ELEVATION CAPITAL'S VALUE FUND BENEFITS FROM HEIGHTENED VOLATILITY

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Elevation Capital Value Fund:

Global markets were strong in January driven principally by growth stocks (e.g. Amazon, Facebook, and Netflix to name but a few). The New Zealand dollar was also strong (+4.06% versus the USD) and this impacted the Value Fund’s returns, given we are both un-hedged, and approximately 30.5% of our cash balance is held in US Dollars. We made no significant portfolio changes in January only adding incrementally to our holdings in: Edgewell Personal Care, NZX Limited, Sanrio and Viacom.

February has seen a sharp u-turn in markets as they succumbed to elevating expectations of higher interest rates. This headline grabbing volatility was exacerbated by the collapse of several funds that were leveraged investment vehicles premised on low volatility continuing. These exchange traded funds/notes (ETF's/ETN's) and their ultimate liquidation are believed to have had a significant impact on the large trading swings we saw on 5 February 2018 in the US markets. It is our view that these types of leveraged vehicles, coupled with increased computer (algorithmic) trading only serve to undermine confidence in the capital markets and the regulators should bear this in mind when approving such products for issuance to investors. Please find a link to a Bloomberg article which will provide further insights/context to our comments above: https://www.bloomberg.com/news/articles/2018-02-07/how-two-tiny-volatility-products-helped-fuel-sudden-stock-slump

We have sought to capitalise on the recent volatility and utilise a small percentage of our cash balance (22.65% as at 31 January 2018) by adding to existing positions and acquiring a new position in CBS (www.cbs.com). The media sector continues to see consolidation and has been a fertile area for the Value Fund over the past two years based on our Takeover Timeline detailed in the 2017 Highlights section below.

As one would expect during times of heightened volatility, the Value Fund due to its conservative positioning and its holdings, is outperforming the broader markets at the time of writing. We continue to view the return of volatility as a positive for value investors as stock selection and well financed/franchise companies should be rewarded. We also believe higher interest rates will again serve value investors well as it will restore a “hurdle rate” for investment and limit the ability of “zombie” or poorly financed companies to compete/survive.

As always, we remain available to discuss the Value Fund and its underlying holdings at any time should you have any questions.