Final Results

Herald Investment Trust PLC

23 February 2026

 

LEI number: 213800U7G1ROCTJYRR70

Herald Investment Trust plc

Annual Financial Report

For the year ended 31 December 2025

Herald Investment Trust plc (the "Company") hereby submits its annual report and financial statements for the year ended 31 December 2025 as required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.1.

The Company's annual report and financial statements for the year ended 31 December 2025 is being published in hard copy format and an electronic copy will shortly be available to download from the Company's web page on the Manager's website at www.heralduk.com. It will also be made available to the public at the Company's registered office, 10-11 Charterhouse Square, London, EC1M 6EE.

The Company's annual report and financial statements has been uploaded to the Financial Conduct Authority's National Storage Mechanism and is available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Enquiries:

NSM Funds (UK) Limited

[e-mail]

RESULTS AND DIVIDEND

The net asset value ("NAV") of the Company as at 31 December 2025 was 2,700.5p per ordinary share (2024 - 2,488.2p). This represented an increase of 8.5% during the year, compared to a decrease of 0.3% for the Russell 2000® Technology Index (small cap) (in sterling terms) and an increase in the comparative total return indices of 11.8% for the Deutsche Numis Smaller Companies plus AIM (ex. investment companies) Index. The discount at year end was 10.9% (2024 - 2.3%).

The directors do not recommend a dividend for the year ended 31 December 2025 (2024 - nil) as explained in the dividend section in the annual report and financial statements for the year ended 31 December 2025.

STATISTICS AND PERFORMANCE - YEAR'S SUMMARY

At 31 December		2025	2024	% change
Total net assets		£1,292.4m	£1,252.6m
Shareholders' funds		£1,292.4m	£1,252.6m
Net asset value per ordinary shareA		2,700.5p	2,488.2p	8.5
Share priceA		2,405.0p	2,430.0p	(1.0)
Deutsche Numis Smaller Companies Index plus AIM (ex. investment companies) (capital only)		5,963.5	5,498.8	8.5
Russell 2000® Technology Index (small cap) (in sterling terms) (capital only)B		5,758.2	5,786.6	(0.5)
Dividend per ordinary share		-	-
Profit per ordinary share (revenue)		0.70p	4.96p
Ongoing chargesA		1.08%	1.08%
Discount to NAVA		10.9%	2.3%
Total return for the year ended 31 December		2025	2024
Net asset valueA		+8.5%	+12.1%
Share priceA		(1.0%)	+26.4%
Deutsche Numis Smaller Companies plus AIM (ex. investment companies) Index		+11.8%	+5.0%
Russell 2000® Technology Index (small cap) (in sterling terms)B		(0.3%)	+25.9%
Year to 31 December		2025	2024
Profit per ordinary share
Revenue		0.70p	4.96p
Capital		198.31p	244.77p
Total		199.01p	249.73p
Year to 31 December	2025	2025	2024	2024
Year's high and low	High	Low	High	Low
Share price	2,560.0p	1,738.0p	2,500.0p	1,870.0p
Net asset value per ordinary shareA	2,873.4p	2,058.9p	2,550.8p	2,161.0p
DiscountA	17.3%	(1.3%)	13.8%	(0.3%)

A   Alternative Performance Measure.

B   Investments and indices valued at USD/GBP exchange rate of 1.348 at 31 December 2025 (1.252 31 December 2024).

® Russell Investment Group.

CAPITAL RETURN SINCE INCEPTION

		Inception
	31 December	16 February
	2025	1994	% change
Net asset value per ordinary share (including
current year incomeA	2,700.49p	98.70p	2,636.06
Net asset value per ordinary share (excluding
current year income)A	2,699.77p	98.70p	2,635.33
Share price	2,405.00p	90.90p	2,545.76
Deutsche Numis Smaller Companies
plus AIM (ex. investment companies) Index	5,963.52	1,750.00	240.77
Russell 2000® Technology Index (small cap)
(in sterling terms)†	5,758.19	688.70*	736.10

A   Alternative Performance Measure (APM).

*    At 9 April 1996 being the date funds were first available for international investment.

†   The Russell 2000® Technology Index (small cap) (in sterling terms) was rebased during 2009 following some minor adjustments to its constituents. The rebased index is used from 31 December 2008 onwards.

CHAIRMAN'S STATEMENT

CORPORATE ACTIVITY

2025 was a year dominated by the unwanted attentions of Saba Capital Management LP ("Saba"). Saba have blocked the board's proposal to give shareholders the choice between selling back to the Company at or close to NAV or staying with the current successful mandate. At the time of writing, it is therefore unclear whether a solution can be found to reconcile the interests of Saba, who have a blocking minority shareholding, and of the rest of the shareholders who form the majority. The board continues to work hard in an attempt to find such a solution, as they have done for many months.

Saba continue to hold some 31% of the Company's shares, which puts them in a position to continue over the months and years ahead to try to take effective control by a process of attrition. If no better solution can be found, as set out in the Company's circular of 12 January 2026, the board would be left with no good alternative but to launch a further tender (the "Backstop Tender"), requiring only a simple majority for approval. This would in all probability spell the end of the Company with its current mandate and management, but would at least allow all shareholders to exit at close to NAV at a time before Saba might gain effective control of the board and/or the management of the Company. The almost unanimous desire of non-Saba shareholders to avoid being in a Saba controlled vehicle is demonstrated by the unequivocal support for the Company in January 2025 at the requisitioned general meeting, when 99.8% of non-Saba votes cast were against Saba's attempt to foist their own nominees onto the board, and again at the Company's AGM in March 2025 where 99.9% of non-Saba votes were cast in favour of continuation.

The consistent theme of Saba's actions is the threat to seek to replace the Company's board with their own nominees (requiring only a 50% approval of those voting), with the likely intention that the new board then appoint Saba in due course to run the Company. The board naturally deplores such an approach, as it oppresses the interests of the numerous small shareholders who collectively make up a majority of the register and it has therefore raised the matter with the Financial Conduct Authority ('the FCA'). In the board's view, where a substantial shareholder nominates a director to the board of a company, and such substantial shareholder is then also proposed to be appointed as the investment manager of that company (being a 'relevant related party transaction' under the UK Listing Rules), that director should not be entitled to vote on the appointment of the investment manager who nominated them in the first place. This would bring such a decision in line with the general guidance that non-independent directors cannot vote on matters between the company and the investment manager.

This is an appropriate moment to thank the many shareholders who have taken time and trouble to vote. It is deeply regrettable that so much money and time, including shareholders', should have been taken up in this matter when the business of the Company is to get on and make good returns for all the savers invested with it.

2025 PERFORMANCE

2025 was yet another good year for the Company. It achieved a +8.5% NAV per share uplift in the year, taking to +2,847.8% the uplift since inception in 1994 and +206.4% over the last ten years. In headline terms, but for the weakness in the year of the US Dollar, the NAV uplift in 2025 would have been circa 10%, recognising that in a global portfolio with many internationally diversified companies, the actual effect of currency swings is more complex, and in this year, probably greater, than headline numbers suggest.

The Manager's report covers in more detail the contributors to the performance.

In summary, in sector terms, the technology hardware and semiconductor sector which accounted for 28.3% of the opening equity portfolio, delivered all the positive return, and more, whereas the large software and technology services sector, accounting at the start of the year for 42.2% of the equity portfolio, delivered a negative return. In broad terms the strong performance of the first and the weak performance of the second had at least in part a common cause: the AI boom has propelled technology hardware stocks and put doubts over the valuation of software stocks. Four stocks within the hardware sector, namely Super Micro Computer, Celestica, BE Semiconductor Industries and Fabrinet, accounted for a remarkable 72.6% of the Company's return. These stocks typify the Manager's approach, having been held for many years and collectively having multiplied in value by nearly 25 times.

The performance of the other sectors in the Company's portfolio, comprising in aggregate less than 30% of both opening and closing equity portfolios, was mixed.

The geographic performance took its lead from the sector performance, with the strong North American performance largely a function of the weight of AI exposure. The return of +17.5% compares with the sterling total return of the Russell 2000® Technology Index (small cap, £) of -0.3%. By contrast, the UK portfolio returned -7.2%, reflecting the larger concentration in software and media stocks. The comparator index, the Deutsche Numis Smaller Companies plus AIM (ex. investment companies) Index, returned +11.8% on a total return basis, although when the index is restricted to technology stocks, it was down -11.5%. Asia, with its focus on hardware and semiconductors, performed very strongly with a return in year of +24.3%. Europe, Middle East and Africa also delivered strong returns of +23.9%, on a broad basis with no single investment or sector dominating.

As noted by the Manager, the unwanted attentions of Saba have adversely affected the Company in two ways - three if you account for the inordinate amount of time having to be spent on corporate affairs rather than fund management. Firstly, conscious of the need potentially to fund a tender, the Manager has felt inhibited from making all the new investments it would normally make for fear of having to sell these again a short while later, incurring costs and possible volatility in doing so. The Company usually buys stocks with a horizon of at least five years. Secondly (and in part, consequently) cash and liquid securities accounted by year end for 15.8% of the NAV, a materially higher proportion than historically, and a drag on performance.

Looking at the share price performance over the year, this has lagged NAV. I note that, at the start of the year, the share price had been driven up by Saba's campaign to buy 29.9% in pursuit of effective control. On occasion Saba was buying shares at a premium.

LIQUIDITY AND CAPITAL ALLOCATION

During the year the Company continued to buy shares back, with 4.9% of the opening share capital bought back in the year, taking the total bought back since 1 January 2023 to 23.0%. The board has paused buy backs in the face of Saba's continued campaign to take effective control: although only allowed by the Takeover Code to buy 29.9%, Saba was benefiting from the denominator effect of the Company shrinking its share base, leading to its present position of it owning some 31% of the Company. Takeover Code rules do not require Saba to make a general offer to shareholders in those circumstances as it benefits from what is referred to as 'The Innocent Bystander' status under these rules. To avoid delivering creeping control to Saba, the board has paused further buybacks after consulting with other large shareholders.

It is worth noting that since its inception, the Company has bought back shares totalling some £530m which compares with the total amount of capital raised of £95m, and still retained a NAV of £1,292m at year end. How many other investment trusts have exhibited a similar capital discipline over the years?

OUTLOOK

As I said last year, the board continues to believe that an active manager with the right skills and experience can achieve excellent returns in this dynamic sector. Index trackers do not reach down into the small and very small levels of the market. There are some 5,000 companies worldwide which fall within the mandate and sorting the wheat from the chaff adds a lot of alpha. To achieve success, the board supports the Manager's view that a portfolio of technology stocks needs to be global: trends and opportunities in different parts of the globe inform decisions in other parts.

Since the year end, there has been marked volatility in technology stocks, especially software companies. The Company's own portfolio has not been immune but is up 2% at the time of writing, reflecting the benefit of the shift away from software in favour of hardware noted above.

Provided that the Company's shareholder register can be sorted out, with short term investors given the opportunity to leave and genuine medium and long-term savers remaining, there remains good reason to have continued confidence in the long-term prospects for the Company.

I would like to conclude by thanking my fellow directors, the Manager and the board's advisers for their commitment over the last 12 months to doing the right thing by all our shareholders. This has involved a time commitment way beyond what is expected.

ANDREW JOY

CHAIRMAN

20 February 2026

Short Summary of Recent Events

The Company issued a circular on 12 January 2026 setting out a proposed tender (the "Tender Offer") to offer shareholders the choice of selling up to 100% of their shares for cash at close to NAV or remaining invested. The board had assessed that it was not sustainable to do nothing given that a process of attrition might eventually see Saba able to win a simple majority vote even though it itself is a minority shareholder, and thus take effective control of the Company.

The board and the Manager continue to have confidence in the Company's strategy, believing there to be attractive long-term investment opportunities within quoted smaller companies in the global technology and communications sectors. The Tender Offer was proposed to enable the Company to focus on delivering strong investment returns with a supportive and stable Shareholder base. It was dependent on Saba not voting against the tender and tendering its shares. If the Tender Offer did not proceed, a subsequent Backstop Tender Offer (the "Backstop Tender") would be proposed which required only 50% of votes in favour to pass, versus the 75% of votes in favour required for the initial Tender Offer.

Given Saba voted against the Tender Offer, the Company cancelled it on 3 February 2026. The board have temporarily deferred launching the Backstop Tender because it is in discussions with Saba in an attempt to reach a mutually acceptable outcome. This would again be for a tender offer giving shareholders the choice to tender up to 100% of shares for cash, with Saba agreeing to both vote in favour and tender their shares. However, if discussions do not lead to a mutually acceptable outcome, in view of the fact that Saba voted against the Tender, the board will launch the Backstop Tender. In that way shareholders would have an opportunity to exit their investment in the Company at a price close to the NAV and at a time before Saba might gain control of the board or the management of the Company.

INVESTMENT Manager's Report

The instability in the share register and the accumulation of a c.31% shareholding by funds advised by Saba Capital Management, L.P. ("Saba") together with their requisition of a general meeting in January 2025 has provided a cloud over the year and meant we have run higher cash levels, whilst minimising new positions in more illiquid investments, which has been part of our process over 30 years. Nevertheless, I am pleased to report further growth in the net assets per share of 8.5%. All the overseas regions delivered strong returns, but the UK lagged. More unusually the positive returns have been concentrated in a handful of stocks in the technology hardware sector. In fact, this sector has delivered a total return of £127.0m in the year versus the total return of the Company, net of expenses, of only £98.5m. The software and technology services sector, which started the year as the biggest sector (42.2% of equities) had a further dull year with a total return of -3.1%, and media, which started the year with a 10.5% weighting, a desultory -21.2%.

SECTOR PERFORMANCE

If the challenges posed by Saba have been the cloud, then the artificial intelligence (AI) supply chain has been the shining driver to performance. The table below quantifies this over the last cycle. In 2025 the technology hardware and semiconductors sector delivered 129% of the total return of the Company, although it only accounted for 26.4% of the assets at the start of the year. Furthermore, the sector accounts for 66.0% of the total returns over six years, although only weighted at 18.8% at the start of this period.

Net Asset Value £m						% of total NAV
	Total NAV	Tech Hardware and Semiconductors	Software and Tech Services	AI 4		Tech Hardware and Semiconductors	Software and Tech Services	AI 4
31/12/2025	1,292.4	402.6	391.3	120.3		31.2%	30.3%	9.3%
31/12/2024	1,252.6	330.2	493.6	101.0		26.4%	39.4%	8.1%
31/12/2023	1,245.8	336.5	457.8	113.3		27.0%	36.8%	9.1%
31/12/2022	1,305.0	312.6	498.9	66.0		24.0%	38.2%	5.1%
31/12/2021	1,760.9	384.7	751.5	50.1		21.8%	42.7%	2.8%
31/12/2020	1,503.4	291.4	655.1	34.1		19.4%	43.6%	2.3%
31/12/2019	1,122.8	211.3	455.8	25.4		18.8%	40.6%	2.3%

Return £m						% of total return
	Total return	Tech Hardware and Semiconductors	Software and Tech Services	AI 4		Tech Hardware and Semiconductors	Software and Tech Services	AI 4
Return 2025	98.5	127.0	-13.6	71.5		129.0%	-13.8%	72.6%
Return 2024	134.3	63.5	69.4	67.8		47.3%	51.7%	50.5%
Return 2023	48.1	69.4	-15.5	90.0		144.3%	-32.2%	187.0%
Return 2022	-405.5	-75.9	-162.3	14.1		18.7%	40.0%	-3.5%
Return 2021	280.4	99.5	72.9	16.1		35.5%	26.0%	5.7%
Return 2020	405.4	86.7	197.4	8.2		21.4%	48.7%	2.0%
Return 2020 - 2025	561.1	370.3	148.3	267.8		66.0%	26.4%	47.7%

Investment realised gains £m
	Total realised gains	Tech hardware and semiconductors	Software and tech services	AI4
2025	137.3	46.2	54.4	49.2
2024	120.4	75.0	37.6	76.5
2023	40.0	39.5	6.3	38.0
2022	101.8	12.2	70.2	0.0
2021	137.5	17.1	52.9	0.7
2020	119.7	32.0	51.6	0.0
2020 - 2025	656.7	222.0	273.1	164.3

Over this six year period there have been 137 holdings in the sector, and 90 in 2025 alone. However, there have been four stand-out contributors that are labelled AI 4 in the table above. These are Super Micro Computer, Celestica, BE Semiconductor Industries and Fabrinet. They alone have accounted for 72.6% of the Company's return in 2025 and 47.7% over six years. It also interesting to see that we have realised gains on these four holdings of £164m in the six years (and £176m over the life of the Company), the current value is still £120m against a residual book cost of £4.9m. This gives a 24.3x return. Of this, about half is multiple expansion and half profits growth. A stark reminder of the power of fashion! In contrast the software and technology services sector, which accounted for 39.4% of the Company's net assets at the start of the year and included 162 holdings in the year, delivered a negative return. This sector led the returns in the last cycle (2019-22) when software-as-a-service was the fashion, and valuations rose to 30x revenue multiples and more. We sold some too early, some well and clearly should have sold more given the 2022 correction, but we did at least move decisively in the right direction and added a little to Super Micro and Celestica. The 2022 correction was clearly the fashion element evaporating and 2024 saw some recovery. The headwind this year has been concerns that AI will make software much easier to develop thereby reducing barriers to entry. In addition, the major players have pushed through price rises and budgets have been diverted to AI initiatives, so revenue growth has generally slowed, but there has been a continued derating. The other concern about the software product sector is that it is swilling in stock-based compensation, which analysts never account for in forecasts, so p/e ratios are a bit fictitious in the US in particular.

The returns of the other sectors represented in the portfolio are shown in the table below, and patchy results are evident. The media sector has been poor and will be discussed more in the UK analysis. A particular headwind has been the hyperscalers diversion of resources to AI capital expenditure, who have historically been lavish spenders for a number of holdings in the media sector. Industrial products have been a bright light. Again a number of holdings in all regions have benefited from the AI infrastructure spend.

	Valuation at 31-Dec 2024 (£m)	Valuation at 31-Dec 2025 (£m)	IRR	Valuation at 31-Dec 2024 (%)	Valuation at 31-Dec 2025 (%)
Software & Tech Services	493.6	391.3	-3.1%	42.2%	36.0%
Tech Hardware & Semiconductors	330.2	402.6	39.7%	28.3%	37.0%
Media	122.4	78.1	-21.2%	10.5%	7.2%
Industrial Products	90.2	102.1	34.9%	7.7%	9.4%
Industrial Services	33.4	24.6	-18.7%	2.9%	2.3%
Telecommunications	32.5	20.0	-37.5%	2.8%	1.8%
Other	66.4	69.5	18.1%	5.6%	6.3%
Total equity portfolio	1,168.6	1,088.2

SECTOR PERFORMANCE

(STERLING, MILLIONS)

	Market value equity portfolio 31 Dec 2025	% of equity portfolio 31 Dec 2025	Total return equity portfolio 31 Dec 2025	% IRR 2025
Software	351.8	32.3	-6.4	-1.7
Technology Hardware	238.1	21.9	99.3	53.3
Semiconductors	164.5	15.1	27.7	20.7
Electrical Equipment	60.0	5.5	21.2	47.4
Internet Media & Services	40.2	3.7	-13.8	-25.6
IT Services	39.5	3.6	-7.2	-12.4
Industrial Intermediate Production	25.7	2.4	7.2	32.0
Commercial Support Services	23.8	2.2	-6.3	-18.3
Telecommunications	20.0	1.8	-12.8	-37.5
Advertising & Marketing	16.4	1.5	-11.0	-32.2
Other	108.2	10.0	13.7	12.5
Total	1,088.2	100.0	111.6	10.3

Source: BICS (Bloomberg Industry Classification Standard) and HIML.

REGIONAL ALLOCATION CHANGES

(STERLING, THOUSANDS)

	Valuation at 31 December 2024	Net acquisitions/  (disposals)	Amortisation	Appreciation/ (depreciation)	Valuation at 31 December  2025
Equities*
UK	444,846	(125,047)	-	(33,974)	285,825
North America	427,253	(1,888)	-	72,858	498,223
EMEA	146,260	(34,991)	-	28,074	139,343
Asia Pacific	150,251	(18,978)	-	33,556	164,829
Total equities	1,168,610	(180,904)	-	100,514	1,088,220
Government bonds	61,417	19,700	755	(1,645)	80,227
Total investments	1,230,027	(161,204)	755	98,869	1,168,447
Net liquid assets	22,575	102,126	-	(735)	123,966
Total assets+	1,252,602	(59,078)	755	98,134	1,292,413

*    Equities includes convertibles and warrants.

+   The total assets figure comprises assets less current liabilities.

Analysis by Region

If at the sector level there has been a swing to hardware and the AI capital expenditure boom, there has also been a geographical cycle. The UK has been particularly hard hit by heavy redemptions from retail funds for another year, and the lack of exposure to the AI capital expenditure supply chain. In part it is evident that the exceptionally high savings rate in the covid era, coinciding with negligible interest rates, led to heavy flows into funds which were focused on the growth sector of technology. It appears that this investment was temporary. This has resulted in a further derating of UK holdings of c10%, so that valuations are nearly as low as they were in the global financial crisis.

Portfolio p/e by region

	UK	North America	EMEA	Asia	Total Equities
2013	16.9	20.9	14.9	9.6	16.8
2014	15.8	19.2	13.4	12.3	16.1
2015	16.4	20.1	16.3	13.2	16.9
2016	15.9	20.7	17.5	13.1	16.7
2017	19.6	27.8	21.4	14.8	20.7
2018	15.9	24.0	17.7	16.3	17.7
2019	21.7	27.9	25.0	20.7	23.2
2020	26.2	45.0	34.9	25.0	30.7
2021	23.8	29.4	33.3	23.0	25.9
2022	16.7	17.9	24.1	16.9	17.8
2023	16.0	22.3	30.4	21.5	19.6
2024	16.6	23.3	29.2	20.5	19.7
2025	15.0	24.1	24.3	19.7	20.5

The exciting thing is that the AI returns have kept the NAV/share increasing over a period of useful derating for the majority of the portfolio from the frothy levels of 2020-21. In addition, the expectation that we shall have to buyback the shareholders who are not long-term investors in our strategy has led to a deliberately higher level of cash and a focus on investments with more liquidity in overseas markets. A further net £125m has been sold from the UK portfolio in 2025, taking the total since the beginning of 2015 to nearly £500m.

Valuation of equity portfolio

	Valuation at 31-Dec-2024 (£m)	Net purchases/ sales (£m)	Gains/ (losses) (£m)	Valuation at 31-Dec-2025 (£m)
UK	444.8	-125.0	-34.0	285.8
North America	427.3	-1.9	72.8	498.2
EMEA	146.3	-35.0	28.1	139.3
Asia	150.2	-19.0	33.6	164.8
Total	1,168.6	-180.9	100.5	1,088.2

Looking over a longer timeframe, as we have done with sectors, the trends are quantified in the table below.

		Equities (£m)					% of total NAV
Equities (£m)	Total NAV (£m)	Asia	EMEA	North America	UK		Asia	North EMEA	America	UK
31/12/2025	1,292	165	139	498	286		12.8%	10.8%	38.5%	22.1%
31/12/2024	1,253	150	146	427	445		12.0%	11.7%	34.1%	35.5%
31/12/2023	1,246	144	150	342	504		11.5%	12.1%	27.4%	40.5%
31/12/2022	1,305	145	141	284	576		11.2%	10.8%	21.8%	44.1%
31/12/2021	1,761	208	201	392	839		11.8%	11.4%	22.3%	47.7%
31/12/2020	1,503	152	129	367	741		10.1%	8.6%	24.4%	49.3%
31/12/2019	1,123	77	67	258	586		6.8%	6.0%	23.0%	52.2%

		Returns to year ending 31 December (£m)				% of total return
	Total return	Asia	EMEA	North America	UK	Asia	EMEA	North America	UK
2025	98.5	36.0	29.5	74.3	-28.3	37%	30%	75%	-29%
2024	134.3	4.8	8.4	115.4	15.7	4%	6%	86%	12%
2023	48.1	19.6	6.3	85.9	-50.7	41%	13%	179%	-105%
2022	-406.0	-56.1	-54.6	-75.9	-212.3	14%	13%	19%	52%
2021	280.4	31.0	63.0	39.5	163.4	11%	22%	14%	58%
2020	405.0	53.4	43.0	139.2	183.7	13%	11%	34%	45%
2020 - 2025	560.3	88.7	95.6	378.4	71.6

Investment realised gains (£m)

	Total realised gains	Asia	EMEA	North America	UK
2025	137.3	18.2	27.8	63.2	27.5
2024	120.4	5.0	9.4	68.5	39.2
2023	40.0	1.2	4.2	36.2	2.5
2022	101.8	10.3	5.4	37.5	45.3
2021	137.5	22.8	3.3	40.5	71.0
2020	119.7	8.5	11.5	56.6	42.2
2020 - 2025	656.7	66.0	61.8	302.5	227.8

North America

The IRR of the North American portfolio in 2025 was +17.5% versus the sterling total return for the Russell 2000 Technology Index of -0.3%. It frustrates me that a number of UK investors think the US is "tech utopia". Valuations are often too high and management teams obsessed with revenue growth build huge losses exacerbated by overly generous stock-based compensation, which unfortunately makes it the obvious market to raise capital, but less obvious that it is the market in which to invest. It is particularly pleasing therefore that we have trounced the comparative index this year again through the AI exposure described above. Ironically, of the three North American Holdings in our AI 4, only one is actually a US company- Super Micro Computer, which has positively contributed to the Company's returns each year from 2019 to 2024, returning a small loss in 2025. The cumulative return is £116.5m making it the most profitable investment in Company's history. This year the leadership came from the Canadian domiciled Celestica returning £48.8m, which supplies the hyperscalers and Google in particular. Second best has been Fabrinet, a Cayman Island company with operations primarily in Thailand. It has returned £21.7m in 2025 and £48.7m since first acquired on a p/e of 10.2x in 2013. Vicor and Silicon Motion Technology (Cayman domiciled, but Taiwanese operations) also contributed c£10m each, both of these holdings had an AI kicker to demand, so in aggregate the technology hardware and semiconductors sector delivered a return of £95.0m from 29 holdings in the year. The 48 holdings in the software and tech services sector delivered a modest negative return of 7.9% with no standout positions, albeit the long held significant software holdings of Descartes Systems, Varonis Systems and SPS Commerce all drifted. Cogent Communications, an acquisition driven internet infrastructure company, proved the biggest loser with price pressure, costs pressures and debt a challenge.

There were eight Israeli companies with NASDAQ listings in our North American bucket, now reduced to seven following the CyberArk Software takeover. Their IRR was +31.8%, and in sterling terms offset the -3.7% loss on the 88 US domiciled companies held. Israel was outshone by Canada +55.4% led by Celestica, and the Cayman Islands +73.0% reflecting Fabrinet and Silicon Motion Technology's strong returns.

The 13 holdings in the industrial products sector returned +44.6% led by laser company nLight. The common theme is that manufacturing companies have generally performed better than software, media and I.T. service companies. As Trump reminds us bluntly, the US has exported manufacturing primarily to Asia, as has the UK, so that has been a headwind for these regions. The market was evidently unsettled by the introduction of tariffs. We are fortunate to be in regular contact with scores of management teams around the world and most companies see little adverse effect on their trading.

The smaller companies' market in the United States is under pressure from withdrawals from active management in favour of index trackers and companies remaining private for longer. There are now only 432 companies in the Bloomberg technology and communications sectors in North America with a market capitalisation of between $100m and $5bn so a further small decline in 2025. There is a big pipeline of venture backed companies that might come to market, but the valuations have to be more realistic than the crop that came to market in 2020-21.

UK

The UK returns to some extent mirror the software returns with a strong covid period and subsequent anaemic performance. The IRR for 2025 of -7.2% is disappointing relative to the Deutsche Numis Smaller Companies Index plus AIM (ex. investment companies) total return of +11.8% and the returns from the overseas regions. However, the sector return within the Deutsche Numis index for technology is -11.5% and the media sector is -27.2%, therefore relative to our sectors the return shows solid outperformance. Just as we were decisively taking profits in software companies in 2021, we were also decisively reducing the UK portfolio. In both cases we moved in the right direction, but not fast enough. Liquidity proved an inhibitor particularly when the market turned, but we could have done more. Trends always move further than rational on the upside and the downside. I observe that basic materials weighting in the index has risen to 7.7% and technology has fallen to only 4.2%. Basic materials has returned +65.3% led by precious metals and mining!

The media sector has accounted for 80.1% of the UK decline, with Trustpilot alone declining £11.1m. This is in spite of Trustpilot's trading performance, delivering on expectations with annual recurring revenue growth rising 21% year on year in the interims. There has been a bear raid from short sellers, and we are sceptical of their negativity, accusing the company of rigging outcomes, which the company vigorously and credibly denies. Two small holdings in the software sector, Corero Network Security and Celebrus Technologies both lost more than £4m, but we remain confident long-term. Volex (+£6.8m) and Diploma (+£5.5m) were the two best performing stocks. Interestingly they were also beneficiaries of the AI capital spending boom in some of their activities, with a Volex subsidiary supplying active electrical cables for connectivity, and Diploma copper cables.

Few of the UK investments have a predominantly domestic market. Technology is an international sector and the majority of revenues and profits are derived in overseas markets. The strength of sterling relative to the dollar is a headwind to profits growth, particularly for the numerous companies which are overweight sterling costs versus dollar revenues.

Whereas we were purposefully selling UK holdings on valuation grounds in 2020-21, this year's increased pace of selling reflects more a desire to increase cash levels and reduce the most illiquid region of the portfolio in the expectation that at some stage the Company may have to undertake a tender offer. The UK market is in a sorry state and the flight of capital has continued throughout 2025. Whilst I am nervous about longer term prospects, because the flight of capital has led to an evaporation of the skillset in London, in the short-term there are some stocks trading at very good valuations and it would be a shame to have to sell more into this unwilling market.

Asia

Asia has been a strong market this year, the portfolio sterling IRR of 24.3% has been achieved despite currency headwinds, with a number of hardware companies in the AI hardware and AI semiconductor supply chains seeing extraordinary revenue growth, benefitting from massive growth in AI data centre capital expenditure and from rising prices for their products. The scale of the hyperscaler AI capex spend is remarkable, growing from $250-300bn in 2024, to perhaps $400bn in 2025 with some analysts forecasting annual capex spend of $1-2tn by 2030. Some individual data centre sites in North America will require capex of over $10bn. A substantial proportion of this spend is on AI servers and AI network switches which have the majority of the hardware value produced in Asia. The biggest beneficiary of direct AI spend to date has been Nvidia (now the largest company globally by market capitalisation), they are the leading provider of AI chips and AI interconnect and have close to 75% gross margins. Hence, for every $1 spent with Nvidia, 25 cents is spent with its suppliers, who are often in Asia. Google's AI ecosystem is based around a semiconductor called a TPU; it is also enjoying remarkable growth, which is passed onto Google's supply chain, again often located in Asia.

To deliver AI requires compute, memory, storage and connectivity. All of these elements require enormous electrical power and power transformation equipment. The scale of demand is immense with data centre electricity consumption forecast to more than double to around 945 TWh by 2030. This is slightly more than Japan's total electricity consumption today. A number of data centre companies are committed to building their own nuclear power stations and making substantial investments in renewable energy. The Asian portfolio has numerous holdings that supply materials and components into companies supplying into this AI datacentre capex spend. They include BizLink (Active Electrical Cables (AEC) for data and power cables), Elite Material and Taiwan Union Technology (Copper Clad Laminates (CCL) used in advanced AI and networking PCBs), MPI (probe cards for semiconductor test), Winway Technology and ISC (semiconductor test sockets), Kulicke & Soffa Industries (bonding machines for advanced semiconductors), ASMPT (bonding machines for advanced semiconductors), eMemory Technology (PUF based security IP to incorporate in semiconductors) and Chroma ATE (advanced semiconductor test equipment).

Companies in the portfolio developing innovative new products to address AI datacentre demand include: Voltronic Power Technology (power supplies), Musashi Seimitsu Industry (hybrid super capacitors), FOCI Fiber Optic Communications (fiber array units), Himax Technologies (micro-lens arrays for TSMC's COUPE (silicon photonics)).

In addition, there are a number of holdings of semiconductor capital equipment manufacturers that supply into both memory and logic fabs. Until recently the wider DRAM and NAND memory industries have been in a multi-year cyclical downturn with weak demand. AI demand for High Bandwidth Memory (HBM) based on DRAM, and to a lesser extent better NAND demand, has transformed memory pricing and the profitability of Samsung Electronics, SK Hynix and Micron Technology. It is anticipated that as a result the capital expenditure of these companies will now rebound, transforming the prospects for a number of the Company's semiconductor equipment manufacturing holdings, potential beneficiaries include Wonik IPS, Eugene Technology, Tokyo Seimitsu and Park Systems. There is great uncertainty as to how long this elevated period of AI related capex will last.

AI is the hot topic and major global technological innovation of the time, but the sources of the performance of the Company's small company portfolio are actually quite diverse and not reliant on AI hype and concept valuations. AI related names are a minority of the Asian portfolio. Although, the biggest individual contributor to the Asian performance is the AI related BizLink, which appreciated +156% (£12m), strong percentage returns were seen from numerous holdings, many not AI related. Some of these gains were due to takeovers and include Kaonavi (HR software in Japan) and Proto (Car dealership software in Japan) others were due to strong revenue and profit growth in niche growth markets. Examples here include Electro Optic Systems (Laser based drone defence systems (Australia)), Catapult Sports (A leading sports analytics company (Australia)), RFHIC (GAN power amplifiers for defence and industrial heating applications (Korea) and finally Genians (Dominant Korean supplier of network access and zero trust software).

In contrast to the shrinking number of public companies in the sectors targeted in the West the number in Asia continues to grow. Six new holdings were added in Asia in the year including Acer Cyber Security, AP Memory Technology, Innodisk, Kinsus Interconnect Technology, MPI and Voltronic Power Technology. In fact, the number of companies in technology and communications with a market capitalisation between $100m and $5bn is 453 in Taiwan, in Japan 380, South Korea 273 and China many more. However, in the United States only 395. A number of Asian companies are moving rapidly up the value chain.

Europe, Middle East and Africa

The European market was unusual in providing a currency tailwind for sterling investors with the Euro appreciating against sterling by 5.4%. The IRR was a pleasing +23.9%. 83% of the EMEA portfolio is invested in two core sectors; technology hardware and semiconductors, which returned +11.5%, and software and technology services, which returned +26.8%. Returns were broad based, led by software companies which provided slightly more than half the sterling gains of £29.5m. These software businesses address a range of applications, with the significant contributors including Median Technologies (AI lung cancer screening), WALLIX (Privileged Access Management) and RaySearch Laboratories (radiotherapy treatment planning). Other significant contributors were LUMIBIRD (lasers for medical, defence and industrial applications), PFISTERER (high-voltage cable accessories) and Nordic Semiconductor (Bluetooth Low-Energy wireless connectivity). Each contributed a gain of circa £4m in the year.

A headwind for the European portfolio going into the year was the high proportion of cash and outstanding takeovers, with Volue having settled late in 2024 and Esker and Nexus, in aggregate 21% of the EMEA portfolio by value, settling in February and April. Pleasingly, as well as adding to existing positions, we have managed to redeploy capital into eight new holdings. PFISTERER, the only European IPO invested in, was the IPO of the year in terms of performance, rising +183% from its IPO price. We have also made post-IPO investments in Planisware (marginally above the IPO price) and HBX Group (at a significant discount to the IPO price). Our other new positions are Comet, Louis Hachette, NCAB, STREAMWIDE and Vivendi.

Our largest position, BE Semiconductor Industries, is one of the four AI beneficiaries described earlier. It was first acquired in 2011 and has since returned £55m, of which £30m has been generated in the last six years, though the shares have been relatively flat since 2023. The company is the market leader in hybrid bonding systems, which we view as critical to enabling the next wave of advanced packaging innovation.

Drivers of the Company's challenges

The challenges posed by Saba are arguably only one factor. Saba would not have accumulated such a large stake if there had not been willing sellers, albeit Saba's buying reduced the discount to a level that was too low versus other trusts with more liquid assets, providing shareholders with a tempting exit. It is depressing that over the last three years we have repurchased 14.3m shares, or 23% of the share capital, including 2.5m shares repurchased in 2025. Over the same period Saba has acquired 14.7m shares, so there has been net selling of 47% of the register. It is bewildering that we have had such heavy selling pressure, whilst continuing to perform. We speculate on the reasons:

(i)       Regulatory pressure for wealth managers and advisors to minimise "double fees" when they invest in funds following the Consumer Duty legislation- albeit our smaller companies focus gives them access to investments that they would not otherwise be exposed to. It is evident that this has contributed to enormous outflows across collective vehicles in the UK.

(ii)      The underperformance of the small companies sector compared to the Magnificent Seven.

(iii)     The incentive ahead of tax rises for investors to realise profits when they enjoyed heavy capital gains. I am pleased to say that we have not raised new capital since 1996, so many investors do have book costs that are less than 10% of market value, which may also have become overweight in their portfolios. Selling was particularly heavy ahead of the UK Budget in the Autumn of 2024.

(iv)     The consolidation of wealth managers and regulatory pressure for them to deliver uniform returns across their client base has led to a focus on very large liquid investments.

(v)      The cash flows out of active managed funds into lower cost index trackers. It infuriates me that active management seems to be perceived as an unnecessary extravagance. Of course, on average active management will underperform, because we have costs, but index trackers are dumb money, and do not provide capital to growth companies. I would rather underperform a market growing by 15% a year by a percent or two than perform in line with a market growing at 3% a year, although we do have a long track record of outperforming relevant indices. If growth companies are not funded, the market will not grow.

(vi)     Quite rightly there is regulatory pressure to ensure liquidity in open ended funds, but there is a lack of stable long-term capital that insurance companies and pension funds used to provide in the London market. This has led to a capital shortage.

I still passionately hope that there will be a route to continuation such that we can continue to invest in an exciting sector. I believe that there is a valuation arbitrage between small companies below the size that attracts flows from index trackers and it is evident that we have benefitted from investing in stocks that have grown into the more expensive category which is included in indices. I also believe that we target a global sector and the intelligence derived from looking at companies across the globe has been a vital contributor to our ability to outperform. Having a large number of positions diversifies both the stock specific risks associated with early stage investing, and the liquidity risk. We have demonstrated that we can make >20x returns and often do which pays for the ones that are less successful, meaning we still deliver strong returns.

Outlook

It is evident that technology is continuing to open up new markets at a faster pace than ever and emerging companies exploit that. So far it has been a boom in hardware companies enabling AI. The next boom will be new applications using AI. I continue to be excited. Alas I am less confident that the Company can survive the shareholder challenges on its own share register but we continue to strive for a solution in one form or another.

KATIE POTTS

20 February 2026

Classification of investments

			North	Japan & Asia	2025	2024
	UK	EMEA	America	Pacific	Total	Total
Classification*	%	%	%	%	%	%
Communications	4.6	0.9	0.7	1.2	7.4	12.4
Advertising & Marketing	1.2	-	-	0.1	1.3	3.1
Entertainment Content	0.5	0.1	-	-	0.6	0.5
Internet, Media & Services	1.3	0.2	0.3	1.0	2.8	4.7
Publishing & Broadcasting	0.8	0.3	-	-	1.1	1.6
Telecommunications	0.8	0.3	0.4	0.1	1.6	2.5
Consumer Discretionary	-	-	0.8	0.2	1.0	0.4
Automotive	-	-	-	0.1	0.1	-
E-Commerce Discretionary	-	-	-	0.1	0.1	0.1
Wholesale - Discretionary	-	-	0.8	-	0.8	0.3
Energy	0.4	-	0.8	-	1.2	0.8
Oil & Gas Services & Equipment	-	-	0.2	-	0.2	0.2
Renewable Energy	0.4	-	0.6	-	1.0	0.6
Financials	0.6	-	-	0.6	1.2	1.2
Asset Management	0.4	-	-	-	0.4	0.5
Speciality Finance	0.2	-	-	0.6	0.8	0.7
Health Care	0.3	0.4	-	0.2	0.9	1.2
Biotechnology & Pharmaceutical	0.1	-	-	-	0.1	0.1
Health Care Facilities & Services	-	-	-	-	-	0.2
Medical Equipment & Devices	0.2	0.4	-	0.2	0.8	0.9
Industrials	4.6	0.5	3.5	1.1	9.7	10.1
Aerospace & Defence	0.6	-	0.5	0.1	1.2	2.0
Commercial Support Services	0.9	-	1.0	-	1.9	2.6
Electrical Equipment	1.3	0.5	1.9	0.9	4.6	3.4
Industrial Intermediate Production	1.8	-	-	0.1	1.9	2.0
Transportation & Logistics	-	-	0.1	-	0.1	0.1
Materials	-	-	-	0.2	0.2	0.3
Chemicals	-	-	-	0.2	0.2	0.2
Forestry, Paper & Wood Products	-	-	-	-	-	0.1
Technology	10.8	9.0	32.7	9.3	61.8	65.6
IT Services	1.1	0.5	0.5	1.0	3.1	5.4
Semiconductors	0.2	3.6	6.0	2.9	12.7	10.1
Software	7.2	4.0	13.6	2.6	27.4	34.0
Technology Hardware	2.3	0.9	12.6	2.8	18.6	16.1
Utilities	0.8	-	-	-	0.8	1.3
Electricity & Gas Marketing & Trading	0.8	-	-	-	0.8	1.1
Gas & Water Utilities	-	-	-	-	-	0.2
TOTAL EQUITIES (including convertibles and warrants)	22.1	10.8	38.5	12.8	84.2	-
Total equities - 2024 (including convertibles and warrants)	35.5	11.7	34.1	12.0	-	93.3
BONDS	1.5	1.2	2.3	1.2	6.2	4.9
NET LIQUID ASSETS**	2.8	2.3	1.3	3.2	9.6	1.8
TOTAL NET ASSETS	26.4	14.3	42.1	17.2	100.0	-
Total net assets - 2024	36.5	13.2	36.8	13.5	-	100.0
SHAREHOLDERS' FUNDS	26.4	14.3	42.1	17.2	100.0	-
Shareholders' Funds - 2024	36.5	13.2	36.8	13.5	-	100.0
Number of equity investments (including convertibles and warrants)	78	30	85	85	278	310

*    Source: Bloomberg Industry Classification Standard.

** Cash, current assets and liabilities.

TOP TWENTY EQUITY HOLDINGS AS AT 31 DECEMBER 2025

CelesticaTM
As a leader in design, manufacturing, hardware platform and supply chain solutions, Celestica partners with leading companies in aerospace and defence, communications, enterprise, health technology, industrial and capital equipment, to deliver solutions for their most complex challenges. Celestica brings global expertise and insight at every stage of product development - from the drawing board to full-scale production and after-market services. Celestica has employees across North America, Europe and Asia, that help, develop and deliver a new products for their customers.		£46.1m   VALUATION 3.6%   OF TOTAL ASSETS 0.2%   OF ISSUED SHARE CAPITAL HELD £1.8m  BOOK COST

Fabrinet
Fabrinet is a leading provider of advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products, such as optical communication components, modules and subsystems, industrial lasers and sensors. Fabrinet offers a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process, including process design and engineering, supply chain management, manufacturing, advanced packaging, integration, final assembly and test. Fabrinet focuses on production of high complexity products in any mix and volume. Fabrinet maintains engineering and manufacturing resources and facilities in Thailand, the United States and the People's Republic of China.		£32.1m   VALUATION 2.5%   OF TOTAL ASSETS 0.3%   OF ISSUED SHARE CAPITAL HELD £1.2m  BOOK COST

BE Semiconductor Industries ('Besi')
BE Semiconductor Industries ('Besi') is a leading supplier of semiconductor assembly equipment for the global semiconductor and electronics industries offering high levels of accuracy, productivity and reliability at a low cost of ownership. Besi develops leading edge assembly processes and equipment for lead frame, substrate and wafer level packaging applications in a wide range of end-user markets including electronics, mobile internet, computer, automotive, industrial, LED and solar energy. Customers are primarily leading semiconductor manufacturers, assembly subcontractors and electronics and industrial companies.		£28.0m   VALUATION 2.2%   OF TOTAL ASSETS 0.3%   OF ISSUED SHARE CAPITAL HELD £0.6m  BOOK COST

PEGA
Founded in 1983, Pegasystems ('Pega') provides a platform that empowers the world's leading organisations to unlock business-transforming outcomes with real-time optimisation software. Clients use Pega's enterprise AI decisioning and workflow automation to solve pressing business challenges - from personalising engagement to automating service to streamlining operations. Pega has built a scalable and flexible architecture to help enterprises meet customer demands while continuously transforming for tomorrow.		£26.7m   VALUATION 2.1%   OF TOTAL ASSETS 0.4%   OF ISSUED SHARE CAPITAL HELD £1.5m  BOOK COST

Silicon Motion Technology ('SMT')
Silicon Motion Technology ('SMT') is the global leader in supplying NAND flash memory controllers for solid state storage devices. They supply more SSD controllers than any other company in the world for servers, PCs and other client devices and are the leading merchant supplier of eMMC and UFS embedded storage controllers used in smartphones, IoT devices and other applications. SMT also supplies customised high-performance hyperscale data center and specialised industrial and automotive SSD solutions. Customers include most of the NAND flash vendors, storage device module makers and leading OEMs.		£24.5m   VALUATION 1.9%   OF TOTAL ASSETS 1.1%   OF ISSUED SHARE CAPITAL HELD £1.7m  BOOK COST

Diploma PLC
Diploma is an international value-add distribution Group, organised across three sectors: Controls, Seals and Life Sciences. Value-add services are delivered alongside products, which include: wire & cable, connectors, fasteners and adhesives; seals, gaskets, hose and fluid power sealing products; surgical and diagnostic equipment, consumables and instrumentation. An entrepreneurial culture and decentralised management structure ensures that decisions are made close to the customer and that the businesses are agile and responsive to changes in the market and the competitive environment. Diploma operates in core geographies of North America, Continental Europe, UK and Australia.		£23.8m   VALUATION 1.8%   OF TOTAL ASSETS 0.3%   OF ISSUED SHARE CAPITAL HELD £0.3m  BOOK COST

Vicor Corporation
Vicor Corporation designs, develops, manufactures and markets modular power components and complete power systems based upon a portfolio of patented technologies. Vicor sells its products to the power systems market, including enterprise and high performance computing, industrial equipment and automation, telecommunications and network infrastructure, vehicles and transportation, aerospace and defence.		£19.9m   VALUATION 1.5%   OF TOTAL ASSETS 0.7%   OF ISSUED SHARE CAPITAL HELD £10.3m   BOOK COST

Nordic Semiconductor
Nordic Semiconductor is a Norwegian fabless semiconductor company specialising in wireless communication technology that powers the Internet of Things (IoT). Nordic was established in 1983 and has more than 1,500 employees across the globe. Nordic's Bluetooth Low Energy solutions pioneered ultra-low power wireless, making them the global market leader. The technology range was later supplemented by ANT+, Thread and Zigbee and in 2018 they launched low power, compact LTE-M/NB-IoT cellular IoT solutions to extend the penetration of the IoT. The Nordic portfolio was further complemented by Wi-Fi technology in 2021. Nordic's Bluetooth LE solutions are used by the world's leading brands in a variety of products, including wireless PC peripherals, gaming, sports and fitness, mobile phone accessories, consumer electronics, toys, healthcare and automation.		£15.6m   VALUATION 1.2%   OF TOTAL ASSETS 0.8%   OF ISSUED SHARE CAPITAL HELD £6.2m  BOOK COST

Volex
Volex is a leader in integrated manufacturing for mission-critical applications, in particular for power and data connectivity solutions. Volex supports international blue-chip customers in five key sectors: Electric Vehicles, Consumer Electricals, Medical, Complex Industrial Technology and Off-Highway. Headquartered in the UK, Volex has operations across 28 advanced manufacturing facilities, uniting 14,000 employees from 25 different nations. Products find their way to market through localised sales teams and authorised distributor partners, supporting Original Equipment Manufacturers and Electronic Manufacturing Services companies across the globe. In a world that grows more digitally complex by the day, customers choose Volex to deliver power and connectivity that drives everything from household essentials to life-saving medical equipment.		£15.1m   VALUATION 1.2%   OF TOTAL ASSETS 2.0%   OF ISSUED SHARE CAPITAL HELD £4.7m  BOOK COST

Supermicro Micro Computer ('Supermicro')
Supermicro Micro Computer ('Supermicro') is a global leader in application-optimised IT solutions. Founded and operating in San Jose, California, Supermicro delivers innovative enterprise, cloud, AI and 5G telco/edge IT infrastructure hardware, it is a total IT Solutions provider with server, AI, storage, IoT, switch systems, software and support services. Supermicro's motherboard, power and chassis design expertise further enables our development and production, enabling next generation innovation from cloud to edge for global customers. Products are designed and manufactured in-house (in the US, Taiwan and the Netherlands), leveraging global operations for scale and efficiency and optimised to improve TCO and reduce environmental impact (Green Computing). The award-winning portfolio of solutions enables customers to optimise for their exact workload and application by selecting from a broad family of systems built from flexible and reusable building blocks that support a comprehensive set of form factors, processors, memory, GPUs, storage, networking, power and cooling solutions (air-conditioned, free air cooling or liquid cooling).		£14.2m   VALUATION 1.1%   OF TOTAL ASSETS 0.1%   OF ISSUED SHARE CAPITAL HELD £1.3m  BOOK COST

BizLink
BizLink was founded in 1996 in Silicon Valley and has grown into a global team of over 20,000 employees across 20 countries. Initial products were power-cord sets, today BizLink offers a full range of wire harnesses, connectors and custom cable assemblies, whilst continuing to innovate in a developing a range of interconnect technologies. With agile manufacturing and collaborative R&D hubs across North America, Europe and Asia, BizLink combines global scale and local responsiveness		£13.1m   VALUATION 1.0%   OF TOTAL ASSETS 0.2%   OF ISSUED SHARE CAPITAL HELD £2.7m  BOOK COST

Radware
Radware is a global leader of cyber security and application delivery solutions for physical, cloud and software defined data centers. Its award-winning solutions portfolio secures the digital experience by providing infrastructure, application and corporate IT protection and availability services to enterprises globally. Radware's solutions empower enterprise and carrier customers worldwide to adapt to market challenges quickly, maintain business continuity and achieve maximum productivity while keeping costs down.		£12.1m   VALUATION 0.9%   OF TOTAL ASSETS 1.6%   OF ISSUED SHARE CAPITAL HELD £5.1m  BOOK COST

Descartes Systems ('Descartes')
Descartes Systems ('Descartes') offers networks, applications, global trade content and collaborative multi-modal logistics communities to improve the productivity, performance. safety and security of logistics and supply chain operations. Customers use Descartes modular, cloud-based and data content solutions to route, schedule, track, train and measure delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access and analyse global trade data; research and perform trade tariff and duty calculations; file customs and security documents for imports and exports; comply with trade regulations and complete numerous other logistics processes. Customers can purchase Descartes' solutions either on a subscription, transactional or perpetual license basis. The company serves transportation providers (air, ocean and truck modes), logistics service providers (including third-party logistics providers, freight forwarders, freight brokers and customs brokers) and manufacturers, retailers, distributors and business service providers. Descartes headquarters are in Waterloo, Ontario, Canada and they have offices and partners around the world.		£12.1m   VALUATION 0.9%   OF TOTAL ASSETS 0.2%   OF ISSUED SHARE CAPITAL HELD £0.4m  BOOK COST

Arlo Technologies ('Arlo')
Arlo Technologies ('Arlo') offers advanced home, business and personal security solutions. Arlo's deep expertise in AI- and CV-powered analytics, cloud services, user experience and product design, and innovative wireless and RF connectivity enables the delivery of a seamless, smart security experience for Arlo users that is easy to set up and interact with. Arlo's cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection. Arlo has recently launched several categories of award-winning connected devices, software and services. These include wire-free, smart Wi-Fi and LTE-enabled security cameras, video doorbells, floodlights, security system and Arlo's subscription service, Arlo Secure.		£11.7m   VALUATION 0.9%   OF TOTAL ASSETS 1.1%   OF ISSUED SHARE CAPITAL HELD £6.2m  BOOK COST

JFrog
JFrog the creator of the unified DevOps, DevSecOps and MLOps platform, aims to create a world of software delivered without friction from developer to production. The JFrog Software Supply Chain Platform is a single system of record that powers organisations to build, manage and distribute software quickly and securely, that is available, traceable and tamper-proof. Integrated security features also help identify, protect and remediate against threats and vulnerabilities. JFrog's hybrid, universal, multi-cloud platform is available as both SaaS services across major cloud service providers and self-hosted. Millions of users and over 7,000 customers worldwide, including a majority of the Fortune 100, depend on JFrog solutions to securely embrace digital transformation.		£10.6m   VALUATION 0.8%   OF TOTAL ASSETS 0.2%   OF ISSUED SHARE CAPITAL HELD £4.5m  BOOK COST

Trustpilot
Founded in Denmark in 2007, Trustpilot has since grown to become one of the world's leading consumer review platforms. Trustpilot offers a public platform where consumers can leave reviews for businesses and businesses can respond to honest feedback. The platform is open to all businesses and consumers - yet independent of both - every interaction on Trustpilot is transparent for all to see. Trustpilot business model is to charge recurring software fees to its corporate customers for the use of the platform.		£10.5m   VALUATION 0.8%   OF TOTAL ASSETS 01.6%  OF ISSUED SHARE CAPITAL HELD £6.8m  BOOK COST

Varonis
Varonis is a leader in data security, fighting a different battle than conventional cybersecurity companies. The company's cloud-native Data Security Platform continuously discovers and classifies critical data, removes exposures and detects advanced threats with AI-powered automation. Thousands of organisations worldwide trust Varonis to defend their data wherever it lives - across SaaS, IaaS and hybrid cloud environments. Customers use Varonis to automate a wide range of security outcomes, including data security posture management (DSPM), data classification, data access governance (DAG), data detection and response (DDR), data loss prevention (DLP) and insider risk management.		£10.2m   VALUATION 0.8%   OF TOTAL ASSETS 0.4%   OF ISSUED SHARE CAPITAL HELD £5.2m  BOOK COST

GB Group ('GBG')
GB Group ('GBG'), was founded in 1989, originally pioneering new ways of delivering address management services. Since then, the offering has grown to cover three core areas of Location, Identity & Fraud, which together create confidence online. The location business ensures addresses and locations can be easily captured, verified and managed. GBG's digital identity verification tools ensure that companies are trading with good customers and can identify the bad actors. Fraud prevention solutions reduce financial risk and ensure compliance with regulations. GBG's future goal is to facilitate online environments where everyone can transact with the complete and unconditional confidence they expect.		£10.1m   VALUATION 0.8%   OF TOTAL ASSETS 1.7%   OF ISSUED SHARE CAPITAL HELD £4.5m  BOOK COST

Telecom Plus
Telecom Plus, which owns and operates Utility Warehouse (UW), is the UK's leading multiservice utility provider, offering bundled household services - energy, broadband, mobile and insurance. Customers benefit from the convenience of a single monthly bill, consistently good value across all their utilities and exceptional service levels. Customers sign up through a network of local UW Partners all across the country. These Partners recommend UW's services to friends, family and people they know by word-of-mouth.		£10.0m   VALUATION 0.8%   OF TOTAL ASSETS 0.9%   OF ISSUED SHARE CAPITAL HELD £5.0m  BOOK COST

Seeing Machines
Seeing Machines, a global company founded in 2000 and headquartered in Australia, is an industry leader in vision-based monitoring technology that enable machines to see, understand and assist people. Seeing Machines' technology portfolio of AI algorithms, embedded processing and optics power products that need to deliver reliable real-time understanding of vehicle operators. The technology spans the critical measurement of where a driver is looking, through to classification of their cognitive state as it applies to accident risk. Reliable "driver state" measurement is the end-goal of driver monitoring systems (DMS) technology. Seeing Machines develops DMS technology to drive safety for automotive, commercial fleet, off-road and aviation. The company has offices in Australia, the U.S., Europe and Asia, and supplies technology solutions and services to industry leaders in each market vertical.		£9.8m  VALUATION 0.8%   OF TOTAL ASSETS 3.7%   OF ISSUED SHARE CAPITAL HELD £7.4m  BOOK COST

STATEMENT OF COMPREHENSIVE INCOME  

For the year ended 31 December 2025

		2025	2025	2025	2024	2024	2024
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	9	-	98,869	98,869	-	131,830	131,830
Losses on foreign exchange		-	(735)	(735)	-	(194)	(194)
Income	2	15,629	-	15,629	17,169	-	17,169
Investment management fee	3	(12,558)	-	(12,558)	(12,894)	-	(12,894)
Other administrative expenses	4	(2,250)	(10)	(2,260)	(1,147)	(8)	(1,155)
Profit before taxation		821	98,124	98,945	3,128	131,628	134,756
Taxation	6	(475)	-	(475)	(460)	-	(460)
Profit after taxation		346	98,124	98,470	2,668	131,628	134,296
Profit per ordinary share (basic
and diluted)	8	0.70p	198.31p	199.01p	4.96p	244.77p	249.73p

There is no final dividend proposed (2024 - nil). More information on dividend distributions can be found in note 7.

The total column of this statement is the profit and loss account of the Company, prepared in accordance with UK Accounting Standards.

The profit after taxation is the total comprehensive income and therefore no additional statement of comprehensive income is presented. The supplementary revenue and capital columns are presented for information purposes in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies. All items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year.

The accompanying notes are an integral part of this statement.

STATEMENT OF FINANCIAL POSITION

For the year ended 31 December 2025

		2025	2024
	Notes	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	9	1,168,447	1,230,027
Current assets
Cash and cash equivalents		124,266	21,890
Other receivables	10	1,215	1,850
		125,481	23,740
Current liabilities
Other payables	11	(1,515)	(1,165)
		(1,515)	(1,165)
Net current assets		123,966	22,575
TOTAL NET ASSETS		1,292,413	1,252,602
Capital and reserves
Called up share capital	12	11,965	12,585
Share premium	13	73,738	73,738
Capital redemption reserve	13	9,987	9,367
Capital reserve	13	1,197,704	1,158,239
Revenue reserve	13	(981)	(1,327)
TOTAL SHAREHOLDERS' FUNDS		1,292,413	1,252,602
NET ASSET VALUE PER ORDINARY SHARE
(including current year income)	14	2,700.49p	2,488.24p
NET ASSET VALUE PER ORDINARY SHARE
(excluding current year income)	14	2,699.77p	2,482.94p

The financial statements of Herald Investment Trust plc (company registration number 02879728) were approved by the board of directors and authorised for issue on 20 February 2026 and signed on its behalf by

ANDREW JOY

CHAIRMAN

The accompanying notes are an integral part of this statement.

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2025

		Called up		Capital			Total
		Share	Share	Redemption	Capital	Revenue	Shareholders'
		Capital	Premium	Reserve	Reserve	Reserve	funds
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Shareholders' funds at 1 January 2025		12,585	73,738	9,367	1,158,239	(1,327)	1,252,602
Profit after taxation		-	-	-	98,124	346	98,470
Shares purchased for cancellation	12	(620)	-	620	(58,659)	-	(58,659)
Shareholders' funds at 31 December 2025		11,965	73,738	9,987	1,197,704	(981)	1,292,413
For the year ended 31 December 2024
		Called up		Capital			Total
		Share	Share	Redemption	Capital	Revenue	Shareholders'
		Capital	Premium	Reserve	Reserve	Reserve	funds
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Shareholders' funds at 1 January 2024		14,034	73,738	7,918	1,154,062	(3,995)	1,245,757
Profit after taxation		-	-	-	131,628	2,668	134,296
Shares purchased for cancellation	12	(1,449)	-	1,449	(127,451)	-	(127,451)
Shareholders' funds at 31 December 2024		12,585	73,738	9,367	1,158,239	(1,327)	1,252,602

The accompanying notes are an integral part of this statement.

STATEMENT OF CASH FLOWS

For the year ended 31 December 2025

		2025	2025	2024	2024
	Notes	£'000	£'000	£'000	£'000
Cash flow from operating activities
Profit before taxation		98,945		134,756
Adjustments for gains on investments		(98,869)		(131,830)
Purchase of investments		(247,249)		(229,991)
Sale of investments		408,315		335,563
Return of capital		138		348
Decrease in receivables		649		123
Increase/(decrease) in payables		350		(24)
Amortisation of fixed income book cost		(755)		(1,424)
Effect of foreign exchange rate changes		735		194
Overseas tax on overseas income		(489)		(465)
Net cash inflow from operating activities			161,770		107,250
Cash flow from financing activities
Shares purchased for cancellation	12	(58,659)		(127,451)
Net cash outflow from financing activities			(58,659)		(127,451)
Net increase/(decrease) in cash and cash equivalents			103,111		(20,201)
Cash and cash equivalents at start of the year			21,890		42,285
Effect of foreign exchange rate changes			(735)		(194)
Cash and cash equivalents at the end of the year			124,266		21,890
Comprised of:
Cash and cash equivalents			124,266		21,890

Cash flow from operating activities includes interest received of £3,743,000 (2024 - £3,765,000) and dividends received of £11,053,000 (2024 - £11,896,000).

As the Company did not have any long-term debt at both the current and prior year ends, no reconciliation of the net debt position is presented.

The accompanying notes are an integral part of this statement.

INCOME.

	2025	2024
	£'000	£'000
Dividend income from investments
UK dividends from listed investments	2,801	3,146
UK dividends from unlisted investments and AIM companies	2,565	3,454
Overseas dividends from UK-listed and AIM companies	265	266
Overseas dividend income	5,714	5,157
	11,345	12,023
Interest income from equity investments
Income from unlisted and AIM companies UK convertible bonds*	(15)	470
Income from unlisted US convertible bonds	17	205
	2	675
Fixed interest
UK interest from government securities	68	-
Overseas interest from government securities	2,260	2,656
	2,328	2,656
Other income
Deposit interest	1,804	1,702
Other income	150	113
	1,954	1,815
Total income	15,629	17,169

* Includes £428,000 receivable interest income written off as an unlisted security was revalued to nil during the year.

Included within dividend income are special dividends of £148,000 (2024 - £330,000).

Included within deposit interest is interest received of £1,804,000 (2024 - £1,702,000).

STATUS

The Company is an investment company within the meaning of s833 of the Companies Act 2006 and operates as an investment trust in accordance with s1158 of the Corporation Tax Act 2010 as amended ("s1158"). The Company is governed by its articles of association, amendments to which must be approved by shareholders by way of a special resolution, and is subject to the UK Listing Rules of the FCA. The Company obtained approval from HM Revenue and Customs of its status as an investment trust under s1158 and the directors are of the opinion that the Company has and continues to conduct its affairs in compliance with s1158 since this approval was granted.

BUSINESS MODEL

The Company has appointed Herald Investment Management Limited ("HIML") as the Alternative Investment Fund Manager to provide all portfolio management and risk management services. HIML is authorised and regulated by the FCA both for investment management and as an Alternative Investment Fund Manager (see the Directors' Report).

Administration of the Company and its investments has been delegated by HIML to the Bank of New York Mellon (International) Limited ("BNYMIL"). BNYMIL is also the depositary under a tripartite agreement between HIML, the Company and BNYMIL, and is responsible for custody activities. The company secretary is NSM Funds (UK) Limited ("NSM").

OBJECTIVE

The Company's objective is described on the inside front cover of this document.

INVESTMENT POLICY - STRATEGY

While the policy is global investment in smaller quoted companies in technology and communications, the approach is to construct a diversified portfolio through the identification of individual companies which offer long-term growth potential, typically over a five-year horizon or more. The portfolio is actively managed and does not seek to track any comparative index. With a remit to invest in smaller companies with market capitalisation generally below $5bn at the point of purchase, there tends to be a correlation with the performance of smaller companies, as well as that of the technology and communications sectors. A degree of volatility relative to the overall market should be expected.

The risk associated with the illiquidity of smaller companies is reduced by generally restricting the stake in any one company to less than 10% of the shares in issue.

A number of investments are in early-stage companies, which have a higher stock specific risk but the potential for above average growth. Stock specific risk is reduced by having a diversified portfolio.

In addition, to contain the risk of any one holding, the Manager generally takes profits when a holding reaches more than 5% of the portfolio. The Manager actively manages the exposure within the constraint that illiquid positions cannot be traded for short-term movements.

The Company has a policy not to invest more than 15% of gross assets in other UK-listed investment companies. From time to time, fixed interest holdings, non--equity or unquoted investments may be held on an opportunistic basis.

The Company recognises the long-term advantages of gearing and has a maximum gearing limit of 50% of net assets. Borrowings are invested primarily in equity markets but the Manager is permitted to invest in other securities in the companies in the target areas when it is considered that the investment grounds merit the Company taking a geared position. The board's intention is to gear the portfolio when appropriate, taking into account current and future cashflow requirements of the Manager. Gearing levels are monitored closely by the Manager and reviewed by directors at each board meeting.

The Company may use derivatives which will be principally, but not exclusively, for the purpose of efficient portfolio management (i.e. for the purpose of reducing, transferring or eliminating investment risk in its investments, including protection against currency risk).

A detailed analysis of the Company's investment portfolio is set out in the Investment Manager's Report.

PRINCIPAL RISKS AND UNCERTAINTIES

The audit committee, on behalf of the board, regularly undertakes a robust assessment of the principal, including emerging, risks facing the Company. These include those that would threaten its business model, future performance, solvency or liquidity (see Corporate Governance Report and the Audit Committee Report). Principal risks are also considered as part of the board's annual strategy meeting. The principal risks that follow are those identified by the board after taking account of mitigating factors.

All risks are documented on a risk register and are grouped into six main categories: strategic risk; market, economic and geopolitical risk; investment management risk; operational risk; emerging/external risk; and regulatory risk. Risks are rated by impact and likelihood of occurrence, with the ratings charted on two risk matrices: a pre-mitigation and a post-mitigation one. Mitigation takes into account processes, procedures and internal controls, and the post-mitigation matrix is used to identify the Company's principal risks. The risk register is reviewed on an ongoing basis, in an attempt to capture all risks and ensure appropriate mitigation is in place, and to enable directors to concentrate on principal risks whilst ensuring all risks are considered. Emerging risks are considered by the board as they come into view and are incorporated into the existing review of the Company's risk register.

As part of the risk review, the board considered the challenging global economic and geopolitical environment including, but not limited to: the continuing effects of tariffs, armed conflicts, climate change (covering adverse impacts, transition and retrenchment of climate policies globally), inflation and interest rates. Closer to the home front, the board considered the challenges to the UK stock market in particular, in conjunction with the wider challenge to investment in the small and mid-cap end of the technology market, and the existential risk to the Company given the non-alignment of shareholders' objectives with each other and the disproportionate challenge to the Company's long-term investment basis caused by the Company's significant minority shareholder.

A. MARKET RISK

(i)       Other price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate or currency rate movement;

(ii)      Interest rate risk, being the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates; and

(iii)     Foreign currency risk, being the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

B. CREDIT RISK

Being the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

The Company invests in government debt securities which are investment grade.

Cash and cash equivalent balances are held only with approved deposit takers which are regulated entities and considered of high credit quality.

The Company is exposed to counterparty credit risk from the parties with which it trades and will bear the risk of settlement default. Counterparty credit risk to the Company arises from transactions to purchase or sell investments held within the portfolio.

There were no past due nor impaired assets as of 31 December 2025 (2024 - nil).

The counterparties engaged with the Company are regulated entities and of high credit quality.

C. LIQUIDITY RISK

Being the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

These risks and the policies for managing them have been applied throughout the year and are summarised below. Further detail is contained in the strategic report.

A. MARKET RISK

(i) Other Price Risk

The Company's investment portfolio is exposed to market price fluctuations which are monitored by the Manager in pursuance of the corporate objective. Quoted securities held by the Company are valued at bid prices, whereas material unquoted investments are valued by the directors on the basis of the latest information in line with the relevant principles of the International Private Equity and Venture Capital Valuation Guidelines (Accounting Policy 1(c)). These valuations represent the fair value of the investments, see note 9.

A full list of the Company's investments is given in the strategic report. In addition, a geographical analysis of the portfolio, an analysis of the investment portfolio by broad industrial or commercial sector and a review of the 20 largest equity investments by their aggregate market value, are shown in the strategic report.

Other Price Risk Sensitivity

8.8% of the Company's total equity investments at 31 December 2025 (2024 - 11.9%) were listed on the main list of the London Stock Exchange and a further 15.9% (2024 - 24.7%) on AIM. The NASDAQ Stock Exchange accounts for 32.2% (2024 - 26.6%), New York Stock Exchange for 11.7% (2024 - 7.8%) and other stock exchanges or unquoted 31.4% (2024 - 29.0%). A 10% increase in equity investment prices at 31 December 2025 would have increased total net assets and profit & loss after taxation by £108,822,000 (2024 - £116,861,000). A decrease of 10% would have the exact opposite effect. The portfolio does not target any exchange as a comparative index, and the performance of the portfolio has a low correlation to generally used indices.

The shares of Herald Investment Trust plc have an underlying NAV per share. The NAV per share of Herald Investment Trust plc fluctuates on a daily basis. In addition, there is volatility in the discount/premium the share price has to NAV.

(ii) Interest Rate Risk

The majority of the Company's assets are equity shares and other investments which neither pay interest nor have a maturity date. However, the Company does hold convertible bonds and Government bonds, the interest rate and maturity dates of which are detailed below. Interest is accrued on cash balances at a rate linked to the local base rate.

The interest rate risk profile of the financial assets and financial liabilities at 31 December was:

FINANCIAL ASSETS

			2025			2024
		2025	Weighted		2024	Weighted
		Weighted	average		Weighted	average
		average	period		average	period
		interest	until		interest	until
	2025	rate/	maturity/	2024	rate/	maturity/
	Fair value	interest	maturity	Fair value	interest	maturity
	£'000	rate	date	£'000	rate	date
Fixed rate:
US bonds	29,689	3.8%	0.3 years	31,919	3.9%	0.3 years
EMEA bonds	15,795	1.5%	0.1 years	14,689	1.8%	0.2 years
Asia Pacific bonds	14,971	1.3%	0.8 years	14,809	1.3%	1.8 years
UK bonds	19,772	1.5%	0.6 years	-	-	-
Overseas convertible bonds	-	-	-	559	18.0%	0.1 years
UK convertible bonds	-	-	-	835	16.0%	1.7 years
Floating rate cash:
Non-sterling	87,208	2.1%		8,593	4.0%
Sterling	37,058	3.6%		13,297	4.9%
	124,266			21,890

The benchmark rate which determines the interest payments received on cash balances is the Bank of England base rate, the European Central Bank rate and the United States Federal Reserve rate.

Interest rate risk sensitivity

(a) Cash

An increase of 100 basis points in interest rates as at 31 December 2025 would have a direct effect on net assets. Based on the position at 31 December 2025, over a full year, an increase of 100 basis points would have increased the profit & loss after taxation by £1,243,000 (2024 - £219,000) and would have increased the net asset value per share by 2.60p (2024 - 0.44p). The calculations are based on the cash balances as at the respective balance sheet dates and are not representative of the year as a whole.

(b) Fixed rate bonds

An increase of 100 basis points in bond yields as at 31 December 2025 would have decreased total net assets and profit & loss after taxation by £332,000 (2024 - £367,000) and would have decreased the net asset value per share by 0.69p (2024 - 0.73p). A decrease in bond yields would have had an equal and opposite effect. The convertible loan stocks having an element of equity are not included in this analysis as given the nature of the businesses and the risk profile of their balance sheets; they are considered to have more equity like characteristics.

(iii) Foreign Currency Risk

The Company's reporting currency is sterling, but investments are made in overseas markets as well as the United Kingdom and the asset value can be affected by movements in foreign currency exchange rates.

Furthermore many companies trade internationally both through foreign subsidiaries, and through exports. The greatest foreign currency risk occurs when companies have a divergence in currencies for costs and revenues. A much less risky exposure to currency is straight translation of sales and profits. The list of investments in the strategic report breaks down the portfolio by geographic listing. However the location of the stock market quote only has a limited correlation to the costs, revenues and even activities of those companies, and so this note should not be regarded as a reliable guide to the sensitivity of the portfolio to currency movements. For example, the holdings in the portfolio that have suffered most from US$ weakness are UK companies with dollar revenues and sterling costs.

The Company does not hedge the sterling value of investments that are priced in other currencies. Overseas income is subject to currency fluctuations. The Company does not hedge these currency fluctuations because it is impossible to quantify the effect for the reasons stated above. However, from time to time the manager takes a view by holding financial assets or liabilities in overseas currencies.

Exposure to currency risk through asset allocation by currency of listing is indicated below:

At 31 December 2025

			Other
			receivables
		Cash and	and	Net
	Investments	deposits	payables	exposure
	£'000	£'000	£'000	£'000
US dollar	507,005	16,668	279	523,952
Euro	87,609	29,629	124	117,362
Taiwan dollar	55,582	6,931	21	62,534
Australian dollar	23,013	33,980	-	56,993
Japanese yen	53,980	-	69	54,049
Norwegian krone	40,773	-	205	40,978
Canadian dollar	33,069	-	9	33,078
Swedish krona	18,678	-	-	18,678
Korean won	18,312	-	78	18,390
Singaporean dollar	14,971	-	31	15,002
Other overseas currencies	9,857	-	10	9,867
Exposure to currency risk on translation of valuations of securities listed in
overseas currencies	862,849	87,208	826	950,883
Sterling	305,598	37,058	(1,126)	341,530
	1,168,447	124,266	(300)	1,292,413
At 31 December 2024
			Other
			receivables
		Cash and	and	Net
	Investments	deposits	payables	exposure
	£'000	£'000	£'000	£'000
US dollar	436,547	2,663	344	439,554
Euro	101,417	2,771	95	104,283
Taiwan dollar	51,898	3,159	-	55,057
Japanese yen	47,741	-	44	47,785
Norwegian krone	36,083	-	207	36,290
Canadian dollar	32,895	-	16	32,911
Australian dollar	27,039	-	-	27,039
Swedish krona	19,257	-	-	19,257
Singaporean dollar	14,920	-	32	14,952
Other overseas currencies	17,494	-	139	17,633
Exposure to currency risk on translation of valuations of securities listed in
overseas currencies	785,291	8,593	877	794,761
Sterling	444,736	13,297	(192)	457,841
	1,230,027	21,890	685	1,252,602

Foreign currency risk sensitivity

At 31 December 2025, had sterling strengthened by 10% (2024 - 10%) in relation to all currencies, with all other variables held constant, total net assets and profit & loss after taxation would have decreased by the amounts shown below based on the balances denominated in foreign currency. A 10% (2024 - 10%) weakening of sterling against all currencies, with all other variables held constant, would have had the exact opposite effect on the financial statement amounts. However, companies whose cost base diverges in currency terms from its sales will in the longer term have a significantly greater effect on valuation than simple translation. In the short term investee companies generally cover their currency exposure to varying degrees. There is insufficient publicly disclosed information to quantify this, but in the long-term this effect is expected to dwarf simple translation of foreign listings in terms of both risk and reward, because many investee companies trade globally. Furthermore, the country of listing is not necessarily an indication of the geography of some or even any operational activities for investee companies. The Manager does not use financial instruments to protect against currency movements. From time to time financial leverage has been made using debt in overseas currencies.

	2025	2024
	£'000	£'000
US dollar	52,395	43,955
Euro	11,736	10,428
Taiwan dollar	6,253	5,506
Australian dollar	5,699	2,704
Japanese yen	5,405	4,779
Norwegian krone	4,098	3,629
Canadian dollar	3,308	3,291
Swedish krona	1,868	1,926
Korean won	1,839	1,372
Singaporean dollar	1,500	1,495
Other overseas currencies	987	391
	95,088	79,476

B. Credit Risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment which it has entered into with the Company. The Manager monitors counterparty risk on an ongoing basis.

The Company has investments in convertible loan stocks that have an element of equity. These securities are viewed as having a risk profile similar to the equity holdings. This is because the convertibles held are in nascent technology companies that may be loss making and may have weak balance sheets. For this reason these stocks are categorised as equity holdings and for risk management purposes excluded from the credit risk analysis.

Credit Risk Exposure

The exposure to credit risk at 31 December was:

	Credit rating	2025	2024
	(S&P)	£'000	£'000
Government debt securities
Norway	AAA	15,795	14,689
Singapore	AAA	14,971	14,809
UK	AA	19,772	-
US	AA+	29,689	31,919
		80,227	61,417
Cash and cash equivalents		124,266	21,890
		204,493	83,307

During the year the maximum exposure in fixed interest investments was £81,019,000 (2024 - £61,804,000) and the minimum £30,163,000 (2024 - £29,506,000). The maximum exposure in cash was £124,266,000 (2024 - £68,825,000) and the minimum £37,480,000 (2024 - £21,890,000).

C. Liquidity Risk

The Company's policy with regard to liquidity is to provide a degree of flexibility so that the portfolio can be repositioned when appropriate and that most of the assets can be realised without an excessive discount to the market price.

Equity Securities

The Company's unquoted investments are not readily realisable, but these only amount to 1.3% of the Company's total assets at 31 December 2025 (2024 - 1.4%).

In practice, liquidity in investee companies is imperfect, particularly those with a market value of less than £100m. To reduce this liquidity risk it is the policy to diversify the holdings and generally to restrict the holding in any one company to less than 10% of the share capital of that company. Furthermore, to contain the risk of any one holding, the Manager generally takes profits when a holding reaches more than 5% of the portfolio.

The market valuation of each underlying security gives an indication of value, but the price at which an investment can be made or realised can diverge materially from the bid or offer price depending on market conditions generally and particularly to each investment. 8.7% (£93m) (2024 - 11.9% (£136m)) of the listed equities in the portfolio are invested in stocks with a market capitalisation below £100m, where liquidity is expected to be more limited. If these stocks had on average a realisable value 20% below the bid price the value of the total fund would be adversely affected by 1.4% (2024 - 2.2%).

Liquidity Risk Exposure

Contractual maturities of the financial liabilities at the year end, based on the earliest date on which payment can be required are as follows:

	2025	2024
	One year	One year
	or less	or less
	£'000	£'000
Other payables	1,515	1,165
	1,515	1,165

Fair Value of Financial Instruments

The Company's investments, as disclosed in the Company's balance sheet, are valued at fair value.

Nearly all of the Company's portfolio of investments are disclosed in the Level 1 category as defined in FRS 102.

Categorisation is based on the lowest level input that is significant to the fair value measure in its entirety.

The three levels set out in FRS 102 follow:

Level 1 - The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.

Level 3 - Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.

The investment manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The analysis of the valuation basis for the financial instruments based on the hierarchy as at 31 December is as follows:

At 31 December 2025

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Financial assets
Equity investments	1,071,594	-	11,239	1,082,833
Government debt securities	80,227	-	-	80,227
Unquoted loan stocks	-	-	5,387	5,387
Total investments	1,151,821	-	16,626	1,168,447
At 31 December 2024
	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Financial assets
Equity investments	1,151,283	-	10,546	1,161,829
Government debt securities	61,417	-	-	61,417
Unquoted loan stocks	-	-	6,781	6,781
Total investments	1,212,700	-	17,327	1,230,027

Unquoted Investments are valued £16,626,000 as at 31 December 2025 (2024 - £17,327,000). A 10% increase in unquoted equity investment prices at 31 December 2025 would have increased total net assets and profit & loss after taxation by £1,662,600 (2024 - £1,732,700). A decrease of 10% would have the exact opposite effect.

A reconciliation of fair value measurements in Level 3 is set out below:

At 31 December 2025

	£'000
Opening balance at 1 January 2025	17,327
Purchases	726
Sales	(1,065)
Total gains or (losses)
- on assets sold during the year	482
- on assets held at 31 December 2025	(2,760)
Net assets transferred during the year	1,916
Closing balance at 31 December 2025	16,626
At 31 December 2024
	£'000
Opening balance at 1 January 2024	15,085
Purchases	3,000
Sales	(2,361)
Total losses
- on assets sold during the year	(87)
- on assets held at 31 December 2024	(6,753)
Net assets transferred during the year	8,443
Closing balance at 31 December 2024	17,327

VIABILITY STATEMENT

The Company, as an investment trust, is a collective investment vehicle designed and managed for the long-term. The directors consider that three years is an appropriate forward-looking time period to consider viability. This recognises the Company's investment strategy, which includes investment in smaller companies, some of which are early-stage and for which a three-year horizon is a meaningful period over which to judge prospects, the board's assessment of the main risks that threaten the ongoing business model and the relatively fast-moving nature of the sectors in which the Company invests. Inevitably, investment in smaller and early-stage companies carries higher risks, both in terms of stock liquidity and longer-term business viability and this risk is accepted by the board as necessary to seek to deliver high returns.

There are no current plans to amend the investment strategy, which has delivered good investment performance for shareholders over many years and, the directors believe, should continue to do so. The investment strategy and its associated risks are kept under constant review by the board. The board undertook a robust assessment of the risks pertaining to the Company during the year, including risks to the Company's viability, and this is set out in the principal risks and uncertainties section. This assessment included emerging risks such as ongoing global tensions (armed conflicts, global trade tariffs), the risk arising from the recent increase in minority activist shareholder concentration, and continuing negative growing effects of climate change. As part of this, the board considered several severe but plausible scenarios, including the impact of significant market movements.

Other items relevant in the directors' assessment of the Company's viability were: income and expenses projections and the expectation that a majority of the Company's investments comprise readily realisable securities as substantiated by liquidity analysis of the portfolio; and the fact that as a closed-ended investment company, the Company is not affected by the liquidity issues of open-ended companies caused by large or unexpected redemptions.

The board takes account of the triennial shareholder vote on whether the Company should continue as an investment trust. At the AGM in March 2025, 65.27% of votes cast were in favour of continuation (AGM vote in favour: 2022 - 99.99% and 2019 - 99.88%), with the lower than normal vote in favour reflecting an activist voting against the resolution following the failure of the January 2025 requisitioned general meeting resolutions to replace the board with the activist's nominees. The next vote, which is an ordinary resolution, will be at the Company's AGM in 2028.

Accordingly, the directors confirm that, based on the above and on reviews conducted as part of the detailed internal controls and risk management processes, they have a reasonable expectation that the Company will continue to maintain its status as an investment trust, to implement its investment strategy and to operate and be able to meet its liabilities as they fall due for at least the next three financial years.

The directors' assessment of the viability of the Company has also taken into account its communications with, and the actions of, Saba. The latter include Saba's requisitioned general meeting in January 2025 (which failed to remove the directors, amongst other things), and Saba's votes against the re-election of directors and the continuation vote (amongst other things) at the Company's AGM later in March.

Saba's significant minority shareholding means that it can block all special (75%) resolution votes, as demonstrated at the AGM. Therefore, as explained in more detail in the Chairman's Statement, on 9 January 2026 the Company issued an announcement that the board had assessed that it is not sustainable to do nothing given that a process of attrition may eventually see Saba able to win a simple majority vote even though it itself is a minority shareholder, and launched a Tender Offer. The Tender Offer was subsequently cancelled and the board is currently in dialogue with Saba, however, the outcome of this is uncertain and the option to go ahead with the Backstop Tender remains. Notwithstanding the possible strategic outcomes of the discussions or the Backstop Tender, the Company's ability to meet its liabilities as they fall due remains, as does its financial and operational ability. However, were an action proposed by the Company to result in the Company changing its investment strategy and/or business model, the period over which it would be reasonable to assess the viability of the Company could be significantly changed, as is also the case were the Company to propose a wind up. These considerations do not affect the underlying viability of the Company.

STATEMENT OF DIRECTORS' RESPONSIBILITIES.

IN RESPECT OF THE FINANCIAL STATEMENTS

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland". Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the directors are required to:

-      select suitable accounting policies and then apply them consistently;

-      make judgements and accounting estimates that are reasonable and prudent;

-      state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

-      prepare the financial statements on the going concern basis, unless it is inappropriate to assume that the Company will continue in business.

The directors are responsible for the keeping of adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors have delegated responsibility to the Manager for the maintenance and integrity of the Company's page of the Manager's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The work carried out by the auditor does not involve any consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Each of the directors, whose names and functions are listed in the directors' biographies confirm that, to the best of their knowledge:

-      the financial statements, which have been prepared in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), give a true and fair view of the assets, liabilities, financial position and loss of the Company;

-      the annual report and financial statements includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces and the Directors' Report contains those matters required to be disclosed by applicable law; and

-      they consider that the annual report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

On behalf of the board

ANDREW JOY

Chairman

20 February 2026

Status of announcement

2024 Financial Information

The figures and financial information for 2024 are extracted from the published Annual Report and Accounts for the year ended 31 December 2024 and do not constitute the statutory accounts for that year. The 2024 Annual Report and Accounts have been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2025 Financial Information

The figures and financial information for 2025 are extracted from the Annual Report and Accounts for the year ended 31 December 2025 and do not constitute the statutory accounts for the year. The 2025 Annual Report and Accounts include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The 2025 Annual Report and Accounts will be delivered to the Registrar of Companies in due course.

Neither the contents of the Company's web pages nor the contents of any website accessible from hyperlinks on the Company's web pages (or any other website) is incorporated into, or forms part of, this announcement.

 

END