Investment Policy

Investment Policy

Investment limits and guidelines

• The Company will not invest more than 15% of the portfolio in any one individual stock at the time of acquisition.

• At least 50% of the portfolio will normally be invested in larger companies (i.e. with a market capitalisation of at least US $10bn).

• At least 20% of the portfolio will normally be invested in smaller companies (i.e. with a market capitalisation of less than US $10bn).

• Investment in unquoted securities will not exceed 10% of the portfolio at the time of acquisition.

• A maximum of 5% of the portfolio, at the time of acquisition, may be invested in each of debt instruments, convertibles and royalty bonds issued by pharmaceutical and biotechnology companies.

• A maximum of 40% of the portfolio, at the time of acquisition, may be invested in companies in the healthcare equipment and supplies sector; and a maximum of 30% of the portfolio, at the time of acquisition, may be invested in companies in the healthcare providers and services sector.

• The Company will not invest more than 10% of its gross assets in other closed-ended investment companies (including investment trusts) listed on the London Stock Exchange, except where the investment companies themselves have stated investment policies to invest no more than 15% of their gross assets in other closed-ended investment companies (including investment trusts) listed on the London Stock Exchange, where such investments shall be limited to 15% of the Company’s gross assets at the time of acquisition.

Derivative strategy and limits

In line with the investment objective, derivatives are employed, when appropriate, in an effort to enhance returns and to improve the risk-return profile of the Company’s portfolio. Only equity swaps were employed within the portfolio during the year. The Board has set the following limits within which derivative exposures are managed:

• Derivative transactions (excluding equity swaps) can be used to mitigate risk and/or enhance capital returns and will be restricted to a net exposure of 5% of the portfolio.

• Equity swaps may be used in order to meet the Company’s investment objective of achieving a high level of capital growth, and counterparty exposure through these is restricted to 12% of the gross assets of the Company at the time of acquisition.

• The Company does not currently hedge against foreign currency exposure.

Gearing limit

• The Board has set a maximum gearing level, through borrowing, of 20% of the net assets.

Leverage limits

• Under the AIFMD the Company is required to set maximum leverage limits. Leverage under the AIFMD is defined as any method by which the total exposure of an AIF is increased.

• The Company has two current sources of leverage: the overdraft facility, which is subject to the gearing limit; and derivatives, which are subject to the separate derivative limits. The Board and Frostrow have set a maximum leverage limit of 140% on both the commitment and gross basis