REG - Herald Inv Trust PLC - Final Results
23/02/2026 07:00
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RNS Number : 9027T Herald Investment Trust PLC 23 February 2026
LEI number: 213800U7G1ROCTJYRR70
Herald Investment Trust plc
Annual Financial Report
For the year ended 31 December 2025
Herald Investment Trust plc (the "Company") hereby submits its annual report
and financial statements for the year ended 31 December 2025 as required by
the Financial Conduct Authority's Disclosure Guidance and Transparency Rule
4.1.
The Company's annual report and financial statements for the year ended 31
December 2025 is being published in hard copy format and an electronic copy
will shortly be available to download from the Company's web page on the
Manager's website at www.heralduk.com (http://www.heralduk.com) . It will also
be made available to the public at the Company's registered office, 10-11
Charterhouse Square, London, EC1M 6EE.
The Company's annual report and financial statements has been uploaded to the
Financial Conduct Authority's National Storage Mechanism and is available for
inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
Enquiries:
NSM Funds (UK) Limited
HIT@nsm.group (mailto:HIT@nsm.group)
RESULTS AND DIVIDEND
The net asset value ("NAV") of the Company as at 31 December 2025 was 2,700.5p
per ordinary share (2024 - 2,488.2p). This represented an increase of 8.5%
during the year, compared to a decrease of 0.3% for the Russell 2000®
Technology Index (small cap) (in sterling terms) and an increase in the
comparative total return indices of 11.8% for the Deutsche Numis Smaller
Companies plus AIM (ex. investment companies) Index. The discount at year end
was 10.9% (2024 - 2.3%).
The directors do not recommend a dividend for the year ended 31 December 2025
(2024 - nil) as explained in the dividend section in the annual report and
financial statements for the year ended 31 December 2025.
STATISTICS AND PERFORMANCE - YEAR'S SUMMARY
At 31 December 2025 2024 % change
Total net assets £1,292.4m £1,252.6m
Shareholders' funds £1,292.4m £1,252.6m
Net asset value per ordinary share(A) 2,700.5p 2,488.2p 8.5
Share price(A) 2,405.0p 2,430.0p (1.0)
Deutsche Numis Smaller Companies Index plus AIM (ex. investment companies) 5,963.5 5,498.8 8.5
(capital only)
Russell 2000(®) Technology Index (small cap) (in sterling terms) (capital 5,758.2 5,786.6 (0.5)
only)(B)
Dividend per ordinary share - -
Profit per ordinary share (revenue) 0.70p 4.96p
Ongoing charges(A) 1.08% 1.08%
Discount to NAV(A) 10.9% 2.3%
Total return for the year ended 31 December 2025 2024
Net asset value(A) +8.5% +12.1%
Share price(A) (1.0%) +26.4%
Deutsche Numis Smaller Companies plus AIM (ex. investment companies) Index +11.8% +5.0%
Russell 2000(®) Technology Index (small cap) (in sterling terms)(B) (0.3%) +25.9%
Year to 31 December 2025 2024
Profit per ordinary share
Revenue 0.70p 4.96p
Capital 198.31p 244.77p
Total 199.01p 249.73p
Year to 31 December 2025 2025 2024 2024
Year's high and low High Low High Low
Share price 2,560.0p 1,738.0p 2,500.0p 1,870.0p
Net asset value per ordinary share(A) 2,873.4p 2,058.9p 2,550.8p 2,161.0p
Discount(A) 17.3% (1.3%) 13.8% (0.3%)
A Alternative Performance Measure.
B Investments and indices valued at USD/GBP exchange rate of 1.348 at 31
December 2025 (1.252 31 December 2024).
® Russell Investment Group.
CAPITAL RETURN SINCE INCEPTION
Inception
31 December 16 February
2025 1994 % change
Net asset value per ordinary share (including
current year income(A) 2,700.49p 98.70p 2,636.06
Net asset value per ordinary share (excluding
current year income)(A) 2,699.77p 98.70p 2,635.33
Share price 2,405.00p 90.90p 2,545.76
Deutsche Numis Smaller Companies
plus AIM (ex. investment companies) Index 5,963.52 1,750.00 240.77
Russell 2000® Technology Index (small cap)
(in sterling terms)(†) 5,758.19 688.70* 736.10
A Alternative Performance Measure (APM).
* At 9 April 1996 being the date funds were first available for
international investment.
† The Russell 2000® Technology Index (small cap) (in sterling terms)
was rebased during 2009 following some minor adjustments to its constituents.
The rebased index is used from 31 December 2008 onwards.
CHAIRMAN'S STATEMENT
CORPORATE ACTIVITY
2025 was a year dominated by the unwanted attentions of Saba Capital
Management LP ("Saba"). Saba have blocked the board's proposal to give
shareholders the choice between selling back to the Company at or close to NAV
or staying with the current successful mandate. At the time of writing, it is
therefore unclear whether a solution can be found to reconcile the interests
of Saba, who have a blocking minority shareholding, and of the rest of the
shareholders who form the majority. The board continues to work hard in an
attempt to find such a solution, as they have done for many months.
Saba continue to hold some 31% of the Company's shares, which puts them in a
position to continue over the months and years ahead to try to take effective
control by a process of attrition. If no better solution can be found, as set
out in the Company's circular of 12 January 2026, the board would be left
with no good alternative but to launch a further tender (the "Backstop
Tender"), requiring only a simple majority for approval. This would in all
probability spell the end of the Company with its current mandate and
management, but would at least allow all shareholders to exit at close to NAV
at a time before Saba might gain effective control of the board and/or the
management of the Company. The almost unanimous desire of non-Saba
shareholders to avoid being in a Saba controlled vehicle is demonstrated by
the unequivocal support for the Company in January 2025 at the requisitioned
general meeting, when 99.8% of non-Saba votes cast were against Saba's attempt
to foist their own nominees onto the board, and again at the Company's AGM in
March 2025 where 99.9% of non-Saba votes were cast in favour of continuation.
The consistent theme of Saba's actions is the threat to seek to replace the
Company's board with their own nominees (requiring only a 50% approval of
those voting), with the likely intention that the new board then appoint Saba
in due course to run the Company. The board naturally deplores such an
approach, as it oppresses the interests of the numerous small shareholders who
collectively make up a majority of the register and it has therefore raised
the matter with the Financial Conduct Authority ('the FCA'). In the board's
view, where a substantial shareholder nominates a director to the board of a
company, and such substantial shareholder is then also proposed to be
appointed as the investment manager of that company (being a 'relevant
related party transaction' under the UK Listing Rules), that director should
not be entitled to vote on the appointment of the investment manager who
nominated them in the first place. This would bring such a decision in line
with the general guidance that non-independent directors cannot vote on
matters between the company and the investment manager.
This is an appropriate moment to thank the many shareholders who have taken
time and trouble to vote. It is deeply regrettable that so much money and
time, including shareholders', should have been taken up in this matter when
the business of the Company is to get on and make good returns for all the
savers invested with it.
2025 PERFORMANCE
2025 was yet another good year for the Company. It achieved a +8.5% NAV per
share uplift in the year, taking to +2,847.8% the uplift since inception in
1994 and +206.4% over the last ten years. In headline terms, but for the
weakness in the year of the US Dollar, the NAV uplift in 2025 would have been
circa 10%, recognising that in a global portfolio with many internationally
diversified companies, the actual effect of currency swings is more complex,
and in this year, probably greater, than headline numbers suggest.
The Manager's report covers in more detail the contributors to the
performance.
In summary, in sector terms, the technology hardware and semiconductor sector
which accounted for 28.3% of the opening equity portfolio, delivered all the
positive return, and more, whereas the large software and technology services
sector, accounting at the start of the year for 42.2% of the equity portfolio,
delivered a negative return. In broad terms the strong performance of the
first and the weak performance of the second had at least in part a common
cause: the AI boom has propelled technology hardware stocks and put doubts
over the valuation of software stocks. Four stocks within the hardware sector,
namely Super Micro Computer, Celestica, BE Semiconductor Industries and
Fabrinet, accounted for a remarkable 72.6% of the Company's return. These
stocks typify the Manager's approach, having been held for many years and
collectively having multiplied in value by nearly 25 times.
The performance of the other sectors in the Company's portfolio, comprising in
aggregate less than 30% of both opening and closing equity portfolios, was
mixed.
The geographic performance took its lead from the sector performance, with the
strong North American performance largely a function of the weight of AI
exposure. The return of +17.5% compares with the sterling total return of the
Russell 2000® Technology Index (small cap, £) of -0.3%. By contrast, the UK
portfolio returned -7.2%, reflecting the larger concentration in software and
media stocks. The comparator index, the Deutsche Numis Smaller Companies plus
AIM (ex. investment companies) Index, returned +11.8% on a total return basis,
although when the index is restricted to technology stocks, it was down
-11.5%. Asia, with its focus on hardware and semiconductors, performed very
strongly with a return in year of +24.3%. Europe, Middle East and Africa also
delivered strong returns of +23.9%, on a broad basis with no single investment
or sector dominating.
As noted by the Manager, the unwanted attentions of Saba have adversely
affected the Company in two ways - three if you account for the inordinate
amount of time having to be spent on corporate affairs rather than fund
management. Firstly, conscious of the need potentially to fund a tender, the
Manager has felt inhibited from making all the new investments it would
normally make for fear of having to sell these again a short while later,
incurring costs and possible volatility in doing so. The Company usually buys
stocks with a horizon of at least five years. Secondly (and in part,
consequently) cash and liquid securities accounted by year end for 15.8% of
the NAV, a materially higher proportion than historically, and a drag on
performance.
Looking at the share price performance over the year, this has lagged NAV. I
note that, at the start of the year, the share price had been driven up by
Saba's campaign to buy 29.9% in pursuit of effective control. On occasion Saba
was buying shares at a premium.
LIQUIDITY AND CAPITAL ALLOCATION
During the year the Company continued to buy shares back, with 4.9% of the
opening share capital bought back in the year, taking the total bought back
since 1 January 2023 to 23.0%. The board has paused buy backs in the face of
Saba's continued campaign to take effective control: although only allowed by
the Takeover Code to buy 29.9%, Saba was benefiting from the denominator
effect of the Company shrinking its share base, leading to its present
position of it owning some 31% of the Company. Takeover Code rules do not
require Saba to make a general offer to shareholders in those circumstances as
it benefits from what is referred to as 'The Innocent Bystander' status under
these rules. To avoid delivering creeping control to Saba, the board has
paused further buybacks after consulting with other large shareholders.
It is worth noting that since its inception, the Company has bought back
shares totalling some £530m which compares with the total amount of capital
raised of £95m, and still retained a NAV of £1,292m at year end. How many
other investment trusts have exhibited a similar capital discipline over the
years?
OUTLOOK
As I said last year, the board continues to believe that an active manager
with the right skills and experience can achieve excellent returns in this
dynamic sector. Index trackers do not reach down into the small and very small
levels of the market. There are some 5,000 companies worldwide which fall
within the mandate and sorting the wheat from the chaff adds a lot of alpha.
To achieve success, the board supports the Manager's view that a portfolio of
technology stocks needs to be global: trends and opportunities in different
parts of the globe inform decisions in other parts.
Since the year end, there has been marked volatility in technology stocks,
especially software companies. The Company's own portfolio has not been immune
but is up 2% at the time of writing, reflecting the benefit of the shift away
from software in favour of hardware noted above.
Provided that the Company's shareholder register can be sorted out, with short
term investors given the opportunity to leave and genuine medium and long-term
savers remaining, there remains good reason to have continued confidence in
the long-term prospects for the Company.
I would like to conclude by thanking my fellow directors, the Manager and the
board's advisers for their commitment over the last 12 months to doing the
right thing by all our shareholders. This has involved a time commitment way
beyond what is expected.
ANDREW JOY
CHAIRMAN
20 February 2026
Short Summary of Recent Events
The Company issued a circular on 12 January 2026 setting out a proposed
tender (the "Tender Offer") to offer shareholders the choice of selling up to
100% of their shares for cash at close to NAV or remaining invested. The board
had assessed that it was not sustainable to do nothing given that a process of
attrition might eventually see Saba able to win a simple majority vote even
though it itself is a minority shareholder, and thus take effective control of
the Company.
The board and the Manager continue to have confidence in the Company's
strategy, believing there to be attractive long-term investment opportunities
within quoted smaller companies in the global technology and communications
sectors. The Tender Offer was proposed to enable the Company to focus on
delivering strong investment returns with a supportive and stable Shareholder
base. It was dependent on Saba not voting against the tender and tendering its
shares. If the Tender Offer did not proceed, a subsequent Backstop Tender
Offer (the "Backstop Tender") would be proposed which required only 50% of
votes in favour to pass, versus the 75% of votes in favour required for the
initial Tender Offer.
Given Saba voted against the Tender Offer, the Company cancelled it on 3
February 2026. The board have temporarily deferred launching the Backstop
Tender because it is in discussions with Saba in an attempt to reach a
mutually acceptable outcome. This would again be for a tender offer giving
shareholders the choice to tender up to 100% of shares for cash, with Saba
agreeing to both vote in favour and tender their shares. However, if
discussions do not lead to a mutually acceptable outcome, in view of the fact
that Saba voted against the Tender, the board will launch the Backstop Tender.
In that way shareholders would have an opportunity to exit their investment in
the Company at a price close to the NAV and at a time before Saba might gain
control of the board or the management of the Company.
INVESTMENT Manager's Report
The instability in the share register and the accumulation of a c.31%
shareholding by funds advised by Saba Capital Management, L.P. ("Saba")
together with their requisition of a general meeting in January 2025 has
provided a cloud over the year and meant we have run higher cash levels,
whilst minimising new positions in more illiquid investments, which has been
part of our process over 30 years. Nevertheless, I am pleased to report
further growth in the net assets per share of 8.5%. All the overseas regions
delivered strong returns, but the UK lagged. More unusually the positive
returns have been concentrated in a handful of stocks in the technology
hardware sector. In fact, this sector has delivered a total return of £127.0m
in the year versus the total return of the Company, net of expenses, of only
£98.5m. The software and technology services sector, which started the year
as the biggest sector (42.2% of equities) had a further dull year with
a total return of -3.1%, and media, which started the year with a 10.5%
weighting, a desultory -21.2%.
SECTOR PERFORMANCE
If the challenges posed by Saba have been the cloud, then the artificial
intelligence (AI) supply chain has been the shining driver to performance. The
table below quantifies this over the last cycle. In 2025 the technology
hardware and semiconductors sector delivered 129% of the total return of the
Company, although it only accounted for 26.4% of the assets at the start of
the year. Furthermore, the sector accounts for 66.0% of the total returns over
six years, although only weighted at 18.8% at the start of this period.
Net Asset Value £m % of total NAV
Total NAV Tech Hardware Software and AI 4 Tech Hardware Software and AI 4
and Tech Services and Tech Services
Semiconductors Semiconductors
31/12/2025 1,292.4 402.6 391.3 120.3 31.2% 30.3% 9.3%
31/12/2024 1,252.6 330.2 493.6 101.0 26.4% 39.4% 8.1%
31/12/2023 1,245.8 336.5 457.8 113.3 27.0% 36.8% 9.1%
31/12/2022 1,305.0 312.6 498.9 66.0 24.0% 38.2% 5.1%
31/12/2021 1,760.9 384.7 751.5 50.1 21.8% 42.7% 2.8%
31/12/2020 1,503.4 291.4 655.1 34.1 19.4% 43.6% 2.3%
31/12/2019 1,122.8 211.3 455.8 25.4 18.8% 40.6% 2.3%
Return £m % of total return
Total Tech Hardware Software and AI 4 Tech Hardware Software and AI 4
return
and Tech Services and Tech Services
Semiconductors Semiconductors
Return 2025 98.5 127.0 -13.6 71.5 129.0% -13.8% 72.6%
Return 2024 134.3 63.5 69.4 67.8 47.3% 51.7% 50.5%
Return 2023 48.1 69.4 -15.5 90.0 144.3% -32.2% 187.0%
Return 2022 -405.5 -75.9 -162.3 14.1 18.7% 40.0% -3.5%
Return 2021 280.4 99.5 72.9 16.1 35.5% 26.0% 5.7%
Return 2020 405.4 86.7 197.4 8.2 21.4% 48.7% 2.0%
Return 2020 - 2025 561.1 370.3 148.3 267.8 66.0% 26.4% 47.7%
Investment realised gains £m
Total Tech hardware Software and AI4
realised and tech services
gains semiconductors
2025 137.3 46.2 54.4 49.2
2024 120.4 75.0 37.6 76.5
2023 40.0 39.5 6.3 38.0
2022 101.8 12.2 70.2 0.0
2021 137.5 17.1 52.9 0.7
2020 119.7 32.0 51.6 0.0
2020 - 2025 656.7 222.0 273.1 164.3
Over this six year period there have been 137 holdings in the sector, and 90
in 2025 alone. However, there have been four stand-out contributors that are
labelled AI 4 in the table above. These are Super Micro Computer, Celestica,
BE Semiconductor Industries and Fabrinet. They alone have accounted for 72.6%
of the Company's return in 2025 and 47.7% over six years. It also interesting
to see that we have realised gains on these four holdings of £164m in the six
years (and £176m over the life of the Company), the current value is still
£120m against a residual book cost of £4.9m. This gives a 24.3x return. Of
this, about half is multiple expansion and half profits growth. A stark
reminder of the power of fashion! In contrast the software and technology
services sector, which accounted for 39.4% of the Company's net assets at the
start of the year and included 162 holdings in the year, delivered a negative
return. This sector led the returns in the last cycle (2019-22) when
software-as-a-service was the fashion, and valuations rose to 30x revenue
multiples and more. We sold some too early, some well and clearly should have
sold more given the 2022 correction, but we did at least move decisively in
the right direction and added a little to Super Micro and Celestica. The 2022
correction was clearly the fashion element evaporating and 2024 saw some
recovery. The headwind this year has been concerns that AI will make software
much easier to develop thereby reducing barriers to entry. In addition, the
major players have pushed through price rises and budgets have been diverted
to AI initiatives, so revenue growth has generally slowed, but there has been
a continued derating. The other concern about the software product sector is
that it is swilling in stock-based compensation, which analysts never account
for in forecasts, so p/e ratios are a bit fictitious in the US in particular.
The returns of the other sectors represented in the portfolio are shown in the
table below, and patchy results are evident. The media sector has been poor
and will be discussed more in the UK analysis. A particular headwind has been
the hyperscalers diversion of resources to AI capital expenditure, who have
historically been lavish spenders for a number of holdings in the media
sector. Industrial products have been a bright light. Again a number of
holdings in all regions have benefited from the AI infrastructure spend.
Valuation Valuation IRR Valuation Valuation
at 31-Dec at 31-Dec at 31-Dec at 31-Dec
2024 2025 2024 2025
(£m) (£m) (%) (%)
Software & Tech Services 493.6 391.3 -3.1% 42.2% 36.0%
Tech Hardware & Semiconductors 330.2 402.6 39.7% 28.3% 37.0%
Media 122.4 78.1 -21.2% 10.5% 7.2%
Industrial Products 90.2 102.1 34.9% 7.7% 9.4%
Industrial Services 33.4 24.6 -18.7% 2.9% 2.3%
Telecommunications 32.5 20.0 -37.5% 2.8% 1.8%
Other 66.4 69.5 18.1% 5.6% 6.3%
Total equity portfolio 1,168.6 1,088.2
SECTOR PERFORMANCE
(STERLING, MILLIONS)
Market value % of Total return %
equity portfolio equity portfolio equity portfolio IRR
31 Dec 2025 31 Dec 2025 31 Dec 2025 2025
Software 351.8 32.3 -6.4 -1.7
Technology Hardware 238.1 21.9 99.3 53.3
Semiconductors 164.5 15.1 27.7 20.7
Electrical Equipment 60.0 5.5 21.2 47.4
Internet Media & Services 40.2 3.7 -13.8 -25.6
IT Services 39.5 3.6 -7.2 -12.4
Industrial Intermediate Production 25.7 2.4 7.2 32.0
Commercial Support Services 23.8 2.2 -6.3 -18.3
Telecommunications 20.0 1.8 -12.8 -37.5
Advertising & Marketing 16.4 1.5 -11.0 -32.2
Other 108.2 10.0 13.7 12.5
Total 1,088.2 100.0 111.6 10.3
Source: BICS (Bloomberg Industry Classification Standard) and HIML.
REGIONAL ALLOCATION CHANGES
(STERLING, THOUSANDS)
Valuation at Net Amortisation Appreciation/ Valuation at
31 December acquisitions/ (depreciation) 31 December
2024 (disposals) 2025
Equities*
UK 444,846 (125,047) - (33,974) 285,825
North America 427,253 (1,888) - 72,858 498,223
EMEA 146,260 (34,991) - 28,074 139,343
Asia Pacific 150,251 (18,978) - 33,556 164,829
Total equities 1,168,610 (180,904) - 100,514 1,088,220
Government bonds 61,417 19,700 755 (1,645) 80,227
Total investments 1,230,027 (161,204) 755 98,869 1,168,447
Net liquid assets 22,575 102,126 - (735) 123,966
Total assets+ 1,252,602 (59,078) 755 98,134 1,292,413
* Equities includes convertibles and warrants.
+ The total assets figure comprises assets less current liabilities.
Analysis by Region
If at the sector level there has been a swing to hardware and the AI capital
expenditure boom, there has also been a geographical cycle. The UK has been
particularly hard hit by heavy redemptions from retail funds for another year,
and the lack of exposure to the AI capital expenditure supply chain. In part
it is evident that the exceptionally high savings rate in the covid era,
coinciding with negligible interest rates, led to heavy flows into funds which
were focused on the growth sector of technology. It appears that this
investment was temporary. This has resulted in a further derating of UK
holdings of c10%, so that valuations are nearly as low as they were in the
global financial crisis.
Portfolio p/e by region
UK North EMEA Asia Total
America Equities
2013 16.9 20.9 14.9 9.6 16.8
2014 15.8 19.2 13.4 12.3 16.1
2015 16.4 20.1 16.3 13.2 16.9
2016 15.9 20.7 17.5 13.1 16.7
2017 19.6 27.8 21.4 14.8 20.7
2018 15.9 24.0 17.7 16.3 17.7
2019 21.7 27.9 25.0 20.7 23.2
2020 26.2 45.0 34.9 25.0 30.7
2021 23.8 29.4 33.3 23.0 25.9
2022 16.7 17.9 24.1 16.9 17.8
2023 16.0 22.3 30.4 21.5 19.6
2024 16.6 23.3 29.2 20.5 19.7
2025 15.0 24.1 24.3 19.7 20.5
The exciting thing is that the AI returns have kept the NAV/share increasing
over a period of useful derating for the majority of the portfolio from the
frothy levels of 2020-21. In addition, the expectation that we shall have to
buyback the shareholders who are not long-term investors in our strategy has
led to a deliberately higher level of cash and a focus on investments with
more liquidity in overseas markets. A further net £125m has been sold from
the UK portfolio in 2025, taking the total since the beginning of 2015 to
nearly £500m.
Valuation of equity portfolio
Valuation at Net Gains/ Valuation at
31-Dec-2024 purchases/ (losses) 31-Dec-2025
(£m) sales (£m) (£m)
(£m)
UK 444.8 -125.0 -34.0 285.8
North America 427.3 -1.9 72.8 498.2
EMEA 146.3 -35.0 28.1 139.3
Asia 150.2 -19.0 33.6 164.8
Total 1,168.6 -180.9 100.5 1,088.2
Looking over a longer timeframe, as we have done with sectors, the trends are
quantified in the table below.
Equities (£m) % of total NAV
Equities (£m) Total Asia EMEA North UK Asia North America UK
NAV America EMEA
(£m)
31/12/2025 1,292 165 139 498 286 12.8% 10.8% 38.5% 22.1%
31/12/2024 1,253 150 146 427 445 12.0% 11.7% 34.1% 35.5%
31/12/2023 1,246 144 150 342 504 11.5% 12.1% 27.4% 40.5%
31/12/2022 1,305 145 141 284 576 11.2% 10.8% 21.8% 44.1%
31/12/2021 1,761 208 201 392 839 11.8% 11.4% 22.3% 47.7%
31/12/2020 1,503 152 129 367 741 10.1% 8.6% 24.4% 49.3%
31/12/2019 1,123 77 67 258 586 6.8% 6.0% 23.0% 52.2%
Returns to year ending 31 December (£m) % of total return
Total Asia EMEA North UK Asia EMEA North UK
return America America
2025 98.5 36.0 29.5 74.3 -28.3 37% 30% 75% -29%
2024 134.3 4.8 8.4 115.4 15.7 4% 6% 86% 12%
2023 48.1 19.6 6.3 85.9 -50.7 41% 13% 179% -105%
2022 -406.0 -56.1 -54.6 -75.9 -212.3 14% 13% 19% 52%
2021 280.4 31.0 63.0 39.5 163.4 11% 22% 14% 58%
2020 405.0 53.4 43.0 139.2 183.7 13% 11% 34% 45%
2020 - 2025 560.3 88.7 95.6 378.4 71.6
Investment realised gains (£m)
Total Asia EMEA North UK
realised
gains America
2025 137.3 18.2 27.8 63.2 27.5
2024 120.4 5.0 9.4 68.5 39.2
2023 40.0 1.2 4.2 36.2 2.5
2022 101.8 10.3 5.4 37.5 45.3
2021 137.5 22.8 3.3 40.5 71.0
2020 119.7 8.5 11.5 56.6 42.2
2020 - 2025 656.7 66.0 61.8 302.5 227.8
North America
The IRR of the North American portfolio in 2025 was +17.5% versus the sterling
total return for the Russell 2000 Technology Index of -0.3%. It frustrates me
that a number of UK investors think the US is "tech utopia". Valuations are
often too high and management teams obsessed with revenue growth build huge
losses exacerbated by overly generous stock-based compensation, which
unfortunately makes it the obvious market to raise capital, but less obvious
that it is the market in which to invest. It is particularly pleasing
therefore that we have trounced the comparative index this year again through
the AI exposure described above. Ironically, of the three North American
Holdings in our AI 4, only one is actually a US company- Super Micro Computer,
which has positively contributed to the Company's returns each year from 2019
to 2024, returning a small loss in 2025. The cumulative return is £116.5m
making it the most profitable investment in Company's history. This year the
leadership came from the Canadian domiciled Celestica returning £48.8m, which
supplies the hyperscalers and Google in particular. Second best has been
Fabrinet, a Cayman Island company with operations primarily in Thailand. It
has returned £21.7m in 2025 and £48.7m since first acquired on a p/e of
10.2x in 2013. Vicor and Silicon Motion Technology (Cayman domiciled, but
Taiwanese operations) also contributed c£10m each, both of these holdings had
an AI kicker to demand, so in aggregate the technology hardware and
semiconductors sector delivered a return of £95.0m from 29 holdings in the
year. The 48 holdings in the software and tech services sector delivered a
modest negative return of 7.9% with no standout positions, albeit the long
held significant software holdings of Descartes Systems, Varonis Systems and
SPS Commerce all drifted. Cogent Communications, an acquisition driven
internet infrastructure company, proved the biggest loser with price pressure,
costs pressures and debt a challenge.
There were eight Israeli companies with NASDAQ listings in our North American
bucket, now reduced to seven following the CyberArk Software takeover. Their
IRR was +31.8%, and in sterling terms offset the -3.7% loss on the 88 US
domiciled companies held. Israel was outshone by Canada +55.4% led by
Celestica, and the Cayman Islands +73.0% reflecting Fabrinet and Silicon
Motion Technology's strong returns.
The 13 holdings in the industrial products sector returned +44.6% led by laser
company nLight. The common theme is that manufacturing companies have
generally performed better than software, media and I.T. service companies. As
Trump reminds us bluntly, the US has exported manufacturing primarily to Asia,
as has the UK, so that has been a headwind for these regions. The market was
evidently unsettled by the introduction of tariffs. We are fortunate to be in
regular contact with scores of management teams around the world and most
companies see little adverse effect on their trading.
The smaller companies' market in the United States is under pressure from
withdrawals from active management in favour of index trackers and companies
remaining private for longer. There are now only 432 companies in the
Bloomberg technology and communications sectors in North America with a market
capitalisation of between $100m and $5bn so a further small decline in 2025.
There is a big pipeline of venture backed companies that might come to market,
but the valuations have to be more realistic than the crop that came to market
in 2020-21.
UK
The UK returns to some extent mirror the software returns with a strong covid
period and subsequent anaemic performance. The IRR for 2025 of -7.2% is
disappointing relative to the Deutsche Numis Smaller Companies Index plus AIM
(ex. investment companies) total return of +11.8% and the returns from the
overseas regions. However, the sector return within the Deutsche Numis index
for technology is -11.5% and the media sector is -27.2%, therefore relative to
our sectors the return shows solid outperformance. Just as we were decisively
taking profits in software companies in 2021, we were also decisively reducing
the UK portfolio. In both cases we moved in the right direction, but not fast
enough. Liquidity proved an inhibitor particularly when the market turned, but
we could have done more. Trends always move further than rational on the
upside and the downside. I observe that basic materials weighting in the
index has risen to 7.7% and technology has fallen to only 4.2%. Basic
materials has returned +65.3% led by precious metals and mining!
The media sector has accounted for 80.1% of the UK decline, with Trustpilot
alone declining £11.1m. This is in spite of Trustpilot's trading performance,
delivering on expectations with annual recurring revenue growth rising 21%
year on year in the interims. There has been a bear raid from short sellers,
and we are sceptical of their negativity, accusing the company of rigging
outcomes, which the company vigorously and credibly denies. Two small holdings
in the software sector, Corero Network Security and Celebrus Technologies both
lost more than £4m, but we remain confident long-term. Volex (+£6.8m) and
Diploma (+£5.5m) were the two best performing stocks. Interestingly they were
also beneficiaries of the AI capital spending boom in some of their
activities, with a Volex subsidiary supplying active electrical cables for
connectivity, and Diploma copper cables.
Few of the UK investments have a predominantly domestic market. Technology is
an international sector and the majority of revenues and profits are derived
in overseas markets. The strength of sterling relative to the dollar is a
headwind to profits growth, particularly for the numerous companies which are
overweight sterling costs versus dollar revenues.
Whereas we were purposefully selling UK holdings on valuation grounds in
2020-21, this year's increased pace of selling reflects more a desire to
increase cash levels and reduce the most illiquid region of the portfolio in
the expectation that at some stage the Company may have to undertake a tender
offer. The UK market is in a sorry state and the flight of capital has
continued throughout 2025. Whilst I am nervous about longer term prospects,
because the flight of capital has led to an evaporation of the skillset in
London, in the short-term there are some stocks trading at very good
valuations and it would be a shame to have to sell more into this unwilling
market.
Asia
Asia has been a strong market this year, the portfolio sterling IRR of 24.3%
has been achieved despite currency headwinds, with a number of hardware
companies in the AI hardware and AI semiconductor supply chains seeing
extraordinary revenue growth, benefitting from massive growth in AI data
centre capital expenditure and from rising prices for their products. The
scale of the hyperscaler AI capex spend is remarkable, growing from $250-300bn
in 2024, to perhaps $400bn in 2025 with some analysts forecasting annual capex
spend of $1-2tn by 2030. Some individual data centre sites in North America
will require capex of over $10bn. A substantial proportion of this spend is on
AI servers and AI network switches which have the majority of the hardware
value produced in Asia. The biggest beneficiary of direct AI spend to date has
been Nvidia (now the largest company globally by market capitalisation), they
are the leading provider of AI chips and AI interconnect and have close to
75% gross margins. Hence, for every $1 spent with Nvidia, 25 cents is spent
with its suppliers, who are often in Asia. Google's AI ecosystem is based
around a semiconductor called a TPU; it is also enjoying remarkable growth,
which is passed onto Google's supply chain, again often located in Asia.
To deliver AI requires compute, memory, storage and connectivity. All of these
elements require enormous electrical power and power transformation equipment.
The scale of demand is immense with data centre electricity consumption
forecast to more than double to around 945 TWh by 2030. This is slightly more
than Japan's total electricity consumption today. A number of data centre
companies are committed to building their own nuclear power stations and
making substantial investments in renewable energy. The Asian portfolio has
numerous holdings that supply materials and components into companies
supplying into this AI datacentre capex spend. They include BizLink (Active
Electrical Cables (AEC) for data and power cables), Elite Material and Taiwan
Union Technology (Copper Clad Laminates (CCL) used in advanced AI and
networking PCBs), MPI (probe cards for semiconductor test), Winway Technology
and ISC (semiconductor test sockets), Kulicke & Soffa Industries (bonding
machines for advanced semiconductors), ASMPT (bonding machines for advanced
semiconductors), eMemory Technology (PUF based security IP to incorporate in
semiconductors) and Chroma ATE (advanced semiconductor test equipment).
Companies in the portfolio developing innovative new products to address AI
datacentre demand include: Voltronic Power Technology (power supplies),
Musashi Seimitsu Industry (hybrid super capacitors), FOCI Fiber Optic
Communications (fiber array units), Himax Technologies (micro-lens arrays for
TSMC's COUPE (silicon photonics)).
In addition, there are a number of holdings of semiconductor capital equipment
manufacturers that supply into both memory and logic fabs. Until recently the
wider DRAM and NAND memory industries have been in a multi-year cyclical
downturn with weak demand. AI demand for High Bandwidth Memory (HBM) based on
DRAM, and to a lesser extent better NAND demand, has transformed memory
pricing and the profitability of Samsung Electronics, SK Hynix and Micron
Technology. It is anticipated that as a result the capital expenditure of
these companies will now rebound, transforming the prospects for a number of
the Company's semiconductor equipment manufacturing holdings, potential
beneficiaries include Wonik IPS, Eugene Technology, Tokyo Seimitsu and Park
Systems. There is great uncertainty as to how long this elevated period of AI
related capex will last.
AI is the hot topic and major global technological innovation of the time, but
the sources of the performance of the Company's small company portfolio are
actually quite diverse and not reliant on AI hype and concept valuations.
AI related names are a minority of the Asian portfolio. Although, the biggest
individual contributor to the Asian performance is the AI related BizLink,
which appreciated +156% (£12m), strong percentage returns were seen from
numerous holdings, many not AI related. Some of these gains were due to
takeovers and include Kaonavi (HR software in Japan) and Proto (Car dealership
software in Japan) others were due to strong revenue and profit growth in
niche growth markets. Examples here include Electro Optic Systems (Laser based
drone defence systems (Australia)), Catapult Sports (A leading sports
analytics company (Australia)), RFHIC (GAN power amplifiers for defence and
industrial heating applications (Korea) and finally Genians (Dominant Korean
supplier of network access and zero trust software).
In contrast to the shrinking number of public companies in the sectors
targeted in the West the number in Asia continues to grow. Six new holdings
were added in Asia in the year including Acer Cyber Security, AP Memory
Technology, Innodisk, Kinsus Interconnect Technology, MPI and Voltronic Power
Technology. In fact, the number of companies in technology and communications
with a market capitalisation between $100m and $5bn is 453 in Taiwan, in Japan
380, South Korea 273 and China many more. However, in the United States only
395. A number of Asian companies are moving rapidly up the value chain.
Europe, Middle East and Africa
The European market was unusual in providing a currency tailwind for sterling
investors with the Euro appreciating against sterling by 5.4%. The IRR was a
pleasing +23.9%. 83% of the EMEA portfolio is invested in two core sectors;
technology hardware and semiconductors, which returned +11.5%, and software
and technology services, which returned +26.8%. Returns were broad based, led
by software companies which provided slightly more than half the sterling
gains of £29.5m. These software businesses address a range of applications,
with the significant contributors including Median Technologies (AI lung
cancer screening), WALLIX (Privileged Access Management) and RaySearch
Laboratories (radiotherapy treatment planning). Other significant contributors
were LUMIBIRD (lasers for medical, defence and industrial applications),
PFISTERER (high-voltage cable accessories) and Nordic Semiconductor (Bluetooth
Low-Energy wireless connectivity). Each contributed a gain of circa £4m in
the year.
A headwind for the European portfolio going into the year was the high
proportion of cash and outstanding takeovers, with Volue having settled late
in 2024 and Esker and Nexus, in aggregate 21% of the EMEA portfolio by value,
settling in February and April. Pleasingly, as well as adding to existing
positions, we have managed to redeploy capital into eight new holdings.
PFISTERER, the only European IPO invested in, was the IPO of the year in terms
of performance, rising +183% from its IPO price. We have also made post-IPO
investments in Planisware (marginally above the IPO price) and HBX Group (at a
significant discount to the IPO price). Our other new positions are Comet,
Louis Hachette, NCAB, STREAMWIDE and Vivendi.
Our largest position, BE Semiconductor Industries, is one of the four AI
beneficiaries described earlier. It was first acquired in 2011 and has since
returned £55m, of which £30m has been generated in the last six years,
though the shares have been relatively flat since 2023. The company is the
market leader in hybrid bonding systems, which we view as critical to enabling
the next wave of advanced packaging innovation.
Drivers of the Company's challenges
The challenges posed by Saba are arguably only one factor. Saba would not have
accumulated such a large stake if there had not been willing sellers, albeit
Saba's buying reduced the discount to a level that was too low versus other
trusts with more liquid assets, providing shareholders with a tempting exit.
It is depressing that over the last three years we have repurchased 14.3m
shares, or 23% of the share capital, including 2.5m shares repurchased in
2025. Over the same period Saba has acquired 14.7m shares, so there has been
net selling of 47% of the register. It is bewildering that we have had such
heavy selling pressure, whilst continuing to perform. We speculate on the
reasons:
(i) Regulatory pressure for wealth managers and advisors to
minimise "double fees" when they invest in funds following the Consumer Duty
legislation- albeit our smaller companies focus gives them access to
investments that they would not otherwise be exposed to. It is evident that
this has contributed to enormous outflows across collective vehicles in the
UK.
(ii) The underperformance of the small companies sector compared to
the Magnificent Seven.
(iii) The incentive ahead of tax rises for investors to realise
profits when they enjoyed heavy capital gains. I am pleased to say that we
have not raised new capital since 1996, so many investors do have book costs
that are less than 10% of market value, which may also have become overweight
in their portfolios. Selling was particularly heavy ahead of the UK Budget in
the Autumn of 2024.
(iv) The consolidation of wealth managers and regulatory pressure for
them to deliver uniform returns across their client base has led to a focus on
very large liquid investments.
(v) The cash flows out of active managed funds into lower cost index
trackers. It infuriates me that active management seems to be perceived as an
unnecessary extravagance. Of course, on average active management will
underperform, because we have costs, but index trackers are dumb money, and do
not provide capital to growth companies. I would rather underperform a market
growing by 15% a year by a percent or two than perform in line with a market
growing at 3% a year, although we do have a long track record of outperforming
relevant indices. If growth companies are not funded, the market will not
grow.
(vi) Quite rightly there is regulatory pressure to ensure liquidity in
open ended funds, but there is a lack of stable long-term capital that
insurance companies and pension funds used to provide in the London market.
This has led to a capital shortage.
I still passionately hope that there will be a route to continuation such that
we can continue to invest in an exciting sector. I believe that there is a
valuation arbitrage between small companies below the size that attracts flows
from index trackers and it is evident that we have benefitted from investing
in stocks that have grown into the more expensive category which is included
in indices. I also believe that we target a global sector and the intelligence
derived from looking at companies across the globe has been a vital
contributor to our ability to outperform. Having a large number of positions
diversifies both the stock specific risks associated with early stage
investing, and the liquidity risk. We have demonstrated that we can make
>20x returns and often do which pays for the ones that are less successful,
meaning we still deliver strong returns.
Outlook
It is evident that technology is continuing to open up new markets at a faster
pace than ever and emerging companies exploit that. So far it has been a boom
in hardware companies enabling AI. The next boom will be new applications
using AI. I continue to be excited. Alas I am less confident that the Company
can survive the shareholder challenges on its own share register but we
continue to strive for a solution in one form or another.
KATIE POTTS
20 February 2026
Classification of investments
North Japan & Asia 2025 2024
UK EMEA America Pacific Total Total
Classification* % % % % % %
Communications 4.6 0.9 0.7 1.2 7.4 12.4
Advertising & Marketing 1.2 - - 0.1 1.3 3.1
Entertainment Content 0.5 0.1 - - 0.6 0.5
Internet, Media & Services 1.3 0.2 0.3 1.0 2.8 4.7
Publishing & Broadcasting 0.8 0.3 - - 1.1 1.6
Telecommunications 0.8 0.3 0.4 0.1 1.6 2.5
Consumer Discretionary - - 0.8 0.2 1.0 0.4
Automotive - - - 0.1 0.1 -
E-Commerce Discretionary - - - 0.1 0.1 0.1
Wholesale - Discretionary - - 0.8 - 0.8 0.3
Energy 0.4 - 0.8 - 1.2 0.8
Oil & Gas Services & Equipment - - 0.2 - 0.2 0.2
Renewable Energy 0.4 - 0.6 - 1.0 0.6
Financials 0.6 - - 0.6 1.2 1.2
Asset Management 0.4 - - - 0.4 0.5
Speciality Finance 0.2 - - 0.6 0.8 0.7
Health Care 0.3 0.4 - 0.2 0.9 1.2
Biotechnology & Pharmaceutical 0.1 - - - 0.1 0.1
Health Care Facilities & Services - - - - - 0.2
Medical Equipment & Devices 0.2 0.4 - 0.2 0.8 0.9
Industrials 4.6 0.5 3.5 1.1 9.7 10.1
Aerospace & Defence 0.6 - 0.5 0.1 1.2 2.0
Commercial Support Services 0.9 - 1.0 - 1.9 2.6
Electrical Equipment 1.3 0.5 1.9 0.9 4.6 3.4
Industrial Intermediate Production 1.8 - - 0.1 1.9 2.0
Transportation & Logistics - - 0.1 - 0.1 0.1
Materials - - - 0.2 0.2 0.3
Chemicals - - - 0.2 0.2 0.2
Forestry, Paper & Wood Products - - - - - 0.1
Technology 10.8 9.0 32.7 9.3 61.8 65.6
IT Services 1.1 0.5 0.5 1.0 3.1 5.4
Semiconductors 0.2 3.6 6.0 2.9 12.7 10.1
Software 7.2 4.0 13.6 2.6 27.4 34.0
Technology Hardware 2.3 0.9 12.6 2.8 18.6 16.1
Utilities 0.8 - - - 0.8 1.3
Electricity & Gas Marketing & Trading 0.8 - - - 0.8 1.1
Gas & Water Utilities - - - - - 0.2
TOTAL EQUITIES (including convertibles and warrants) 22.1 10.8 38.5 12.8 84.2 -
Total equities - 2024 (including convertibles and warrants) 35.5 11.7 34.1 12.0 - 93.3
BONDS 1.5 1.2 2.3 1.2 6.2 4.9
NET LIQUID ASSETS** 2.8 2.3 1.3 3.2 9.6 1.8
TOTAL NET ASSETS 26.4 14.3 42.1 17.2 100.0 -
Total net assets - 2024 36.5 13.2 36.8 13.5 - 100.0
SHAREHOLDERS' FUNDS 26.4 14.3 42.1 17.2 100.0 -
Shareholders' Funds - 2024 36.5 13.2 36.8 13.5 - 100.0
Number of equity investments (including convertibles and warrants) 78 30 85 85 278 310
* Source: Bloomberg Industry Classification Standard.
** Cash, current assets and liabilities.
TOP TWENTY EQUITY HOLDINGS AS AT 31 DECEMBER 2025
Celestica(TM)
As a leader in design, manufacturing, hardware platform and supply chain £46.1m VALUATION
solutions, Celestica partners with leading companies in aerospace and defence,
communications, enterprise, health technology, industrial and capital 3.6% OF TOTAL ASSETS
equipment, to deliver solutions for their most complex challenges. Celestica
brings global expertise and insight at every stage of product development - 0.2% OF ISSUED SHARE CAPITAL HELD
from the drawing board to full-scale production and after-market services.
Celestica has employees across North America, Europe and Asia, that help, £1.8m BOOK COST
develop and deliver a new products for their customers.
Fabrinet
Fabrinet is a leading provider of advanced optical packaging and precision £32.1m VALUATION
optical, electro-mechanical and electronic manufacturing services to original
equipment manufacturers of complex products, such as optical communication 2.5% OF TOTAL ASSETS
components, modules and subsystems, industrial lasers and sensors. Fabrinet
offers a broad range of advanced optical and electro-mechanical capabilities 0.3% OF ISSUED SHARE CAPITAL HELD
across the entire manufacturing process, including process design and
engineering, supply chain management, manufacturing, advanced packaging, £1.2m BOOK COST
integration, final assembly and test. Fabrinet focuses on production of high
complexity products in any mix and volume. Fabrinet maintains engineering and
manufacturing resources and facilities in Thailand, the United States and the
People's Republic of China.
BE Semiconductor Industries ('Besi')
BE Semiconductor Industries ('Besi') is a leading supplier of semiconductor £28.0m VALUATION
assembly equipment for the global semiconductor and electronics industries
offering high levels of accuracy, productivity and reliability at a low cost 2.2% OF TOTAL ASSETS
of ownership. Besi develops leading edge assembly processes and equipment for
lead frame, substrate and wafer level packaging applications in a wide range 0.3% OF ISSUED SHARE CAPITAL HELD
of end-user markets including electronics, mobile internet, computer,
automotive, industrial, LED and solar energy. Customers are primarily leading £0.6m BOOK COST
semiconductor manufacturers, assembly subcontractors and electronics and
industrial companies.
PEGA
Founded in 1983, Pegasystems ('Pega') provides a platform that empowers the £26.7m VALUATION
world's leading organisations to unlock business-transforming outcomes with
real-time optimisation software. Clients use Pega's enterprise AI decisioning 2.1% OF TOTAL ASSETS
and workflow automation to solve pressing business challenges - from
personalising engagement to automating service to streamlining operations. 0.4% OF ISSUED SHARE CAPITAL HELD
Pega has built a scalable and flexible architecture to help enterprises meet
customer demands while continuously transforming for tomorrow. £1.5m BOOK COST
Silicon Motion Technology ('SMT')
Silicon Motion Technology ('SMT') is the global leader in supplying NAND flash £24.5m VALUATION
memory controllers for solid state storage devices. They supply more SSD
controllers than any other company in the world for servers, PCs and other 1.9% OF TOTAL ASSETS
client devices and are the leading merchant supplier of eMMC and UFS embedded
storage controllers used in smartphones, IoT devices and other applications. 1.1% OF ISSUED SHARE CAPITAL HELD
SMT also supplies customised high-performance hyperscale data center and
specialised industrial and automotive SSD solutions. Customers include most of £1.7m BOOK COST
the NAND flash vendors, storage device module makers and leading OEMs.
Diploma PLC
Diploma is an international value-add distribution Group, organised across £23.8m VALUATION
three sectors: Controls, Seals and Life Sciences. Value-add services are
delivered alongside products, which include: wire & cable, connectors, 1.8% OF TOTAL ASSETS
fasteners and adhesives; seals, gaskets, hose and fluid power sealing
products; surgical and diagnostic equipment, consumables and instrumentation. 0.3% OF ISSUED SHARE CAPITAL HELD
An entrepreneurial culture and decentralised management structure ensures that
decisions are made close to the customer and that the businesses are agile and £0.3m BOOK COST
responsive to changes in the market and the competitive environment. Diploma
operates in core geographies of North America, Continental Europe, UK and
Australia.
Vicor Corporation
Vicor Corporation designs, develops, manufactures and markets modular power £19.9m VALUATION
components and complete power systems based upon a portfolio of patented
technologies. Vicor sells its products to the power systems market, including 1.5% OF TOTAL ASSETS
enterprise and high performance computing, industrial equipment and
automation, telecommunications and network infrastructure, vehicles and 0.7% OF ISSUED SHARE CAPITAL HELD
transportation, aerospace and defence.
£10.3m BOOK COST
Nordic Semiconductor
Nordic Semiconductor is a Norwegian fabless semiconductor company specialising £15.6m VALUATION
in wireless communication technology that powers the Internet of Things (IoT).
Nordic was established in 1983 and has more than 1,500 employees across the 1.2% OF TOTAL ASSETS
globe. Nordic's Bluetooth Low Energy solutions pioneered ultra-low power
wireless, making them the global market leader. The technology range was later 0.8% OF ISSUED SHARE CAPITAL HELD
supplemented by ANT+, Thread and Zigbee and in 2018 they launched low power,
compact LTE-M/NB-IoT cellular IoT solutions to extend the penetration of the £6.2m BOOK COST
IoT. The Nordic portfolio was further complemented by Wi-Fi technology in
2021. Nordic's Bluetooth LE solutions are used by the world's leading brands
in a variety of products, including wireless PC peripherals, gaming, sports
and fitness, mobile phone accessories, consumer electronics, toys, healthcare
and automation.
Volex
Volex is a leader in integrated manufacturing for mission-critical £15.1m VALUATION
applications, in particular for power and data connectivity solutions. Volex
supports international blue-chip customers in five key sectors: Electric 1.2% OF TOTAL ASSETS
Vehicles, Consumer Electricals, Medical, Complex Industrial Technology and
Off-Highway. Headquartered in the UK, Volex has operations across 28 advanced 2.0% OF ISSUED SHARE CAPITAL HELD
manufacturing facilities, uniting 14,000 employees from 25 different nations.
Products find their way to market through localised sales teams and authorised £4.7m BOOK COST
distributor partners, supporting Original Equipment Manufacturers and
Electronic Manufacturing Services companies across the globe. In a world that
grows more digitally complex by the day, customers choose Volex to deliver
power and connectivity that drives everything from household essentials to
life-saving medical equipment.
Supermicro Micro Computer ('Supermicro')
Supermicro Micro Computer ('Supermicro') is a global leader in £14.2m VALUATION
application-optimised IT solutions. Founded and operating in San Jose,
California, Supermicro delivers innovative enterprise, cloud, AI and 5G 1.1% OF TOTAL ASSETS
telco/edge IT infrastructure hardware, it is a total IT Solutions provider
with server, AI, storage, IoT, switch systems, software and support services. 0.1% OF ISSUED SHARE CAPITAL HELD
Supermicro's motherboard, power and chassis design expertise further enables
our development and production, enabling next generation innovation from cloud £1.3m BOOK COST
to edge for global customers. Products are designed and manufactured in-house
(in the US, Taiwan and the Netherlands), leveraging global operations for
scale and efficiency and optimised to improve TCO and reduce environmental
impact (Green Computing). The award-winning portfolio of solutions enables
customers to optimise for their exact workload and application by selecting
from a broad family of systems built from flexible and reusable building
blocks that support a comprehensive set of form factors, processors, memory,
GPUs, storage, networking, power and cooling solutions (air-conditioned, free
air cooling or liquid cooling).
BizLink
BizLink was founded in 1996 in Silicon Valley and has grown into a global team £13.1m VALUATION
of over 20,000 employees across 20 countries. Initial products were power-cord
sets, today BizLink offers a full range of wire harnesses, connectors and 1.0% OF TOTAL ASSETS
custom cable assemblies, whilst continuing to innovate in a developing a
range of interconnect technologies. With agile manufacturing and collaborative 0.2% OF ISSUED SHARE CAPITAL HELD
R&D hubs across North America, Europe and Asia, BizLink combines global
scale and local responsiveness £2.7m BOOK COST
Radware
Radware is a global leader of cyber security and application delivery £12.1m VALUATION
solutions for physical, cloud and software defined data centers. Its
award-winning solutions portfolio secures the digital experience by providing 0.9% OF TOTAL ASSETS
infrastructure, application and corporate IT protection and availability
services to enterprises globally. Radware's solutions empower enterprise and 1.6% OF ISSUED SHARE CAPITAL HELD
carrier customers worldwide to adapt to market challenges quickly, maintain
business continuity and achieve maximum productivity while keeping costs down. £5.1m BOOK COST
Descartes Systems ('Descartes')
Descartes Systems ('Descartes') offers networks, applications, global trade £12.1m VALUATION
content and collaborative multi-modal logistics communities to improve the
productivity, performance. safety and security of logistics and supply chain 0.9% OF TOTAL ASSETS
operations. Customers use Descartes modular, cloud-based and data content
solutions to route, schedule, track, train and measure delivery resources; 0.2% OF ISSUED SHARE CAPITAL HELD
plan, allocate and execute shipments; rate, audit and pay transportation
invoices; access and analyse global trade data; research and perform trade £0.4m BOOK COST
tariff and duty calculations; file customs and security documents for imports
and exports; comply with trade regulations and complete numerous other
logistics processes. Customers can purchase Descartes' solutions either on a
subscription, transactional or perpetual license basis. The company serves
transportation providers (air, ocean and truck modes), logistics service
providers (including third-party logistics providers, freight forwarders,
freight brokers and customs brokers) and manufacturers, retailers,
distributors and business service providers. Descartes headquarters are in
Waterloo, Ontario, Canada and they have offices and partners around the world.
Arlo Technologies ('Arlo')
Arlo Technologies ('Arlo') offers advanced home, business and personal £11.7m VALUATION
security solutions. Arlo's deep expertise in AI- and CV-powered analytics,
cloud services, user experience and product design, and innovative wireless 0.9% OF TOTAL ASSETS
and RF connectivity enables the delivery of a seamless, smart security
experience for Arlo users that is easy to set up and interact with. Arlo's 1.1% OF ISSUED SHARE CAPITAL HELD
cloud-based platform provides users with visibility, insight and a powerful
means to help protect and connect in real-time with the people and things that £6.2m BOOK COST
matter most, from any location with a Wi-Fi or a cellular connection. Arlo has
recently launched several categories of award-winning connected devices,
software and services. These include wire-free, smart Wi-Fi and LTE-enabled
security cameras, video doorbells, floodlights, security system and Arlo's
subscription service, Arlo Secure.
JFrog
JFrog the creator of the unified DevOps, DevSecOps and MLOps platform, aims to £10.6m VALUATION
create a world of software delivered without friction from developer to
production. The JFrog Software Supply Chain Platform is a single system of 0.8% OF TOTAL ASSETS
record that powers organisations to build, manage and distribute software
quickly and securely, that is available, traceable and tamper-proof. 0.2% OF ISSUED SHARE CAPITAL HELD
Integrated security features also help identify, protect and remediate against
threats and vulnerabilities. JFrog's hybrid, universal, multi-cloud platform £4.5m BOOK COST
is available as both SaaS services across major cloud service providers and
self-hosted. Millions of users and over 7,000 customers worldwide, including a
majority of the Fortune 100, depend on JFrog solutions to securely embrace
digital transformation.
Trustpilot
Founded in Denmark in 2007, Trustpilot has since grown to become one of the £10.5m VALUATION
world's leading consumer review platforms. Trustpilot offers a public platform
where consumers can leave reviews for businesses and businesses can respond to 0.8% OF TOTAL ASSETS
honest feedback. The platform is open to all businesses and consumers - yet
independent of both - every interaction on Trustpilot is transparent for all 01.6% OF ISSUED SHARE CAPITAL HELD
to see. Trustpilot business model is to charge recurring software fees to its
corporate customers for the use of the platform. £6.8m BOOK COST
Varonis
Varonis is a leader in data security, fighting a different battle than £10.2m VALUATION
conventional cybersecurity companies. The company's cloud-native Data Security
Platform continuously discovers and classifies critical data, removes 0.8% OF TOTAL ASSETS
exposures and detects advanced threats with AI-powered automation. Thousands
of organisations worldwide trust Varonis to defend their data wherever it 0.4% OF ISSUED SHARE CAPITAL HELD
lives - across SaaS, IaaS and hybrid cloud environments. Customers use Varonis
to automate a wide range of security outcomes, including data security posture £5.2m BOOK COST
management (DSPM), data classification, data access governance (DAG), data
detection and response (DDR), data loss prevention (DLP) and insider risk
management.
GB Group ('GBG')
GB Group ('GBG'), was founded in 1989, originally pioneering new ways of £10.1m VALUATION
delivering address management services. Since then, the offering has grown to
cover three core areas of Location, Identity & Fraud, which together 0.8% OF TOTAL ASSETS
create confidence online. The location business ensures addresses and
locations can be easily captured, verified and managed. GBG's digital identity 1.7% OF ISSUED SHARE CAPITAL HELD
verification tools ensure that companies are trading with good customers and
can identify the bad actors. Fraud prevention solutions reduce financial risk £4.5m BOOK COST
and ensure compliance with regulations. GBG's future goal is to facilitate
online environments where everyone can transact with the complete and
unconditional confidence they expect.
Telecom Plus
Telecom Plus, which owns and operates Utility Warehouse (UW), is the UK's £10.0m VALUATION
leading multiservice utility provider, offering bundled household services -
energy, broadband, mobile and insurance. Customers benefit from the 0.8% OF TOTAL ASSETS
convenience of a single monthly bill, consistently good value across all their
utilities and exceptional service levels. Customers sign up through a network 0.9% OF ISSUED SHARE CAPITAL HELD
of local UW Partners all across the country. These Partners recommend UW's
services to friends, family and people they know by word-of-mouth. £5.0m BOOK COST
Seeing Machines
Seeing Machines, a global company founded in 2000 and headquartered in £9.8m VALUATION
Australia, is an industry leader in vision-based monitoring technology that
enable machines to see, understand and assist people. Seeing Machines' 0.8% OF TOTAL ASSETS
technology portfolio of AI algorithms, embedded processing and optics power
products that need to deliver reliable real-time understanding of vehicle 3.7% OF ISSUED SHARE CAPITAL HELD
operators. The technology spans the critical measurement of where a driver is
looking, through to classification of their cognitive state as it applies to £7.4m BOOK COST
accident risk. Reliable "driver state" measurement is the end-goal of driver
monitoring systems (DMS) technology. Seeing Machines develops DMS technology
to drive safety for automotive, commercial fleet, off-road and aviation. The
company has offices in Australia, the U.S., Europe and Asia, and supplies
technology solutions and services to industry leaders in each market vertical.
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2025
2025 2025 2025 2024 2024 2024
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments 9 - 98,869 98,869 - 131,830 131,830
Losses on foreign exchange - (735) (735) - (194) (194)
Income 2 15,629 - 15,629 17,169 - 17,169
Investment management fee 3 (12,558) - (12,558) (12,894) - (12,894)
Other administrative expenses 4 (2,250) (10) (2,260) (1,147) (8) (1,155)
Profit before taxation 821 98,124 98,945 3,128 131,628 134,756
Taxation 6 (475) - (475) (460) - (460)
Profit after taxation 346 98,124 98,470 2,668 131,628 134,296
Profit per ordinary share (basic
and diluted) 8 0.70p 198.31p 199.01p 4.96p 244.77p 249.73p
There is no final dividend proposed (2024 - nil). More information on dividend
distributions can be found in note 7.
The total column of this statement is the profit and loss account of the
Company, prepared in accordance with UK Accounting Standards.
The profit after taxation is the total comprehensive income and therefore no
additional statement of comprehensive income is presented. The supplementary
revenue and capital columns are presented for information purposes in
accordance with the Statement of Recommended Practice issued by the
Association of Investment Companies. All items in the above statement derive
from continuing operations of the Company. No operations were acquired or
discontinued in the year.
The accompanying notes are an integral part of this statement.
STATEMENT OF FINANCIAL POSITION
For the year ended 31 December 2025
2025 2024
Notes £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 9 1,168,447 1,230,027
Current assets
Cash and cash equivalents 124,266 21,890
Other receivables 10 1,215 1,850
125,481 23,740
Current liabilities
Other payables 11 (1,515) (1,165)
(1,515) (1,165)
Net current assets 123,966 22,575
TOTAL NET ASSETS 1,292,413 1,252,602
Capital and reserves
Called up share capital 12 11,965 12,585
Share premium 13 73,738 73,738
Capital redemption reserve 13 9,987 9,367
Capital reserve 13 1,197,704 1,158,239
Revenue reserve 13 (981) (1,327)
TOTAL SHAREHOLDERS' FUNDS 1,292,413 1,252,602
NET ASSET VALUE PER ORDINARY SHARE
(including current year income) 14 2,700.49p 2,488.24p
NET ASSET VALUE PER ORDINARY SHARE
(excluding current year income) 14 2,699.77p 2,482.94p
The financial statements of Herald Investment Trust plc (company registration
number 02879728) were approved by the board of directors and authorised for
issue on 20 February 2026 and signed on its behalf by
ANDREW JOY
CHAIRMAN
The accompanying notes are an integral part of this statement.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2025
Called up Capital Total
Share Share Redemption Capital Revenue Shareholders'
Capital Premium Reserve Reserve Reserve funds
Notes £'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at 1 January 2025 12,585 73,738 9,367 1,158,239 (1,327) 1,252,602
Profit after taxation - - - 98,124 346 98,470
Shares purchased for cancellation 12 (620) - 620 (58,659) - (58,659)
Shareholders' funds at 31 December 2025 11,965 73,738 9,987 1,197,704 (981) 1,292,413
For the year ended 31 December 2024
Called up Capital Total
Share Share Redemption Capital Revenue Shareholders'
Capital Premium Reserve Reserve Reserve funds
Notes £'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at 1 January 2024 14,034 73,738 7,918 1,154,062 (3,995) 1,245,757
Profit after taxation - - - 131,628 2,668 134,296
Shares purchased for cancellation 12 (1,449) - 1,449 (127,451) - (127,451)
Shareholders' funds at 31 December 2024 12,585 73,738 9,367 1,158,239 (1,327) 1,252,602
The accompanying notes are an integral part of this statement.
STATEMENT OF CASH FLOWS
For the year ended 31 December 2025
2025 2025 2024 2024
Notes £'000 £'000 £'000 £'000
Cash flow from operating activities
Profit before taxation 98,945 134,756
Adjustments for gains on investments (98,869) (131,830)
Purchase of investments (247,249) (229,991)
Sale of investments 408,315 335,563
Return of capital 138 348
Decrease in receivables 649 123
Increase/(decrease) in payables 350 (24)
Amortisation of fixed income book cost (755) (1,424)
Effect of foreign exchange rate changes 735 194
Overseas tax on overseas income (489) (465)
Net cash inflow from operating activities 161,770 107,250
Cash flow from financing activities
Shares purchased for cancellation 12 (58,659) (127,451)
Net cash outflow from financing activities (58,659) (127,451)
Net increase/(decrease) in cash and cash equivalents 103,111 (20,201)
Cash and cash equivalents at start of the year 21,890 42,285
Effect of foreign exchange rate changes (735) (194)
Cash and cash equivalents at the end of the year 124,266 21,890
Comprised of:
Cash and cash equivalents 124,266 21,890
Cash flow from operating activities includes interest received of £3,743,000
(2024 - £3,765,000) and dividends received of £11,053,000 (2024 -
£11,896,000).
As the Company did not have any long-term debt at both the current and prior
year ends, no reconciliation of the net debt position is presented.
The accompanying notes are an integral part of this statement.
INCOME.
2025 2024
£'000 £'000
Dividend income from investments
UK dividends from listed investments 2,801 3,146
UK dividends from unlisted investments and AIM companies 2,565 3,454
Overseas dividends from UK-listed and AIM companies 265 266
Overseas dividend income 5,714 5,157
11,345 12,023
Interest income from equity investments
Income from unlisted and AIM companies UK convertible bonds* (15) 470
Income from unlisted US convertible bonds 17 205
2 675
Fixed interest
UK interest from government securities 68 -
Overseas interest from government securities 2,260 2,656
2,328 2,656
Other income
Deposit interest 1,804 1,702
Other income 150 113
1,954 1,815
Total income 15,629 17,169
* Includes £428,000 receivable interest income written off as an unlisted
security was revalued to nil during the year.
Included within dividend income are special dividends of £148,000 (2024 -
£330,000).
Included within deposit interest is interest received of £1,804,000 (2024 -
£1,702,000).
STATUS
The Company is an investment company within the meaning of s833 of the
Companies Act 2006 and operates as an investment trust in accordance with
s1158 of the Corporation Tax Act 2010 as amended ("s1158"). The Company is
governed by its articles of association, amendments to which must be approved
by shareholders by way of a special resolution, and is subject to the UK
Listing Rules of the FCA. The Company obtained approval from HM Revenue and
Customs of its status as an investment trust under s1158 and the directors are
of the opinion that the Company has and continues to conduct its affairs in
compliance with s1158 since this approval was granted.
BUSINESS MODEL
The Company has appointed Herald Investment Management Limited ("HIML") as the
Alternative Investment Fund Manager to provide all portfolio management and
risk management services. HIML is authorised and regulated by the FCA both for
investment management and as an Alternative Investment Fund Manager (see the
Directors' Report).
Administration of the Company and its investments has been delegated by HIML
to the Bank of New York Mellon (International) Limited ("BNYMIL"). BNYMIL is
also the depositary under a tripartite agreement between HIML, the Company and
BNYMIL, and is responsible for custody activities. The company secretary is
NSM Funds (UK) Limited ("NSM").
OBJECTIVE
The Company's objective is described on the inside front cover of this
document.
INVESTMENT POLICY - STRATEGY
While the policy is global investment in smaller quoted companies in
technology and communications, the approach is to construct a diversified
portfolio through the identification of individual companies which offer
long-term growth potential, typically over a five-year horizon or more. The
portfolio is actively managed and does not seek to track any comparative
index. With a remit to invest in smaller companies with market capitalisation
generally below $5bn at the point of purchase, there tends to be a correlation
with the performance of smaller companies, as well as that of the technology
and communications sectors. A degree of volatility relative to the overall
market should be expected.
The risk associated with the illiquidity of smaller companies is reduced by
generally restricting the stake in any one company to less than 10% of the
shares in issue.
A number of investments are in early-stage companies, which have a higher
stock specific risk but the potential for above average growth. Stock specific
risk is reduced by having a diversified portfolio.
In addition, to contain the risk of any one holding, the Manager generally
takes profits when a holding reaches more than 5% of the portfolio. The
Manager actively manages the exposure within the constraint that illiquid
positions cannot be traded for short-term movements.
The Company has a policy not to invest more than 15% of gross assets in other
UK-listed investment companies. From time to time, fixed interest holdings,
non--equity or unquoted investments may be held on an opportunistic basis.
The Company recognises the long-term advantages of gearing and has a maximum
gearing limit of 50% of net assets. Borrowings are invested primarily in
equity markets but the Manager is permitted to invest in other securities in
the companies in the target areas when it is considered that the investment
grounds merit the Company taking a geared position. The board's intention is
to gear the portfolio when appropriate, taking into account current and future
cashflow requirements of the Manager. Gearing levels are monitored closely by
the Manager and reviewed by directors at each board meeting.
The Company may use derivatives which will be principally, but not
exclusively, for the purpose of efficient portfolio management (i.e. for the
purpose of reducing, transferring or eliminating investment risk in its
investments, including protection against currency risk).
A detailed analysis of the Company's investment portfolio is set out in the
Investment Manager's Report.
PRINCIPAL RISKS AND UNCERTAINTIES
The audit committee, on behalf of the board, regularly undertakes a robust
assessment of the principal, including emerging, risks facing the Company.
These include those that would threaten its business model, future
performance, solvency or liquidity (see Corporate Governance Report and the
Audit Committee Report). Principal risks are also considered as part of the
board's annual strategy meeting. The principal risks that follow are those
identified by the board after taking account of mitigating factors.
All risks are documented on a risk register and are grouped into six main
categories: strategic risk; market, economic and geopolitical risk; investment
management risk; operational risk; emerging/external risk; and regulatory
risk. Risks are rated by impact and likelihood of occurrence, with the ratings
charted on two risk matrices: a pre-mitigation and a post-mitigation one.
Mitigation takes into account processes, procedures and internal controls, and
the post-mitigation matrix is used to identify the Company's principal risks.
The risk register is reviewed on an ongoing basis, in an attempt to capture
all risks and ensure appropriate mitigation is in place, and to enable
directors to concentrate on principal risks whilst ensuring all risks are
considered. Emerging risks are considered by the board as they come into view
and are incorporated into the existing review of the Company's risk register.
As part of the risk review, the board considered the challenging global
economic and geopolitical environment including, but not limited to: the
continuing effects of tariffs, armed conflicts, climate change (covering
adverse impacts, transition and retrenchment of climate policies globally),
inflation and interest rates. Closer to the home front, the board considered
the challenges to the UK stock market in particular, in conjunction with the
wider challenge to investment in the small and mid-cap end of the technology
market, and the existential risk to the Company given the non-alignment of
shareholders' objectives with each other and the disproportionate challenge to
the Company's long-term investment basis caused by the Company's significant
minority shareholder.
A. MARKET RISK
(i) Other price risk, being the risk that the value of investment
holdings will fluctuate as a result of changes in market prices caused by
factors other than interest rate or currency rate movement;
(ii) Interest rate risk, being the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of changes in
market interest rates; and
(iii) Foreign currency risk, being the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of changes
in foreign exchange rates.
B. CREDIT RISK
Being the risk that one party to a financial instrument will cause a financial
loss for the other party by failing to discharge an obligation.
The Company invests in government debt securities which are investment grade.
Cash and cash equivalent balances are held only with approved deposit takers
which are regulated entities and considered of high credit quality.
The Company is exposed to counterparty credit risk from the parties with which
it trades and will bear the risk of settlement default. Counterparty credit
risk to the Company arises from transactions to purchase or sell investments
held within the portfolio.
There were no past due nor impaired assets as of 31 December 2025 (2024 -
nil).
The counterparties engaged with the Company are regulated entities and of high
credit quality.
C. LIQUIDITY RISK
Being the risk that an entity will encounter difficulty in meeting obligations
associated with financial liabilities.
These risks and the policies for managing them have been applied throughout
the year and are summarised below. Further detail is contained in the
strategic report.
A. MARKET RISK
(i) Other Price Risk
The Company's investment portfolio is exposed to market price fluctuations
which are monitored by the Manager in pursuance of the corporate objective.
Quoted securities held by the Company are valued at bid prices, whereas
material unquoted investments are valued by the directors on the basis of the
latest information in line with the relevant principles of the International
Private Equity and Venture Capital Valuation Guidelines (Accounting Policy
1(c)). These valuations represent the fair value of the investments, see note
9.
A full list of the Company's investments is given in the strategic report. In
addition, a geographical analysis of the portfolio, an analysis of the
investment portfolio by broad industrial or commercial sector and a review of
the 20 largest equity investments by their aggregate market value, are shown
in the strategic report.
Other Price Risk Sensitivity
8.8% of the Company's total equity investments at 31 December 2025 (2024 -
11.9%) were listed on the main list of the London Stock Exchange and a further
15.9% (2024 - 24.7%) on AIM. The NASDAQ Stock Exchange accounts for 32.2%
(2024 - 26.6%), New York Stock Exchange for 11.7% (2024 - 7.8%) and other
stock exchanges or unquoted 31.4% (2024 - 29.0%). A 10% increase in equity
investment prices at 31 December 2025 would have increased total net assets
and profit & loss after taxation by £108,822,000 (2024 - £116,861,000).
A decrease of 10% would have the exact opposite effect. The portfolio does not
target any exchange as a comparative index, and the performance of the
portfolio has a low correlation to generally used indices.
The shares of Herald Investment Trust plc have an underlying NAV per share.
The NAV per share of Herald Investment Trust plc fluctuates on a daily basis.
In addition, there is volatility in the discount/premium the share price has
to NAV.
(ii) Interest Rate Risk
The majority of the Company's assets are equity shares and other investments
which neither pay interest nor have a maturity date. However, the Company does
hold convertible bonds and Government bonds, the interest rate and maturity
dates of which are detailed below. Interest is accrued on cash balances at a
rate linked to the local base rate.
The interest rate risk profile of the financial assets and financial
liabilities at 31 December was:
FINANCIAL ASSETS
2025 2024
2025 Weighted 2024 Weighted
Weighted average Weighted average
average period average period
interest until interest until
2025 rate/ maturity/ 2024 rate/ maturity/
Fair value interest maturity Fair value interest maturity
£'000 rate date £'000 rate date
Fixed rate:
US bonds 29,689 3.8% 0.3 years 31,919 3.9% 0.3 years
EMEA bonds 15,795 1.5% 0.1 years 14,689 1.8% 0.2 years
Asia Pacific bonds 14,971 1.3% 0.8 years 14,809 1.3% 1.8 years
UK bonds 19,772 1.5% 0.6 years - - -
Overseas convertible bonds - - - 559 18.0% 0.1 years
UK convertible bonds - - - 835 16.0% 1.7 years
Floating rate cash:
Non-sterling 87,208 2.1% 8,593 4.0%
Sterling 37,058 3.6% 13,297 4.9%
124,266 21,890
The benchmark rate which determines the interest payments received on cash
balances is the Bank of England base rate, the European Central Bank rate and
the United States Federal Reserve rate.
Interest rate risk sensitivity
(a) Cash
An increase of 100 basis points in interest rates as at 31 December 2025 would
have a direct effect on net assets. Based on the position at 31 December 2025,
over a full year, an increase of 100 basis points would have increased the
profit & loss after taxation by £1,243,000 (2024 - £219,000) and would
have increased the net asset value per share by 2.60p (2024 - 0.44p). The
calculations are based on the cash balances as at the respective balance sheet
dates and are not representative of the year as a whole.
(b) Fixed rate bonds
An increase of 100 basis points in bond yields as at 31 December 2025 would
have decreased total net assets and profit & loss after taxation by
£332,000 (2024 - £367,000) and would have decreased the net asset value per
share by 0.69p (2024 - 0.73p). A decrease in bond yields would have had an
equal and opposite effect. The convertible loan stocks having an element of
equity are not included in this analysis as given the nature of the businesses
and the risk profile of their balance sheets; they are considered to have more
equity like characteristics.
(iii) Foreign Currency Risk
The Company's reporting currency is sterling, but investments are made in
overseas markets as well as the United Kingdom and the asset value can be
affected by movements in foreign currency exchange rates.
Furthermore many companies trade internationally both through foreign
subsidiaries, and through exports. The greatest foreign currency risk occurs
when companies have a divergence in currencies for costs and revenues. A much
less risky exposure to currency is straight translation of sales and profits.
The list of investments in the strategic report breaks down the portfolio by
geographic listing. However the location of the stock market quote only has a
limited correlation to the costs, revenues and even activities of those
companies, and so this note should not be regarded as a reliable guide to the
sensitivity of the portfolio to currency movements. For example, the holdings
in the portfolio that have suffered most from US$ weakness are UK companies
with dollar revenues and sterling costs.
The Company does not hedge the sterling value of investments that are priced
in other currencies. Overseas income is subject to currency fluctuations. The
Company does not hedge these currency fluctuations because it is impossible to
quantify the effect for the reasons stated above. However, from time to time
the manager takes a view by holding financial assets or liabilities in
overseas currencies.
Exposure to currency risk through asset allocation by currency of listing is
indicated below:
At 31 December 2025
Other
receivables
Cash and and Net
Investments deposits payables exposure
£'000 £'000 £'000 £'000
US dollar 507,005 16,668 279 523,952
Euro 87,609 29,629 124 117,362
Taiwan dollar 55,582 6,931 21 62,534
Australian dollar 23,013 33,980 - 56,993
Japanese yen 53,980 - 69 54,049
Norwegian krone 40,773 - 205 40,978
Canadian dollar 33,069 - 9 33,078
Swedish krona 18,678 - - 18,678
Korean won 18,312 - 78 18,390
Singaporean dollar 14,971 - 31 15,002
Other overseas currencies 9,857 - 10 9,867
Exposure to currency risk on translation of valuations of securities listed in
overseas currencies 862,849 87,208 826 950,883
Sterling 305,598 37,058 (1,126) 341,530
1,168,447 124,266 (300) 1,292,413
At 31 December 2024
Other
receivables
Cash and and Net
Investments deposits payables exposure
£'000 £'000 £'000 £'000
US dollar 436,547 2,663 344 439,554
Euro 101,417 2,771 95 104,283
Taiwan dollar 51,898 3,159 - 55,057
Japanese yen 47,741 - 44 47,785
Norwegian krone 36,083 - 207 36,290
Canadian dollar 32,895 - 16 32,911
Australian dollar 27,039 - - 27,039
Swedish krona 19,257 - - 19,257
Singaporean dollar 14,920 - 32 14,952
Other overseas currencies 17,494 - 139 17,633
Exposure to currency risk on translation of valuations of securities listed in
overseas currencies 785,291 8,593 877 794,761
Sterling 444,736 13,297 (192) 457,841
1,230,027 21,890 685 1,252,602
Foreign currency risk sensitivity
At 31 December 2025, had sterling strengthened by 10% (2024 - 10%) in relation
to all currencies, with all other variables held constant, total net assets
and profit & loss after taxation would have decreased by the amounts shown
below based on the balances denominated in foreign currency. A 10% (2024 -
10%) weakening of sterling against all currencies, with all other variables
held constant, would have had the exact opposite effect on the financial
statement amounts. However, companies whose cost base diverges in currency
terms from its sales will in the longer term have a significantly greater
effect on valuation than simple translation. In the short term investee
companies generally cover their currency exposure to varying degrees. There is
insufficient publicly disclosed information to quantify this, but in the
long-term this effect is expected to dwarf simple translation of foreign
listings in terms of both risk and reward, because many investee companies
trade globally. Furthermore, the country of listing is not necessarily an
indication of the geography of some or even any operational activities for
investee companies. The Manager does not use financial instruments to protect
against currency movements. From time to time financial leverage has been made
using debt in overseas currencies.
2025 2024
£'000 £'000
US dollar 52,395 43,955
Euro 11,736 10,428
Taiwan dollar 6,253 5,506
Australian dollar 5,699 2,704
Japanese yen 5,405 4,779
Norwegian krone 4,098 3,629
Canadian dollar 3,308 3,291
Swedish krona 1,868 1,926
Korean won 1,839 1,372
Singaporean dollar 1,500 1,495
Other overseas currencies 987 391
95,088 79,476
B. Credit Risk
Credit risk is the risk that a counterparty to a financial instrument will
fail to discharge an obligation or commitment which it has entered into with
the Company. The Manager monitors counterparty risk on an ongoing basis.
The Company has investments in convertible loan stocks that have an element of
equity. These securities are viewed as having a risk profile similar to the
equity holdings. This is because the convertibles held are in nascent
technology companies that may be loss making and may have weak balance sheets.
For this reason these stocks are categorised as equity holdings and for risk
management purposes excluded from the credit risk analysis.
Credit Risk Exposure
The exposure to credit risk at 31 December was:
Credit rating 2025 2024
(S&P) £'000 £'000
Government debt securities
Norway AAA 15,795 14,689
Singapore AAA 14,971 14,809
UK AA 19,772 -
US AA+ 29,689 31,919
80,227 61,417
Cash and cash equivalents 124,266 21,890
204,493 83,307
During the year the maximum exposure in fixed interest investments was
£81,019,000 (2024 - £61,804,000) and the minimum £30,163,000 (2024 -
£29,506,000). The maximum exposure in cash was £124,266,000 (2024 -
£68,825,000) and the minimum £37,480,000 (2024 - £21,890,000).
C. Liquidity Risk
The Company's policy with regard to liquidity is to provide a degree of
flexibility so that the portfolio can be repositioned when appropriate and
that most of the assets can be realised without an excessive discount to the
market price.
Equity Securities
The Company's unquoted investments are not readily realisable, but these only
amount to 1.3% of the Company's total assets at 31 December 2025 (2024 -
1.4%).
In practice, liquidity in investee companies is imperfect, particularly those
with a market value of less than £100m. To reduce this liquidity risk it is
the policy to diversify the holdings and generally to restrict the holding in
any one company to less than 10% of the share capital of that company.
Furthermore, to contain the risk of any one holding, the Manager generally
takes profits when a holding reaches more than 5% of the portfolio.
The market valuation of each underlying security gives an indication of value,
but the price at which an investment can be made or realised can diverge
materially from the bid or offer price depending on market conditions
generally and particularly to each investment. 8.7% (£93m) (2024 - 11.9%
(£136m)) of the listed equities in the portfolio are invested in stocks with
a market capitalisation below £100m, where liquidity is expected to be more
limited. If these stocks had on average a realisable value 20% below the bid
price the value of the total fund would be adversely affected by 1.4% (2024 -
2.2%).
Liquidity Risk Exposure
Contractual maturities of the financial liabilities at the year end, based on
the earliest date on which payment can be required are as follows:
2025 2024
One year One year
or less or less
£'000 £'000
Other payables 1,515 1,165
1,515 1,165
Fair Value of Financial Instruments
The Company's investments, as disclosed in the Company's balance sheet, are
valued at fair value.
Nearly all of the Company's portfolio of investments are disclosed in the
Level 1 category as defined in FRS 102.
Categorisation is based on the lowest level input that is significant to the
fair value measure in its entirety.
The three levels set out in FRS 102 follow:
Level 1 - The unadjusted quoted price in an active market for identical assets
or liabilities that the entity can access at the measurement date.
Level 2 - Inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data) for the asset or liability,
either directly or indirectly.
Level 3 - Inputs are unobservable (i.e. for which market data is unavailable)
for the asset or liability.
The investment manager considers observable data to be that market data that
is readily available, regularly distributed or updated, reliable and
verifiable, not proprietary, and provided by independent sources that are
actively involved in the relevant market.
The analysis of the valuation basis for the financial instruments based on the
hierarchy as at 31 December is as follows:
At 31 December 2025
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial assets
Equity investments 1,071,594 - 11,239 1,082,833
Government debt securities 80,227 - - 80,227
Unquoted loan stocks - - 5,387 5,387
Total investments 1,151,821 - 16,626 1,168,447
At 31 December 2024
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial assets
Equity investments 1,151,283 - 10,546 1,161,829
Government debt securities 61,417 - - 61,417
Unquoted loan stocks - - 6,781 6,781
Total investments 1,212,700 - 17,327 1,230,027
Unquoted Investments are valued £16,626,000 as at 31 December 2025 (2024 -
£17,327,000). A 10% increase in unquoted equity investment prices at 31
December 2025 would have increased total net assets and profit & loss
after taxation by £1,662,600 (2024 - £1,732,700). A decrease of 10% would
have the exact opposite effect.
A reconciliation of fair value measurements in Level 3 is set out below:
At 31 December 2025
£'000
Opening balance at 1 January 2025 17,327
Purchases 726
Sales (1,065)
Total gains or (losses)
- on assets sold during the year 482
- on assets held at 31 December 2025 (2,760)
Net assets transferred during the year 1,916
Closing balance at 31 December 2025 16,626
At 31 December 2024
£'000
Opening balance at 1 January 2024 15,085
Purchases 3,000
Sales (2,361)
Total losses
- on assets sold during the year (87)
- on assets held at 31 December 2024 (6,753)
Net assets transferred during the year 8,443
Closing balance at 31 December 2024 17,327
VIABILITY STATEMENT
The Company, as an investment trust, is a collective investment vehicle
designed and managed for the long-term. The directors consider that three
years is an appropriate forward-looking time period to consider viability.
This recognises the Company's investment strategy, which includes investment
in smaller companies, some of which are early-stage and for which a three-year
horizon is a meaningful period over which to judge prospects, the board's
assessment of the main risks that threaten the ongoing business model and the
relatively fast-moving nature of the sectors in which the Company invests.
Inevitably, investment in smaller and early-stage companies carries higher
risks, both in terms of stock liquidity and longer-term business viability and
this risk is accepted by the board as necessary to seek to deliver high
returns.
There are no current plans to amend the investment strategy, which has
delivered good investment performance for shareholders over many years and,
the directors believe, should continue to do so. The investment strategy and
its associated risks are kept under constant review by the board. The board
undertook a robust assessment of the risks pertaining to the Company during
the year, including risks to the Company's viability, and this is set out in
the principal risks and uncertainties section. This assessment included
emerging risks such as ongoing global tensions (armed conflicts, global trade
tariffs), the risk arising from the recent increase in minority activist
shareholder concentration, and continuing negative growing effects of climate
change. As part of this, the board considered several severe but plausible
scenarios, including the impact of significant market movements.
Other items relevant in the directors' assessment of the Company's viability
were: income and expenses projections and the expectation that a majority of
the Company's investments comprise readily realisable securities as
substantiated by liquidity analysis of the portfolio; and the fact that as a
closed-ended investment company, the Company is not affected by the liquidity
issues of open-ended companies caused by large or unexpected redemptions.
The board takes account of the triennial shareholder vote on whether the
Company should continue as an investment trust. At the AGM in March 2025,
65.27% of votes cast were in favour of continuation (AGM vote in favour: 2022
- 99.99% and 2019 - 99.88%), with the lower than normal vote in favour
reflecting an activist voting against the resolution following the failure of
the January 2025 requisitioned general meeting resolutions to replace the
board with the activist's nominees. The next vote, which is an ordinary
resolution, will be at the Company's AGM in 2028.
Accordingly, the directors confirm that, based on the above and on reviews
conducted as part of the detailed internal controls and risk management
processes, they have a reasonable expectation that the Company will continue
to maintain its status as an investment trust, to implement its investment
strategy and to operate and be able to meet its liabilities as they fall due
for at least the next three financial years.
The directors' assessment of the viability of the Company has also taken into
account its communications with, and the actions of, Saba. The latter include
Saba's requisitioned general meeting in January 2025 (which failed to remove
the directors, amongst other things), and Saba's votes against the re-election
of directors and the continuation vote (amongst other things) at the Company's
AGM later in March.
Saba's significant minority shareholding means that it can block all special
(75%) resolution votes, as demonstrated at the AGM. Therefore, as explained in
more detail in the Chairman's Statement, on 9 January 2026 the Company issued
an announcement that the board had assessed that it is not sustainable to do
nothing given that a process of attrition may eventually see Saba able to win
a simple majority vote even though it itself is a minority shareholder, and
launched a Tender Offer. The Tender Offer was subsequently cancelled and the
board is currently in dialogue with Saba, however, the outcome of this is
uncertain and the option to go ahead with the Backstop Tender remains.
Notwithstanding the possible strategic outcomes of the discussions or the
Backstop Tender, the Company's ability to meet its liabilities as they fall
due remains, as does its financial and operational ability. However, were an
action proposed by the Company to result in the Company changing its
investment strategy and/or business model, the period over which it would be
reasonable to assess the viability of the Company could be significantly
changed, as is also the case were the Company to propose a wind up. These
considerations do not affect the underlying viability of the Company.
STATEMENT OF DIRECTORS' RESPONSIBILITIES.
IN RESPECT OF THE FINANCIAL STATEMENTS
The directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have elected to prepare the
financial statements in accordance with applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice),
including FRS 102 "The Financial Reporting Standard applicable in the UK and
Republic of Ireland". Under company law the directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss of the
Company for that period. In preparing these financial statements, the
directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and accounting estimates that are reasonable and
prudent;
- state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
- prepare the financial statements on the going concern basis, unless
it is inappropriate to assume that the Company will continue in business.
The directors are responsible for the keeping of adequate accounting records
that are sufficient to show and explain the Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements and the
Directors' Remuneration Report comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The directors have delegated responsibility to the Manager for the maintenance
and integrity of the Company's page of the Manager's website. Legislation in
the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The work carried out by the auditor does not involve any consideration of
these matters and, accordingly, the auditor accepts no responsibility for any
changes that may have occurred to the financial statements since they were
initially presented on the website.
Each of the directors, whose names and functions are listed in the directors'
biographies confirm that, to the best of their knowledge:
- the financial statements, which have been prepared in accordance
with applicable law and United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice), give a true and fair view of the
assets, liabilities, financial position and loss of the Company;
- the annual report and financial statements includes a fair review of
the development and performance of the business and the position of the
Company, together with a description of the principal risks and uncertainties
that it faces and the Directors' Report contains those matters required to be
disclosed by applicable law; and
- they consider that the annual report and financial statements, taken
as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position, performance,
business model and strategy.
On behalf of the board
ANDREW JOY
Chairman
20 February 2026
Status of announcement
2024 Financial Information
The figures and financial information for 2024 are extracted from the
published Annual Report and Accounts for the year ended 31 December 2024 and
do not constitute the statutory accounts for that year. The 2024 Annual Report
and Accounts have been delivered to the Registrar of Companies and included
the Report of the Independent Auditors which was unqualified and did not
contain a statement under either section 498(2) or section 498(3) of the
Companies Act 2006.
2025 Financial Information
The figures and financial information for 2025 are extracted from the Annual
Report and Accounts for the year ended 31 December 2025 and do not constitute
the statutory accounts for the year. The 2025 Annual Report and Accounts
include the Report of the Independent Auditors which is unqualified and does
not contain a statement under either section 498(2) or section 498(3) of the
Companies Act 2006. The 2025 Annual Report and Accounts will be delivered to
the Registrar of Companies in due course.
Neither the contents of the Company's web pages nor the contents of any
website accessible from hyperlinks on the Company's web pages (or any other
website) is incorporated into, or forms part of, this announcement.
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