The provided text is a comprehensive financial report for Herald Investment Trust plc, covering the year ended 31 December 2025. It includes detailed information about the companys financial performance, investment strategy, risks, and governance. Here’s a structured summary of the key points
### **Financial Performance**
**Net Asset Value (NAV)** Increased by 8.5% to 2,700.49p per share (from 2,488.24p in 2024).
**Profit After Taxation** £98.47 million (2024: £134.29 million).
**Total Return** £98.5 million (2024: £134.3 million).
**Dividend** No final dividend proposed (2024: nil).
### **Investment Strategy**
**Focus** Global investment in smaller quoted companies in technology and communications.
**Portfolio Diversification** Aimed at reducing risk through diversification across sectors and geographies.
**Gearing** Maximum limit of 50% of net assets, with gearing levels closely monitored.
**Derivatives** Used for efficient portfolio management, including currency risk protection.
### **Sector and Regional Performance**
**Sector Performance**
**Technology Hardware & Semiconductors** Strong performance, driven by AI-related investments.
**Software & Tech Services** Negative return due to concerns about AI reducing software development barriers.
**Media** Poor performance, impacted by reduced spending from hyperscalers.
**Regional Performance**
**North America** Strong performance, led by AI-related investments.
**UK** Weak performance, impacted by retail fund redemptions and lack of AI exposure.
**Asia** Strong performance, driven by AI-related hardware demand.
**EMEA** Positive performance, with software and hardware sectors contributing.
### **Principal Risks and Uncertainties**
**Market Risk** Exposure to price fluctuations in investments.
**Credit Risk** Risk of counterparty default, mitigated by high credit quality of investments.
**Liquidity Risk** Managed through diversification and focus on liquid investments.
**Strategic Risk** Challenges from activist shareholder Saba, potential changes in investment strategy.
### **Viability Statement**
**Outlook** The board has a reasonable expectation that the company will continue to operate and meet its liabilities for at least the next three years.
**Challenges** Ongoing discussions with Saba and potential strategic changes, including a tender offer or backstop tender.
### **Governance**
**Board Responsibilities** Ensuring compliance with laws, maintaining adequate accounting records, and safeguarding assets.
**Auditor’s Report** Unqualified opinion, with no material departures from UK Accounting Standards.
### **Key Financial Ratios and Metrics**
**NAV per Share:** 2700.49p (2024: 2488.24p).
**Profit per Ordinary Share** 199.01p (2024: 249.73p).
**Total Shareholders Funds:** £1292.41 million (2024: £1252.60 million).
### **Top Equity Holdings**
**Celestica** £46.1 million (3.6% of total assets).
**Fabrinet** £32.1 million (2.5% of total assets).
**BE Semiconductor Industries** £28.0 million (2.2% of total assets).
### **Cash Flow**
**Net Cash Inflow from Operating Activities:** £161.77 million (2024: £107.25 million).
**Net Cash Outflow from Financing Activities:** £58.66 million (2024: £127.45 million).
### **Shareholder Information**
**Shares Purchased for Cancellation** 2.5 million shares in 2025, totaling £58.66 million.
**Shareholder Funds** Increased to £1,292.41 million (2024: £1,252.60 million).
### **Conclusion**
Herald Investment Trust plc demonstrated resilience in 2025, achieving a NAV growth of 8.5% despite challenges in the UK market and the software sector. The company’s focus on AI-related hardware investments in North America and Asia contributed significantly to its performance. However, the ongoing situation with activist shareholder Saba poses strategic and governance challenges that the board is actively addressing. The company remains committed to its long-term investment strategy and maintaining its viability.