STRATEGIC EQUITY CAPITAL PLC

Q4 Update 2016

2

Notice to recipients This document is given to the recipient on condition that the recipient accepts that it is not a client of GVQ Investment Management Limited (“GVQIM”) and that hence, none of the client protections applicable to GVQIM’s clients are in fact in force or available, and GVQIM is not providing any financial or other advice to it.

This document has been issued by GVQIM in the UK solely for the purposes of section 21 of the UK Financial Services and Markets Act 2000. GVQIM, whose registered office is at 12-13 St. James’s Place, London SW1A 1NX, is registered in England: No 4493500 and is authorised and regulated by the UK Financial Conduct Authority.

The information contained in this presentation is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations for financial, securities, investment or other advice or to take any decision. You are encouraged to seek individual advice from your personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product.

The investments referred to in this presentation are only suitable for investors who are capable of evaluating the merits and risks of such investments and who have sufficient resources to be able to bear any losses which may arise from that investment (taking into account the fact those losses may be equal to the whole amount invested).

The information contained in this presentation is provided for general information and is not comprehensive and has not been prepared for any other purpose. Any financial, securities or investment related service or product referred to may not be available to all customers or in all cases; may be available only where specifically requested and agreed upon; may be associated with certain specific fees and conditions and may be materially different than as described.

Risk considerations:

You should remember that the value of investments, and the income from them, may go down as well as up, and is not guaranteed, and investors may not get back the amount of money invested. Past performance cannot be relied on as a guide to future performance. Exchange rate changes may cause the value of overseas investments or investments denominated in different currencies to rise or fall.

In addition, there is no guarantee that the market price of shares will fully reflect their underlying net asset value and it is not uncommon for the market price of such shares to trade at a substantial discount to their net asset value.

The unconstrained, long term philosophy and concentrated portfolios resulting from GVQIM’s investment style can lead to periods of significant short term variances of performance relative to comparative indices. GVQIM believes that evaluating performance over rolling periods of no less than three years, as well as assessing risk taken to generate these returns, is most appropriate given the investment style and horizon. Properly executed, GVQIM believes that this investment style can generate attractive long term risk adjusted returns.

These are not all the risks of an investment in Strategic Equity Capital Plc shares (“Strategic Equity Capital” or “SEC”). Investors should take advice from their own independent, professional financial advisers before making an investment decision and are responsible for ascertaining any income tax or other tax consequences which may affect their acquisition of any investment. FE Crown Rating : 4 crown rating issued July 2016 Morningstar RatingTM for 3 and 5 Years: 5 star rating first issued October 2013 Money Observer: Rated Fund as at 31st March 2016 Runner Up 2016, Winner 2015, Highly Commended 2014: Money Observer Trust Awards. Category: Best UK Equity Trust Highly Commended 2016, Winner 2015, Highly Commended 2014: Moneywise Investment Trust Awards . Category: UK Smaller Companies Winner 2015 and 2014: What Investment Trust Awards . Category: Best UK Investment Trust Winner 2015: Investment Adviser 100 Club Awards . Category: UK Smaller Companies Winner 2015: Grant Thornton Quoted Company Awards . Category: Fund Manager of the Year Winner 2014: PLC Awards . Category: Fund Manager of the Year Winner 2014: Investment Week, Investment Company of the Year Awards . Category: UK Smaller Companies Highly Commended 2012: Money Observer Trust Awards . Category: Best UK Smaller Companies Trust Winner 2011: Investment Trust Magazine . Category: Best Small Companies Trust

3

Contents

Q4 update 2016

• Summary & highlights 5

• Performance 7

• Detailed portfolio analysis 13

Outlook 17

Appendix 30

Q4 UPDATE 2016

5

Q4 2016 Executive summary • Net assets per share increased by 1.2%1 over the period, with net cash averaging 15.2% over Q4

• FTSE Smaller Companies ex Investment Trusts Index increased by 4.6% in Q4 2016. We estimate that the IA

UK Smaller Companies sector increased by 4.2%1

• Lack of exposure to resources stocks has contributed to the NAV lagging broader markets over the last year • Net cash balance decreased from 17.0% to end the period at 11.2%

• Recommended bid for longstanding portfolio company E2V at a 48% premium from US trade peer Teledyne.

Completion expected mid March 2017

• Forecast portfolio earnings growth continues to exceed the FTSE Smaller Companies Index, despite much lower financial gearing of the portfolio. Portfolio also less geared than equivalent AIM companies1

• Portfolio rating has reduced both Year on Year and Quarter on Quarter. Rating even lower ex E2V and Tribal

(former subject to agreed bid; latter on recovery multiple)

• We believe that there is significant earnings “self-help” within the portfolio, as well as companies which are trading on considerable discounts to precedent M&A multiples

Share price & discount • Average discount of c.10.8%1 over the quarter, ending the period at c.11.4%

As at 31st December 2016 Source: 1. Bloomberg; Capita; Factset; iii; Trustnet & GVQIM Note: IA = Investment Association – UK Smaller Company OEICs Past performance is no guarantee of future performance and the value of investments can go down as well as up

6

Q4 2016 Highlights

Investment highlights1: • Net assets per share increased by 1.2%, compared with the 4.6% rise in the FTSE Smaller Companies (ex

investment trusts) index

• 11.2% net cash at the end of December reflects top up investments made in November and early December. >5% points of cash deployed

• Portfolio forward earnings growth marginally increased from 12.7% to 13.0% over the quarter. Portfolio p/e rating has reduced by 0.8x to 16.4x

• Takeover of E2V provides clean exit at a reasonable price. Excellent long term investment, which we have been highly engaged with. Cash will arrive in late March 2017

• Portfolio companies generally trading well. News flow limited but typically positive Unaudited financial highlights1: • Net assets of 225.1p per share2

• Average discount in Q4 2016 was 10.8% compared to a discount of 7.5% in Q3 20163

As at 31st December 2016 Source: 1. Bloomberg, Capita, GVQIM. 2. NAV unaudited. 3. Bloomberg Past performance is no guarantee of future performance and the value of investments can go down as well as up

Net investment of c.5% points over the quarter in existing holdings. E2V takeover provides capital for 2017

7

Long term track record

As at 31st December 2016 Source: IA; Bloomberg; Capita; iii data Note: 1. FTSE Small Cap, FTSE 250 and IA data rebased to SEC start NAV June 2009. 2. CAGR: compound annual growth rate Past performance is no guarantee of future performance and the value of investments can go down as well as up

CAGR2

FTSE Small Cap ex IT 15.8%

Strong cumulative performance since process improvements in June 2009. No use of gearing or derivatives

FTSE 250 ex IT 16.2%

SEC NAV 22.7%

IA UK Smaller Companies 15.8%

0

20

40

60

80

100

120

140

160

180

200

220

240

Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16

Cumulative rebased total returns1

8

1.2

6.3

12.0

19.8

4.6

12.5

7.4

19.4

4.2

8.1 6.8

15.5

0

5

10

15

20

25

3 months 1 year 3 years 5 years

Total return %

SEC NAV performance against comparator index1 & IA Sector2

SEC NAV Total Return FTSE Small Cap x IT Total Return¹ IA UK Smaller Companies

Medium and long term outperformance

As at 31st December 2016 Source: Unaudited Bloomberg; Capita; IA; GVQIM Note: 1. Comparator index FTSE Small Cap ex Investment Trusts Total Return. 2. IA data aggregates performance of some 53 smaller company open ended funds Past performance is no guarantee of future performance and the value of investments can go down as well as up

Annualised

Strong medium and long term annualised absolute and relative performance

Average Net Cash 15.2% 12.7% 11.1% 9.8%

9

2016 small cap market returns were narrow

• Significant index impact from the resource sectors, and for the FTSE Small Cap ex Investment Trusts Index (“SMXX”), Melrose PLC

• The resource sectors do not fit our investment criteria – and we have never invested in these sector

• Following a very poor 2015 for the shares of mid cap resource companies, a number were

– demoted from the FTSE250 to become very large weights in the SMXX from early 2016 – included for the first time in the broader small cap index – the Numis Smaller Companies Index (“NSCI”)

• Extremely strong rebounds in the share prices of some of these companies had a disproportionate impact on

the returns of the smaller companies indices. e.g. – SMXX – of the c.10.6%1 capital return for the year (total return 12.5%), Mining and Oil & Gas sectors

combined contributed more than 5.7% points – 54% of the total index return from sectors which began 2016 as c.10% weights3 in the SMXX index

– NSCI - of the 11.1%2 total index return in 2016, Mining and Industrial Metals & Mining delivered 4.2% points and 1.8% points, and total returns of 145% and 237% respectively. All other sectors delivered a return of 5.1% points of the 11.1% total return (46%), and began the year compromising 3.6% of the NSCI index by value

• In addition, Melrose, as a single stock, generated a very significant proportion of the 2016 SMXX annual

return (c.2% points of the total SMXX annual return of 12.5%) over the three months it was a member of the SMXX index due to unusual circumstances

As at 31st December 2016 1Liberum Capital; 2Numis Securities 3 Peel Hunt NB: Resource sectors (Oil & Gas & Mining) comprised 7.6% of SMXX at the beginning of 2015 and between 12 and 13% at the beginning of Jan 20143

Past performance is no guarantee of future performance and the value of investments can go down as well as up

10

Q4 performance attribution

Company Total return three months to 31st December 2016 (%)

Contribution to return (bps) GVQIM Comment

Top 5 contributors

e2v Technologies 16.9% 156 Slightly weak interims followed by recommended bid approach

Wilmington 7.0% 56 In line Q1 trading statement

EMIS 2.8% 27 CEO retirement announced

Tribal 3.2% 22 US peer Jenzabar continues to purchase shares

Harworth Group 6.2% 16 Positive newsflow on site disposals

Bottom 5 contributors

IFG Group -6.3% -43 Cut in base rates reduces interest income. CEO changes

Servelec Group -3.6% -29 Announces award of oil and gas automation contract

Goals Soccer -4.9% -26 No newsflow

Equiniti Group -2.1% -18 Shares depressed by share placing

Clinigen Group -1.3% -14 Shares were weak into the end of the year – forced seller?

Total 1.2% Average net cash position 15.2%

FTSE Small Cap Ex IT 4.6%

As at 31st December 2016 Source: Attribution estimates based on FactSet Portfolio Analysis and GVQIM Past performance is no guarantee of future performance and the value of investments can go down as well as up

E2V realisation. Clinigen shares were very weak in the last few days of the year on no news

11

Case study – E2V Technologies

0

50

100

150

200

250

300

Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16

E2V share price FTSE Small Cap ex IT FTSE Electricals & Electronics

Review of company with new IAP* member

Longstanding CEO leaves

New Chairman appointed New CEO joins

GVQIM governance engagement

Site visit with IAP member

• Initial investment thesis

- Support balance sheet repair - High IP business, trading at trough

sales, margins, rating - Operational upside

• Following review with new IAP member in

late 2011, decision taken to lengthen investment horizon and engage:

- Whilst good return made to date, the IAP member & SW concluded that the business was still underperforming its potential

- New Chairman and CEO were appointed in 2013

• New CEO initiated a significant change

process

- Strategic focus/simplification - Significant people and culture change - Focus on customer - Operational improvement

• Attracted bid from longstanding suitor and trade peer Teledyne Technologies Inc

IRR of around 40% (no gearing) during hold of >7 years We believe that fundamental research and corporate engagement have driven returns

Share price

As at 31st December 2016 Source: GVQIM, Bloomberg * Industrial Advisory Panel Note: Capital return only. FITSE Small Cap ex IT and FTSE Electricals and Electronics sectors rebased to SEC’s initial purchase price of E2V shares

Share price performance since first SEC investment

Bid from Teledyne

12

Q4 saw purchases significantly exceed disposals

Investment highlights • £8.5m purchases of existing holdings • £4.3m additional investment in Equiniti, some of which

was via institutional placing

• IFG (£1.1m), E2V (£0.8m – between interims and bid approach), Harworth (£0.8m), EMIS (£0.7m), Servelec (£0.7m)

• No new investments made

Realisation highlights • £0.5m disposals

• Mainly continued profit taking in Gooch & Housego

(£0.3m)

As at 31st December 2016 Source: GVQIM Past performance is no guarantee of future performance and the value of investments can go down as well as up

Investments mainly made during a period of weak share prices of portfolio companies in November and early December

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Q3

05

Q3

06

Q3

07

Q3

08

Q3

09

Q3

10

Q3

11

Q3

12

Q3

13

Q3

14

Q3

15

Q3

16

Moving annual total purchases and sales as % of NAV

Purchases Disposals

Purchases buoyed by SEC’s share issuance

13

Highly concentrated and unconstrained portfolio

As at 31st December 2016 Source: GVQIM Note: *“Other”: UK listed companies which are not eligible for inclusion in indices either due to liquidity or dual listed with only standard list on the LSE, with market cap. of £150-£350m Past performance is no guarantee of future performance and the value of investments can go down as well as up

Concentration

1 Top 10 76.0%

2 Rank 11 - 15 11.8%

3 Smaller holdings 1.0%

4 Net cash 11.2%

Sector exposure by value

1 Technology – software & services 24.7%

2 Support Services 16.3%

3 Electronics 12.9%

4 Healthcare 8.5%

5 Media 7.8%

6 Financials 7.8%

7 Consumer Services 4.2%

8 Industrials 3.1%

9 Property 2.7%

10 Unlisted 0.9%

11 Net cash 11.2%

Value by market cap band

1 <£50m 0.1%

2 £50m - £100m 5.6%

3 £100m - £200m 22.7%

4 £200m - £300m 15.3%

5 £300m - £500m 9.1%

6 > £500m 35.2%

7 Unlisted 0.9%

8 Net cash 11.2%

Value by index membership No. Holdings

1 Small Cap 39.1% 5

2 Aim 32.4% 8

3 Other* 16.4% 3

4 Unlisted 0.9% 1

5 Net cash 11.2%

1 2

3

4

5

6

7 8

1

2

3 4

1

2

3

4 5

E2V was 10.0% of the portfolio at the year end, a Top 10 holding & >£500m market cap Will turn into cash in mid March 2017 due to the takeover

1

2

3 4

5

6

7 8

9 10

11

14

Portfolio valuation – ex Harworth and Vintage

Portfolio weighted average

Portfolio weighted median

FTSE UK Small Cap ex investment trusts

FTSE UK Small Cap ex

investment trusts ex resources

FTSE AIM ex resources

Number of securities 15 15 149 138 603

Market capitalisation (£m) 401 489 327 326 101

Consensus EV/EBITDA FY1 10.4x 8.3x 6.5x* 7.3x* 11.2x

Consensus price earnings FY1 16.4x 16.2x 12.6x* 12.4x* 16.4x

Consensus FY1 earnings growth 13.0% 11.0% 11.8%* 10.9%* 12.9%

Consensus dividend yield FY1 2.4% 2.6% 3.1%* 3.7%* 2.4%

Price/book FY1 3.0x 2.8x 1.4x n/a n/a

Price/sales FY1 1.8x 2.0x 0.7x n/a n/a

Price/cash flow 14.4x 14.4x n/a n/a n/a

Debt to EBITDA 0.1x -0.1x 1.7x 1.6x 1.0x

GVQIM cash flow yield FY11 9.0% 9.1% n/a n/a n/a

Overseas sales as % 40.3% 26.0% n/a n/a n/a

As at 31st December 2016 for SEC; as at 1st January 2017 for Index data Source: Factset portfolio analysis; Bloomberg; Peel Hunt; *Index is ex loss makers – i.e. valuation and yield is flattered. Harworth Estates & Vintage excluded from analysis Note: 1. GVQIM cashflow yield: (12m forward Cash EBITDA minus maintenance capex)/(market capitalisation plus 12m forward net debt) Past performance is no guarantee of future performance and the value of investments can go down as well as up

Portfolio average metrics closer to AIM than FTSE Small Cap. Price to cashflow metrics look attractive Portfolio ratings more attractive ex E2V (subject to bid premium) and Tribal (high p/e recovery rating)

15

Top 10 holdings1

Company Vintage Sector

GVQIM Funds %

of company

Return potential2

Progress vs thesis

GVQIM CF

yield3 NTM4

Net debt/ EBITDA

NTM4 12 month catalysts Market

leader2

Equiniti 2016 Support Services >5% High Ahead 9.5% 2.1x Delivery of organic growth and cashflow. M&A? Becomes more broadly owned Yes in niches

e2v technologies 2009 Electronics >5% N/A In line 9.1% -0.1x N/A – recommended bid from Teledyne Inc Yes - niche

Servelec 2013 Technology >5% Medium Behind 9.8% -0.2x Work begins on oil & gas platform 2; clarity on prospects for healthcare market

Yes – UK niches

Clinigen 2014 Healthcare >3% Medium Ahead 8.3% 0.4x Article 31 for Cardioxane lifted. Delivery of organic growth Yes – niche

Wilmington 2010 Media >5% Medium In line 10.4% 0.8x Overseas growth; de-gearing; M&A Yes - niche

Tribal 2014 Support Services >5% High Behind 4.0% -0.8x Update on improvement plan Yes - UK

EMIS 2014 Technology >3% Medium Ahead 8.3% -0.4x Traction in secondary care business Yes – UK

4imprint 2006 Support Services <3% Medium Ahead 7.4% -0.5x Continued US growth Yes - US niche

IFG Group 2015 Financials >5% High In line 12.2% -2.2x Initiatives to recover margin. In H2, cross sell of GIA and ISAs into SIPP client base

#2 in high end SIPPs

Goals Soccer 2012 Consumer Services >5% High Behind 9.9% 1.5x New pitch capex and soft comps drive recovery in L4L sales growth Yes - UK

As at 31st December 2016. Source: GVQIM analysis; Capita Note: 1. Top 10 holdings representing c.71% of NAV. 2. In the opinion of GVQIM. 3. GVQIM cashflow yield: (12m forward Cash EBITDA minus maintenance capex)/(market capitalisation plus 12m forward net debt). 4. NTM: Next Twelve Months Past performance is no guarantee of future performance and the value of investments can go down as well as up

Equiniti most geared but due to de-gear materially

16

Investment pipeline considerations

• Valuations seem polarised in the small cap market – Quality growth with momentum mostly expensive, or very expensive. De-ratings severe when news

disappoints – Many “value” stocks cheap for a reason (e.g. contingent liabilities/non-earnings cash leakage) – Many stocks trade at, or above, precedent M&A multiples – less margin of error; less chance of M&A – Recovery situations can price in a good deal of recovery before certainty of delivery

• Liquidity remains low – Sub £400m market cap companies see either small retail buying/selling, or reasonably sizeable block trades – We have seen situations where: • a marginal change in buying/selling sentiment can have a disproportionate impact on pricing • spreads have widened materially • share prices are “stuck” – limited market making activity – “buyers and sellers stand-off” • even moderate overhangs/buying demand (in the case of the latter – particularly IHT qualifying AIM quoted

companies) causing individual stock volatility which is often untradeable – Difficult to see a positive catalyst for better liquidity in 2018 with MIFID2 – large stakes akin to a private

investment! • Some interesting IPOs – but caution and significant DD required; little interesting secondary issuance

• We remain wary of investing in companies with material pension schemes and deficits, due to the potential

poison pill this creates. This continues to limit the investable universe

As at 31st December 2016 Source: GVQIM

We retain a preference for reasonably priced quality growth, with self-help. Ideally non-cyclicals

OUTLOOK

18

Outlook summary • Positives

– Fall in Sterling is good for UK companies with overseas earnings – Market volatility is likely to lead to more mispricing and opportunities – M&A levels picked up notably in Q4 2016, with long awaited activity from overseas trade buyers – US banking sector appears stable (and much better than EU) – UK banks and UK corporates much better capitalised than in 2008

• Negatives

– Brexit impact, process and outcome is unclear, and will remain so for some time – Global macro risks remain unresolved: Eurozone/EU; Chinese shadow banking & equity bubble; public

sector indebtedness and persistent budget deficits – Potential for a European Banking crisis – Geopolitical risks remain e.g. Iraq/Syria/ISIL; North Korea; Russia; US President change – Liquidity in companies <£400m market cap remains poor – Aggressive re-rating (on low volumes) of some IHT qualifying AIM growth stocks – “crowded trades”

• The big “known-unknowns”

– How will equity ratings react if, as expected, US interest rates tighten • Bull case – “great rotation” – capital moves from bonds to equities • Bear case – all asset classes de-rate as the risk free rate rises – Is this equity cycle prolonged due to QE, and we are mid cycle? Or are we in the final stages of a typical 8-9

year cycle?

As at 31st December 2016 Past performance is no guarantee of future performance and the value of investments can go down as well as up

Trying to time when the music stops is impossible. Supports selective investment approach, a strong balance sheet and being prepared for volatility

19

The investment cycle – where are markets now?

Market Phase Bottom Early Stage Recovery Mid-Stage Bull Market Peak of Bull Market Bear Market

General vertical direction (but not horizontal direction) of asset price movements Investment Style

Value

Growth/Momentum

Balance Sheet

Fundamentals 20%

Improving but ignored 30%

Solid underlying performance

40% Sweet summer growth

20% Optimistic, Long-duration

projections

30% Over awareness of

deteriorating conditions

Valuation 20%

Attractive, but no takers 50%

Abundant bargains

30% Willingness to

pay up

20% Revised models justify

stretching

20% Shocked recognition of outlandish prices paid

Psychology/ Technical

60% Exhaustion, disbelief and

demoralization

20% Doubt, reflection and conversion

30% Faith, hope and charity

60% Euphoria, greed and

extrapolation

50% Fear, panic and loathing

As at 31st December 2016 Source: Morgan Stanley Securities; GVQIM

Does QE mean this equity cycle is longer/just different? How does slowing growth impact the cycle?

20

Earnings growth, cashflow and M&A to drive returns

Source: GVQIM © GVQ Investment Management Past performance is no guarantee of future performance and the value of investments can go down as well as up

Growth Corporate Activity

Value De-gearing

• SEC portfolio valuation lower than Dec-15 – materially lower ex E2V and Tribal

• We are not assuming wholesale re-ratings

• Some holdings trade at material discounts to sum-of-parts value

• Low teens digit aggregate earnings growth for portfolio

• Portfolio growth broadly in line with the market, despite portfolio’s much lower financial gearing

• Portfolio de-gearing continues at an estimated 4% p.a.

• Additional 2.4% dividend yield

• Potential for more activity given FX , niche nature, and (arguably) overcapitalisation of portfolio companies. Negligible poison pills

• Corporate debt in general is low. Larger companies gearing up again via M&A

We continue to target double digit annualised returns from the portfolio over the medium term

SEC portfolio

21

-30

-20

-10

0

10

20

30

Mar

08

Sep

08

Mar

09

Sep

09

Mar

10

Sep

10

Mar

11

Sep

11

Mar

12

Sep

12

Mar

13

Sep

13

Mar

14

Sep

14

Mar

15

Sep

15

Mar

16

Sep

16

12m forward EPS growth by FTSE index ex investment trusts March 2008 to date2

FTSE 100 Mid 250 Small Cap

12-month forward EPS1 growth projections

As at 31st December 2016 Source: 1. EPS = earnings per share 2. Peel Hunt Note: Index excludes loss makers Past performance is no guarantee of future performance and the value of investments can go down as well as up

FTSE All Share earnings projections have materially improved over the quarter, driven primarily by FTSE 100 companies, the principal beneficiaries of the on-going weakness of Sterling

22

How SEC’s portfolio dynamics compare to the market

Index Average market

cap

12m forward p/e

12m forward eps growth

12m forward dividend yield

Growth & yield

PEG ratio PE/(growth + yield)

Net debt/ EBITDA

FTSE 100 £16.4bn 14.6x 9.2% 3.8% 13.0% 1.6x 1.1x 1.6x

FTSE 250 £1.7bn 14.4x 10.1% 3.4% 14.5% 1.4x 1.0x 1.3x

FTSE Small Cap £326m 12.4x 10.9% 3.7% 14.6% 1.1x 0.8x 1.6x

FTSE AIM £101m 16.4x 12.8% 2.4% 15.2% 1.3x 1.1x 1.0x

SEC portfolio £401m 16.4x 13.0% 2.4% 15.4% 1.3x 1.1x 0.1x

SEC portfolio ex E2V & Tribal

£403m 15.1x 12.2% 2.4% 14.6% 1.2x 1.0x 0.2x

As at 31st December 2016 for SEC and index data from Peel Hunt Source: Peel Hunt; Capita; Factset; GVQIM Note: *Indices presented exclude resources, as well as non-dividend payers and loss makers Past performance is no guarantee of future performance and the value of investments can go down as well as up

FTSE100 growth rates may be buoyed by the depreciation of Sterling, given the level of overseas earnings Portfolio metrics similar to FTSE AIM, ex debt, despite average company being 4x size (and more liquid?)

Valuation and growth metrics of key indices ex oil, miners and ex loss makers and non-dividend payers*

23

0%

5%

10%

15%

20%20

03

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

'Lit' trades

'Dark' + 'Lit'

As at 31st December 2016 Source: Liberum, Bloomberg Note: *Assuming 100% of daily volume Past performance is no guarantee of future performance and the value of investments can go down as well as up

% of free float traded / month – FTSE 250 % of free float traded / month – FTSE Small Cap

0%

5%

10%

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

'Lit' trades

'Dark' + 'Lit'

0

50

100

150

200

250

300

FTSE 100 FTSE 250 FTSE Small Cap AIM 100

10% least liquid

10% most liquid

Index average

Days to sell 10% of a stock*

0.2 2.1

16.9

34.4

0

20

40

60

FTSE 100 FTSE 250 FTSE SmallCap

AIM 100

Days to trade £50m* (average)

FTSE Small Cap liquidity remains low

FTSE 250 liquidity almost 4x that of Small Cap – and unlike Small Cap is back to 2006/7 levels

24

0%

2%

4%

6%

8%

10%

12%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Value of acquisitions as % of index starting mkt cap

FTSE 100 (LHS) FTSE 250 (LHS) Small Cap (LHS)

Small Cap M&A levels picked up materially in Q4

As at 31st December 2016 Source: Liberum Past performance is no guarantee of future performance and the value of investments can go down as well as up

M&A still appears below trend. Notable bids from overseas trade buyers in Q4 2016

25

FTSE Small Cap Calendar Year 2016 downgrades

As at 31st December 2016 Source: Peel Hunt; GVQIM Note: Index excludes loss makers

Aggregate sector earnings disappointed again other than financial services

-53.1 -25.3

14.3 12.2

28.6

10.0

23.5 18.8

10.2

-56.2 -81.0

3.0 8.3

-5.7 -1.8

23.7

-6.7 -1.7

-25

-15

-5

5

15

25

eps growth

eps growth by sector CY2016

13.3 11.8 13.1 12.5 15.9

11.4 11.3

18.8

13.3 13.7 13.4 13.9 13.2

24.9

10.2 12.4

21.9

13.7

0

5

10

15

20

25

Oil & Gas Basic Materials Industrials ConsumerGoods

Healthcare ConsumerServices

FinancialServices

Technology FTSE SmallCap Ex oils,

mining

p/e P/E rating by sector CY2016 Dec-15 Dec-16

26

Only moderate market re-rating over the year

5.4

7.5

10.3

16.6

14.7

-0.4

2.6

-1.7

-2.7

10.7

-10 0 10 20 30

FTSE100

FTSE250

FTSE Small Cap

FTSE Fledgling

FTSE AIM

As at 2nd January 2017 1CY = Calendar Year Source: Peel Hunt; GVQIM analysis

1.7

1.7

1.6

1.3

1.0

1.9

1.5

1.8

1.6

1.1

0.0 0.5 1.0 1.5 2.0

15.3

16.5

13.3

12.2

17.4

15.9

15.7

13.7

11.0

18.0

0 5 10 15 20 25

CY1 2016 eps growth CY 2016 net debt/EBITDA CY 2016 p/e rating

General trend of companies gradually gearing up, despite aggregate earnings misses

Implications • Another year of aggregate earnings disappointments, combined with gearing exceeding expectations except the FTSE250, which

also de-rated on an aggregate basis • FTSE100 relative re-rating compared with the rest of the market, especially on an ungeared basis

FTSE Indices data, ex resources and loss makers

27

-300

-200

-100

0

100

200

300

400

Dec

02

Dec

03

Dec

04

Dec

05

Dec

06

Dec

07

Dec

08

Dec

09

Dec

10

Dec

11

Dec

12

Dec

13

Dec

14

Dec

15

Dec

16

£m Monthly net flows of UK smaller companies funds Dec-02 to Nov-16

UK Smaller Companies OEIC flows

As at 30th November 2016 Source: Investment Association Note: Total AUM in the IA UK Smaller Companies Sector in November 2016 was £12.0bn © GVQ Investment Management Past performance is no guarantee of future performance and the value of investments can go down as well as up

Outflows continued unabated through Q4

-2,500

-2,000

-1,500

-1,000

-500

0

500

Dec

02

Dec

03

Dec

04

Dec

05

Dec

06

Dec

07

Dec

08

Dec

09

Dec

10

Dec

11

Dec

12

Dec

13

Dec

14

Dec

15

Dec

16

£m Cumulative net flows of UK smaller companies funds Dec-02 to Nov-16

28

UK profit warnings

As at 31st December 2016 Source: Ernst & Young Past performance is no guarantee of future performance and the value of investments can go down as well as up

Profit warnings were down marginally YoY in Q3

0

20

40

60

80

100

120

140

160#

UK profit warnings per quarter Q1 1999 – Q3 2016

2015 2016 1999 2002 2001 2000 2010 2003 2004 2006 2007 2008 2009 2005 2011 2012 2013 2014

29

Growth in number of smaller companies has paused

As at 31st December 2016 Source: Numis Securities; Bloomberg Past performance is no guarantee of future performance and the value of investments can go down as well as up

Number of constituents of smaller companies index remains well below the middle of the last cycle Given buoyant market ratings, why is this so low? Perhaps more companies IPO and stay on AIM

438

316

277 263 269

250 241 228 201

163 164 154 135 136

151 155 149

0

100

200

300

400

50020

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Constituents of the FTSE Small Cap ex Investment Trusts Index

APPENDIX

31

Performance

As at 31st December 2016 Source: 1. GVQIM; Capita; Bloomberg; Trustnet. 2. Preliminary estimates based on Trustnet & Morningstar data Past performance is no guarantee of future performance and the value of investments can go down as well as up

2016 2015 2014 2013 2012 2011 2010 2009

Share Price Total Return -1.6% 14.2% 32.6% 61.4% 25.6% 9.4% 35.1% 252.1%

NAV Total Return 6.3% 12.1% 18.0% 46.0% 21.3% 3.9% 37.1% 63.8%

FTSE Small Cap ex Investment Trusts Total Return 12.5% 13.0% -2.7% 43.9% 36.3% -15.2% 16.9% 57.7%

IA UK Smaller Companies 8.1%2 14.7% -1.7% 37.4% 22.5% -9.0% 30.8% 50.1%

Share price return in 2016 impacted by the widening of the discount

Calendar Year Annual performance1

32

There are strict criteria for inclusion in our funds

Note: *Growth at a reasonable price © GVQ Investment Management

GVQIM’s research process aims to identify high quality coveted assets with attractive cash flows

Turnaround Distress

A

B

C

A

B

C

Asse

t qua

lity Asset quality

Investment focus

Speculative growth Fair valued GARP* Under valued Recovery

Avoid

Avoid Avoid

33

How we identify coveted assets

Qualitative Quantitative

• Niche market leaders

• Orderly end markets, with some growth

• Sustainable business model/franchise/uniqueness

• Overseas earnings

• Able to pass on price increases

• Intellectual property

• Operational know-how

• High barriers to entry

• High and/or improving ROCE

• Strong cash conversion

• Limited capex or working capital investment needed to finance growth

• Recurring revenues/profits/cashflows

• Ideally achieving, or has potential to achieve double digit operating profit margin

• Realisable surplus tangible fixed assets and/or working capital

Source: GVQIM © GVQ Investment Management

We believe coveted assets retain value even in tough times, and are more likely to be acquired

We look for characteristics which GVQIM believes potential acquirers value highly

34

Our Black List screens out companies with fundamental business risks

Operational

• Excessive reliance on a single product, customer, supplier or distributor

• The primary driver of profitability cannot be influenced by management (e.g. resources)

• Inherently low margins

• Structurally declining markets

Financial

• Poor accounting systems or controls

• Weak cash flows – especially when reported profits look good!

• Excessive gearing

Governance

• Controlling shareholder with misaligned interests

• Below average/deteriorating governance practices

• Stakeholders unwilling to engage constructively

Source: GVQIM © GVQ Investment Management

We have learnt what to avoid from previous experiences

35

Types of market purchases we consider

Source: GVQIM © GVQ Investment Management

Self help Broken growth Quality GARP

Time

Share price

Target buying point Target buying point Target buying point

• Typically low growth businesses • Some element of engagement

required to stimulate performance improvement

• Long term investments

• Momentum stocks, which have gone wrong. Over rated transitions to under rated

• Base investment case attractive even assuming moderate growth

• Often attract corporate suitors

• Quality, growing, high margin “value compounders”

• Temporary out of favour with investors -> opportunity to buy at a discount to fair value

Became relatively over valued in our opinion in late 2015

Shunned by momentum investors. Some interesting opportunities

Identified via deep research. Require corporate engagement to unlock value

36

Contact details

For further information regarding the SEC please contact the GVQ Investment Management marketing team below, or visit the Company’s website: www.strategicequitycapital.com For general enquiries, please contact: GVQ Investment Management Limited 12-13 St. James’s Place, London, SW1A 1NX Tel +44 (0)20 3824 4500 Fax +44 (0)20 3824 4539 Email: gvqimmarketing@gvqim.com www.gvqim.com Secretary and Registered Office PATAC Limited 21 Walker Street, Edinburgh, EH3 7HX T: +44 (0)131 538 6608 www.patplc.co.uk