REG - Herald Inv Trust PLC - Half-year Report
23/07/2025 07:00
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RNS Number : 1123S Herald Investment Trust PLC 23 July 2025
LEI number: 213800U7G1ROCTJYRR70
HERALD INVESTMENT TRUST plc
(the "Company")
HALF-YEARLY FINANCIAL REPORT
For the six months ended 30 June 2025
Herald Investment Trust plc hereby submits its Half-Yearly Report for the six
months ended 30 June 2025 as required by the Financial Conduct Authority's
Disclosure Guidance and Transparency Rule 4.2.
The Half-Yearly Report is being published in hard copy format and a copy has
been submitted to the National Storage Mechanism and it will shortly be
available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) and on the Company's
web pages at www.heralduk.com (http://www.heralduk.com) .
Enquiries:
NSM Funds (UK) Limited
HIT@nsm.group (mailto:HIT@nsm.group)
INVESTMENT OBJECTIVE
Herald Investment Trust plc's ("Herald" or the "Company") 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
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).
SUMMARY OF PERFORMANCE
Total return for the period At inception At At Performance since Performance since
16 February 1 January 2025 30 June 2025 1 January 2025 inception
1994
Net asset value(A) per ordinary share (including current year revenue) 98.7p 2,488.2p 2,553.9p 2.6% 2,687.6%
Net asset value(A) per ordinary share (excluding current year revenue) 98.7p 2,488.2p 2,553.1p 2.6% 2,687.6%
Share price 90.9p 2,430.0p 2,315.0p -4.7% 2,663.4%*
Deutsche Numis Smaller Companies plus AIM (ex. Investment companies) Index 2,299.9 16,554.4 17,703.9 6.9% 669.8%
(total return)
Russell 2000(®) Technology Index (small cap) (in sterling terms) (total 674.7 6,023.5 5,313.9 -11.8% 687.6%**
return)(†)
(A) Alternative Performance Measure (APM) - See page 18 of the
Half-Yearly Report.
* Share Price Total Return based on 90.9p, the 1994 CGT base
subscription price for shareholders adjusting for warrants, which were issued
on a 1 for 5 basis.
** 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.
Past performance is not a reliable indicator of future returns.
CHAIRMAN'S STATEMENT
I am pleased to report that after a strong 2024, the first half of 2025 saw a
further increase in the Net Asset Value ("NAV") per share in spite of
extraordinarily volatile markets and unpredictable events in geopolitics.
The Investment Manager's Report covers the performance in the first half year
in some detail. In summary, the NAV per share rose by 2.6%. This would have
been materially higher but for the significant appreciation in sterling
against the US Dollar over the period (c. 9.7%), with the US Dollar in general
enduring its weakest first six months for more than 50 years. With US stocks
accounting for 34.1% of the Company's portfolio this led to a lower headline
return for the portfolio. Geographically in sterling terms, the US portfolio
returned a favourable return of 3.4% compared with the Russell 2000(®)
Technology Index (small cap) return of -11.8%. Both the Asia and the Europe,
Middle East and Africa ("EMEA") portfolios showed strong returns; and only the
UK portfolio was down, and that by a small amount, underperforming the
Deutsche Numis Smaller Companies plus AIM (ex. investment companies) Index.
Stepping back, many of the trends identified in recent annual and half-yearly
statements also affected this period. These include the continuing decline in
the proportion of the portfolio invested in UK stocks, now 30.8%, reflecting
the regrettable reduction in the number of technology companies listed in the
UK; smaller company returns in stock markets generally lagging the tech
giants; the lack of IPOs to replenish takeovers; and the phenomenon of stocks
involved in the AI boom leading the growth in NAV. Although these larger
trends are a principal determinant of performance, it remains the case that in
small company investing stock selection is critical.
The six months to 30 June 2025 was notable for two general meetings. The
first, on 22 January 2025, was a requisitioned meeting which saw a resounding
defeat of the attempt by Saba Capital Management L.P. ("Saba") to replace the
board with its own nominees. The second meeting was the AGM in March which
also included the triennial continuation vote. Saba was again almost the only
shareholder to vote against the board's recommendation, which at the AGM was
for continuation of the Company. The board is grateful to all the shareholders
who took the time and effort to vote at the meetings and for those who were
able to attend in person.
Saba continues to be a major shareholder with what is now a 30% holding of the
Company's shares. The board has engaged with Saba, whose current intentions
remain unclear. The majority of shareholders, as clearly expressed at the two
meetings, are supportive of the Company and its manager, Herald Investment
Management Limited ("HIML" or the "Manager"), and the board would like to find
a resolution to the uncertainty caused by Saba's large holding. The board is
mindful that not only is the Company a successful, long-term investment
trust, offering its shareholders access to investments many could not in
practice access themselves in a cost effective way, but it is also
systemically important as an active investor in the small cap tech market,
historically and hopefully in the future providing capital to growing tech
companies.
During the period, the Company continued to buy back its shares: in aggregate
0.7% of the opening number of shares since 1 January 2025, bringing the
proportion of the Company's shares bought back since 1 January 2023 to 19.6%.
The Company's share price in the six months lagged the growth in NAV per
share, reflecting the end to Saba's buying campaign ahead of the first of the
General Meetings mentioned earlier.
As covered in the annual report for the year ended 31 December 2024, the board
was very sad to see the departure of James Will as a director at the
conclusion of the AGM on 24 March 2025 after ten years of service. His wisdom
and expertise will be missed.
Given the pace and breadth of developments in technology and the providers of
services to it in all regions in which the Company invests, the board
continues to believe there is a bright future for the Company with HIML as its
manager. The Manager's specialist strategy works well in its chosen sectors.
ANDREW JOY
CHAIRMAN
22 July 2025
INVESTMENT MANAGER'S REPORT
The first half of 2025 has proved to be a volatile period for investments
globally, and it is something of a relief to have ended the period with a
positive return in net assets per share of 2.6%. The North American portfolio,
which now comprises the largest element of the Company's assets (34.1%) began
the year strongly but corrected materially as markets anticipated the Trump
tariffs in February and March so that the first quarter return of the US
Russell 2000 Technology Index (small cap) (the Russell Index) was down 23.6%
in sterling. The second quarter saw some recovery so that by the end of June
the Russell Index decline was only 11.8% for the half. It is therefore
pleasing to report a positive North American return of 3.4% for the
portfolio of the Company in the half. The UK, which now accounts for 30.8% of
the Company's assets, was down 12.9% in the first quarter reflecting
a continued flight of capital from the UK small companies' sector in which
the main co-investors are domestically owned UK smaller companies' funds.
However, Trump's Liberation Day seemed to mark a point of inflection where the
selling pressure eased in the UK. Albeit net inflows are elusive, flows from
the UK to the US ebbed. The second quarter saw some recovery, so the UK
portfolio ended the period down 3.5%, which is materially behind the Deutsche
Numis Smaller Companies plus AIM (ex. Investment companies) Index (+6.9%)
albeit within the index both the technology sector (+0.9%) and the media
sector (-17.7%) underperformed the wider index. Currency has been a major
headwind for the value of USD assets, with sterling appreciating 9.7% versus
the USD. Overall, the currency headwind has been £24m on translation of
overseas holdings, however, it also affects the performance and profitability
of many UK holdings, as UK technology companies often have material USD
revenues, but predominantly sterling costs. The returns in both Asia (+12.2%)
and Europe (+17.8%) have been strong, and the Euro has actually strengthened
versus £. In addition, capital flows have conspicuously increased towards
European equities without the retail selling so visible in the UK.
Market Value (£m)
31 December 30 June
Regional Market Values and IRR (total return) 2024 2025 IRR*
Asia 150.2 164.9 12.2%
EMEA 146.3 143.9 17.8%
North America 427.3 435.6 3.4%
UK 444.8 393.6 -3.5%
Total 1,168.6 1,138.0 2.5%
Liquid assets and government bonds net of share buybacks 84.0 138.8
Total net assets 1,252.6 1,276.8
* IRR- Internal Rate of Return.
Cash has been received from the takeover of eleven holdings for an aggregate
value of £64.8m: three in each of the North America, UK and Asia, and two in
Europe. The two in EMEA, Esker and Nexus AG had an aggregate value of £29.1m,
which equates to 19.9% of the value of the Europe portfolio at the start of
the year. It is sad to see Esker go at €262/share, having first acquired
them at €10 in 2012, albeit the position was subsequently increased from
35,000 shares to 100,000 through subsequent purchases. Over the period of
ownership, the share count increased by a third, and the final take-out value
was €1.62bn, demonstrating what a successful micro-cap stock it has been.
In addition, European holdings in Raysearch Laboratories, Lumibird, Nordic
Semiconductor and Wallix Group have all performed well. There are four further
takeovers pending of which three are in the US and one in the UK with an
aggregate value of c.£15m. Almost all the takeovers completed and announced
have been made by private equity and to our concern, management have rolled
into private equity in frustration at public markets failure to provide
capital or an appropriate valuation.
The North American performance has again been led by the companies in the AI
(artificial intelligence) supply chain. In aggregate Celestica, Super Micro
Computer and Fabrinet have returned £29.2m, so the remaining holdings have in
aggregate declined by £14.8m. This equates to a return of -3.5% for other
positions, which is still usefully better than the Russell Index return of
-11.8% in sterling. Arlo Technologies and Silicon Motion Technology have also
contributed well, while Cogent Communications and QuickLogic have
disappointed. In percentage terms the stars have been Tecogen (+323%), Digital
Turbine (+218%) and Ouster (+102%).
The UK portfolio (-3.5%) has seen the strongest sterling returns from Volex,
Cohort and Diploma (c£13.1m in aggregate), and ITM Power and Filtronic both
returned in excess of 100%. These positive returns have been offset by a few
disappointments. Celebrus Technologies plc also declined noticeably which
seemed anomalous but the share price has reassuringly recovered since the
period end. Trustpilot was the star performer last year but gave back £5.4m
in the half and GB Group continued to disappoint declining by £4.8m. Since it
was first held GB Group has nevertheless delivered a return of £26.2m
reflecting the fact that we had managed to take some profits at higher levels
and bought 6.4m shares at an average price of 25.14p in 2008 and 2009 when the
market capitalisation was c£23m. Next Fifteen has also delivered strong
returns historically, up £25.7m despite losing £4m this year. Sadly, this
has led to the long-standing CEO falling on his sword. His insightful views on
the technology sector and efforts over a long period will be missed. In our
view the share price is now unjustifiably low and we have therefore added to
the position this half. The challenge of selling successful positions or
buying at good prices or providing follow-on funding is a function of a rather
broken market. Sadly, it has led to a deliberate further withdrawal of funds
from the UK market of £34m. We observe that since 1 January 2017 £322m has
been withdrawn from the UK portfolio, and over the same 8 and a half year
period the Company has bought back £405m in shares of which £7m has been in
the first half. Over the same period the UK as a proportion of total net
assets has halved to 30.8%. A further decline is expected in the second half
of this year. Having raised outside capital of £95m we have provided primary
capital of £533m to UK listed companies over 30 years. The first half total
of £440,000 in two follow-on placings is by far the lowest rate ever. Perhaps
the powers that be will recognise that the stock market has a purpose for
funding domestic companies and not continue to undermine it.
The Asian return of 12.2% has been led by Japan which returned 22.8%, and
accounts for 33.8% of the Asian portfolio. The return was helped by the
takeovers of Kaonavi and Proto. South Korea also returned 26.2% with Genians
and RFHIC both returning more than 100%, however South Korea accounts for only
11.0% of the Asian exposure. Taiwan is the other main market, accounting for
32.6% and returned 5.8%. Historically it has been the most profitable country
for the Company, but lagged others this time. Catapult Group and Electro Optic
Systems in Australia and BizLink in Taiwan also did well. The workforce in
Asia have strong discipline and a sound work ethic. In addition, the sector in
the region started as low cost, low added value manufacturing, but it is
increasingly moving up the value-added chain.
The table below provides a snapshot of the forward P/E ratio for each
portfolio region at the period end, according to analyst forecasts on
Bloomberg.
31 December 31 December 30 June
Regional Price to Earnings 2023 2024 2025
Asia 21.5 20.5 19.0
EMEA 30.4 29.2 23.2
North America 22.3 23.3 25.4
UK 16.0 16.6 16.1
It is our policy to invest in companies with a market capitalisation below
$5bn, but we are not compelled to sell above that level. We draw attention to
the fact that there are now 21 holdings with a market capitalisation greater
than $5bn with a combined market value of these holdings of £269.1m and
a residual book cost of £32.1m having already realised profits of £218.6m.
On average these holdings are now 8.4x book cost. These stocks have therefore
delivered cumulative returns of £475m, while the total return of the whole
current portfolio of investments is £1.05bn. By contrast the 69 holdings
below $100m market capitalisation have cumulatively lost £25.3m. This
reflects in part the disappointing holdings, but also there is a lifecycle.
Some in this bracket are early stage and we remain optimistic they will be in
a position to deliver returns in future periods.
In an unsettled world with excessive Government deficits and growing
geopolitical tensions, returns are going to be more difficult to achieve from
a wide range of financial and other investment assets. Nevertheless, the pace
of innovation is faster than ever, and we continue to be excited to be
globally diversified in the growth sectors of technology and communications.
We have repeatedly demonstrated that the winners can really make a difference
and deliver for the portfolio strong returns into the future.
Katie Potts
22 July 2025
TOP TWENTY EQUITY HOLDINGS
At 30 June 2025
Ordinary or common shares unless otherwise stated.
Value % of total
Company (region) Business £'000 assets
Celestica (NA) Leader in design, manufacturing, hardware platform and supply chain solutions 39,810 3.1
Fabrinet (NA) Advanced optical, electro-mechanical and electronic manufacturing services 30,029 2.3
BE Semiconductor Industries (EMEA) Supplier of semiconductor assembly equipment 26,157 2.1
Diploma (UK) Distributor of components and systems 24,985 2.0
Super Micro Computer (NA) Leading server and storage vendor 24,983 2.0
Pegasystems (NA) Develops applications for sales, marketing and operations 23,740 1.9
Trustpilot (UK) Digital platform to independently record customer experiences and ratings 20,805 1.6
Silicon Motion Technology ADR* (NA) Develops controllers used with flash memory 19,515 1.5
Volex (UK) Leading global supplier of power and connectivity-related solutions 19,251 1.5
Telecom Plus (UK) Provider of telecommunications and other utilities 15,949 1.3
Catapult (APAC) Supplier of products for sports teams to capture, analyse and share insights 15,035 1.2
about athletes
Cohort (UK) Provides a range of technology for customers in defence and security sectors 15,018 1.2
Nordic Semiconductor (EMEA) Wireless semiconductor technology 14,898 1.2
Radware (NA) Developer of application delivery and cyber security solutions 14,433 1.1
Varonis Systems (NA) Data security and data protection software provider 14,223 1.1
Descartes Systems (NA) Cloud-based logistics and supply chain management solutions 13,689 1.1
Arlo Technologies (NA) Provides a cloud-based security platform 13,583 1.1
RaySearch Laboratories (EMEA) Developer of innovative software solutions to improve cancer treatment 12,782 1.0
Sidetrade (EMEA) Develops AI-powered order-to-cash application software 11,952 0.9
GB Group (UK) Global specialists in digital identity and fraud prevention 11,767 0.9
382,604 30.1
* American Depositary Receipt.
GEOGRAPHICAL SPREAD OF INVESTMENTS
(Distribution of total assets)
At At
30 June 31 December
2025 2024
Net Liquid Assets* & Government Bonds 10.9% 6.7%
UK 30.8% 35.5%
EMEA** 11.3% 11.7%
North America 34.1% 34.1%
Asia Pacific 12.9% 12.0%
*Cash, current assets and liabilities.
** EMEA: Europe, Middle East and Africa.
TOP FIVE WINNERS AND LOSERS
For the six months ended 30 June 2025 in sterling terms (millions)
TOP 5 WINNERS
Celestica 15.5
Super Micro Computer 7.9
Rayseach Laboratories 5.9
Fabrinet 5.8
Catapult 5.6
TOP 5 LOSERS
Trustpilot -5.4
GB Group -4.8
Cogent Communications -4.1
Next 15 -4.0
Celebrus Technologies -4.0
INTERIM MANAGEMENT REPORT
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks facing the Company, including the board's assessment
thereof and mitigation factors, are detailed in the annual report and
financial statements for the year ended 31 December 2024 on pages 35 to 37 of
the Strategic Report. Market risk, liquidity risk and credit risk are
discussed in detail in note 17 of the Company's annual report and financial
statements for the year ended 31 December 2024. Principal risks facing the
Company include the following: strategic risk (risk as an investor in smaller
companies, the Company's objective and strategy are not attractive to
investors, and the continuation vote fails to be passed); market, economic and
geopolitical risks (with these three risks covering currency risk, interest
rate risk and other price risk including, but not limited to liquidity, price,
valuation, technology and communications, small cap, and political
developments); investment management risks (including liquidity of the
portfolio and key person risks); third party service provider operational
risks (failure of service providers and cyber risk); emerging/external risk
(failure to have in place procedures that assist in identifying new or
familiar risks that become apparent in new or unfamiliar conditions). Other
risks are also considered: gearing risk (the use of borrowings can magnify the
impact of falling markets); discount and discount volatility; operational
risk; emerging/external risks (climate change and global pandemic risk); and
regulatory risk (the loss of investment trust status or a breach of applicable
legal and regulatory requirements).
In the view of the board, the principal risks and uncertainties facing the
business are broadly the same as those in the published annual report and
financial statements for the year ended 31 December 2024, and these risks and
uncertainties remain applicable to the remaining six months of the year.
In particular, the board notes that though the triennial continuation vote
risk for the Company has reduced, global factors (such as armed conflicts,
tariffs, retrenchment from climate initiatives, etc) keep uncertainty higher
than was historically the case.
The annual report can be obtained free of charge from the Manager, Herald
Investment Management Limited ("HIML") (see contact details on page 19 of
the Half-Yearly Report) and is available on its website: www.heralduk.com.
RELATED PARTY TRANSACTIONS
Details of the related party transactions were provided in the annual report
and financial statements for the year ended 31 December 2024. There have been
no changes to the related party transactions described in the annual report
that could have a material effect on the financial position or performance of
the Company.
GOING CONCERN
The directors have undertaken a review of the Company's financial position and
ability to continue as a going concern. This review took account of continuing
global factors such as armed conflicts and tariffs which continue to create
geopolitical and economic uncertainties. The Company's principal risks are
market-related and the current market conditions have demonstrated the
resilience of the Company and its investment objective and policy. The board
considers that there are no material uncertainties that call into question the
Company's ability to continue as a going concern for at least twelve months
from the date of approval of these financial statements and the board is
confident that the Company will be able to continue in operation and meet its
liabilities as they fall due. Consequently, the financial statements continue
to be prepared on a going concern basis.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We confirm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared in accordance
with FRS 104 'Interim Financial Reporting' and gives a true and fair view of
the assets, liabilities, financial position and profit of the Company;
b) the half-yearly financial report and interim management report includes a
fair review of the information required by Disclosure Guidance and
Transparency Rule 4.2.7R; and
c) the half-yearly financial report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule 4.2.8R
(disclosure of related party transactions and changes therein). There have
been no such transactions that have materially affected the financial position
of the Company.
On behalf of the board
ANDREW JOY
CHAIRMAN
22 July 2025
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
For the six months ended 30 June 2025 For the six months ended 30 June 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Realised gains on investments - 42,462 42,462 - 80,211 80,211
Movements in unrealised gains on investments - (10,077) (10,077) - 53,254 53,254
Losses on foreign exchange - (1,229) (1,229) - (507) (507)
Income 8,020 - 8,020 8,560 - 8,560
Investment management fee - note 3 (6,041) - (6,041) (6,532) - (6,532)
Other administrative expenses - note 4 (1,339) (5) (1,344) (591) (4) (595)
Profit before taxation 640 31,151 31,791 1,437 132,954 134,391
Taxation (252) - (252) (225) - (225)
Profit after taxation 388 31,151 31,539 1,212 132,954 134,166
Profit per ordinary share (basic and diluted) - note 5 0.77p 61.98p 62.75p 2.21p 241.89p 244.10p
Weighted average number of ordinary shares in issue during the period 50,257,638 54,964,006
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 period.
CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited)
As at As at
30 June 31 December
2025 2024
(unaudited) (audited)
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 1,197,146 1,230,027
Current assets
Cash and cash equivalents 72,864 21,890
Other receivables 8,412 1,850
81,276 23,740
Current liabilities
Other payables (1,606) (1,165)
(1,606) (1,165)
Net current assets 79,670 22,575
TOTAL NET ASSETS 1,276,816 1,252,602
Capital and reserves
Called up share capital - note 8 12,499 12,585
Share premium 73,738 73,738
Capital redemption reserve 9,453 9,367
Capital reserve 1,182,065 1,158,239
Revenue reserve (939) (1,327)
TOTAL SHAREHOLDERS' FUNDS 1,276,816 1,252,602
NET ASSET VALUE PER ORDINARY SHARE (basic and diluted) (including current year 2,553.9p 2,488.2p
revenue)
NET ASSET VALUE PER ORDINARY SHARE (basic and diluted) (excluding current year 2,553.1p 2,482.9p
revenue)
Ordinary shares in issue 49,995,442 50,340,861
CONDENSED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
For the six months ended 30 June 2025
Capital Total
Called up Share redemption Capital Revenue Shareholders'
share capital premium reserve reserve reserve funds
£'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at 1 January 2025 12,585 73,738 9,367 1,158,239 (1,327) 1,252,602
Profit after taxation - - - 31,151 388 31,539
Shares purchased for cancellation - note 8 (86) - 86 (7,325) - (7,325)
Shareholders' funds at 30 June 2025 12,499 73,738 9,453 1,182,065 (939) 1,276,816
For the six months ended 30 June 2024
Capital Total
Called up Share redemption Capital Revenue Shareholders'
share 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 - - - 132,954 1,212 134,166
Shares purchased for cancellation - note 8 (520) - 520 (43,260) - (43,260)
Shareholders' funds at 30 June 2024 13,514 73,738 8,438 1,243,756 (2,783) 1,336,663
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
For the six For the six
months ended months ended
30 June 30 June
2025 2024
£'000 £'000
Cash flow from operating activities
Profit before taxation 31,791 134,391
Adjustments for gains on investments (32,385) (133,465)
Purchase of investments (112,566) (127,771)
Sale of investments 171,831 168,074
Capital special dividends/return of capital 73 223
Increase in receivables (233) (34)
Increase in payables 76 64
Amortisation of fixed income book cost (361) (874)
Effect of foreign exchange rate changes 1,229 507
Overseas tax on overseas income (292) (234)
Net cash inflow from operating activities 59,163 40,881
Cash flow from financing activities
Shares purchased for cancellation (6,960) (42,815)
Net cash outflow from financing activities (6,960) (42,815)
Net increase/(decrease) in cash and cash equivalents 52,203 (1,934)
Cash and cash equivalents at start of the period 21,890 42,285
Effect of foreign exchange rate changes (1,229) (507)
Cash and cash equivalents at the end of the period 72,864 39,844
Comprised of:
Cash and cash equivalents 72,864 39,844
Cash flow from operating activities includes interest received of £2,222,000
(30 June 2024 - £2,065,000) and dividends received of £4,860,000 (30 June
2024 - £5,463,000).
As the Company did not have any long-term debt at both the current and prior
six month period end, no reconciliation of the net debt position is presented.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1 FINANCIAL STATEMENTS
The condensed financial statements for the six months to 30 June 2025 within
the Half Yearly Financial Report comprise the statements set out on pages 11
to 14 together with the related notes on pages 15 to 17 of the Half-Yearly
Report. The condensed financial statements do not constitute statutory
accounts as defined in sections 434 to 436 of the Companies Act 2006 and have
been neither audited nor reviewed by the Company's auditor. Financial
information in relation to the year ended 31 December 2024 has been extracted
from the statutory accounts which have been filed with the Registrar of
Companies. The auditor's report on those accounts was unqualified and did not
contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
The directors have adopted the going concern basis in preparing the accounts.
Details of the directors' assessment of the going concern status of the
Company is shown on page 9 of the Half-Yearly Report.
2 ACCOUNTING POLICIES
The condensed financial statements have been prepared in accordance with
applicable United Kingdom Accounting Standards and applicable law (UK
Generally Accepted Accounting Practice), including FRS 102 The Financial
Reporting Standard applicable in the UK and Republic of Ireland, FRS 104
Interim Financial Reporting and the Statement of Recommended Practice
Financial Statements of Investment Trust Companies and Venture Capital Trusts,
issued by the Association of Investment Companies in July 2022.
The accounting policies applied for the condensed financial statements are as
set out in the Company's annual report for the year ended 31 December 2024.
3 INVESTMENT MANAGEMENT FEE
Herald Investment Management Limited is appointed investment manager under a
management agreement which is terminable on twelve months' notice. The
management fee is 1.0% per annum of the Company's net asset value (excluding
current year net revenue) based on middle market prices up to £1.25bn and
0.8% per annum on amounts beyond this level. The management fee is levied on
all assets.
4 OTHER ADMINISTRATIVE EXPENSES
Other administrative expenses have increased significantly in the six months
ended 30 June 2025, largely as a result of the requisition in late 2024 of a
general meeting of the Company by Saba Capital Management L.P.
5 NET RETURN PER ORDINARY SHARE
Six months Six months
ended ended
30 June 30 June
2025 2024
£'000 £'000
Revenue profit after taxation 388 1,212
Capital profit after taxation 31,151 132,954
Total net return 31,539 134,166
Weighted average number of ordinary shares 50,257,638 54,964,006
Net return per ordinary share is based on the above totals of revenue and
capital and the weighted average number of ordinary shares in issue during
each period.
There are no dilutive or potentially dilutive shares in issue.
6 DIVIDENDS
In accordance with FRS 102 Section 32 'Events After the End of the Reporting
Period', the final dividend payable on ordinary shares is recognised as a
liability when approved by shareholders. Interim dividends are recognised only
when paid.
No dividends were paid for the year ended 31 December 2024 (2023: same), nor
declared for the interim (2024: same).
7 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 in the Level 1
category as defined in FRS 102.
The three levels set out in FRS 102 are as follows:
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 Manager considers observable data to be the 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 is as follows:
As at As at
30 June 31 December
2025 2024
£'000 £'000
Level 1 1,180,141 1,212,700
Level 3 17,005 17,327
Total fixed assets 1,197,146 1,230,027
The fair value of listed security investments is bid value. Investments on the
Alternative Investment Market are included at their bid value. The fair value
of unlisted investments uses valuation techniques determined by the directors
on the basis of latest information in line with the relevant principles of the
International Private Equity and Venture Capital Valuation Guidelines.
8 SHARE CAPITAL
As at 30 June 2025, the share capital consists of 49,995,442 fully paid
ordinary shares of 25p each (31 December 2024: 50,340,861).
At the AGM held on 24 March 2025 the Company's authority to buy back up to
14.99% of its issued share capital at that date was renewed. In the six months
to 30 June 2025 a total of 345,419 (30 June 2024: 2,080,423) ordinary shares
of 25p each were bought back and cancelled at a total cost of £7,324,905 (30
June 2024: £43,259,825). At 30 June 2025 the Company had authority to buy
back a further 7,200,676 ordinary shares.
9 FIXED ASSET INVESTMENTS
During the period, cost of purchases amounted to £112,566,000 (30 June 2024:
£127,877,000) and proceeds of sales amounted to £178,048,000 (30 June 2024:
£166,899,000).
Six months Six months
ended ended
30 June 30 June
2025 2024
£'000 £'000
Transaction costs
Commission costs:
Purchases 193 262
Sales 196 339
Total commission costs 389 601
Custody transaction costs 5 4
Other transaction costs 19 16
Total transaction costs 413 621
STATUS OF THIS REPORT
The information contained in this Half-Yearly Report does not constitute the
Company's statutory accounts for the purposes of section 434 of the Companies
Act 2006. They are unaudited. The Half-Yearly Report will be made
available to the public at the Company's registered office.
The information for the year ended 31 December 2024 has been extracted from
the last published audited financial statements, unless otherwise stated. The
audited financial statements have been delivered to the Registrar of
Companies. PwC LLP reported on those accounts and their report was
unqualified, did not draw attention to any matters by way of emphasis and did
not contain a statement under sections 498(2) or 498(3) of the Companies Act
2006.
The Half-Yearly Report was approved by the Board on 22 July 2025.
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