. Within a period of one
calendar month after receipt of such cash payment, the Investment
Manager shall be required to purchase Ordinary shares in the market
of a value equal to such cash payment.
-- If Ordinary shares are trading at, or at a premium to, the
NAV per Ordinary share when the performance fee becomes payable,
the performance fee shall be satisfied by the sale of Ordinary
shares out of Treasury or by the issue of new fully paid Ordinary
shares. The number of Ordinary shares that shall become payable
shall be a number equal to the performance fee payable divided by
the closing mid-market price per Ordinary share on the date on
which such performance fee became payable.
Performance fee for year ended 30 June 2020
At 30 June 2020, the Basic Performance Hurdle was 230.03 pence
(as adjusted for all dividends paid during the performance period
on their respective payment dates, compounded at the applicable
annual rate) (2019: 214.53 pence), and the high-water mark
(adjusted for dividends) was 244.12 pence.
The NAV per share before any accrual for the performance fee
payable in respect of the year was 106.31 pence, excluding the
issuance of charitable shares on 26 September 2019 and 10 March
2020. Accordingly, no performance fee was earned during the year
ended 30 June 2020 (2019: GBP2,456,957) and GBPNil was payable at
30 June 2020 (2019: GBP2,456,957).
Ocorian Administration (Guernsey) Limited (formerly known as
Estera International Fund Managers (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% (2019: 0.12%) of that
part of the NAV of the Company up to GBP150 million and 0.1% (2019:
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 GBP157,059 (2019: GBP267,031).
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% (2019: 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 GBP69,696 (2019: GBP114,705).
(*) Effective from 15 July 2019, Butterfield Bank (Guernsey)
Limited acquired ABN AMRO (Guernsey) Limited.
18. ULTIMATE CONTROLLING PARTY
In the opinion of the Directors, on the basis of the
shareholdings advised to them, the Company has no ultimate
controlling party.
19. POST BALANCE SHEET EVENTS
On 1 July 2020, the Company entered into a loan facility with
Intertrader Limited whereby it has transferred an amount of equity
holdings with a value of GBP19.1 million as at 1 July 2020 to
Intertrader Limited to be held as collateral for CFD instruments.
The Company may draw on a loan facility of up to 25% of the value
of the initial equity holdings transferred. As at the date of this
report, the amount owed to Intertrader Limited under the loan
facility was GBP4.1 million.
On 20 August 2020, the Company reported that its unaudited NAV
at 31 July 2020 was 112.56 pence per Ordinary share.
On 14 September 2020, the Company reported that its unaudited
NAV at 31 August 2020 was 117.90 pence per Ordinary share.
The Company purchased 928,000 of its own Ordinary shares during
the period between 1 July 2020 and 18 September 2020, which were
held as Treasury shares. Following these purchases, the total
number of Ordinary shares held as Treasury shares by the Company
was 8,691,195.
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;
"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;
"Black Scholes" means the Black Scholes model, a mathematical
model of a financial market containing derivative instruments;
"Board" or "Directors" or "Board of Directors" means the
directors of the Company;
"BOE" means barrels of oil equivalent;
"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;
"EPS" means Early Production System;
"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;
"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.;
"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;
"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;
"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;
"SaaS" means a Software-as-a-Service;
"Smaller Companies Index" means an index of small market
capitalisation companies;
"SME" means small and medium sized enterprises;
"SORP" means Statement of Recommended Practice;
"SPS" means Spectrum Payment Services Ltd;
"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.
Directors and General Information
Directors Investment Manager
Christopher Waldron (Chairman) Crystal Amber Asset Management (Guernsey) Limited
Fred Hervouet (Chairman of Remuneration and Management PO Box 286
Engagement Committee with effect from Floor 2, Trafalgar Court
22 November 2019) Les Banques, St Peter Port
Jane Le Maitre (Chairman of Audit Committee) Guernsey GYI 4LY
Nigel Ward (retired with effect from 22 November 2019) Nominated Adviser
Allenby Capital Limited
Investment Adviser 5 St. Helen's Place
Crystal Amber Advisers (UK) LLP London EC3A 6AB
17c Curzon Street
London W1J 5HU Legal Advisers to the Company
As to English Law
Administrator and Secretary Norton Rose Fulbright LLP
Ocorian Administration (Guernsey) Limited (formerly known as 3 More London Riverside
Estera International Fund Managers London SE1 2AQ
(Guernsey) Limited)
PO Box 286 As to Guernsey Law
Floor 2, Trafalgar Court Carey Olsen
Les Banques, St Peter Port PO Box 98
Guernsey GYI 4LY Carey House
Les Banques
Broker St. Peter Port
Winterflood Investment Trusts Guernsey GY1 4BZ
The Atrium Building
Cannon Bridge House Custodian
25 Dowgate Hill Butterfield Bank (Guernsey) Limited
London EC4R 2GA PO Box 25
Regency Court
Independent Auditor Glategny Esplanade
KPMG Channel Islands Limited St. Peter Port
Glategny Court Guernsey GY1 3AP
Glategny Esplanade
St. Peter Port Registrar
Guernsey GY1 1WR Link Asset Services
65 Gresham Street
Registered Office London
PO Box 286 EC2V 7NQ
Floor 2, Trafalgar Court
Les Banques, St Peter Port
Guernsey GYI 4LY
Identifiers
ISIN: GG00B1Z2SL48
Sedol: B1Z2SL4
Ticker: CRS
Website: http://crystalamber.com
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