Investment Policy, Strategy and Benchmark

The investment policy adopted by the Board, which constitutes the Company’s business model, is to invest in a portfolio of quoted and unquoted special situations, which may not normally be available to the general public, with the objective of achieving growth of shareholder value. By the very nature of special situation investments, the opportunity to invest in them will arise at any time and often not for long periods. Sometimes a number of opportunities may arise at the same time. Any single investment may, on occasion, constitute a significant proportion of the portfolio and/or that of the company concerned.

The investment strategy of the Company has evolved over time, but it has always been managed with a strong focus on seeking out undervalued investments. The Company has historically comprised a portfolio of special situations in UK equities, combined with a strategic stake in Ocean Wilsons Holdings Limited. The Company continues to invest in these assets, but the updated investment strategy introduced at the start of the year includes a wider remit that spans other asset classes and geographies. Typically, the non‑UK equity exposure is achieved through investment in funds managed by third party managers with whom we have relationships through Hansa Capital Partners’ activities. Many of the investments are not readily available to the general public. The final part of the Company’s portfolio reflects its size and flexible structure, as we are always on the lookout for unconventional investments, which often cannot be accommodated by more traditional, larger fund managers, typically less flexible in their approach. These more eclectic investments range from those sectors benefiting from structurally higher growth, such as biotechnology, to assets which we believe stand on unwarranted discounts to their true intrinsic value, including other investment trusts.

This investment approach may well produce returns which are not replicated by movements in any market index.

Returns are compared with an absolute benchmark derived from the three year average rolling rate of return of a five year UK Government bond, plus 2% with interest being reinvested semi‑annually. Investments are intended to add value over the medium to longer term through a non‑market correlated, conviction based investment style.

The Portfolio Manager is charged by the Board to implement the investment policy under its supervision and guidance. It is important for the Portfolio Manager to be able to vary any investment at any time, in order either to protect shareholders’ funds and/or to optimise shareholders’ returns.

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