Annual Financial Report
Summary by AI BETAClose X
The Edinburgh Investment Trust plc
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED 31 MARCH 2026
21 May 2026 - The Directors of The Edinburgh Investment Trust plc ("the Company") have today announced the annual results for the year ended 31 March 2026.
Highlights
· NAV total return of 7.2% and share price total return of 8.5% for the year, versus the FTSE All-Share Index return of 21.5%
· Share price of 773p at year end (740p as at 31 March 2025)
· Share price discount to NAV reduced to 8.6% at year-end (9.4% as at 31 March 2025)
· Total dividend for the financial year proposed at 32.0p per share, an increase of 11.1% on the prior year and comfortably ahead of UK inflation of 3.3%
· Since March 2020, when Liontrust began managing the Company's portfolio, the annualised NAV total return was 15.0% and share price total return was 13.9%, versus 13.6% for the FTSE All-Share Index
Elisabeth Stheeman, Chair, said: "The Company's financial year to 31 March 2026 marks the second consecutive year in which the UK equity index has outperformed both the US equity index and broader global equity indices, with the FTSE All-Share Index recording double digit returns over the two years. In this context, while positive in absolute terms, the Company's investment returns over the last twelve months have been disappointing relative to the Index. The share price and net asset value total returns were 8.5% and 7.2% respectively compared with the Index at 21.5%. This in turn has impacted the Company's three and five-year returns.
"However, over the six years since the appointment of the management team, it is encouraging to record that the Company's share price and NAV total returns were 15.0% per annum and 13.9% per annum respectively. This compares with the UK equity index total return of 13.6% per annum. Of the 17 peer investment trusts in the UK equity income sector over the same period, Edinburgh ranks fourth.
"While we accept that short-term returns for an actively managed portfolio will be volatile, the Board is focused on ensuring that the Company's returns improve after this challenging twelve-month period. The underperformance last year was a function of three main factors: share price weakness in holdings perceived to be losers from the Artificial Intelligence revolution, some operational underperformance in a small number of holdings, and being underweight in certain companies with a more pronounced value orientation.
"A final dividend of 8.4 pence per share is proposed, to be paid this summer subject to shareholder approval at the July AGM. The total dividend for the financial year will be 32.0 pence per share. This will represent an increase of 11.1% compared with the previous year, comfortably in excess of the rate of UK inflation of 3.3%.
"There is well-founded optimism that the Company's diversified portfolio of stocks will drive attractive returns in the years ahead."
Imran Sattar, Portfolio Manager, said: "We remain committed to a flexible and pragmatic investment approach. Over the last year the portfolio had a bias to quality growth stocks. There was, however, a notable derating in a number of portfolio holdings which the market has, we believe erroneously, characterised as 'Artificial Intelligence losers'. Alongside this, a few holdings underperformed operationally and being underweight in larger value-oriented benchmark companies was a further drag.
"Notable purchases during the year fell into three categories. First, purchases of de-rated data and analytics companies which we judge will turn out to be winners from the AI evolution - this included adding to London Stock Exchange Group and RELX. Second, additions to positions in Renishaw and Oxford Instruments, the specialised instrumentation companies experiencing short-term cyclical weakness in end markets. Finally, new purchases of Marshalls and Ibstock: cyclically depressed and lower valuation stocks that present attractively skewed risk-reward profiles.
"We continue to identify many opportunities to invest in high quality businesses in the UK at attractive valuations. We remain focused on bottom-up stock selection and constructing a diversified portfolio to deliver attractive returns over the long term."
ENDS
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Enquiries
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Liontrust Fund Partners LLP James Mowat
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+44 20 3908 8822 |
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Investec Bank plc Tom Skinner Helen Goldsmith
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+44 20 7597 4000 |
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Montfort Communications Limited Gay Collins Shireen Farhana
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+44 7798 626282
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NSM Funds (UK) Limited (Company Secretary) Brian Smith Ciara McKillop
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+44 20 3697 5772 |
Notes to editors
About the Edinburgh Investment Trust plc
Founded over 130 years ago, the Edinburgh Investment Trust plc is listed on the London Stock Exchange and is a member of the FTSE 250 index. It invests primarily in a portfolio of UK listed shares and has net assets of approximately £1.1 billion. The Company aims to exceed the total return on the FTSE All-Share Index and grow its dividend faster than UK inflation. This objective will be assessed over the long term and performance against the FTSE All-Share Index will be measured on a NAV total return basis.
Investment objective
The Company aims to exceed the total return on the FTSE All-Share Index and grow its dividend faster than UK inflation. This objective will be assessed over the long term and performance against the FTSE All-Share Index will be measured on a NAV total return basis.
Investment policy
The Company invests primarily in the shares of companies quoted on a recognised stock exchange in the UK. Securities of companies quoted on a recognised stock exchange outside of the UK may also be held but will not exceed 20% of the market value of the investment portfolio, measured at the time of any acquisition.
The portfolio is selected by the Portfolio Manager, and monitored carefully by the Board, on the basis of the Portfolio Manager's assessment of the fundamental value available in individual securities, whilst giving due regard to sector and industry weightings and to broader economic and market conditions. Companies are chosen by the Portfolio Manager on the basis of their individual business strengths, growth and income characteristics and valuation, and not according to specific rules of asset allocation.
Borrowings may be used to provide gearing to the equity portfolio of up to 25% of net assets.
Investment decisions are restricted by the following:
· No acquisition may be made which would result in a holding being greater than 10% of the market value of the investment portfolio;
· The Company will not invest more than 15% of its total assets in the shares of other UK-listed investment trusts or investment companies;
· The Company will not hold more than 5% of the issued share capital (or voting shares) of any one company.
In addition, the Company may:
· invest in convertibles (securities which are typically expected to convert into shares on a recognised stock exchange) subject to no acquisition or conversion resulting in a holding breaching the limits in this investment policy;
· use derivative instruments, monitored carefully by the Board and subject to constraints, including the writing of covered calls against securities (which in aggregate amount to no more than 10% of the value of the investment portfolio) and the investment in FTSE 100 futures (subject to the value of such positions, if exercised, not exceeding 15% of the value of the investment portfolio). Other derivative instruments may be employed, subject to prior Board approval, provided that the cost (and potential liability) of exercise of all outstanding derivative positions should not exceed 25% of the value of the investment portfolio at any time;
· hedge exposure to changes in foreign currency rates in respect of its overseas investments
At the Company's Annual General Meeting on 22 July 2025, shareholders unanimously approved the above Investment Objective and Policy. The revisions simplified the language but changed neither the way the Company's portfolio is managed nor what the Company is seeking to achieve.
Nature of the Company
The Company is a FTSE 250 Investment Company whose shares are listed on the London Stock Exchange ('LSE'). The business of the Company consists of investing its assets according to a specified investment objective and policy, with the aim of spreading investment risk and generating a return for shareholders.
The Company uses borrowing to enhance returns to shareholders. This increases the risk to shareholders should the value of investments fall.
The Company has contracted with an external manager, Liontrust Fund Partners LLP ('LFP' or 'the Manager') to act as its Alternative Investment Fund Manager ('AIFM') and to manage its investments. Other administrative functions are contracted to external services providers. The Company has a Board of non-executive directors who oversee and monitor the activities of the Manager and other service providers on behalf of shareholders and ensure that the investment objective and policy are adhered to. The Company has no employees.
The Company's ordinary shares qualify as mainstream investment products suitable for promotion to both retail and professional investors. The Company's ordinary shares are eligible for investment in an ISA.
FINANCIAL INFORMATION AND PERFORMANCE STATISTICS
|
Capital Return(1)(3) |
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At 31 March 2026 |
At 31 March 2025 |
Change % |
|
Net asset value - debt at fair value |
|
846.04p |
817.16p |
+3.5 |
|
Share price(4) |
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773.00p |
740.00p |
+4.5 |
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FTSE All-Share Index(4) |
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5,430.69 |
4,623.62 |
+17.5 |
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Discount(1)(2)(3) - debt at fair value |
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(8.6)% |
(9.4)% |
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Gearing (debt at fair value)(1)(2)(3) |
- gross gearing |
5.9% |
5.6% |
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|
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- net gearing |
5.8% |
5.0% |
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Year Ended |
Year Ended |
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Revenue and Dividends(2) |
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31 March 2026 |
31 March 2025 |
Change % |
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Revenue return per ordinary share |
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26.60p |
25.02p |
+6.3 |
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Dividends |
- first interim |
7.60p |
6.90p |
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|
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- second interim |
7.60p |
6.90p |
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|
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- third interim |
8.40p |
7.50p |
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|
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- proposed final |
8.40p |
7.50p |
|
|
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- total dividends |
32.00p |
28.80p |
+11.1 |
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Consumer Price Index(3)(4) - annual change |
3.3% |
2.3% |
|
|
|
Dividend Yield(1)(2)(3) |
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4.1% |
3.9% |
|
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Ongoing Charges Ratio(1)(2)(3) |
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0.52% |
0.51% |
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Notes:
(1) These terms are defined in the Glossary of Terms and Alternative Performance Measures, including reconciliations. NAV with debt at fair value is widely used by the investment company sector for the reporting of performance, premium or discount, gearing and ongoing charges.
(2) Key Performance Indicator.
(3) Alternative Performance Measures.
(4) Source: LSEG Data & Analytics.
TEN YEAR HISTORICAL INFORMATION
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Per ordinary share |
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|
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|||
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Year ended 31 March |
Ordinary shareholders' funds £m |
Shares (bought back)/ issued m |
Revenue return p |
Dividend rate p |
NAV (debt at fair value) p |
Share price p |
Discount (debt at fair value) % |
Gross gearing (debt at fair value) % |
Net gearing (debt at fair value) % |
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2016 |
1,392 |
0.55 |
26.66 |
24.35 |
695.30 |
665.00 |
(4.4) |
15.5 |
15.3 |
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2017 |
1,535 |
- |
27.94 |
25.35 |
768.81 |
713.50 |
(7.2) |
15.9 |
15.7 |
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2018 |
1,400 |
- |
29.25 |
26.60 |
703.34 |
642.00 |
(8.7) |
12.1 |
11.8 |
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2019 |
1,382 |
(0.19) |
28.66 |
28.00 |
696.91 |
644.00 |
(7.6) |
11.0 |
10.8 |
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2020 |
872 |
(20.80) |
27.83 |
28.65 |
490.40 |
434.00 |
(11.5) |
13.4 |
8.3 |
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2021 |
1,091 |
(2.50) |
16.21 |
28.65(1) |
628.29 |
600.00 |
(4.5) |
10.1 |
7.1 |
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2022 |
1,176 |
(1.10) |
22.41 |
24.80 |
686.69 |
634.00 |
(7.7) |
10.3 |
4.4 |
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2023 |
1,139 |
(5.60) |
25.99 |
26.20 |
713.75 |
660.00 |
(7.5) |
6.6 |
4.7 |
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2024 |
1,135 |
(13.99) |
23.93 |
27.20 |
779.97 |
690.00 |
(11.5) |
6.2 |
3.1 |
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2025 |
1,126 |
(7.17) |
25.02 |
28.80 |
817.16 |
740.00 |
(9.4) |
5.6 |
5.0 |
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2026 |
1,059 |
(12.67) |
26.60 |
32.00 |
846.04 |
773.00 |
(8.6) |
5.9 |
5.8 |
(1) including special dividend of 4.65p.
Capital Returns (excluding dividends paid) to 31 March 2026
|
|
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
2026 |
3yr |
5yr |
10yr |
|
NAV (debt at fair value) (%) |
10.6 |
-8.5 |
-0.9 |
-29.6 |
28.1 |
9.3 |
3.9 |
9.3 |
4.8 |
3.5 |
18.5 |
34.6 |
21.7 |
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Share Price (%) |
7.3 |
-10.0 |
0.3 |
-32.6 |
38.2 |
5.7 |
4.1 |
4.5 |
7.2 |
4.5 |
17.1 |
28.8 |
16.2 |
|
FTSE All-Share Index (%) |
17.5 |
-2.4 |
2.2 |
-21.9 |
23.3 |
9.3 |
-0.7 |
4.3 |
6.6 |
17.5 |
30.6 |
41.8 |
60.0 |
Source: LSEG Data & Analytics.
Total Returns (with dividends reinvested) to 31 March 2026
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2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
2026 |
3yr |
5yr |
10yr |
|
NAV (debt at fair value) (%) |
14.7 |
-5.9 |
2.9 |
-26.7 |
34.8 |
14.1 |
7.9 |
13.4 |
8.3 |
7.2 |
31.7 |
62.2 |
78.8 |
|
Share Price (%) |
11.2 |
-6.7 |
4.6 |
-29.4 |
46.4 |
10.6 |
8.4 |
8.9 |
11.3 |
8.5 |
31.5 |
57.6 |
76.8 |
|
FTSE All-Share Index (%) |
22.0 |
1.2 |
6.4 |
-18.5 |
26.7 |
13.0 |
2.9 |
8.4 |
10.5 |
21.5 |
45.6 |
69.3 |
129.8 |
Source: LSEG Data & Analytics
CHAIR'S STATEMENT
DEAR SHAREHOLDERS,
The Company's financial year to 31 March 2026 marks the second consecutive year during which the UK equity index has outperformed both the US equity index and broader global equity indices, with the FTSE All-Share Index (the "Index") recording double digit returns over the last two years. This denotes the continuation of a more benevolent backdrop for investing in UK equities than was the case previously. In this context, while positive in absolute terms, the Company's investment returns over the last twelve months have been disappointing relative to the Index. The share price and net asset value ("NAV") total returns were 8.5% and 7.2% respectively compared with the Index at 21.5%. This in turn has had a detrimental effect on the Company's three and five year returns. However, over the six years since the appointment of the management team, it is encouraging to record that the Company's share price and NAV total returns were 15.0% per annum (p.a.) and 13.9% p.a. respectively. This compares with the UK equity Index total return of 13.6% p.a.. Of the 17 peer investment trusts in the UK equity income sector over the same period, Edinburgh ranks fourth. Table 1, below, sets out the Company's returns over all the key periods.
While we accept that short-term returns for an actively managed portfolio will be volatile, the Board is focused on ensuring that the Company's returns improve after this challenging twelve month period. We are engaging robustly with the Managers and broader executive team at Liontrust to ensure that the investment team and their process identify attractive companies that will contribute to the strong overall returns that the Company seeks to achieve.
The underperformance last year was a function of three main factors: share price weakness in holdings perceived to be losers from the Artificial Intelligence ("AI") revolution, some operational underperformance in a small number of holdings, and being underweight in certain companies with a more pronounced 'value' orientation. The Managers' report explores each of these factors in more detail. As you will also read in the Managers' report, there is well-founded optimism that the Company's diversified portfolio of stocks will drive attractive returns in the years ahead.
Table 1: The Edinburgh Investment Trust NAV, share price and benchmark total returns to 31 March 2026
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|
1 year |
3 years p.a. |
5 years p.a. |
6 years p.a. |
10 years p.a. |
|
|
|
|
|
(Manager |
|
|
|
|
|
|
inception) |
|
|
NAV |
7.2% |
9.6% |
10.2% |
13.9% |
6.0% |
|
Share price |
8.5% |
9.6% |
9.5% |
15.0% |
5.9% |
|
FTSE All-Share |
21.5% |
13.3% |
11.1% |
13.6% |
8.7% |
DIVIDENDS
The Company's investment objective has two elements: to outperform the Index, and to grow dividends per share in excess of UK inflation. The Company is meeting this second part. Last month, we declared a third interim dividend of 8.40 pence per share. As a Board we are proposing the same payment of 8.40 pence per share for the final dividend, to be paid this summer. Assuming this proposal is approved by shareholders at July's Annual General Meeting ("AGM"), the total dividend for the financial year will be 32.0 pence per share. This will represent an increase of 11.1% compared with the previous year, comfortably in excess of the rate of UK inflation of 3.3%. These dividend payments are funded largely by the portfolio's natural underlying income: the Company generated a revenue return of 26.6 pence per share. Compared with a total dividend of 32.0 pence per share, the gap of 5.4 pence per share is funded from capital. We keep this draw on capital under review and are content that this level is sustainable. Indeed, as the Managers note in their report, the headline level of portfolio income is only part of the story, as many investee companies also return significant sums through share buybacks (in aggregate the Managers estimate that the combined 'yield' from buybacks and dividends would be c.1.7x the dividend yield alone).
As I flagged in the Interim Report of last November, we are recommending a small change to the timing of the Company's dividend payments. At present the first three interim dividends are equally spaced at three monthly intervals, with the fourth 'final' dividend two months after the third. This means that there is a four month gap between the final dividend and the first dividend in a new financial year. Resolution 4 at the AGM proposes paying four interim dividends throughout the year.
This would mean that for the 2027 financial year and beyond, shareholders would receive four equally-spaced dividends. We believe this schedule of dividend payments should be more appealing to investors.
BORROWINGS
The Company has £120m of long-term debt (the 'par' value) which was negotiated in 2021. The blended fixed annual coupon across the four tranches of debt is 2.4% and the average period to maturity is 22 years. At the end of the financial year the Company had de minimis cash balances, meaning that net debt at par as a percentage of NAV was 11.3%.
It is the general convention in the investment trust sector to look at the 'fair' value of debt for valuation purposes, which takes account of changing bond yields. These can have dramatic effects on the value of long-term debt such as ours. Indeed, as bond yields have risen since we negotiated the borrowings, the fair value of the debt has fallen from £120m to £66m (it was £67m at the previous year end). Once cash is deducted, net borrowing at fair value as a percentage of NAV is a more modest 5.8%. This fair value adjustment also means that the debt's 'redemption yield' of c.6.3% is the effective hurdle for the portfolio to add value net of the cost of the debt. The portfolio's return exceeded this hurdle last year: the value added from the borrowings is quantified in the Annual Report. We have every confidence that the long-term annualised returns of the portfolio should continue to add value above this fair value hurdle. Taking all this into account, we view the current 5.8% level of net borrowing as a suitable balance between the likely long-term positive returns from the portfolio and the Managers' shorter term more cautious view of markets.
SHARE PRICE DISCOUNT TO NAV
The Company's discount finished the year at 8.6%, a little tighter than the 9.4% level a year ago. At the time of writing, it is 8.4%. During the year, the Board used the Company's share buyback authority to repurchase 8.8% of the shares outstanding. This has enhanced the NAV by 0.7% over the period. We recognise that during a period of less strong investment returns, there may be less appetite for the Company's shares and, in this circumstance, we believe buying back shares represents an attractive capital allocation decision. Despite this shrinkage of the Company's share capital, the strong investment returns of recent years mean that Edinburgh remains a large and well-resourced Company. We continue to deploy resources to enhance the awareness and reputation of the Company: combined with attractive future investment returns, this should deliver a tighter discount over time.
MARKETING
As an example of reputation building, we continue to execute a marketing plan to raise the profile of the Company and drive demand for shares from new and existing shareholders. Initiatives include digital and print advertising, videos, podcasts and high-profile attendance at a range of events including the major retail investment trust event in London hosted by the Association of Investment Companies ("AIC"). These initiatives are in addition to our own two major shareholder events: the AGM in Edinburgh and a similar shareholder event in London each October. We have also upgraded the format of this annual report and the interim report published last November.
In the print media, the management team and I have been interviewed and quoted in a range of publications over the year, including the Financial Times, Investment Week and the Daily Mail as well as a wide range of online publications. The Company's social media profile continues to grow in prominence.
BOARD AND GOVERNANCE
There have been no changes to the composition of the Board over the year. It has operated well throughout, with all Directors making significant contributions to our discussions. Following the guidance of the AIC Corporate Governance Code, an internal Board review was undertaken using the services of Boardforms, an external evaluation consultancy which is independent of the Company. The review covered performance of the Board and its Committees, individual Directors and the Chair. The overall results were positive and demonstrated that the Board and its Committees were operating effectively. The Board continues to meet the FCA Listing Rules targets on gender diversity, female representation in senior roles and ethnic representation on the Board. All Directors also conform with the UK Corporate Governance Code's guidance on board tenure. I thank all the Directors for their continued hard work on behalf of shareholders.
ANNUAL GENERAL MEETING
This year's AGM will take place on Tuesday 21 July 2026 at 11:00 a.m. at the Balmoral Hotel in Edinburgh. We warmly invite all shareholders to attend. Refreshments will be available from 10.30 a.m. and we encourage early arrival so that the formal business of the meeting can begin promptly at 11.00 a.m..
As usual, shareholders will be asked to vote on the resolutions set out in the Notice of AGM. Shareholders are encouraged to attend and also submit voting instructions in advance of the meeting. Full details on how to vote ahead of the meeting are set out in the Notice of AGM. Shareholders who would like to vote at the meeting itself and who do not hold shares in their own name will need to obtain a corporate letter of representation from their investment platform or nominee ahead of the AGM in order to attend and vote in person at the meeting.
The meeting will also include a presentation by the Managers and an opportunity to ask questions of both the Managers and Board. Following the conclusion of the meeting, there will be an informal lunch and a chance to meet a range of colleagues and advisors that manage the Company on a day-to-day basis.
LONDON SHAREHOLDER EVENT
We will host a presentation to shareholders in central London on Thursday 8 October 2026. This will be another chance to meet the Board, Portfolio Managers and other members of the team. Further details will be posted on the Company's website in the summer. We had a full house for this event last year and I encourage you to sign-up via the Company website once the registration facility opens.
OUTLOOK / CONCLUSION
In closing, I would like to reiterate that all of us involved with the day-to-day management or oversight of the Company are working very hard to ensure that the Company's investment returns improve after this recent challenging period. I thank all our investors for their ongoing support. As ever we welcome feedback - contact details are at the back of this report - and my colleagues and I look forward to meeting shareholders at our various events in the months ahead.
ELISABETH STHEEMAN
Chair
20 May 2026
PORTFOLIO MANAGERS' REPORT
FOR THE YEAR ENDED 31 MARCH 2026
The UK equity market has delivered another strong set of returns and we have had an active year positioning the portfolio to take advantage of the available opportunities.
During this period it has also been a pleasure to meet a wide range of shareholders and we are looking forward to continuing this engagement at the Company's AGM and other events. As ever, the stock market has provided challenges as well as exciting opportunities. In this report we will first review performance and activity, before turning to the current shape of the portfolio and the investment outlook. Despite recent returns below that of the UK index, we are confident that the positioning of the portfolio will lead to stronger returns in the years ahead.
PERFORMANCE REVIEW
While the Company has delivered solid longer-term returns since our appointment in 2020, the last financial year was disappointing relative to the market. The NAV total return was 7.2% and the share price total return was 8.5%. These compare with a total return of 21.5% from the Company's benchmark, the FTSE All-Share Index. Gearing contributed 0.5% to returns over the course of the year. As the Chair has set out in her statement, the last twelve months have contributed to three and five year returns being behind the index. All our energies are now focused on returning these metrics back into positive territory.
We remain committed to a flexible and pragmatic investment approach. Over the last year the portfolio has had a bias to 'quality growth' stocks - this was born out of judgement and was principally driven by where we find the best bottom-up opportunities. Over the year this bias was a headwind to our returns relative to that of the index, even though the majority of portfolio holdings have delivered strategically, operationally and financially. There was, however, a notable derating in a number of portfolio holdings which the market has, we believe erroneously, characterised as 'Artificial Intelligence losers'. Alongside this were a few holdings which underperformed operationally which we discuss further below. Stronger performance from a number of larger value-oriented benchmark companies in which we are underweight was also a headwind. As we describe later in this report, our investment process continues to uncover a range of different investment opportunities, some of which are more growth oriented, some of which are more value oriented and many of which most recently fall into the category of self-help turnarounds.
The banking sector was a strong performer in the UK market last year, which was another significant factor in the portfolio's return lagging that of the index. The sector has continued to be supported by the lagged benefit from higher interest rates into net interest income (via the 'structural hedge' which smooths net interest income over the course of an interest rate cycle), improved capital positions and continued strong distributions to shareholders. NatWest, a 5.3% position in the portfolio at the year end, had a strong rally until early 2026, subsequently giving back the outperformance, as investors digested the announcement of the acquisition of Evelyn Partners, a strategically attractive but optically expensive deal. HSBC performed strongly but was a detractor for your portfolio with the 2.9% position underweight compared against the benchmark. The transformation at HSBC under the new chief executive continues with a streamlining of operations and refocus on areas of competitive advantage - notably wealth management in Hong Kong and broader Asia, and its market-leading position in the region was cemented with the acquisition of the remaining stake in Hang Seng Bank.
The aerospace and defence, and metals and mining sectors were standout performers in the UK market, as geopolitical tensions rose. The holding in Anglo American, a world class copper and iron ore miner, performed strongly with solid operating performance, progress on the simplification of the business and the announcement of a highly synergistic proposed merger with Teck Resources. Another positive contributor to performance was the position in Tesco, the leading UK supermarket that is more defensively positioned and which continues to gain market share through strong execution, taking advantage of distracted competitors. Another more defensive company, GlaxoSmithKline ("GSK"), the global pharmaceutical business, upgraded guidance during the year, reaffirmed medium term targets and appointed a new CEO, Luke Miels - a highly regarded internal appointment. Alongside Tesco and GlaxoSmithKline, the other two largest contributors to relative performance were not owning Diageo, the global alcoholic beverages giant, and not owning Experian, the global credit bureau. Experian suffered AI-induced sentiment declines, like many of its data and analytics peers. Diageo is a company we have been reassessing regularly over the last two years, and one we are continuing to monitor closely. The shares have been weak amidst a debate on whether the weak topline performance is indicative of structurally weaker alcohol demand particularly in developed markets. The new CEO, Sir Dave Lewis, formerly of Tesco, is set to give a strategic update later this year.
THE PORTFOLIO'S AI-EXPOSED STOCKS
Thematically, since late 2024, we have seen the largest P/E multiple de‑rating of capital-light companies vs capital intensive companies since the global financial crisis (GFC). The capex to sales ratio in developed markets (ex‑technology spend) went from 7-9% pre GFC, to circa 6-7% post. This reduced capital intensity has shown up in areas such as the systemic underinvestment in defence, the outsourcing of energy sovereignty, the outsourcing of supply chains, and outdated physical infrastructure in a number of developed markets. That implicit trade-off between higher market free cash flow vs. ensuring security and stability has been questioned more in recent years, particularly following the outbreak of the Russia-Ukraine war and the pandemic-induced supply chain gyrations. The value of tangible assets is being reappraised, with this process further intensified with ongoing announcements of significant capital investments in AI infrastructure. It may take time to see whether the returns on these very significant AI investments justify the cost. These emerging AI innovations have also raised concerns about the future profitability of capital light businesses. We hold a number of these companies and they have been a drag to relative performance during the year, most notably Rightmove, AutoTrader and Baltic Classifieds.
Rightmove is the dominant property portal in the UK, with a strong and well developed economic moat. With the business having essentially all the supply of available properties in the UK, and over 80% share of viewership, Rightmove as the matching engine has a very powerful moat as its competitive advantage. We judge that AI is most likely to make the searching and filtering process more efficient for consumers, whilst Rightmove can use AI to provide higher value add products - rather than AI replacing the two-sided network it has built. However, Rightmove was also one of the holdings which underperformed financially during the year, with its second margin reset of the last few years as the management team increase costs by investing to future-proof the platform.
AutoTrader is the dominant used car portal in the UK. As with Rightmove, the platform brings together disparate pools of buyers and sellers and that network is its economic moat. This moat comes from the market depth, importance in the dealer workflows, and increasingly the value added data and services provided to the car dealers by AutoTrader. Rather than AI disintermediating AutoTrader, we think the much more likely outcome is that it can use AI to enhance their proposition, helping dealers improve conversion and productivity.
Baltic is the leading online classifieds group in the Baltics, which owns and operates fourteen leading vertical and generalist online classifieds portals in Lithuania, Estonia and Latvia. It has suffered from a similar swing in sentiment and - like Rightmove - was one of the holdings which also underperformed operationally and financially during the year, in its case owing to short term cyclical weakness in the Estonian car market.
The Company's revenue return per share rose from 25.0p to 26.6p, an increase of 6.3%. Top line revenues were £40.8m, and the portfolio yield is 3.2%. The underlying cash generation of the portfolio remains strong, with an increasing number of companies embracing the flexibility of share buybacks to return capital to shareholders. We calculate the 'share buyback yield' of the portfolio over the year to have been 2.3%, which represents a significant additional return of capital, even though it does not affect the numbers immediately above. Looking ahead, the portfolio's weighted-average estimated dividend growth remains in mid-high single digits which should support the Company's objective of growing the dividend per share in excess of UK inflation.
TRANSACTIONS
Notable purchases during the year fall into three categories:
First, purchases of de‑rated data and analytics companies which we judge will turn out to be winners from the AI evolution:
· Softcat is a new position in the portfolio. Softcat is a value-added reseller of technology to medium sized companies, with exposure to more than 200 technology vendors, and partners with companies to help them navigate an evolving technology landscape. Softcat is just the partner medium sized companies need during this rapid evolution in AI and technology offerings. Softcat has an exceptional long-term track record and is well positioned to benefit from continued growth in technology spending, particularly in areas such as AI, cybersecurity, and cloud services. Softcat generates high returns on invested capital, is strongly cash generative, and consistently returns excess capital to shareholders. We believe the current valuation offers an attractive opportunity to initiate a position in this high-quality business.
· We topped up the position in Sage. Sage develops software that helps small and mid-sized businesses manage their accounting, payroll and HR processes, underpinned by a highly recurring revenue model and strong cash generation. The business continues to deliver consistent growth, driven by its transition to cloud and increasing adoption of AI-enabled solutions, which are enhancing customer productivity and supporting pricing and upsell opportunities. We believe Sage is well positioned to sustain attractive growth and margin expansion, with AI innovation and a large installed base providing a durable competitive advantage.
· We also added to London Stock Exchange Group ("LSEG") and RELX. Both are leading providers of data and analytics tools within their respective industries, with a high proportion of recurring subscription based revenues and strong cash generation which they are using to buy back shares at what they judge to be attractive valuations; we agree.
Second, additions to existing positions in specialised instrumentation companies experiencing short term cyclical weakness in end markets, and so providing opportunities to buy shares at attractive valuations in these long-term structural winners:
• Oxford Instruments is a leading player in high-end scientific instruments. It is a high quality, differentiated business exposed to structural growth drivers such as healthcare R&D, and a self-help opportunity in moving their Advanced Technologies division from a low single digit margin towards the medium term target for the division of 10-12% operating margins. Like other scientific instrumentation companies, it has suffered some cyclical headwinds more recently but we think the medium-term opportunity is very attractive.
• Renishaw is a world-leading engineering company specialising in precision measurement. The business is exposed to structurally growing end-markets such as robotics & automation, semiconductors and electronics. These end-markets can be cyclical and this has weighed on the company's sales and profitability. However, we believe these markets remain attractive longer-term and short-term uncertainty has enabled us to add to the position in a world-class company.
Finally, purchases of Marshalls and Ibstock: cyclically depressed and lower valuation multiple UK construction and RMI (repair, maintenance, improvement) exposed businesses - and both going through turnarounds. These are new positions in the portfolio, are naturally higher risk investments and have been sized accordingly, both presenting attractively skewed risk-reward profiles.
· Marshalls is a UK manufacturer of landscaping, building and roofing products. Landscaping volumes are down over 30% from their peak and profits are almost 80% down - there is significant recovery potential within the division. The building products division also offers recovery potential, with volumes down around 25% from peak levels. Meanwhile, the roofing business continues to perform extremely well and is one of the best performing businesses in the industry. There is huge earnings recovery potential for the business with volumes close to all-time lows and an attractive valuation, alongside a self-help turnaround with a new chief executive focused on cost cutting and realigning the product offering to more closely match customer requirements.
· Ibstock is the UK market leader in brick manufacturing. Brick market volumes are down around 30% from their peak and profits down around 50% - there is significant earnings recovery potential here given the operating leverage in the business. With its recent capex cycle ending, Ibstock should become increasingly cash generative, and recent share price weakness due to concerns on market volumes in the short-term provided an attractive entry point.
Notable sales during the year included Thermo Fisher Scientific, the global leader in life sciences tools and services. The shares recovered strongly as the academic research end markets in the US have held up better than expected and there had been a cyclical recovery in some of their other markets. Following the share price recovery and significant valuation rerating we exited the position to redeploy capital into more attractive opportunities. We exited the position in BAE Systems, one of the leading global defence contractors. We sold as we felt the positive outlook for higher defence budgets was largely reflected in the share price following a period of re-rating, with some risk that spending would be more back-end loaded than the market expected. Finally, we trimmed the position in Whitbread, the UK's leading value hotel operator through its Premier Inn brand. While trading has remained depressed but not worsening, and cost efficiencies have improved, uncertainty around the medium term cost impact of higher business rates impacting cost inflation has increased the range of outcomes and lowered our conviction. We have therefore reduced our position to redeploy capital where the risk-reward range is more attractive.
CURRENT SHAPE OF THE PORTFOLIO
Portfolio construction is an important part of our process. We aim to build a portfolio of around 40-50 idiosyncratic investment opportunities across the style spectrum, to form a portfolio that is economically and thematically well diversified. The current themes and economic diversification within the portfolio are shown in the Annual Report.
Over the course of the year we made incremental adjustments to the portfolio's style positioning, increasing exposure to the value part of the market principally through gentle increases to more cyclically depressed companies presenting turnaround opportunities such as Marshalls and Ibstock, and additions to Lloyds Bank and HSBC where we have seen opportunities. While we currently retain a quality-growth bias in the portfolio, we have found more opportunities recently in the 'value' part of the equity market principally through our bottom-up research. Our investment approach continues to yield opportunities across the style spectrum. If the economic weather is a little more difficult, we are confident that the vast majority of portfolio holdings will deliver attractive profit growth and strong cashflows.
ENGAGEMENT
Among the company site visits during the year there are three which stand out, a visit to a new position in the portfolio Ibstock a leading brick manufacturer, a visit to Renishaw a position we have added to during the year, and a visit to a longer standing position in the portfolio - Howdens, the UK market leading trade only kitchen supplier. We have also updated our investment thesis on the main UK banks during the course of the year.
Ibstock
We visited Ibstock's Atlas site, a newly developed factory near Birmingham. The visit highlighted a step-change in manufacturing capability, alongside management's strategy to drive lower costs, higher margins and improved sustainability through targeted investment. Atlas represents a £75m investment and is designed to produce c.105m bricks (c.11% of group capacity). The site sits at the bottom of the cost curve, and importantly, this is not just incremental capacity, but a structural improvement in how bricks are manufactured. A key part of our investment thesis is that Ibstock is now coming off a heavy capex cycle and is well positioned to deliver margin expansion and free cash flow as volumes recover. While near-term demand remains subdued, the visit reinforced our view that the business has materially upgraded its asset base. As volumes normalise, this should drive a meaningful improvement in profitability, supporting a stronger through-cycle margin profile and cash generation.
Renishaw
Renishaw's Miskin manufacturing facility in South Wales is one of its core production sites. A consistent theme throughout the visit was the strength of Renishaw's innovation and how this is embedded within both its products and manufacturing processes. During the site tour, Renishaw demonstrated how use of its own metrology equipment and software enables closed-loop manufacturing, where inspection and calibration data feed directly into machine settings in real time. This enhances precision and productivity, while also providing direct insight into customer challenges, supporting ongoing product development.
Overall, the visit reinforced our conviction that Renishaw is a world-leading innovation-led business. While end-markets remain cyclical, the strength of its technology and product offering positions the company well to benefit when demand recovers, supporting a compelling long-term investment case.
Howdens
We visited a local depot in York alongside one of Howdens' core manufacturing sites in Howden itself, which also houses its kitchen showroom/expo. The visit highlighted both the scale of operational investment and the strength of Howdens' integrated supply chain model.
At the manufacturing site, the level of investment in automation and capacity was notable. The business continues to invest heavily to improve efficiency, capacity and consistency, reinforcing its position as a scaled, vertically integrated operator. This is further supported by ongoing expansion, with the site increasing from c.80 acres to 100 acres, signalling confidence in long-term demand and a clear focus on future-proofing the business. Overall, the visit reinforced our view that Howdens' logistics and manufacturing capabilities are best-in-class, and that continued investment in these areas is widening its economic moat. The model enables superior availability, supports depot expansion (including smaller urban sites), and drives strong customer loyalty among tradespeople.
UK Banks
We met with the UK banks multiple times during the year to understand and appraise topics including:
· The durability of the positive momentum at NatWest (as noted earlier, a 5.3% position at the year end) and the evolution of the wealth and mass affluent strategy, most recently with the acquisition of Evelyn Partners;
· How the bancassurance model has evolved and how Lloyds (a 2.4% position) is strategically placed as the only bancassurer in the UK;
· The sustainability of the wealth flows at HSBC (a 2.9% position), the recently completed Hang Seng acquisition, and credit impairments in the Hong Kong loan book;
· How Barclays is approaching refocusing on growth in the UK and private credit exposure.
These reviews have seen us add to the positions in Lloyds Bank and HSBC and retain our conviction in NatWest.
OUTLOOK: REFLECTIVE NOT REFLEXIVE PORTFOLIO MANAGEMENT
Given the very volatile market conditions and wider range of short to medium term outcomes than we have seen for some time, we think this calls for a more balanced style of portfolio in the immediate future, whilst remaining quality growth biased given the risks in the broader environment. To this end we have been using recent volatility to gently add to positions in companies we think are very well placed over the long term but may be experiencing short term share price weakness, such as HSBC, Lloyds, Sage, and Spirax. Our resolute focus remains on owning a collection of businesses we think are well placed to deliver over the next five years, with share prices that provide attractive risk-reward skews across the style spectrum.
Reflecting our short term market caution, reflected in a quality and defensive tilt to the portfolio, we believe the modest net gearing level of 5.8% is currently appropriate. We keep the level under review, with our market expectations and the cost of debt feeding into this process.
Whilst we are primarily bottom up stockpickers, we recognise that companies do not operate in a vacuum. We need to take into account the macroeconomic backdrop. We generate our macroeconomic insights principally from the micro - the individual companies. This 'macro from the micro' intelligence-seeking part of our process - learning about the macroeconomic environment from the wide range of companies that we meet - is giving us mixed signals. It remains a difficult operating environment and the outlook is tough to predict given the macroeconomic and geopolitical risks on the horizon. To navigate this environment, we believe the investment trust structure is the ideal vehicle: a stable pool of capital, the ability to smooth dividends, and a structure that supports long-term patient thinking to deliver attractive returns over the long term.
IMRAN SATTAR
PORTFOLIO MANAGER
EMILY BARNARD
DEPUTY PORTFOLIO MANAGER
20 MAY 2026
THE PORTFOLIO MANAGERS' INVESTMENT PRINCIPLES
Our competitive edge rests on the combination of our Global Fundamental team's experience and our flexible investment process, which delivers a differentiated and diversified portfolio of listed equities.
ACTIVE MANAGEMENT
Stock-driven. Share prices follow fundamentals over the long term. Through our proven investment approach, we expect to outperform over the long term, net of fees.
High conviction portfolio. We expect the portfolio to contain around 40 to 50 stocks. Holdings sizes reflect the conviction we have in each company and our assessment of the upside and downside potential of its share price.
Risk. We think of risk as permanent capital loss. To mitigate this, our analysis of a company's valuation is the first line of defence. Our risk management process combines our depth of knowledge of the stocks in the portfolio, plus separate oversight by Liontrust's Portfolio Risk Committee.
FLEXIBLE INVESTMENT STYLE
Open-minded approach. We do not have dogmatic style biases, such as 'growth' or 'value'. We are also prepared to invest in companies that we identify as having scope for recovery through management change, business transformation or an improving business environment. We expect the profile of the portfolio to evolve depending on our assessment of individual companies and our reading of the economic and market background.
Disciplined, rigorous, fundamental research. In keeping with the stock-driven nature of the portfolio, the vast majority of our effort takes the form of in-depth stock research. The remainder is spent on macroeconomic analysis.
Materiality assessment is a core part of the investment process. As part of the investment process, we identify and prioritise the key risks and opportunities that each holding (or potential holding) faces over our investment time horizon. Some of these have financial implications for the portfolio's holdings and, as such, we engage each holding on its key issues or exposures. The outcomes from our in-depth analysis and engagement help form our conviction level and investment decisions.
TOTAL RETURN STRATEGY
A focus on both capital growth and income. We take a total return approach: investor returns should derive over the long term from both capital appreciation and dividend income. We generally prefer companies with organic investment opportunities but will sometimes hold companies with acquisitive profiles. Either way, companies with growth tailwinds are preferred. We view income as an important component rather than the primary driver of investment return. This aligns with the Company's twin objectives.
LONG TERM
Typical holding period of three to five years. This is an appropriate period to ensure that underlying corporate fundamentals drive investment returns. It is therefore also a sensible period over which to measure an active manager.
Gearing should enhance shareholder returns. One of the advantages of an investment trust is the ability to borrow to enhance equity returns. We expect gearing to boost investment returns over time.
CAPACITY MANAGEMENT
Scale diseconomies. In our view, investment performance can rapidly suffer if assets under management become too large. We carefully manage capacity to ensure that the interests of existing clients take precedence over new clients. The approach ensures we retain a size advantage. It enables us to reposition the portfolio - and those of all our other clients - quickly and efficiently when required.
DEEP INVESTMENT RESOURCE WITH GLOBAL PERSPECTIVE
A close-knit investment team. Average experience of the investment team is 12 years. The team has been stress-tested across various market cycles. The team members own Liontrust equity and co-invest in the team's investment strategies, including The Edinburgh Investment Trust, which in turn underpins teamwork and collaboration.
Challenge and debate. This is encouraged within a structured risk control environment, with robust oversight processes.
BUSINESS REVIEW
STRATEGY AND BUSINESS MODEL
The Edinburgh Investment Trust plc is an investment company and its investment objective and investment policy are set out in the Annual Report. The strategy the Board follows to achieve that objective is to set investment policy and risk guidelines, including investment limits, and to monitor how they are applied. These are also set out below and have been approved by shareholders.
The business model the Company has adopted to achieve its investment objective has been to contract the services of the Manager to manage and administer the portfolio in accordance with the Board's strategy and under its oversight. The Portfolio Manager with lead individual responsibility for the day-to-day management of the portfolio is Imran Sattar and the Deputy Portfolio Manager is Emily Barnard. Imran Sattar and Emily Barnard took on these new roles on 6 February 2024.
In addition, the Company has contractual arrangements with MUFG Corporate Markets to act as registrar, The Bank of New York Mellon (International) Limited as depositary and custodian, and NSM Funds (UK) Limited to act as Company Secretary.
RESULTS AND DIVIDENDS
At the year end the share price was 773.00p per ordinary share (2025: 740.00p). The net asset value (debt at fair value) per ordinary share was 846.04p (2025: 817.16p).
The Directors declared a third interim dividend for the year ended 31 March 2026 of 8.40 pence per ordinary share (2025: 7.50 pence), an increase of 12.5% compared with each of the first two interim dividends. This dividend is payable on 22 May 2026 to ordinary shareholders on the register on 1 May 2026. The shares were quoted ex‑dividend on 30 April 2026.
The Board is recommending a final dividend of 8.40 pence per share which is the same as the third interim dividend declared last month, implying a full year payout of 32.00 pence per share. This represents an increase of 11.1% compared with the total underlying ordinary dividends paid for the financial year to 31 March 2025.
Subject to approval at the Company's AGM, the dividend will have an ex‑dividend date of 4 June 2026 and will be paid on 24 July 2026, to shareholders on the register at 5 June 2026.
PERFORMANCE
The Board reviews the Company's performance by reference to a range of key measures, which are shown under "Annual results at a Glance" and the Directors' Report. They are measures of the Company's absolute and relative performance and assist in managing performance and are reviewed by the Board at each meeting.
The Chair's Statement gives a commentary on the performance of the Company during the year, the gearing and the dividend.
The Board reviews an analysis of expenditure at each Board meeting, and the Audit and Management Engagement Committees formally review the fees payable to the main service providers, including the Manager, on an annual basis.
The ongoing charges figure is calculated in accordance with the AIC methodology and is reviewed by the Board annually in comparison to peers.
The Board also regularly reviews the performance of the Company in relation to the 17 investment trusts in the UK Equity Income sector (including the Company). As at 31 March 2026 the Company was ranked 15th by NAV performance in this sector over one year, 7th over three years and 5th over five years (source: Winterflood).
OUTLOOK, INCLUDING THE FUTURE OF THE COMPANY
The main trends and factors likely to affect the future development, performance and position of the Company's business can be found in the Portfolio Managers' Report. Details of the principal risks affecting the Company can be found on in the Annual Report.
FINANCIAL POSITION AND BORROWINGS
The Company's balance sheet shows the assets and liabilities at the year end. Borrowings at the year ended 31 March 2026 comprised £120 million of Unsecured Senior Loan Notes (2025: £120 million).
PERFORMANCE ATTRIBUTION
The following table illustrates the differing contributions to NAV excess returns, split between underlying stock selection and other factors such as gearing, costs and share buybacks.
|
|
|
for the |
for the |
|
|
|
year ended |
year ended |
|
|
|
31 March |
31 March |
|
|
|
2026 |
2025 |
|
|
|
% |
% |
|
Total Return Basis(1) |
|
|
|
|
NAV (debt at fair value) |
|
7.2 |
8.3 |
|
Benchmark |
|
21.5 |
10.5 |
|
Relative performance |
|
-14.3 |
‑2.2 |
|
Analysis of Relative |
|
|
|
|
Performance |
|
|
|
|
Portfolio total return |
|
6.6 |
7.3 |
|
Benchmark total return(1) |
|
21.5 |
10.5 |
|
Portfolio outperformance |
[A] |
-15.0 |
‑3.2 |
|
Borrowings: |
|
|
|
|
Net gearing effect |
|
0.6 |
0.8 |
|
Interest |
|
-0.2 |
‑0.3 |
|
Market value movement |
|
0.1 |
0.6 |
|
Management fee |
|
-0.4 |
‑0.4 |
|
Other expenses |
|
-0.1 |
‑0.1 |
|
Tax |
|
0.0 |
0.0 |
|
Share buybacks |
|
0.7 |
0.4 |
|
Subtotal |
[B] |
0.7 |
1.0 |
|
Relative performance |
[A+B] |
-14.3 |
‑2.2 |
(1) LSEG Data & Analytics.
Performance attribution - analyses the performance of the Company relative to its benchmark. The Analysis of Relative Performance estimates the quantum of relative performance that is attributable to each of the factors set out in this table. The table is intended to be indicative rather than precise; the accuracy of each estimate is determined by a variety of factors such as the volatility of investment returns over the year and intra-month, and the timing of income receipts and expenditure payments.
Relative performance - represents the arithmetic difference between the NAV and benchmark returns.
Portfolio total return - represents the return of the holdings in the portfolio including transaction costs, cash and income received, but excluding expenses incurred by the Company.
Net gearing effect - measures the impact of the unsecured senior loan notes and cash on the Company's relative performance. This will be positive if the portfolio has positive capital performance and negative if capital performance is negative.
Interest - interest payable on the unsecured senior loan notes has a negative impact on performance.
Market value movement - represents the change in market value of the Company's borrowings, measured to the end of the financial year or maturity from the start of the financial year or issuance, each as appropriate.
Management fee - the fee reduces the Company's net assets and decreases returns.
Other expenses and tax - reduce the level of assets and therefore result in a negative effect on relative performance.
Share buybacks - measures the effect of ordinary shares bought back at a discount to net asset value on the Company's relative performance. Where shares are bought back at a discount, the transaction is generally NAV accretive, as the Company is effectively acquiring its underlying portfolio for less than its NAV and reducing the number of shares in issue, which increases NAV per share.
INVESTMENTS IN ORDER OF VALUATION
AT 31 MARCH 2026
UK LISTED ORDINARY SHARES UNLESS OTHERWISE STATED
|
|
|
At Market Value |
% of |
|
Company |
Sector |
£'000 |
Portfolio |
|
Shell |
Oil, Gas and Coal |
82,426 |
7.1 |
|
Haledon |
Pharmaceuticals and Biotechnology |
69,438 |
5.9 |
|
GSK |
Pharmaceuticals and Biotechnology |
67,283 |
5.8 |
|
NatWest |
Banks |
62,368 |
5.3 |
|
Unilever |
Personal Care, Drug and Grocery Stores |
58,270 |
5.0 |
|
National Grid |
Gas, Water and Multi-utilities |
57,720 |
4.9 |
|
AstraZeneca |
Pharmaceuticals and Biotechnology |
55,641 |
4.8 |
|
Anglo American |
Industrial Metals and Mining |
51,466 |
4.4 |
|
Rentokil |
Industrial Support Services |
45,340 |
3.9 |
|
Compass |
Consumer Services |
41,185 |
3.5 |
|
TOP TEN HOLDINGS |
|
591,137 |
50.6 |
|
Dunelm |
Retailers |
38,154 |
3.3 |
|
London Stock Exchange Group |
Finance and Credit Services |
37,205 |
3.2 |
|
HSBC |
Banks |
34,069 |
2.9 |
|
Spirax |
Industrial Engineering |
33,903 |
2.9 |
|
RELX |
Media |
31,968 |
2.7 |
|
Sage |
Software and Computer Services |
30,997 |
2.7 |
|
Grainger |
Real Estate Investment and Services |
30,017 |
2.6 |
|
Lloyds Bank |
Banks |
28,292 |
2.4 |
|
Greggs |
Personal Care, Drug and Grocery Stores |
26,570 |
2.3 |
|
Softcat |
Computer Services |
23,689 |
2.0 |
|
TOP TWENTY HOLDINGS |
|
906,001 |
77.6 |
|
Auto Trader |
Software and Computer Services |
20,185 |
1.7 |
|
Rightmove |
Real Estate Investment and Services |
18,891 |
1.6 |
|
Whitbread |
Travel and Leisure |
17,845 |
1.5 |
|
Rotork |
Electronic and Electrical Equipment |
16,714 |
1.4 |
|
Tesco |
Personal Care, Drug and Grocery Stores |
16,502 |
1.4 |
|
Admiral |
Non-Life Insurance |
15,863 |
1.4 |
|
Baltic Classifieds |
Software and Computer Services |
15,728 |
1.4 |
|
Halma |
Electronic and Electrical Equipment |
15,290 |
1.3 |
|
Verisk - US Listed |
Industrial Support Services |
14,972 |
1.3 |
|
KONE - B shares - Finnish Listed |
Industrial Engineering |
14,043 |
1.2 |
|
TOP THIRTY HOLDINGS |
|
1,072,034 |
91.8 |
|
Money Supermarket |
Software and Computer Services |
13,601 |
1.2 |
|
Trainline |
Travel and Leisure |
11,057 |
1.0 |
|
Marshalls |
Construction and Materials |
10,796 |
0.9 |
|
Diploma |
Industrial Support Services |
10,287 |
0.9 |
|
Oxford Instruments |
Electronic and Electrical Equipment |
8,504 |
0.7 |
|
Ibstock |
Construction and Materials |
7,213 |
0.6 |
|
3i |
Investment Banking and Brokerage Services |
7,181 |
0.6 |
|
Renishaw |
Electronic and Electrical Equipment |
6,816 |
0.6 |
|
Ashmore |
Financial Services |
6,744 |
0.6 |
|
Howden Joinery |
Retailers |
6,023 |
0.5 |
|
TOP FORTY HOLDINGS |
|
1,160,256 |
99.4 |
|
Segro |
Real Estate Investment Trusts |
4,935 |
0.4 |
|
AJ Bell |
Investment Banking and Brokerage Services |
2,358 |
0.2 |
|
Eurovestech (UQ) |
Investment Banking and Brokerage Services |
- |
- |
|
Raven Property (S) - Preference shares |
Real Estate Investment and Services |
- |
- |
|
TOTAL HOLDINGS 44 |
|
1,167,549 |
100.0 |
UQ - Unquoted investment
S - Delisted
PRINCIPAL RISKS AND UNCERTAINTIES
RISK MANAGEMENT AND MITIGATION
The Manager ('AIFM') is responsible for the portfolio management of the Company and for exercising the risk management function in respect of the Company. As part of this risk management function, the AIFM maintains a risk control summary of identified risks including emerging risks likely to impact the Company. This is updated regularly, following discussions with the Manager and highlighted to the Board.
The Board, through the Audit Committee and with the assistance of the Manager, regularly reviews a report of potential risks to the Company in the form of a risk control summary. The document includes a description of each identified risk, the mitigating action taken, reporting and disclosure to the Board and an impact and probability risk rating. The rating is given both prior to and after the Board's mitigation of each risk. The information is then displayed in matrix form which allows the Board to identify the Company's key risks. As the changing risk environment in which the Company operates has evolved, the total number of risks has fluctuated, with certain risks having been removed and new risks added with emerging risks actively discussed as part of this process and, so far as practicable, mitigated.
As part of the risk review, the Audit Committee considered the challenging global economic and geopolitical environment including, but not limited to, the continuing effects of global trade tariffs, armed conflicts, climate change, inflation and interest rates. Particular attention was also given to risks arising from minority activist shareholder concentration, the Company's performance and broader market volatility.
Furthermore, the risk control summary underpins the Company's preparation for the revised AIC Code, which requires boards to make a declaration of the effectiveness of the material controls at the balance sheet date, which applies to accounting periods beginning on or after 1 January 2026. This particularly supports the new Provision 34 of the AIC Code which ensures the Board has established and maintains procedures to manage risk, oversee the internal control framework and identify any material controls which have not operated effectively, identifying both actions and improvements.
The composition of the Board is regularly reviewed to ensure its members offer sufficient knowledge and experience to assess, anticipate and mitigate these risks, as far as possible.
The principal risks and uncertainties facing the Company are an integral consideration when assessing the operations in place to meet these objectives, including the performance of the portfolio, share price and dividends. The Board is ultimately responsible for the risk control systems, but the day-to-day operation and monitoring are delegated to the Manager. The Board has carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The following sets out a description of the principal and emerging risks and how they are being managed or mitigated.
MARKET RISK
All the Company's investments are traded on recognised stock exchanges, bar a very small number that have delisted or suspended since purchase. The principal market risk for investors in the Company is a significant fall in, or a prolonged period of weakness across equity markets. The value of the Company's investments and the income derived from them are influenced by a wide range of external factors, including economic conditions, interest rates, inflation, currency movements, commodity and energy prices, investor sentiment, and changes in government policy and regulation. Market conditions can also be materially affected by geopolitical events (including the ongoing wars in Ukraine and the Middle East together with wider geopolitical tensions), sanctions regimes, public health events, and changes to global trade policy (including the introduction or escalation of tariffs).
These factors are outside the control of the Board and the Manager and may give rise to increased volatility in the prices of investments held by the Company. The asset value and price of the Company's shares and its earnings and dividends may consequently also experience volatility and may decline. Movements in interest rates, inflation and exchange rates can further affect returns and may contribute to a reduction in the Company's NAV.
Market risk is monitored through the risk control summary prepared by the Manager and reviewed by the Board at each meeting. In addition, the Board receives regular reporting on portfolio performance and positioning at each meeting, and the Manager monitors market developments and portfolio exposures on an ongoing basis, positioning the portfolio for medium to long-term returns.
INVESTMENT RISK
The Board sets investment policy and risk guidelines, together with investment limits, and monitors adherence to these at each Board meeting. All individual investment decisions are undertaken by the Portfolio Managers. The Portfolio Managers' approach is to construct a portfolio which should benefit from expected future trends in the UK and global economies. The Portfolio Managers take a long-term investment approach, and are prepared to take substantial positions in securities across a range of different types of stock. This reflects the Portfolio Managers' high conviction, stock-driven investment process and total return approach. Strategy, asset allocation and stock selection decisions by the Portfolio Managers can lead to underperformance of the portfolio relative to the benchmark and/or income targets.
The Portfolio Managers' style may result in a concentrated portfolio with significant overweight or underweight positions in individual stocks or sectors compared to the benchmark and, consequently, the Company's performance may deviate significantly, possibly for extended periods, from that of the benchmark. In a similar way, the Portfolio Managers manage other portfolios, holding many of the same stocks as the Company which reflects the Portfolio Managers' high conviction style of investment management. This could increase the liquidity and price risk of certain stocks under certain scenarios and market conditions. However, the Board and the Portfolio Managers believe that the investment process and policy outlined above should, over the long term, meet the Company's objectives. Investment selection is delegated to the Portfolio Managers. The Board does not specify asset allocations. Information on the Company's performance against the benchmark and peer group is provided to the Board at each Board meeting. The Board uses this to review the performance of the Company, taking into account how performance relates to the Company's objectives. The Portfolio Managers are responsible for monitoring the portfolio selected and seek to ensure that individual stocks meet an acceptable risk-reward profile. There is also independent oversight of the portfolio and Company's asset structure by the Liontrust Investment Risk team and the Liontrust Portfolio Risk Committee.
As described in the investment policy, derivatives may be used provided that the market exposure arising is less than 25% of the value of the portfolio.
Investment performance risk is included in the risk control summary report that is prepared by the Manager and reviewed by the Board at each meeting. The Board also receives reports on the performance of the portfolio and on compliance with the Company's investment policy guidelines from the Manager's risk and compliance department at each meeting. As part of an annual assessment, the Board reviews the performance of the Manager and the management contract at the Management Engagement Committee meeting.
The Board also reviews the annual depository report and report from the compliance department of the Manager and any breaches of the investment policy, limits or guidelines are reported immediately to the Board and Audit Committee Chairs.
Investment risk is increased through the Company's borrowing, namely the £120m Unsecured Senior Loan Notes. This facilitates additional investment exposure than would be the case for an unleveraged portfolio; if the investments fall in value, this will increase the adverse impact on performance. On a regular basis the Board monitors the appropriateness of gross and net gearing levels, and the amount of headroom above minimum NAV levels as agreed with the lenders.
INCOME/DIVIDEND RISK
The Company is subject to the risk that income generation from its investments fails to reach the level of income required to meet its objectives.
The Board monitors this risk through the review of detailed income and dividend forecasts and comparison against budget. These forecasts form part of the Board papers and are considered at each Board meeting, and are also reviewed at relevant Committee meetings when dividend recommendations are being assessed. The Board also takes into account the size of the Company's accumulated income and capital reserves which can be used to supplement dividends when income levels alone do not cover the proposed dividend payments. These reserves are currently being used to support the dividend and, given the underlying income characteristics of the portfolio, the Board expects that reserves will continue to play a role in supporting dividends for the foreseeable future, while keeping the sustainability of distributions under close review.
Subject to shareholder approval at the AGM, the Board intends to move to the payment of four interim dividends each year, broadly evenly spaced, to provide shareholders with a more consistent income profile. If approved, the Board will continue to review the Company's overall dividend policy annually and will seek shareholder approval at each subsequent AGM.
DISCOUNT RISK
The share price is monitored on a daily basis and, at the request of the Board, the Company is empowered to repurchase shares within agreed parameters which are regularly reviewed with the Company's Broker. The discount at which the shares trade to NAV can be influenced by share repurchases. During the year, the Company repurchased 12,668,000 shares for holding in treasury (2025: 7,170,500).
Risk management activity includes systematic reviews of the investment objective and investment strategy and regular dialogue with shareholders and marketing activities.
Share price and discount risk is included in the risk control summary report that is prepared by the Manager and reviewed by the Board at each meeting. In addition, the Board monitors the Company's investment performance against its stated objectives and peer group and reviews the marketing report at every Board meeting.
CORPORATE GOVERNANCE AND INTERNAL CONTROLS RISK
The Board has delegated to third-party service providers the management of the investment portfolio, depositary and custody services (including the safeguarding of the assets), registration services, accounting and company secretarial services. Details of the Company's principal service providers are set out in the Directors' Report.
The principal risks arising from these arrangements relate to the allocation of the Company's assets by the current Investment Manager and the effective and professional delivery of administrative, registration, banking, depositary and custodial services. A failure in these areas could result in adverse outcomes including loss of assets, inadequate returns to shareholders and potential loss of the Company's investment trust status. In addition, cyber security risks could lead to breaches of confidentiality, compromised data integrity and disruption to investment decision-making processes. Failures in physical security could result in damage to or loss of equipment, with consequential operational and financial impacts on the Company. Consequently, in respect of these activities, the Company is dependent on Liontrust's control systems and those of its administrator, depositary, custodian and registrar.
The Board manages corporate governance and internal control risks, including those identified in the preceding paragraph, through a structured framework of oversight, delegation and assurance. Service providers are appointed following due diligence and operate under formal contractual arrangements that clearly define roles, responsibilities and performance standards. Each of the contracts were entered into after full and proper consideration of the quality and cost of services offered, including the financial control systems in operation in so far as they relate to the affairs of the Company.
The Board and its Committees regularly review the performance of all key service providers, supported by periodic reporting, controls assurance, and compliance attestations. This reporting covers such matters as business resilience, cyber security risk and data, as well as additional matters that are subject to review as part of the annual audit of the Company. Policies and procedures are reviewed regularly, with any exceptions or incidents reported promptly to the Board. All key service providers produce annual internal control reports for review by the Audit Committee. The Audit Committee oversees the effectiveness of internal controls and risk management systems, including third-party controls, and ensures that appropriate escalation, remediation and assurance processes are in place. This framework enables the Board to monitor risks on an ongoing basis and take timely action where necessary.
Investment trust status is assessed by the Manager, reviewed at every Board meeting and confirmed by the Audit Committee and HMRC annually. Taxation matters are dealt with by independent accountants, with oversight from the Board.
RELIANCE ON THE MANAGER AND OTHER THIRD-PARTY PROVIDERS RISK
The Company is reliant upon the performance of third-party service providers for its executive function and other service provisions. The Company's most significant contract is with Liontrust Fund Partners LLP who have been appointed as the Company's AIFM. The Company has other contractual arrangements with third parties to act as administrator, company secretary, registrar, depositary and broker. The Company's operational structure means that all cyber risk (information and physical security) arises at its third-party service providers, including fraud, sabotage or crime against the Company. Failure by any service provider to carry out its obligations to the Company in accordance with the terms of its appointment could have a materially detrimental impact on the operation of the Company and could affect the ability of the Company to pursue successfully its investment policy and expose the Company to risk of loss or to reputational risk.
In particular, the Manager performs services which are integral to the operation of the Company. The Manager may be exposed to the risk that litigation, misconduct, operational failures, negative publicity and press speculation, whether or not it is valid, will harm its reputation. Any damage to the reputation of the Manager could result in counterparties and third parties being unwilling to deal with the Manager and by extension the Company. This could have an adverse impact on the ability of the Company to pursue its investment policy.
The Board seeks to manage these risks in a number of ways:
· The Company Secretary reviews the performance and the service organisation control reports of third-party service providers and reports to the Board on an annual basis at the Audit Committee meeting.
· The Board reviews the performance of the Manager at every Board meeting and otherwise as appropriate. The Board has the power to replace the Manager and reviews the management contract formally once a year.
· The day-to-day management of the portfolio is the responsibility of the named Portfolio Managers.
· The risk that the Portfolio Manager might be incapacitated or otherwise unavailable is mitigated by the fact that he works within, and is supported by, the wider Liontrust team. Moreover, Emily Barnard, as Deputy Portfolio Manager, works closely with Imran on a daily basis and would be able to manage the portfolio if Imran Sattar was unable to do so for any reason.
· The Board has set guidelines within which the Portfolio Managers are permitted wide discretion. Any proposed variation outside these guidelines is referred to the Board and compliance with the guidelines and the guidelines themselves are reviewed at every Board meeting.
PHYSICAL AND TRANSITIONAL CLIMATE CHANGE
Globally, climate change effects are already emerging in the form of changing weather patterns. Extreme weather events could potentially impair the operations of individual investee companies, potential investee companies, their supply chains and their customers. Legislative changes are driving an economic adjustment towards a low-carbon economy. There are considerable risks to the value, business model and operations of investee and potential investee companies due to stranded assets and how investors, financial regulators and policymakers respond to climate concerns. The Portfolio Managers take such risks into account, along with the downside risk to any company - whether in the form of its business prospects, market valuation or sustainability of dividends - that is perceived to be making a detrimental contribution to climate change. The Company invests in a broad portfolio of businesses with operations spread geographically, which should limit the impact of location-specific weather events.
Climate change related risks are regularly monitored by the Manager and reviewed by the Board as required, together with any new guidance. The Company does not adopt a UK Sustainability Disclosure Requirements (SDR) investment label, as it does not pursue specific sustainability objectives aligned with the four SDR categories. However, ESG considerations are integrated into the investment process.
OTHER RISKS
The Company is subject to laws and regulations by virtue of its status as an investment trust and is required to comply with certain regulatory requirements that are applicable to listed closed-ended investment companies. The Company is subject to the continuing obligations imposed by the UK Listing Authority on all companies whose shares are listed on the Official List.
The Manager reviews compliance with investment trust tax conditions and other financial and regulatory requirements on a daily basis with any issues being immediately brought to the attention of the Board.
The Company may be exposed to other business, strategic and political risks in the future, as well as regulatory risks (such as an adverse change in the tax treatment of investment companies), credit, liquidity and concentration risks. The risk control summary report allows the Board to consider all these risks, the measures in place to control them and the possibility of any other risks that could arise.
The Board ensures that satisfactory assurances are received from the service providers. The Manager's compliance officers produce regular reports for review by the Company's Audit Committee.
Additionally, the depositary monitors stock, cash, borrowings and investment restrictions throughout the year. The depositary reports formally once a year and also has access to the Company Chair and the Audit Committee Chair if needed during the year.
Please see Note 16 to read more about risk management and financial instruments.
EMERGING RISKS
Emerging risks are characterised by a high degree of uncertainty and may arise from sudden events, new trends or changes in existing risk factors where the likelihood and potential impact are not yet clear. As an emerging risk becomes better understood, it may be reclassified and incorporated into the Company's risk matrix as a "known" risk.
The Board has established robust procedures to support the early identification of emerging risks, with the aim of acting proactively rather than reactively. The Board's collective experience and judgement are central to this process, alongside regular updates and advice from the Company's key service providers, including the Manager, Broker, Company Secretary and Auditor, as well as industry and regulatory updates provided by the Association of Investment Companies ("AIC"). The Board and the Manager regularly assess emerging risk developments, discuss potential mitigating actions and, where appropriate, document and refine the Company's response.
The Board is currently monitoring a number of emerging risks, including: (i) heightened geopolitical tensions and conflict (notably the conflict between the US and Iran and the resultant disruption to global energy markets) and potential shifts in global trade and regulatory policy (including US trade policy under the second Trump administration), which may contribute to market volatility; (ii) macroeconomic uncertainty, including inflation, interest rates, currency movements and the recent significant rise in energy costs; and (iii) the evolving threat landscape relating to cybercrime and the misuse of AI. These emerging risks are kept under review and mitigating actions are discussed and documented. This ensures that the Board can react ahead of any risk materialising, therefore minimising risk exposure.
VIABILITY STATEMENT
The Directors' view of the Company's viability remains unchanged that it is viable for the foreseeable future.
The Company, as an investment trust, is a collective investment vehicle rather than a commercial business venture and is designed and managed for long-term investment. The Company's investment objective clearly sets this out. 'Long-term' for this purpose is considered by the Directors to be at least five years, a timeframe in which the accuracy of estimates and assumptions is deemed to be reasonable. The Company's viability has thus been assessed over that period. Five years is considered a reasonable time frame for a forecast, however, the life of the Company is not intended to be limited to that or any other period.
There are no current plans to amend the investment strategy, which has delivered long-term good investment performance above or in line with benchmark for shareholders and, the Directors believe, should continue to do so. The investment strategy and its associated risks are kept under regular review by the Board.
In assessing the viability of the Company under various scenarios, the Directors undertook a robust assessment of the risks to which it is exposed (including the conflict in the Middle East, climate change, US trade policy under the second Trump administration and global supply chain issues), as set out in the Annual Report together with mitigating factors. The risks of failure to meet the Company's investment objective, and contributory market and investment risks, were considered to be of particular importance. The Directors also took into account: the investment capabilities of the Portfolio Managers; the liquidity of the portfolio, with nearly all investments being listed and readily realisable; the Company's borrowings as considered in further detail in the Going Concern Statement; the ability of the Company to meet its liabilities as they fall due; the Company's annual operating costs and that, as a closed-ended investment trust, the Company is not affected by the liquidity issues of open-ended companies caused by large or unexpected redemptions.
In taking account of these factors and on reviews conducted as part of the detailed internal controls and risk management processes, the Directors have undertaken a reverse stress test seeking to identify the extreme financial circumstances that might result in the Company becoming unviable. This concluded that the viability of the Company becomes challenged if the value of Total Shareholders' Funds were to fall permanently by at least 80% from the level at the year end, a fall that the Board considers to be implausible having noted that since the inception of the Company's FTSE All-Share Index Total Return benchmark in December 1985, the largest fall over any calendar year has been 29.9%, the largest fall over any rolling five year period was 28.8% and the largest fall over any period was 42.9% (all based on benchmark calendar month end values).
Based on the above, and assuming there is no adverse change to the regulatory environment and tax treatment of UK investment trusts to the extent that would challenge the viability of the UK investment trust industry as a whole, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period of assessment.
SECTION 172 STATEMENT, COMPANY SUSTAINABILITY AND STAKEHOLDERS
BOARD RESPONSIBILITIES
The responsibilities of the Board include setting the Company's strategic aims, providing the leadership to put them into effect, supervising the Manager and reporting to shareholders on their stewardship. The Board is ultimately responsible for the direction, management, performance and long-term sustainable success of the Company.
The Board sets the Company's strategy and objectives, taking into account the interests of all its stakeholders. However, the Company has no employees and no customers in the traditional sense. Consistent with the Company's nature as an investment trust, the Board's principal concern has been, and continues to be, the interests of the Company's shareholders taken as a whole.
COMPANY SUSTAINABILITY AND STAKEHOLDERS
A good understanding of the Company's stakeholders enables the Board to consider the potential impact of strategic decisions on each stakeholder group during the decision-making process. By considering the Company's purpose, vision and values, together with its strategic priorities, the Board aims for its decisions to be fair and take account of the interests of the key stakeholder groups. As an externally managed investment company, the Board considers its main stakeholders to be its shareholders, service providers and investee companies.
SECTION 172 STATEMENT
This section of the Annual Report explains how the Board has discharged its duties under section 172(1) of the Companies Act 2006, namely to promote the success of the Company for the benefit of its members as a whole. In doing so, the Board has had regard to the likely long-term consequences of its decisions, the interests of the Company's stakeholders, the need to maintain high standards of business conduct, and the impact of the Company's activities on the environment.
The Board recognises that effective engagement with stakeholders is fundamental to sound decision-making and long-term value creation. As an externally managed investment company, the Company operates through a number of external service providers, including the Portfolio Managers, Administrator, Company Secretary, Corporate Broker, Public Relations Adviser, Custodian, Depositary and banking providers. These service providers are key stakeholders and play an important role in supporting the Board's governance responsibilities and its engagement with shareholders and the wider market.
The Board has identified the Company's principal stakeholders and considers their interests as part of its ongoing oversight and strategic decision-making. The Board regularly assesses both the actual and potential impact of its decisions on these stakeholders, particularly in the context of strategy, performance, risk management and capital allocation. This approach helps to ensure that stakeholder considerations are embedded within the Board's deliberations and that decisions are taken with a view to the Company's long-term sustainability and success. Key Board decisions include payment of dividends, liquidity management via share issuance and share buybacks, marketing, performance evaluation, negotiation on debt and re-appointment of the Manager and other key service providers, ESG integration into investment decisions and Board succession planning.
ENGAGEMENT WITH SHAREHOLDERS
Shareholder relations are given high priority by both the Board and the Manager, and the Board welcomes feedback from shareholders throughout the year. The primary means by which the Company communicates with shareholders is through the half-yearly and annual financial reports, which aim to provide shareholders with a clear and balanced account of the Company's activities, performance and outlook. This is supported by the daily publication of the NAV, monthly factsheets, as well as dividend and other announcements.
Shareholders are also encouraged to use the Company's website, which provides access to the annual and half-yearly financial reports, Key Information Documents ("KIDs"), factsheets, proxy voting results and stock exchange announcements, together with relevant video and written material published by the Manager. Shareholders may submit questions via the website and/or contact the Company Secretary, who ensures that correspondence addressed to the Board is passed to the Chair.
Feedback from shareholders is considered at Board meetings throughout the year and at the Board's annual strategy meeting, including in the context of how the Company is meeting shareholder expectations. The Board receives regular updates on the shareholder register, trading activity and discount levels, and reports from the Manager and the Company's Broker on shareholder views and engagement activity. Meetings held with shareholders by the Manager and/or the Broker are reported back to the Board.
The Annual General Meeting ("AGM") remains an important forum for engagement. Shareholders are encouraged to attend, vote, and raise questions with the Board. Shareholders had the opportunity to join the 2025 AGM meeting in person or virtually via a live weblink using their smartphone, tablet or computer, with the option to submit questions to the meeting in real time. Following the formal business of the AGM, the Portfolio Managers typically provide an update and shareholders have the opportunity to meet and speak informally with the Board and the Manager. The Company also supports engagement with retail shareholders through shareholder events and wider investor communications during the year, including participation in industry events and meetings. Please see the notice of the 2026 Annual General Meeting and the Annual Report for details of the 2026 shareholder event.
During the year, the Company continued to support investor communications and awareness through a programme of marketing and media engagement, supported by its public relations advisers. Activity included participation in industry events (AIC showcase event in London) and investor meetings, and the production of digital and written communications (including interviews, podcasts and thematic updates) covering performance drivers, dividend matters and the outlook for UK equities. Senior representatives also engaged with the financial media, contributing commentary across both national and specialist investment channels. In February 2026, the Board also hosted a media briefing dinner, supported by the Company's public relations adviser, to facilitate direct discussion of the Company's approach and developments.
It can be easy for investments to become "lost" over time, for example, following a change of address, a change of nominee or platform provider, or where share certificates and paperwork are misplaced. The Board considers it important that shareholders are able to exercise their rights and receive the dividends to which they are entitled. Accordingly, the Company operates an asset reunification programme, working with the Registrar and specialist identity verification support to reconnect shareholders with dormant holdings and to facilitate payment of any unclaimed dividends, while maintaining appropriate safeguards against fraud. To date, 213 shareholders have completed the verification process and been reunited with their shareholdings, receiving approximately £85,684 of previously unclaimed dividends. A further 184 shareholder claims are in progress and, subject to completion of the required checks, could result in payment of an additional £122,640 of unclaimed dividends. www.edinburgh-investment-trust.co.uk/asset-reunification-program
ENGAGEMENT WITH THE MANAGER
The Board maintains a constructive and collaborative working relationship with the Portfolio Managers, encouraging open discussion. The Board has regular dialogue with and receives reports from the Portfolio Managers on the portfolio of investments, including performance against set objectives and risk management. The Portfolio Manager and Deputy Portfolio Manager normally attend each Board meeting to provide updates and answer questions from the Board. The Chair also regularly meets with Liontrust executive directors. The Board has also discussed the AIFM's responsibility under the FCA Consumer Duty with the Manager and received comfort as to how those responsibilities will be met.
The Board agreed a lower management fee scale from 1 April 2024, further supporting the role of the Company as a natural home for long-term equity investors.
The Portfolio Manager with individual responsibility for the day-to-day management of the portfolio is Imran Sattar and the Deputy Portfolio Manager is Emily Barnard. Imran Sattar and Emily Barnard took on these new roles on 6 February 2024.
ENGAGEMENT WITH SERVICE PROVIDERS
As an externally managed investment trust, the Company conducts all its business through its key service providers. The Board believes that maintaining a collaborative relationship with each of the Company's service providers is essential to the Board's decision-making and the ongoing success of the Company. At least annually the Board reviews the performance and services of its key service providers including the Manager and receives and considers their internal control reports on a quarterly basis covering their operations, policies and control environments.
The Board reviews the quarterly reports of the service providers and whether the services meet the requirements of the Company, represent value for money and are therefore in the best interests of shareholders. The Board treats all service providers fairly, to maintain a reputation as a trusted, fair and reliable partner. The Board and/or delegates of the Board engage with key providers on a periodic basis through service review meetings or, by invitation, attendance at Board or committee meetings. Such engagement gives opportunity to both parties to discuss any challenges being experienced and potential solutions thereon, and to identify planned developments at the Company or the service provider. We aim to pay promptly and if in dispute, to engage openly to resolve matters in a timely manner.
The Board continues to ensure that service providers are as prepared as possible for all such eventualities which could disrupt the performance of their respective functions.
ENGAGEMENT WITH INVESTEE COMPANIES
The Portfolio Managers are long-term investors and typically develop strong relationships with both investee and potential investee companies. Both the Board and the Portfolio Managers believe that engagement with investee companies is positive, beneficial and welcomed.
Voting is a key activity in the dialogue with investee companies and these decisions are reported to the Board on a quarterly basis.
The Board supports the Portfolio Managers' approach to ESG in the context of its management of the portfolio, as discussed below.
ENVIRONMENTAL SOCIAL AND GOVERNANCE ("ESG") MATTERS
As an investment company with no employees, property or activities outside investment, environmental policy has limited application. Nevertheless, the Board is committed to taking a responsible approach to ESG matters. The Company's compliance with the AIC Corporate Governance Code is detailed in the Corporate Governance Statement, which demonstrates the Company's own responsibilities on matters such as governance.
In respect of the Company's investments, the Portfolio Managers and the other members of the investment team integrate ESG risks and opportunities (including climate change related risks) as part of a material assessment undertaken for all holdings. Consistent with the Portfolio Managers' investment approach, this analysis is undertaken on a bottom-up, stock basis. The risks and opportunities that each holding faces over a three-to-five-year period are then identified and prioritised. Many of these issues can be sub-categorised as "E", "S" and "G" issues. The issues that are identified as the key ones are at the forefront of engagement discussions on holdings with the investee companies. These frequently include issues related to global warming, including those focused on transitional risks, legislation risks, and/or physical risks. The Manager is a signatory to the Principles of Responsible Investment ('PRI') and the Company's assets form part of its commitment to the Net Zero Asset Managers Initiative. Further information is available at www.liontrust.com and through the investment company disclosures at www.theaic.co.uk.
The Board recognises that the most material way in which the Company can have an impact is through responsible ownership of its investments. The Manager discusses below how it engages with the management of investee companies to encourage that high standards of ESG practice are adopted.
The Company made no political donations during the year in review.
Please see the table below for a reference to where information can be found of how the Company's key stakeholders were considered during key Board decisions:
|
Section 172 statement area |
Reference |
|
The likely consequences of any decision in the long-term |
See Chair's Statement, The Portfolio Managers' Report, Core Investment Beliefs and Business Review, Going Concern and Viability Statements and Stakeholder Engagement section below. |
|
The interests of the Company's employees |
As a closed-ended investment company, the Company has no employees. Stewardship section refers to how the Company assesses its impact on social issues. |
|
The need to foster the Company's business relationships with suppliers, customers and others |
As a closed-ended investment company, the Company has no customers in the traditional sense. See Stakeholder Engagement section below Principal Risks and Uncertainties and Stewardship section on how the Company assesses its impact on and engages with its key stakeholders. |
|
The impact of the Company's operations on the community and environment |
See Principal Risks and Uncertainties, Stewardship section and ESG matters disclosure below on how the Company assesses its impact on the community and environment of its investee companies. |
|
The desirability of the Company maintaining a reputation for high standards of business conduct |
See Stakeholder Engagement section, Anti-Bribery and Corruption and Modern Slavery disclosures. |
|
The need to act fairly as between members of the Company |
See Stakeholder Engagement section and Corporate Governance Report. |
STEWARDSHIP CODE AND EXERCISE OF VOTING POWERS
The Board considers that the Company has a responsibility as a shareholder to ensure that high ESG standards are maintained in the companies in which it invests. One of the principal means of putting shareholder responsibility into practice is through the exercise of voting rights. The Company aims to provide investment specific active stewardship and the Company's voting rights are exercised on an informed and independent basis. The Manager has adopted a clear and considered policy towards its stewardship responsibility on behalf of the Company. The Manager takes steps to satisfy itself about the extent to which investee companies protect shareholder value and comply with local recommendations and practices, such as the UK Corporate Governance Code. The Manager's approach to corporate governance and the UK Stewardship Code can be found on the Manager's website at www.liontrust.com together with a copy of the Manager's Stewardship Policy and the Manager's global proxy voting policy.
Members of the Managers' investment team are responsible for overseeing all aspects of the Stewardship process, including voting on all resolutions at all Annual General Meetings and Extraordinary General Meetings in the UK and overseas. The Portfolio Managers assess corporate governance, remuneration policies and, if deemed necessary, will challenge management where it is felt that the best interests of shareholders are not being met.
The Board reviews the Portfolio Managers' voting record at each meeting. The table below demonstrates how the Portfolio Managers voted during the year in review.
|
Category |
Number of |
Number Voted |
|
Audit Related |
91 |
91 |
|
Capitalization |
180 |
180 |
|
Company Articles |
3 |
3 |
|
Compensation |
82 |
82 |
|
Corporate Governance |
2 |
1 |
|
Director Election |
444 |
443 |
|
Director Related |
3 |
3 |
|
Environmental |
2 |
2 |
|
Miscellaneous |
93 |
87 |
|
Social |
31 |
31 |
|
Strategic Transactions |
3 |
3 |
|
Takeover Related |
43 |
43 |
|
TOTAL |
977 |
969 |
In addition, the Manager publishes an annual Responsible Capitalism report, providing cumulative voting statistics, full disclosure on voting policy and extracts of engagement for the year. The Manager publishes a quarterly voting record on its website www.liontrust.com.
MODERN SLAVERY DISCLOSURE
The Company aims to adopt the highest standards of conduct and is committed to integrating responsible business practices throughout its operations. The prevention of modern slavery is an important part of corporate good governance.
The Company is an investment vehicle and does not provide goods or services in the normal course of its business or have customers or employees. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015.
ANTI-BRIBERY AND CORRUPTION
It is the Company's policy to conduct its business in an honest and ethical manner. The Company takes a zero-tolerance approach to bribery and corruption and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships wherever it operates. The Company's policy and the procedures that implement it are designed to support that commitment and the appropriate training has been undertaken by the Board and key service providers. The Company also has policies, procedures and controls in place to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
PREVENTION OF THE FACILITATION OF TAX EVASION
The Board has adopted a zero-tolerance approach to the criminal facilitation of tax evasion.
GREENHOUSE GAS EMISSIONS AND STREAMLINED
ENERGY AND CARBON REPORTING ('SECR')
The Company has no employees, physical assets, property or operations of its own, does not provide goods or services and does not have its own customers. It follows that the Company has little or no direct environmental impact. In consequence, the Company has limited greenhouse gas emissions to report from its operations aside from travel to board meetings, nor does it have responsibility for any other sources of emissions under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013. As the Company has no material operations and therefore has low energy usage, it has not included an energy and carbon report.
CONCLUSION
The Directors believe that they have fulfilled their duties under s172 of the Companies Act 2006 in their deliberations on all matters. The Board takes into account the interests of all the Company's key stakeholders, as outlined above, in its decision-making which reflects the Board's belief that the long-term sustainable success of the Company is linked directly to its key stakeholders. The work of the Board and its Committees is described in the Governance Report.
This Strategic Report was approved by the Board on 20 May 2026.
Signed by order of the Board of Directors
NSM FUNDS (UK) LIMITED
COMPANY SECRETARY
20 MAY 2026
STATEMENT OF DIRECTORS' RESPONSIBILITIES
IN RESPECT OF THE PREPARATION OF THE ANNUAL FINANCIAL REPORT
The Directors are responsible for preparing the annual financial report and 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 prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", and applicable law).
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 its profit or loss 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 United Kingdom Accounting Standards, comprising FRS 102 have been followed, subject to any material departures disclosed and explained in the financial statements; and
· prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping 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 its financial statements comply with the Companies Act 2006.
They are responsible for such internal controls as they determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website, which is maintained by the Company's Manager. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL FINANCIAL REPORT
Each of the Directors, whose names and functions are listed in the Annual Report confirm that, to the best of their knowledge:
· the financial statements, prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102, give a true and fair view of the assets, liabilities, financial position and return of the Company; and
· the Strategic Report 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.
We consider the annual financial report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
In the case of each Director in office at the date the Directors' report is approved:
· so far as the Director is aware, there is no relevant audit information of which the Company's Auditors are unaware; and
· they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's Auditors are aware of that information.
Signed on behalf of the Board of Directors
ELISABETH STHEEMAN
CHAIR
20 May 2026
INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH
|
|
|
|
2026 |
|
|
2025 |
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Gains on investments held at fair value |
9(b) |
- |
46,346 |
46,346 |
- |
53,697 |
53,697 |
|
(Losses)/gains on foreign exchange |
|
- |
(17) |
(17) |
- |
22 |
22 |
|
Income |
2 |
40,750 |
- |
40,750 |
40,666 |
- |
40,666 |
|
Investment management fee |
3 |
(1,410) |
(3,291) |
(4,701) |
(1,385) |
(3,231) |
(4,616) |
|
Other expenses |
4 |
(1,242) |
(19) |
(1,261) |
(1,274) |
(19) |
(1,293) |
|
Net return before finance costs and taxation |
|
38,098 |
43,019 |
81,117 |
38,007 |
50,469 |
88,476 |
|
Finance costs |
5 |
(893) |
(2,052) |
(2,945) |
(884) |
(2,066) |
(2,950) |
|
Return before taxation |
|
37,205 |
40,967 |
78,172 |
37,123 |
48,403 |
85,526 |
|
Taxation |
6 |
(28) |
- |
(28) |
(78) |
- |
(78) |
|
Return after taxation for the financial year |
|
37,177 |
40,967 |
78,144 |
37,045 |
48,403 |
85,448 |
|
Return per ordinary share: |
|
|
|
|
|
|
|
|
Basic and diluted |
7 |
26.60p |
29.31p |
55.91p |
25.02p |
32.70p |
57.72p |
The total columns of this statement represent the Company's profit and loss account. The supplementary revenue and capital columns are both prepared in accordance with the Statement of Recommended Practice issued by the AIC. 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 these financial statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2026
|
|
Notes |
Share |
Share |
Capital |
Capital |
Revenue |
Total |
|
At 1 April 2024 |
|
48,917 |
10,394 |
24,676 |
1,004,498 |
46,562 |
1,135,047 |
|
Return on ordinary activities |
|
- |
- |
- |
48,403 |
37,045 |
85,448 |
|
Dividends paid |
8 |
- |
- |
- |
- |
(40,983) |
(40,983) |
|
Shares bought back and held in treasury2 |
13 |
- |
- |
- |
(53,566) |
- |
(53,566) |
|
At 31 March 2025 |
|
48,917 |
10,394 |
24,676 |
999,335 |
42,624 |
1,125,946 |
|
Return on ordinary activities |
|
- |
- |
- |
40,967 |
37,177 |
78,144 |
|
Dividends paid |
8 |
- |
- |
- |
- |
(42,477) |
(42,477) |
|
Shares bought back and held in treasury2 |
13 |
- |
- |
- |
(102,181) |
- |
(102,181) |
|
At 31 March 2026 |
|
48,917 |
10,394 |
24,676 |
938,121 |
37,324 |
1,059,432 |
1 The revenue reserve and certain amounts of the capital reserve are distributable by way of dividend.
2 Shares bought back and held in treasury includes transaction costs.
The accompanying notes are an integral part of these financial statements.
BALANCE SHEET
AT 31 MARCH
|
|
Notes |
2026 |
2025 |
|
Non-current assets |
|
|
|
|
Investments held at fair value through profit and loss |
9(a) |
1,167,549 |
1,230,888 |
|
Current assets |
|
|
|
|
Debtors |
10 |
12,705 |
8,518 |
|
Cash and cash equivalents |
|
1,123 |
7,233 |
|
Total assets |
|
1,181,377 |
1,246,639 |
|
Non-current liabilities |
|
|
|
|
Unsecured Senior Loan Notes |
12 |
(120,000) |
(120,000) |
|
Current liabilities |
|
|
|
|
Other payables |
11 |
(1,945) |
(693) |
|
Total assets less current liabilities |
|
1,179,432 |
1,245,946 |
|
Total liabilities |
|
(121,945) |
(120,693) |
|
Net assets |
|
1,059,432 |
1,125,946 |
|
Equity |
|
|
|
|
Called up share capital |
13 |
48,917 |
48,917 |
|
Share premium account |
14 |
10,394 |
10,394 |
|
Capital redemption reserve |
14 |
24,676 |
24,676 |
|
Capital reserve |
14 |
938,121 |
999,335 |
|
Revenue reserve |
14 |
37,324 |
42,624 |
|
Total equity |
|
1,059,432 |
1,125,946 |
|
Net asset value per ordinary share: |
|
|
|
|
Basic and diluted - debt at par value |
15 |
804.72p |
780.17p |
|
Basic and diluted- debt at fair value |
15 |
846.04p |
817.16p |
The financial statements were approved and authorised for issue by the Board of Directors on 20 May 2026.
ELISABETH STHEEMAN
CHAIR
Signed on behalf of the Board of Directors
Company Number SC001836
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH
|
|
2026 |
2025 |
|
Cash flow from operating activities |
|
|
|
Net return before finance costs and taxation |
81,117 |
88,476 |
|
Tax on overseas income |
(28) |
(78) |
|
Adjustments for: |
|
|
|
Purchase of investments |
(261,037) |
(559,942) |
|
Sale of investments |
368,227 |
593,166 |
|
Gains on investments held at fair value |
(46,346) |
(53,697) |
|
(Increase)/decrease in debtors |
(1,692) |
1,594 |
|
Decrease in creditors |
(59) |
(3) |
|
Net cash inflow from operating activities |
140,182 |
69,516 |
|
Cash flow from financing activities |
|
|
|
Interest paid on overdraft |
(1) |
(7) |
|
Interest paid on Unsecured Senior Loan Notes |
(2,944) |
(2,943) |
|
Shares bought back and held in treasury |
(100,870) |
(54,664) |
|
Dividends paid |
(42,477) |
(40,983) |
|
Net cash outflow from financing activities |
(146,292) |
(98,597) |
|
Net decrease in cash and cash equivalents |
(6,110) |
(29,081) |
|
Cash and cash equivalents at start of the year |
7,233 |
36,314 |
|
Cash and cash equivalents at the end of the year |
1,123 |
7,233 |
|
Reconciliation of cash and cash equivalents to the Balance Sheet is as follows: |
|
|
|
Cash held at custodian |
1,037 |
1,068 |
|
Goldman Sachs Liquidity Reserve International Fund - Money Market Fund |
86 |
6,165 |
|
Cash and cash equivalents |
1,123 |
7,233 |
|
|
At 1 April |
|
Non-cash |
At 31 March |
|
|
2025 |
Cash flow |
movement |
2026 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Reconciliation of net debt: |
|
|
|
|
|
Cash and cash equivalents |
7,233 |
(6,110) |
- |
1,123 |
|
Unsecured Senior Loan Notes |
(120,000) |
- |
- |
(120,000) |
|
Total |
(112,767) |
(6,110) |
- |
(118,877) |
|
|
At 1 April |
|
Non-cash |
At 31 March |
|
|
2024 |
Cash flow |
movement |
2025 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Reconciliation of net debt: |
|
|
|
|
|
Cash and cash equivalents |
36,314 |
(29,081) |
- |
7,233 |
|
Unsecured Senior Loan Notes |
(120,000) |
- |
- |
(120,000) |
|
Total |
(83,686) |
(29,081) |
- |
(112,767) |
The accompanying notes are an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. PRINCIPAL ACCOUNTING POLICIES
Accounting policies describe the Company's approach to recognising and measuring transactions during the year and the position of the Company at the year end.
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied during the year and the preceding year.
A. Basis of Preparation
Accounting Standards Applied
The financial statements have been prepared in accordance with the Companies Act 2006, applicable United Kingdom Accounting Standards and applicable law (UK Generally Accepted Accounting Practice (UK GAAP)) including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and with the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts, issued by the Association of Investment Companies (SORP) in April 2021 (as amended in July 2022).
The financial statements are issued on a going concern basis. Details of the Directors' assessment of the going concern status of the Company, which considered the adequacy of the Company's resources are given in the annual report.
However, the Directors' have elected to present a cash flow statement in the annual financial report to present additional relevant information to readers of the financial statements.
Significant Accounting Estimates, Assumptions and Judgements
The preparation of the financial statements may require the use of estimates, assumptions and judgements which may affect the reported amounts of assets and liabilities at the reporting date. While estimates are based on best judgement using information and financial data available, the actual outcome may differ from these estimates. The Directors have applied their judgement for the allocation of the investment management fee and finance costs between capital and revenue in the income statement as set out in Note 1G and the treatment of special dividend income between capital and income, as set out in Note 1J. The Directors do not believe that these judgements nor any accounting estimates, assumptions or judgements that have been applied to the financial statements have a significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year.
B. Foreign Currency and Segmental Reporting
(i) Functional and presentational currency
The financial statements are presented in sterling, which is the Company's functional and presentational currency and the currency in which the Company's share capital and expenses, as well as its assets and liabilities, are denominated.
(ii) Transactions and balances
Transactions in foreign currency, whether of a revenue or capital nature, are translated to sterling at the rates of exchange ruling on the dates of such transactions. Foreign currency assets and liabilities are translated to sterling at the rates of exchange ruling at the balance sheet date. Any gains or losses, whether realised or unrealised, are taken to the capital reserve or to the revenue account, depending on whether the gain or loss is of a capital or revenue nature. All gains and losses are recognised in the income statement.
(iii) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment of business of investing in equity and debt securities, issued by companies quoted mainly on the UK or other recognised stock exchanges.
C. Financial Instruments
The Company has chosen to apply Section 11 and 12 of FRS102 in full in respect of the financial instruments.
(i) Recognition of financial assets and financial liabilities
The Company recognises financial assets and financial liabilities when the Company becomes a party to the contractual provisions of the instrument. The Company will offset financial assets and financial liabilities if the Company has a legally enforceable right to set off the recognised amounts and intends to settle on a net basis.
(ii) Derecognition of financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire or it transfers the right to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in the transferred financial asset that is created or retained by the Company is recognised as an asset.
(iii) Derecognition of financial liabilities
The Company derecognises financial liabilities when its obligations are discharged, cancelled or have expired.
(iv) Trade date accounting
Purchases and sales of financial assets are recognised on trade date, being the date on which the Company commits to purchase or sell the assets.
(v) Classification and measurement of financial assets and financial liabilities
· Financial assets
The Company's investments are classified as held at fair value through profit or loss.
Financial assets held at fair value through profit or loss are initially recognised as fair value, which is taken to be their acquisition price, with transaction costs expensed in the income statement. These are subsequently valued at fair value.
Fair value for investments that are actively traded in organised financial markets is determined by reference to stock exchange quoted bid prices at the balance sheet date. Fair value for investments that are actively traded but where active stock exchange quoted bid prices are not available is determined by reference to a variety of valuation techniques including broker quotes and price modelling. Unquoted, unlisted or illiquid investments are valued by the Directors at fair value using a variety of valuation techniques including earnings multiples, recent transactions and other market indicators, cash flows and net assets.
· Financial liabilities
Financial liabilities, including borrowings, are initially measured at transaction price, being the fair value. For liabilities issued at a discount or with significant associated transaction costs, such discount and costs are subsequently measured at amortised cost using the effective interest method.
D. Cash and Cash Equivalents
Cash and cash equivalents may comprise cash (including short term deposits which are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value) as well as cash equivalents, including money market funds. Investments are regarded as cash equivalents if they meet all of the following criteria: short term in duration (typically three months or less from the date of acquisition), highly liquid investments that are readily convertible to a known amount of cash, are subject to an insignificant risk of change in value and provide a return no greater than the rate of a three-month high quality government bond.
E. Hedging
Forward currency contracts entered into for hedging purposes are valued at the appropriate forward exchange rate ruling at the balance sheet date. Profits or losses on the closure or revaluation of positions are recognised in the income statement and taken to capital reserves.
F. Income
Interest income arising from fixed income securities and cash is recognised in the income statement using the effective interest method. Dividend income arises from equity investments held and is recognised on the date investments are marked 'ex-dividend'. Special dividends are looked at individually to ascertain the reason behind the payment. This will determine whether they are treated as income or capital in the income statement.
Deposit interest and underwriting commission receivable are taken into account on an accruals basis.
G. Expenses and Finance Costs
Expenses are recognised on an accruals basis and finance costs are recognised using the effective interest method in the income statement.
The investment management fee and finance costs are allocated 70% to capital and 30% to revenue. This is in accordance with the Board's expected long-term split of returns, in the form of capital gains and income respectively, from the portfolio. Transaction costs are recognised as capital in the income statement. All other expenses are allocated to revenue in the income statement.
H. Taxation
The liability to corporation tax is based on net revenue for the year, excluding non-taxable dividends. The tax charge is allocated between the revenue and capital account on the marginal basis whereby revenue expenses are matched first against taxable income in the revenue account.
Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax or a right to pay less tax in the future have occurred. Timing differences are differences between the Company's taxable profits and its results as stated in the financial statements. Deferred taxation assets are recognised where, in the opinion of the Directors, it is more likely than not that these amounts will be realised in future periods.
A deferred tax asset is only recognised in respect of surplus management expenses, losses on loan relationships and eligible unrelieved foreign tax to the extent that it is probable that the Company will be able to recover them from future taxable revenue.
I. Dividends payable
Dividends are not recognised in the financial statements unless there is an obligation to pay at the balance sheet date. Proposed dividends are recognised in the year in which they are paid to shareholders.
J. Critical accounting estimates and judgements
No critical accounting judgements or estimates were made during the year.
K. Accounting for reserves
The share premium comprises the net proceeds received by the Company following the issue of shares, after deduction of the nominal amount of 25 pence and any applicable issue costs. The capital redemption reserve maintains the equity share capital of the Company and arose from the nominal value of any shares bought back and cancelled; both are non-distributable.
The capital reserve includes the investment holding gains/(losses), being the difference between cost and market value at the balance sheet date. It also includes cumulative realised gains/(losses) and costs related to share buybacks. Capital investment gains and losses are shown in note 9(b) and form part of the capital reserve.
The revenue reserve shows the net revenue retained after payment of any dividends. In accordance with the Articles of Association, distributions by way of a dividend can be made from both the revenue reserve and capital reserve, to the extent they are realised.
L. Shares repurchased and held in treasury
The cost of repurchasing ordinary shares (for cancellation or to hold in treasury) including the related stamp duty and transaction cost is charged to the capital reserve and dealt with in the Statement of Changes in Equity. Share repurchase transactions are accounted for on a trade date basis. Where shares are cancelled (or are subsequently cancelled having previously been held in treasury), the nominal value of those shares is transferred out of Called up share capital and into the Capital redemption reserve. Should shares held in treasury be reissued, the sales proceeds will be treated as a realised capital profit up to the amount of the purchase price of those shares and will be transferred to capital reserves. The excess of the sales proceeds over the purchase price will be transferred to Share premium.
2. INCOME
This note shows the income generated from the portfolio (investment assets) of the Company and income received from any other source.
|
|
2026 |
2025 |
|
|
£'000 |
£'000 |
|
Income from investments: |
|
|
|
UK dividends |
37,936 |
34,929 |
|
UK special dividends |
1,675 |
2,526 |
|
Overseas dividends |
830 |
1,222 |
|
Interest from money market funds |
308 |
1,980 |
|
|
40,749 |
40,657 |
|
Other income: |
|
|
|
Deposit interest |
1 |
9 |
|
|
1 |
9 |
|
Total income |
40,750 |
40,666 |
No special dividends have been recognised in capital during the year (2025: £702,000).
3. INVESTMENT MANAGEMENT FEE
This note shows the fee due to the Manager. This is calculated and paid monthly.
|
|
2026 |
2025 |
||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Investment management fee |
1,410 |
3,291 |
4,701 |
1,385 |
3,231 |
4,616 |
Details of the investment management and secretarial agreement are disclosed in the Directors' Report.
For the year ended 31 March 2026, investment management fees of £398,000 (2025: £374,000) were accrued.
4. OTHER EXPENSES
The other expenses(i) of the Company are presented below, those paid to the Directors and the auditors are separately identified.
|
|
2026 |
2025 |
||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Other expenses |
1,242 |
19 |
1,261 |
1,274 |
19 |
1,293 |
|
Other expenses include the following: |
|
|
|
|
|
|
|
Directors' remuneration(ii) |
172 |
- |
172 |
182 |
- |
182 |
|
Auditors' fees(iii): |
|
|
|
|
|
|
|
- for audit of the Company's annual financial statements |
55 |
- |
55 |
53 |
- |
53 |
The maximum Directors' fees authorised by the Articles of Association are £250,000 per annum.
I. Other expenses include:
· £25,000 (2025: £14,000) of employer's National Insurance payable on Directors' remuneration. As at 31 March 2026, the amounts outstanding on Directors' remuneration and employer's National Insurance was £nil (2025: £52,000); and
· custodian transaction charges of £19,000 (2025: £19,000). These are charged to capital.
II. There were five directors during the year and the Directors' Remuneration Report provides further information on Directors' fees.
III. Auditors' fees include expenses but exclude VAT.
5. FINANCE COSTS
Finance costs arise on any borrowing facilities the Company has used. Borrowing facilities are the £120m notes (2025: £120m notes). Please see Note 12 for additional details of the terms.
|
|
2026 |
2025 |
||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Interest payable on borrowings repayable not by instalment: |
|
|
|
|
|
|
|
- Interest on overdraft facility |
- |
1 |
1 |
2 |
5 |
7 |
|
- Unsecured Senior Loan Notes repayable after 5 years |
893 |
2,051 |
2,944 |
882 |
2,061 |
2,943 |
|
|
893 |
2,052 |
2,945 |
884 |
2,066 |
2,950 |
6. TAXATION
As an investment trust the Company pays no tax on capital gains. As the Company invests principally in UK equities, it has little overseas tax and the overseas tax charge is the result of withholding tax deducted at source. This note also clarifies the basis for the Company having no deferred tax asset or liability.
(a) Tax charge
|
|
2026 |
2025 |
|
Overseas taxation |
28 |
78 |
(b) Reconciliation of tax charge
|
|
2026 |
2025 |
|
|
£'000 |
£'000 |
|
Return before taxation |
78,172 |
85,526 |
|
Theoretical tax at the current UK Corporation Tax rate of 25% (2025: 25%) |
19,543 |
21,382 |
|
Effects of: |
|
|
|
- Non-taxable UK dividends |
(9,443) |
(8,439) |
|
- Non-taxable UK special dividends |
(419) |
(632) |
|
- Non-taxable overseas dividends |
(184) |
(310) |
|
- Non-taxable gains on investments |
(11,586) |
(13,424) |
|
- Non-taxable losses/(gains) on foreign exchange |
4 |
(6) |
|
- Excess of allowable expenses over taxable income |
2,080 |
1,424 |
|
- Disallowable expenses |
5 |
5 |
|
- Overseas taxation |
28 |
78 |
|
Tax charge for the year |
28 |
78 |
(c) Deferred tax
Owing to the Company's status as an investment company, and the Directors' intention that it continues to meet the conditions required to maintain that approval in the foreseeable future, no deferred tax has been provided on any capital gains and losses arising on the revaluation or disposal of investments.
(d) Factors that may affect future tax changes
The Company has cumulative excess management expenses of £524,667,000 (2025: £516,349,000) that are available to offset future taxable revenue.
A deferred tax asset of £131,167,000 (2025: £129,087,000) at 25% (2025: 25%) has not been recognised in respect of these expenses since the Directors believe that there will be no taxable profits in the future against which the deferred tax assets can be offset.
7. RETURN PER ORDINARY SHARE
Return per share is the amount of gain generated for the financial year divided by the weighted average number of ordinary shares in issue.
The basic revenue, capital and total return per ordinary share is based on each of the returns/loss after taxation and on 139,777,121 (2025: 148,041,467) ordinary shares, being the weighted average number of ordinary shares in issue throughout the year.
8. DIVIDENDS ON ORDINARY SHARES
Dividends represent the distribution of income to shareholders. The Company pays four dividends a year - three interim and one final dividend.
|
|
2026 |
|
2025 |
|
|
|
pence |
£'000 |
pence |
£'000 |
|
Dividends paid and recognised in the year: |
|
|
|
|
|
- third interim paid in respect of previous year |
7.50 |
10,822 |
6.90 |
10,429 |
|
- final paid in respect of previous year |
7.50 |
10,787 |
6.90 |
10,390 |
|
- first interim paid |
7.60 |
10,553 |
6.90 |
10,153 |
|
- second interim paid |
7.60 |
10,315 |
6.90 |
10,011 |
|
|
30.20 |
42,477 |
27.60 |
40,983 |
|
|
2026 |
|
2025 |
|
|
|
pence |
£'000 |
pence |
£'000 |
|
Dividends payable in respect of the year: |
|
|
|
|
|
- first interim |
7.60 |
10,553 |
6.90 |
10,153 |
|
- second interim |
7.60 |
10,315 |
6.90 |
10,011 |
|
- third interim |
8.40 |
11,059 |
7.50 |
10,823 |
|
- proposed final |
8.40 |
11,059 |
7.50 |
10,823 |
|
|
32.00 |
42,986 |
28.80 |
41,810 |
9. INVESTMENTS HELD AT FAIR VALUE
The portfolio comprises investments which are principally listed on a regulated stock exchange or traded on AIM. A very small proportion of investments are valued by the Directors as they are unlisted.
Gains or losses are either:
- realised, usually arising when investments are sold; or
- unrealised, being the difference from cost on those investments still held at the year end.
(a) Analysis of investments by listing status
|
|
2026 |
2025 |
|
|
£'000 |
£'000 |
|
Investments listed on a recognised investment exchange |
1,167,549 |
1,230,888 |
(b) Analysis of investment gains:
|
|
2026 |
2025 |
|
|
£'000 |
£'000 |
|
Opening book cost |
1,097,403 |
976,923 |
|
Opening investment holding gains |
133,485 |
229,640 |
|
Opening fair value |
1,230,888 |
1,206,563 |
|
Movements in year: |
|
|
|
Purchases at cost |
261,037 |
554,028 |
|
Sales - proceeds |
(370,722) |
(583,400) |
|
Gains on investments in the year |
46,346 |
53,697 |
|
Closing fair value |
1,167,549 |
1,230,888 |
|
Closing book cost |
1,075,319 |
1,097,403 |
|
Closing investment holding gains |
92,230 |
133,485 |
|
Closing fair value |
1,167,549 |
1,230,888 |
The Company received £370,722,000 (2025: £583,400,000) from investments sold in the year. The book cost of these investments when they were purchased was £283,121,000 (2025: £433,548,000) realising a gain of £87,601,000 (2025: £149,852,000). These investments have been revalued over time and until they were sold any unrealised profits/losses were included in the fair value of the Investments.
The transaction costs included in gains on investments amount to £1,378,000 (2025: £2,748,000) on purchases and £174,000 (2025: £272,000) for sales.
10. DEBTORS
Debtors are amounts which are due to the Company, such as monies due from brokers for investments sold and income which has been earned (accrued) but not yet received.
|
|
2026 |
2025 |
|
|
£'000 |
£'000 |
|
Amounts due from brokers |
2,495 |
- |
|
Overseas withholding tax recoverable |
1,666 |
1,409 |
|
Income tax recoverable |
235 |
56 |
|
Prepayments and accrued income |
8,309 |
7,053 |
|
|
12,705 |
8,518 |
11. OTHER PAYABLES
Creditors are amounts which must be paid by the Company and are split between those payable within 12 months of the balance sheet date and those payable after that time. The main creditors have historically been the long-term debt and bank borrowings. The other creditors include any amounts due to brokers for the purchase of investments, amounts owing on share buybacks awaiting settlement or amounts owed to suppliers (accruals) such as the Manager and auditors.
|
|
2026 |
2025 |
|
|
£'000 |
£'000 |
|
Share buybacks awaiting settlement |
1,311 |
- |
|
Accruals and deferred income |
634 |
693 |
|
|
1,945 |
693 |
12. UNSECURED SENIOR LOAN NOTES
These creditors are amounts that must be paid, as shown by note 11, but are due more than one year after the balance sheet date.
|
|
2026 |
2025 |
|
|
£'000 |
£'000 |
|
Unsecured Senior Loan Notes - 2.26% interest rate, maturity 30 September 2037 |
35,000 |
35,000 |
|
Unsecured Senior Loan Notes - 2.49% interest rate, maturity 30 September 2047 |
35,000 |
35,000 |
|
Unsecured Senior Loan Notes - 2.53% interest rate, maturity 30 September 2051 |
20,000 |
20,000 |
|
Unsecured Senior Loan Notes - 2.53% interest rate, maturity 30 September 2057 |
30,000 |
30,000 |
|
|
120,000 |
120,000 |
The Unsecured Senior Loan Notes comprise four separate notes. As shown above, each has a fixed interest rate and contracted maturity date when the par value must be repaid. Interest is payable on a semi-annual basis, with equal amounts payable on each of 31 March and 30 September each year. These notes require the net tangible assets of the Company to remain not less than £300m and net borrowings to remain less than 35% of net assets. This requirement was met throughout the year.
13. CALLED UP SHARE CAPITAL
Share capital represents the total number of shares in issue, including treasury shares.
|
|
2026 |
2025 |
|
|
£'000 |
£'000 |
|
Share capital: |
|
|
|
Ordinary shares of 25 pence each |
32,914 |
36,080 |
|
Treasury shares of 25 pence each |
16,003 |
12,837 |
|
|
48,917 |
48,917 |
|
|
2026 |
2025 |
|
Number of ordinary shares in issue: |
|
|
|
Brought forward |
144,321,025 |
151,491,525 |
|
Shares bought back and held in treasury |
(12,668,000) |
(7,170,500) |
|
Carried forward |
131,653,025 |
144,321,025 |
|
Number of shares held in treasury: |
|
|
|
Brought forward |
51,345,709 |
44,175,209 |
|
Shares bought back into treasury |
12,668,000 |
7,170,500 |
|
Carried forward |
64,013,709 |
51,345,709 |
|
Total ordinary shares |
195,666,734 |
195,666,734 |
During the year the Company bought back into treasury 12,668,000 (2025: 7,170,500) ordinary shares at an average price of 806.60p (2025: 747.03p) (including costs).
Since the year end to 19 May 2026 (being the last practicable day prior to the publication of this report), 2,827,500 shares have been bought back into treasury. Note 1L explains the policy on the transaction costs related to the shares repurchased and held in treasury.
The Directors' Report sets out the Company's share capital structure, restrictions and voting rights.
14. RESERVES
This note explains the different reserves attributable to shareholders. The aggregate of the reserves and share capital (see previous note) make up total shareholders' funds.
The share premium comprises the net proceeds received by the Company following the issue of shares, after deduction of the nominal amount of 25 pence and any applicable issue costs. The capital redemption reserve maintains the equity share capital of the Company and arose from the nominal value of any shares bought back and cancelled; both are non-distributable.
The capital reserve includes the investment holding gains/(losses), being the difference between cost and market value at the balance sheet date. It also includes cumulative realised gains/(losses) and costs related to share buybacks. Capital investment gains and losses are shown in note 9(b) and form part of the capital reserve. The distributability of this portion of the reserve has not been analysed as it is complex to determine. This complexity is explained further in ICAEW Technical Release 02/17BL, which offers guidance on realised and distributable profits under the Companies Act 2006.
The revenue reserve and certain amounts of the capital reserve are distributable by way of dividend.
15. NET ASSET VALUE PER ORDINARY SHARE
The Company's total net assets (total assets less total liabilities) are often termed shareholders' funds and are converted into NAV per ordinary share by dividing by the number of shares in issue (excluding treasury shares).
NAV - debt at par value
The shareholders' funds in the balance sheet are accounted for in accordance with accounting standards.
|
|
2026 |
2025 |
||
|
|
NAV |
Shareholders' |
NAV |
Shareholders' |
|
|
per share |
funds |
per share |
funds |
|
|
pence |
£'000 |
pence |
£'000 |
|
Shareholders' funds |
804.72 |
1,059,432 |
780.17 |
1,125,946 |
|
NAV - debt at par |
804.72 |
1,059,432 |
780.17 |
1,125,946 |
A reconciliation showing the NAV per share and Shareholders' funds using debt at fair value is shown in the Alternative Performance Measures.
16. RISK MANAGEMENT, FINANCIAL ASSETS AND LIABILITIES
Financial instruments comprise the Company's investment portfolio, derivative instruments (if any) as well as cash, and any borrowings, debtors and creditors. This note sets out the Company's financial instruments and the risks related to them.
Financial instruments
The Company's financial instruments mainly comprise its investment portfolio and Unsecured Senior Loan Notes as well as its cash, debtors and creditors that arise directly from its operations such as sales and purchases awaiting settlement and accrued income. For the purpose of this note, 'cash' should be taken to comprise cash and cash equivalents as defined in note 1D. The accounting policies in note 1C include criteria for the recognition and the basis of measurement applied for financial instruments. Note 1 also includes the basis on which income and expenses arising from financial assets and liabilities are recognised and measured.
The main financial risks that the Company faces from its financial instruments are market risk, liquidity risk, and credit risk. These are set out below:
Market risk - arising from fluctuations in the fair value or future cash flows of a financial instrument because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk:
- Currency risk - arising from fluctuations in the fair value or future cash flows of a financial instrument because of changes in foreign exchange rates;
- Interest rate risk - arising from fluctuations in the fair value or future cash flows of a financial instrument because of changes in market interest rates; and
- Other price risk - arising from fluctuations in the fair value or future cash flows of a financial instrument for reasons other than changes in foreign exchange rates or market interest rates.
Liquidity risk - arising from any difficulty in meeting obligations associated with financial liabilities.
Credit risk - arising from financial loss for a company where the other party to a financial instrument fails to discharge an obligation.
Risk Management Policies and Procedures
The Directors have delegated to the Manager the responsibility for the day-to-day investment activities and management of gearing of the Company as more fully described in the Directors' Report.
The Company invests in equities and other investments for the long-term so as to fulfil its investment policy (incorporating the Company's investment objective). In pursuing its investment objective, the Company is exposed to a variety of risks that could result in either a reduction in the Company's net assets or a reduction of the profits available for dividends. The associated risk management policies are summarised below and have remained substantially unchanged for the two years under review.
16.1 Market Risk
The Company's Manager assesses the Company's exposure when making each investment decision, and monitors the overall level of market risk for the whole of the investment portfolio on an ongoing basis. The Board has meetings in each calendar quarter to assess risk and review investment performance, as disclosed in the Board Responsibilities. Any borrowing to gear the investment portfolio is used to enhance returns but also increases the Company's exposure to market risk and volatility. The Company has the ability to gear using its £120 million Unsecured Senior Loan Notes.
16.1.1 Currency risk
The majority of the Company's assets and liabilities are denominated in sterling. There is some exposure to US dollar, Danish Krone, Swiss franc and the Euro.
16.1.2 Inflation risk
The Company has no assets or liabilities that have direct inflation link properties.
Management of the currency risk
The Manager monitors the Company's direct exposure to foreign currencies on a daily basis and reports to the Board on a regular basis. Forward currency contracts can be used to reduce the Company's exposure to foreign currencies arising naturally from the Manager's choice of securities. All contracts are limited to currencies and amounts commensurate with the assets denominated in currencies. No Forward currency contracts were used during the year (2024: none).
Income denominated in foreign currencies is converted to sterling on receipt. The Company does not use financial instruments to mitigate the currency exposure in the period between the time that income is included in the financial statements and its receipt.
The Company may invest up to 20% of the portfolio in securities listed on non-UK stock exchanges. At the year-end holdings of non-UK securities total £29.0 million (2025: £76.1 million) representing 2.5% (2025: 6.2%) of the portfolio.
Currency exposure
The fair values of the Company's monetary items that had a material currency exposure at 31 March are shown below. Where the Company's equity investments (which are not monetary items) are priced in a foreign currency, they have been included separately in the analysis so as to show the overall level of exposure.
|
|
2026 |
2025 |
||||||
|
|
USD |
DKK |
CHF |
EUR |
USD |
DKK |
CHF |
EUR |
|
Currency exposure |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Foreign currency exposure on net monetary items |
1,061 |
18 |
1,064 |
584 |
869 |
38 |
988 |
384 |
|
Investments at fair value through profit or loss that are equities |
14,972 |
- |
- |
14,043 |
55,389 |
- |
- |
20,701 |
|
Total net foreign currency exposure |
16,033 |
18 |
1,064 |
14,627 |
56,258 |
38 |
988 |
21,085 |
The above may not be representative of the exposure to risk during the year, because the levels of foreign currency exposure may change significantly throughout the year.
Currency sensitivity
In respect of the Company's material direct foreign currency exposure to investments denominated in currencies, if sterling had weakened by 1.3% (2025: 2.1%) against the US dollar and for the Euro, 1.3% (2025: 1.2%) for the Swiss franc, 1.9% (2025: 1.2%) and for the Danish Krone, 1.2% (2025: 1.2%) during the year, the capital return and net assets of the Company would have increased for all currency exposures by £0.4 million (2025: £1.4 million). Conversely, if sterling had strengthened to the same extent for the currencies mentioned above, the capital return and net assets of the Company would have decreased by the same amount. The exchange rate variances noted above have been based on market volatility in the year, using the standard deviation of sterling's fluctuation to the applicable currency. This sensitivity takes no account of any impact on the market values of the Company's investments arising from the foreign currency mix of their respective revenues, expenses, assets and liabilities.
16.1.3 Interest rate risk
Interest rate movements will affect the level of income receivable on cash deposits and money market funds, and the interest payable on variable rate borrowings. When the Company has cash balances, they are held on variable rate bank accounts yielding rates of interest dependent on the base rate determined by the custodian, The Bank of New York Mellon (International) Limited.
The Company has Unsecured Senior Loan Notes of £120 million (2025: £120 million). The Unsecured Senior Loan Notes have a fixed interest rate which only exposes the Company to changes in market value in the event that the debt is repaid before maturity. Specifics of the Unsecured Senior Loan Notes are shown in Note 12. The details of their fair value and the effect on net asset value within the Net Asset Value (NAV) - Debt at Fair Value reconciliation is within the Alternative Performance Measures.
The Company held no fixed income securities during the year (2025: no fixed income securities). As at 31 March 2026 no government bonds (2025: none) were recognised as a Cash and Cash Equivalent on the Balance Sheet.
Interest rate exposure
At 31 March the exposure of financial assets and financial liabilities to interest rate risk is shown by reference to:
- floating interest rates (giving cash flow interest rate risk) - when the interest rate is due to be re-set; and
- fixed interest rates (giving fair value interest rate risk) - when the financial instrument is due for repayment.
|
|
2026 |
2025 |
||||||
|
|
|
Between |
|
|
|
Between |
|
|
|
|
|
one |
After |
|
|
one |
After |
|
|
|
Within |
and five |
five |
|
Within |
and five |
five |
|
|
|
one year |
years |
years |
Total |
one year |
years |
years |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Exposure to floating interest rates: Cash and cash equivalents |
1,123 |
- |
- |
1,123 |
7,233 |
- |
- |
7,233 |
|
Unsecured Senior Loan Notes - debt at par value |
- |
|
(120,000) |
(120,000) |
- |
|
(120,000) |
(120,000) |
|
Total exposure to interest rates |
1,123 |
- |
(120,000) |
(118,877) |
7,233 |
- |
(120,000) |
(112,767) |
16.1.4 Other price risk
Other price risks (i.e. changes in market prices other than those arising from interest rate risk or currency risk) may affect the value of the equity investments, but it is the business of the Manager to manage the portfolio to achieve the best return that he can.
Management of the other price risk
The Directors manage the market price risks inherent in the investment portfolio by meeting regularly to monitor on a formal basis the Manager's compliance with the Company's stated objectives and policies, and to review investment performance.
The Company's portfolio is the result of the Manager's investment process and need not be highly correlated with the Company's benchmark or the market in which the Company invests. The value of the portfolio will not move in line with the market but will move as a result of the performance of the company shares within the portfolio.
If the value of the portfolio fell by 10% at the balance sheet date, the profit after tax for the year and the net assets of the Company would decrease by £116.8 million (2025: £123.1 million). Conversely, if the value of the portfolio rose by 10%, the profit after tax and the net assets of the Company would increase by the same amounts.
16.2 Liquidity risk
Liquidity risk is minimised as the majority of the Company's investments constitute a diversified portfolio of readily realisable securities which can be sold to meet funding commitments as necessary.
Liquidity risk exposure
The contractual maturities of the financial liabilities at the year end, based on the earliest date on which payment can be required, are as follows:
|
|
|
More than |
|
|
|
|
|
three |
|
|
|
|
|
months |
|
|
|
|
Three |
but less |
More than |
|
|
|
months |
than |
one |
|
|
|
or less |
one year |
year |
Total |
|
2026 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Unsecured Senior Loan Notes - debt at par value |
- |
- |
120,000 |
120,000 |
|
Interest on Unsecured Senior Loan Notes |
- |
2,928 |
61,717 |
64,645 |
|
Share buybacks awaiting settlement |
1,311 |
- |
- |
1,311 |
|
Accruals and deferred income |
634 |
- |
- |
634 |
|
|
1,945 |
2,928 |
181,717 |
186,590 |
|
|
|
|
|
|
|
|
|
More than |
|
|
|
|
|
three |
|
|
|
|
|
months |
|
|
|
|
Three |
but less |
More than |
|
|
|
months |
than |
one |
|
|
|
or less |
one year |
year |
Total |
|
2025 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Unsecured Senior Loan Notes - debt at par value |
- |
- |
120,000 |
120,000 |
|
Interest on Unsecured Senior Loan Notes |
- |
2,928 |
64,645 |
67,573 |
|
Accruals and deferred income |
693 |
- |
- |
693 |
|
|
693 |
2,928 |
184,645 |
188,266 |
16.3 Credit risk
Credit risk encompasses the failure by counterparties to deliver securities which the Company has paid for, or to pay for securities which the Company has delivered, and cash balances. Counterparty risk is minimised by using only approved counterparties. The Company's ability to operate in the short-term may be adversely affected if the Company's custodian suffers insolvency or other financial difficulties. However, with the support of the depositary's restitution obligation the risk of outright credit loss on the investment portfolio is remote. The Board reviews the custodian's annual controls report and the Manager's management of the relationship with the custodian. Cash balances are limited to a maximum of 1% of net assets with any one deposit taker, with only approved deposit takers being used, and a maximum deposit of 6% of net assets in aggregate in liquidity funds with credit ratings of AAAm (or equivalent). These limits are at the discretion of the Board and are reviewed on a regular basis. The investment policy also allows for UK Government Treasuries to be held. Such holdings are recorded as cash equivalents if they meet the criteria set out in Note 1D.
16.4 Custody risk
All investment assets are held in custody by The Bank of New York Mellon (International) Limited in accounts segregated from the bank's own assets.
17. CLASSIFICATION UNDER FAIR VALUE HIERARCHY
The values of the financial assets and financial liabilities are carried either at their fair value (investments), or at a reasonable approximation of fair value (amounts due from brokers, dividends receivable, accrued income, amounts due to brokers, accruals and cash).
Fair Value Hierarchy Disclosures
All except two of the Company's portfolio of investments are in the Level 1 category as defined in FRS 102 as amended for fair value hierarchy disclosures (March 16). The three levels set out in this 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.
Categorisation within the hierarchy is determined on the basis of the lowest level input that is significant to the fair value measurement of each relevant asset/liability.
The valuation techniques used by the Company are explained in the accounting policies note.
|
|
2026 |
|||
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Financial assets designated at fair value through profit or loss: |
|
|
|
|
|
Quoted investments: |
|
|
|
|
|
Equities and preference shares |
1,167,549 |
- |
- |
1,167,549 |
|
Total for financial assets |
1,167,549 |
- |
- |
1,167,549 |
|
|
2025 |
|||
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Financial assets designated at fair value through profit or loss: |
|
|
|
|
|
Quoted Investments: |
|
|
|
|
|
Equities and preference shares |
1,230,888 |
- |
- |
1,230,888 |
|
Total for financial assets |
1,230,888 |
- |
- |
1,230,888 |
The book cost and fair value of Unsecured Senior Loan Notes, are as follows:
|
|
2026 |
|
2025 |
|||
|
|
Book |
Fair |
Book |
Fair |
||
|
|
Value |
Value |
Value |
Value |
||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||
|
Unsecured Senior Loan Notes |
120,000 |
65,590 |
120,000 |
66,611 |
||
|
|
120,000 |
65,590 |
120,000 |
66,611 |
||
Incorporating the fair value of the Unsecured Senior Loan Notes, results in the increase of the net asset value per ordinary share to 846.04p (2025: 817.16p).
18. CAPITAL MANAGEMENT
The Company's total capital employed at 31 March 2026 was £1,179,432,000 (2025: £1,245,946,000) comprising borrowings of £120,000,000 (2025: £120,000,000) and equity share capital and other reserves of £1,059,432,000 (2025: £1,125,946,000).
The Company's total capital employed is managed to achieve the Company's objective and investment policy, including that borrowings may be used to provide gearing of the equity portfolio up to the maximum authorised by shareholders, currently 25% of net assets. Net gearing was 5.8% (2025: 5.0%) at the balance sheet date. The Company's policies and processes for managing capital were unchanged throughout the year and the preceding year.
The main risks to the Company's investments are shown in the Strategic Report under the 'Principal Risks and Uncertainties' section. These also explain that the Company is able to use borrowings to gear and that gearing will amplify the effect on equity of changes in the value of the portfolio.
The Board can also manage the capital structure directly since it has taken the powers, which it is seeking to renew, to issue and buyback shares and it also determines dividend payments.
The Company is subject to externally imposed capital requirements with respect to the obligation and ability to pay dividends by section 1158 Corporation Tax Act 2010 and by the Companies Act 2006, respectively. The Board regularly monitors, and has complied with, the externally imposed capital requirements. This is unchanged from the prior year. As detailed in note 11 and note 12, current borrowings comprise the Unsecured Senior Loan Notes.
19. CONTINGENCIES, GUARANTEES AND FINANCIAL COMMITMENTS
There were no contingencies, guarantees or other financial commitments of the Company as at 31 March 2026 (2025: nil).
20. RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH MANAGER
A related party is a company or individual who has direct or indirect control or who has significant influence over the Company. Under accounting standards, the Manager is not a related party.
Under UK GAAP, the Company has identified the Directors as related parties. The Directors' remuneration and interests have been disclosed in the annual report with additional disclosure in note 4. No other related parties have been identified.
Details of the Manager's services and fees are disclosed in the Directors' Report and in note 3.
21. POST BALANCE SHEET EVENTS
There are no significant events after the end of the reporting period requiring disclosure.
FINANCIAL INFORMATION
This announcement does not constitute the Company's statutory accounts. The financial information is derived from the statutory accounts, which will be delivered to the registrar of companies and will be put forward for approval at the Company's Annual General Meeting. The auditors have reported on the accounts for the year ended 31 March 2025 and the year ended 31 March 2026, their reports were unqualified and did not include a statement under Section 498(2) or (3) of the Companies Act 2006.
The Annual Report for the year ended 31 March 2026 was approved on 20 May 2026.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held on 21 July 2026 at 11:00 a.m. at The Balmoral Hotel, Edinburgh, EH2 2EQ.
For further information contact:
NSM Funds (UK) Limited
4th Floor, 46-48 James Street, London, W1U 1EZ
Email: EIT@nsm.group
Tel: +44 (0) 20 3697 5770
END
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