Downing Strategic Micro-cap Investment Trust

22 March 2024

Downing Strategic Microcap Investment Trust (DSM).

To the shareholders of Downing Strategic Microcap Investment Trust,

Milkwood Capital, long-term value-oriented fund manager based in Windsor, United Kingdom, has recently acquired over 16.6% of the shares in DSM through the Milkwood Fund.

Milkwood Capital wishes to make public:

1.   We intend to vote against all resolutions tabled at the upcoming general meeting.

2.   Based on current market prices of DSM and its underlying investee companies we intend to continue to build our stake in DSM.

We believe that the UK equity market is materially undervalued.  The undervaluation is even more pronounced in smaller-sized companies, listed in the UK, which is where DSM's portfolio is invested.

We believe DSM provides an excellent vehicle to explore this opportunity.

Cordially,

Rhys Summerton

Founder - Milkwood Capital

Windsor, United Kingdom

[email protected]

Milkwood Capital is a trading name of Milkwood Capital Ltd.

The views expressed herein are based on publicly available information with respect to DSM. Milkwood Capital currently has an economic interest in the price movement of the securities of DSM. It is possible that there will be developments in the future that cause Milkwood Capital to modify this economic interest at any time or from time to time. This may include a decision to sell all or a portion of its holdings of such securities in open market transactions or otherwise (including via short sales), purchase additional such securities (in open market or privately negotiated transactions or otherwise) or trade in options, puts, calls or other derivative instruments relating to such securities. Milkwood Capital also reserves the right to take any actions with respect to its investment in DSM as it may deem appropriate, including, but not limited to, communication with the board of directors, the manager and other investors.

Milkwood Capital is publishing this letter solely for the information of other shareholders and potential investors in DSM. This letter is not intended to be and does not constitute or contain any investment recommendation as defined by Regulation (EU) No 596/2014. No information in this letter should be construed as recommending or suggesting an investment strategy. Nothing in this letter is a statement of or indicates or implies any specific or probable value outcome in any particular circumstance. This letter is provided merely for general informational purposes and is not intended to be, nor should it be construed as (1) investment, financial, tax or legal advice, or (2) a recommendation to buy, sell or hold any security or other investment, or to pursue any investment style or strategy. Neither the information nor any opinion contained in this letter constitutes an inducement or offer to purchase or sell or a solicitation of an offer to purchase or sell any securities or other investments in DSM or any other company by Milkwood Capital or any fund managed by Milkwood Capital. This letter does not consider the investment objective, financial situation, suitability or the particular need or circumstances of any specific individual who may access or review this letter, and may not be taken as advice on the merits of any investment decision. Any person who is in any doubt about the matters to which the information, statements or opinions contained in this letter relate should consult an authorised financial adviser or other person authorised under the UK Financial Services and Markets Act 2000. All expressions of opinion are subject to change without notice, and Milkwood Capital does not undertake to update or supplement any of the information, analysis and opinion contained herein.

Save in the case of fraud, no liability is accepted for any errors, omissions or inaccuracies in such information or opinions. In no event shall Milkwood Capital be liable for any claims, losses, costs or damages of any kind, including direct, indirect, punitive, exemplary, incidental, special or, consequential damages, arising out of or in any way connected with any information in this letter (or any inaccuracies or omissions therein). This limitation of liability applies regardless of any negligence or gross negligence of Milkwood Capital. You accept all risks in relying on the information in this letter. Thus, shareholders and others should conduct their own independent investigation and analysis of those statements and communications and of DSM and any other companies to which those statements or communications may be relevant.

This letter includes statements of intention that are, or may be deemed to be, "forward-looking statements". All statements other than statements of historical facts included in this letter are forward-looking statements. Forward-looking statements are subject to risks and uncertainties and accordingly DSM's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. There is no assurance or guarantee with respect to the prices at which any securities of DSM or any other company will trade, and such securities may not trade at prices that may be implied herein. Any projections or potential impact of the opportunities identified by Milkwood Capital herein are based on assumptions that Milkwood Capital believes to be reasonable as of the date hereof, but there can be no assurance or guarantee that actual results or performance will not differ, and such differences may be material and adverse. In particular, although as a general point Milkwood Capital believes the UK equity markets to be undervalued there are securities within the market which are not or may be overvalued. No representation or warranty, express or implied, is given by Milkwood Capital or any of its officers or employees as to the achievement or reasonableness of, and no reliance should be placed on, any projections, forecasts, targets, prospects or returns contained herein. Nothing in this letter should be relied upon as a promise or representation as to the future.

In relation to the United Kingdom, this letter is directed only at, (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO"); (ii) high net-worth companies, unincorporated associations and other bodies within the meaning of Article 49 of the FPO; (iii) journalists within the meaning of Article 47(2) of the FPO; and (iv) persons to whom it is otherwise lawful to make this letter available (all such persons together being referred to as "Permitted Recipients"). Persons who are not Permitted Recipients must not act or rely on the information contained in this letter. Any person who is in any doubt about the matters to which the information, statements or opinions contained in this letter relate should consult an authorised financial adviser or other person authorised under the UK Financial Services and Markets Act 2000.

The distribution of this letter in certain countries may be restricted by law and persons who access it are required to inform themselves and to comply with any such restrictions. Milkwood Capital disclaims all responsibility where persons access this letter in breach of any law or regulation in the country of which that person is a citizen or in which that person is residing or is domiciled.

Milkwood Capital Ltd is authorised and regulated by the Financial Conduct Authority FRN 607356.

Address:

12 Park Street

Windsor

Berkshire

United Kingdom

SL4 1LU