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Major Holdings The Fund's major holdings are disclosed in the monthly NAV announcements, which can be found in the News section. Quarter-end NAV announcements also include a commentary on some of the Fund's investments.

The holdings list and comments below were included in the Fund's Annual Report for the 12 months ended 30 June 2021.

01. De La Rue plc

De La Rue plc ("De la Rue")
De La Rue's Currency Division designs and prints banknotes and produces related components, including security features. The Authentication Division supplies tax stamps and products and software to authenticate and track individual products throughout their supply chains, and it produces components for inclusion within individual identity documents such as passports. The Fund's previous annual reports include additional background information on this investment.

In July 2020, De La Rue completed a £100 million equity fundraise, which was priced at 110 pence per share. The Fund participated in the firm placing and open offer elements of the raise. The company now has an almost debt-free balance sheet, a vastly improved pension funding schedule, bank facilities extended until December 2023 and, most significantly, a fully funded turnaround plan. This is proceeding well, with a reduced cost base and revised strategy for the currency division focused on polymer note printing and a renewed focus on authentication opportunities.

De La Rue published full year results to 31 March 2021 on 26 May 2021 and reported adjusted operating profits of £38.1 million. The Currency Division achieved 100% banknote capacity utilisation and strong margin progression. Its polymer growth plans also saw encouraging progress. The Authentication Division secured £195 million of expected multi-year contract value.

The Fund continues to believe that De La Rue enjoys a combination of strong competitive positions in high return businesses and attractive growth opportunities. It holds a 30% market share of global commercial banknote printing. Bank notes will continue to be in demand even in cashless societies as they are needed for currency reserves and wealth storage. The product cycle of 7-12 years is mainly driven by counterfeit risks. This drives the conversion of notes to polymer substrates, which currently only accounts for 4% of notes in issue. Furthermore, the company's core market is developing countries where demand for cash is expected to track economic and demographic growth. De la Rue is well placed to capitalise on the structural shift towards polymer notes. Over the year, the company has announced new contracts in its higher margin Authentication Division. The H2 2021 revenues of £45.9 million suggest that the £100 million Authentication target revenue for FY22 is well underpinned.

Over the year, the essential management changes instigated by the Fund continued to bear fruit. Nevertheless, De La Rue's share price trades on a multiple of just 0.9 of current year revenues and on a PE multiple of 12 times earnings. On consensus estimates for the following year, the revenue multiple is forecast at 0.8 and the PE multiple at 9. The Fund strongly believes that De La Rue's equity valuation is significantly underpriced. Unless the stock market is prepared to value De La Rue appropriately, Crystal Amber anticipates that a trade buyer or buyers are likely to intervene to acquire the business.

02. GI Dynamics Inc.

GI Dynamics Inc ("GI Dynamics")
GI Dynamics is the developer of the EndoBarrier, a minimally invasive therapy for the treatment of Type 2 diabetes and obesity. EndoBarrier is a temporary bypass sleeve that is endoscopically delivered to the duodenal intestine. It offers similar effects to the surgical gastric bypass, without the risks of a major surgical procedure. The Fund's previous annual reports contain the background to the company and the Fund's investment.

During the year, GI Dynamics delisted from the Australian stock exchange. Its board and CEO were replaced with new executives and directors with medical device experience. As part of a $10 million investment in preferred stock, the Fund's senior secured loan was converted, and warrants were cancelled. The Fund currently owns one $4.9 million convertible loan note, together with preferred and common stock.

While COVID 19 delayed the company's progress in 2020, it highlighted the need to address the prevalence of Type II diabetes and obesity. During this year, as a result of the lifting of COVID19 restrictions and widespread vaccine access in the US, GID has been able to recommence enrolment to its clinical trial. After delays due to the COVID 19 surge in India, the I-STEP application for a randomised clinical trial (to be conducted in conjunction with Apollo Sugar Clinics) was reviewed by regulators in India in June 2021. GI Dynamics is in the process of filing its application to commercialise EndoBarrier under the new Medical Device Regulations (MDR) which will allow access throughout the EU. The first milestone toward achieving CE Mark for European regulatory approval was achieved in November 2020 as GI Dynamics successfully completed the required ISO Certification audit.

The global pandemic has reaffirmed the importance of gaining control of the significant risk factors associated with Type II diabetes and obesity. More than ever, medical professionals and patients alike are seeking minimally invasive and effective therapies so help control and resolve these chronic conditions. GI Dynamics is preparing to meet this large unmet clinical need.

03. Equals Group plc

Equals Group plc ("Equals")
Equals is an e-banking and international payment services provider. It serves retail and business customers mainly in the United Kingdom under an e-money licence. Equals provides faster, cheaper and more convenient money management than traditional banking services with bank-grade UK domestic clearance. In June 2019, the company rebranded from FairFX to Equals to reflect the broader range of services it now offers that go beyond foreign currency. The Fund's previous annual reports include additional background to this investment.

Inevitably, from March 2020 Equals was adversely affected by the enormous restrictions on international travel. Shortly after, its supply chain was temporarily disrupted with the demise of payment processor Wirecard. These two events impacted Equals after a period of increased investment in its product suite which also increased its cost base. Equals successfully dealt with these challenges and continued its transition towards B2B, growing those revenues by 10% in 2020. It also improved its supply chain with new payment processors and user interfaces that will become available across product lines. Management also realigned its cost base from £1.2 million of base pay per month in January 2020 to £0.9 million in June 2021. In 2020, B2C revenues fell by 30% due to the impact of the pandemic on travel. However, as a result of strong growth elsewhere in the business, this represented less than 5% of revenue in Q2 2021.

Equals' proposition to SMEs is compelling relative to that offered by legacy banks. The Fund believes that better understanding of the economics of higher lifetime value business customers will improve perceptions of Equals' prospects. The company's assets include over one million customers, an upgraded technology platform and licences and industry relationships built over many years. With larger players keen to acquire fintech capabilities, the Fund believes Equals is an attractive takeover candidate.

On 14 September 2021, Equals reported strong underlying sales growth, positive operational cash flow and current quarter revenue up by 58 per cent year on year. As the largest shareholder in Equals and having worked closely with management over the last 18 months, it is pleasing to report on both the turnaround and the momentum that the business now enjoys.

04. Hurricane Energy plc

Hurricane Energy ("Hurricane")
Hurricane is an oil exploration and production company targeting naturally fractured basement reservoirs in the West of Shetland. The Fund's previous annual reports include background information on this investment. The Fund has been an investor in Hurricane since 2013 and has to date realised profits of £43 million.

For the year under review, our intensive engagement with the board of directors culminated in the resignation of all five of the company's non-executive directors. This took place only hours before the AGM shareholder vote. In their stead, John Wright and David Craik, two experienced sector specialists who have been advising the Fund on Hurricane for several years, were appointed. The general meeting that the Fund had requisitioned to make these changes was therefore no longer required.

In June 2021 at the High Court, Mr Justice Zacaroli refused to sanction the Hurricane board's attempt to force through a highly dilutive debt for equity swap. 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. The coupon on the existing bonds is 7.5%.

Mr Justice Zacaroli referred in his judgment to the continued profitable trading at Hurricane and the prospects of that continuing long into the future. In this regard, Bluewater Energy Services B.V. (from whom Hurricane leases the FPSO - Floating Production Storage and Offloading - vessel) made contact directly with Crystal Amber and stated that it remains very keen to progress discussions and investigate solutions and proposals to extend the charter beyond June 2022. Last month, Hurricane confirmed that it is engaged in positive negotiations on securing an extension.

The threat of massive equity dilution combined with continued downbeat comments from the previous board with regard to the company's future prospects, heavily contributed to what has been 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 buyback 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 Fund has written to the Hurricane Board under Article 94 of the company's articles of association to request that a committee (comprising the non-executive directors) be established with a mandate to investigate what happened and to engage external advisers (should that be needed) for the investigation.. The committee would then make a recommendation to the Hurricane Board.

Whilst the Fund would have preferred not to have had to endure the past 18 months as a shareholder in Hurricane, the share price weakness enabled the Fund to take advantage by more than doubling its shareholding from 1 January 2021 to 30 June 2021 to 22.6% and it successfully defended the interests of all shareholders on a crucial point of law. The Fund currently owns more than 25% of Hurricane and is the largest shareholder.

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 Fund 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 has reduced Hurricane's capital and interest obligations by approximately $22 million. This represents an important and material saving. Without the Fund's successful intervention at the High Court, this would not have happened.

The Fund now believes that Hurricane must secure an extension with Bluewater Energy Services B.V. (from whom Hurricane leases the Floating Production Storage and Offloading vessel). This will secure the prospects of significantly increased free cash flow generation for equity holders. The Fund believes that a twelve month extension is required.

Latest production information from Hurricane is that its P6 well is producing 11,100 barrels per day. This compares well with the company's production forecasts (released in May 2021) estimating production for August 2021 at 9,500 barrels per day. Production for June and July were also ahead of forecast. The latest production shipment in August 2021 was for 505,000 barrels and it is estimated that this generated around $34 million of revenue.

At anticipated production levels, the Fund estimates that by February 2024, 8.3 million barrels will be produced. At a selling price of $68 a barrel, $570 million of revenues will be achieved. Based on historic margins, this would deliver operating cash flows of around $250 million. By the time the bonds are due to be repaid, the Fund estimates that 3.3 million barrels can be produced, generating $227 million of revenue and around $110 million of operating cash flow. These revenues and cash flows are taken from the current oil producing asset within Hurricane's portfolio. Set against this context, whilst inevitable production risk remains, the Fund believes the prospects for Hurricane are far better than has been presented by its executives.

The Fund notes and welcomes that since the court hearing, actual production achieved has been running materially ahead of budget and in August, it exceeded budget by more than 20 per cent at 11,467 barrels a day.

05. Allied Minds plc

Allied Minds plc ("Allied Minds")
Allied Minds is an IP commercialisation business focused on early-stage company development within the US technology sector. In 2019, it announced that it would henceforth focus on maximising returns and shareholder distributions from its existing portfolio, rather than continuing to invest in new businesses. The portfolio contains three significant holdings: Federated Wireless, BridgeComm and Orbital Sidekick, all of which have raised capital from third parties including strategic investors. As at 30 June 2021, Allied Minds had cash of $17.8 million, plus three smaller stakes in other technology and life-sciences companies. The Fund's previous annual reports include additional background to this investment.

Over the year, the Fund focused on securing further reductions in parent company costs and improved transparency of progress of the underlying investments, all of which are unlisted.

In January 2021, the CEO left the business, shortly after Allied Minds revealed that its investee company Spin Memory faced a "significant liquidity issue," stating "a down-round financing is not uncommon in early venture companies." The Fund notes that Allied Minds commenced its investment in Spin Memory in 2007 and considers that if Spin Memory was still characterised as an early venture company some 13 years later, this reflects poorly on the management of Allied Minds given that Allied Minds is the largest shareholder of Spin Memory with an interest of 43%. In June 2021, Allied Minds announced that Spin Memory would be liquidated and there could be no guarantee that Allied Minds would receive any return of capital. Allied Minds has invested $50.5 million in Spin Memory since 2007.

The investments are now managed directly by the three non-executive board directors.

In August 2021, Allied Minds reported that Federated Wireless Inc had met its revenue expectations for its first half and was on track to meet its full year plan. The most encouraging aspect of last month's update related to Occu Terra Therapeutics Inc ("Occu Terra Therapeutics"), a clinical stage ophthalmology drug development company in which Allied Minds has a fully diluted holding of 13%. This had been a passive holding and had been provided for in full. Occu Terra Therapeutics has recently closed a $31.5 million funding round at a post money valuation of $48.9 million.

In May 2021, the Fund voted against the re-election of Chairman Harry Rein and non-executive director Bruce Failing. At the meeting, the vote against Harry Rein's re-election was 47.1% and 37.3% against Bruce Failing.

Whilst the Fund believes that the current share price of 23 pence fails to reflect the net asset value of around 45 pence, realising the inherent value of the portfolio and return of proceeds to shareholders would be accelerated and enhanced either by the removal of Harry Rein and Bruce Failing and replacement with alternative directors, or a corporate solution. Accordingly, the Fund has commenced discussions with third parties with this objective in mind.

Previous profitable exits include Dart Group plc, Pinewood Group plc, 4imprint Group plc, Aer Lingus Group plc, Thorntons plc, Norcros plc, 3i Quoted Limited Private Equity, Delta plc, Kentz Corporation Limited, Tate & Lyle, Chloride Group plc, NCC, Ocado and Boku.