REG - Herald Inv Trust PLC - Final Results
20/02/2025 07:15
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RNS Number : 7703X Herald Investment Trust PLC 20 February 2025
LEI number: 213800U7G1ROCTJYRR70
Herald Investment Trust plc
Annual Financial Report
For the year ended 31 December 2024
Herald Investment Trust plc (the "Company") hereby submits its annual report
and financial statements for the year ended 31 December 2024 as required by
the Financial Conduct Authority's Disclosure and Transparency Rule 4.1.
The Company's annual report and financial statements for the year ended 31
December 2024 is being published in hard copy format and an electronic copy
will shortly be available to download from the Company's web page on the
Manager's website at www.heralduk.com (http://www.heralduk.com) . It will also
be made available to the public at the Company's registered office, 10-11
Charterhouse Square, London, EC1M 6EE.
The Company's annual report and financial statements has been uploaded to the
Financial Conduct Authority's National Storage Mechanism and is available for
inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
Enquiries:
NSM Funds (UK) Limited
HIT@nsm.group (mailto:HIT@nsm.group)
Results and dividend
The net asset value ('NAV') of the Company as at 31 December 2024 was 2,488.2p
per ordinary share (2023 - 2,219.2p). This represented an increase of 12.1%
during the year, compared to an increase in the comparative total return
indices of 5.0% for the Deutsche Numis Smaller Companies plus AIM (ex.
investment companies) Index and an increase of 25.9% for the Russell 2000®
Technology Index (small cap) (in sterling terms). The discount at year end was
2.3% (2023 - 13.4%).
The directors do not recommend a dividend for the year ended 31 December 2024
(2023 - nil) as the revenue reserve is in deficit.
STATISTICS AND PERFORMANCE - YEAR'S SUMMARY
31 December 2024 2023 % change
Total net assets £1,252.6m £1,245.8m
Shareholders' funds £1,252.6m £1,245.8m
Net asset value per ordinary share(A) 2,488.2p 2,219.2p +12.1
Share price(A) 2,430.0p 1,922.0p +26.4
Deutsche Numis Smaller Companies plus AIM (ex. investment companies) Index 5,498.8 5,404.7 +1.7
(capital only)
Russell 2000® Technology Index (small cap) (in sterling terms) (capital 5,786.6 4,605.3 +25.7
only)(B)
Dividend per ordinary share - -
Profit per ordinary share (revenue) 4.96p 6.79p
Ongoing charges(A) 1.08% 1.07%
Discount to NAV(A) 2.3% 13.4%
Total return for the year ended 31 December 2024 2023
Net asset value(A) +12.1% +5.7%
Share price(A) +26.4% +7.9%
Deutsche Numis Smaller Companies plus AIM (ex. investment companies) Index +5.0% +3.2%
Russell 2000® Technology Index (small cap) (in sterling terms) (B) +25.9% +21.0%
At 31 December 2024 2023
Profit per ordinary share
Revenue 4.96p 6.79p
Capital 244.77p 74.35p
Total 249.73p 81.14p
Year to 31 December 2024 2024 2023 2023
Year's high and low High Low High Low
Share price 2,500.0p 1,870.0p 1,950.0p 1,596.0p
Net asset value per ordinary share(A) 2,550.8p 2,161.0p 2,283.5p 1,911.4p
Discount/(Premium)(A) 13.8% (0.3%) 17.3% 11.4%
A Alternative Performance Measure
B Investments and indices valued at USD/GBP exchange rate of 1.252 at 31
December 2024 (1.275 at 31 December 2023).
® Russell Investment Group.
CAPITAL RETURN SINCE INCEPTION
Inception
31 December 16 February
2024 1994 % change
Net asset value per ordinary share (including current year income(A) 2,488.24p 98.70p 2,421.01
Net asset value per ordinary share (excluding current year income )(A) 2,482.94p 98.70p 2,415.64
Share price 2,430.00p 90.90p 2,573.27
Deutsche Numis Smaller Companies plus AIM (ex. investment companies) Index 5,498.80 1,750.00 214.22
Russell 2000® Technology Index (small cap) (in sterling terms)(†) 5,786.55 688.70* 740.21
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) was rebased during 2009
following some minor adjustments to its constituents. The rebased index is
used from 31 December 2008 onwards.
CHAIRMAN'S STATEMENT
2024, the Company's thirtieth year, proved to be an eventful one for it,
finishing with the prospect of a vote for the Company's survival in its
current form.
Performance
The Company's investment performance in 2024 was strong, with the Net Asset
Value ("NAV") per share rising by 12.1% in the year. The Manager's Report goes
into more detail, but in summary the North American portfolio, with a return
of 36.3%, outperformed the Russell 2000(®) Technology Index (25.9%). Two
stocks in particular, Super Micro Computer and Celestica, generated much of
the performance. The UK portfolio, with a return in the year of 3.3%, modestly
underperformed the Deutsche Numis Smaller Companies plus AIM (ex. investment
companies) Index of 5.0% (reflecting the UK portfolio's heavy exposure to AIM
companies). Partly as a result, the Company's North American portfolio by
year-end was for the first time in the Company's history of a similar size to
its UK one, each accounting for approximately 35% of the Company. A further
6.6% comprised cash and government bonds, and the remaining 23.4% or so
represented the investments in EMEA and in Asia, in roughly equal proportions.
The strong performance in North America was driven mainly by the holdings with
exposure to the boom in AI related investment. The UK, however, was held back
by the very weak performance of the AIM market, stocks on which account for
the majority of the UK portfolio. The weakness in AIM was driven in part by
the anticipation, following the change of government at the General Election,
that Inheritance Tax ("IHT") relief for AIM stocks would be withdrawn. In the
event IHT relief was halved in the Chancellor's UK Budget in October. More
generally there has continued to be a much discussed flight of capital from
the smaller end of the UK Stock Market, which is troubling for the
Government's growth agenda. This is in spite of the fact, as mentioned in the
Manager's Report, that trading results have typically been good.
A continuing feature of 2024 was the relative outperformance of larger quoted
technology stocks compared to the smaller ones on which the Company has always
focused. For most of the Company's history, small has outperformed large, but
in recent years the opposite has been true. The board and Manager continue to
believe that this will not last indefinitely and there is very much a place
for a top performing fund focused exclusively on the smaller companies in the
technology and communications space. In part, because there is a lack of
research available to market participants, it is possible for an active
manager who makes their own assessment of opportunities to achieve superior
and differentiated performance.
The Company's share price in the year was extremely strong, rising 26.4%. This
reflected the share purchases by Saba Capital Management, L.P. ("Saba")
discussed below, which squeezed up the share price until Saba reached 29.1%,
close to the maximum holding allowed without making an offer for the Company,
after which not surprisingly the share price fell back somewhat. Any
shareholder who invested at the Company's inception in 1994 would have made
27x NAV total return(1) by 31 December 2024. Even over the 15 years following
the end of the Global Financial Crisis in 2009, the return has been close to
6x share price total return.
Liquidity and Capital Allocation
2024 saw a continuation of the trend for takeovers of the Company's holdings
in North America, the UK and Europe, with precious few IPOs or share placings
to replace the companies leaving the markets. As a result, the Company has
repeatedly found itself with involuntary cash inflows. The Manager as always
had a choice, guided by the board, over how to deploy that liquidity.
Some years it may be that valuations in the market are compelling and the
surplus liquidity will best be recycled into investments that bring the
opportunity of high returns over the medium term. Alternatively, the Company
can buy back its own shares in the market. In practice a combination of the
two, in varying proportions, is likely. In 2024 the main use of liquidity was
to buy back shares amounting to 10.3% of the Company's opening share capital.
This was the second year running where a significant percentage of the
Company's shares was bought back, always at a discount which enhances
remaining shareholders' NAV. The Company has bought back shares every year
since 2007. As well as enhancing the shares' liquidity, buying back shares has
the added benefit that the Company does not outgrow its mandate. Since the
Company was launched in 1994, it has bought back shares totalling some £471m,
which compares extremely favourably with the Company's total capital raised of
£95m.
Corporate Activity
The defining development in the year was the continuation of Saba's purchases
of the Company's shares, and the ensuing chain of events which straddled the
year end. Saba started buying materially in 2023, slowed in the first half of
2024 only to accelerate in the second half when Saba clearly made a decision
to try to seek management control of the Company. This culminated on 18
December 2024 with Saba issuing a requisition for a General Meeting of the
Company at which it proposed to remove all the current independent directors
and replace them with its own appointees, with a view to also terminating the
management contract of Herald Investment Management Limited and replacing in
due course with Saba. The General Meeting was held on 22 January 2025 at which
shareholders voted overwhelmingly to reject the proposals, with 99.85% of the
shares which voted (other than shares believed to have been voted by Saba)
voting against.
As the board highlighted in its statement after the vote, the outcome was
clear, complete and incontrovertible. Regrettably the whole process has cost
the Company a material amount of money in hiring advisers and arranging the
meeting, and we are unable to charge Saba for this uninvited distraction. In
addition, it has been very unsettling for the Company's Manager, which, as
pointed out in the Manager's Report, needs a stable and supportive shareholder
base to make the sort of far-sighted investment decisions which have in the
past led to its stellar long-term performance.
The board and the Manager were delighted by, and extremely grateful for, the
overwhelming support of shareholders. The turnout at the vote was remarkable
by historic standards, showing the strength of feeling among shareholders,
including those who hold their shares through "platforms" who have
historically tended not to vote. Commentators have wondered whether this may
mark a turning point for retail shareholder turnout, but at the least the
debate has started as to how to make it easier for retail shareholders to know
when there is a vote, and then how to participate in the vote. The board
recognises that although nominally voting for the board, the almost unanimous
support in Herald's case was for its strategy and the way it has been
executed. The board and the Manager are also grateful to the many shareholders
who attended the General Meeting in person, some of whom asked questions, and
we hope that this level of turnout will continue for future meetings - the
next being the Annual General Meeting (see below).
It should not be overlooked that what Saba has been trying to do is to take
control of companies from a position of owning less than 30% of the shares,
hoping that it can achieve a simple majority at a general meeting to sack an
independent board and take control, relying as much on low turnout among
shareholders as on any support for its objectives.
Saba continues to hold a material percentage of your Company's shares and
there is uncertainty as to what it proposes to do, now that it has found that
it has to all intents and purposes no support whatsoever from other
shareholders.
Outlook
The board continues to believe that an active manager with the right skills
and experience can achieve excellent returns in this sector. To keep pace with
the evolution of what constitutes the smaller quoted companies market
globally, the board has agreed with the Manager that investments in new
positions can be made in companies capitalised at up to $5bn, compared with up
to $3bn before. Worldwide there are over 5,000 companies with a market cap
below $5bn in the sectors addressed by the Company. Many of the holdings owned
by the Company are in smaller and relatively illiquid companies and the board
believes that a closed end investment company, known in the UK as an
investment trust, is an excellent way to invest for the long term in such a
portfolio. The Manager can afford to take the liquidity risk in the portfolio
whereas if it were an open-ended fund that would not be the case.
Since the year end, there has been something of a convulsion in the market
values of the larger technology companies, triggered by the announcement of
the low-cost Chinese AI large language model, DeepSeek. Some of this has been
felt at the smaller company end of the sector as well. The coming year will no
doubt throw up its usual mix of opportunities and challenges, not least with
the second term of Donald Trump as US President leading to increased
volatility and uncertainty.
The Board
It is with sadness that the board will soon lose the input of James Will, who
is stepping down after the AGM as he will have served for ten years. His
contribution cannot be overstated, not least during the recent corporate
activity. His role as Senior Independent Director will be taken over by
Henrietta Marsh, who has been on the board since 2019. The board wishes James
the very best for the future.
AGM AND CONTINUATION VOTE
The Annual General Meeting ("AGM") to be held on 24 March 2025, to which all
shareholders are invited, provides shareholders with an opportunity to hear
the Manager speak first hand and to ask questions of the board and the
Manager.
The Company has also published a circular to shareholders (the "AGM
Circular"), which contains the notice of AGM and further details of the AGM.
At this meeting, there will be the Company's next triennial continuation vote.
The board urges shareholders to again vote to ensure your Company can
continue.
Your Company is the only investment trust specialising in the global small and
mid-capital sections of the technology and communication sectors and its
offering is both successful and unique in the UK listed investment company
sector. Its distinctive investment focus has delivered a 27x NAV total
return(1) to shareholders since its inception in February 1994 and enables
shareholders to invest in a diverse portfolio of companies, with high stock
specific risk and low liquidity, which would otherwise be difficult to access.
The board believes that the Company's mandate will continue to provide
attractive long-term investment opportunities. The directors believe that the
prospects for investment in the technology and communications sectors remain
positive and that we have a proven Manager in the form of Herald Investment
Management Limited. Your board strongly recommends that shareholders vote in
favour of the resolution to continue as an investment trust, and the other
resolutions to be proposed at the AGM, as the directors intend to do in
relation to their own shareholdings.
Please see the section of the AGM Circular titled "Action to be taken" for
further information on the action shareholders are recommended to take in
respect of the AGM and details of how you can instruct a proxy to vote on
your behalf at the AGM.
ANDREW JOY
Chairman
19 February 2025
INVESTMENT Manager's Report
The Chairman has described how 2024 proved to be a challenging year reflecting
instability in the Company's share register. Fortunately, this was not the
result of poor investment performance. The net asset value per share has
appreciated by 12.1%. The highlight has been the remarkable performance of two
North American companies which have seen strong growth in their data centre
computers enabling artificial intelligence. In addition, nine takeovers
announced in 2023 have completed yielding £21.1m in cash. A further eight
have been announced and completed delivering an additional £48.8m in cash and
more recently another nine have been announced with a potential value of a
further £50.0m. This level of takeovers is consistent with previous years.
However, new issues have been few and far between in all geographies,
reflecting continued withdrawal of assets from active managers in favour of
fixed interest investments and index trackers. There is a large pipeline of
companies funded by venture capital and private equity which would like to
float if public markets were receptive and valuations appropriate. With a
handful of exceptions trading performance across the portfolio has generally
been good.
Regional Analysis
Valuation at
31 December
2024 Return* % of
£m % Net Assets
UK 444.8 3.3% 35.5%
North America 427.3 36.3% 34.1%
EMEA 146.3 5.8% 11.7%
Asia 150.2 3.3% 12.0%
Total equities 1,168.6 93.3%
Cash and liquid assets 84.0 6.7%
Total net assets 1,252.6 12.1% 100.0%
*IRR for year to 31 December 2024.
Over the last five years, £333m has been spent buying back shares in the
Company. 2024 marks the tenth successive year when cash has been withdrawn
from the UK portfolio, reflecting high levels of takeovers and our cautious
outlook for UK smaller quoted companies despite the attractive valuations. In
North America, cash has also been withdrawn reflecting significant profits in
Super Micro Computer, partially offset by further investments.
Net Acquisitions and Disposals Total by Takeover
£m 2020 2021 2022 2023 2024 Region Proceeds
UK -24.9 -57.7 -43.3 -12.5 -67.6 -206.0 116.0
North America -29.5 -13.0 -30.7 -27.6 -28.0 -128.8 137.0
EMEA 19.1 10.7 -3.7 4.2 -11.2 19.1 54.0
Asia 23.0 27.4 -4.5 -19.1 3.4 30.2 35.0
Total -12.3 -32.6 -82.2 -55.0 -103.4 -285.5 342.0
The table below shows the weighted average forecast p/e of the Company's
portfolio by region. It highlights a lower forecast p/e in the UK, similar to
the level a decade ago. All other regions have to varying degrees rerated
upwards. Valuations are more comfortable in the UK reflecting an illiquidity
discount.
Regional Price to Earnings
Year-end P/E North
UK America EMEA Asia
2013 16.9 20.9 14.9 9.6
2014 15.8 19.2 13.4 12.3
2015 16.4 20.1 16.3 13.2
2016 15.9 20.7 17.5 13.1
2017 19.6 27.8 21.4 14.8
2018 15.9 24.0 17.7 16.3
2019 21.7 27.9 25.0 20.7
2020 26.2 45.0 34.9 25.0
2021 23.8 29.4 33.3 23.0
2022 16.7 17.9 24.1 16.9
2023 16.0 22.3 30.4 21.5
2024 16.6 23.3 29.2 20.5
Source: Bloomberg. Analyst earnings estimates, where available, are aggregated
using the Bloomberg weighted harmonic average calculation. This excludes
loss-making companies from the p/e calculation. A weighted harmonic average
will normally be lower than a geometric or arithmetic average.
The performance by market capitalisation at the year end and by region is
shown in the table below and shows a mixed picture.
Market Market Market Market Market Market
Return by region cap cap cap cap cap cap
and market <$100m $100- $250m- $500m- $1bn- >$3bn
capitalisation (%)* 250m 500m 1bn 3bn
UK -19.4% 23.8% -13.8% 2.0% 31.3% 20.8%
North America 14.4% -16.1% 27.6% 30.0% -4.5% 74.3%
EMEA -21.9% -9.6% 23.1% 46.5% 13.9% -6.7%
Asia -14.6% -2.1% -13.3% 10.2% -6.2% 20.4%
All equities -17.6% 6.2% -1.6% 13.4% 11.6% 49.4%
* IRR for year to 31 December 2024.
Value of equity
investments in Market Market Market Market Market Market Total
market cap cap cap cap cap cap by
capitalisation <$100m $100- $250m- $500m- $1bn- >$3bn region
range (£m) 250m 500m 1bn 3bn
UK 97.8 75.2 74.6 87.8 85.6 23.8 444.8
North America 10.4 26.8 51.6 57.3 62.8 218.4 427.3
EMEA 15.4 21.5 21.7 16.4 45.0 26.3 146.3
Asia 14.0 18.3 18.2 26.9 28.7 44.1 150.2
Total equities 137.6 141.8 166.1 188.4 222.1 312.6 1,168.6
North America
The North American return of 36.3% compares well with the return of the
small-cap Russell 2000® Technology Index (total return) of 25.9% in sterling.
The dramatic performance of Super Micro Computer continued in the first
quarter. Celestica and Fabrinet also performed strongly, driven by the
artificial intelligence supply chain boom. It should be noted that the index
had only returned 6.0% in the nine months to the end of September, so the
majority of the return occurred in the fourth quarter when there was a "Trump
boom" in the smaller companies market, and the returns on the Company's North
American portfolio similarly broadened out. Nevertheless, the weighted average
return of small-cap stocks in Bloomberg's Technology and Communication sectors
is still negative for the year, and a far cry from that of the Magnificent
Seven stocks.
Thanks to the strong performance in this region, the North American portfolio
has now reached 34.1% of the Company's net assets and after further withdrawal
of cash from the UK portfolio is a similar proportion to the UK.
REGIONAL ALLOCATION CHANGES
(STERLING, THOUSANDS)
Valuation at Net Valuation at
31 December acquisitions/ Appreciation/ 31 December
2023 (disposals) Amortisation (depreciation) 2024
Equities*
UK 503,934 (67,570) - 8,482 444,846
North America 341,571 (27,978) - 113,660 427,253
EMEA 150,349 (11,179) - 7,090 146,260
Asia Pacific 144,020 3,395 - 2,836 150,251
Total equities 1,139,874 (103,332) - 132,068 1,168,610
Government bonds 60,765 (534) 1,424 (238) 61,417
Total investments 1,200,639 (103,866) 1,424 131,830 1,230,027
Net liquid assets 45,118 (22,349) - (194) 22,575
Total net assets(+) 1,245,757 (126,215) 1,424 131,636 1,252,602
* Equities includes convertibles and warrants.
+ The total assets figure comprises assets less current liabilities.
UK
The UK performance overall was a lacklustre return of 3.3%. There was a marked
divergence in returns between fully listed holdings of 20.6% and the return of
AIM stocks of -4.5%. The Deutsche Numis Smaller Companies plus AIM (ex.
investment companies) Index returned 5.0%. However, in both cases there are
outliers that have impacted the Company significantly. At the year end, the
value of fully listed stocks was £139.6m (22 holdings). Trustpilot (+£16.1m)
is the largest holding, and accounted for most of the return, followed by long
held Diploma and Bloomsbury Publishing.
The AIM portfolio is £288.5m (84 holdings), representing the lowest
proportion of the Company's assets since 2005. Regrettably, there are too few
co-investors to adequately fund companies, and an inadequate secondary market,
so the exposure has been gradually reduced through takeovers. Through history,
profits of c£349m have been achieved in AIM stocks, and we regret AIM's
decline, because capital could be usefully deployed. The performance of the
Company's AIM portfolio for the year was marred by big declines in YouGov
(-£14.7m), Next Fifteen (-£10.5m) and Bango (-£8.1m). All had trading
issues, have contributed positively in the past and in aggregate, and have
returned £50.8m even after including this year's price falls. Fortunately,
aggregate profits of £32.1m have already been realised, reducing the adverse
impact. This has been mitigated by strong returns from Cohort (+£7.9m),
Corero Network Security (+£4.9m) and IQGeo (+£4.6m). The latter was one of
nine UK takeovers to complete this year. Acquisition terms have also been
agreed for Eckoh, Intelligent Ultrasound and Windward but are yet to complete.
It is interesting to observe that the FTSE-AIM Index, the FSTE-Small Companies
Index, and the Deutsche Numis Smaller Companies plus AIM (ex. investment
companies) Index all had similar returns until May. Thereafter, AIM steadily
underperformed. The one-day respite was the day of the Budget, when AIM IHT
relief was not abolished, but merely halved.
It is particularly fulfilling to see Corero perform well, having patiently
provided primary capital over a number of years, but there are also a number
of smaller holdings that have contributed positively - Filtronic, Intercede,
Celebrus Technologies and System1 to name a few.
Like a record stuck in a groove, I repeat my annual message: "There are
promising small UK companies, but too few co-investors."
Europe, Middle East and Africa
The EMEA (Europe, Middle East and Africa) region currently only comprises
stocks in continental Europe, and accounts for 11.7% of the Company's assets.
As in the UK, the European quoted smaller company markets are challenged by a
shortage of capital. The positive return of 5.8% achieved in 2024 is thanks to
an extraordinarily high number of takeovers. EQS, Efecte, Invision and Volue
have all been acquired this year yielding £21.6m in cash. In addition, Esker
and Nexus have received takeover bids which may yield a further £29m. As in
the UK, acquirers are generally private equity, and disappointingly boards and
management teams have generally rolled indicating good long-term prospects. At
this stage private equity still has deeper pockets, and higher valuations than
public markets, certainly in the UK and Europe. This may prove temporary as
private equity returns have been flattered by leverage when interest rates
were low. Now that interest rates have normalised profitable exits are more
difficult to achieve, and the returns are more subdued. I remain an evangelist
for public markets providing permanent capital, and they should in normal
times provide liquidity too. Currency has been a material headwind this year
to the £ Sterling reported return, with the Euro depreciating by 4.5% and the
Swedish Krona by 7.3% against it.
Asia
Asia now accounts for 12.0% of the Company's assets and returned 3.3% in 2024.
Taiwanese investments account for a third of the Asian portfolio and
delivered another satisfactory return of 13.7%. Australia, with half of the
weighting of Taiwan, did even better, returning 44.8%, with Catapult the
standout performer. It collects and analyses data on athletes' performance.
Unfortunately, these strong gains were largely offset by negative returns in
Japan (-5.2%) and South Korea (-36.6%). There have also been major currency
headwinds with the Japanese Yen declining 8.7% versus Sterling and the Korean
Won declining 11.2%, but no major stock specific challenges.
Sector Analysis
Valuation at Appreciation/ 31-Dec-24
31-Dec-24 depreciation % of equity 2024
£m £m investments % return*
Software &
Technology Services 493.1 69.3 42.2% 15.2%
Technology Hardware & Semiconductors 330.2 63.5 28.3% 22.3%
Media 122.4 -8.9 10.5% -6.3%
Industrial Products 90.2 20.5 7.7% 29.0%
Industrial Services 33.3 4.4 2.8% 15.6%
Telecommunications 32.5 0.6 2.8% 1.7%
Other 66.9 -5.0 5.7% -7.0%
Total 1,168.6 144.4 100.0%
*IRR for year to 31 December 2024.
By value 70.5% of the Company's investments are classified in the Technology
sector (Bloomberg), most of the remainder being in Communications and
Industrials. These Technology investments are divided into two subsectors:
Software and Technology Services, and Technology Hardware and Semiconductors.
Software and Technology Services
The Software sector was fashionable in the Covid era, and
Software-as-a-Service companies reached exotic valuations in 2020-21. 2022-23
saw a sharp correction, and the return of 15.2% in 2024 represents some
recovery. In contrast the Technology Services sector has had a challenging
year, with financial services and governments alike conspicuously slowing the
pace of investment. It seems their focus is on saving money. Enterprise IT
budgets have been moved towards experimentation around AI initiatives.
31-Dec-23 31-Dec-24 2024
Software and Technology Services £m £m % return*
UK 191.4 168.3 10.5%
North America 139.8 188.3 20.0%
EMEA 68.3 85.3 25.4%
Asia 57.5 51.2 3.4%
Total 457.0 493.1 15.2%
*IRR to 31 December 2024.
US listed Pegasystems delivered the highest sterling return, and the market
value is now 14.7x the book cost. It had a choppy period in 2022 when it was
sued by Appian, and the court found Pegasystems guilty with a $2bn fine. We
know management well having held the shares since 2003 and have immense
respect for the founder and CEO Alan Trefler, so we maintained the holding. We
have been rewarded with an appeal which reversed the initial judgment, and the
company has continued to make progress, significantly improving profitability.
It is an early user of AI for corporate workflows and customer engagement.
The second highest sterling return was from French listed Esker, which has
also been long held (since 2012 and increased more recently) and its market
value is 4.9x book cost. It supplies software for purchase and invoice
management and is subject to a bid by private equity. The bid price is a
little disappointing, and disappointingly for us, management will roll with
the new owners. We prefer takeovers when management sell as well, but it is
another example of a company that thinks private equity will be a better
owner than public markets.
Third on the list, Swedish listed RaySearch Laboratories is a more recent
position with the first investment in 2020, and additional purchases each year
since. It provides radiotherapy treatment planning software - RayStation - for
cancer treatment clinics. RaySearch has recently also launched two new
software products, an oncology information system - RayCare - and an AI
assisted oncology analytics platform - RayIntelligence. Both have been
developed organically with key cancer centre clients across the world and
revenues are just starting for these new products while the costs are already
in the profit and loss and were covered by the revenues and profits generated
from RayStation.
Fourth on the list is Canadian listed Descartes, which was first acquired in
2007. The market value is an astonishing 46.8x book cost. Descartes
exemplifies the investment process, where we are prepared to take small
high-risk positions in a range of early-stage companies. When the successes
rise 46.8x, they compensate for a minority of holdings which disappoint.
Descartes provide inter-enterprise software for global supply chain management
and they have been acquisitive using internally generated cash to buy at
sensible prices.
Corero, IQGeo and AvePoint all delivered returns between £4-5m. The worst
return was Bango which declined by £8.1m, having set market expectations too
high in a fragile AIM market. Oxford Metrics followed with a £3.8m decline,
as an order drought followed overordering when there were Covid related
supply chain issues.
Technology Hardware and Semiconductors
This is the sector that has benefited most from the artificial intelligence
supply chain boom, and the sector returns were dominated by two stocks, Super
Micro Computer and Celestica, which together returned £65.5m out of a total
sector return of £63.5m.
Technology Hardware 31-Dec-23 31-Dec-24 2024
and Semiconductors £m £m % return*
UK 58.5 40.0 -12.3%
North America 164.7 178.5 64.7%
EMEA 60.6 50.1 -14.3%
Asia 53.0 61.6 4.6%
Total 336.8 330.2 22.3%
*IRR to 31 December 2024.
Super Micro Computer was the most profitable holding last year, and momentum
continued in the first quarter. More recently it has been challenged by the
resignation of the company's auditor, and thus a late filing, albeit the
numbers do not appear to need changing. The speed of growth was unprecedented
and I am sure the corporate functions were stretched. Fortunately, we had sold
the majority of the holding, but we remain holders of a residual position.
If Super Micro Computer has worked hand in glove with Nvidia, Celestica has
been a big supplier to Google Cloud. Fabrinet was the next best contributor
with a return of, relatively speaking, a modest £4.3m reflecting strong
demand from Nvidia. Bizlink in Taiwan which sells high performance cables also
did well.
The disappointing stocks were Nordic Semiconductor (-£3.8m) and IQE
(-£3.1m). The latter has been long held. Fortunately, £19.6m of profits have
already been realised, but there have been management issues and a tough
mobile phone market.
Communications
This sector comprises two subsectors - Media and Telecommunications.
31-Dec-23 31-Dec-24 2024
Communications £m £m % return*
UK 132.6 111.3 -6.0%
North America 22.3 24.7 10.2%
EMEA 13.6 5.1 -0.1%
Asia 17.0 13.8 -17.3%
Total 185.5 154.9 -4.8%
*IRR to 31 December 2024.
This sector is dominated by UK holdings. Trustpilot has performed very well
and returned £16.1m and is the only material new UK holding in recent years,
with the first purchases in March 2022. Unfortunately, this was more than
offset by declines in YouGov and Next 15. Both companies had operational
issues, both companies were heavily owned by investors looking for inheritance
tax relief, and had made exceptional returns in the past. Previously realised
profits of £12.4m in YouGov, and £18.1m in Next Fifteen contained the
declines. Other returns were relatively immaterial.
Industrials
31-Dec-23 31-Dec-24 2024
Industrials £m £m % return*
UK 72.6 81.9 19.8%
North America 11.4 26.4 24.9%
EMEA 3.2 2.5 -0.5%
Asia 5.3 12.7 108.7%
Total 92.5 123.5 25.2%
*IRR to 31 December 2024.
The exposure to this sector is again dominated by UK holdings. Cohort has
appreciated 100% this year, with stronger trading and a record order intake,
while Leonardo DRS is a US listed defence company which has done well too.
Catapult in Australia and Diploma in the UK have been the other useful
contributors.
Other
31-Dec-23 31-Dec-24 2024
Other £m £m % return*
UK 48.8 43.3 -5.7%
North America 3.4 9.4 28.2%
EMEA 4.7 3.3 -26.4%
Asia 11.2 10.9 -20.8%
Total 68.1 66.9 -7.0%
*IRR to 31 December 2024.
The holdings encompassed in the "Other" category include holdings in
healthcare, renewable energy and financial services which have a technology
aspect. There were no standout performances, either positively or negatively.
Best was a US listed company Climb Global Solutions, which was offset by
Invinity Energy, which raised money through a placing before a set of
disappointing results.
Sector Summary
I have endeavoured to demonstrate with this detail that the target sector in
which we invest has not produced a homogenous performance. In fact in 2024, 29
holdings were down more than 50%, while 18 holdings appreciated more than
100%. It is also what makes active fund management fulfilling, particularly
when we have provided primary capital to so many companies. Index trackers
cannot provide primary capital. Without primary capital, there will not be
growth companies.
Outlook
There are a number of factors that should drive continued growth in the wider
technology sector. Artificial intelligence has been the talk of 2024. So far
it has evidently benefited companies directly in the supply chain, led by
staggeringly high levels of capital expenditure by the hyperscalers (Microsoft
Azure, AWS, etc), but it is inevitable that new applications will emerge from
innovative small companies. Meanwhile the drive to net zero poses some
unresolved technical challenges, in particular the storage and distribution of
renewable power, plus a long tail of further requirements. Meanwhile, military
conflicts and a geopolitically volatile world are leading to evident
innovation in defence and cyber security.
I am also optimistic that the flow of attractive new issues will improve as
the markets for companies continue to adjust to the new norm for interest
rates. The challenge for the Company is to unite shareholders around its
mandate in order that we can continue to make long-term investments in smaller
quoted technology companies.
I should like to thank shareholders for voting at the recent requisitioned
general meeting and so decisively demonstrating support. I should like to
thank my team for their hard work during the year and the extra effort the
Saba issue has caused. I would, of course, also like to thank the board who
have borne the brunt and especially the Chairman whose efforts have been
immense.
SECTOR PERFORMANCE
(Sterling Millions)
Market value % of Total return Total return
equity portfolio equity portfolio equity portfolio equity portfolio
31 Dec 2024 31 Dec 2024 31 Dec 2024 31 Dec 2023
Software 426.2 36.5 71.6 -6.8
Technology Hardware 202.9 17.4 73.5 56.5
Semiconductors 127.3 10.9 -10.0 13.0
Technology Services 66.9 5.7 -2.3 -6.7
Internet Media & Services 58.5 5.0 13.6 8.8
Electrical Equipment 41.5 3.5 4.5 4.6
Advertising & Marketing 37.6 3.2 -22.5 -6.7
Telecommunications 32.5 2.8 0.6 3.7
Commercial Support Services 32.1 2.8 3.7 1.7
Industrial Intermediate Production 24.9 2.1 4.8 7.0+
Other 118.2 10.1 6.9 -14.0+
Total 1,168.6 100.0 144.4 61.1
Source: BICS (Bloomberg Industry Classification Standard).
+ 2023 Comparative figures restated.
Katie Potts
19 February 2025
Classification of investments
North Japan & Asia 2024 2023
UK EMEA America Pacific Total Total
Classification* % % % % % %
Communications 9.0 0.4 1.9 1.1 12.4 14.9
Advertising & Marketing 2.8 0.1 0.2 - 3.1 5.4
Entertainment Content 0.5 - - - 0.5 0.8
Internet, Media & Services 3.1 0.1 0.6 0.9 4.7 4.3
Publishing & Broadcasting 1.5 - 0.1 - 1.6 1.9
Telecommunications 1.1 0.2 1.0 0.2 2.5 2.5
Consumer Discretionary - - 0.3 0.1 0.4 0.6
Automotive - - - - - -
E-Commerce Discretionary - - - 0.1 0.1 0.2
Leisure Facilities & Services - - - - - 0.1
Retail - Discretionary - - - - - 0.1
Wholesale - Discretionary - - 0.3 - 0.3 0.2
Energy 0.4 - 0.4 - 0.8 0.7
Oil & Gas Services & Equipment - - 0.2 - 0.2 0.2
Renewable Energy 0.4 - 0.2 - 0.6 0.5
Financials 0.7 - - 0.5 1.2 1.5
Asset Management 0.5 - - - 0.5 0.6
Equity Investment Instruments - - - - - 0.2
Speciality Finance 0.2 - - 0.5 0.7 0.7
Health Care 0.8 0.3 - 0.1 1.2 1.2
Biotechnology & Pharmaceutical 0.1 - - - 0.1 -
Health Care Facilities & Services 0.2 - - - 0.2 0.2
Medical Equipment & Devices 0.5 0.3 - 0.1 0.9 1.0
Industrials 6.6 0.2 2.2 1.1 10.1 6.8
Aerospace & Defence 1.2 - 0.7 0.1 2.0 0.4
Commercial Support Services 1.6 - 1.0 - 2.6 1.9
Electrical Equipment 1.9 0.2 0.4 0.9 3.4 2.7
Industrial Intermediate Production 1.9 - - 0.1 2.0 1.8
Transportation & Logistics - - 0.1 - 0.1 -
Materials 0.1 - - 0.2 0.3 0.3
Chemicals - - - 0.2 0.2 0.2
Forestry, Paper & Wood Products 0.1 - - - 0.1 0.1
Technology 16.6 10.8 29.3 8.9 65.6 64.2
IT Services 2.6 1.2 0.7 0.9 5.4 7.8
Semiconductors 0.6 3.0 4.2 2.3 10.1 10.4
Software 10.9 5.6 14.3 3.2 34.0 29.4
Technology Hardware 2.5 1.0 10.1 2.5 16.1 16.6
Utilities 1.3 - - - 1.3 1.3
Electricity & Gas Marketing & Trading 1.1 - - - 1.1 1.1
Gas & Water Utilities 0.2 - - - 0.2 0.2
TOTAL EQUITIES (including convertibles and warrants) 35.5 11.7 34.1 12.0 93.3 -
Total equities - 2023 (including convertibles and warrants) 40.5 12.1 27.4 11.5 - 91.5
BONDS - 1.2 2.5 1.2 4.9 4.9
NET LIQUID ASSETS** 1.0 0.3 0.2 0.3 1.8 3.6
TOTAL NET ASSETS 36.5 13.2 36.8 13.5 100.0 -
Total net assets - 2023 41.8 12.3 33.2 12.7 - 100.0
SHAREHOLDERS' FUNDS 36.5 13.2 36.8 13.5 100.0 -
Shareholders' Funds - 2023 41.8 12.3 33.2 12.7 - 100.0
Number of equity investments (including convertibles and warrants) 111 31 82 86 310 322
* Source: Bloomberg Industry Classification Standard.
** Cash, current assets and liabilities.
Top 20 Equity Holdings
AS AT 31 DECEMBER 2024
A brief description of the twenty largest equity holdings in companies is as
follows:
Celestica(TM)
As a leader in design, manufacturing, hardware platform and supply chain £31.0M VALUATION
solutions, Celestica partners with leading companies in aerospace and defence,
communications, enterprise, health technology, industrial, and capital 2.5% OF TOTAL ASSETS
equipment, to deliver solutions for their most complex challenges. Celestica
brings global expertise and insight at every stage of product development - 0.4% OF ISSUED SHARE
from the drawing board to full-scale production and after-market services.
Celestica has employees across North America, Europe and Asia, that help, CAPITAL HELD
develop and deliver new products for their customers.
£3.7M BOOK COST
Trustpilot
Founded in Denmark in 2007, Trustpilot has since grown to become one of the £29.0M VALUATION
world's leading consumer review platforms. Trustpilot offers a public platform
where consumers can leave reviews for businesses and businesses can respond to 2.3% OF TOTAL ASSETS
honest feedback. The platform is open to all businesses and consumers - yet
independent of both - every interaction on Trustpilot is transparent for all 2.3% OF ISSUED SHARE
to see. Trustpilot's business model is to charge recurring software fees to
its corporate customers for the use of the platform. CAPITAL HELD
£10.0m BOOK COST
Fabrinet
Fabrinet is a leading provider of advanced optical packaging and precision £26.8m Valuation
optical, electro-mechanical, and electronic manufacturing services to original
equipment manufacturers of complex products, such as optical communication 2.1% of total assets
components, modules and subsystems, industrial lasers and sensors. Fabrinet
offers a broad range of advanced optical and electro-mechanical capabilities 0.4% of issued share
across the entire manufacturing process, including process design and capital held
engineering, supply chain management, manufacturing, advanced packaging,
integration, final assembly and test. Fabrinet focuses on production of high £1.9m Book Cost
complexity products in any mix and volume. Fabrinet maintains engineering and
manufacturing resources and facilities in Thailand, the United States, and the
People's Republic of China.
BE Semiconductor Industries
BE Semiconductor Industries ("Besi") is a leading supplier of semiconductor £26.3m Valuation
assembly equipment for the global semiconductor and electronics industries
offering high levels of accuracy, productivity and reliability at a low cost 2.1% of total assets
of ownership. Besi develops leading edge assembly processes and equipment for
lead frame, substrate and wafer level packaging applications in a wide range 0.3% of issued share
of end-user markets including electronics, mobile internet, computer, capital held
automotive, industrial, LED and solar energy. Customers are primarily leading
semiconductor manufacturers, assembly subcontractors and electronics and £0.6m Book Cost
industrial companies.
Diploma PLC
Diploma is an international value-add distribution group, organised across £23.8m Valuation
three sectors: Controls, Seals and Life Sciences. Value-add services are
delivered alongside products, which include: wire & cable, connectors, 1.9% of total assets
fasteners and adhesives; seals, gaskets, hose and fluid power sealing
products; surgical and diagnostic equipment, consumables and instrumentation. 0.4% of issued share
An entrepreneurial culture and decentralised management structure ensures that capital held
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 £0.4m Book Cost
operates in core geographies of North America, Continental Europe, UK and
Australia.
Pegasystems
Founded in 1983, Pegasystems ("Pega") provides a platform that empowers the £22.4m Valuation
world's leading organisations to unlock business-transforming outcomes with
real-time optimisation software. Clients use Pega's enterprise AI decisioning 1.8% of total assets
and workflow automation to solve pressing business challenges - from
personalising engagement to automating service to streamlining operations. 0.4% of issued share
Pega has built a scalable and flexible architecture to help enterprises meet capital held
customer demands while continuously transforming for tomorrow.
£1.5m Book Cost
Esker
Esker is a global cloud platform built to unlock strategic value for finance, £21.6m Valuation
procurement and customer Service professionals, and strengthen collaboration
between companies by automating the cash conversion cycle. Esker's solutions 1.7% of total assets
incorporate AI technologies to drive increased productivity, enhanced
visibility, reduced fraud risk, and improved collaboration with customers, 1.6% of issued share
suppliers and employees. Founded in 1985, Esker operates in North America, capital held
Latin America, Europe and Asia Pacific with global headquarters in Lyon,
France, and U.S. headquarters in Madison, Wisconsin. In September 2024, Esker £4.4m Book Cost
and Bridgepoint announced a proposed cash public tender offer for Esker, made
by Bridgepoint, in association with General Atlantic and the management
shareholders.
Descartes Systems
Descartes Systems ("Descartes") offers networks, applications, global trade £17.2M VALUATION
content, and collaborative multi-modal logistics communities to improve the
productivity, performance, safety and security of logistics and supply chain 1.4% OF TOTAL ASSETS
operations. Customers use Descartes modular, cloud-based and data content
solutions to route, schedule, track, train and measure delivery resources; 0.2% OF ISSUED SHARE
plan, allocate and execute shipments; rate, audit and pay transportation
invoices; access and analyse global trade data; research and perform trade CAPITAL HELD
tariff and duty calculations; file customs and security documents for imports
and exports; comply with trade regulations, and complete numerous other £0.4M BOOK COST
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.
Super Micro Computer
Super Micro Computer ("Super Micro") is a global leader in £17.0m Valuation
application-optimised IT solutions. Founded and operating in San Jose,
California, Super Micro delivers innovative enterprise, cloud, AI, and 5G 1.4% of total assets
telco/edge IT infrastructure hardware, it is a total IT Solutions provider
with server, AI, storage, IoT, switch systems, software, and support services. 0.1% of issued share
Super Micro's motherboard, power, and chassis design expertise further enables capital held
development and production, enabling next generation innovation from cloud to
edge for global customers. Products are designed and manufactured in-house (in £1.4m Book Cost
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).
GB Group
GB Group ("GBG"), was founded in 1989, originally pioneering new ways of £16.3m Valuation
delivering address management services. Since then, the offering has grown to
cover three core areas of Location, Identity and Fraud, which together create 1.3% of total assets
confidence online. The location business ensures addresses and locations can
be easily captured, verified and managed. GBG's digital identity verification 1.9% of issued share
tools ensure that companies are trading with good customers and can identify capital held
the bad actors. Fraud prevention solutions reduce financial risk and ensure
compliance with regulations. GBG's future goal is to facilitate online £5.2m Book Cost
environments where everyone can transact with the complete and unconditional
confidence they expect.
Volex
Volex is a leader in integrated manufacturing for mission-critical £15.8m Valuation
applications, in particular for power and data connectivity solutions. Volex
supports international blue-chip customers in five key sectors: Electric 1.3% of total assets
Vehicles, Consumer Electricals, Medical, Complex Industrial Technology and
Off-Highway. Headquartered in the UK, Volex has operations across 28 advanced 3.1% of issued share
manufacturing facilities, uniting 14,000 employees from 25 different nations. capital held
Products find their way to market through localised sales teams and authorised
distributor partners, supporting Original Equipment Manufacturers and £7.3m Book Cost
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.
Silicon Motion Technology
Silicon Motion Technology ("SMT") is the global leader in supplying NAND flash £15.4m Valuation
memory controllers for solid state storage devices. They supply more SSD
controllers than any other company in the world for servers, PCs and other 1.2% of total assets
client devices and are the leading merchant supplier of eMMC and UFS embedded
storage controllers used in smartphones, IoT devices and other applications. 1.1% of issued share
SMT also supplies customised high-performance hyperscale data centre and capital held
specialised industrial and automotive SSD solutions. Customers include most of
the NAND flash vendors, storage device module makers and leading OEMs. £1.7m Book Cost
Cohort Plc
Cohort is the parent company of six innovative, agile and responsive £14.9m Valuation
businesses providing a wide range of services and products for British and
international customers in defence, security and related markets. Cohort was 1.2% of total assets
founded on the principle that SME-size businesses can prosper by being part of
a larger group, where they can benefit from financial oversight, management 2.9% of issued share
support and the exchange of information and practices. Cohort aims to achieve capital held
this while preserving the high growth potential of innovative independent
businesses. £3.2m Book Cost
Telecom Plus
Telecom Plus, which owns and operates Utility Warehouse ("UW"), is the UK's £14.1m Valuation
leading multiservice utility provider, offering bundled household services -
energy, broadband, mobile and insurance. Customers benefit from the 1.1% of total assets
convenience of a single monthly bill, consistently good value across all their
utilities and exceptional service levels. Customers sign up through a network 1.0% of issued share
of local UW Partners all across the country. These Partners recommend UW's capital held
services to friends, family and people they know by word-of-mouth.
£3.3m Book Cost
Idox
Idox is a specialist software and geospatial solutions provider, helping £13.9m Valuation
government and industry, drive productivity and offer a better experience for
everyone. Built around the user and designed in collaboration with experts who 1.1% of total assets
have worked through every detail of every process from end-to-end, the
company's hard-working process engines deliver exceptional functionality and 4.8% of issued share
embed workflows that drive efficiency and best practice with a long-term focus capital held
for regulated environments. Through the automation of tasks, simplification of
complex operations, scalability as operations evolve, and more effective £3.6m Book Cost
management of information, Idox helps their customers achieve more.
Varonis Systems
Varonis Systems ("Varonis") is a leader in data security, fighting a different £13.7m Valuation
battle than conventional cybersecurity companies. The company's cloud-native
Data Security Platform continuously discovers and classifies critical data, 1.1% of total assets
removes exposures, and detects advanced threats with AI-powered automation.
Thousands of organisations worldwide trust Varonis to defend their data 0.3% of issued share
wherever it lives - across SaaS, IaaS, and hybrid cloud environments. capital held
Customers use Varonis to automate a wide range of security outcomes, including
data security posture management ("DSPM"), data classification, data access £4.1m Book Cost
governance ("DAG"), data detection and response ("DDR"), data loss prevention
("DLP"), and insider risk management.
Radware
Radware is a global leader of cyber security and application delivery £13.0m Valuation
solutions for physical, cloud, and software defined data centres. Its
award-winning solutions portfolio secures the digital experience by providing 1.0% of total assets
infrastructure, application, and corporate IT protection and availability
services to enterprises globally. Radware's solutions empower enterprise and 1.7% of issued share
carrier customers worldwide to adapt to market challenges quickly, maintain capital held
business continuity and achieve maximum productivity while keeping costs down.
£5.4M Book Cost
Wilmington plc
Wilmington is the recognised knowledge leader and partner of choice for data, £11.9m Valuation
information, education and training in the global Governance, Risk and
Compliance ("GRC") markets. Wilmington provides critical data and information 0.9% of total assets
to enable their customers to make the decisions needed to maintain compliance
with the rules and regulations that apply to them; and provides training and 3.5% of issued share
education to equip customers with the knowledge and skills to carry out their capital held
activities in line with best practice.
£4.4M Book Cost
Craneware
Craneware is the market leader in healthcare value cycle solutions for 25 £11.3m Valuation
years, it collaborates with US healthcare providers to optimise revenue
integrity, pricing intelligence, decision support, labour productivity, 0.9% of total assets
business of pharmacy, and 340B programme management. Founded in May 1999 by
CEO Keith Neilson and co-founder Gordon Craig, Craneware launched its first 1.5% of issued share
product in October 1999 after signing its first customer contract the previous capital held
month. By the end of 2000, Craneware had more than 20 customers, setting the
stage for the continuous growth to come, and in September 2007, Craneware £2.2M Book Cost
listed on the AIM market of the London Stock Exchange.
RaySearch Laboratories
RaySearch Laboratories ("RaySearch") is a medical technology company that £10.8m Valuation
develops innovative software solutions for improved cancer treatment.
RaySearch markets the RayStation treatment planning system ("TPS") and the 0.9% of total assets
oncology information system ("OIS") RayCare. The most recent additions to the
RaySearch product line are RayIntelligence and RayCommand. RayIntelligence is 2.0% of issued share
an oncology analytics system ("OAS") which enables cancer clinics to collect, capital held
structure and analyse data. RayCommand, a treatment control system ("TCS"), is
designed to link the treatment machine and the treatment planning and oncology £3.8m Book Cost
information systems. RaySearch's software has been sold to over 1,000 clinics
in 44 countries. The company was founded in 2000 as a spin-off from the
Karolinska Institute in Stockholm and the shares have been listed on Nasdaq
Stockholm since 2003.
Statement of Comprehensive Income
For the year ended 31 December 2024
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 131,830 131,830 - 45,419 45,419
Losses on foreign exchange - (194) (194) - (1,316) (1,316)
Income 17,169 - 17,169 17,926 - 17,926
Investment management fee (12,894) - (12,894) (12,375) - (12,375)
Other administrative expenses (1,147) (8) (1,155) (966) (8) (974)
Profit before taxation 3,128 131,628 134,756 4,585 44,095 48,680
Taxation (460) - (460) (559) - (559)
Profit after taxation 2,668 131,628 134,296 4,026 44,095 48,121
Profit per ordinary shares (basic and diluted) 4.96p 244.77p 249.73p 6.79p 74.35p 81.14p
There is no final dividend proposed (2023 - 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
At 31 December 2024
2024 2023
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 1,230,027 1,200,639
Current assets
Cash and cash equivalents 21,890 42,285
Other receivables 1,850 4,022
23,740 46,307
Current liabilities
Other payables (1,165) (1,189)
(1,165) (1,189)
Net current assets 22,575 45,118
TOTAL NET ASSETS 1,252,602 1,245,757
Capital and reserves
Called up share capital 12,585 14,034
Share premium 73,738 73,738
Capital redemption reserve 9,367 7,918
Capital reserve 1,158,239 1,154,062
Revenue reserve (1,327) (3,995)
TOTAL SHAREHOLDERS' FUNDS 1,252,602 1,245,757
NET ASSET VALUE PER ORDINARY SHARE (including current year income) 2,488.24p 2,219.23p
NET ASSET VALUE PER ORDINARY SHARE (excluding current year income) 2,482.94p 2,212.06p
The financial statements of Herald Investment Trust plc (company registration
number 02879728) were approved by the board of directors and authorised for
issue on 19 February 2025 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 2024
Called up Capital Total
Share Share Redemption Capital Revenue Shareholders'
Capital Premium Reserve Reserve Reserve funds
£'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 (1,449) - 1,449 (127,451) - (127,451)
Shareholders' funds at 12,585 73,738 9,367 1,158,239 (1,327) 1,252,602
31 December 2024
For the year ended 31 December 2023
Called up Capital Total
Share Share Redemption Capital Revenue Shareholders'
Capital Premium Reserve Reserve Reserve funds
£'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at 1 January 2023 15,543 73,738 6,409 1,217,387 (8,029) 1,305,048
Profit after taxation - - - 44,095 4,026 48,121
Unclaimed dividends - - - - 8 8
Shares purchased for cancellation (1,509) - 1,509 (107,420) - (107,420)
Shareholders' funds at 31 December 2023 14,034 73,738 7,918 1,154,062 (3,995) 1,245,757
The accompanying notes are an integral part of this statement.
Statement of Cash Flows
For the year ended 31 December 2024
2024 2024 2023 2023
£'000 £'000 £'000 £'000
Cash flow from operating activities
Profit before taxation 134,756 48,680
Adjustments for gains on investments (131,830) (45,419)
Purchase of investments (229,991) (169,090)
Sale of investments 335,563 237,981
Return of capital 348 -
Decrease/(increase) in receivables 123 (817)
Decrease in payables (24) (26)
Amortisation of fixed income book cost (1,424) (1,516)
Effect of foreign exchange rate changes 194 1,316
Overseas tax on overseas income (465) (538)
Net cash inflow from operating activities 107,250 70,571
Cash flow from financing activities
Shares purchased for cancellation (127,451) (107,420)
Unclaimed dividends - 8
Net cash outflow from financing activities (127,451) (107,412)
Net decrease in cash and cash equivalents (20,201) (36,841)
Cash and cash equivalents at start of the year 42,285 80,442
Effect of foreign exchange rate changes (194) (1,316)
Cash and cash equivalents at the end of the year 21,890 42,285
Comprised of:
Cash and cash equivalents 21,890 42,285
Cash flow from operating activities includes interest received of £3,765,000
(2023 - £2,663,000) and dividends received of £11,896,000 (2023 -
£12,235,000).
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
2024 2023
£'000 £'000
Dividend income from investments
UK dividends from listed investments 3,146 4,184
UK dividends from unlisted investments (inc AIM) 3,454 3,273
Overseas dividends from UK-listed and AIM companies 266 394
Overseas dividend income 5,157 5,179
12,023 13,030
Interest income from equity investments
Income from unlisted (inc AIM) UK convertible bonds 470 535
Income from unlisted US convertible bonds 205 85
675 620
Fixed interest
UK interest from government securities - 312
Overseas interest from government securities 2,656 2,368
2,656 2,680
Other income
Deposit interest 1,702 1,596
Other income 113 -
1,815 1,596
Total income 17,169 17,926
Included within dividend income are special dividends of £330,000 (2023 -
£964,000).
Included within deposit interest is interest received of £1,702,000 (2023 -
£1,598,000), and interest paid of £nil (2023 - £2,000).
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"); up until 30 September 2024 the company
secretary was Apex Listed Companies Services (UK) Limited ("Apex").
OBJECTIVE
The Company's objective is to achieve capital appreciation through investments
in smaller quoted companies in the areas of technology and communications.
Investments may be made across the world. The business activities of investee
companies will include technology and communications, and the supply of
equipment and services to these companies.
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).
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.
As part of the risk review, the board considered the challenging global
economic and geopolitical environment including: the continuing effects of the
Russia/Ukraine war; the Israel/Hamas conflict with resultant Middle East
effects; tensions between China/Taiwan and China/USA, with attendant global
supply chain issues; the increased probability of imposition of trade tariffs;
and the risks from climate change. Inflation and interest rates were also
discussed.
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 2024 (2023 -
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.
Other Price Risk Sensitivity
11.9% of the Company's total equity investments at 31 December 2024 (2023 -
13.1%) were listed on the main list of the London Stock Exchange and a further
24.7% (2023 - 30.0%) on AIM. The NASDAQ Stock Exchange accounts for 26.6%
(2023 - 24.4%), New York Stock Exchange for 7.8% (2023 - 5.4%) and other stock
exchanges or unquoted 29.0% (2023 - 27.1%). A 10% increase in equity
investment prices at 31 December 2024 would have increased total net assets
and profit & loss after taxation by £116,861,000 (2023 - £113,987,000).
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 UK base rate.
The interest rate risk profile of the financial assets and financial
liabilities at 31 December was:
FINANCIAL ASSETS
2024 2023
2024 Weighted 2023 Weighted
Weighted average Weighted average
average period average period
interest until interest until
2024 rate/ maturity/ 2023 rate/ maturity/
Fair value interest maturity Fair value interest maturity
£'000 rate date £'000 rate date
Fixed rate:
US bonds 31,919 3.9% 0.3 years 60,765 2.7% 0.3 years
EMEA and Asia Pacific bonds 29,498 1.5% 1.0 years - - -
Overseas convertible bonds 559 18.0% 0.1 years 549 18.0% 1.1 years
UK convertible bonds 835 16.0% 1.7 years 2,336 9.1% 0.9 years
Floating rate cash:
Non-sterling 8,593 4.0% 27,877 3.7%
Sterling 13,297 4.9% 14,408 3.4%
21,890 42,285
The benchmark rates which determine the interest payments received on cash
balances are 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 2024 would
have a direct effect on net assets. Based on the position at 31 December 2024,
over a full year, an increase of 100 basis points would have increased the
profit & loss after taxation by £219,000 (2023 - £423,000) and would
have increased the net asset value per share by 0.44p (2023 - 0.75p). The
calculations are based on the cash balances and number of shares in issue 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 2024 would
have decreased total net assets and profit & loss after taxation by
£367,000 (2023 - £195,000) and would have decreased the net asset value per
share by 0.73p (2023 - 0.35p). A decrease in bond yields would have had an
equal and opposite effect. The 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 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 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 785,291 8,593 877 794,761
overseas currencies
Sterling 444,736 13,297 (192) 457,841
1,230,027 21,890 685 1,252,602
At 31 December 2023
Other
receivables
Cash and and Net
Investments deposits payables exposure
£'000 £'000 £'000 £'000
US dollar 403,795 10,942 787 415,524
Euro 112,813 2,777 76 115,666
Taiwan dollar 43,155 14,158 9 57,322
Japanese yen 47,257 - 34 47,291
Norwegian krone 22,988 - - 22,988
Australian dollar 22,182 - - 22,182
Korean won 18,388 - 119 18,507
Other overseas currencies 26,342 - 36 26,378
Exposure to currency risk on translation of valuations of securities listed in
overseas currencies 696,920 27,877 1,061 725,858
Sterling 503,719 14,408 1,772 519,899
1,200,639 42,285 2,833 1,245,757
Foreign currency risk sensitivity
At 31 December 2024, had sterling strengthened by 10% (2023 - 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% (2023 -
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.
2024 2023
£'000 £'000
US dollar 43,955 41,552
Euro 10,428 11,567
Taiwan dollar 5,506 5,732
Japanese yen 4,779 4,729
Norwegian krone 3,629 2,299
Canadian dollar 3,291 899
Australian dollar 2,704 2,218
Swedish krona 1,926 1,089
Singaporean dollar 1,495 22
Other overseas currencies 1,763 2,479
79,476 72,586
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:
2024 2023
£'000 £'000
Government debt securities 61,417 60,765
Cash and cash equivalents 21,890 42,285
Sales for subsequent settlement - 1,918
83,307 104,968
During the year the maximum exposure in fixed interest investments was
£61,804,000 (2023 - £75,518,000) and the minimum £29,506,000 (2023 -
£38,735,000). The maximum exposure in cash was £68,825,000 (2023 -
£79,533,000) and the minimum £21,890,000 (2023 - £23,504,000).
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 1.4% of the Company's total assets at 31 December 2024 (2023 -
1.2%).
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 the guideline is for no single investment to account for more than
5% of the assets of the Company.
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. 11.9% (£136m) (2023 - 15.1%
(£169m)) 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 2.2% (2023 -
2.7%).
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:
2024 2023
One year One year
or less or less
£'000 £'000
Other payables 1,165 1,189
1,165 1,189
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 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
At 31 December 2023
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial assets
Equity investments 1,124,789 - 9,813 1,134,602
Government debt securities 60,765 - - 60,765
Unquoted loan stocks - - 5,272 5,272
Total investments 1,185,554 - 15,085 1,200,639
Unquoted Investments are valued £17,327,000 as at 31 December 2024 (2023 -
£15,085,000). A 10% increase in unquoted equity investment prices at 31
December 2024 would have increased total net assets and profit & loss
after taxation by £1,732,700 (2023 - £1,508,500). 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 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
At 31 December 2023
£'000
Opening balance at 1 January 2023 13,737
Purchases 2,538
Sales (400)
Total losses
- on assets held at 31 December 2023 (2,366)
Assets transferred during the year 1,576
Closing balance at 31 December 2023 15,085
VIABILITY STATEMENT
The directors' view of the Company's viability has not changed since last
year. 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 current position, the 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 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 (for example the war in
Ukraine, the Israel/Hamas conflict and associated tensions in the Middle East,
and tensions over Taiwan), the risk arising from the recent increase in
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; any borrowing facilities
in place - noting there were none at the year end; 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 April 2022,
99.99% of votes cast were in favour of continuation. The next vote, which is
an ordinary resolution, will be at the Company's forthcoming AGM on 24 March
2025. The board has no reason to believe that the continuation vote will not
pass given a combination of factors including but not limited to: the
performance of the portfolio; feedback from stakeholders, including the
Company's advisers and several major shareholders; the past voting of all
shareholders, including at the requisitioned general meeting held on
22 January 2025 (the details of which are contained in the Chairman's
Statement).
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.
On behalf of the board
ANDREW JOY
Chairman
19 February 2025
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
19 February 2025
Status of announcement
2023 Financial Information
The figures and financial information for 2023 are extracted from the
published Annual Report and Accounts for the year ended 31 December 2023 and
do not constitute the statutory accounts for that year. The 2023 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.
2024 Financial Information
The figures and financial information for 2024 are extracted from the Annual
Report and Accounts for the year ended 31 December 2024 and do not constitute
the statutory accounts for the year. The 2024 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 2024 Annual Report and Accounts will be delivered to
the Registrar of Companies in due course.
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