Investment Policy

Investment Objective

The Company will seek investments in securities that the Investment Manager believes can generate a 15 per cent. IRR1 over the medium to long-term, principally through capital appreciation, and would typically expect a holding period of at least three to five years.

Investments will be sought where the securities are valued at less than the Investment Manager’s view of their intrinsic value. The Investment Manager will seek to invest in businesses which it believes offer opportunities for value to be unlocked or created through strategic, management or operational changes, typically leading to improved returns, profits and growth.

For larger, ‘core’ holdings, the Company will seek to acquire influential block stakes (targeting between 5 per cent. and 25 per cent. of the ‘core’ holdings issued ordinary share capital) for cash or share consideration and in conjunction with other funds run by the Investment Manager when additional capital is needed.

Investment Policy

The Company has an active investing policy and will invest predominantly in a diversified portfolio of publicly listed or quoted UK equities capitalised under £250 million at the point of investment. The Company will retain flexibility to invest in non-listed investments in certain situations that will not cumulatively exceed 15 per cent. of the Company’s Net Asset Value (NAV) at the time of any investment.

The Company intends to invest the majority of its capital in a concentrated portfolio of up to 10 ‘core’ investments. Initial holding weightings are expected to represent between 4 to 15 per cent. of the NAV at the time of investment, although the Company will have discretion to invest up to 20 per cent. of NAV, at the time of investment, in a single holding or in the securities of any one issuer, if a suitable opportunity arises. The remainder of the portfolio is expected to be invested in a focused group of between 15-25 investments. These will meet the investment criteria but are where the opportunity to establish a ‘core’ size investment has not arisen yet, or are more liquid corporate recovery/’special’ situations where the targeted return objectives can be expected but where a large stake is not deemed necessary to influence or generate change.

The Company will not be required to dispose of any investment or to rebalance the portfolio as a result of a change in the respective valuations of its assets.

For maximum flexibility, given the full range of potential future corporate situations ‘core’ investments may result in the Company investing directly or indirectly in companies listed in nonUK OECD countries (e.g. demerged overseas division or a re-listing elsewhere). Non-UK OECD investments will cumulatively not exceed 25 per cent. of NAV at the time of investment.

The investment policy will not be to seek or target investments in privately held companies, however, in order to ensure the maximum realisation of shareholder value, these will be allowable if: (i) a public-to-private transaction occurs, and/or (ii) the investment is unlisted preferred equity and convertible debt and other debt instruments enabling flexibility of exposure within the capital structure when ‘core’ investments are identified.

The Company may, from time to time, use borrowing for short-term liquidity purposes, which could be achieved by putting a bank facility in place or other types of borrowing instruments, but will limit borrowing to no more than 20 per cent. of gross assets, calculated at the time of drawdown of the relevant borrowings.

The Company will not invest in other listed closed ended investment funds.

No material change will be made to the investment policy without the prior approval of Shareholders by ordinary resolution and the prior approval of the FCA in accordance with the Listing Rules.

1. The IRR target above is a target only and not a profit forecast. There can be no assurance that the target will be met. Accordingly, potential investors should not place any reliance on this target in deciding whether or not to invest in the Company.

a few major opportunities clearly recognisable as such will usually come to one who continuously searches and waits with a curious mind that loves diagnosis involving multiple variables. And then all that is required is a willingness to bet heavily when the odds are extremely favourable using resources available as a result of prudence and patience in the past"

Charlie Munger