Crystal Amber Regulatory News (CRS)

25 October 2023

Crystal Amber Fund Limited

("Crystal Amber Fund" or the "Company")

Final results for the year ended 30 June 2023

The Company announces its final results for the year ended 30 June 2023.

Highlights

· Substantial return of capital with £37.5m paid during the year, bringing total returns of capital to more than £100 million.

· Adjusting for the 45p a share of dividends paid, Net Asset Value ("NAV") per share decreased by 4.6% as at 30 June 2023 to 93.33p (145.03p at 30 June 2022 and 130.05p at 31 December 2022).

· Net asset value since the year end has increased over the three months to 30 September 2023 by 6.8%.

· Fund performance according to Trustnet over the last six months is first out of 26 peer group funds and over three years, third out of 25 peer group funds.

· Completed successful exit of Equals Group plc at a significant premium to 30 June 2022 valuation.

· Cash realisation during the year from acquisition of Hurricane Energy plc of £34.7 million, with a further £1.8 million banked in September 2023.

· Successful intensive activism campaign at De La Rue plc, with De La Rue now able to demonstrate its strategic value. De La Rue share price has doubled since 23 June 2022.

· Significant strengthening of board at Morphic Medical Inc. (formerly GI Dynamics Inc.) ahead of anticipated regulatory approval in current financial year.

Contacts:

Crystal Amber Fund Limited

Chris Waldron (Chairman)

Tel: 01481 742 742

www.crystalamber.com

Allenby Capital Limited - Nominated Adviser

Jeremy Porter/ Dan Dearden-Williams

Tel: 020 3328 5656

Winterflood Investment Trusts - Broker

Joe Winkley/Neil Langford

Tel: 020 3100 0160

Crystal Amber Advisers (UK) LLP - Investment Adviser

Richard Bernstein

Tel: 020 7478 9080

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

Chairman's Statement

I hereby present the sixteenth annual report of Crystal Amber Fund Limited (the "Company" or the "Fund"), for the year to 30 June 2023. During this period, by far the most significant impact on NAV was the return to shareholders by means of cash dividends in aggregate of £37.5 million, equivalent to 45p per share. This of course resulted in a commensurate 45p a share fall in NAV.

To put this into context: despite a deteriorating macroeconomic backdrop with worsening liquidity and rising interest rates, the payout comprised more than one-third of NAV at the start of the year under review. This has brought total returns of capital, including share buy backs to more than £100 million to date.

Reflecting the £37.5 million dividend payments, at the year end, NAV was £77.7 million, compared with an unaudited NAV of £108.2 million at 31 December 2022 and an audited NAV of £120.7 million at 30 June 2022. NAV per share was 93.33p at 30 June 2023 compared with 130.05p at 31 December 2022 and 145.03p at 30 June 2022. Underlying NAV, reflecting dividends paid, decreased by 4.6% over the year. This compares to the Numis Smaller Companies Index, which fell by 2.5% in the same period.

The new investment policy, formally approved by shareholders in March 2022, focuses on monetising the portfolio in an orderly manner, achieving an appropriate balance between maximising value received and making timely returns of capital. I believe that during the year, the Company achieved considerable success in this objective. In summary, at the beginning of 2022, the Fund had net assets of £119.4 million. Since then, the Investment Manager has achieved realisations of £71.4 million. Having returned £45.8 million in dividends, net assets at 30 September 2023 amounted to £83.0 million.

It would have been all too easy for the Investment Manager to have lost patience and accepted below market bids for relatively illiquid holdings in portfolio companies. It is all too common to see substantial stakes sold at discounts to carrying values, but across the portfolio, the Investment Manager has delivered premiums.

Two examples of this are the fintech payments platform Equals Group ("Equals.") and the oil and gas exploration and production company Hurricane Energy plc ("Hurricane Energy"). At the beginning of 2022, the Fund owned 36.9 million shares in Equals. This represented a greater than one-fifth ownership of Equals and had a carrying value of £28.4 million. Having reduced its holding in early 2022, the Fund exited its remaining holding during the year under review, realising £31.1million since the beginning of 2022. The Fund initially became a shareholder in 2016 and worked intensively with management. The Fund achieved a total profit on the holding of £22 million.

Since the adoption of the new investing policy, the most time consuming and perhaps jointly, the most stressful holding for the Investment Manager was Hurricane Energy. Nevertheless, despite the significant operational risk of being a single oil well, single pump producer, a difficult executive team and the imposition of the energy profits levy, the Manager succeeded in not only significantly reducing the risk of the investment but achieved cash returns of a magnitude that perhaps could have only been dreamt of at the beginning of 2022.

At the start of 2022, the Fund's holding of just over 575 million shares, representing 28.9 per cent of Hurricane Energy's issued share capital, had a carrying value of £23 million. In June 2023, following the acquisition of the entire issued share capital by Prax Exploration, the Fund received cash proceeds of £34.7 million. However, those proceeds are not the end of the Hurricane Energy journey. The offer included a deferred consideration element based on revenues from April 2023 until January 2026. Earlier this month, the Fund received additional proceeds of £1.8 million from these deferred consideration units. This equates to 2.1p a share to the Fund's shareholders. Should the deferred consideration units achieve their maximum payout of £37.3 million, equivalent to 41.6p per Crystal Amber share, the total potential consideration due relating to the sale of the Fund's shareholding in Hurricane Energy would be £72 million. This compares very favourably with, the January 2022 stock market valuation of £23 million.

Hurricane Energy is an example of the Investment Manager's determination to fight for Shareholders when necessary and the financial reward in doing so. Shareholders will recall the 2021 judgement from the High Court which prevented a 95% dilution for ordinary shareholders which the Hurricane Energy management had sought to push through. Whilst market participants had written off Hurricane Energy as little more than an embarrassment, the Investment Manager, with its long standing and deep technical knowledge, fought and succeeded in blocking the restructuring. Without the Company's intervention, Shareholders would have been deprived of any meaningful exposure to this improvement in the Company's fortunes.

The Investment Manager also secured sales of unquoted holdings at more than their carrying values. The disposal of Board Intelligence generated £2 million and Leaf Clean Energy was sold at more than 13 times its carrying value, realising £1.6 million.

Following the change of investment policy, some shareholders might prefer to focus solely on accelerated cash returns. However, the Board and the Investment Manager believes that this would be a short-sighted approach. The new investment policy afforded the Fund the ability to make opportunistic purchases in existing holdings and whilst intuitively, this might appear contrary to returning funds, given the overall objective of balancing cash returns with the maximisation of shareholder value, the Board and Investment Manager are confident that this is the optimal course.

Specifically, in recent months, following a prolonged period of intense, stressful, and ultimately successful activism, the Fund purchased 15.3 million shares in De La Rue at a cost of £6.3 million. Whilst it remains the case that profits remain unrealised until banked, in a few months, this purchase has increased net assets by more than £3 million. It has resulted in the Fund raising its holding in De La Rue to close to 17 per cent of its issued share capital, up from less than 10 per cent at the beginning of June. Importantly, at a time when the currency market cycle is improving, the Fund remains of the view that the strategic value of De La Rue remains substantially more than its operational value and that it is now an attractive takeover target in an industry requiring consolidation. Long term shareholders will remember, the strategic importance of the Fund's 18 per cent shareholding in Thorntons in 2015, ahead of Ferrero's takeover.

The other addition to the Fund's holdings is equally consistent with the new investment policy and that is to support and enhance the value of its holding in GI Dynamics Inc. During the summer, GI Dynamics Inc. changed its name to Morphic Medical Inc. ("Morphic Medical"). Shareholders will be aware that the Fund has always sought to patiently acquire significant holdings in scalable businesses and following successful delivery on its activist strategy, to hold the shares until value can be maximised. This is evidenced by the disposals referred to above: the Fund commenced buying shares in Hurricane Energy in 2013 and in Equals in 2016. In 2014, the Fund made a toe-hold investment in Morphic Medical, when it was listed on the Australian Stock Exchange, following an IPO valuing the business at A$300 million. In 2020, Morphic Medical delisted and the Fund has since invested directly in Morphic Medical. By the end of 2021, the carrying value of the Fund's holding was valued at £30 million. This represented around 17.5 per cent of the Fund's net asset value.

Following further investment of £8.3 million in Morphic Medical since the beginning of 2022 and combined with cash returns of 55p a share, Morphic Medical now accounts for 40 per cent of net asset value. The Fund has a fully diluted equity interest in Morphic Medical of 81.5 per cent in addition to interest bearing loan notes. The importance of the future success of Morphic Medical therefore cannot be underestimated. I am therefore pleased to report that following a request by the Fund, in anticipation of the re-instatement of the CE Mark, which will enable sales to re-commence, the board of Morphic Medical has recently been significantly strengthened by the appointment of an ex-Medtronic Executive and by the appointment of the former Chairman of Apollo Endosurgery, which, last year, was acquired by Boston Scientific for an enterprise value of $615 million.

The Company is mindful that the Company's shares trade at a substantial discount to NAV. Whilst rising interest rates and poor liquidity in the investment trust sector have resulted in a general widening of discounts, the Board believes that the historically high level of the discount should be addressed at the forthcoming Annual General Meeting, where a new share buyback programme is to be proposed.

In a little over seven quarters and against a backdrop of poor equity markets, rising interest rates and deteriorating liquidity, the Fund has realised more than £71 million and exited from several seemingly wholly illiquid positions at premiums to carrying value. While this difficult economic and geopolitical background continues to challenge the realisation process, the work to date is testament to the skill and perseverance of the Investment Manager.

When we look back at the last three years, we see that the UK Smaller Companies investment companies has risen by 19 per cent. Over the same period, the Fund has delivered a return of 55 per cent (source: Trustnet) and there still remains substantial value within the portfolio. The Board is confident that the Investment Manager, with its intimate and long acquired knowledge of the portfolio, is ideally placed to continue to deliver impressive performance and realisations.

Christopher Waldron

Chairman

24 October 2023

Investment Manager's Report

Performance

During the year, and reflecting the 45p per share dividend payments (representing £27.5 million in aggregate), the Company's NAV per share fell from 145.03p to 93.3p. Underlying net asset value, also reflecting dividend payments, declined by 4.6%.

Portfolio and Strategy

At 30 June 2023, the Company held equity investments in six companies (2022: nine). The Company also held debt instruments in Morphic Medical Inc (formerly GI Dynamics Inc.) and Sigma Broking Limited.

The Company's strategy is to optimise realisations for a limited number of special situations where the Company believes value can be realised regardless of broad market direction. By its nature as an activist fund, the Company needs to hold sufficiently large stakes to facilitate engagement as a significant shareholder. Therefore, the Company is inevitably exposed to concentration risk particularly as continuing realisations will increase the weighting of the remaining holdings.

As at 30 June 2023, the weighted average market capitalisation of the Company's listed investee companies was £83 million (30 June 2022: £129 million).

Hurricane Energy plc ("Hurricane")

The most significant monetisation during the year was that of Hurricane. After a lengthy formal sales process and more than a year later, following an initial expression of interest in May 2022 from another trade buyer, the acquisition by Prax Exploration completed in June 2023. The Fund received initial proceeds of £34.7 million from the acquisition. Against a backdrop at the time of a harsh regulatory and taxation environment, several potential purchasers concluded that despite the short-term "cash cow" attributes of this asset and substantial available tax losses, the potential rewards did not justify the risk. In addition to the formal sale process, the Fund had direct discussions with three other potential buyers. Ultimately, they also were unable to "pull the trigger." The Investment Manager was not prepared for the Fund to continue to be at material risk of the uncertain outcomes of both the stability of the single well method of extraction, the pump and the oil price. The transaction with Prax was structured to deliver a very significant monetisation together with equally significant potential upside. The first tranche of this potential upside was received by the Fund at the beginning of this month: £1.8 million from the Deferred Consideration Units.

Two years earlier, every other institutional investor had sold out of Hurricane Energy. However, with its detailed knowledge and history of this investment, the Fund was able to convince the High Court that management's extremely dilutive proposal was plainly wrong. The Fund was able to effectively double its shareholding at a level that represented emotional distress rather than dispassionate analysis. For context, the Fund acquired some of its holding at 1p a share. Given that in June 2023, the Fund received over 6p a share in cash, the decision to average the cost of investment was clearly the right one.

De La Rue plc ("De La Rue")

We have previously explained how De La Rue stands out as a case study of how poor leadership is the ultimate destroyer of shareholder returns. The company has a long and proud history, having been established in 1821 and has been printing banknotes since 1860. In 1982, the share price was 617.5p. Forty-one years later, it traded at below 30p. Ten years ago, De La Rue paid an annual dividend of 42.3p a share. In 2019, the dividend was shelved.

In July 2020, De La Rue completed a £100 million fundraise which was priced at 110p per share. The Fund was the largest investor in this raise and ended up owning around 18% of De La Rue's issued share capital. Following a significant rise in the share price, the Fund reduced its exposure and reverted to being a 10% shareholder.

As early as January 2022, the Fund publicly highlighted operational and strategic mistakes at De La Rue. Rather than engage constructively, management was completely dismissive.

Last September, the Fund commented that it believed that De La Rue was in a critical position, with essential strategic decisions required. In July 2022, the Fund wrote to the Chairman and Chief Executive of De La Rue to request that Crystal Amber, as a 10% shareholder, be invited to nominate a director in a non-executive capacity. After more than two months of procrastination and attendance at several meetings, the proposal was rejected. The board of De La Rue then called a meeting of shareholders to vote on the Chairman's future. In December 2022, the Chairman was re-elected. Following a profit warning in January 2023, the Fund requisitioned a meeting of shareholders in March 2023 to remove Chairman Kevin Loosemore. Following a further profit warning in April, his position became untenable and he resigned.

In May 2023, Clive Whiley was appointed Chairman. By the end of the following month he was able to successfully negotiate a reduction in contributions to the pension plan, revise and relax banking covenants and secure the removal of the material uncertainty going concern audit qualification. Against this improved backdrop and with increasing evidence of a cyclical upturn in the currency market, the Fund substantially added to its holding. During the summer, the Fund increased its shareholding from less than 10% of De La Rue's issued capital to close to 17%. The average cost of these purchases was 41.2p a share. The Fund remains of the view that the strategic value of De La Rue continues to be substantially more than its operational value and that it is now an attractive takeover target in an industry requiring consolidation.

Allied Minds Plc ("Allied Minds")

The Company has been an investor in Allied Minds since November 2018, and currently owns more than 18% of its issued share capital. Engagement to date has secured a 70% reduction in the annual cost base.

Allied Minds' portfolio contains three significant holdings: Federated Wireless, BridgeComm and Orbital Sidekick.

As liquidity in Allied Minds has diminished, it has been necessary for the Fund to seek board changes on two occasions, most recently in 2022, with the necessary departure of then Chairman Harry Rein.

Last summer, Allied Minds announced that it considered that the costs of a premium listing on the Main Market of the London Stock Exchange were prohibitively high relative to Allied Minds' size and maintaining a public listing was no longer in its best interests. Allied Minds delisted in November 2022 following shareholder approval.

Since delisting, the Fund's engagement with the two directors of Allied Minds, Sam Dobbyn and Bruce Failing has been frustrating and unproductive. The Fund has written to both Allied Minds and two of its largest shareholders expressing concerns regarding the lack of governance and oversight. Astonishingly, much of the board's focus at Allied Minds has been on securing increased remuneration for its directors. The Fund has seen no evidence of realising or monetising investments.

Without such evidence in the very near term, the Fund will take appropriate action to protect its interests. Whilst this holding currently accounts for less than 5% of net asset value, the Fund will take action to ensure that the interests of those charged with the responsibility of delivering value from Allied Minds for its owners are aligned with the interests of its owners. The Fund is surprised and disappointed that to date, other institutional shareholders have been prepared to condone this conduct, but the Fund will continue to engage with them.

Morphic Medical Inc ("Morphic Medical") formerly GI Dynamics Inc ("GI Dynamics")

GI Dynamics changed its name to Morphic Medical Inc in summer 2023. Morphic Medical is a privately held company, headquartered in Boston, MA, that develops an endoscopically delivered medical device indicated for patients with Type 2 Diabetes and Obesity. The device is called the Endobarrier. The Fund first took a toehold investment in 2014.

Morphic Medical had listed on the Australian stock exchange in 2011, raising A$80m and commanded a market capitalisation of A$304m. The company's sales and regulatory relationships were impacted by the negative developments in the US. Relations with the CE Mark notified body were further impacted by the change in regulatory framework in the EU. The latter created a much-increased workload for notified bodies that oversee CE Mark compliance.

In 2017, the company received formal notification of CE Mark withdrawal, preventing the sale of EndoBarrier in Europe and select Middle Eastern countries.

Since Covid 19, the regulatory environment for obtaining regulatory approval has seen lengthening cycles: a new EU directive (Medical Devices Regulation, MDR) has increased the standard of clinical evidence required. MedTech Europe has stated that 480,000 products require re-certification, with the majority of devices requiring an approval process of a duration of 13-24 months. Nevertheless, the company has made good progress towards recovery of its CE Mark certification. The company is on track for completion of all filings by December 2023, with approval expected in the first half of 2024. Thereafter, sales can re-commence, with Germany being the first market. With that in mind, the company has recruited a European Head of Sales and Marketing who started in September 2023.

Last year, enrolment for the company's US trial restarted. It successfully persuaded the FDA to ease some of the enrolment restrictions. Specifically, it has reduced the stringent Vitamin D requirements that was screening out many potential candidates for the trial.

Morphic Medical has added new sites to its US trial and improved its design in a way that should facilitate patient enrolment. The US market opportunity is substantial and can be an extremely large and lucrative market for the company.

Following further investment of £8.3 million in Morphic Medical since the beginning of 2022, combined with cash returns of 55p a share, Morphic Medical now accounts for 40% of NAV. The Fund has a fully diluted equity interest of 81.5% in addition to interest bearing loan notes. The importance of its future success therefore cannot be underestimated.

In anticipation of the re-instatement of the CE Mark, which will enable sales to re-commence, the board of Morphic Medical has recently been significantly strengthened by the appointment of an ex-Medtronic Executive and by the appointment of the former Chairman of Apollo Endosurgery, which, last year, was acquired by Boston Scientific for an enterprise value of $615 million.

Outlook

Following significant cash returns, the Manager remains mindful of the concentration risk of the portfolio and the increasingly challenging macro-economic backdrop, as long-term interest rates breach 15-year highs. Nevertheless, the Fund's holdings offer significant upside, and this is expected to convert into continuing to maximise returns of capital. The Manager is optimistic that the strong relative performance of the last three years can be repeated in the coming 12 months.

Crystal Amber Asset Management (Guernsey) Limited

24 October 2023

Investment Policy

The Company is an activist fund which aims to identify and invest in undervalued companies and, where necessary, engage with management to take steps to enhance their value. The Company's strategy is to optimise realisations at a limited number of special situations where the Company believes value can be realised regardless of market direction. By its nature as an activist fund, the Company needs to hold sufficiently large stakes to facilitate engagement as a significant shareholder. Therefore, the Company is inevitably exposed to concentration risk particularly as continuing realisations will increase the weighting of the remaining holdings.

Investment objective

The objective of the Company is to provide its Shareholders with an attractive total return, which is expected to comprise primarily capital growth but with the potential for distributions from realised distributable reserves, including the realisation of investments, if this is considered to be in the best interests of its Shareholders.

Investment strategy

On 7 March 2022 a revised investment policy to reflect a realisation strategy was approved by Shareholders at an Extraordinary General Meeting. It was agreed that the Fund would not make any new investments and would only make further opportunistic investments in existing holdings where, in the view of the Board and Investment Manager, such investment was considered necessary to protect the interests of Shareholders and/or provide the Investment Manager with additional influence to maximise value and facilitate and accelerate an exit. Any such investment would require the prior approval of the Board and would only be permitted where it was not expected to compromise the timescale for realisations. 

From 7th March 2022 the Company adopted a strategy of maximising capital returned to Shareholders by way of timely disposals, including trade sales of the Company's strategic holdings, where appropriate (with the potential exception of Morphic Medical Inc.) and returns of cash to Shareholders. Whilst it was initially intended to complete this process by 31 December 2023, Shareholders were aware that this was a target rather than a deadline.

In seeking the realisation of predominantly all the Company's investments (with the possible exception of Morphic Medical Inc.), it was agreed that the Directors would aim to achieve a balance between maximising their net value and progressively returning cash to Shareholders. In so doing, the Board would take account of the continued costs of operating the Company. The Company's admission to trading on AIM will be maintained for as long as the Directors believe it to be practicable and cost-effective within the requirements of the AIM Rules.

The Company has ceased to make any new investments except where, in the opinion of the Investment Manager and with the approval of the Board, the investment is considered necessary by the Board to protect or enhance the value of any existing investments of the Company or to facilitate orderly disposals of assets held by the Company. Any cash received by the Company as part of the realisation process prior to its distribution to Shareholders will be held by the Company, on behalf of the Shareholders, as cash on deposit and/or as cash equivalents.

As it is probable that the Company will not have realised all of its investments by 31 December 2023, it is intended that the Board will consult Shareholders and/or make arrangements to seek Shareholder approval on the future strategy of the Company, including steps that might be necessary to maximise the opportunity to realise value from the remaining assets of the Company.

Dividend Policy

Following any material realisations of the Company's investments, the Directors intend to continue to return cash to Shareholders using tax-efficient means such as redeemable shares, dividends and/or tender offers.

Crystal Amber Fund Limited

Statement of Profit or Loss and Other Comprehensive Income

For the year ended 30 June 2023

All items in the above statement derive from continuing operations.

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

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

Crystal Amber Fund Limited

Statement of Financial Position

As at 30 June 2023

The Financial Statements were approved by the Board of Directors and authorised for issue on 24 October 2023.

Christopher Waldron Jane Le Maitre

Chairman Director

24 October 2023 24 October 2023

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

Crystal Amber Fund Limited

Statement of Changes in Equity

For the year ended 30 June 2023

Crystal Amber Fund Limited

Statement of Cash Flows

For the year ended 30 June 2023

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

Crystal Amber Fund Limited

Notes to the Financial Statements

For the year ended 30 June 2023

General information

Crystal Amber Fund Limited (the "Company") was incorporated and registered in Guernsey on 22 June 2007 and is governed in accordance with the provisions of the Companies Law. The registered office address is PO Box 286, Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GYI 4LY. The Company was established to provide Shareholders with an attractive total return, which was expected to comprise primarily capital growth with the potential for distributions of up to 5p per share per annum following consideration of the accumulated retained earnings as well as the unrealised gains and losses at that time. Following changes to the Company's investment policy, the Company's strategy is now to optimise outcomes at a limited number of special situations where the Company believes value can be realised regardless of market direction.

Morphic Medical Inc is an unconsolidated subsidiary of the Company and was incorporated in Delaware. As at 30 June 2023 it had 5 wholly-owned subsidiaries and its principal place of business is Boston. Refer to Note 15 for further information.

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

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

1. SIGNIFICANT ACCOUNTING POLICIES

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

Basis of preparation

The Financial Statements have been prepared to give a true and fair view, are in accordance with IFRS and the SORP "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued by the AIC in November 2014 and updated in January 2017 to the extent to which it is consistent with IFRS and comply with the Companies Law. The Financial Statements are presented in Sterling, the Company's functional currency.

The Financial Statements have been prepared under the historical cost convention with the exception of financial assets designated at fair value through profit or loss ("FVTPL").

Investment Entities 

To determine whether the Company meets the definition of an investment entity, further consideration is given to the characteristics of an investment entity that are demonstrated by the Company.

The Company meets the definition of an investment entity on the basis of the following criteria:

· The Company obtains funds from multiple investors for the purpose of providing those investors with investment management services;

· The Company commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and

· The Company measures and evaluates the performance of substantially all its investments on a fair value basis.

As the Company has met the definition of an investment entity under IFRS 10, it is exempt from preparing consolidated financial statements.

The Company has taken the exemption permitted by IAS 28 "Investments in Associates and Joint Ventures" and IFRS 11 "Joint Arrangements" for entities similar to investment entities and measures its investments in associates at fair value. The Directors consider an associate to be an entity over which the Group has significant influence by means of owning between 20% and 50% of the entities' shares. The Company's associates are disclosed in Note 14.

The Company meets the definition of an investment entity and complies with disclosure requirements in IFRS 10, IFRS 12 and IAS 27.

Going concern

As at 30 June 2023, the Company had net assets of £77.7 million (30 June 2022: £120.7 million) and cash balances of £12.25 million (30 June 2022: £0.05 million) which are sufficient to meet current obligations as they fall due.

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

The Directors have considered the potential impact of the conflicts between Russia and Ukraine, and Israel and Gaza which have both had a negative impact on the global economy. This poses significant challenges and uncertainty globally and continues to have potentially adverse consequences for investee companies as energy costs rise. The Directors do not consider that this will impact the Company's ability to continue as a going concern.

In relation to the Company's investment portfolio, 29% of the Company's investments are valued by reference to the market bid price as at the date of this report.

As these are quoted prices in an active market, any volatility in the global economy is reflected within the value of the financial assets designated at fair value through profit or loss. As such, the Company has not included any fair value impairments in relation to its investments.

The Directors have also considered the result of the continuation vote which occurred at the 2021 AGM and results of the subsequent EGM which did not conclude that the Company should be wound up. Following extensive Shareholder consultation, a new investment policy was put before Shareholders and approved at the EGM in March 2022 which prioritised the Company's intention to maximise the return of capital to Shareholders, representing a change of strategy.

The Board believed that it was in the interests of Shareholders as a whole for the Company to adopt a strategy of maximising capital return to Shareholders by way of timely disposals, including trade sales of the Company's mature listed strategic holdings, where appropriate. The Company has a track record of returning cash to Shareholders via share buybacks and dividends: since 2013, when the requirement for the continuation vote to be proposed at the 2021 AGM was introduced, £114.2 million has been returned to Shareholders via such means.

In line with the change in strategy, the Company has sold investments in Alquiber Quality S.A., Board Intelligence Limited and Equals Group Plc. Hurricane Energy Plc was acquired by Prax Exploration & Production Plc and realised a part disposal.

As the Company will not have realised all of its investments by 31 December 2023, it is intended that the Board will consult Shareholders and/or make arrangements to seek Shareholder approval on the future strategy of the Company, including steps that might be necessary to maximise the opportunity to realise value from the remaining assets of the Company.

In 2014, the Company acquired an initial shareholding in Morphic Medical Inc. The Company believes, it has been able to acquire majority ownership of a valuable shareholding, which comprises 81.5% of Morphic Medical Inc 's diluted share capital. With board representation, the Company is actively involved in the management of Morphic Medical Inc.

The Company looks forward to continuing to work with Morphic Medical Inc to achieve its operational milestones and to further develop the pathway to maximise shareholder value. Given the anticipated value accretive milestones, the Company believes it is appropriate that it gives Morphic Medical Inc the time it requires to maximise shareholder returns.

In due course, the Company will consult with investors about the longer-term plans for Morphic Medical Inc to realise value for the Company's Shareholders. A trade sale is a potential crystallisation path. Alternatively, as the Company continues a disposal programme of its listed investment portfolio, it is possible that the Company's listing may provide a suitable and cost-effective vehicle for Morphic Medical Inc to be listed, raise its profile and potentially, following the achievement of milestones, provide the Company's Shareholders with direct exposure to its growth prospects, as well as liquidity.

The Directors have made a robust assessment of the prospects of the Company over the two-year period ending 30 June 2025. The Directors consider that this is an appropriate period to assess the viability of the Company given the new investment policy agreed with Shareholders in March 2022 and the time horizon over which investment decisions are made.

The Directors have also considered the Company's income and expenditure projections over the two-year period ending 30 June 2025, the fact that the Company currently has no borrowings and that most of its investments comprise readily realisable securities which can be sold to meet funding requirements if necessary.

Based on the results of this analysis, including the Investment Management Agreement, change in investment strategy and future strategic plans involving Morphic Medical Inc, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for the foreseeable future.

The Directors have considered the contributing factors set out above and are confident that the Company has adequate resources to continue in operational existence for the foreseeable future, and do not consider there to be any threat to the going concern status of the Company. Accordingly, they continue to adopt the going concern basis of accounting in preparing these financial statements.

Use of estimates and judgements

The preparation of the Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of the reported amounts in these Financial Statements. The determination that the Company is an investment entity is a critical judgement, as set out above. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable in the circumstances. Actual results may differ from these estimates. The unquoted equity and debt securities have been valued based on unobservable inputs (see Note 14).

Segmental reporting

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

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

Foreign currency translation

Monetary assets and liabilities are translated from currencies other than Sterling ('foreign currencies') to Sterling (the 'functional currency') at the rate prevailing on the reporting date. Income and expenses are translated from foreign currencies to Sterling at the rate prevailing at the date of the transaction. Exchange differences are recognised in the profit or loss section of the Statement of Profit or Loss and Other Comprehensive Income.

Financial instruments

Financial instruments comprise investments in equity, debt instruments, derivatives, trade and other receivables, cash and cash equivalents, and trade and other payables. Financial instruments are initially recognised at fair value unless they are trade receivables. The cost of the instrument may be indicative of the fair value. Subsequent to initial recognition financial instruments are measured as described below.

Financial assets designated at FVTPL

All the Company's investments including equity, debt instruments and derivative financial instruments are held at FVTPL. Financial instruments are initially recognised at fair value. The cost of the instrument may be indicative of the fair value. Transaction costs are expensed in the profit or loss section of the Statement of Profit or Loss and Other Comprehensive Income. Gains and losses arising from changes in fair value are presented in the profit or loss section of the Statement of Profit or Loss and Other Comprehensive Income in the period in which they arise.

Purchases and sales of investments are recognised using trade date accounting. Quoted investments are valued at bid price on the reporting date or at realisable value if the Company has entered into an irrevocable commitment prior to the reporting date to sell the investment. Where investments are listed on more than one securities market, the price used is that quoted on the most advantageous market, which is deemed to be the market on which the security was originally purchased. If the price is not available as at the accounting date, the last available price is used. The valuation methodology adopted is in accordance with IFRS 13.

Loan notes are classified as debt instruments and are initially recognised at fair value. The cost of the instrument may be indicative of the FV. Subsequent to initial recognition, loan notes are valued at fair value. In the absence of an active market, the Company determines the fair value of its unquoted investments by taking into account the International Private Equity and Venture Capital ("IPEV") guidelines.

Derivatives held for trading

When considered appropriate the Company will enter into derivative contracts to manage its price risk and provide protection against the volatility of the market.

Quoted derivatives are valued at bid price on the reporting date. Where derivatives are listed on more than one securities market, the price used is that quoted on the most advantageous market, which is deemed to be the market on which the security was originally purchased. If the price is not available as at the accounting date, the last available price is used. Gains and losses arising from changes in fair value are presented in the profit or loss section of the Statement of Profit or Loss and Other Comprehensive Income in the period in which they arise.

Trade and other receivables

The Company's trade and other receivables are classified as financial assets at amortised cost. They are measured at amortised cost less impairment assessed using the general approach of the expected credit loss model based on experience of previous losses and expectations of future losses.

Trade and other payables

The Company's trade and other payables are measured at amortised cost and include trade and other payables and other short term monetary liabilities which are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.

Derecognition of financial instruments

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised), and consideration received (including any new asset obtained less any new liability assumed) is recognised in the profit or loss section of the Statement of Profit or Loss and Other Comprehensive Income.

The Company derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. Any gain or loss on derecognition is recognised in the profit or loss section of the Statement of Profit or Loss and Other Comprehensive Income.

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of less than 90 days when acquired to be cash equivalents. Due to the credit rating of the financial institutions holding the Company's cash and cash equivalents, no impairment has been recognised.

Share issue expenses

Share issue expenses of the Company directly attributable to the issue and listing of its own shares are charged to the distributable reserve.

Share capital

Ordinary shares are classified as equity where there is no obligation to transfer cash or other assets. 

Dividends

Dividends paid during the year from distributable reserves are disclosed in the Statement of Changes in Equity. Dividends declared post year end are disclosed in the Notes to the Financial Statements.

Distributable reserves

Distributable reserves represent the amount transferred from the share premium account, approved by the Royal Court of Guernsey on 18 July 2008, and amounts transferred to distributable reserves in relation to the sale of Treasury shares above cost.

Income

Investment income and interest income have been accounted for on an accruals basis using the effective interest method. Dividend income is recognised in the profit or loss section of the Statement of Profit or Loss and Other Comprehensive Income when the relevant security is quoted ex-dividend.

The Company currently incurs withholding tax imposed by countries other than the UK on dividend income. These dividends are recorded gross of withholding tax in the profit or loss section of the Statement of Profit or Loss and Other Comprehensive Income.

Expenses

All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Statement of Profit or Loss and Other Comprehensive Income, all expenses have been presented as revenue items except as follows:

· expenses which are incidental to the acquisition and disposal of an investment are charged to capital; and

· expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated. Accordingly, the performance fee is charged to capital, reflecting the Directors' expected long-term view of the nature of the investment returns of the Company.

Treasury shares reserve

The Company has adopted the principles outlined in IAS 32 'Financial Instruments: Presentation' and treats consideration paid including directly attributable incremental cost for the repurchase of Company shares held in Treasury as a deduction from equity attributable to the Company's equity holders until the shares are cancelled, reissued or sold. No gain or loss is recognised within the statement of Profit or Loss and Other Comprehensive Income on the purchase, sale, issue or cancellation of the Company's own equity investments. 

Any consideration received, net of any directly attributable incremental transaction costs upon sale or re-issue of such shares, is included in equity attributable to the Company's equity holders.

2. NEW STANDARDS AND INTERPRETATIONS

New and amended standards and interpretations applied in these financial statements

There were no new standards or interpretations effective for the first time for periods beginning on or after 1 July 2022 that had a significant effect on the Company's financial statements. Furthermore, none of the amendments to standards that are effective from that date had a significant effect on the financial statements.

New and amended standards and interpretations not applied in these financial statements (issued but not yet effective)

Other accounting standards and interpretations have been published and will be mandatory for the Company's accounting periods beginning on or after 1 January 2023 or later periods, but the impact of these standards is not expected to be material to the reported results and financial position of the Company.

3. TAXATION

The Company is exempt from taxation in Guernsey under the provisions of the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 2008 and is charged an annual fee of £1,200 (2022: £1,200).

4. TRANSACTION COSTS

The transaction charges incurred in relation to the acquisition and disposal of investments during the year were as follows:

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

Earnings per share is based on the following data:

6. NAV PER SHARE

NAV per share is based on the following data:

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:

8. TRADE AND OTHER RECEIVABLES

There were no past due or impaired receivable balances outstanding at the year end (2022: £Nil).

9. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

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:

On 8th June 2023, Hurricane Energy Plc was acquired by Prax Exploration & Production Plc resulting in the Company receiving £34,654,130 and 575,649,999 Deferred Consideration Units (DCU) in Prax Exploration & Production. The DCU's confer an entitlement for DCU Holders to receive 17.5% of all future net revenues earned by Hurricane Energy from 1 March 2023 until 31 December 2026, including revenue from both the Lancaster oil field and from any acquisition made by Prax Exploration via Hurricane Energy, capped at a total of 6.48p per DCU. The DCU payments will be paid biannually in arrears, approximately 90 days after 30 June and 31 December.

In the Statement of Cashflow the purchases and sales proceeds have been adjusted by the valuation of Prax Exploration & Production Plc of £10,189,005 to reflect that this was a non-cash transaction as part of the acquisition of Hurricane Energy Plc.

10. TRADE AND OTHER PAYABLES

The carrying amount of trade payables approximates to their fair value.

11. SHARE CAPITAL AND RESERVES

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

The issued share capital of the Company, including Treasury shares (See note 12), is as follows:

Capital risk management

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to Shareholders, return capital to Shareholders, issue new shares or sell assets.

In accordance with the Company's Memorandum and Articles of Incorporation the retained earnings and distributable reserve shown in the Company's Statement of Financial Position at the year end are distributable by way of dividend.

The Company may carry the returns of the Company to the distributable reserve or use them for any purpose to which the returns of the Company may be properly applied and either employed in the business of the Company or be invested, in accordance with applicable law. The distributable reserve includes the amount transferred from the share premium account which was approved by the Royal Court of Guernsey on 18 July 2008.

During the year ended 30 June 2023, the Company paid dividends of £37,453,950 (2022: £10,431,425) from distributable reserves, as disclosed in Note 13. On 8 June 2023, the Company declared an interim dividend of £20.8 million equating to 25p per Ordinary share, which was paid on 30 June 2023.

Externally imposed capital requirement

There are no capital requirements imposed on the Company.

Rights attaching to shares

The Ordinary shares carry the right to vote at general meetings and the entitlement to receive any dividends and surplus assets of the Company on a winding up.

12. TREASURY SHARES RESERVE

No Treasury shares were purchased during the year ended 30 June 2023 (2022: 506,000). Treasury shares purchased in 2022 had an average price of 113.73p per share and represented an average discount to NAV at the time of purchase of 42.1%.

13. DIVIDENDS

On 7 July 2022, the Company declared an interim dividend of £8,323,100 equating to 10p per Ordinary share, which was paid on 5 August 2022 to Shareholders on the register on 15 July 2022.

On 11 November 2022, the Company declared an interim dividend of £8,323,100 equating to 10p per Ordinary share, which was paid on 23 December 2022 to Shareholders on the register on 25 November 2022.

On 8 June 2023, the Company declared an interim dividend of £20,807,750 equating to 25p per Ordinary share, which was paid on 30 June 2023 to Shareholders on the register on 16 June 2023.

14. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS

Financial risk management objectives

The Investment Manager, Crystal Amber Asset Management (Guernsey) Limited and the Administrator, Ocorian Administration (Guernsey) Limited provide advice to the Company which allows it to monitor and manage financial risks relating to its operations through internal risk reports which analyse exposures by degree and magnitude of risk. The Investment Manager and the Administrator report to the Board on a quarterly basis. The risks relating to the Company's operations include credit risk, liquidity risk, and the market risks of interest rate risk, price risk and foreign currency risk. The Board has considered the sensitivity of the Company's financial assets and monitors the range of reasonably possible changes in significant observable inputs on a regular basis and does not consider that any changes are required this year to the categories used in prior years.

Credit risk

Credit risk is the risk that the counterparty to a financial instrument will default on its contractual obligations with the Company, resulting in financial loss to the Company. At 30 June 2023 the major financial assets which were exposed to credit risk included financial assets designated at FVTPL and cash and cash equivalents.

The carrying amounts of financial assets best represent the maximum credit risk exposure at 30 June 2023. The Company's credit risk on liquid funds is minimised because the counterparties are banks with high credit ratings assigned by an international credit-rating agency.

The table below shows the cash balances at the accounting date and the S&P credit rating for each counterparty at that date.

The credit ratings disclosed above are the credit ratings of the parent entities of each of the counterparties being The Bank of N. T. Butterfield & Son Limited and Barclays Bank Plc.

The Company's credit risk on financial assets designated at FVTPL arises on debt instruments. The Company's credit risk on financial assets designated at FVTPL is considered acceptable as debt instruments make up only a small percentage of the financial assets. The Company is also exposed to credit risk on financial assets with its brokers for unsettled transactions. This risk is considered minimal due to the short settlement period involved and the high credit quality of the brokers used. There are no credit ratings available for the debt instruments held by the Company. At 30 June 2023, £69,259,635 (2022: £110,239,478) of the financial assets of the Company were held by the Custodian, Butterfield Bank (Guernsey) Limited.

Bankruptcy or insolvency of the Custodian may cause the Company's rights with respect to financial assets held by the Custodian to be delayed or limited. 70% (2022: 91%) of the Company's financial assets are held by the Custodian in segregated accounts. The Company monitors its risk by monitoring the credit quality and financial position of the Custodian. The parent of the Custodian has an S&P credit rating of BBB+ (2022: BBB+). The remaining balance of financial assets of £12,926,476 (2022: £10,741,145) includes £253,423 (2022: £9,957) cash held by Barclays Bank Plc, £71,338 (2022: £70,728) trade receivables and £11,888,484 (2022: £7,987,857) loan notes issued by Morphic Medical Inc and £713,230 (2022: £2,672,603) loan notes issued by Sigma Broking Limited.

Liquidity risk

Liquidity risk is the risk that the Company will be unable to meet its obligations arising from financial liabilities. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate framework for the management of the Company's liquidity requirements.

The Company adopts a prudent approach to liquidity risk management and maintains sufficient cash reserves to meet its obligations. All the Company's Level 1 investments are listed and are subject to a settlement period of three days.

The following tables detail the Company's expected and contractual maturities for its financial assets and liabilities:

Market risk

The Company is exposed through its operations to market risk which encompasses interest rate risk, price risk and foreign exchange risk.

Interest rate risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Company is exposed to interest rate risk as it has current account balances with variable interest rates and debt instruments at fair value through profit or loss. The Company's exposure to interest rates is detailed in the liquidity risk section of this note. Interest rate repricing dates are consistent with the maturities stated in the liquidity risk section of this note. The Company is exposed to fixed interest rate risk on the loans receivable as where an instrument is a fixed rate security, the value of the Financial Instruments is expected to be particularly affected by the current climate of rising interest rate.

The Investment Manager monitors market interest rates and will place interest bearing assets at best available rates but will also take the counterparty's credit rating and financial position into consideration.

The cash at hand balances are the only assets with variable interest rates and the movement in variable interest rates is an immaterial amount, therefore, no sensitivity analysis for the movement is disclosed.

Price risk

Price risk is the risk that the fair value of investments will fluctuate as a result of changes in market prices. This risk is managed through diversification of the investment portfolio across business sectors. However, there is no guarantee that the value will not rise above 20% after any investment is made, particularly where it is believed that an investment is exceptionally attractive.

The following tables detail the Company's equity investments as at 30 June 2023:

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.

The Company has assessed the price risk of the listed equity and debt based on a potential 25% (2022: 25%) increase/decrease in market prices, which the Company believes represents the effect of a possible change in market prices and provides consistent analysis for Shareholders, as follows:

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

· If market prices of listed equity and debt had been 25% higher (2022: 25% higher), the Company's return and net assets for the year ended 30 June 2023 would have increased by £4,159,562, net of any impact on performance fee accrual (2022: £20,058,562);

· If market prices of listed equity, debt and derivative financial instruments had been 25% lower (2022: 25% lower), the Company's return and net assets for the year ended 30 June 2023 would have decreased by £4,159,562, net of any impact on performance fee accrual (2022: decreased by £20,058,562 reflecting the effect of the derivative financial instruments held at the reporting date); and

· There would have been no impact on the other equity reserves.

Foreign exchange risk

Foreign exchange risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates and arises when the Company invests in financial instruments and enters into transactions that are denominated in currencies other than its functional currency. During the year, the Company was exposed to foreign exchange risk arising from equity and debt investments and financial instruments held in Euro and US Dollars (2022: Euro and US Dollars).

The table below illustrates the Company's exposure to foreign exchange risk at 30 June 2023;

If the Euro weakened/strengthened by 10% (2022: 10%) against Sterling with all other variables held constant, the fair value of equity investments would increase/decrease by £ Nil (2022: £9,626).

If the US Dollar weakened/strengthened by 10% (2022: 10%) against Sterling with all other variables held constant, the fair value of debt instruments would increase/decrease by £1,188,849 (2022: £798,796) and the fair value of the unlisted equity investments would increase/decrease by £1,916,508 (2022: £2,305,707).

Fair value measurements

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

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

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

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

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

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

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

The following tables analyse within the fair value hierarchy the Company's financial assets measured at fair value at 30 June 2023 and 30 June 2022:

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

The Level 2 equity investments relates to Sutton Harbour due to the low volume of trading activity in the market for this investment and has been valued by reference to the closing bid price in the investee company on the reporting date. Prax Exploration that has been recently listed on JP Jenkins and has been valued by reference to the closing bid price in the investee company on the reporting date.

The Level 3 equity investment in Allied Minds (which delisted on 30 November 2022) was valued at the Net Asset Value per share on 31 December 2022 converted at an exchange rate of $1.2699 to £1 and reduced by a 25% liquidity discount. The Level 3 equity and debt investments in Morphic Medical Inc were valued by reference to the discounted cash flow value of the company with an additional discount for dilution risk. The total valuation was then allocated through a waterfall to the loan note, Series A shares and common stock owned by the Company. The Level 3 equity investment in Sigma Broking Limited was valued by reference to a third party funding of the company. The third party is an external investor buying into the investment for equity.

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

Fair value hierarchy - Level 3

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

The Company recognises transfers between levels of the fair value hierarchy on the date of the event of change in circumstances that caused the transfer.

The table below provides information on significant unobservable inputs used at 30 June 2023 in measuring equity financial instruments categorised as Level 3 in the fair value hierarchy. It also details the sensitivity to changes in significant unobservable inputs used to measure value in each case.

15. RELATED PARTIES

Richard Bernstein is a director and a member of the Investment Manager, a member of the Investment Adviser and a holder of 10,000 (2022: 10,000) Ordinary shares in the Company, representing 0.01% (2022: 0.01%) of the voting share capital of the Company at the year end.

During the year, the Company incurred management fees of £960,000 (2022: £1,649,299) none of which were outstanding at the year-end (2022: £Nil). No performance fees were incurred in the year (2022: £Nil) and none were outstanding at the year-end (30 June 2022: £Nil).

As at 30 June 2023, the Investment Manager held 6,899,031 Ordinary shares (2022: 6,899,031) of the Company, representing 8.30% (2022: 8.29%) of the voting share capital.

As at 30 June 2023, the Company's investment in Morphic Medical Inc is an unconsolidated subsidiary due to the Company's percentage holding in the voting share capital of Morphic Medical. There is no restriction on the ability of MMI to pay cash dividends or repay loans, but it is unlikely that MMI will make any distribution or loan repayments given its current strategy. During the year, the Company purchased convertible loan notes (not driven by any contractual obligation) for the purpose of supporting MMI in pursuing its strategy.

Morphic Medical Inc was incorporated in Delaware, had five wholly owned subsidiaries as at 30 June 2023 and its principal place of business is Boston. The five subsidiaries were as follows:

· Morphic Medical Securities Corporation, a Massachusetts-incorporated non-trading entity;

· GID Europe Holding B.V., a Netherlands-incorporated non-trading holding company;

· GID Europe B.V., a Netherlands-incorporated company that conducts certain European business operations;

· GID Germany GmbH, a German-incorporated company that conducts certain European business operations; and

· GI Dynamics Australia Pty Ltd, an Australian-incorporated company that conducts Australian business operations.

16. DIRECTORS' INTERESTS AND REMUNERATION

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

(1) Ordinary shares held indirectly

During the year, the Directors earned the following remuneration in the form of Directors' fees from the Company:

(1) Chairman of the Company with effect from 23 November 2017.

(2) Chairman of Audit Committee with effect from 4 January 2018.

(3) Chairman of Remuneration and Management Engagement Committee with effect from 22 November 2019.

At 30 June 2023, Directors' fees of £32,500 (2022: £32,500) were accrued within trade and other payables.

17. MATERIAL AGREEMENTS

The Company was party to the following material agreements:

Crystal Amber Asset Management (Guernsey) Limited

Until 7th March 2022, the management agreement with the Investment Manager provided for a management fee of 2% applied to the Market Capitalisation of the Company at 30 June 2013 (£73.5 million) (the "Base Amount"). To the extent that an amount equal to the lower of the Company's NAV and market capitalisation, at the relevant time of calculation, exceeded the Base Amount (the "Excess Amount"), the applicable fee rate on the Excess Amount would have been 1.5%.

The Investment Manager was also entitled to a performance fee in certain circumstances. The fee was originally calculated by reference to the increase in NAV per Ordinary share over the course of each performance period.

At an EGM on 7 March 2022, Shareholders agreed with the Company's proposals to enter into a new Investment Management Agreement incorporating revised management and performance fee arrangements and to make changes to the termination provisions to reflect the future strategy of the Company.

Accordingly, the management fee has been reduced to £106,666 per month from 1 April 2022 until 30 June 2022, £90,000 per month from 1 July 2022 to 31 December 2022, £70,000 per month from 1 January 2023 to 30 June 2023, £50,000 per month from 1 July 2023 to 30 September 2023 and then to £40,000 per month until 31 December 2023 when the management fee was due to cease in anticipation of the Company's investments having been substantially realised.

However, due to the requirement for the Fund to have active portfolio management going into 2024, the Board has agreed that the Fund will continue paying a monthly management fee to the Investment Manager on the basis of the fees paid in 2023. Accordingly, the Investment Management Agreement will be amended such that from 1 January 2024, a monthly management fee of £57,500 will be applied. This will be subject to revision by the Company on one month's notice in the light of future realisations, but will in any event be formally reviewed by the Board at the time of the next interim report.

The Investment Manager is also entitled to a performance fee in certain circumstances. This fee was previously calculated by reference to the increase in NAV per Ordinary share over the course of each performance period. In accordance with the new Investment Management Agreement, the performance fee will be calculated by reference to the aggregate cash returned to Shareholders after 1 January 2022. The Investment Manager will receive 20% of the aggregate cash paid to Shareholders after 1 January 2022 (including the interim dividend of 10p per Ordinary Share declared on 22 December 2021) in excess of a threshold of £216,000,000.

Depending on whether the Ordinary shares are trading at a discount or a premium to the Company's NAV per share when the performance fee becomes payable, the performance fee will be either payable in cash (subject to the restrictions set out below) or satisfied by the sale of Ordinary shares out of Treasury or by the issue of new fully paid Ordinary shares (the number of which shall be calculated as set out below):

· If Ordinary shares are trading at a discount to the NAV per Ordinary share when the performance fee becomes payable, the performance fee shall be payable in cash. Within a period of one calendar month after receipt of such cash payment, the Investment Manager shall be required to purchase Ordinary shares in the market of a value equal to such cash payment.

· If Ordinary shares are trading at, or at a premium to, the NAV per Ordinary share when the performance fee becomes payable, the performance fee shall be satisfied by the sale of Ordinary shares out of Treasury or by the issue of new fully paid Ordinary shares. The number of Ordinary shares that shall become payable shall be a number equal to the performance fee payable divided by the closing mid-market price per Ordinary share on the date on which such performance fee became payable.

As at 30 June 2023, the Investment Manager held 6,899,031 Ordinary shares (30 June 2022: 6,899,031) of the Company, representing 8.29% (30 June 2022: 8.29%) of the voting share capital.

Performance fee for year ended 30 June 2023

At 30 June 2023, the Basic Performance Hurdle was £216,000,000 (as adjusted for all dividends paid during the performance period on their respective payment dates, compounded at the applicable annual rate) (2022: £216,000,000).

The aggregate cash returned to Shareholders after 1 January 2022 was £45,791,950 (2022: £8,338,000). Accordingly, no performance fee was earned during the year ended 30 June 2023 (2022: £Nil).

Ocorian Administration (Guernsey) Limited

The Administrator provides administration and company secretarial services to the Company. For these services, the Administrator is paid an annual fee of 0.12% (2022: 0.12%) of that part of the NAV of the Company up to £150 million and 0.1% (2022: 0.1%) of that part of the NAV over £150 million (subject to a minimum of £75,000 per annum). During the year, the Company incurred administration fees of £127,028 (2022: £168,247).

Butterfield Bank (Guernsey) Limited

Under the custodian agreement, the Custodian receives a fee, calculated and payable quarterly in arrears at the annual rate of 0.05% (2022: 0.05%) of the NAV per annum, subject to a minimum fee of £25,000 per annum. Transaction charges of £100 per trade for the first 200 trades processed in a calendar year and £75 per trade thereafter are also payable. During the year, the Company incurred custodian fees of £51,497 (2022: £124,454).

18. ULTIMATE CONTROLLING PARTY

In the opinion of the Directors and on the basis of the shareholdings advised to them, the Company has no ultimate controlling party.

19. OTHER INFORMATION

The Company reported that its unaudited NAV at 31 July 2023 was 92.63p per Ordinary share.

The Company reported that its unaudited NAV at 31 August 2023 was 95.81p per Ordinary share.

The Company reported that its unaudited NAV at 30 September 2023 was 99.75p per Ordinary share.

20. POST BALANCE SHEET EVENTS

On August 9, 2023, Morphic Medical entered into a convertible note purchase agreement with the Company to fund Morphic Medical to a total of $4.5 million. Under this convertible note purchase agreement, the parties executed an unsecured convertible promissory note for proceeds of $2.25 million which accrues interest at 7.5% per annum. All principal and accrued unpaid interest on this note will be due in January 2025. $2.25 million was paid on August 22, 2023.

On 24 October 2023, the Board agreed that the Fund will continue paying a monthly management fee to the Investment Manager on the basis of the fees paid in 2023. The Investment Management Agreement will be amended such that from 1 January 2024, a monthly management fee of £57,500 will be applied. This will be subject to revision by the Company on one month's notice in the light of future realisations, but will in any event be formally reviewed by the Board at the time of the next interim report.

There were no other events subsequent to the reporting date, 30 June 2023.

Glossary of Capitalised Defined Terms

"Admission" means admission of the Ordinary shares on 17 June 2008, to the Official List and/or admission to trading on the Alternative Investment Market of the London Stock Exchange, as the context may require;

"AEOI Rules" means the Automatic Exchange of Information Rules;

"AGM" or "Annual General Meeting" means the annual general meeting of the Company;

"AIF" means Alternative Investment Funds;

"AIFM" means AIF Manager;

"AIFM Directive" means the EU Alternative Investment Fund Managers Directive (no. 2011/61/EU);

"AIC" means the Association of Investment Companies;

"AIC Code" means the AIC Code of Corporate Governance;

 "AIM" means the Alternative Investment Market of the London Stock Exchange;

"Annual Report" means the annual publication of the Company to the Shareholders to describe its operations and financial conditions, together with the Company's financial statements;

"APMs" means Alternative Performance Measures.

"ARR" means annual recurring revenue;

"Articles of Incorporation" or "Articles" means the articles of incorporation of the Company; 

"Audited Financial Statements" or "Financial Statements" means the audited annual financial statements of the Company, including the Statement of Profit or Loss and Other Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and associated notes;

"Australian Stock Exchange" means the Australian Stock Exchange Limited;

"Bank of England" means the Bank of England, the central bank of the UK;

"Board" or "Directors" or "Board of Directors" means the directors of the Company;

"Brexit" means the departure of the UK from the European Union;

"CBRS" means Citizens Broadband Radio Service;

"CEO" means chief executive officer;

"CE Mark" means a certification mark that indicates conformity with health, safety, and environmental protection standards;

"CFD" means Contracts for Difference;

"Committee" means the Audit Committee of the Company;

"Company" or "Fund" means Crystal Amber Fund Limited;

"Companies Law" means the Companies (Guernsey) Law, 2008, (as amended);

"CRS" means Common Reporting Standard;

"EBITDA" means earnings before interest, taxes, depreciation and amortisation;

"EGM" or "Extraordinary General Meeting" means an extraordinary general meeting of the Company;

"EndoBarrier" means a minimally invasive medical device for treatment of type 2 diabetes;

"Equals" means Equals Group Plc;

"FATCA" means Foreign Account Tax Compliance Act;

"FCA" means the Financial Conduct Authority;

"FDA" means the United States Food and Drug Administration;

 "FRC" means the Financial Reporting Council;

"FRC Code" means the UK Corporate Governance Code published by the FRC;

"FTSE" means the Financial Times Stock Exchange;

"FV" means Fair Value;

"FVTPL" means Fair Value Through Profit or Loss;

"General Counsel" means the main lawyer who gives legal advice to a company;

"GFSC" means the Guernsey Financial Services Commission;

"GFSC Code" means the GFSC Finance Sector Code of Corporate Governance;

"GID" means GI Dynamics, Inc. now known as Morphic Medical Inc;

"Gross Asset Value" means the value of the assets of the Company, before deducting its liabilities, and is expressed in Pounds Sterling;

"HQ" means headquarters;

"IAS" means international accounting standards as issued by the Board of the International Accounting Standards Committee;

"IASB" means the International Accounting Standards Board;

"IFRIC" means the IFRS Interpretations Committee, which issues IFRIC interpretations following approval by the IASB;

"IFRS" means the International Financial Reporting Standards, being the principles-based accounting standards, interpretations and the framework by that name issued by the International Accounting Standards Board;

"Interim Financial Statements" means the unaudited condensed interim financial statements of the Company, including the Condensed Statement of Profit or Loss and Other Comprehensive Income, the Condensed Statement of Financial Position, the Condensed Statement of Changes in Equity, the Condensed Statement of Cash Flows and associated notes;

"Interim Report" means the Company's interim report and unaudited condensed financial statements for the period ended 31 December;

"Investment Management Agreement" means the agreement between the Company and the Investment Manager, dated 16 June 2008, as amended on 21 August 2013, further amended on 27 January 2015 and further amended on 12 June 2018. Additionally, the Investment Management Agreement was further amended and restated on 14 February 2022.

"IPEV Capital Valuation Guidelines" means the International Private Equity and Venture Capital Valuation Guidelines on the valuation of financial assets;

"KPMG" means KPMG Channel Islands Limited;

"LSE" or "London Stock Exchange" means the London Stock Exchange Plc;

"Market Capitalisation" means the total number of Ordinary shares of the Company multiplied by the closing share price;

"MMI" means Morphic Medical Inc.;

 "MW" means megawatt;

"NAV" or "Net Asset Value" means the value of the assets of the Company less its liabilities as calculated in accordance with the Company's valuation policies and expressed in Pounds Sterling;

"NAV per share" means the Net Asset Value per Ordinary share of the Company and is expressed in pence;

 "NMPI" means Non-Mainstream Pooled Investments;

"Official List" is the list maintained by the Financial Conduct Authority (acting in its capacity as the UK Listing Authority) in accordance with Section 74(1) of the Financial Services and Markets Act 2000;

"Ordinary share" means an allotted, called up and fully paid Ordinary share of the Company of £0.01 each;

"R&D" means research and development;

"Risk Committee" means the Risk Committee of the Investment Manager;

"S&P" means Standard & Poor's Credit Market Services Europe Limited, a credit rating agency registered in accordance with Regulation (EC) No 1060/2009 with effect from 31 October 2011;  

"Smaller Companies Index" means an index of small market capitalisation companies;

"SME" means small and medium sized enterprises;

"SORP" means Statement of Recommended Practice;

"Stewardship Code" means the Stewardship Code of the Company adopted from 14 June 2016, as published on the Company's website www.crystalamber.com;

"Supreme Court" means the highest court in the federal judiciary of the US;

"Target Multiple" means the maximum multiple of the original investment that could be paid, given value drivers, and receive a desired return on investment;

"TISE" means The International Stock Exchange;

"Treasury" means the reserve of Ordinary shares that have been repurchased by the Company;

"Treasury shares" means Ordinary shares in the Company that have been repurchased by the Company and are held as Treasury shares;

 "UK" or "United Kingdom" means the United Kingdom of Great Britain and Northern Ireland;

"UK Stewardship Code" means the UK Stewardship Code published by the FRC in July 2010 and revised in September 2012;

"US" means the means the United States of America, its territories and possessions, any state of the United States and the District of Columbia;

"US$" or "$" means United States dollars;

"US Federal Reserve" means the Federal Reserve System, the central banking system of the US; and

 "£" or "Pounds Sterling" or "Sterling" means British pounds sterling and "pence" means British pence.

Alternative Performance Measures

ALTERNATIVE PERFORMANCE MEASURES ("APMs")

We assess our performance using a variety of measures that are not specifically defined under IFRS and therefore termed APMs. The APMs that we use may not be directly comparable with those used by other companies.

ONGOING CHARGES

Ongoing charges are calculated using the AIC Ongoing Charges methodology, which was last updated in April 2022 and is available on the AIC website (theaic.co.uk). They represent the Company's investment management fee and all other operating expenses, excluding currency loss/profit, ad-hoc costs associated with portfolio transactions, ad-hoc research expenses and non-recurring legal and professional fees and are expressed as a percentage of the average Net Asset Value for the year. The Board continues to be conscious of expenses and works hard to maintain a sensible balance between good quality service and cost. The ongoing charges calculation is shown below:

NET ASSET VALUE ("NAV")

The NAV is the net assets attributable to shareholders that is, total assets less total liabilities, expressed as an amount per individual share.

NAV PER SHARE INCLUDING DIVIDENDS

A measure showing how the NAV per share has performed in the year, taking into account both capital returns and dividends paid to shareholders.

NAV total return is calculated by adjusting for dividends paid. It considers the changes in market value as well as other surges of income such as dividends expressed as a percentage. It shows a more accurate valuation of a stock's return.

The AIC shows NAV total return as a percentage change from the start of the year. It assumes that dividends paid to shareholders are reinvested at NAV at the time the shares are quoted ex-dividend.

Net Asset Value ("NAV") per share including dividends paid decreased by 4.6% (2022: increase 7.3%).

TOTAL RETURN

Total return is calculated by taking the difference between the number of shares multiplied by NAV per share at both the start and end of the year. The increase or decrease percentage is calculated based on the opening value. Adjusting for dividends paid, the total loss in the Company's NAV per share for the year was 35.68% (2022: return 8%)