Judith MacKenzie, Lead Investment Manager, comments:

“The Trust focuses on driving long-term returns from the often overlooked micro-cap area of the market, investing in companies below £150 million market capitalisation at the time of investment. As the Manager, we aim to take strategic stakes in companies we consider have reached a transformational stage, yet are undervalued.”

As at 29 December 2017, DSM has invested over £8.0 million into the above companies, bringing the amount that DSM has invested in total to £27.5 million. The Trust is now 52.1% invested.

Science in Sport (SiS)

Science in Sport is a leading sports nutrition company that develops, manufactures and markets sports nutrition products for professional athletes and sports enthusiasts.

MacKenzie comments:

“Downing managed funds initially invested in the company in 2013 and were impressed by the strength of the brand and the strong management team. The business has sector-leading gross margins and we believe that this will continue. We believe revenue growth will further improve utilisation of the current facility and the Company’s growing e-commerce business will provide additional margin support."

"In 2015, Downing managed funds made a follow-on investment in SiS to support international expansion, specifically into Australia and the United States. We believe that management has now established a solid platform for continued growth in these regions."

"In November 2017, SiS returned to the market for working capital and growth investment for expansion in the US and Italy, and into a new target market for SiS – football. DSM participated in this placing, providing £1.5 million through an equity placing at 70p to raise a total of £14 million from existing and new institutional holders, and a further £0.8 million through an open offer, prior to expenses. As at 29 December 2017, DSM holds 3.2% of the company’s equity and Downing holds 13.4% in total, including DSM and across other client funds."

"SiS is a business which we believe we know well, and where we have provided support to management as well as financial commitment. After this most recent fundraise in November 2017, we expect that management will be focused on delivering cost effective revenue growth. We would not be surprised if the business was acquired in a few years.”

Ramsdens (RFX)

Ramsdens is a diversified financial services provider and retailer offering foreign currency exchange, pawnbroking, precious metal purchasing and selling, and jewellery. It retails to a large, repeat and growing customer base and operates mainly in the North of England, Scotland and Wales from over 120 stores.

In December 2017, Downing managed funds invested over £7.0 million, of which DSM invested £2.6 million. As at 29 December 2017 DSM holds over 5.0% of the equity and Downing funds have over 15.0% of the equity.

MacKenzie comments:

“At the time of DSM’s investment, Ramsdens was an existing holding in the Downing Monthly Income Fund as well as Downing’s IHT & ISA portfolios. As we continued our due diligence process we gained a deeper understanding of the business, management’s approach, and Group strategy. As a result we believe there to be a significant mispricing opportunity."

"We believe that the business is run by a strong and conservative management team and it has potential to deliver earnings upgrades in the near term. This may be bolstered by expansion into different products or an expedited store roll-out, for which we could provide strategic support.”

Synectics (SNX)

Synectics is a leader in the design, integration, control and management of advanced surveillance technology and networked security systems. It has two main business segments: Systems, and Integration and Managed Services. It operates mainly in heavily regulated industries, including gaming, transport and critical infrastructure, high security and public space applications and oil and gas.

MacKenzie concludes:

“In December 2017, the share price weakened and a liquidity opportunity allowed us to take a 13.1% equity stake across Downing managed funds, of which around 9% is held by DSM (as at 29 December 2017)."

"Our investment case is predicated on the strong and growing forward order book, which increased by 28% in the first half of their 2017 financial year. We see a large opportunity in the gaming market where Synectics has an existing client base of global casino owners and operators. We also value Synectics’ focus on managed services which contributes c25% of higher quality, ‘recurring’ revenues."

"Our investment case is centred on an improvement in operating performance and, perhaps in the longer term, the potential for consolidation in what we believe is a fairly fragmented sector with exposure to highly regulated markets.”

Hugh Aldous, Chairman of DSM, comments:

“Judith and her team are steadily building a portfolio with exceptional style. Each investment is a company at a transformational point. There are direct and clear relationships with corporate management. This is thorough, constructive, actively involved investing; exactly what the sector needs.”‍