Crystal Amber Regulatory News (CRS)

30 September 2022

Crystal Amber Fund Limited

Final results for the year ended 30 June 2022

The Company announces its final results for the year ended 30 June 2022.

Key Points

· Net Asset Value ("NAV") per share including dividends paid increased by 7.3%. After dividends, NAV declined by 1.2% to 145.03 pence (146.81 pence at 30 June 2021 and 143.19 pence at 31 December 2021).

· Following the result of the continuation vote, a new investment policy was approved by Shareholders to maximise returns of capital.

· Concentrated portfolio continues to deliver progress: from July 2021, the Hurricane Energy share price has almost tripled and the share price of Equals Group has doubled. The Company is actively engaged with all investee companies to deliver on their potential.

· Hurricane Energy prospects transformed with company now debt free with net cash accounting for around 50% of market capitalisation and production of three million barrels forecast over the next year.

· Completed exit from Leaf Clean Energy upon receipt of its final (£1.6 million) wind down distribution. Final distribution received equivalent to £61.17 per share against £4.54 per share carrying value.

· Increased cash returns to Shareholders, with £10.4 million distributed in two dividends and £0.5 million in share buybacks. A further 10 pence dividend, amounting to £8.3 million, was paid in August 2022.

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

Chairman's Statement

I hereby present the fifteenth annual report of Crystal Amber Fund Limited ("the Company"), for the year to 30 June 2022. At the year end, NAV was £120.7 million, compared with an unaudited NAV of £119.4 million at 31 December 2021 and an audited NAV of £122.9 million at 30 June 2021. NAV per share was 145.03 pence at 30 June 2022 compared with 143.19 pence at 31 December 2021 and 146.81 pence at 30 June 2021. Underlying NAV, reflecting dividends paid, increased by 7.3% over the year.

During the year, the Company has continued to optimise outcomes for its portfolio companies and while the NAV has remained broadly flat, the Company's positive returns have been distributed to Shareholders. Two dividends, totalling 12.5 pence per share were paid in the period and another of 10 pence per share was paid after the year end in August 2022. 

The Company also bought back 506,000 of its own shares at an average price of 113.73 pence as part of its strategy to limit any substantial discount of the Company's share price to NAV. Over the year, the Company's shares traded at an average month-end discount to NAV of 24.6%. At the year end, the shares traded at a discount of 20.0% to NAV. The share buyback programme had a positive contribution of 0.16% to NAV per share during the year.

The significant dividend distributions are a tangible product of the Company's revised investment policy, which was approved by Shareholders in March 2022 following the 2021 AGM, when the continuation vote did not achieve the requisite 75% majority. The revised policy commits the Company to maximising capital returns through the timely disposal of its holdings. This was initially envisaged to be largely completed by the end of 2023, with the exception of GI Dynamics, which was highlighted in the February circular as being a longer-term project. However, after consultation with Shareholders, it was clear that setting December 2023 as a fixed deadline could be counterproductive and consequently the Board reiterated its focus on the best outcomes for all Shareholders.

A good example of this measured progress is Equals, which the Company has held for some years, but refrained from selling until the management had built on its undoubted promise and made tangible improvements in its product offering. This was finally evident in 2022 and resulted in a rerating of the shares, at which point the Company began the process of reducing its stake from over 20% to less than 3% at the time of writing.

Whilst we hope that similar incremental improvements will lead to opportunities to reduce other holdings, the Company has had to act more purposefully in some cases, especially Hurricane Energy and Allied Minds. Allied Minds is covered in detail in the Investment Manager's report below, but Hurricane is worth noting here, as an example of the Company's determination to fight for Shareholders when necessary and the financial reward in doing so. 

At the start of the year, the Company had received a favourable judgment from the High Court which had prevented a wholly unnecessary 95% dilution which the Hurricane management had sought to push through. Whilst market participants had written off Hurricane as little more than an embarrassment, the Company, with its long standing and deep technical knowledge, fought and succeeded in blocking the restructuring. Having previously suffered from the headwinds of a falling oil price, in the year under review, the tailwinds of a rising oil price fast tracked Hurricane's renaissance. Without the Company's intervention, Shareholders would have been deprived of any meaningful exposure to this improvement in the Company's fortunes. During the year, the Company also nominated a member of the Investment Adviser to the board of Hurricane Energy to continue to protect Shareholders' interests.

The Manager's focus on the Company's remaining companies has increased as investments have been realised and portfolio concentration increased. As an activist investor, this engagement takes many forms but generally the Company's preference is to engage constructively, in private, with investee companies, although Hurricane proved to be a necessary exception to this strategy of quiet engagement.

A more detailed review of investee companies is set out below in the Investment Manager's Report.

Christopher Waldron

Chairman

29 September 2022

Investment Manager's Report

Performance

The Company's NAV per share fell by 1.2% during the year. Adjusting for dividends paid, the total return in the Company's NAV per share for the year was 8%. This compares to the Numis Smaller Companies Index which fell by 13.6% in the same period.

Key positive contributors to performance were Hurricane Energy (15.9%) and Equals Group (9.6%). Key detractors were De la Rue (-16.8%) and Board Intelligence (-2.2%). The Company did not purchase FTSE put options in the year. 

Portfolio and Strategy

At 30 June 2022, the Company held equity investments in nine companies (2021: 10). The Company also held a debt instrument in GI Dynamics and Sigma Broking Limited.

The Company's month-end average net cash and accruals position was -0.1% of NAV (2021: 0.3%), meaning that it has remained fully invested throughout the year. Cash realisations were principally utilised to fund two interim dividends and the share buybacks.

The Company's strategy is to optimise outcomes on 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 but levels of investment in individual companies continue to be closely monitored and parameters are set to ensure this risk is managed and kept to an appropriate level.

As at 30 June 2022, the weighted average market capitalisation of the Company's listed investee companies was £129 million (30 June 2021: £229 million).

The Company's key positions remained the same over the year. The Company received the final distribution from the wind down of Leaf Clean Energy Company. A smaller position in Hansard Global was also sold. The Company increased its investment in GI Dynamics with a £3.2 million convertible note instrument. A new position in an unlisted business, Sigma Broking Limited was opened in the first half of the period, following a commitment by the Company in its last financial year. The Company increased its stake in Hurricane Energy to 28.9% of Hurricane's equity (2021: 22.6%), although the last new quoted investment purchase was made in April 2018. During the year, £10.9 million was returned to Shareholders through share buybacks and dividends (2021: £9 million).

The Company believes that because of its intensive activism, the investment in GI Dynamics now has considerable strategic value. This was recently evidenced by two approaches from US trade parties that have expressed an interest in making a significant investment in GI Dynamics. The Company looks forward to continuing to work with the company to achieve its operational milestones and to further develop the pathway to maximise shareholder value.

Additional investments and shareholder returns were funded by reducing the Company's shareholding in De La Rue and Equals Group. The holding in De la Rue decreased to 9.8% of De La Rue's equity (2021: 12.3%). The position in Equals was reduced as shares re-rated to 10% of the company.

Investee companies

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

De La Rue Plc ("De La Rue")

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 617.5 pence Forty years later it is 82 pence. Ten years ago, De La Rue paid an annual dividend of 42.3 pence a share. In 2019, the dividend was shelved.

In July 2020, De La Rue completed a £100 million fundraise which was priced at 110 pence a share. Over the last two years, the business has been transformed. However, a combination of failing to fully capitalise on pricing in a buoyant currency market in 2020 as central buyers stocked up, limited contract wins in both its Currency and Authentication divisions, cost inflation and continuing to work through legacy issues inherited from the previous Chief Executive Martin Sutherland, has seen the market capitalisation decline to £164 million. During the year to June 2022, De La Rue's share price fell by 55 per cent.

The Company notes that since March, the current management team has achieved significant success with two legacy issues. Firstly, in March, the De La Rue Pension Trustee agreed that the planned £9.5 million per annum increase in pension contributions for the next six years was no longer required. Secondly, in July, De La Rue and Portals Paper Limited ("Portals") terminated the agreement they signed in 2018, which had committed De La Rue to purchase substantial quantities of paper until 2028. Without this termination, in the remaining years of the relationship, De La Rue would have been committed to paying Portals volume shortfall payments, which the Company estimates would have been approximately £8 million per annum.

In the year to March 2022, De La Rue delivered adjusted earnings per share of 13 pence. Current year market estimates are for adjusted earnings per share of 11.7 pence.

Despite these two legacy "wins," De La Rue's share price trades on just seven times current year earnings. Whilst this reflects in part the market's understandable scepticism in the context of two profit warnings since January and a lack of pricing power, it has left De La Rue very vulnerable to corporate action. In the year to March 2022, the Authentication division achieved revenues of £90 million. Management is guiding to current year revenues of £100 million and close to 20 per cent operating margins. The Company believes that this division, with its long-term earnings visibility could now be sold for between £200 million and £250 million.

The Company believes that De La Rue is now at a critical position, with essential strategic decisions required, but unfortunately, over many years, De La Rue's track record demonstrates its poor judgment when it comes to making business decisions in the interests of its owners. The Company believes that now is the time for better decision making, with input from stakeholders.

Consequently, in early July, the Company wrote to the Chairman and Chief Executive of De La Rue to request that Crystal Amber, as a 10 per cent shareholder, be invited to nominate a director in a non-executive capacity and a decision is expected on this in the near future. With corporate action most likely, the Company believes it is in the interests of all stakeholders that a long-term and significant shareholder now has representation at board level.

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.

In March 2020, Harry Rein was appointed Chairman of the Allied Minds board, having joined the board in November 2017. In January 2021, following a strategic review, Allied Minds introduced what it described as "a new form of governance better suited to achieve value creation." The board had no Chief Executive and Allied Minds was managed by its three non-executive directors. The Company considers, in practical terms, that Harry Rein was the key decision maker.

During the year, the Company expressed several governance concerns to Allied Minds, none of which was adequately resolved. In February 2022, Crystal Amber announced that it had sent a requisition notice to the board of Allied Minds requiring Allied Minds to convene a general meeting at which a resolution would be proposed to remove Harry Rein as a non-executive director. The Company considered Harry Rein to be a major impediment to value protection and realisation. Prior to the requisition meeting and following discussions with shareholders, Harry Rein agreed to step down from the board and as a result, the Company withdrew its requisition notice.

In March 2022, Allied Minds announced that it was undertaking a formal strategic review, aimed at creating and / or realising shareholder value. It also launched a formal sales process and the commencement of an offer period. Disappointingly, earlier this month, the board of Allied Minds has stated that whilst the process is ongoing, to date, no notable interest has been forthcoming.

Last month, Allied Minds announced that it considers that the costs of maintaining a premium listing on the Official List and the Main Market of the London Stock Exchange are now prohibitively high relative to Allied Minds' current size and maintaining a public listing is no longer in its best interests. It stated that it therefore intends to formally consult with shareholders regarding a possible delisting of the company. In response to the potential delisting, shares in Allied Minds fell by 40% to 10 pence.

The Company estimates that net asset value per share at Allied Minds is approximately 36 pence, placing the shares on a 70% discount to net asset value. If a delisting is to proceed, the Company believes that Allied Minds first must communicate to market participants a timeline of cash realisations and return of sale proceeds. Furthermore, it should explain how its three non-executive directors are going to be more than spectators at portfolio companies and fight for the interests of Allied Minds. The Company also believes that were a delisting to proceed, Allied Minds should offer private investors with shareholdings of up to 100,000 shares, the opportunity to tender their shares to the company for purchase. Allied Minds could purchase up to 5 per cent of its issued share capital, around 12 million shares. Doing so would be accretive to net asset value whilst providing private investors with a liquidity facility.

Equals Group plc ("Equals")

Equals has delivered impressive growth in the period as a result of substantial investments in product and marketing capabilities undertaken since 2019. These developed multi-currency capabilities for a range of users, including larger businesses and other financial intermediaries.

Sales efficiency also improved with the deployment of new tools. Since May 2021, growth in revenues across products has been aided by the launch of Equals Solution. This is a new multicurrency product with own-name IBAN capability targeted at larger corporations.

The Company has reduced its position from over 20% to 10% as the shares re-rated. Following the period end, additional disposals have taken the Company's equity holding in the company down to less than 3%.

The Company expects Equals to continue to deliver strong top line growth and to benefit from industry consolidation. Having engaged intensively with management over the last two years, it is pleasing to have converted this investment into substantial realised profits.

Hurricane Energy ("Hurricane")

In June 2021, Mr Justice Zacaroli in the High Court refused to sanction the Hurricane board's attempt to force through a highly dilutive debt for equity swap. At the time, Hurricane claimed that without a debt for equity swap, bondholders would not be able to recover more than 56% of their investment. The board had proposed that $50 million of the $230 million repayable to bondholders in July 2022 be converted into 95% of Hurricane's equity, with the remaining $180 million debt earning cash interest of 9.4 % per annum plus payment in kind interest of 5% per annum.

In July 2022, Hurricane announced that the bond had been repaid in full, thanks to recovered oil prices and an excellent operational performance. Furthermore, the company had net free cash of $89 million at the end of July. This is a remarkable transformation within 12 months. The Company's actions not only averted a wholly unnecessary 95% dilution but has positioned the Company to benefit from Hurricane's exciting prospects within its own assets and beyond.

Other strategic decisions materially contributed to the company's current strength. In August 2021, after a further request from Crystal Amber, Hurricane finally launched a tender offer for up to 50% of the outstanding bonds. Allocating up to $80 million of its cash, initially the tender was priced at up to 72 cents, but this was increased to 78 cents. Whilst the Company fails to understand the amount of time taken by the board to implement the buyback of the bonds (in early July 2021, the bonds were trading at just 49.25 cents), purchasing just over one third of the bonds in issue reduced Hurricane's capital and interest obligations by approximately $22 million. An additional buyback was implemented in December 2021, bringing the total savings to $29 million. Without the Company's successful intervention at the High Court, this would not have happened.

During the period, the Company engaged with management regarding the utilisation of tax losses. In its 2021 results, Hurricane disclosed that it had $382 million of ring-fenced trading losses at group level and other allowances and supplementary charge losses and investment allowances of $693 million, which have no expiry date and would be available for offset against future trading profits. Additionally, it had $328 million of capital allowances available against future ring-fenced trading profits. It commented that the estimated value of these losses and allowances at prevailing tax rates, including the Group's pre-trading expenditure, future decommissioning costs and non-ring-fenced losses, is $410 million. In the event of a corporate transaction, the Company believes that the benefit arising to Hurricane's shareholders could be very substantial.

Hurricane Energy ("Hurricane")

In 2020 and 2021, the threat of massive equity dilution combined with continued downbeat comments from the previous board about the company's outlook, heavily contributed to what became a dreadful share price performance. Whilst there is no doubt that the fall in oil price in 2020 was entirely beyond management's control, the decision not to use some of its cash to buy-back the bonds when they were trading at a discount of 70%, as urged to do so at the time by Crystal Amber, has proven extremely costly in addition to legal costs of $17 million on a restructuring plan that both Crystal Amber and more importantly the High Court found to be inappropriate.

The share price weakness enabled the Company to take advantage by increasing its shareholding to 29% of the company. Having previously banked profits of £43 million on Hurricane, the average cost of the Company's current shareholding is 6.7 pence a share.

In February 2022, the Company requested and were offered a position on the Hurricane board to assist Hurricane to fully realise its potential. In March 2022, Juan Morera was appointed to the board. Subsequently, the arrival of two additional independent non-executive directors means that the Hurricane board now meets the necessary governance standards.

GI Dynamics Inc ("GI Dynamics")

The company has continued preparations to initiate a randomised clinical trial in India. It is readying the necessary supporting team for the trial and its local partner Apollo Sugar Clinics have started to screen for patients in its hospitals. After delays due to the COVID-19 surge in India, the I-STEP clinical trial application was approved in December 2021 and the remaining approvals have been secured since then. The company expects to have initiated implants by the end of this year. 

GI Dynamics has added new sites to its US trial and improved its design in a way that should facilitate patient enrolment. For example, requirements for certain minimum Vitamin D levels have been reduced. The US market opportunity is substantial.

The company has continued to make progress toward recovering the CE Mark for its device, albeit this has taken longer than expected. Encouragingly, recent publication of data gathered in its prior US trial supports a positive risk/benefit assessment of the treatment. Further data is expected to be published in a peer review journal over the coming months.

Outlook

The Manager is mindful of the concentration risk of the portfolio and the unhelpful macro-economic backdrop. However, its holdings are of strategic value, and this is expected to bear fruit in terms of maximising returns of capital. The Manager is optimistic that the strong relative performance of the last 12 months can be repeated in the coming 12 months.

Crystal Amber Asset Management (Guernsey) Limited

29 September 2022

Investment Policy

The Company is an activist fund which aims to identify and invest in undervalued companies and, where necessary, take steps to enhance their value. The Company aims to invest in a concentrated portfolio of undervalued companies which are expected to be predominantly, but not exclusively, listed or quoted on UK markets (usually the Official List or AIM) and which have a typical market capitalisation of between £100 million and £1 billion. Following investment, the Company and its advisers will also typically engage with the management of those companies with a view to enhancing value for all their Shareholders.

Investment objective

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

Investment strategy

The Company focuses on investing in companies which it considers are undervalued and will aim to promote measures to correct the undervaluation. In particular, it aims to focus on companies which the Company's Investment Manager and Investment Adviser believe may have been neglected by fund managers and investment funds due to their size; where analyst coverage is inadequate or where analysts have relied on traditional valuation techniques and/or not fully understood the underlying business. The Company and its advisers seek the co-operation of the target company's management in connection with such corrective measures as far as possible. Where a different ownership structure would enhance value, the Company will seek to initiate changes to capture such value. The Company may also seek to introduce measures to modify existing capital structures and introduce greater leverage and/or seek the sale of certain businesses or assets of the investee company.

Where it considers it to be appropriate, the Company may (i) utilise leverage for the purpose of investment and enhancing returns to Shareholders and/or (ii) enter into derivative transactions, for example to provide portfolio protection against significant falls in the market or for the purposes of efficient portfolio management, in seeking to manage its exposure to interest rate and currency fluctuations through the use of currency and interest rate hedging arrangements, and to acquire exposure to target companies through contracts for difference.

Investment restrictions

It is not intended that the Company will invest, save in exceptional circumstances, in:

· companies with a market capitalisation of less than £100 million at the time of investment;

· pure technology-based businesses; or

· unlisted companies or companies in pre-IPO situations.

It is expected that no single investment in any one company will represent more than 20% of the Gross Asset Value of the Company at the time of investment. However, there is no guarantee that this will be the case after any investment is made, or where the Investment Manager believes that an investment is particularly attractive.

New Investment Policy

On 7 March 2022 a revised investment policy, as summarised in the following paragraphs, to reflect a realisation strategy, was approved by Shareholders at an Extraordinary General Meeting.

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 GI Dynamics Inc) and returns of cash to Shareholders intended to be completed by 31 December 2023, although after consultation with Shareholders it was noted that this should be seen as a target rather than a deadline.

In seeking the realisation of predominantly all the Company's investments (with the possible exception of GI Dynamics), the Directors will aim to achieve a balance between maximising their net value and progressively returning cash to Shareholders. In so doing, the Board will take account of the continued costs of operating the Company. The Company's admission to AIM and the capacity to trade in its shares 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 will cease 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.

At 31 December 2023, should any of the Company's investments remain unrealised, the Board will consider consulting Shareholders and/or make arrangements to seek Shareholder approval on the future strategy of the Company, including any steps that might be necessary to maximise the opportunity to realise value from the remaining assets of the Company.

Any material change to the New Investment Policy would require Shareholder approval before being implemented in accordance with the AIM Rules.

Dividend Policy

Following any material realisations of the Company's investments, the Directors intend to return cash to Shareholders using tax-efficient means such as redeemable shares and/or tender offers. The Directors intend to seek Shareholder approval to put mechanisms in place to enable such distributions to take place at the appropriate time. The Board intends to return cash to Shareholders by way of capital distributions. Accordingly, the Board intends to suspend the declaration of dividends until further notice.

Report of the Directors

Incorporation

The Company was incorporated on 22 June 2007 and was admitted to trading on AIM on 17 June 2008.

Principal activities

The Company is a Guernsey registered closed ended company established to provide Shareholders with an attractive total return, which is expected to comprise primarily capital growth and distributions from accumulated retained earnings taking into consideration unrealised gains and losses at that time. This will be achieved through investment in a concentrated portfolio of companies that are considered to be undervalued and which are expected to be predominantly, but not exclusively, listed or quoted on UK markets and which mostly have a market capitalisation of between £100 million and £1 billion.

The Company became a member of the AIC on 26 March 2009.

Business review

A review of the business together with likely future developments is contained in the Chairman's Statement and the Investment Manager's Report.

Results and dividend

The results for the year are set out in the Statement of Profit or Loss and Other Comprehensive Income.

Historically, the Company has declared dividends twice yearly in the sum of 2.5 pence per share totalling 22.5 pence per share over the last five years to 30 June 2021 (the exception being the 2020 interim dividend which was withheld as a result of the emergence of COVID-19, which created uncertainty as to the timing and quantum of dividend receipts from the Company's portfolio companies). Traditionally, the dividends have been largely funded by dividends received from portfolio companies.

On 7 July 2021, the Company declared a second interim dividend of £2,093,425 in respect of the financial year ended 30 June 2021 equating to 2.5 pence per Ordinary share, which was paid on 30 July 2021 to Shareholders on the register on 15 July 2021.

On 22 December 2021, the Company declared an interim dividend of £8,338,000 in respect of the financial year ended 30 June 2022 equating to 10 pence per Ordinary share, which was paid on 2 February 2022 to Shareholders on the register on 14 January 2022.

On 7 July 2022, the Company declared an interim dividend of £8,338,000 equating to 10 pence per Ordinary share, which was paid on 5 August 2021 to Shareholders on the register on 15 July 2022.

Continuation vote

The Company has regularly submitted itself to continuation votes. An extraordinary resolution was passed at the 2019 AGM under which 75% of the votes would be required to continue as currently constituted and an extraordinary resolution was tabled at the 2021 AGM, requiring a 75% majority for continuation.

On 22 December 2021, the Company provided an update following the results of its 2021 AGM where the resolution that the Company continue as constituted received a majority of votes, but did not achieve the requisite 75% majority of votes cast and accordingly was not passed.

On 15 February 2022, the Company issued a circular which included a notice of Extraordinary General Meeting to be held on 7 March 2022 in connection with proposals for a change of investment policy and new management and incentive arrangements.

On 7 March 2022, Shareholders approved the change in investment policy and new management and incentive arrangements.

Going concern

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. As disclosed further in Note 1, the Directors have considered the potential impact of the effects of COVID-19, the Russian invasion of Ukraine and the current inflationary environment on the Company's activities and do not consider that these will impact the Company's ability to operate as a going concern.

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 the AGM, the Company was obliged to return to Shareholders with proposals to either reorganise, restructure, or wind up the Company. Following extensive Shareholder consultation, a new investment policy was put before Shareholders which prioritised the intention to maximise the return of capital representing a change of strategy. In March 2022, this change of investment policy was approved by Shareholders.

The Board believes that it was in the interests of Shareholders as a whole for the Company to adopt a strategy of maximising capital returned 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, £76.7 million has been returned to Shareholders via such means.

In 2014, the Company acquired an initial shareholding in GI Dynamics. The Company believes that because of its intensive activism, it has been able to acquire majority ownership of a strategically valuable shareholding, which comprises 81.5% of GI Dynamic's diluted share capital. With board representation, the Company is actively involved in the management of GI Dynamics.

The Company looks forward to continuing to work with GI Dynamics 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 GI Dynamics the time it requires to maximise Shareholder returns.

In due course, the Company will consult with investors about the longer-term plans for GI Dynamics to realise value for the Company's Shareholders. A trade sale is a potential crystallisation path. Alternatively, as the Company continues its disposal programme of its listed investment portfolio, it is possible that the Company's listing may provide a suitable and cost-effective vehicle for GI Dynamics 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.

Long term viability

As further disclosed in the corporate governance note in the Report of the Directors, the Company is a member of the AIC and complies with the AIC Code. In accordance with the AIC Code, the Directors have made a robust assessment of the prospects of the Company over the two-year period ending 30 June 2024. The Directors consider that this is an appropriate period to assess the viability of the Company given the average length of investment in each portfolio company and the time horizon over which investment decisions are made.

In considering the prospects of the Company, the Directors have considered the risks facing the Company, giving particular attention to the principal risks identified below, the effectiveness of controls over those risks, the process in place for identifying emerging risks and have evaluated the sensitivities of the portfolio to market volatility.

The Directors have also considered the Company's income and expenditure projections over the two-year period ending 30 June 2024, the fact that the Company currently has no borrowings and that most of its investments comprise readily realisable securities which can be expected to be sold to meet funding requirements if necessary.

Based on the results of this analysis, including the Investment Manager Agreement, change in investment strategy and future strategic plans involving GI Dynamics, 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.

Principal risks and uncertainties

The Company has implemented a rigorous risk management framework including a comprehensive risk matrix that is reviewed and updated regularly. This ensures that procedures are in place to identify principal risks, mitigate and minimise the impact of those risks should they crystallise, and to identify emerging risks and determine whether any action is required. The Investment Manager has created a Risk Committee from which the Board receives quarterly reports. Fred Hervouet, one of the Board Directors, liaises with the Risk Committee and attends its regular meetings to offer an independent view and to enhance communication between the committee and the Board. The Directors have carried out a robust assessment of the principal risk areas relevant to the performance of the Company including those that would threaten its business model, future performance, solvency and liquidity and these are detailed below. As it is not possible to eliminate risks completely, the purpose of the Investment Manager's risk management policies and procedures is to reduce and manage risk and to ensure that the Company is as adequately prepared as reasonably possible to respond to such risks and to minimise their impact should they occur.

Continuation

As a result of the loss of the continuation vote, the Board, with Shareholder approval, 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. The Company previously announced, based on the Investment Manager's assessment of the status and timing of anticipated corporate transactions, that it was targeting additional Shareholder returns of at least £40 million or 50 pence per Share before 30 June 2022. The payment of the 10 pence a share dividend to Shareholders on 9 February 2022, representing a gross return of £8.3 million, was the first shareholder return towards achieving that target.

As stated in the Company's circular to Shareholders dated 15 February 2022 to convene an EGM, the Company, following consultation with several Shareholders, determined it was no longer in the interests of the Company to impose a fixed deadline for the return of capital, but would retain 31 December 2023 as a target. On 7 July 2022 the Company declared a further interim dividend of 10 pence per share in respect of the financial year ended 30 June 2022.

Regulatory compliance risk

A breach of regulatory rules could lead to a suspension of the Company's stock exchange listing or financial penalties. The Company Secretary monitors the Company's compliance with the AIM Rules in conjunction with the Nominated Adviser and compliance with these rules is reviewed by the Directors at each Board meeting.

One of the most significant regulatory risks for an activist investor such as the Company is in relation to market abuse provisions. The FCA has published guidance stating that in general it would not consider an activist shareholder's conduct to amount to market abuse where the shareholder merely carried out acquisitions of a target company's securities on the basis of the target company's intentions and the Company's knowledge of the target company's strategy.

However, the FCA has stated that if, for example, other shareholders trade in the target's shares on the basis of another shareholder's strategy, they may view such conduct as amounting to market abuse. There is no guarantee that other shareholders will not follow the Company's strategy, and, in certain circumstances the Company may act with, or be dependent upon, the support of other shareholders to implement its strategies. There is also no guarantee that the FCA's guidance will not change. The Company and its Advisers operate in a highly regulated environment and whilst they will always seek to take appropriate professional advice, there is a risk of an inadvertent breach of securities laws or regulations, or allegations of such breach, taking place.

The following risks, whilst they may affect the performance of the Company, will not in themselves affect the ability of the Company to operate.

'Key Man' risk

The Investment Adviser and the Investment Manager rely heavily on the expertise, knowledge and network of Richard Bernstein when sourcing investment opportunities. He is a Shareholder of the Company, a director and Shareholder of the Investment Manager and a member of the Investment Adviser and his loss to these service providers could have an adverse effect on the Company's performance. In the absence of Richard Bernstein, the Board and Investment Manager have sufficient relevant experience to manage the Company's portfolio while considering the future of the Company.

Portfolio concentration risk

By its very nature as an activist fund, the Company is exposed to the risk that its portfolio of investee companies is not sufficiently diversified to absorb the impact of a fall in value of some of its major investments. As noted in the Investment Policy, the Company seeks to invest in companies and use activism to unlock value. An inherent consequence of this policy is a portfolio concentrated on a number of key investee companies. The Board is aware of this risk and feels it is a necessary risk to take in order to provide returns through the investment strategy.

Levels of investment in individual companies have been monitored and parameters used to ensure that the aggregated risk of a more concentrated portfolio has been kept to an acceptable level.

Underlying investment performance risk

The Company invests in underlying investee companies, the majority of the securities of which are publicly traded or are offered to the public. The performance of these companies is likely to fluctuate due to a number of factors beyond the Company's control. The Investment Manager and Investment Adviser monitor investee company performance and share price movements on a daily basis. The Administrator prepares weekly portfolio valuation reports. The Investment Adviser engages with investee companies through regular meetings and reports to the Board. The Investment Manager and Investment Adviser also compare the Company's performance to the Numis Smaller Companies Index and investigate all underperformance and unrealised losses of the Company.

Market risk

The Company's investments include investments in companies the securities of which are publicly traded or are offered to the public and investments in unlisted companies. The market prices and values of these securities may be volatile and are likely to fluctuate due to a number of factors beyond the Company's control. These include actual and anticipated fluctuations in the quarterly, half yearly and annual results of the companies in which investments are made and other companies in the industries in which they operate and market perceptions concerning the availability of additional securities for sale.

They also include general economic, social or political developments, changes in industry conditions, shortfalls in operating results from levels forecast by securities analysts, the general state of the securities markets and other material events, such as significant management changes, refinancing, acquisitions and disposals. Changes in the values of these investments may adversely affect the Company's NAV and cause the market price of the Company's shares to fluctuate.

Shareholder concentration risk

A total of 10 investors with holdings of 3% or more each of the shares of the Company hold a combined total of 84.42% of the voting rights. A significant shareholder seeking liquidity could have a negative impact on the Company causing movements in Company share price through voting at an AGM, or by placing pressure on the Board to act to realise value in the portfolio at a sub-optimal time and value. To manage this risk the Investment Manager maintains regular contact with significant shareholders to discuss the performance of the Company and any views the shareholder may have.

Liquidity risk

The Company's ability to meet its obligations arising from financial liabilities could be reliant on its ability to reduce or exit investment holdings. This could be more difficult with the Company's less liquid portfolio holdings. To manage this risk, the cash and trade positions are monitored on a daily basis by the Investment Adviser and the Administrator. The liquidity of stocks is also considered at the point of recommendation by the Investment Adviser and prior to investment.

Inside information risk

The Company may, from time to time, be exposed to insider information. A breach of insider trading rules could lead to a suspension of the Company's stock exchange listing or financial penalties. This risk is mitigated and managed through continual monitoring and policy setting, which ensures all employees of the Investment Adviser clearly understand insider trading rules and adhere to all relevant procedures.

Implementation risk

The Company's ability to generate attractive returns for Shareholders depends upon the Investment Adviser's ability to assess future values that may be realised in connection with investments. The ability to assess future values and the timing thereof, whether in connection with the making of an investment or exiting from an investment, may be particularly important in the case of investments over which the Company has little or no control on its own. The ability of the Company to exit certain investments on favourable terms will be dependent (inter alia) upon the successful implementation of the strategic plans for such investee company and, in particular, the ability to persuade management to adopt such strategic plans. It will also depend on the relative liquidity of the stock of the investee company at that time.

Risks were identified in relation to the ongoing COVID-19 pandemic. Further details including mitigation strategies, are included within the going concern section of Note 1 to the Financial Statements.

In summary, the risks noted above are mitigated and managed by the Board, the Investment Manager and Investment Adviser through continual review of the portfolio, policy setting and updating the Company's risk matrix to ensure that procedures are in place to minimise their impact.

Further detail on the Company's risk factors is set out in the Company's admission document, available on the Company's website (www.crystalamber.com) and should be reviewed by Shareholders.

Details about the financial risks associated with the Company's investment portfolio and the way that investments are managed are given in Note 14 to the Financial Statements.

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. These APMs are detailed in full in the APMs section.

Ongoing charges

For the year ended 30 June 2022 the ongoing charges ratio of the Company was 1.95% (2021: 2.07%). The ongoing charges ratio has been calculated using AIC recommended methodology and is made up as follows:

Ongoing charges are those expenses of a type which are likely to recur in the foreseeable future, whether charged to capital or revenue, and which relate to the operation of the Company as a collective fund, excluding the costs of acquisition/disposal of investments, performance fees, financing charges and gains/losses arising on investments. Ongoing charges are based on costs incurred in the year as being the best estimate of future costs. The ongoing charges ratio is calculated by dividing the annualised ongoing charges by the average NAV for the financial year.

Directors

The Directors of the Company who served during the year and up to the date of this report are shown on the Directors section. Biographies of the Directors holding office as at 30 June 2022 and at the date of signing these Financial Statements are shown on the Directors section. 

Directors' interests

The interests of the Directors in the share capital of the Company at the year-end are disclosed in Note 16.

Directors' remuneration

The remuneration of the Directors during the year is disclosed in Note 16.

Directors' responsibilities to stakeholders

Section 172 of the UK Companies Act 2006 applies directly to UK domiciled companies. Nonetheless the AIC Code requires that the matters set out in Section 172 are reported by all companies, irrespective of domicile. This requirement does not conflict with the Companies Law in Guernsey.

Section 172 recognises that Directors are responsible for acting in a way that they consider, in good faith, is most likely to promote the success of the Company for the benefit of all of its Shareholders. In doing so, they are also required to consider the broader implications of their decisions and operations on other key stakeholders and their impact of those decisions on the wider community and the environment.

Key decisions are defined as those that are material to the Company, but also those that are significant to any of the Company's key stakeholder groups. The Company's engagement with its key stakeholders is discussed further in the corporate governance section of this report.

The Directors made or approved the following key decisions during the year, with the overall aim of promoting the success of the Company taking into account the likely impact on its members and wider stakeholders;

Dividends

During the year ended 30 June 2022, the Company paid dividends of £10,431,425 (2021: £2,107,376) from distributable reserves, as disclosed in Note 13.

The Directors also concluded that a dividend should be paid in this financial year. On 7 July 2022, the Company declared a dividend of £8,338,000 equating to 10 pence per Ordinary share, which was paid on 12 August 2022.

Charitable shares

During the prior year, the Company approved the issue of 125,000 shares to five separate charitable organisations in accordance with the authority granted to the Company by Shareholders at the 2019 AGM. The Company issued 125,000 shares on 25 September 2020 split equally amongst the following five charitable organisations: St Andrews Clinic for Children, Cancer Research UK, Feis Ceoil, James' Place and Sentable. The Directors recognise that more recently, the Shareholder base has changed significantly and consequently, the Directors decided that in recognition of the views articulated by newer Shareholders, the Company suspended future share issues to charities at this time. All Charitable shares issued have been redeemed and no charitable shares were issued in the year to 30 June 2022.

Substantial interests

As at 8 August 2022 the Company had been notified of the following voting rights of 3% or more of its total voting rights:

Statement of Directors' responsibilities

The Directors are responsible for preparing the Directors' Report and the Financial Statements in accordance with applicable law and regulations. 

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the Financial Statements in accordance with International Financial Reporting Standards, as issued by the IASB, and applicable law.

The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

· assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

· use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website (www.crystalamber.com), and for the preparation and dissemination of financial statements. Legislation in the United Kingdom and Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Disclosure of information to the Auditor

The Directors each confirm that they have complied with the above requirements in preparing the Financial Statements. They also confirm that so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware and that they have taken all the steps they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Corporate governance

As a Guernsey registered company, the share capital of which is admitted to trading on AIM, the Company is not required to comply with the FRC Code. However, the Directors recognise the value of sound corporate governance and it is the Company's policy to comply with best practice on good corporate governance that is applicable to investment companies.

The Board has considered the principles and provisions of the AIC Code. The AIC addresses the principles and provisions set out in the FRC Code and includes additional provisions on issues that are of specific relevance to the Company. The Board considers that reporting against the principles and provisions of the AIC Code, which has been endorsed by the FRC and the Guernsey Financial Services Commission, provides more relevant information to Shareholders. The Company has complied with the principles and provisions of the AIC Code. The AIC Code is available on the AIC's website, www.theaic.co.uk, which includes an explanation of how the AIC Code adapts the principles and provisions set out in the FRC Code to make them relevant for investment companies. The FRC Code is available on the FRC's website, www.frc.org.uk.

The GFSC Code came into force in Guernsey on 1 January 2012. Under the GFSC Code, the Company is deemed to satisfy the GFSC Code provided that it continues to conduct its governance in accordance with the requirements of the AIC Code.

The Company adheres to a Stewardship Code adopted from 14 June 2016. The Company's Stewardship Code incorporates the principles of the UK Stewardship Code. A copy of the Stewardship Code is available on the Company's website.

Environmental, social and governance report

As an investment company, the Company's activities only have a limited impact on the environment in which it operates. The Company has no employees and its registered office is based in Guernsey, where all of the Directors reside, thus minimising the need for extensive travel to attend Board or other meetings, with associated environmental impact.

Responsible investment principles have been applied to each of the investments made. These policies require the Company to make reasonable endeavours to procure the ongoing compliance of its portfolio companies with its own policies on responsible investment. The Company is an activist fund which aims to identify and invest in undervalued companies and, where necessary, take steps to enhance their value. Following investment, the Company and its advisers will also typically engage with the management of those companies with a view to enhancing value for all their shareholders, in line with the UK Stewardship Code.

Purpose, culture and values

Under the revised investment policy the Company has 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 GI Dynamics Inc) and returns of cash to Shareholders.

The Board has considered the Company's culture and values. As an investment company with no employees, it is considered that the culture and values of the Board are aligned with those of the Investment Manager and Investment Adviser, with a focus on constructive long term relationships with the Company's key stakeholders.

The Board

The Company is led and controlled by a Board of Directors, which is collectively responsible for the long-term success of the Company. The Company believes that the composition of the Board is a fundamental driver of its success as the Board must provide strong and effective leadership of the Company. The current Board was selected, as their biographies illustrate, to bring a breadth of knowledge, skills and business experience to the Company.

As at the date of this report, the Board comprises three Non-Executive Directors (2021: three), all of whom are considered to be independent of the Investment Manager and Investment Adviser and free from any business or other relationship that could materially interfere with the exercise of their judgement. Board appointments are considered by all members of the Board and have been made based on merit against objective criteria.

The Chairman of the Board is Christopher Waldron. The Board has taken note of the provisions of the AIC Code relating to independence and has determined that Mr Waldron is an independent director.

The Company has no employees and therefore there is no requirement for a Chief Executive, nor has it established a Senior Independent Director due to the size of the Board and the Company. The Board is satisfied that any relevant issues that arise can be properly considered by the Board.

A biography for the Chairman and all the other Directors follows in the next section, which sets out the range of investment, financial and business skills and experience they bring to the Board. The Directors believe that the current mix of skills, experience and length of service represented on the Board are appropriate for the requirements of the Company.

In view of the Board's non-executive nature and the requirement of the Articles of Incorporation that one third of Directors retire by rotation at least every three years, the Board considers that it is not appropriate for Directors to be appointed for a specified term as recommended by principle 3 of the AIC Code. In accordance with the publication of the 2019 AIC Code, which the Board adopted from 1 July 2019, all Directors will be subject to annual re-election.

None of the Directors has a contract of service with the Company. The Company has no executive Directors and no employees. However, the Board has engaged external companies to undertake the investment management, administrative and custodial activities of the Company. Clearly documented contractual arrangements are in place with these companies which define the areas where the Board has delegated certain responsibilities to them, but the Board retains accountability for all delegated responsibilities.

Chair tenure policy

The Company has adopted a chair tenure policy, whereby the Chair should normally serve no longer than nine years as a Director and Chair but, where it is considered to be in the best interests of the Company, its Shareholders and stakeholders, the Chair may serve for a limited time beyond that. In such circumstances, the independence of the other Directors will ensure that the Board as a whole remains independent.

The Company's view is that the continuity and experience of its Directors are important and that a suitable balance needs to be struck between the need for independence and refreshing the skills and expertise of the Board. The Company believes that some limited flexibility in its approach to Chair tenure will enable it to manage succession planning more effectively. 

Diversity policy

The Company monitors developments in corporate governance to ensure the Board remains aligned with best practice with respect to the increased focus on diversity. The Company has a Board diversity policy, which acknowledges the importance of diversity, for the effective functioning of the Board and commits to supporting diversity in the boardroom. It is the Board's ongoing aspiration to have a well-diversified membership. 

Performance and evaluation

Internal evaluation of the Board, the Committees and individual Directors is undertaken on an annual basis in the form of questionnaires, peer appraisal, and discussions to determine effectiveness and performance in various areas as well as the Directors' continued independence.

New Directors receive an induction on joining the Board, and all Directors receive other relevant training as necessary. Directors have regular contact with the Investment Manager to ensure that the Board remains regularly updated on all issues. All members of the Board are members of professional bodies and serve on other Boards, which ensures they are kept abreast of the latest technical developments in their areas of expertise.

Board responsibilities

The Board is responsible to Shareholders for the overall management of the Company. The Board has adopted a set of reserved powers which set out the particular duties of the Board. Such reserved powers include decisions relating to the determination of investment policy and oversight of the Investment Manager and their advisers, strategy, risk assessment, Board composition, capital raising, statutory obligations and public disclosure, financial reporting and entering into any material contracts by the Company.

The Directors have access to the advice and services of the Administrator and Secretary, who are responsible to the Board for ensuring that Board procedures are followed and that it complies with the Companies Law and applicable rules and regulations of the GFSC and the London Stock Exchange. Where necessary, in carrying out their duties, the Directors may seek independent professional advice at the expense of the Company.

The Company maintains appropriate directors' and officers' liability insurance in respect of legal action against its Directors on an ongoing basis. Investment Advisory services are provided to the Company by Crystal Amber Advisers (UK) LLP through the Investment Manager. The Board is responsible for setting the overall investment policy and has delegated day to day implementation of the Company's strategy to the Investment Manager but retains responsibility to ensure that adequate resources of the Company are directed in accordance with their decisions. The Board monitors the actions of the Investment Adviser and Investment Manager at regular Board meetings. The Board has also delegated administration and company secretarial services to Ocorian Administration (Guernsey) Limited but retains accountability for all functions it delegates.

The Directors are responsible for ensuring the effectiveness of the internal controls of the Company which are designed to ensure that proper accounting records are maintained, the financial information on which business decisions are made and which is issued for publication is reliable, and the assets of the Company are safeguarded. A formal review of the effectiveness of the Company's risk management and internal control systems is conducted at least once a year and this was completed successfully during the year under review. The Investment Manager has established a Risk Committee to monitor and manage risks faced by the Company.

The Board meets at least four times a year for regular, scheduled meetings and should the nature of the business of the Company require it, additional meetings may be held, some at short notice. Prior to each of its quarterly meetings, the Board receives reports from the Investment Adviser and Administrator covering activities during the period, performance of relevant markets, performance of the Company's assets, finance, compliance matters, working capital position and other areas of relevance to the Board. The Board also considers from time to time reports provided by the Investment Manager and other service providers. The Board also receives quarterly reports from the Risk Committee.

There is regular contact between the Board, the Investment Manager and the Administrator. The Directors maintain overall control and supervision of the Company's affairs.

There may be a requirement to hold Board meetings outside the scheduled quarterly meetings in order to review and consider investment opportunities and/or formal execution of documents and to consider ad hoc business.

Between meetings there is regular contact with the Investment Manager and the Administrator, and the Board requires information to be supplied in a timely manner by the Investment Manager, the Company Secretary and other advisers in a form and of a quality to enable it to discharge its duties.

The Board, through the Remuneration and Management Engagement Committee, is responsible for the appointment and monitoring of all service providers including the Investment Manager. It conducts a formal review of all service providers on an annual basis and confirms that such a review has taken place during the year.

Audit committee

Due to the size of the Board, all Directors are members of the Audit Committee. Jane Le Maitre acts as Chair of the Committee. The responsibilities of the Committee include reviewing the Annual Report and Audited Financial Statements, the Interim Report and Financial Statements, the system of internal controls and risk management, and the terms of appointment and remuneration of the Auditor. It is also the forum through which the Auditor reports to the Board.

The Committee met twice in the year ended 30 June 2022. Matters considered at these meetings included but were not limited to:

• review of the accounting policies and format of the financial statements;

• review of the Annual Report and Audited Financial Statements for the year ended 30 June 2021;

• review of the Interim Report and Unaudited Interim Condensed Financial Statements for the six months ended 31 December 2021;

• review of the audit plan and timetable for the preparation of the Annual Report and Audited Financial Statements for the year ended 30 June 2022;

• discussions and approval of the fee for the external audit;

• assessment of the effectiveness of the external audit process as described below;

• review of the Company's significant risks and internal controls;

• review and consideration of the AIC Code, the GFSC Code and the Stewardship Code; and

• detailed review of the 2022 Annual Report in relation to the AIC Code and determining the period of assessment for the long term viability of the Company.

The Committee considers the valuation of investments to be a significant matter in relation to these Financial Statements. The Company's accounting policy is to value investments as designated at fair value through profit or loss or as derivatives held for trading, and to recognise sales and purchases of those investments using trade date accounting. This is significant as the Company's investments and derivatives amount to 100.1% (30 June 2021: 98.9%) of the NAV. The Committee has satisfied itself that the sources used for pricing the Company's investments are appropriate and reliable.

The Committee also reviews the objectivity and independence of the Auditor. The Board considers KPMG Channel Islands Limited ("KPMG") to be independent of the Company. The audit fees disclosed in the profit or loss section of the Statement of Profit or Loss and Other Comprehensive Income are in relation to the audit of the Financial Statements. During the year, KPMG did not receive any remuneration from the Company for non-audit services. 

The Committee assessed the effectiveness of the audit process by considering KPMG's fulfilment of the agreed audit plan through the reporting presented to the Committee by KPMG and discussions at Committee meetings which highlighted the major issues that arose during the course of the audit. In addition, the Committee also sought feedback from the Investment Manager and the Administrator on the effectiveness of the audit process. The Committee was satisfied that there had been appropriate focus and challenge on the primary areas of audit risk and assessed the quality of the audit process to be good.

The external audit was initially put out to tender in 2008 when the Company's shares were listed and admitted to trading on AIM and KPMG was appointed. The lead audit partner changed in 2010 and 2015. The current lead audit partner took charge in 2020 and will change again by rotation in 2025. There are no obligations to restrict the Company's choice of external auditor. The external audit was put out to tender in 2017. Following a robust competitive tender process, the Committee concluded that the interests of the Company and its Shareholders would be best served by retaining the services of KPMG to provide a consistent audit approach.

The Board considers that an internal audit function specific to the Company is unnecessary and that the systems and procedures employed by the Investment Manager and the Administrator, including their own internal control functions, provide sufficient assurance that a sound system of internal control is maintained, which safeguards the Company's assets. Formal terms of reference for the Committee are available on the Company's website www.crystalamber.com.

Other committees

Although the AIC Code recommends that companies appoint a Nomination Committee, as the Board is wholly comprised of non-executive Directors the Board has not deemed this necessary and as such all matters are considered by the full Board.

The Board has established a Remuneration and Management Engagement Committee. Due to the size of the Board, all Directors are members of this committee. Fred Hervouet acts as Chairman of the committee. The Remuneration and Management Engagement Committee meets at least once a year pursuant to its terms of reference. It provides a formal mechanism for the review of the remuneration of the Chairman and Directors and review of the performance and remuneration of the Investment Manager, Investment Adviser and other service providers.

Remuneration policy

The Company aims to ensure remuneration is competitive, aligned with Shareholder interests, relatively simple and transparent, and compatible with the aim of attracting, recruiting and retaining suitably qualified and experienced directors.

In addition, the Board reviews the arrangements for the provision of management and other services to the Company on an ongoing basis. The Company receives regular reporting from the Investment Adviser and regular valuations of the Company's investments, which allows the Board to form a judgement as to the performance of its portfolio.

Board meetings, Committee meetings and Directors' attendance

One of the key criteria the Company uses when selecting Directors is their confirmation prior to their appointment that they will be able to allocate sufficient time to the Company to discharge their responsibilities in a timely and effective manner.

The Board formally met four times during the year and other ad hoc Board committee meetings were called in relation to specific events or to issue approvals, often at short notice and did not necessarily require full attendance. Directors are encouraged to give the Chairman their views and comments on matters to be discussed, in advance when they are unable to attend a meeting.

Attendance at the quarterly Board meetings is further set out below:

In addition to the above, there were two additional Board committee meetings during the year.

Engagement with stakeholders

The Company is committed to maintaining good communications and building positive relationships with all stakeholders, including Shareholders, suppliers, investee companies, and the wider community and environment in which the Company and its investee companies operate. This includes regular engagement with the Company's Shareholders and other stakeholders by the Board, the Investment Manager, Investment Adviser and the Administrator. Regular feedback is provided to Board members to ensure they understand the views of stakeholders.

Relations with Shareholders

The Board welcomes the views of Shareholders and places great importance on communication with its shareholders. Senior members of the Investment Adviser make themselves available to meet with principal Shareholders and key sector analysts. The Chairman and other Directors are also available to meet with Shareholders, if required.

All Shareholders have the opportunity to ask questions of the Company at its registered office. The Annual General Meeting of the Company provides a forum for Shareholders to meet and discuss issues with the Directors and Investment Adviser. Company information is also available to Shareholders on the Company's website www.crystalamber.com.

The Board regularly monitors the shareholder profile of the Company and receives comprehensive shareholder reports from the Company's Broker at all quarterly board meetings.

The Company recognises that relationships with suppliers are enhanced by prompt payment and the Company's Administrator ensures all payments are processed within the contractual terms agreed with individual suppliers.

Key decisions made or approved by the Directors during the year and the impact of those decisions on the Company's Shareholders and wider stakeholders is disclosed further in Report of the Directors section of the financial statements.

Whistleblowing

The Board has considered the AIC Code recommendations in respect of arrangements by which staff of the Investment Adviser or Administrator may, in confidence, raise concerns within their respective organisations about possible improprieties in matters of financial reporting or other issues. It has concluded that adequate arrangements are in place for the proportionate and independent investigation of such matters and, where necessary, for appropriate follow up action to be taken within their respective organisations.

AIFM Directive

The Company is categorised as an externally managed non-EU AIF under the AIFM Directive. The Investment Manager of the Company is its non-EU AIFM. The Investment Manager as the AIFM has created a Risk Committee which meets at least quarterly to consider the risks faced by the Company and the investment process, consistent with the requirements of the AIFM Directive. The AIFM has adopted a remuneration policy which accords with the principles established by the AIFM Directive. The remuneration policy is in compliance with the requirements of the AIFM Directive and the guidance issued by the FCA. The Investment Manager in its capacity as the AIFM does not have any employees. Mark Huntley and Laurence McNairn of Crystal Amber Asset Management (Guernsey) Limited and as directors of the AIFM received total aggregate remuneration of £30,000 by way of a fixed fee for the year ended 30 June 2022. No variable fee elements of remuneration were paid to the Directors of the AIFM.

The AIFM Directive outlines the information which has to be made available to investors in an AIF and directs that material changes to this information be disclosed in the Annual Report of the AIF. All information required to be disclosed under the AIFM Directive is either disclosed in this Annual Report or on the Company's website www.crystalamber.com.

AEOI Rules

Under AEOI Rules, the Company is registered under FATCA and continues to comply with both FATCA and CRS requirements to the extent relevant to the Company.

NMPI

The Board has been advised that the Company would satisfy the criteria for being an investment trust if it was resident in the UK. Accordingly, the Board has concluded that the Company's Ordinary shares are not non-mainstream pooled investments for the purposes of the FCA rules regarding the restrictions on the promotion to retail investors of unregulated collective investment schemes and close substitutes. This means that the restrictions on promotion imposed by the FCA rules do not apply to the Company. It is the Board's intention that the Company conducts its affairs so that these restrictions will continue to remain inapplicable.

Independent auditor

KPMG has agreed to offer itself for re-appointment as Auditor of the Company and a resolution proposing re-appointment and authorising the Directors to determine remuneration will be presented at the Annual General Meeting.

Annual General Meeting

The Annual General Meeting of the Company will be held at 10:00am on 23 November 2022 at the offices of Ocorian Administration (Guernsey) Limited, Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey.

On behalf of the Board

Christopher Waldron Jane Le Maitre

Chairman Director

29 September 2022 29 September 2022

Directors

Christopher Waldron Guernsey Resident, (appointed 1 July 2014)

Non-Executive Chairman (with effect from 23 November 2017)

Christopher Waldron has over 35 years' experience as an investment manager, specialising in fixed income, hedging strategies and alternative investment mandates and until 2013 was Chief Executive of the Edmond de Rothschild Group in the Channel Islands. Prior to joining the Edmond de Rothschild Group in 1999, Mr Waldron held investment management positions with Bank of Bermuda, the Jardine Matheson Group and Fortis but he is now primarily an independent non-executive director of a number of listed funds and investment companies. From 2014 to 2020 he was a member of the States of Guernsey's Investment and Bond Sub-Committee. He is a Fellow of the Chartered Institute of Securities and Investment.

Jane Le Maitre, Guernsey Resident, Non-Executive Director (appointed 8 May 2017)

Jane Le Maitre has over 30 years' experience in the Finance Industry in the UK and Guernsey. She is a Fellow of the Institute of Chartered Accountants in England & Wales, a Chartered Tax Adviser and a member of the Institute of Directors. She trained in audit with Coopers & Lybrand in the UK and joined the tax and fiduciary division of KPMG (Channel Islands) in 1989. She became a Partner in 1995 where she remained until 2000 before becoming a director in the fiduciary division at Kleinwort Benson. After 5 years with Kleinwort Benson, she joined the Intertrust Group in Guernsey becoming Managing Director of Intertrust Reads Private Clients Limited for a period of 6 years and held other Intertrust Board positions until September 2021. She is now an independent Director and Trustee of a number of private client structures and continues to hold executive positions in a number of unlisted property and investment holding entities.

Fred Hervouet, Guernsey Resident, Non-Executive Director (appointed 6 December 2017)

Fred Hervouet has over 20 years' experience of working in different areas of the Financial Markets and Asset Management Industry. His experience includes Fixed Income and Derivatives Markets, Structured Finance, Structured Products, Trading and Risk Management. Prior to moving to Guernsey in December 2013, he was Managing Director and Head of Commodity Derivatives Asia for BNP Paribas. He holds a number of non-executive director positions on LSE listed funds and Private Equity funds including Chenavari Toro Income Fund Limited, where he is chairman. He holds a Masters' Degree in Financial Markets, Commodity Markets and Risk Management from University Paris Dauphine and an MSc in Applied Mathematics and International Finance. He is a member of the UK Institute of Directors and the UK Association of Investment Companies.

In addition to their directorships of the Company, the Directors currently hold the following directorships of listed companies: