REG-Aberforth Smaller Companies Trust Plc: Final Results
29/01/2026 14:15
Aberforth Smaller Companies Trust plc
Audited Annual Results for the year to 31 December 2025
The following is an extract from the Company's Annual Report and Financial
Statements for the year to 31 December 2025. Page references correspond to the
2025 Annual Report & Financial Statements. The Annual
Report is expected to be posted to shareholders by 6 February 2026.
Members of the public may obtain copies from Aberforth Partners
LLP, 14 Melville Street, Edinburgh EH3 7NS or from its website:
https://www.aberforth.co.uk/trusts-and-funds/aberforth-smaller-companies-trust-plc/
. A copy will also shortly be available for
inspection at the National Storage Mechanism at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
.
FINANCIAL HIGHLIGHTS
Year to 31 December 2025
Net Asset Value per Ordinary Share Total Return 7.9%
DNSCI (XIC) Total Return 12.7%
Ordinary Share Price Total Return 10.8%
Total ordinary dividends (excluding special dividend) for the year of 46.80p
per share represents growth of 7.3% compared to last year’s 43.60p per
share. In addition, a special dividend of 12.00p (last year: 6.00p) results in
total dividends of 58.80p per share for the year.
INVESTMENT OBJECTIVE
The investment objective of the Company is to achieve a net asset value total
return (with dividends reinvested) greater than that of the Deutsche Numis
Smaller Companies Index (excluding Investment Companies) (“DNSCI (XIC)” or
“benchmark”) over the long term.
CHAIRMAN’S STATEMENT TO SHAREHOLDERS
Review of performance
ASCoT completed its 35th year in the twelve months to 31 December 2025 and
recorded a net asset value total return of 7.9%. The share price total return
was higher at 10.8%, which reflected a narrowing of the discount between the
net asset value and share price. ASCoT’s small company benchmark is the
Deutsche Numis Smaller Companies Index (excluding investment companies), which
is abbreviated throughout this report as DNSCI (XIC). Its total return in 2025
was 12.7%. The positive return from small companies is welcome, but it was
eclipsed in 2025 by that of larger companies: the FTSE All-Share was up by a
remarkable 24.0%. I touch on the context for performance in 2025 below, while
the Managers’ Report as usual goes into the important influences on absolute
and relative performance in greater depth.
ASCoT’s long term performance record is strong. Since inception in 1990,
ASCoT’s net asset value total return has compounded at an 11.7% annual rate,
which compares with 9.7% for the DNSCI (XIC).
Investment background in 2025
Donald Trump’s second presidency took shape in the opening months of 2025.
It was dominated by the so-called Liberation Day tariffs, which shocked
financial markets and sent share prices around the world lower. The long
lasting impact on businesses is unclear since the measures are subject to
legal challenge in the US itself and negotiations between countries continue.
However, after their initial consternation, markets took confidence from a
series of trade deals that indicate a pragmatism on the part of the US’s
trading partners, and that would seem to reduce the risk of a spiralling trade
war. Sentiment also improved as geopolitical risk eased. The war in Ukraine
continues, but the US has worked to achieve a ceasefire between Israel and
Hamas. The recovery in share prices was further enhanced by what often feels
like an obsession with AI. There is growing excitement that the vast amounts
being invested by the large US technology companies will generate commensurate
profits in due course.
However, I would note that the strong returns in 2025 were not the preserve of
the AI leaders, as the performance of larger companies in the UK showed in
shrugging off concerns about the UK’s politics and economy. If the FTSE
All-Share showed what was possible, the valuation of smaller companies
continues to bear the brunt of concerns about the UK’s fiscal position.
Their share prices have struggled as both recent Budgets leaned on the private
sector and the political stability promised by Labour’s decisive majority
remained elusive. Amid this uncertainty, it is important to remember that the
market’s reservations about smaller companies contrasted with another year
of dividend growth and share buy-backs, funded by the strong free cash flow
and balance sheets that characterise the DNSCI (XIC) and ASCoT’s portfolio.
These qualities are not lost on overseas companies or private equity as
takeovers of small companies carry on at an unusually high rate. ASCoT’s
performance continued to benefit from this takeover interest as recommended
bids for eight of the investee companies were received in 2025.
Dividends
Despite the caution about the state of the UK’s politics and economy, the
Investment Income from Revenue that ASCoT received from its investee companies
grew by 7% in 2025. This outcome was better than the Managers’ estimates at
the start of the year and surpassed the previous high point in 2023. The
Revenue Return per Ordinary Share was 64.0p. Excluding special dividends
received in both years, the Revenue Return per Ordinary Share rose by 13% in
2025 compared with 2024. This good rate of progress was helped by the year’s
share buy-back activity, which is described below.
The Board’s ambition is to grow ASCoT’s full year ordinary dividend above
the year-on-year rate of CPI inflation, which was 3.4% in December 2025. Our
dividend deliberations are also influenced by ASCoT’s dividend experience
over the year and on the Managers’ forecasts for coming years. We are
conscious that the dividends paid by ASCoT are an output of the Managers’
investment process and that they should not lead that process. With this in
mind, we take comfort from ASCoT’s healthy revenue reserves, which afford
the Managers investment flexibility and allow dividends to move ahead even in
testing times, most recently during the pandemic.
The Board proposes a final dividend of 32.5p per Ordinary Share, which
compares with the previous year’s 30.0p. Together with the interim dividend
of 14.3p, the full year dividend would be 46.8p. Growth for the full year
dividend would be 7.3%, which would be comfortably above the rate of
inflation. On top of the ordinary dividend, we propose a special dividend of
12.0p, which brings the total dividend to 58.8p per share and ensures that
ASCoT complies with HMRC’s minimum retention test for investment trusts. The
total of these means that ASCoT would distribute c.£47m in the form of
dividends to its Shareholders in respect of 2025. Even after these payments,
ASCoT would be able to retain 5.2p of revenue per Ordinary Share. This would
increase revenue reserves to 99.1p per Ordinary Share to keep the ordinary
dividend covered close to a healthy two times.
Share buy-backs
The Board and Managers have two aims for ASCoT’s share buy-backs. First,
when conducted at a discount to net asset value, they deliver an economic
uplift for those Shareholders wishing to remain invested in the Company.
Second, they provide additional liquidity at the margin for those Shareholders
looking to crystallise their investment. An additional benefit is that
consistently applied share buy-backs may bring additional tension to the share
price of an investment trust when the market loses sight of the portfolio’s
value. This last point is less certain since the discount depends on many
factors that the Board and Managers cannot influence. Nevertheless, the
reasons for buy-backs are convincing and ASCoT was active in 2025.
In the year to 31 December 2025, 4,082,000 shares were bought back and
cancelled. The total value of these repurchases was £60m, on an average
discount of 11.2%. Since 2008, ASCoT has deployed £226m of its capital on
share buy-backs, which have added £33m of value to Shareholders.
Abnormal market circumstances may influence the pace of buy-backs, but ASCoT
can fund them over time through cash generated from the natural turnover of
the portfolio. This is consistent with the Managers’ value investment
philosophy and has been supported by the high level of M&A activity in recent
years. Additional flexibility is provided by the credit facility with the
Royal Bank of Scotland International.
The Company seeks authority to buy back up to 14.99% of its Ordinary Shares at
each Annual General Meeting. Shareholders voted in favour in March 2025 and
the Board will seek to renew the authority at the Annual General Meeting on 5
March 2026.
Gearing
The ability to gear is an important differentiator for investment trusts. The
Board’s gearing policy has been consistent throughout ASCoT’s life.
Gearing is deployed in a tactical fashion with the aim of taking advantage of
periods of stress in equity markets. ASCoT has been geared on four occasions
in its 35 years. The current phase started amid the pandemic in early 2020 and
has since enhanced ASCoT’s net asset value performance. The Board and
Managers regularly review the level of gearing. They judge that it remains
appropriate in view of the attractive stockmarket valuations and the prospects
for the profitability of the underlying companies. At the year end, £75m of
gearing was deployed and the gearing ratio, which is defined in the glossary
on page 68 of the Annual Report, was 5%. Beyond the potential to enhance
investment returns, the credit facility provides other benefits. It gives
flexibility to conduct share buy-backs and allows the Managers to react nimbly
to new opportunities without disturbing existing investments. This is
particularly important in what can be a volatile and relatively illiquid asset
class.
ASCoT has a credit facility with The Royal Bank of Scotland International
Limited. This £130m facility runs to June 2026, which is aligned with the
three yearly continuation vote cycle. After the Annual General Meeting on 5
March 2026, and providing that the continuation vote is passed, the Board and
Managers will seek to put in place a new facility.
Annual General Meeting (AGM) and continuation vote
The AGM will be held at 14 Melville Street, Edinburgh EH3 7NS at 10.30 am on 5
March 2026. Details of the resolutions to be considered by Shareholders are
set out in the Notice of the Meeting on page 64 of the Annual Report.
Shareholders are encouraged to submit their vote by proxy in advance of the
meeting. In accordance with normal practice, the results of the AGM will be
issued in a regulatory news announcement and posted on Aberforth’s website.
An update on performance and the portfolio will also be available on the
website following the meeting.
It is the Company’s policy to hold a continuation vote every three years.
March’s Annual General Meeting will include the eleventh such vote in its
history. The Board views the continuation vote as an important shareholder
right and encourages all Shareholders to exercise it.
ASCoT’s performance in the continuation vote period just completed was
frustrating. The difficult conclusion to 2025 meant that ASCoT under-performed
the DNSCI (XIC) over the three years to 31 December 2025. The net asset value
total return was 31.0%, while the share price total return was 32.5%. The
comparable performance of the DNSCI (XIC) was 35.9%. Naturally, the Board has
sought to understand the reasons for this.
Importantly, it is clear to us that there has been no deviation from how the
Managers have always implemented ASCoT’s investment policy. Their value
investment discipline, fundamental analysis of companies and constructive
approach to stewardship are all unchanged. Confidence in this allows us to
look to longer term patterns of performance. A corollary of the Managers’
consistency is a volatility to ASCoT’s relative performance, even over three
year periods, as the mood of the stockmarket ebbs and flows.
For much of the most recent continuation vote period, the stockmarket’s mood
was one of gloom towards the UK’s politics and economy, with further
uncertainty emanating from the US’s experiment with tariffs. These factors
affected sentiment towards and valuations of many smaller companies. From our
interactions with the Managers, we know that they have confidence in the
resilience of many smaller companies and that they are therefore comfortable
investing in such businesses, notwithstanding their greater sensitivity to
swings in economic activity. We saw this sensitivity in action during the
pandemic in 2020, when ASCoT’s investment performance suffered particularly
badly as economic activity collapsed. Clearly, the reasons for the economic
uncertainty then were different from today’s, but the Managers’ confidence
in the resilience of the portfolio’s businesses was vindicated as the
recovery took hold.
This has not been the first continuation vote period in which ASCoT’s total
return has lagged its benchmark’s. For the Board, the reassuring point is
that the consistency of the investment approach has allowed a rebound in
ASCoT’s fortunes in earlier instances and has underpinned an excellent
record of relative and absolute performance over longer time periods. Three
years ago, following a continuation vote period in which ASCoT out-performed
the DNSCI (XIC), I observed that ASCoT’s differentiated and consistent
investment proposition “does not guarantee superior
performance every year, but it does improve the likelihood of success over
time” . The relevance of this point stands, which gives
the Board confidence to focus on the investment opportunity at hand and on
ASCoT’s prospective returns.
Conclusion
The Managers’ Report addresses ASCoT’s investment opportunity in detail. I
would draw out the following points as important aspects of what is a positive
outlook.
• Sentiment towards the UK remains downbeat, which is affecting the
stockmarket’s valuations of smaller companies.
• We have a good idea why this pessimism persists. The dominant narrative
since the EU Referendum – almost ten years ago now – has been one of
political dysfunction and economic stagnation in the UK.
• Large companies have shrugged off these concerns – even domestically
oriented companies such as the banks have participated in the FTSE
All-Share’s resurgence. History gives encouragement that where large
companies lead small companies follow.
• My personal suspicion is that the UK gloom has been overdone and that the
UK’s institutional advantages are being overlooked. However, I am more
confident in asserting that the dominant narrative has drowned out recognition
of the underlying progress of smaller companies.
• In recent years, ASCoT’s portfolio holdings have endured a pandemic, a
surge in inflation, higher interest rates and a recession. In the Board’s
discussions with the Managers about the investee companies, we are struck by
their resilience. They have retained strong balance sheets and continued to
generate cash, which is coming back to their shareholders in the form of
rising dividends and share buy-backs.
• The underlying qualities and valuations of these companies are being
recognised, though not yet in a broad fashion. The beneficiaries hitherto have
been overseas companies and private equity who are responsible for the still
high rate of M&A within the small company universe. Another lesson from
history is that when the appetite for small companies improves share prices
move rapidly and substantially.
• The current lack of interest in small UK quoted companies contrasts
sharply with the great confidence that the stockmarket has in the giant
technology companies as they spend their billions on AI development. In my
experience of equity markets, such disparities in sentiment and valuation are
not uncommon but tend to be overdone. As in the past, ASCoT is well positioned
to benefit when fashions do inevitably change.
None of this is to deny the risks confronting smaller companies, from domestic
politics, through the threat of a trade war and actual conflicts, to the
implications of the vast investment in AI. However, investment is always
risky. The returns generated by equities over time have been the rewards for
exposing capital to risk. In my experience, what is crucial is that the
capital should be deployed in assets whose valuations provide a margin of
safety and should be managed in accordance with a tried and tested investment
process.
On both counts, ASCoT’s record suggests that it is well positioned. The
Managers’ approach to the asset class sets the portfolio apart from the
majority of small company funds. It has driven good returns to Shareholders
over time and the Board notes that the Managers continue to add to their
personal holdings in ASCoT. We also recognise the advantages of ASCoT’s
investment trust status, particularly when operating in a relatively illiquid
and volatile asset class such as small UK quoted companies. The ability to
retain income helps dividends to grow in real terms even in difficult
circumstances and contrasts with the more volatile capital performance.
Meanwhile, share buy-backs and tactical gearing promise to improve what we
expect to be a positive performance from the portfolio over coming years.
I would also note that ASCoT enjoys significant flexibility in its capital
allocation by virtue of its natural portfolio turnover, ability to gear and
revenue reserves. These features allow meaningful sums to be returned to
Shareholders – dividends and share buy-backs totalled £107m in respect of
2025. The Board is therefore optimistic about ASCoT’s prospects from here
and recommends that Shareholders vote in favour of the Company’s
continuation at March’s AGM.
Ahead of that event, my fellow Directors and I welcome views and questions
from Shareholders. Please contact me at my e-mail address, which is noted
below.
Richard Davidson
Chairman
29 January 2026
richard.davidson@aberforth.co.uk
MANAGERS’ REPORT
Introduction
Since inception in 1990, ASCoT’s purpose has been to achieve a net asset
value total return greater than that of the DNSCI (XIC) over the long term. To
achieve this objective, the Managers have applied a consistent and
differentiated investment strategy, which has three notable aspects.
• The basis of the investment process is understanding companies within the
DNSCI (XIC). The Managers consider factors such as financial performance,
competitive dynamics and capital allocation priorities, as well as relevant
environmental and social matters. Company analysis is conducted by individual
investment managers, but decisions about which stocks merit a place in the
portfolio are taken by the full investment team. The team is experienced and
well-resourced. It is often the case that it has known investee companies for
longer than the directors running the companies.
• Stock selection is guided by a value investment philosophy. The reason for
this is that there is strong historical evidence that a value premium can be
harvested within equity markets over time. In practice, the Managers seek
companies whose share prices are trading at wide discounts to their true
values. As the gap between the two narrows, positions are reduced, with the
proceeds recycled into other companies with greater upside, a process that the
Managers term the “value roll”.
• Consideration of governance issues and engagement with company directors,
especially chairs, is an important element of Aberforth’s investment
process. Throughout ASCoT’s history, the Managers have aimed to engage in a
purposeful, discreet and constructive fashion, both as part of their research
and to effect change if necessary. They engage on any topic that affects a
company’s valuation and are willing to be taken inside for extended periods.
In return for this commitment to responsible stewardship of their clients’
capital, the Managers expect that consultation will be timely and that they
will not be presented with faits accomplis
by the boards of investee companies.
The consistent application of these features does not guarantee strong returns
in each year. However, it does ensure that ASCoT benefits from a
differentiated and relevant investment strategy, which has contributed to a
good outcome for investors over ASCoT’s 35 years.
Performance
ASCoT’s superior total returns since its inception are shown in the table
below. The table also shows performance data for the three year continuation
vote period that ended on 31 December 2025. The three indices provide context
and include the DNSCI (XIC), which is ASCoT’s benchmark of small UK quoted
companies.
Total returns 2023 2024 2025 CAGR to 31 December 2025
3 years Inception
ASCoT NAV +8.2% +12.1% +7.9% +9.4% +11.7%
DNSCI (XIC) +10.1% +9.5% +12.7% +10.8% +9.7%
FTSE All-Share +7.9% +9.5% +24.0% +13.6% +8.5%
MSCI World (£ terms) +18.0% +21.6% +13.2% +17.5% +9.9%
• Equity returns through the continuation vote period were positive,
supported by the continued recovery from the pandemic.
• The strongest performance came from the MSCI World index. This is
dominated by the US stockmarket and so reflected the incredibly strong returns
from the very large technology companies that are seen to be leading the AI
race.
• Perhaps the most notable number in the table is the resurgence of the UK
in 2025, with large company share prices rising by even more than world
equities.
• The strength of the FTSE All-Share in 2025 meant that smaller companies
under-performed large over the three years. This large cap out-performance is
considered in greater detail below.
• ASCoT’s total return lagged that of the benchmark across the
continuation vote period. This was largely a result of a disappointing outcome
for 2025 and so the performance analysis commentary later in this report
focuses on events in 2025.
Over the past three years, the valuations of small UK quoted companies
experienced two challenges, one more relevant to those companies that earn
their profits within the UK economy, and the other to those companies reliant
on overseas markets.
• The former group, the domestics, comprises consumer-oriented companies,
such as retailers, leisure businesses and media companies. It accounts for
around 53% of the revenues of DNSCI (XIC) constituents. These companies were
most severely affected by Brexit and by lockdown during the pandemic. They
operated resiliently in the face of these challenges but were confronted in
2025 by intensifying concerns about the UK government’s fiscal situation.
The Chancellor has struggled to achieve convincing fiscal headroom as she
contends with her own fiscal rules, manifesto commitments and the internal
politics of the Labour Party. The predicament was encapsulated by the
gyrations in gilt yields through 2025 and by the rising cost of government
debt here in comparison with the rest of the world: ten year gilt yields
started 2025 in line with those in the US but ended the year 31 basis points
higher. The UK private sector, wary after the 2024 Budget, was naturally
cautious ahead of the 2025 Budget. It is likely that economic activity
suffered as, in a classic Ricardian fashion, households and businesses held
back on spending and investment. This was to the disadvantage of the
domestically oriented companies.
• The overseas facing companies tend to be industrial businesses and account
for the other 47% of the DNSCI (XIC)’s total revenues. They were less
affected by the pandemic and their profitability even benefited from the EU
referendum as sterling weakened in its aftermath. The disruption of supply
chains in the wake of the pandemic, along with the conflicts in Ukraine and
Gaza, were unhelpful, but these companies tended to enjoy good trading
conditions for much of the three year period. That changed in April 2025 with
Donald Trump’s tariff announcements. Their longer lasting effects on global
trade and broad economic activity are as yet uncertain, but it is clear that
businesses have incurred near term headwinds in the form of higher costs and
working capital requirements. Consequently, the valuations of overseas facing
companies within the DNSCI (XIC) also came under pressure in 2025.
These twin pressures have hampered the valuation of smaller companies,
particularly those whose profits are perceived to be more sensitive to broader
economic activity. This has affected ASCoT's performance since many of the
most attractively valued smaller companies today are in the more economically
sensitive sectors of the stockmarket. Indeed, the market's near term fears of
cyclicality can often be what presents the Managers with investment
opportunity as they take a longer term view of a business's underlying
qualities and profit potential.
For most of the three year continuation vote period, gloom about the UK's
politics and economics affected sentiment towards the UK stockmarket in
general, with the valuations of both small and large companies below their
long term averages. That started to change in 2025. The very strong total
returns from large companies took their valuations above the long term
average, even as smaller companies continued to languish. A common explanation
for this performance divergence rests in the different sector profiles of the
large and small company universes. Among the stronger performers in the FTSE
All-Share in 2025 were banks, defence, mining, telecoms and life assurance,
which are all sectors with a lower representation in the DNSCI (XIC). However,
this explanation struggles when the banks are considered further. Most of the
banks are heavily reliant on the domestic UK economy. They are literally
geared into the health of British businesses and households, the same sort of
exposure that many smaller companies have.
Smaller companies are being penalised for their very size and relative
illiquidity, rather than for fundamental reasons. This suspicion is backed up
by analysis of the dividend characteristics of the DNSCI (XIC) and the FTSE
All Share. For the first time since the global financial crisis, the dividend
yield of the DNSCI (XIC) is higher than the FTSE All-Share’s. This is
despite small companies’ average dividend cover being above that of large
companies and despite small companies’ balance sheets being stronger than
those of large companies. Moreover, dividend growth of the DNSCI (XIC) has
remained superior to that of the FTSE All-Share. Since 2015 – the year
before the EU referendum and therefore a fair starting point – small company
dividend growth has been 63%, whereas large company dividend growth has been
29%. Since 2019 – the year before the pandemic – small companies have
grown their dividends by 23%, whereas large companies have seen their
aggregate dividends decline by 6%.
The superior dividend growth from smaller companies is evident in almost all
time periods and supports the growing dividends paid by ASCoT to its
Shareholders. These dividends also benefit from how the Managers invest
ASCoT’s capital. An important facet of the process is the “value roll”,
in which capital is rotated from companies with low upside to the Managers’
target prices into companies with high upsides. This rotation implies that
capital is moved from companies with low dividend yields into those with high
dividend yields, a dynamic that enhances the income earned by the portfolio
over time. This has enabled ASCoT’s dividends to grow by 7.1% per annum
since inception in 1990, well ahead of the DNSCI (XIC)’s 4.9%, the FTSE
All-Share’s 3.4% and the consumer price index at 2.4%. The steadiness and
consistency of ASCoT’s dividend growth contrast with the volatility of
annual capital performance. They have also contributed to the good absolute
and relative total returns that ASCoT has achieved over time.
Influences on performance in 2025
In 2025, ASCoT’s NAV total return was 7.9%, which was behind the DNSCI
(XIC)’s 12.7%. The table below sets out the contribution of certain factors
to ASCoT’s relative return. As usual, the most important influence was the
investment portfolio. The paragraphs that follow provide context and
explanation for the portfolio’s performance in 2025.
For the twelve months ended 31 December 2025 Basis points
Attributable to the portfolio of investments, based on mid prices (after transaction costs of 18 basis points) (429)
Movement in mid to bid price spread 12
Cash/gearing (27)
Purchase of ordinary shares 54
Management fee (70)
Other expenses (12)
Total attribution based on bid prices (472)
Note: 100 basis points = 1%. Total Attribution is the difference between the total return of the NAV and the Benchmark Index (i.e. NAV = 7.95%; Benchmark Index = 12.67%; difference is -4.72% being -472 basis points).
Economic cyclicality
As described above, ASCoT’s returns in 2025 were influenced by concerns
about economic activity both domestically and overseas. Many of the most
attractively valued companies within the DNSCI (XIC) at present are perceived
as sensitive to the economic cycle. The Managers are prepared to look beyond
these near term concerns, putting more store in the resilience of business
models, records of profit progress from cycle to cycle and strength of balance
sheets. Such bouts of concern are not unusual in ASCoT’s 35 year history.
Economic cyclicality hampered ASCoT’s performance in 2025, but it is the
Managers’ experience that the stockmarket tends to under-estimate the
resilience of smaller companies and thus creates the conditions for a strong
recovery in due course.
Value style
The Managers follow a value investment philosophy. They calculate target
valuations for existing and potential investments. These are influenced by
fundamental analysis of the companies, judgement informed by experience, and
reference to other relevant valuations in equity markets or corporate
activity. Growth of profits is an important component of target valuations,
but the Managers find that stockmarket valuations are often too generous in
their assumptions of the sustainability and pace of growth.
To gauge the style effect on ASCoT’s performance, the Managers use analysis
by the London Business School (LBS). This defines value narrowly in terms of
low price to book ratios, rather than in the broader fashion undertaken by the
Managers. Therefore, while useful, the LBS approach is an imperfect measure of
style effects, particularly over short periods. Despite AI leading the way
among global equity markets, the LBS analysis suggests that value stocks
within the DNSCI (XIC) out-performed the index as a whole in 2025. On this
basis, style would have benefited ASCoT’s returns in 2025.
Size, within the DNSCI (XIC)
The DNSCI (XIC) includes all main listed stocks in the UK with market
capitalisations below c.£2.5bn. It therefore has an extensive overlap with
the FTSE 250 and includes many mid caps, which the Managers refer to as
“larger small” companies. However, ASCoT has a relatively high exposure to
the DNSCI (XIC)’s “smaller small” companies and has had for much of the
period since the global financial crisis in 2008. This positioning reflects
the more attractive valuations available down the market capitalisation scale,
which are demonstrated in the Valuations section later in this report.
Analysis by LBS shows that the return from “smaller small” companies was
slightly ahead of that from “larger small” companies in 2025. Accordingly,
ASCoT had a modest benefit from its size positioning over the past twelve
months.
Corporate activity
The pattern is a familiar one of recent years – a lot of takeovers targeting
small UK quoted companies, a lot of buy-backs and few IPOs.
On M&A, the takeovers of eleven companies in the DNSCI (XIC) were completed in
2025. On top of those, there were offers outstanding for another ten companies
at the year end. Of these 21 deals, the bidders were most often trade buyers,
with private equity houses less active than in 2024. The bidders were
overwhelmingly from overseas, attracted by the presently low stockmarket
valuations of small UK quoted companies. The average premium of the bid price
to the undisturbed share price before announcement of the deal was 44%, which
is above the longer term average premium for control of 25-30%. ASCoT had
investments in eleven of the 21 takeover targets. Four of the eleven deals
were announced in 2024, with the deals completing in 2025. The takeover
premiums therefore benefited 2024 returns. Nevertheless, M&A helped ASCoT’s
returns in 2025.
Takeovers can be an effective means by which the value in ASCoT’s portfolio
is realised. However, there is an important caveat. The low valuations of
smaller companies mean that takeovers may be proposed on unattractive terms
and that investors’ interests might be better served by rejecting the
takeover approach. The risk is exacerbated by boards and some shareholders
yielding too quickly to takeover interest, no doubt succumbing to the gloomy
sentiment towards the UK. The Managers attempt to mitigate the risk by
engaging with boards to support their independence if the terms of a bid are
unattractive or to improve the terms. This engagement is helped by the often
significant stakes that ASCoT and Aberforth’s other clients hold in investee
companies. At 31 December 2025, 15% of ASCoT’s portfolio was invested in
companies that had attracted takeover interest over the previous 18 months,
but where the approaches had not developed into formal bids. In several of
these situations, the Managers were consulted by the boards of the target
companies and, if the standalone option promised superior returns, supported
their independence.
The depressed valuations of small UK quoted companies mean that the IPO market
remains subdued. There were just two IPOs of a reasonable size and eligible
for the DNSCI (XIC) in 2025. The Managers view this dearth of activity as a
temporary phenomenon and a function of prevailing valuations. Recent
regulatory change, to the listing rules and prospectus regime, are likely to
encourage IPOs once the valuation basis of the small UK quoted companies
recovers.
While the DNSCI (XIC) has not been refreshed by IPOs, it is experiencing an
influx of companies that are choosing to move from AIM to the Main Market.
ASCoT does not invest in AIM quoted companies except in limited circumstances.
These include when an AIM company makes a public
announcement of its intention to move to the Main List. Over the past 18
months, 15 AIM quoted companies have announced an intention to relist. Of
these, six completed the process in 2025 and were included in the DNSCI (XIC)
on its annual rebalancing on 1 January 2026. Of the 15 companies, ASCoT has
invested in four. These businesses were subject to the Managers’ usual
investment process of research and engagement. Their valuations were
attractive and consistent with the existing portfolio’s.
Income
The UK’s economic and political uncertainties contributed to a lacklustre
capital performance in 2025, but the dividend performance from small UK quoted
companies remained resilient. ASCoT’s income experience is shown in the
following table, which splits the portfolio’s 78 holdings into categories
determined by the most recent dividend action.
Nil Payer Cutter Unchanged Payer Increased Payer New/Returner
14 9 23 28 4
The drag on ASCoT’s income from the 9 cutters was out-weighed by the 28
companies that increased their dividends and by the four companies that either
resumed dividends or paid for the first time. Overall, ASCoT’s Investment
Income from Revenue, as shown in the Income Statement, rose by 7% in 2025.
There was a slightly larger contribution from special dividends received than
in 2024, but the effect was not significant. The 7% growth took Investment
Income to its highest level in ASCoT’s 35 years, surpassing the previous
high in 2023.
The historical dividend yield of ASCoT’s holdings at 31 December 2025 was
4.3%, which was 31% higher than the average over ASCoT’s 35 year history.
Dividend cover was 2.2x, which is less than the long term average of 2.8x. The
lower dividend cover was due to the effect of macro economic uncertainty on
profits, together with the higher dividends as companies looked through the
near term uncertainty and took confidence from strong balance sheets. The
Managers’ forecasts suggest that dividend cover will rise in 2026 and 2027.
Significant stakes
Engagement with the boards of investee companies has always been a crucial
component of the Managers’ investment process. It is particularly relevant
at present in view of the high rate of takeover activity among smaller
companies and of the recent regulatory changes to the listing rules and
prospectus regime. The latter are intended to make the UK stockmarket a more
attractive place to list, but they come at a cost by undermining governance
protections for investors in UK listed companies.
The Managers’ scope to engage effectively is supported by their ability to
take significant stakes of up to 25% in issued share capital across their
client base. At 31 December 2025, ASCoT had six holdings in which
Aberforth’s clients had a stake of more than 20% and 28 holdings in which
the stake exceeded 10%. The 28 holdings had a combined portfolio weight of
32%.
Significant stakes bring increased influence but come with a downside in the
form of illiquidity – reducing these positions by selling into the
stockmarket can be difficult. However, there are compensating factors. First,
the increased influence, coupled with patience and support, has contributed to
improved investment outcomes – significant stakes have enhanced ASCoT’s
performance over time. Second, illiquidity has been manageable. Exiting
significant stakes has been facilitated by M&A or by renewed investor appetite
as prospects for the business improve. Third, ASCoT’s closed-end structure
is ideally suited to holding significant stakes – patient support from
investors is often required as boards work to improve business performance.
The Managers are confident that their approach to engagement and ability to
take significant stakes have enhanced ASCoT’s returns over time and will
continue to do so.
ASCoT’s gearing
As an investment trust ASCoT can employ gearing with the aim of enhancing
returns from the portfolio. ASCoT’s approach to gearing is tactical and
seeks to take advantage of periods of stress in economies and financial
markets. It is currently geared for the fourth time in its history, having
drawn on its borrowing facility amid the pandemic in early 2020. Since then,
returns from small UK quoted companies have been positive and gearing has
enhanced ASCoT’s returns, which was also the case in 2025 specifically.
Since UK equity valuations continue to be attractive, the Managers believe
that it is appropriate that ASCoT remains geared. At 31 December 2025, the
gearing ratio was 5%. The realisation of proceeds from takeovers was
substantial through 2025, which meant that the gearing ratio was often below
the Managers’ target. Given the attractiveness of valuations and the
profusion of investment opportunities, it is likely, all else equal, that the
gearing ratio will rise from its current level.
Portfolio characteristics
The next table presents a selection of important characteristics for both the
portfolio and the DNSCI (XIC). The subsequent paragraphs expand on some of
these characteristics.
Portfolio characteristics 31 December 2025 31 December 2024
ASCoT DNSCI (XIC) ASCoT DNSCI (XIC)
Number of companies 78 352 79 350
Weighted average market capitalisation £578m £1,225m £649m £1,019m
Weighting in “smaller small” companies* 49% 17% 55% 21%
Weighting in companies with net cash** 39% 26% 29% 30%
Portfolio turnover 34% - 20% -
Active share 80% - 78% -
Price earnings (PE) ratio (historical) 10.5x 13.8x 9.6x 13.0x
Dividend yield (historical) 4.3% 3.4% 4.0% 3.4%
Dividend cover (historical) 2.2x 2.1x 2.6x 2.2x
*”Smaller small” companies are members of the DNSCI (XIC) that are not
also members of the FTSE 250; **Tracked Universe reference explained below.
Balance sheets
The following table sets out the balance sheet profile of ASCoT’s portfolio
and of the Managers’ Tracked Universe. This subset of the DNSCI (XIC)
represents 99% by value of the index as a whole and is made up of the 246
companies that the Managers follow closely.
Weight in companies with: Net cash Net debt/EBITDA < 2x Net debt/EBITDA > 2x Other*
Portfolio 2025 39% 46% 14% 1%
Tracked Universe 2025 26% 43% 24% 7%
*Includes loss-makers and lenders
Balance sheets remain robust both within the portfolio and among small caps in
general. Compared with a year ago, the portfolio’s exposure to companies
with stronger balance sheets has risen: the weighting in companies with net
cash and leverage below two times was 75% at the end of 2024 and 85% at the
end of 2025. This shift reflects both the cash generation of the investee
companies and portfolio activity. The stockmarket’s lack of interest in
smaller companies means that stronger balance sheets are not being reflected
in higher valuations. This lack of discernment has brought more companies into
the Managers’ valuation range and has contributed to the higher exposure to
companies with strong balance sheets.
The strength of balance sheets raises the question of how capital should be
deployed. This is a frequent topic of engagement for the Managers with the
boards of ASCoT’s investee companies. The highest priority should be organic
investment to maintain the viability of a business and allow it to grow. This
is especially pertinent at present since it seems that the economic and
political uncertainty has discouraged companies from larger capital
expenditure projects. After organic investment, a coherent and appropriate
dividend policy is essential, optimally one that allows ordinary dividends to
grow in real terms through economic cycles. After that, acquisitions may be
considered, but these should be assessed against the benchmark of lower risk
special dividends or share buy-backs. Many small companies again bought back
shares in 2025, including 29 companies within ASCoT’s portfolio of 78
stocks.
Active share
Active share is a measure of how different a portfolio is from an index. The
ratio is calculated as half of the sum of the absolute differences between
each stock’s weighting in the index and its weighting in the portfolio. The
higher a portfolio’s active share, the higher its chance of performing
differently from the index, for better or worse. The Managers target an active
share ratio of at least 70% for ASCoT’s portfolio compared with the DNSCI
(XIC). At 31 December 2025, it stood at 80%.
Value roll and portfolio turnover
The main influence on ASCoT’s portfolio turnover in any period is usually
the stockmarket’s appetite for small UK quoted companies. If prices and
valuations are rising, the upsides to the Managers’ target prices are likely
to be narrowing. All else being equal, this would encourage the rotation of
ASCoT’s capital from companies with lower upsides to those with higher.
Portfolio turnover is defined as the lower of purchases and sales divided by
the average portfolio value. In 2025, turnover was 34%, which is in line with
the long term average of 33%. This rate of turnover was influenced by the
year’s significant takeover activity.
Environmental, social and governance (ESG)
In their analysis and assessment of companies, the Managers consider any issue
that affects valuation. This includes matters that come under the umbrella
term of ESG. If the Managers determine that a company’s valuation can be
enhanced by addressing such an issue, they engage with the board in question.
Most engagements remain concerned with governance, which reflects the
Managers’ firm belief that good governance is a pre-requisite for a good
performance in environmental and social terms. Examples are provided in the
Stewardship & ESG section of the Managers’ website at www.aberforth.co.uk.
Further details of the Managers’ approach to ESG are set
out on pages 16 to 18 of the Annual Report.
Valuations
Recent Managers’ Reports have described how ASCoT benefits from a triple
valuation discount. This referred to ASCoT’s portfolio being on lower
valuations than small UK quoted companies, which were on lower valuations than
UK large companies, which were on lower valuations than world equities. The
table below updates the analysis.
Price earnings (PE) ratio: 35 year average 31 December 2023 31 December 2024 31 December 2025
World equities* 16.0x 16.0x 17.0x 18.1x
FTSE All-Share 15.3x 10.3x 14.6x 17.6x
Smaller companies** 13.5x 10.3x 11.9x 12.2x
Portfolio 12.0x 7.9x 9.6x 10.5x
*Source: Bloomberg; Panmure Liberum **DNSCI
(XIC) to 2013 then Tracked Universe
Twelve months on, the triple discount remains in place, and yet there has been
movement. The historical PEs of all four groups have risen, but the most
significant move over the past twelve months has been among large UK
companies. The PE of the FTSE All-Share has jumped from 14.6x to 17.6x and now
sits above its long term average of 15.3x. Meanwhile, the PE of smaller
companies, and of ASCoT’s portfolio in particular, remain below their long
term averages. As noted in the opening section of this report, it is unclear
at the fundamental level why the valuation gap between small and large
companies should have opened up to this degree. In view of the fundamental
qualities of smaller companies – stronger balance sheets and higher growth
– their lower valuations offer the opportunity of stronger future share
price returns.
The following table turns to forward looking valuations. It uses the
Managers’ favoured valuation metric, EV/EBITA (enterprise value to earnings
before interest, tax and amortisation). Ratios are set out for the portfolio,
the Tracked Universe and certain subdivisions of the Tracked Universe. The
profits underlying the ratios are based on the Managers’ forecasts for each
company that they track. The bullet points following the table summarise its
main messages.
EV/EBITA 2024 2025 2026
ASCoT’s portfolio 7.8x 8.0x 7.2x
Tracked Universe (246 stocks) 11.2x 11.1x 9.7x
- 34 growth stocks 19.8x 17.5x 15.5x
- 212 other stocks 10.5x 10.5x 9.1x
- 113 stocks >60% revenue within UK 11.5x 11.2x 10.1x
- 113 stocks >60% revenue overseas 10.8x 10.7x 9.2x
- 110 stocks > £600m market cap 12.0x 11.8x 10.4x
- 136 stocks < £600m market cap 9.0x 9.0x 7.8x
• ASCoT’s EV/EBITA ratio is higher for 2025 than for 2024, which implies
that profits earned by portfolio companies fell slightly in 2025. This is
consistent with the slowdown in activity through the second half of the year
as concern about the Budget grew. The decline in the ratio in 2026 compared
with 2025 suggests that, based on the Managers’ bottom-up estimates, profits
will increase again in 2026.
• The average EV/EBITA multiples of the portfolio are lower than those of
the Tracked Universe. This has been a consistent feature over ASCoT’s
history and is consistent with the Managers’ value investment style.
• The portfolio’s 8.0x EV/EBITA ratio for 2025 is considerably lower than
the average multiple of 14.7x at which takeover offers for DNSCI (XIC)
constituents have been made in the past four years.
• Each year, the Managers identify a cohort of growth stocks within the
DNSCI (XIC). The 34 growth stocks for 2026 are on much higher multiples than
both the portfolio and the rest of the Tracked Universe.
• The “smaller small” companies within the DNSCI (XIC) remain more
attractively valued than the “larger smalls”. This explains why ASCoT’s
portfolio has a relatively high exposure to the “smaller smalls”.
• For more of the period since the EU referendum, overseas facing companies
have enjoyed higher valuations than have their peers that are more reliant on
the UK’s domestic economy. The gap between the two narrowed in 2025 as
sentiment towards the overseas cohort was affected by the tariffs.
Outlook and conclusion
The “Liberation Day” tariff announcements convulsed stockmarkets in 2025.
The full effects on global trade and economic activity are still unclear,
particularly when the status of some of the tariffs remains subject to legal
challenge. What is clear is that companies, both in ASCoT’s portfolio and
more widely, are incurring extra cost when exporting to the US. This is
another factor in the broad theme of deglobalisation, which has developed
since the pandemic as geopolitical tensions have intensified. The implication
for ASCoT is a more uncertain outlook for its cohort of investee companies
that generate their revenues outside the UK.
Despite the tariff shock, equity valuations have recovered well from the
Liberation Day nadir. Returns have been particularly good for the group of
companies seen to be benefiting from AI. As 2025 ended, the hopes and
valuations for the AI leaders were very high, but some caution is merited. The
business models of the US technology giants are no longer capital light since
AI development necessitates significant investment in computing power and
infrastructure. More broadly, the US economy is becoming increasingly reliant
on AI, with growth driven by the investment boom and with buoyant equity
prices supporting the wealth effect. Furthermore, it is not clear what the
returns on the investment will prove to be or who will emerge the eventual
winners of the AI arms race, as the US technology giants compete with each
other and with Chinese rivals. In the meantime, the effects of AI on companies
more broadly are as yet unclear. Some business models will be challenged and
it is important for the Managers to consider where these threats lie. On the
other hand, it is also important to consider the productivity gains that AI
promises. Despite what the relative valuations might suggest, the upside from
AI investment is unlikely to be confined to the companies currently deploying
the capital – it is plausible that ASCoT’s portfolio holdings can also
benefit.
The more significant near term influence on the fortunes of small UK quoted
companies is likely to be the direction of the UK economy. The immediate
challenges are the government’s fiscal position and a set of policies that
are likely to increase costs and the regulatory burden on the private sector.
These problems are well known and have contributed to the gloom surrounding
the valuations of small UK quoted companies. However, there are other more
positive dynamics at work, which tend to be overlooked at present and which
suggest that the often hysterical talk about the UK is overdone.
• The private sector in the UK has deleveraged meaningfully over two decades
– the ratio of private non financial debt to GDP is back to the levels last
seen in 2000. Financial risk today is therefore reduced and there is the
potential to re-leverage in the future. While many companies are choosing to
deploy surplus capital on share buy-backs at present, a pick-up in investment
would be good for growth of profits and the economy in general.
• The recent Budget, while unhelpfully late in the year, was not as
threatening to economic activity as feared. The Chancellor tested her fiscal
rules by deferring most tax increases until later in the parliament. This
pragmatism gives the economy breathing space, especially as government
spending does increase in the near term. One can debate the merits of such
policies, but at the margin they bode well for economic activity.
• Inflation in the UK remains stickier than elsewhere but does seem to be on
a downward path. This has given the Bank of England scope to reduce interest
rates, which again should be supportive of near term economic activity.
So there is good reason to believe that the UK economy may turn out to be
better, or at least less bad, than commonly perceived. This would be
significant for the valuations of small UK quoted companies, especially the
more economically sensitive businesses since so little is expected of them.
The revaluation of larger companies in 2025 – particularly the banks –
shows what is possible when sentiment turns. The opportunity is encapsulated
by small companies’ low valuations and high resilience. Self-help, strong
balance sheets and free cash generation are supporting dividend growth and
share buybacks as we await improved trading conditions.
The attractiveness of this combination is being recognised by more than the
Managers. The elevated rate of M&A activity shows that other companies and
private equity, particularly from overseas, understand the value on offer
among the constituents of the DNSCI (XIC). At the same time, traditional
holders of UK equities, such as insurance companies and larger asset managers,
are being replaced on share registers by other sorts of investor. These are
typically smaller institutions or individuals, often again from overseas, who
share the Managers’ contrarian approach to investment and, amid a broad
opportunity set, have identified the value on offer among small UK quoted
companies.
Over ASCoT’s 35 years, the Managers’ consistent investment approach has
achieved superior returns for Shareholders. Their value investment philosophy,
understanding of the companies and active engagement are particularly well
suited to the current opportunity in small UK quoted companies and bode well
for future returns.
The Managers’ optimism is also rooted in ASCoT’s structural advantages.
Tactical gearing and share buy-backs can enhance the investment performance of
the portfolio. They can also benefit from growth in the dividends paid to
ASCoT’s Shareholders. The underlying resilience of the investee companies,
along with ASCoT’s healthy revenue reserves, suggest that dividends can
continue to grow in real terms, even in more difficult economic conditions.
Finally, the closed-end nature of an investment trust affords the Managers a
longer term investment horizon, allowing them to take advantage of concerns
about illiquidity, to engage constructively and to support investee companies.
The aim here, as always, is the improvement of investment returns for
Shareholders.
Aberforth Partners LLP
Managers
29 January 2026
DIRECTORS’ RESPONSIBILITY STATEMENT
Each of the Directors confirms to the best of their knowledge that:
(a) the financial statements, which have been prepared in accordance with
applicable accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
(b) the Strategic Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces; and
(c) the Annual Report, taken as a whole, is fair, balanced and understandable
and provides information necessary for Shareholders to assess the Company’s
position, performance, business model and strategy.
On behalf of the Board
Richard Davidson
Chairman
29 January 2026
PRINCIPAL RISKS
The Board carefully considers the risks faced by the Company and seeks to
manage these risks through continual review, evaluation, mitigating controls
and action as necessary. A risk matrix for the Company is maintained. It
groups risks into the following categories: portfolio management; investor
relations; regulatory and legal; financial reporting; and core objectives.
Further information regarding the Board’s governance oversight of risk and
the context for risks can be found in the Corporate Governance Report on page
37 of the 2025 Annual Report. The Audit Committee Report (pages 38 to 40 of
the Annual Report) details the Committee's review process, matters considered,
and actions taken on internal controls and risks during the year.
The Company outsources all the main operational activities to recognised,
well-established firms and the Board receives internal control reports from
these firms, where available, to review the effectiveness of their control
frameworks including cyber security. This review is also recorded in the
Company's risk documentation.
Emerging risks are those that are still evolving, and are not fully
understood, but that could have a future meaningful impact on the Company. The
Board regularly reviews them and, during the year, it added to the matrix the
emerging risks related to various economic and geopolitical market events and
to uses of Artificial Intelligence. The Board monitors these risks and how the
Managers integrate them into their investment decision making. The Board also
monitored the current corporate development activity in the investment company
sector and regularly considered implications for the Company and Shareholders.
Principal risks are those risks in the matrix that have the highest ratings
based on likelihood and impact. They tend to be relatively consistent from
year to year given the nature of the Company and its business. The principal
risks faced by the Company, together with the approach taken by the Board
towards them, are summarised below. To indicate the extent to which the
principal risks change during the year and the level of monitoring required,
each principal risk has been categorised as either dynamic risk, requiring
detailed monitoring as it can change regularly, or stable risk.
Market risk
Risk –this is a portfolio management risk Mitigation
Investment performance is affected by external market risk factors, including those creating uncertainty about future price movements of investments. The factors include geo-political and economic conditions. The Board delegates consideration of market risk to the Managers to be carried out as part of the investment process. The Managers regularly assess the exposure to market risk when making investment decisions and the Board monitors the results via the Managers’ quarterly and other reporting. The Board and Managers closely monitor significant economic and political
developments including the potential effects of climate change (see pages 16 to 18 of the Annual Report). This remained a dynamic risk during the year, in which the Managers reported on market risks including economic and geopolitical issues as addressed
in the Managers’ Report.
Investment strategy/performance risk
Risk –this is a portfolio management risk Mitigation
The Company’s investment policy and strategy exposes the portfolio to share price movements. The performance of the investment portfolio typically differs from the performance of the benchmark and is influenced by investment strategy and policy, investment style, stock selection, liquidity and market risk factors (see Market risk above and Note 19 in the 2025 Annual Report for further details). Investment in small companies is generally perceived to carry more risk than investment in large companies. While this is reasonable when comparing individual companies, it is much less so when comparing the risks inherent in diversified portfolios of small and large companies. The Board monitors performance against the investment objective over the long term by ensuring the investment portfolio is managed appropriately, in accordance with the investment policy and strategy. The Board has outsourced portfolio management to
experienced investment managers with a clearly defined investment philosophy and investment process. The Board receives regular and detailed reports on investment performance including detailed portfolio analysis, risk profile and attribution analysis.
Senior representatives of Aberforth Partners attend each Board meeting. Peer group performance is also regularly monitored by the Board. This remains a dynamic risk, with detailed consideration during the year. The Managers’ Report contains information on
portfolio investment performance and risks.
Share price discount
Risk –this is an investor relations risk Mitigation
Investment trust shares tend to trade at discounts to their underlying net asset values, but a significant share price discount, related volatility, or a discount significantly beyond peers’, could reduce shareholder returns and confidence. The Board and the Managers monitor the discount daily, both in absolute terms and relative to ASCoT’s peers. In this context, the Board intends to continue to use the buy- back authority as described in the Directors’ Report, in the 2025 Annual Report.
This is considered a dynamic risk as the discount moves daily.
Gearing risk
Risk –this is a portfolio management risk Mitigation
Tactical gearing can negatively affect investment performance. In rising markets, gearing enhances returns, but in falling markets it reduces returns to shareholders. The Board and the Managers have specifically considered the gearing strategy and associated risks during the year. At present this is a dynamic risk as the Company’s tactical gearing facility is partially deployed.
Reputational risk
Risk –this is an investor relations risk Mitigation
The risk of an event damaging the Company's reputation and shareholder demand. The reputation of the Company is important in maintaining the confidence of shareholders. The Board and the Managers regularly monitor factors that may affect the reputation of the Company and/or of its main service providers and take action if appropriate. The Board reviews relevant internal control reporting for critical outsourced service providers. This has been monitored as a stable risk.
Regulatory risk
Risk –this is a regulatory and legal risk Mitigation
Failure to comply with applicable legal, tax and regulatory requirements could lead to suspension of the Company’s share price listing, financial penalties or a qualified audit report. A breach of Section 1158 of the Corporation Tax Act 2010 could lead to The Board receives quarterly compliance reports from the Secretaries to evidence compliance with rules and regulations, together with information on future developments. This is a stable risk.
the Company losing investment trust status and, as a consequence, any capital gains would then be subject to capital gains tax.
Going Concern
The Audit Committee has undertaken and documented an assessment of whether the
Company is a going concern for the period of at least 12 months from the date
of approval of the financial statements. The Committee reported the results of
its assessment to the Board.
The Company’s business activities, capital structure and borrowing
facilities, together with the factors likely to affect its development and
performance, are set out in the Strategic Report. In addition, the 2025 Annual
Report includes the Company’s objectives, policies and processes for
managing its capital and financial risk, along with details of its financial
instruments and its exposures to credit risk and liquidity risk. The
Company’s assets comprise mainly readily realisable equity securities and
funding flexibility can typically be achieved through the use of the borrowing
facilities, which are described in notes 12 and 13 of the 2025 Annual Report.
The Company has adequate financial resources to enable it to meet its
day-to-day working capital requirements. The triennial continuation vote was
considered including the outcome of the last vote in 2023, which was passed
overwhelmingly, and the prospects for passing the continuation vote to be held
on 5 March 2026.
In summary and taking into consideration all available information, the
Directors have concluded it is appropriate to continue to prepare the
financial statements on a going concern basis.
The Income Statement, Balance Sheet, Reconciliation of Movements in
Shareholders’ Funds and Cash Flow Statement are set out below.
INCOME STATEMENT
For the year ended 31 December 2025
(audited)
For the year ended For the year ended
31 December 2025 31 December 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Net gains on investments - 54,778 54,778 - 116,364 116,364
Investment income 58,557 776 59,333 54,506 - 54,506
Other income 66 - 66 118 - 118
Investment management fee (Note 2) (3,691) (6,151) (9,842) (3,708) (6,180) (9,888)
Portfolio transaction costs - (2,591) (2,591) - (2,179) (2,179)
Other expenses (980) - (980) (858) - (858)
-------- -------- -------- -------- -------- --------
Net return before finance costs 53,952 46,812 100,764 50,058 108,005 158,063
and tax
Finance costs (1,698) (2,831) (4,529) (2,427) (4,045) (6,472)
-------- -------- -------- -------- -------- --------
Return on ordinary activities 52,254 43,981 96,235 47,631 103,960 151,591
before tax
Tax on ordinary activities - - - - - -
-------- -------- -------- -------- -------- --------
Return attributable to
equity shareholders 52,254 43,981 96,235 47,631 103,960 151,591
====== ======= ======= ====== ======= =======
Returns per Ordinary Share (Note 4) 64.02p 53.88p 117.90p 56.59p 123.50p 180.09p
The Board declared on 29 January 2026 a final dividend of 32.50p per Ordinary
Share and a special dividend of 12.00p per Ordinary Share. The Board declared
on 29 July 2025 an interim dividend of 14.30p per Ordinary Share.
The total column of this statement is the profit and loss account of the
Company. All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued in the
year. A Statement of Comprehensive Income is not required as all gains and
losses of the Company have been reflected in the above statement.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
For the year ended 31 December 2025
(audited)
Capital
Share redemption Special Capital Revenue
capital reserve reserve reserve reserve Total
£’000 £’000 £’000 £’000 £’000 £’000
Balance as at 31 December 2024 838 150 30,469 1,262,006 103,854 1,397,317
Return on ordinary activities after taxation - - - 43,981 52,254 96,235
Equity dividends paid (Note 3) - - - - (41,591) (41,591)
Purchase of Ordinary Shares (Note 7) (41) 41 (30,469) (29,776) - (60,245)
-------- -------- -------- -------- -------- --------
Balance as at 31 December 2025 797 191 - 1,276,211 114,517 1,391,716
====== ====== ====== ====== ====== ======
For the year ended 31 December 2024
(audited)
Capital
Share redemption Special Capital Revenue
capital reserve reserve reserve reserve Total
£’000 £’000 £’000 £’000 £’000 £’000
Balance as at 31 December 2023 844 144 38,840 1,158,046 99,353 1,297,227
Return on ordinary activities after taxation - - - 103,960 47,631 151,591
Equity dividends paid (Note 3) - - - - (43,130) (43,130)
Purchase of Ordinary Shares (Note 7) (6) 6 (8,371) - - (8,371)
-------- -------- -------- -------- -------- --------
Balance as at 31 December 2024 838 150 30,469 1,262,006 103,854 1,397,317
====== ====== ====== ====== ====== ======
BALANCE SHEET
As at 31 December 2025
(audited)
31 December 31 December
2025 2024
£‘000 £‘000
Fixed assets
Investments at fair value through profit or loss (Note 5) 1,457,871 1,497,304
---------- ----------
Current assets
Debtors 4,010 2,874
Cash at bank 5,141 1,349
---------- ----------
9,151 4,223
Creditors (amounts falling due within one year) (75,306) (302)
---------- ----------
Net current (liabilities)/assets (66,155) 3,921
---------- ----------
Total Assets less Current Liabilities 1,391,716 1,501,225
Creditors (amounts falling due after more than one year) - (103,908)
---------- ----------
Total Net Assets 1,391,716 1,397,317
======= =======
Capital and reserves: equity interests
Called up share capital 797 838
Capital redemption reserve 191 150
Special reserve - 30,469
Capital reserve 1,276,211 1,262,006
Revenue reserve 114,517 103,854
---------- ----------
Total Shareholders’ Funds 1,391,716 1,397,317
======= =======
Net Asset Value per Ordinary Share (Note 6) 1,745.26p 1,666.95p
CASH FLOW STATEMENT
For the year ended 31 December 2025
(audited)
2025 2024
£’000 £’000
Operating activities
Net revenue return before finance costs and tax 53,952 50,058
Receipt of special dividends taken to capital 776 -
Investment management fee charged to capital (6,151) (6,180)
(Increase) in debtors (1,136) (213)
Increase in other creditors 10 8
-------- --------
Net cash inflow from operating activities 47,451 43,673
===== =====
Investing activities
Purchases of investments (369,470) (307,701)
Sales of investments 461,056 288,596
-------- --------
Cash inflow/(outflow) from investing activities 91,586 (19,105)
===== =====
Financing activities
Purchases of Ordinary Shares (Note 7) (60,245) (8,371)
Equity dividends paid (Note 3) (41,591) (43,130)
Interest and fees paid (4,409) (6,452)
Gross drawdowns of bank debt facilities (before any costs) 95,000 79,000
Gross repayments of bank debt facilities (before any costs) (124,000) (47,000)
-------- --------
Cash (outflow) from financing activities (135,245) (25,953)
===== =====
Change in cash during the period 3,792 (1,385)
===== =====
Cash at the start of the period 1,349 2,734
Cash at the end of the period 5,141 1,349
====== ======
SUMMARY NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been presented under Financial Reporting
Standard 102 ("FRS 102") and under the AIC’s Statement of Recommended
Practice “Financial Statements of Investment Trust Companies and Venture
Capital Trusts” ("SORP"). The financial statements have been prepared on a
going concern basis under the historical cost convention, modified to include
the revaluation of the Company’s investments as described in Note 1 of the
2025 Annual Report. The Directors' assessment of the basis of going concern is
described on page 31 of the 2025 Annual Report. The functional and
presentation currency is pounds sterling, which is the currency of the
environment in which the Company operates. The Board confirms that no critical
accounting judgements or significant sources of estimation uncertainty have
been applied to the financial statements and therefore there is not a
significant risk of a material adjustment to the carrying amounts of assets
and liabilities within the next financial year. The Company’s accounting
policies are set out in the 2025 Annual Report.
2. INVESTMENT MANAGEMENT FEE AND BANK BORROWINGS
The Managers, Aberforth Partners LLP, receive an annual management fee,
payable quarterly in advance, equal to 0.75% of net assets up to £1 billion,
and 0.65% thereafter.
The investment management fee and finance costs of bank borrowings have been
allocated 62.5% to capital reserve and 37.5% to revenue reserve, in line with
the Board’s expected long term split of returns, in the form of capital
gains and income respectively, from the investment portfolio of the Company.
The Company has a three year unsecured £130m Facility Agreement with Royal
Bank of Scotland International. This is due to expire on 15 June 2026.
3. DIVIDENDS
31 December 2025 £’000 31 December 2024 £’000
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2024 of 30.00p (2023: 28.55p) paid on 10 March 2025 24,967 24,091
Special dividend for the year ended 31 December 2024 of 6.00p (2023: 9.00p) paid on 10 March 2025 4,993 7,595
Interim dividend for the year ended 31 December 2025 of 14.30p (2024: 13.60p) paid on 28 August 2025 11,631 11,444
------------ ------------
41,591 43,130
------------ ------------
The final dividend of 32.50p (2024: 30.00p) and special dividend of 12.00p
(2024: 6.00p) for the year ended 31 December 2025 will be paid, subject to
shareholder approval, on 9 March 2026. The final and special dividends for
2025 and 2024 have not been included as liabilities in the financial
statements for that year.
4. RETURNS PER ORDINARY SHARE
Year to 31 December 2025 Year to 31 December 2024
The returns per Ordinary Share are based on : Returns attributable to Ordinary Shareholders £96,235,000 £151,591,000
Weighted average number of shares in issue during the year 81,626,049 84,175,009
Returns per Ordinary Share 117.90p 180.09p
There are no dilutive or potentially dilutive shares in issue.
5. INVESTMENTS AT FAIR VALUE
In accordance with FRS 102 fair value measurements have been classified using
the fair value hierarchy:
Level 1 - using unadjusted quoted prices for identical instruments in an
active market;
Level 2 - using inputs, other than quoted prices included within Level 1, that
are directly or indirectly observable (based on market data); and
Level 3 - using inputs that are unobservable (for which market data is
unavailable).
Investments held at fair value through profit or loss
As at 31 December 2025 Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
Listed equities 1,457,871 - - 1,457,871
Unlisted equities - - - -
------------ ------------ ------------ ------------
Total financial asset investments 1,457,871 - - 1,457,871
------------ ------------ ------------ ------------
As at 31 December 2024 Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
Listed equities 1,497,304 - - 1,497,304
Unlisted equities - - - -
------------ ------------ ------------ ------------
Total financial asset investments 1,497,304 - - 1,497,304
------------ ------------ ------------ ------------
6. NET ASSET VALUE PER SHARE
The Net Asset Value per Share and the net assets attributable to the Ordinary
Shares at the year end are calculated in accordance with their entitlements in
the Articles of Association and were as follows.
31 December 2025 31 December 2024
Net assets attributable £1,391,716,000 £1,397,317,000
Ordinary Shares in issue at the end of the year 79,742,605 83,824,605
Net Asset Value per Ordinary Share (a) 1,745.26p 1,666.95p
Dividend reinvestment factor * (b) 1.031025 1.033876
Net Asset Value Total Return basis * (a) x (b) 1,799.41p 1,723.42p
*Defined in the glossary of the 2025 Annual Report as an alternative
performance measure.
7. SHARE CAPITAL AND RESERVES
During the year, the Company bought back and cancelled 4,082,000 shares (2024:
590,000) at a total cost of £60,245,000 (2024: £8,371,000). During the
period 1 January to 29 January 2026, 323,500 shares have been bought back for
cancellation.
During the year to 31 December 2025 the Special Reserve, which was used to
account for the cost of purchasing Ordinary Shares for cancellation, was
exhausted. Following this, the Capital Reserve represented by realised capital
profits, is being used.
8. RELATED PARTY TRANSACTIONS
The Directors have been identified as related parties and their fees and
shareholdings are detailed in the Directors’ Remuneration Report on pages 41
and 42 of the Annual Report. During the year no Director was interested in any
contract or other matter requiring disclosure under section 412 of the
Companies Act 2006.
9. ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures ("APMs") are measures that are not defined by
FRS 102 and FRS 104. The Company believes that APMs, referred to as ‘Key
Performance Indicators’ on page 5 of the Annual Report, provide Shareholders
with important information on the Company and are appropriate for an
investment trust company. These APMs are also a component of reporting to the
Board. A glossary of APMs can be found in the 2025 Annual Report.
10. FURTHER INFORMATION
The foregoing do not constitute statutory accounts (as defined in section
434(3) of the Companies Act 2006) of the Company. The statutory accounts for
the year ended 31 December 2024 which contained an unqualified Report of the
Auditors, have been lodged with the Registrar of Companies and did not contain
a statement required under section 498(2) or (3) of the Companies Act 2006.
Certain statements in this announcement are forward looking statements.
By their nature, forward looking statements involve a number of
risks, uncertainties or assumptions that could cause actual results or events
to differ materially from those expressed or implied by those statements.
Forward looking statements regarding past trends or
activities should not be taken as representation that such trends or
activities will continue in the future. Accordingly,
undue reliance should not be placed on forward looking statements.
CONTACT: Euan Macdonald or Jeremy Hall, Aberforth Partners LLP, 0131 220 0733
Aberforth Partners LLP, Secretaries – 29 January 2026
ANNOUNCEMENT ENDS
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