The following is an amplification of the Group’s formal Investment Policy:

Strategy

• Our aim is to maintain and grow a portfolio of equity interests primarily comprising industrial and services businesses with sound growth records or potential for growth, that will generate cash and earn above average returns on capital over a period.
• Our interests in unlisted companies will usually be large minority holdings with sizeable interests held by management, or financial or family shareholders with whom we interact as partners.
• We also hold listed investments where we are represented on the boards and/or where directors or material shareholders are known to us, or in special situations.
• We may hold equity investments that are small in percentage terms, but where we are able to exert influence through Board representation or shareholder agreements. Conversely we may hold majority or joint controlling interests but without direct management responsibility. Accordingly, we participate in good businesses with first-class management without being restricted by a required size of holdings.
• Our approach to our investments is similar to that of a diversified holding company. However, each business in which we are invested is free standing in financial terms, ring-fenced as to risk and separately assessed.
• We wish to hold a meaningful level of investments in international currencies, directly or indirectly.
• We do not follow a trading approach to our primary holdings. We do not acquire or dispose of investments in accordance with a private equity philosophy, nor are we constrained by any required balance between listed and unlisted holdings. We hold our investments on a long-term basis subject only to continual review of the quality of the underlying businesses, and to any constraints or obligations in shareholder agreements or JSE closed periods.
• We will, when necessary, make changes to our holdings or within the businesses in which we are invested notwithstanding any short-term accounting consequences.
• We do not issue shares for acquisitions or investments, or for the purposes of raising funds, unless the value received meaningfully exceeds the value given.
• In addition to our long-term portfolio of equity investments, any surplus liquidity is invested in cash, listed equities, funds and debt instruments from time to time.

Performance Metrics

Sabcap’s target growth rates over three-year rolling periods are:
Net asset value per share CPI + 10% p.a.
Dividends per share CPI + 5% p.a.

These may be changed by the Board if movements in macro-economic factors such as CPI, exchange rates, interest rates and rates of taxation make changes appropriate. The Board may also amend the dividend target in the context of free cash being utilized for share buy-backs from time to time relative to cash for dividends.

In addition to these financial metrics, Sabvest aims to:

• adhere to its Code of Ethics;
• comply with all applicable laws and regulations;
• Be a good corporate citizen on all levels and with particular sensitivity to the maturing but volatile socio-economic environment in South Africa; and
• maintain the highest levels of corporate governance.

Sabcap believes that it has achieved and complied with all of these metrics. With regard to King IVTM, a full compliance report is incorporated in this Integrated Report.