• by  • March 5, 2018 • Crystal Amber

    Crystal Amber Fund Limited

    Interim results for the period ended 31 December 2017

    The Company announces its interim results for the six months ended 31 December 2017.

    Highlights

    • NAV(1) per share fell by 6.7 per cent over the six-month period or 4.2 per cent after adjusting for dividends declared in the period. Over the 2017 calendar year, NAV per share fell by 12.5 per cent or 10.2 per cent after adjusting for dividends declared in the year.
    • NAV per share of 190.69 pence at 31 December 2017 (204.37 pence at 30 June 2017, 218.02 pence at 31 December 2016). NAV per share of 201.29 pence at 31 January 2018.
    • Dividends of 2.5 pence per share were declared in July 2017 and December 2017. The 5 pence dividend paid in respect of calendar 2017 represents a 2.6 per cent dividend yield on the 31 December 2017 NAV.
    • Significant contributions to NAV performance from FairFX Group plc (“FairFX”), NCC Group plc (“NCC”) and Ocado Group plc (“Ocado”), offset by the price weakness of GI Dynamics Inc (“GI Dynamics”), STV Group plc (“STV”) and Northgate plc (“Northgate”).
    • Successful partial exit from Sutton Harbour Holdings plc (“Sutton Harbour”) to regeneration specialists FB Investors LLP, which the Fund is pleased to support by retaining an investment in the company. £0.9 million gain booked in January 2018 from the partial exit.
    • Active engagement with Hurricane Energy plc (“Hurricane”) on the appointment of a credible Chairman, exploring strategic alternatives with Northgate and promoting the Ocado Smart Platform.
    • The share buyback programme has continued and contributed to maintaining a low average discount to NAV of 1.8 per cent over the period.

    Christopher Waldron, Chairman of the Company, commented: “I am pleased to report good progress on our engagement with key Fund holdings in my first Interim Report as Chairman. This engagement has continued to bear fruit in the first months of 2018, as we have seen with Ocado and Sutton Harbour, and we are confident that this will continue for the remainder of the year.”

    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 interim results of the Company for the six month period to 31 December 2017.

    The UK economy decelerated over the period, finishing 2017 with a 1.8 per cent annual growth rate, the slowest since 2012. Disposable consumer income has been under pressure from increased price inflation, partially caused by the weakening of Sterling in the aftermath of the Brexit referendum. The impact of Brexit remains unclear: the economy has continued to grow, but it does so now at the slowest pace of the G7 Group of wealthy countries.

    NAV fell from £201.0 million (204.37 pence per share) at 30 June 2017 to an unaudited £186.3 million (190.69 pence per share) at 31 December 2017. The Fund’s negative return (including dividends) of 4.2 per cent compares to an 8.5 per cent return on the FTSE 250 and a 7.2 per cent return on the FTSE Small Cap Index.

    Taken in isolation, this serves as a reminder that the Fund’s performance is driven by a relatively small number of carefully researched positions and does not seek to match any particular index. This focus on absolute return will continue to produce results that vary from passive investment. A key component of the Fund’s absolute return strategy has been the consistent purchase of FTSE put options as insurance against a potential significant market sell-off. The net cost of these options amounted to 1.8 per cent of NAV over the period to 31 December 2017. However, in February 2018, as equity markets declined, and volatility rose, the value of this protection was clearly shown as the Fund realised gains on FTSE put options of £6.8 million, equivalent to 6.9 pence per share.

    The buyback programme has continued with 652,482 Ordinary shares purchased during the period at an average price of 185.36 pence per share. The programme contributed to a low 1.8 per cent average share price to NAV discount over the period and an increase in NAV per share of 0.025 per cent. At 31 December 2017, the Fund held 1,287,482 Ordinary shares in Treasury.

    In July 2017 and December 2017 the Fund declared interim dividends of 2.5 pence per share continuing the Fund’s policy of making distributions from income and net realised gains from investments. Based on the NAV at 31 December 2017, this represents a dividend yield of 2.6 per cent.

    Despite the general uncertainty over the UK economy, I am encouraged by the Fund’s progress on its engagement with several investee companies and this is discussed in greater detail in the Investment Manager’s Report.

    Finally, as anticipated in the last Annual Report, Bill Collins retired as Chairman at the November AGM. Unfortunately, in early January Sarah Evans also stepped down as a Director due to ill health. Bill and Sarah had both served on the Board of Crystal Amber since its launch in 2008 and I’d like to take this opportunity thank them for their invaluable contributions over the years.

    Christopher Waldron

    Chairman

    2 March 2018

    Investment Manager’s Report

    Strategy and performance

    The Fund continues to engage closely with the management and boards of its major holdings.

    At 31 December 2017, equity investments in 17 companies represented 91.4 per cent of NAV. The Fund also held other investments, including warrants, loan notes and convertible instruments that accounted for 9.1 per cent of the NAV. The Fund’s net cash and accruals position came to negative £1.3 million, including £2.4 million accrued for the dividend paid in January 2018.

    The Fund participated in the July 2017 fundraising for Hurricane with a US$10 million investment, having previously realised a profit of £15 million from its holding in the company. In September 2017, the Fund subscribed to a loan note issued by Leaf Clean Energy Company (“Leaf”) with a commitment of up to US$2.5 million. Three new investments were initiated and three were exited. The latter include previously disclosed holdings in Shepherd Neame Limited and Montanaro UK Smaller Companies Investment Trust plc. The position in Johnston Press plc (“Johnston Press”), a top ten holding at the beginning of the period, was reduced by 51 per cent. The Fund also reduced its positions in FairFX and NCC, realising £1.9 million and £1.2 million of profits from each respectively. Following the period end, the Fund sold its holding in Hurricane’s convertible bond, purchased at the company’s fundraising, and realised a £0.9 million profit.

    Portfolio

    The table below lists the top ten holdings at 31 December 2017, showing the performance contribution of each during the period. The principal positive contributions came from FairFX (2.5 per cent), NCC (2.3 per cent) and Ocado (1.7 per cent). The main negative contributions came from GI Dynamics (2.6 per cent), STV (1.6 per cent) and Northgate (1.5 per cent).

    Top ten shareholdings Pence per share Percentage of investee equity held Total return over the period Contribution to NAV performance
    Hurricane Energy plc 49.9 8.0% (5%) (1.2%)
    Northgate plc 26.9 5.2% (10%) (1.5%)
    FairFX Group plc 19.0 15.3% 34% 2.5%
    STV Group plc 18.4 14.5% (14%) (1.6%)
    NCC Group plc 13.4 2.0% 45% 2.3%
    Ocado Group plc 13.2 0.5% 37% 1.7%
    Leaf Clean Energy Company 10.1 29.9% (21%) (1.4%)
    Sutton Harbour Holdings plc 7.9 29.3% 3% 0.2%
    GI Dynamics Inc 4.3 46.7% (56%) (2.6%)
    Camellia plc 2.9 0.9% 14% 0.2%
    Total of ten largest holdings 166.0
    Other investments 26.1
    Cash and accruals (1.4)
    Total NAV 190.7

    Investee companies

    Our comments on a number of our principal investments are as follows:

    Hurricane

    In July 2017, Hurricane completed a US$530 million deal to fully fund an early production system for its Lancaster asset. The company proceeded to take the final investment decision and received development and production consent in September 2017. In December 2017, it hosted a site visit to Drydocks World, Dubai where it is upgrading the floating production storage and offloading vessel as well as fabricating a new buoy. The early production system remains on time and on budget for first oil in the first half of 2019.

    The early production system is expected to de-risk the company’s assets as it demonstrates that basement reservoirs in the West of Shetland can become commercially productive. In addition, Hurricane estimates that at a US$60 barrel of oil equivalent (“BOE”), the early production system base case of 17,000 BOE produced per day should generate an annual cash flow of US$190 million.

    In December 2017, Hurricane published a Competent Person’s Report (“CPR”), increasing its combined resource estimate to 2.6 billion BOE. Together with the previously published CPR for Lancaster, Hurricane now has an updated assessment of its licences that incorporates the results of its exploration efforts since its initial public offering. The December 2017 assessment included the Halifax prospect for the first time, which holds an estimated 1.2 billion BOE. The company believes this is part of the Greater Lancaster structure, which is targeted by the early production system under construction, and could be monetised together with Lancaster.

    In November 2017, Robert Arnott resigned as chairman of the board with immediate effect, criticising the company’s corporate governance standards, a concern publicly shared by the Fund. The company instituted a board committee to address these issues and has subsequently been engaging with the Fund.

    Northgate

    At its capital markets day in October 2017, the company’s new management team detailed its strategy to return the UK business to growth and presented its three-year growth and margin expectations for the UK and Spain. However, following interim results in December 2017, analysts downgraded earnings forecasts due to lower expectations of profit from the sale of vehicles, despite residual values having remained stable to date.

    The Fund supports management’s efforts to arrest market share losses in the UK, optimise the vehicle hire site network, and maximise the opportunity presented by the Van Monster retail network and brand. In Spain, Northgate is the clear leader in the van flexible hire market, with a strong brand, good geographic coverage and attractive return on assets. Management expects to achieve more than 10 per cent annualised growth in vehicles-on-hire in Spain over the next three years, together with a consequent further improvement in margins.

    However, the Fund believes that the considerable value of Northgate’s Spanish business is not reflected in its share price. It has engaged with management over Northgate’s options to realise the value of this asset. This includes ways that could preserve procurement synergies with the UK, such as a partial listing of its Spanish business in Spain.

    Ocado

    In November 2017, Ocado announced its first international deal for its technology solution, Ocado Smart Platform (“OSP”), with French grocer Groupe Casino. After the period end, in January 2018, Ocado announced a second deal for its OSP with Sobeys Inc. of Canada.

    The Fund invested in Ocado in spring 2017 on the basis that the market was not ascribing any value to its technology platform. Ocado’s OSP has now been validated by two leading international grocers and by Morrisons in the UK. With those three deals, Ocado’s partners have been able to leapfrog the competition in terms of capability and service levels and are ready to defend themselves from competitors like Amazon. As more grocers offer online shopping convenience to consumers, more deals are expected to follow. We project significant scale benefits will accrue to Ocado long-term. In our opinion, the replacement value of Ocado’s market leading capabilities and know-how continues to be well above its market valuation and the company remains a potential takeover candidate.

    Leaf

    In September 2017, the Fund provided a commitment of up to US$2.5 million in an issue of up to US$5 million of loan notes by Leaf, of which US$1 million has been drawn down from the Fund by Leaf to date. This facility will support the company’s ongoing litigation with Invenergy Wind.

    GI Dynamics

    In October 2017, GI Dynamics was audited by SGS SA to assess the company’s compliance with CE Mark requirements and quality management. Despite the favourable result of those inspections, SGS SA decided to withdraw the CE Mark certification in November 2017 based on a negative scientific assessment of patient risks and benefits. As a result, the company is currently precluded from selling the EndoBarrier in Europe, its primary market, and will focus on gaining approval for an FDA clinical trial.

    This assessment contrasts with the favourable conclusions from scientific research that have been reported throughout the year and have continued over the period. For example, favourable clinical evidence from an NHS trial of the ongoing benefits of EndoBarrier after the device’s removal was presented at the European Association for the Study of Diabetes conference in Lisbon in September 2017.

    In January 2018, the Fund participated in a US$1.6 million fundraising to support the company in its application for a new clinical trial with the US Food and Drugs Administration. The application is expected to be submitted in the first half of 2018.

    Sutton Harbour

    In December 2017, Sutton Harbour announced a recommended cash offer from FB Investors LLP for up to 70 per cent of its capital at 29.5 pence per share. FB Investors LLP also agreed to subscribe for £2.8 million worth of new shares at the same price to strengthen the company’s balance sheet and bring its Sugar House development in house.

    The Fund engaged with FB Investors LLP prior to the announcement of the deal. We were impressed by chairman Philip Beinhaker’s vision for the company and his track record of urban regeneration projects. The Fund agreed to tender its holding in full, as that was a prerequisite for the offer. Since the offer was oversubscribed, the Fund’s tender was scaled back and the Fund is content to retain a position of 7.2 per cent in the company and has purchased further shares since the period end.

    The Fund is pleased that as a result of its engagement with the company, Sutton Harbour can now benefit from strengthened leadership with ambitious plans to unlock value for the company and the city of Plymouth.

    Realisations

    Net realised losses after accounting for put option insurance amounted to £2.8 million. This figure includes gains of £1.9 million on FairFX and £1.2 million on NCC, and a loss of £3.1 million on Johnston Press.

    Following the period end, the Fund realised £0.9 million of gains from the partial offer for Sutton Harbour, and £0.9 million from its investment in Hurricane’s convertible bond.

    Hedging activity

    The Fund continues to purchase FTSE put options as an insurance against a potential significant market sell-off. The net cost of these options amounted to 1.8 per cent of NAV over the period. In February, as equity markets declined and volatility rose, the Fund realised gains on FTSE put options of £6.8 million, equivalent to 6.9 pence per share.

    Outlook

    We are encouraged that our work and engagement with Sutton Harbour in the first half has proven to be successful with both a partial realisation and the introduction of an impressive and experienced majority shareholder.

    Our analysis of Ocado also bore fruit. We are confident that our extensive recent work with other portfolio companies will achieve a positive outcome and are excited by our prospects.

    Crystal Amber Asset Management (Guernsey) Limited

    2 March 2018

    Condensed Statement of Profit or Loss and Other Comprehensive Income (Unaudited)

    For the six months ended 31 December 2017

    Six months ended 31 December Six months ended 31 December
    2017 2016
    (Unaudited) (Unaudited)
    Revenue Capital Total Revenue Capital Total
    Notes £ £ £ £ £ £
    Income
    Dividend income from listed equity investments 1,980,590 1,980,590 1,861,886 1,861,886
    Interest income from listed debt instruments 99,072 99,072
    Arrangement fee received from debt instruments 4 46,531 46,531
    Interest received 252 252
    2,126,193 2,126,193 1,862,138 1,862,138
    Net gains on financial assets designated at FVTPL and derivatives held for trading
    Equities
    Net realised gains 4 202,555 202,555 8,832,775 8,832,775
    Movement in unrealised (losses)/gains 4 (4,348,174) (4,348,174) 64,123,866 64,123,866
    Debt instruments
    Movement in unrealised gains 4 381,233 381,233
    Derivative financial instruments
    Realised losses 4 (3,045,990) (3,045,990) (4,973,571) (4,973,571)
    Movement in unrealised (losses)/gains 4 (227,407) (227,407) 5,887,194 5,887,194
    (7,037,783) (7,037,783) 73,870,264 73,870,264
    Total income/(loss) 2,126,193 (7,037,783) (4,911,590) 1,862,138 73,870,264 75,732,402
    Expenses
    Transaction costs 119,851 119,851 214,538 214,538
    Foreign exchange movements on revaluation of investments 518,127 518,127 (76,135) (76,135)
    Management fees 9 1,649,074 1,649,074 1,438,909 1,438,909
    Performance fees 9 983,800 983,800 5,714,940 5,714,940
    Directors’ remuneration 81,232 81,232 58,914 58,914
    Administration fees 106,441 106,441 111,783 111,783
    Custodian fees 45,091 45,091 47,655 47,655
    Audit fees 12,320 12,320 10,920 10,920
    Other expenses 154,426 154,426 105,546 105,546
    2,048,584 1,621,778 3,670,362 1,773,727 5,853,343 7,627,070
    Return/(loss) for the period 77,609 (8,659,561) (8,581,952) 88,411 68,016,921 68,105,332
    Basic and diluted earnings/(loss) per share (pence) 2 0.08 (8.83) (8.75) 0.09 68.70 68.79

    All items in the above statement derive from continuing operations.

    The total column of this statement represents the Company’s Statement of Profit or Loss and Other Comprehensive Income prepared in accordance with IFRS. The supplementary information on the allocation between revenue return and capital return is presented under guidance published by the AIC.

    The Notes to the Unaudited Condensed Financial Statements form an integral part of these Interim Financial Statements.

    Condensed Statement of Financial Position (Unaudited)

    As at 31 December 2017

    As at As at As at
    31 December 30 June 31 December
    2017 2017 2016
    (Unaudited) (Audited) (Unaudited)
    Assets Notes £ £ £
    Cash and cash equivalents 835,330 7,957,943 764,000
    Trade and other receivables 448,599 48,468 797,806
    Financial assets designated at FVTPL and derivatives held for trading 4 187,669,649 202,370,814 221,451,533
    Total assets 188,953,578 210,377,225 223,013,339
    Liabilities
    Trade and other payables 2,623,425 9,353,420 8,555,747
    Total liabilities 2,623,425 9,353,420 8,555,747
    Equity
    Capital and reserves attributable to the Company’s equity shareholders
    Share capital 6 989,998 989,998 989,998
    Treasury shares reserve 7 (2,182,262) (972,800) (972,800)
    Distributable reserve 100,156,159 105,058,397 105,058,397
    Retained earnings 87,366,258 95,948,210 109,381,997
    Total equity 186,330,153 201,023,805 214,457,592
    Total liabilities and equity 188,953,578 210,377,225 223,013,339
    NAV per share (pence) 3 190.69 204.37 218.02

    The Interim Financial Statements were approved by the Board of Directors and authorised for issue on 2 March 2018.

    Christopher Waldron                                                                          Jane Le Maitre

    Chairman                                                                                                 Director

    2 March 2018                                                                                          2 March 2018

    Condensed Statement of Changes in Equity (Unaudited)

    For the six months ended 31 December 2017

    Share Treasury
    shares
    Distributable Retained earnings Total
    Notes capital reserve reserve Capital Revenue Total equity
    £ £ £ £ £ £ £
    Opening balance at 1 July 2017 989,998 (972,800) 105,058,397 98,217,020 (2,268,810) 95,948,210 201,023,805
    Purchase of Ordinary shares into Treasury 7 (1,209,462) (1,209,462)
    Dividends paid in the period 8 (4,902,238) (4,902,238)
    (Loss)/return for the period (8,659,561) 77,609 (8,581,952) (8,581,952)
    Balance at 31 December 2017 989,998 (2,182,262) 100,156,159 89,557,459 (2,191,201) 87,366,258 186,330,153

    For the six months ended 31 December 2016

    Share Treasury
    shares
    Distributable Retained earnings Total
    Notes capital reserve reserve Capital Revenue Total capital
    £ £ £ £ £ £ £
    Opening balance at 1 July 2016 989,998 (720,478) 109,977,886 42,151,632 (874,967) 41,276,665 151,524,071
    Purchase of Ordinary shares into Treasury 7 (252,322) (252,322)
    Dividends paid in the period (4,919,489) (4,919,489)
    Return for the period 68,016,921 88,411 68,105,332 68,105,332
    Balance at 31 December 2016 989,998 (972,800) 105,058,397 110,168,553 (786,556) 109,381,997 214,457,592

    Condensed Statement of Cash Flows (Unaudited)

    For the six months ended 31 December 2017

    Six months Six months
    ended ended
    31 December 31 December
    2017 2016
    (Unaudited) (Unaudited)
    £ £
    Cash flows from operating activities
    Dividend income received from listed equity investments 1,584,253 1,519,269
    Interest income received from listed debt instruments 99,072
    Arrangement fee received from debt instruments 46,531
    Bank interest received 2,285
    Management fees paid (1,649,074) (1,438,909)
    Performance fee paid (3,338,552)
    Directors’ fees paid (73,834) (58,914)
    Other expenses paid (374,690) (248,542)
    Net cash outflow from operating activities (3,706,294) (224,811)
    Cash flows from financing activities
    Purchase of Ordinary shares into Treasury (1,185,573) (252,322)
    Dividends paid (2,456,619) (2,460,370)
    Net cash outflow from financing activities (3,642,192) (2,712,692)
    Cash flows from investing activities
    Purchase of equity investments (9,957,618) (35,322,456)
    Sale of equity investments 20,359,191 43,748,529
    Purchase of debt instruments (6,178,430)
    Purchase of derivative financial instruments (3,869,720) (5,913,500)
    Sale of derivative financial instruments 86,079
    Transaction charges on purchase and sale of investments (127,550) (214,538)
    Net cash inflow from investing activities 225,873 2,384,114
    Net decrease in cash and cash equivalents during the period (7,122,613) (553,389)
    Cash and cash equivalents at beginning of period 7,957,943 1,317,389
    Cash and cash equivalents at end of period 835,330 764,000

    Notes to the Unaudited Condensed Financial Statements

    For the six months ended 31 December 2017

    General Information

    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 Company’s registration number is 47213 and it is regulated by the GFSC as an authorised closed ended investment scheme. The registered office address is Heritage Hall, Le Marchant Street, St. Peter Port, Guernsey, GYI 4HY. The Company was established to provide shareholders with an attractive total return which is expected to comprise primarily capital growth with the potential for distributions of up to 5 pence per share per annum following consideration of the accumulated retained earnings as well as the unrealised gains and losses at that time. The Company seeks to achieve this through investment in a concentrated portfolio of undervalued companies which are expected to be predominantly, but not exclusively, listed or quoted on UK markets and which have a typical market capitalisation of between £100 million and £1,000 million.

    The Company’s Ordinary shares were listed and admitted to trading on AIM, on 17 June 2008. The Company is also a member of the AIC.

    All capitalised terms are defined in the Glossary of Capitalised Defined Terms unless separately defined.

    1.             SIGNIFICANT ACCOUNTING POLICIES

    The principal accounting policies applied in the preparation of these Interim Financial Statements are set out below. These policies have been consistently applied to those balances considered material to the Interim Financial Statements throughout the current period, unless otherwise stated.

    Basis of preparation

    The Interim Financial Statements have been prepared in accordance with IAS 34, Interim Financial Reporting.

    The Interim Financial Statements do not include all the information and disclosures required in the Annual Financial Statements and should be read in conjunction with the Company’s Annual Financial Statements for the year to 30 June 2017. The Annual Financial Statements have been prepared in accordance with IFRS.

    The same accounting policies and methods of computation are followed in the Interim Financial Statements as in the Annual Financial Statements for the year ended 30 June 2017.

    The presentation of the Interim Financial Statements is consistent with the Annual Financial Statements. Where presentational guidance set out in the SORP “Financial Statements of Investment Trust Companies and Venture Capital Trusts”, issued by the AIC in November 2014 and updated in January 2017, is consistent with the requirements of IFRS, the Directors have sought to prepare the Interim Financial Statements on a basis compliant with the recommendations of the SORP. In particular, supplementary information which analyses the Statement of Profit or Loss and Other Comprehensive Income between items of a revenue and capital nature has been presented alongside the total Statement of Profit or Loss and Comprehensive Income.

    The Company does not operate in an industry where significant or cyclical variations as a result of seasonal activity are experienced during the financial year. Income and dividends from investments will vary according to the construction of the portfolio from time to time.

    Going concern

    The Directors are confident that the Company has adequate resources to continue in operational existence for the foreseeable future and do not consider there to be any threat to the going concern status of the Company.

    Continuation vote

    The Directors have specifically considered the implications of the continuation vote scheduled to occur every two years on the application of the going concern basis. At the AGM held on 23 November 2017, an extraordinary resolution was proposed and passed, that the Company continue as constituted. Therefore, the Directors conclude that there is no material uncertainty which may cast significant doubt on the ability of the Company to continue as a going concern. For this reason, they continue to adopt the going concern basis in preparing the Interim Financial Statements. The next continuation vote will be proposed at the 2019 AGM.

    Segmental reporting

    Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board as a whole. The key measure of performance used by the Board to assess the Company’s performance and to allocate resources is the total return on the Company’s NAV, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in these Interim Financial Statements.

    For management purposes, the Company is domiciled in Guernsey and is engaged in a single segment of business mainly in one geographical area, being investment in UK equity instruments, and therefore the Company has only one operating segment.

    2.             BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE

    (Loss)/earnings per share is based on the following data:

    Six months Six months
    ended ended
    31 December 31 December
    2017 2016
    (Unaudited) (Unaudited)
    (Loss)/return for the period £(8,581,952) £68,105,332
    Weighted average number of issued Ordinary shares 98,071,325 98,999,762
    Basic and diluted (loss)/earnings per share (pence) (8.75) 68.79

    3.             NET ASSET VALUE PER SHARE

    NAV per share is based on the following data:

    As at As at As at
    31 December 30 June 31 December
    2017 2017 2016
    (Unaudited) (Audited) (Unaudited)
    NAV per Condensed Statement of Financial Position £186,330,153               £201,023,805 £214,457,592
    Total number of issued Ordinary shares (excluding Treasury shares) 97,712,280                 98,364,762    98,364,762
    NAV per share (pence) 190.69 204.37          218.02

    4.             FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS AND DERIVATIVES HELD FOR TRADING

    1 July 1 July 1 July
    2017 to 2016 to 2016 to
    31 December 30 June 31 December
    2017 2017 2016
    (Unaudited) (Audited) (Unaudited)
    £ £ £
    Equity investments 170,344,729 186,431,885 211,706,765
    Debt instruments 10,292,085 9,502,417
    Financial assets designated at FVTPL 180,636,814 195,934,302 211,706,765
    Derivative financial instruments held for trading 7,032,835 6,436,512 9,744,768
     Total financial assets designated at FVTPL and derivatives held for trading 187,669,649 202,370,814 221,451,533
    Equity investments
    Cost brought forward 156,798,987 153,875,142 153,875,142
    Purchases 8,539,686 82,612,821 34,335,995
    Sales (20,359,191) (109,680,734) (43,748,529)
    Net realised gains 202,555 29,991,758 8,832,775
    Cost carried forward 145,182,037 156,798,987 153,295,383
    Unrealised gains/(losses) brought forward 29,708,411 (5,852,434) (5,852,434)
    Movement in unrealised (losses)/ gains (4,348,174) 35,560,845 64,123,866
    Unrealised gains carried forward 25,360,237 29,708,411 58,271,432
    Effect of exchange rate movements on revaluation (197,545) (75,513) 139,950
    Fair value of equity investments 170,344,729 186,431,885 211,706,765
    Debt instruments
    Cost brought forward 9,318,984
    Purchases 804,530 9,318,984
    Cost carried forward 10,123,514 9,318,984
    Unrealised gains brought forward 290,017
    Movement in unrealised gains 381,233 290,017
    Unrealised gains carried forward 671,250 290,017
    Effect of exchange rate movements on revaluation (502,679) (106,584)
    Fair value of debt instruments 10,292,085 9,502,417
    Total financial assets designated at FVTPL 180,636,814 195,934,302 211,706,765
    Derivative financial instruments held for trading
    Cost brought forward 360,001 1,023,001 1,023,001
    Purchases 3,869,720 10,098,112 5,913,500
    Sales (86,082) (86,079)
    Net realised losses (3,045,990) (10,675,030) (4,973,571)
    Cost carried forward 1,183,731 360,001 1,876,851
    Unrealised gains brought forward 6,076,511 1,980,723 1,980,723
    Movement in unrealised (losses)/gains (227,407) 4,095,788 5,887,194
    Unrealised gains carried forward 5,849,104 6,076,511 7,867,917
    Fair value of derivatives held for trading 7,032,835 6,436,512 9,744,768
    Total derivative financial instruments held for trading 7,032,835 6,436,512 9,744,768
    Total financial assets designated at FVTPL and derivatives held for trading 187,669,649 202,370,814 221,451,533

    On 15 June 2017, the Company purchased US$5 million of convertible loan notes from GI Dynamics. Interest on these loan notes is accrued at a rate equal to 5 per cent per annum, compounded annually. On 20 September 2017, the Company purchased US$1 million of loan notes from Leaf. The Company received an arrangement fee of US$62,500, which was deducted from the advance of US$1 million loan notes to Leaf. Interest on these loan notes is accrued at a rate equal to 12 per cent per annum, compounded annually. At the reporting date, the Company’s loan notes were classified as debt instruments and measured at FVTPL.

    On 30 June 2017, the Company purchased 7 million shares of quoted convertible bonds issued by Hurricane for US$7 million. The convertible bonds have a coupon rate of 7.5 per cent per annum and mature on 24 July 2022. At the reporting date, the Company’s convertible bond shares were classified as debt instruments and measured at FVTPL.

    At the reporting date the Company’s derivative financial instruments consisted of two (30 June 2017: one) FTSE 100 Index Put Option positions, purchased as protection against a significant market sell-off and two warrant instruments in FairFX and Hurricane (30 June 2017: two) for the purchase of ordinary shares.

    At the reporting date, the warrant instruments in FairFX and Hurricane were valued using a Black Scholes valuation technique.

    The following table details the Company’s positions in derivative financial instruments:

    Nominal amount Value
    (Unaudited) (Unaudited)
    31 December 2017 £
    Derivative financial instruments
    Puts on UKX P7100 (expiry: January 2018) 2,000 70,000
    Puts on UKX P7300 (expiry: February 2018) 2,000 380,000
    FairFX warrant instrument 6,000,000 3,165,762
    Hurricane warrant instrument 23,333,333 3,417,073
    29,337,333 7,032,835
    Nominal amount Value
    (Audited) (Audited)
    30 June 2017 £
    Derivative financial instruments
    Puts on UKX P7100 (expiry: July 2017) 1,000 290,000
    FairFX warrant instrument 6,000,000 2,001,252
    Hurricane warrant instrument 23,333,333 4,145,260
    29,334,333 6,436,512

    5.             FINANCIAL INSTRUMENTS

    Fair value measurements

    The Company measures fair values using the following fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under IFRS 13 are as follows:

    Level 1:       Quoted price (unadjusted) in an active market for an identical instrument.

    Level 2:       Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques for which all significant inputs are directly or indirectly observable from market data.

    Level 3:       Valuation techniques using significant unobservable inputs. This category includes all instruments for which the valuation technique includes inputs that are not based on observable data, and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

    The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

    The determination of what constitutes ‘observable’ requires significant judgement by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

    The objective of the valuation techniques used is to arrive at a fair value measurement that reflects the price that would be received if an asset was sold or a liability transferred in an orderly transaction between market participants at the measurement date.

    The following tables analyse, within the fair value hierarchy, the Company’s financial assets measured at fair value at 31 December 2017 and 30 June 2017:

    Level 1 Level 2 Level 3 Total
    (Unaudited) (Unaudited) (Unaudited) (Unaudited)
    31 December 2017 £ £ £ £
    Financial assets designated at FVTPL and derivatives held for trading:
    Equities – listed equity investments 170,344,729 170,344,729
    Debt – listed debt instruments 5,724,929 5,724,929
    Debt – loan notes 4,567,156 4,567,156
    Derivatives – listed derivative instruments 450,000 450,000
    Derivatives – warrant instruments 6,582,835 6,582,835
    170,794,729 12,307,764 4,567,156 187,669,649

     

    Level 1 Level 2 Level 3 Total
    (Audited) (Audited) (Audited) (Audited)
    30 June 2017 £ £ £ £
    Financial assets designated at FVTPL and derivatives held for trading:
    Equities – listed equity investments 186,431,885 186,431,885
    Debt – listed debt instruments 5,656,030 5,656,030
    Debt – loan notes 3,846,387 3,846,387
    Derivatives – listed derivative instruments 290,000 290,000
    Derivatives – warrant instruments 6,146,512 6,146,512
    186,721,885 11,802,542 3,846,387 202,370,814

    The Level 1 equity investments were valued by reference to the closing bid prices in each investee company on the reporting date.

    The Level 2 derivative investments were valued using a Black Scholes valuation technique. The listed debt instruments were valued with reference to the last available bid price of the convertible bond on the reporting date, which are considered to be Level 2 investments due to the level of trading activity of the bond.

    The loan notes were classified as Level 3 debt instruments as there was no observable market data. The Board has concluded that fair value is approximate to cost plus accumulated interest.

    For financial instruments not measured at FVTPL, the carrying amount is approximate to their fair value.

    Fair value hierarchy – Level 3

    The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of the fair value hierarchy:

    Six months Six months
    ended ended
    31 December 31 December
    2017 2016
    (Unaudited) (Unaudited)
    £ £
    Opening balance at 1 July 3,846,387 4,680,103
    Purchases 744,491
    Movement in unrealised gain 119,834 1,410,007
    Sales (5,272,547)
    Net realised loss (549,193)
    Effect of exchange rate movements (143,556)
    Closing balance at 31 December 4,567,156 268,370

    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.

    At the period end and assuming all other variables are held constant:

    • If unobservable inputs in Level 3 investments had been 5 per cent higher/lower (2016: 5 per cent higher/lower), the Company’s return and net assets for the six months ended 31 December 2017 would have increased/decreased by £228,358 (2016: £13,419); and
    • There would have been no impact on the other equity reserves.

    6.             SHARE CAPITAL AND RESERVES

    The authorised share capital of the Company is £3,000,000 divided into 300 million Ordinary shares of £0.01 each.

    The issued share capital of the Company is comprised as follows:

    31 December 2017 30 June 2017
    (Unaudited) (Audited)
    Number £ Number £
    Issued, called up and fully paid Ordinary shares of £0.01 each 98,999,762 989,998 98,999,762 989,998

    7.             TREASURY SHARES RESERVE

    Six months ended Year ended
    31 December 2017 30 June 2017
    (Unaudited) (Audited)
    Number £ Number £
    Opening balance (635,000)  (972,800) (475,000)  (720,478)
    Treasury shares purchased during the period/year (652,482)  (1,209,462) (160,000)  (252,322)
    Closing balance (1,287,482)  (2,182,262) (635,000)  (972,800)

    During the period ended 31 December 2017, 652,482 (2016: 160,000) Treasury shares were purchased at an average price of 185.4 pence per share (2016: 157.7 pence per share), representing an average discount to NAV at the time of purchase of 5.2 per cent (2016: 4.5 per cent). During the period ended 31 December 2017, Nil (2016: Nil) Treasury shares were sold.

    The Company purchased 136,500 of its own Ordinary shares during the period between 1 January 2018 and 2 March 2018, which were held as Treasury shares. Following these purchases, the total number of Ordinary shares held as Treasury shares by the Company was 1,423,982.

    8.            DIVIDENDS

    On 11 July 2017, the Company declared an interim dividend of £2,456,619, equating to 2.5 pence per Ordinary share, which was paid on 18 August 2017 to shareholders on the register as at 21 July 2017.

    On 12 December 2017, the Company declared an interim dividend of £2,445,619, equating to 2.5 pence per Ordinary share, which was paid on 18 January 2018 to shareholders on the register as at 22 December 2017.

    9.             RELATED PARTIES

    Richard Bernstein is a director and a member of the Investment Manager, a member of the Investment Adviser and a holder of 10,000 (30 June 2017: 10,000) Ordinary shares in the Company, representing 0.01 per cent (30 June 2017: 0.01 per cent) of the voting share capital of the Company at 31 December 2017.

    During the period, the Company incurred management fees of £1,649,074 (2016: £1,438,909) none of which was outstanding at 31 December 2017 (30 June 2017: £Nil). The Company also accrued performance fees of £Nil (2016: £5,714,940) none of which was outstanding or included in trade and other payables as at 31 December 2017 (30 June 2017: £2,354,752 was outstanding and included in trade and other payables). A performance fee of £983,800 was payable in respect of the year ended 30 June 2017 as accrued in the August 2017 NAV and paid during the period.

    Under the terms of the IMA between the Company and the Investment Manager, if the NAV per share at 30 June 2018 exceeds the 2018 performance hurdle, a performance fee will be payable to the Investment Manager. The performance hurdle represents an expected return on share capital since placing compounded at a rate of 7 per cent up to 20 August 2013, 8 per cent up to 27 January 2015 and 10 per cent after that date.

    As the NAV per share at 31 December 2017 did not exceed the performance hurdle at that date, a performance fee has not been accrued in the Interim Financial Statements. In the event that, on 30 June 2018, the NAV per share exceeds the 2018 performance hurdle, the performance fee will be an amount equal to 20 per cent of the excess of the NAV per share at that date and is adjusted for dividends declared since payment of the last performance fee, over the 2018 performance hurdle multiplied by the time weighted average number of Ordinary shares in issue during the year ending 30 June 2018. Depending on whether the Ordinary shares are trading at a discount or a premium to the Company’s NAV per share at 30 June 2018, the performance fee will be either payable in cash (subject to the Investment Manager being required to use the cash payment to purchase Ordinary shares in the market) or satisfied by the sale of Ordinary shares out of Treasury or by the issue of new fully paid Ordinary shares at the closing mid-market closing price on 30 June 2018, respectively.

    As at 31 December 2017, the Investment Manager held 4,205,287 Ordinary shares (30 June 2017: 4,015,606) of the Company, representing 4.30 per cent (30 June 2017: 4.08 per cent) of the voting share capital. Subsequent to the period end, the Investment Manager sold 800,000 Ordinary shares of the Company on 16 January 2018 and now holds 3,405,287 Ordinary shares of the Company.

    The interests of the Directors in the share capital of the Company at the period/year end, and as at the date of this report, are as follows:

    31 December 2017 30 June 2017
    Number of Ordinary shares Total voting rights Number of Ordinary shares Total voting rights
    William Collins(1) 25,000 0.03% 25,000 0.03%
    Sarah Evans(2) 25,000 0.03% 25,000 0.03%
    Christopher Waldron(3) 10,000 0.01%
    Total 60,000 0.07% 50,000 0.06%

    (1) Resigned as Chairman and Director of the Company on 23 November 2017

    (2) Resigned as Chairman of the Audit Committee and Senior Independent Director of the Company on 3 January 2018

    (3) Ordinary shares held indirectly by Mr Waldron

    All related party transactions are carried out on an arm’s length basis.

    10.          POST BALANCE SHEET EVENTS

    On 4 January 2018, Sarah Evans resigned as Chairman of the Audit Committee and Senior Independent Director of the Company.  Jane Le Maitre was appointed as Chairman of the Audit Committee with effect from 4 January 2018.

    On 18 January 2018, the Investment Manager sold 800,000 Ordinary shares of the Company and now  holds 3,405,287 Ordinary shares of the Company.

    On 7 February 2018, the Company reported that its unaudited NAV at 31 January 2018 was 201.29 pence per share.

    The Company purchased 136,500 of its own Ordinary shares during the period between 1 January 2018 and 2 March 2018, which were held as Treasury shares. Following these purchases, the total number of Ordinary shares held as Treasury shares by the Company is 1,423,982.

    On 2 March 2018, the Directors approved the issue of an aggregate 125,000 Ordinary shares of £0.01 divided equally amongst five charitable organisations, the nominal value of which has been paid by Richard Bernstein. Application will be made for these shares to be admitted to trading on the AIM market and dealings are expected to commence on 9 March 2018.

    11.          AVAILABILITY OF INTERIM REPORT

    Copies of the Interim Report will be available to download from the Company’s website www.crystalamber.com.