The Company’s investment objective is to achieve capital growth and outperform its benchmark, the Russell 2000 Index.
The Manager will seek to meet this objective by investing primarily in securities issued by companies, quoted or domiciled in the US and Canada. These include privately placed common stock, preferred stock, convertible debentures and warrants, and may also include securities traded on an exchange. The companies in which investments are made would generally be regarded as belonging to the category of companies with ‘mirco’ stock capitalisations at the time of purchase, typically those companies with market capitalisations below $1 billion.
The Company may also invest in the securities of unlisted companies having similar characteristics. It is not the Board’s intention to hedge currency risk between the US Dollar and Sterling. It is the Company’s policy not to invest in listed investment companies (including listed investment trusts).
Principal risks associated with the Company
Risks associated with investing in the Company include, but are not limited to, liquidity/marketability risk, interest rate risk, gearing risk, foreign currency risk, market price and discount volatility risk, risk associated with non compliance with Sections 1158 to 1162 of the Corporation Tax Act 2010, credit risk, risks associated with the engagement of third parties and the risk that shareholders will not vote in favour of the continuation of the Company.
Further details on these risks and how the Board has sought to mitigate these can be found in the Annual Report.
Management agreement
The Company’s investments are managed by RENN Capital Group, Inc. under an agreement dated 17 May 1996, as amended. The management fee is calculated at the rate of 0.125% per calendar month (exclusive of any VAT) of the net asset value of the Company and is payable quarterly in arrears. No management fee is payable on any cash or near cash investments held by the Company.
RENN Capital Group is also entitled to an annual performance fee equivalent to 20% of the amount by which the net asset value of the Company at the year end, together with gross dividends paid or distributions made, exceeds the net asset value of the Company at the preceding financial year and as increased or decreased in line with the movement in the Russell 2000 Index over the same period.
No performance fee will be payable in respect of any year where the net asset value is less than either the placing price or the net asset value at the end of the preceding financial year. This year no performance fee was payable.