Caledonia Investments Stock

Good morning, everyone, and thank you for joining us today for Caledonia Investments plc Full Year Results Presentation. The presentation will commence shortly. A copy of the presentation slides is also available to download from the results center on Caledonia's website, www.caledonia.com. [Operator Instructions] Please note that this call is being live streamed to webcast for a wide audience and will be recorded.

I would now like to hand it over to Mat Masters, Chief Executive Officer, to open the presentation. Please go ahead.

Hello. I'm Mat Masters, CEO of Caledonia Investments, and welcome to our results presentation for our year ended 31st of March 2026. Before I get to the results, I'd like to take a moment to update you on 2 changes to our Board. Will Wyatt has been appointed as successor to David Stewart as Chair. Many of you know Will. He successfully led Caledonia as Chief Executive for over a decade until becoming a Non-Executive Director in 2022. He is also a member of the Cayzer family and brings a deep understanding of Caledonia's culture, investment strategy and long-term approach. I'd like to thank David for his support and counsel throughout his tenure.

In addition, after a little over 4 decades of service, Charles Cayzer has decided not to stand for reelection at the AGM. Charles has helped guide strategy and played a key part in creating Caledonia's unique culture, both as an Executive and latterly as a Non-Executive Director. We shall miss his wisdom and experience.

And now on to the results. The past year once again demonstrated the strength of Caledonia's distinctive model and long-term investment approach. Against a volatile global economic backdrop, we delivered a solid NAV total return of 5.4%, with all 3 investment pools contributing positively. Throughout the year, we remained disciplined taking opportunities where we saw value and continuing to manage risk.

A standout development was the agreed sale of Stonehage Fleming, which once completed will deliver a 3.2x money multiple. And pleasingly, the performance of our Asia funds has improved, reflecting the more favorable IPO and fundraising environment. Caledonia's balance sheet continues to be strong, and we have the flexibility to deploy capital selectively and decisively where we see compelling opportunities for long-term value creation.

In March, the Iran conflict affected both our NAV performance and our total shareholder return. Over the year, Caledonia's shares traded at an average discount to NAV of 34%. That discount widened in March and by year-end was 43.4%. That move reflected weaker markets in the final month of the year. The result was a total shareholder return of negative 7.1%. We recognize that shareholders will understandably be disappointed by that outcome. Now, Rob will talk about this and our actions in more detail later.

On dividends, today, we are announcing our final dividend of 4p per share, taking our total annual dividend to 7.68p per share, an increase of 4.4% year-on-year, extending our track record to 59 years of consecutive dividend growth at around 5% annualized growth rate.

This slide shows Caledonia's long-term performance over 3, 5 and 10 years. Over 10 years, we have delivered NAV total return of 9.2% per annum, ahead of the FTSE All-Share and at the top end of our target range of inflation plus 3% to 6%. That reflects the strength of our diversified portfolio and the benefits of our long-term approach. The 3-year number is more mixed with NAV growth ahead of inflation, but below target, reflecting the more challenging market environment we have seen recently. The clear area of disappointment is the share price total return, particularly over 3 years. This reflects the widening discount to NAV rather than the underlying quality of the portfolio.

So on to the first of our investment pools, public companies. This is a focused portfolio of around 30 public equity holdings, and it's all about really understanding the fundamentals of high-quality compounding businesses and making long-term investments. The idea is simple, buy well and then hold for the long term. We research companies for a long time and wait for the right time to invest. This tends to be when markets sell off. We treat those periods as opportunities. This is exactly what we did in April 2025, when markets fell sharply following President Trump's Liberation Day announcement.

We deployed GBP 24 million into Charles Schwab, a U.S.-listed brokerage business, which we've been tracking since 2017. This derisked our entry point and provides a clear example of our Time Well Invested approach in practice. We also initiated 2 other positions, Cintas and Paychex, both of which we have been following for a number of years. For the year, the pool delivered a modest total return of 1.2% against a challenging market backdrop.

In this context, it is helpful to look at the progression of the capital portfolio's total return over the last 5 years. In this chart, you can see the volatility over the financial year and the 2 market-driven troughs in March 2025 and March 2026, with pool returns declining by 7.8% in February this year alone. Whilst the portfolio comprises good quality companies, which we are very happy with, the more recent selloff was not quite enough for us to significantly add during the period. You can also see the meaningful recovery since the year-end.

Another theme of the year was AI, and our investment in Oracle illustrates both the opportunity and the volatility it can create. The shares rose sharply in September as the market responded to a very positive trading update, and we risk-managed the position, realizing GBP 65 million. Since then, the shares have softened as market appetite has weakened. We made a 96.3% return in the year versus the stock's 2.4%. We first invested GBP 35 million in 2014 and have received GBP 112 million through top slicing and dividends and is in the NAV of GBP 42 million. That's a 4.4x money-on-money and 19% annualized return. That's a great result for us, demonstrating the benefits of compounding and our disciplined approach to risk management.

On to private capital. This is where we partner with management teams, mainly in U.K. operating businesses to help them grow and improve over the long term. It's a portfolio of up to 10 companies focused on the mid-market. We look for control positions or at least a significant minority, where we can be influential, and we sit on the Board. And unlike a traditional private equity fund, we're investing from our permanent balance sheet. So there's no fixed time line, no pressure to do deals and no forced exits. We can invest at low volume with real conviction and focus on long-term value creation.

We're also conservative on debt, typically around 2.5x EBITDA. The pool delivered a 13.1% return for the year. We agreed the sale of Stonehage Fleming to Corient Wealth. Since investing GBP 90 million alongside the founding partners in 2019, we have supported management with their growth plans. On completion in the coming weeks, we expect proceeds of circa GBP 290 million, equal to 3.2x cost. Stonehage Fleming is a great example of our partnership-led approach.

AIR-serv delivered a strong return of 23.8%, as it continued to expand its footprint entering Portugal and Austria. It remains highly cash generative paying a GBP 24.5 million dividend to Caledonia while continuing to invest in its estate for future growth. AIR-serv is exactly the kind of business we seek to back, high quality, well-led and able to generate cash returns today while building for the future.

The other companies in the portfolio continue to make progress in executing the value creation plans. The bubble chart plots realized IRR against uplift to carrying value for our major realizations. And you can see Stonehage Fleming there with a 30% uplift to the March 2025 carrying value. Since 2012, we have generated GBP 1.4 billion of proceeds, returning around GBP 700 million of net cash with realized investments delivering an excellent 17% IRR and a 2x multiple on cost.

And with that, I'll now hand over to Rob to talk through our funds pool and the financials.

Thank you, Mat. Good morning, everybody. I'm Rob Memmott, the CFO. Our funds pool partners with managers and provides access to 2 significant market opportunities. These funds tend not to market in Europe, meaning we are often the only European investor, a real differentiator. The pool NAV of GBP 941 million is a diverse portfolio invested in some 82 funds by 46 managers and in 600 underlying businesses. 62% of the NAV is focused on the North American lower mid-market buyouts. The funds are typically the first institutional investors into relatively small, often owner-managed businesses that are profitable, cash generative.

The playbook is to transform the companies by strengthening the management team, improving operational efficiency and growing sales by product and by geography and both organically and through bolt-on acquisitions. These improved companies with greater scale provide the feedstock to mid-market private equity. It's a very pure form of capitalism. The remaining 38% is invested in Asia, where we target 2 megatrends. The first is focused on domestic consumption and supply chains, fueled by the aging population, growing middle class and tech adoption. The second is world-leading innovation, where we invest in government-supported new technologies.

The pool has delivered solid returns of 11.4% and 13.1% over 5- and 10-year periods. Pleasingly, the performance from Asia improved over the last 6 months to generate 7.7% return in the year in local currency. This reflects good execution, but also an improved IPO and fundraising environment. The North American funds delivered 6.8% in local currency, continuing the good trading performance of the underlying companies. Overall, the pool produced an annual return of 7.1% in local currency or 4.9% in sterling.

Looking at the cash flows in a little bit more detail. The chart shows realization and investment activity over a recent 12-month period. The last few years, activity has been at subdued levels following higher interest rates, the U.S. tariff announcements and the economic uncertainty caused by geopolitical tension. In the second half of the year, there was some pickup in activity, but still below normal market conditions. And this has resulted in a slightly higher weighted average life of our primary portfolio increasing to 4.7 years. Our capital commitments of GBP 346 million, 78% of which is to North America, GBP 117 million was invested in the year and a GBP 55 million of new commitments were made into 2 North American managers.

So to the numbers. During the year, our NAV total return was 5.4%, growing our NAV to GBP 3 billion, of which GBP 2.8 billion is invested in a diversified portfolio of listed and privately held companies and funds that have global reach. Cash on balance sheet was GBP 90 million. This, combined with our undrawn revolving credit facility of GBP 325 million, enables us to act quickly to invest in companies and funds that we find attractive. This was demonstrated in April 2025, when we deployed approximately GBP 50 million into the public company strategy, including that new position in Charles Schwab that Mat mentioned.

On the 13th of May, we renewed our revolving credit facility. The RCF is provided by 3 banks. Of the GBP 325 million, GBP 150 million has 5 years of maturity and GBP 175 million has 3 years. We are proposing a final dividend of 4p, which will bring the dividend for the year to 7.68p, an increase of 4.4% over the prior year and making this the 59th year of progressive dividend payments at an annual growth rate of 5.3%, well ahead of inflation. The final dividend will be paid to shareholders on the 6th of August 2026.

Of course, now to my beloved waterfall chart. This chart shows the movement in NAV over the period. We started the year at GBP 2.9 billion. The portfolio return of GBP 167 million includes the negative impact of FX. We then deduct management expenses of GBP 29.9 million. This equates to an operating cost ratio of 83 basis points. There is then the cash return to shareholders, GBP 34.6 million, allocated to share buybacks of GBP 47.4 million for the prior year final and current year interim dividend. And this results in a closing NAV of GBP 3 billion. 53% of the assets are domiciled in U.S. dollars and 38% in sterling. Movements in the dollar-sterling exchange rate, therefore, will impact on our in-period results. And in the year, we suffered an FX loss of GBP 22.4 million, reducing our NAV by 0.7%.

We have a robust balance sheet with no structural leverage. Walking you through the cash movements, we started the year with GBP 151 million, and net GBP 5.8 million has been invested into the portfolio. The investment income from our assets was GBP 58.7 million, higher than in previous periods, as it includes the GBP 24.5 million dividend we've received from AIR-serv. We have consumed GBP 32.2 million in the cash cost of management expenses and working capital. And next, you have the payment of the dividend GBP 47.4 million and GBP 34.6 million allocated to share buybacks, resulting in that closing cash position of GBP 90 million.

We expect to complete the sale of Stonehage Fleming in mid-2026. Many shareholders have asked how we intend to allocate the expected proceeds of circa GBP 290 million. Following the sale, private capital will represent 23% of Caledonia's NAV. So we will want to deploy a meaningful share of the proceeds into new private capital companies. However, we feel no pressure to invest, and we will continue to appraise investment opportunities across all 3 pools on their merits and as they arise.

Overall, we have a prudent capital allocation policy to investments, our dividend, and where appropriate, share buybacks. During the 12 months, we allocated GBP 34.6 million to share buybacks, increasing the total since March 2024 to GBP 100 million, delivering 9.72p NAV per share accretion or 1.8%. The average discount over the financial year was 34%, but at its widest in March, in part due to the Iranian conflict, ending the year at 43%, which has resulted in a negative 7.1% TSR.

Whilst the discount has recovered during April to 37%, we continue to believe fundamentally undervalues the quality of the portfolio, our track record and prospects. We are taking action over the things that we can control, continue to invest in a quality portfolio, allocating capital to share buybacks. We've completed a 10-for-1 share split. In addition, we have rebalanced the profile of the dividend. These measures will improve visibility of income, make payments more balanced and make dividend reinvestment easier.

We continue to evolve our IR and communications to ensure that the Caledonia investment proposition is understood and rated. We have held capital market spotlight events focused on the investment pools. And if you've not had the opportunity, I would encourage you to visit the website and watch the presentations. They provide a great insight into how the pools operate, what differentiates us and how we add value. When you visit the website, you will see that this has been significantly improved with new content, which we will continue to develop so that along with the results announcement, investors understand the progression of the pools.

I will now pass back to Mat.

So to close, while we expect uncertainty to remain a feature of markets in the year ahead, we believe Caledonia is well placed to continue delivering long-term value for shareholders. Our diversified portfolio of high-quality companies and active approach to risk management have helped deliver NAV growth against an uncertain backdrop, demonstrating the resilience of our model and the strength of our investment discipline.

At the same time, our strong balance sheet and liquidity gives us the flexibility to pursue opportunities as they arise. Our focus remains on compounding net asset value per share over time, delivering shareholder returns, including maintaining our progressive dividend policy and ensuring the strength of our investment proposition is more fully reflected in the share price.

Thank you for your time. There will be a short pause, and then, we'll take questions.

Good morning, everybody, and thank you for joining us today. We will be taking questions initially from the analysts, and then, we will take questions from the webcast. Where questions cover similar themes, then we will group those together and address them collectively. And if we are unable to get to your question during the session, we will be sure to follow up with you via e-mail shortly after the event.

I'll now pass across to the moderator to assemble the queue.

[Operator Instructions] We'll take our first question from Anthony Leatham from Peel Hunt.

Hopefully, you can hear me. I'm just asking about the quality focus on the listed equity portfolio. Obviously, that's been quite challenging for a number of actively managed strategies, certainly over the last 12 months. Have you and the team gone back through the key criteria and maybe looked at how challenging it's been and considered whether there's anything to be adjusted in that public equity selection process?

Anthony, Mat here. Thanks for the question. Yes, so the team were -- unfortunately, this year, the portfolio obviously sold off during March. And that's the second time that's happened because that happened last year as well. So the results have been depressed by this strange phenomenon happening at 2 year ends. We remain very happy with their approach and the way that they're investing. They handled the volatility of Oracle pretty well during the year. They sold a lot of Oracle when that shot up, and that gave some protection when it came off again. So I think they're managing the portfolio well, and we're sort of happy with their approach.

[Operator Instructions] We have another question from Anthony Leatham with Peel Hunt.

Great. Sorry for dominating the questions. Could you just give us a bit more color on the funds portfolio? You mentioned, I think, that the Asia portfolio was -- had been performing better. Obviously, the market is hoping for a turnaround in terms of IPO activity. Any additional detail on the 2 parts of that funds portfolio would be helpful.

Yes. Thanks, Anthony. So with respect to Asia, we've seen a significant uptick in fundraising activity and IPOs. In the year, 6 companies successfully IPO-ed. And really, that was through the sort of back end of 2025 and in the first quarter of 2026. We've also had 2 companies IPO since our financial year-end. And there are 5 that are in the process of filing for IPO. So I guess that gives you a sort of feeling of the increase in activity. The companies are performing well. But as people will be aware, activity has been subdued for a number of years. So it's particularly pleasing to see that uptick in activity now. And I should just remind people that when -- firstly, the companies are relatively small, given the diversification of the portfolio. And then secondly, when a company does IPO, we are often locked up for a 12-month period. So it will take some time for the managers to decide or be in a position to liquidate that position.

And with respect to North America, again, trading activity of the underlying companies has been strong, and it's really that that's driving the underlying performance. There has been some exit activity, and we benefited from some uplift in value through exit activity. Really, we sort of started to see that improvement after -- in the final quarter of 2025. And so that starts to sort of pick up into 2026. There's been a sort of further sort of pause given the Iran conflict. So currently, I think the portfolio is performing well, but the sort of visibility and the sort of cadence of exit activity remains a little bit subdued.

There are no further questions on the Zoom. I will now hand back over to Rob to cover the written questions. Please go ahead.

Thanks very much. I'll just pull together a few of the questions. There's one with respect to Stonehage Fleming, which is, why did we decide to sell that asset? Mat, maybe you can take that.

Well, thanks for the question. It's obviously a really good success for us. We invested for many years and really enjoyed partnering with Giuseppe and his team, and the business has developed very well over that period of time. And I think often what we find is that when you take a longer-term view and you really improve the quality of these businesses, they become sort of strategically very interesting for purchases, and that's exactly what happened with Stonehage Fleming, so we got an approach from Corient. It made a lot of strategic sense. They were very keen to buy the business. And so it just made -- it made sense in the context of everything in and around the business to enter into discussions with Corient and then -- and sell the business. So that's how that came about.

Okay. Thank you. We've got -- there's a sort of a few questions obviously around discount, capital allocation. And if I sort of try and just sort of pull those together, as we sort of mentioned on the call, we have a sort of prudent capital allocation strategy. We want to remain invested in the investment pools that we have. We will be receiving just under GBP 290 million from the sale of Stonehage Fleming in due course. But at that point, as I mentioned on the call, the share of assets of net asset value within private capital will be 23%. And our strategic allocation range is 25% to 35% for private capital. So we will want to add a meaningful portion of the -- of that GBP 290 million to private capital. But also, we will allocate to the other investment pools for appropriate opportunities.

And then, with respect to buybacks, we completed GBP 35 million in the year. People are sort of saying, why have we not done more because of where the sort of discount has been. And I think you'll probably see that in the -- in March and April, the level has picked up. We were a bit lighter in the first quarter of the year, partly through being in a sort of closed period and not been able to act. So there will be some sort of -- we'll continue to buy back, particularly where the shares are, but it will be balanced with making sure that we are invested in the portfolio.

We've got a question, which has come through, which is why the funds so diversified, so 600 underlying companies and 48 managers. Maybe, Mat, if you take that.

That's a good question. So it does look very diversified. I think we've got to accept that, not necessarily a bad thing. The team are very good at keeping track of everything and understanding what's going on. However, one of the reasons for the diversification is, of course, it's across 2 geographies. We're covering North America and Asia, and hardly any other funds cover both geographies. I think there's only one that sort of covers both.

And then there's a sort of mathematics of it all that we want to -- we're not chasing investments here, but we're looking to get a certain amount of money at work into the lower mid-market or earlier-stage funds in Asia. So they're not big funds. And so just the math of getting a certain amount of money to work into funds that themselves are quite small, and then, it doesn't make sense for them or for us to be over a certain sort of size in those funds just ends up sort of driving that sort of diversification, which I think we would all admit does look very diverse, but not necessarily a bad thing.

Great. Thank you, Mat. I think we're about there on time. I think we've answered the majority of the questions which have come through. And what we will make sure that we do is that we will come back to each of you with specific answers to your specific questions if we have not already called them.

So thank you very much for your time this morning. Have a good day.

Thank you for joining today's call. We are no longer live. Have a nice day.

Good morning, everyone, and thank you for joining us today for Caledonia Investments Plc Fund Spotlight. The presentation will commence shortly. A copy of the presentation slides are also available to download from the results center on Caledonia's website, www.caledonia.com. After the presentation, we will conduct a Q&A session. [Operator Instructions] Please note that this call is being live streamed to a webcast for a wider audience and will be recorded.

I would now like to hand over to Mat Masters, Chief Executive Officer, to open the presentation. Please go ahead.

Hello. I'm Mat Masters, CEO of Caledonia Investments, and it is my pleasure to welcome you to our Funds Spotlight. This follows on from the private capital and public company spotlights, which are available on our website. The purpose of these events is to provide you with the opportunity to hear directly from our specialist investment team for them to explain the strategy and how it's executed. Today, you'll hear from Jamie Cayzer-Colvin, who leads our funds team, alongside Eloise Fox, who will take you through our North American strategy with the bulk of our NAV and future commitment is and Min Ong, who will provide an update on Asia.

Before we get to the spotlight, a short reminder about Caledonia. We are long-term stewards of our shareholders' capital, including the Cayzer family who have entrusted us with theirs for generations. Looking after multigenerational capital shapes everything we do. We need to make returns but do so whilst limiting the risk of losing capital. We target absolute returns of inflation plus 3% to 6% and this influences the level of risk we're prepared to take. Over the last 10 years, our approach to investing has delivered results at the top end of this target range at 9.8% per annum, outperforming inflation by 6.5% per annum, and we have consistently increased our dividend for over half a century.

Our approach to investing is straightforward. We invest in high-quality businesses and hold them for the long term. Our maxim, time well invested captures the essence of our approach perfectly. Our in-house investment team is fully aligned with shareholders. We do not manage anyone else's money, and there is no fundraising. Performance is measured against NAV per share over time and rewarded in Caledonia shares, so our incentives are directly tied to long-term value creation. Across all our investments, we look for the same 3 core ingredients: attractive markets to operate in, resilient businesses with strong fundamentals and return characteristics and management teams that are high quality and well aligned with shareholders. We are organized across 3 main strategies, giving us exposure to both private and public companies across a range of sectors and geographies.

Each team takes a focused, concentrated approach while shareholders benefit from the diversification that comes from having exposure across all 3 strategies. Our public company's pool comprises 2 portfolios investing in high-quality businesses with good long-term prospects. We take a concentrated long-term approach seeking to buy well and hold durable compounders over time. Private capital invest alongside management teams in predominantly U.K. mid-market businesses. We typically hold a small number of investments, often as majority shareholder and work closely with management to build sustainable value using prudent leverage. Today, you will hear about our fund strategy, which provides us with diversified exposure to 2 great long-term markets and represents 30% of our NAV or GBP 894 million. We have chosen to focus our fund strategy on 2 areas in order to capitalize on attractive risk reward dynamics in the case of North America, and the opportunity to harness significant macro themes in Asia.

Turning to North America lower mid-market first, which is where around 2/3 of the funds pool is invested. You'll hear how the funds in this market invest in small but profitable companies, often the first institutional capital into owner-managed businesses and then help them to improve and broaden their operations to allow them to grow in the world's largest market. The risk these funds take on is that smaller companies bring higher operational risk. But this is managed across a very well-diversified portfolio and we can offset this risk by the funds typically paying lower multiples and using less leverage than the larger part of the market. Our returns are primarily driven by operational improvement, backing private equity managers who are entirely aligned with us on this aim.

And importantly, we are often the only European investor in these funds, giving us differentiated access to managers and opportunities that are not always available to international investors. The other 1/3 of the pool is invested in Asian private market funds, which focused on 2 important macro trends, a growing middle class and innovation. These funds take on early-stage risk with investments and typically don't use any leverage. This Asia exposure also provides a very good source of diversification for the portfolio. Across both these areas, we invest alongside the experienced, operationally focused managers with deep local knowledge and proven track records. This approach allows us to access high-quality opportunities that are difficult to reach directly from the U.K. while benefiting from disciplined manager selection, robust due diligence and ongoing portfolio monitoring. Funds play a key role in broadening our opportunity set, enhancing geographic and strategy diversification and complementing our direct investment capabilities.

Thank you. I'll now hand you over to Jamie.

Hello. My name is Jamie Cayzer-Colvin, and I head the funds pool. As a member of the Cayzer family, it's a real privilege to be part of an enterprise that's flourished for 147 years across 6 generations and the seventh now joining us. My perspective is shaped by generations, not months, quarters or years, and that's why Caledonia's ethos, time well invested, ring so true and continues to inspire us today. As Mat said in his introduction, the funds pool strategy complements our direct investment strategies by providing diversification into markets that otherwise difficult to access. We do this through partnership with some of the best managers in the world. These managers have the skill to build better businesses, they can help companies fulfill their potential, who in turn generate shareholder value.

Now before we go into the details of the portfolio, let me first explain how and why we do this. You will hear us talk about partnership a lot because partnerships are at the heart of what we do. We began this now proven process 16 years ago, focusing on Asia and North America, large markets with depth and long-term growth. Here, we have built extensive networks and deep market expertise. Given the scale and maturity of North America, it's not surprising that it now accounts for around 2/3 of our portfolio NAV. We have forged relationships with highly skilled, experienced managers where we can be truly aligned and share in their value creation approach. We prefer smaller funds where management fees only cover the running costs of the investment team and we like to be aligned with managers who are motivated to share in the value they create.

Many of these managers do not market themselves outside their home regions. So gaining access will be almost impossible for investors here in the U.K. without our network. We invest only when we have deep conviction that the manager will deploy capital consistently and in line with our stated strategy. That conviction comes from getting to know them extremely well with frequent meetings. We often build a relationship over many years before committing to a fund. These are long-duration assets. So we seek to deploy capital steadily, not opportunistically and avoid market timing. Our goal is a consistent, well diversified exposure across managers, sectors and investment styles.

Caledonia's unique structure enables us to block out the noise of the market, allowing us to take our time. After all, markets reward the patient investor. Investing does not end with committing capital. We monitor our managers through financial and operating reporting, performance benchmarking. And in most cases, we take a seat on the Funds Advisory Board, the [ LPAC ]. This gives us oversight and a voice on critical governance matters. We also engage directly in person with portfolio leadership ensuring transparency, accountability and adherence to investment objectives. The process we have developed gives investors diversification into markets they could not access alone, underpinned by a rigorous risk management system that delivers strong long-term performance.

We have built our portfolio using the 3 Ts, team, thesis and track record. This thorough analysis often conducted over many years, allows us to build the conviction we seek. We start with the team. Some of the key questions we ask of them are what's the value creation skills that they bring to the portfolio companies? What is their depth and breadth of experience in both up and down cycles? Are the team hungry for success? And how well does their culture and incentive structure align with our own values and long-term objectives? We spent significant time with the managers to understand their leadership style, their succession planning and their ability to attract and retain top talent. Ultimately, we back people. And in our experience, the quality and character of the team is the single most important driver for long-term success.

Next, we look at the thesis. We ask what is the manager's differentiated angle or edge in the current market? How clear and robust is the plan for value creation and risk management? Is the thesis supported by strong fundamentals, long-term trends and defensible market positions? We also test whether the thesis is robust and fits with the broader portfolio objectives and whether the manager has shown discipline in how they deploy capital. Our objective is simple, to back only those managers with a clear, compelling evidence-based thesis that can be executed in practice and not just in theory.

Finally, we examined track record. We don't just look at headline returns. We break performance down by vintage year, sector, deal type, geography to understand what really drove results. Our process includes attribution analysis to separate genuine skill from luck or market beta. We review manager's price discipline on acquisitions. We examined exits to find out what the value creation drivers were and the consistency across cycles and the ability for the manager to generate multiple expansion. We referenced past investors and portfolio company executives to validate what we're told. We look for a proven, resilient, transparent track record that demonstrates repeatable results.

Now executing this strategy requires a rigorous methodical process, and there are literally thousands of managers in our target markets. Through systematic desktop research, we narrow that universe to around 500 managers, all of whom of which met and actively monitored. From this group, we then reduced the number by half creating our focused pipeline. And from that pipeline, we have built an investment portfolio of 46 approved managers overseeing 82 underlying funds. This portfolio provides exposure to more than 600 companies.

Our investment process is lengthy. We build confidence as we get to know our managers, and this is matched by a rigorous internal approval process with all commitments being approved by the Investment Committee. We conduct formal legal reviews of the limited partnership agreement, which governs the funds to ensure we negotiate the best possible investment terms and in most cases, we have a seat on the Funds Advisory Board. Once invested, monitoring is intensive. We meet each manager in person at least twice a year. We turned our annual and LPAC meetings as well as participating in quarterly update calls. I am proud to say that we know our managers extremely well. We take the word partnership very seriously.

I'm immensely grateful to the team here at Caledonia, who spend a great deal of time on the road. I've been incredibly fortunate that soon after setting up the funds pool, I was joined by Min Ong and Eloise Fox, and the 3 of us have built the processes, relationships and portfolio you see today. You will shortly hear from both Min and Eloise. But before you do, I'd like to briefly mention 3 other colleagues who helped manage the portfolio. Geordie Cox, Freddie Buxton and Shengying Li. They bring legal and accountancy expertise, fund portfolio experience and regional perspective.

Caledonia places great value on the next generation something reflected in our long-standing intern program, and it is especially pleasing to see Freddie return to Caledonia having first joined us as an intern a decade ago. The investment team is supported by Rachel Mack and Sarah Harcourt-Wood and her team, who doing an outstanding job of keeping everything running smoothly. Ours is a truly multicultural team with colleagues from China, Malaysia, Singapore, South Africa, Taiwan and Britain.

I would now like to turn to the North American portfolio and introduce my colleague, Eloise Fox who will present the next section of this review.

Thank you, Jamie. Good morning. I am Eloise Fox, and I run Caledonia's North American Funds program. I have had the great pleasure of working at Caledonia for the past 14 years, and I started this successful program when I joined the firm in 2012. Today, I'd like to tell you more about the attractions of U.S. lower mid-market private equity.

The U.S. economy is dominated by small privately held businesses. There are 400,000 companies in the U.S., where EBITDA is in the range of $2 million to $10 million. In aggregate, it thought that these companies generate more than $10 trillion in revenue a year and employ over 48 million people. And this is typically where the lower mid-market is considered to sit. What makes this segment particularly compelling is the strength of the founder owner culture in the U.S. Founder owners have been instrumental in shaping corporate America, driving innovation and value across all ends of the market. These hard-working and adaptable entrepreneurs, often family backed or self-made embody agility, risk taking and hands-on management in a market where they possess a really deep local market knowledge.

These are established businesses, cash generative and are typically started and grown primarily using the founders personal savings and the company's own profits without relying on any external investors. This approach allows the founder to maintain full control and operate leanly, but it often means slower growth due to the company being under invested. As a result, there's often clear headroom for value creation through targeted investment and professionalization. 57% of founder owners are 50 or more years old and, therefore, may be thinking about retirement plans, succession planning, partial liquidity or looking for a partner to help grow the business. This combination, depth of supply, resilient operating businesses and a consistent pipeline of founder transitions creates a significant opportunity set.

Not only are there many companies in the lower mid-market. This part of the market is less intermediated and therefore, less efficient than large-cap private equity, resulting in lower entry valuations. There's less capital targeting this part of the market leading to reduced competition for deals and more attractive entry opportunities. As the chart illustrates, the lower mid-market consistently trades at materially lower and much more stable entry multiples than the broader U.S. buyout market. And as lower entry multiples can support this, typically lower levels of leverage are used in lower mid-market transactions versus larger deals.

Here, we are trading greater operational risk for lower financial risk. There are many sources of untapped value, more often than not revolving around the founder. The companies are well run, but there's plenty of room for value creation. This is often focused on investing in and augmenting the management teams, improving our company's data and analytics and growing the company organically and inorganically through M&A, increasing scale by number of locations and service offerings. All of these operational levers create a more professionalized and scaled business, which is attractive to a broader buyer set, larger private equity funds as well as strategic buyers. All this generates the potential for outsized returns.

The diligence process includes an assessment of a manager's pricing discipline as well as their exit discipline where consistency is key. To provide a real-life example of this, let me take you through a case study from one of our long-term fund relationships, CenterOak Partners. CenterOak is a Dallas, Texas-based private equity firm. The firm invests in business, industrial and consumer services and has a history of creating significant value through organizational development, operational improvements and transformational growth. We have partnered with them for 11 years and are invested in their Funds 1, 2 and 3. The CenterOak team spun out from another Dallas-based private equity firm, and we were able to diligence their prior track record in order to be comfortable backing a first-time fund. CenterOak Fund 1 is now fully realized and is a top quartile fund, having generated a 2.7x net money-on-money and a 28% net IRR.

Funds 2 and 3 are tracking in line with our underwrite of 2.5x net money-on-money. CenterOak acquired Turf Masters in 2022, a leading provider of residential lawn care services. Turf Masters was founded in 2002 by Andy Kadrich, operating from his basement in Atlanta, Georgia, with just a handful of customers, and I have enjoyed spending time with Andy and hearing his amazing story firsthand. The Turf Masters business quickly grew to be a household name in Atlanta all of the while maintaining the high level of service and care that only a family-owned local company can provide. Turf Masters differentiates itself through high-quality application work, exceptional customer service, investment in best-in-class equipment and a people-first culture, focused on skills development and really meaningful career opportunities.

At the time of CenterOak's acquisition in 2022, the company was a strong regional leader, serving approximately 100,000 customers. As the first institutional investor, CenterOak partnered closely with management to accelerate the company's evolution from a regional operator into one of the nation's premier residential lawn care platforms. Over the course of ownership, CenterOak invested behind the core value creation levers we like in the lower mid-market, talent, systems, expanded service offerings and scaled shared services. They supported 19 add-on acquisitions that expanded the branch network from roughly 20 to more than 40 locations and helped more than double the customer base. Equally important, more than 1/3 of EBITDA growth was organic, driven by new customer growth, disciplined pricing, strong retention and enhanced cross-selling of high-margin ancillary services.

This investment exemplifies not only CenterOak's differentiated value creation approach but also reflects the broader repeatable playbook across our mid-market funds. The exit of Turf Masters was the second exit from Fund 2, a 2020 vintage Fund and the fourth CenterOak exit in the past 24 months all of which have been in the range of 2.2x to 3.5x net money on money. So how do we go about finding groups such as CenterOak and incredible founder owner such as Andy Kadrich?

Over the past 14 years, we've systematically mapped the U.S. mid-market. We've identified around 1,500 mid-market managers who share a similar value creation mindset but each with their own sector or geographic focus. And importantly, many of these firms don't actively market in Europe and often even outside their own state, which means they're often under followed by international investors. On average, we've spent around 12 weeks a year in the U.S. for the past 14 years. Desktop research helps but there's no substitute for building relationships face-to-face and earning trust over multiple cycles.

This graphic shows the focus of our time on the ground which was more dedicated to the coasts and large cities in the early years. New York, L.A., Boston, Chicago, before moving to the large states and large economies of Texas and Florida. So Dallas, Austin, Miami, and more recently, we've been deliberate about spending more time in the Midwest and the fly over states, places like St. Louis, Nashville, Jackson Hole and many others. These are large markets in their own right, with a high density of founder-owned businesses, but fewer private equity firms on the ground. That dynamic creates a real edge, more proprietary deal flow and typically lower entry valuations. This on-the-ground sourcing is also critical to our fund selection discipline. We're not just backing the same managers. We deliberately seek a renewing pipeline of emerging and next-generation managers because that's where alignment is strongest.

In practice, we typically invest once the manager is proven, but before the firm becomes too large. Once fund scale beyond a certain point, incentives can shift from being hungry for capital gains to being driven by fee growth, and that's not where we want to be. As a result of these efforts, we've met around 1,000 managers over the years. We actively monitor about 400 as credible, investable opportunities within our strategy and have conducted detailed due diligence on about 150 firms. So how does this translate to our current portfolio? The detailed diligence undertaken on 150 firms has resulted in a current portfolio of 30 managers across 45 funds with typical commitments of $25 million to $30 million per fund.

Currently, we are invested in around 200 underlying companies. With fund-to-fund holdings included, this would be in excess of 800 companies. These companies provide a balanced portfolio with exposure across a wide range of industry sectors. Industrials, consumer discretionary, health care and technology are the largest sector exposures. The same data cut by line of business rather than sector shows that the portfolio is 60% services focused with this being B2B and B2C services in the U.S. domestic economy, therefore, largely insulated from first-tier tariffs.

To dive deeper into these underlying portfolio companies, this graphic shows that we are invested in businesses that provide essential recurring services and that benefit from long-term structural demand. I have already mentioned lawn care but we also have exposure to termite and pest control. Once your lawn is in good shape, it's important to keep the fire ants and armyworms at bay, not to mention the cockroaches and the mosquitoes. Heating, ventilation, air conditioning, essential for those bitterly cold winters and swelteringly hot southern summers as well as plumbing and electrical services. The trend of DIY has moved to one of do-it-for-me, particularly for younger generations. For even the simple matters of swimming pool maintenance or gardening, there is someone to do it for you. And no matter how many YouTube videos one watches, nobody wants to DIY their own electrics or reroof their in-house.

Caledonia has a lot of exposure to these essential recurring services revenue streams across the portfolio. We also have exposure to automotive repair, an area supported by strong underlying fundamentals. The average age of a passenger car on the road in the U.S. is 14.5 years old. These cars need regular maintenance, whether as a result of collision repair or general maintenance due to wear and tear. We are invested in traffic management systems, including traffic lights, road markings, car park cleaning, paving, and it's not all traditional businesses. We also have exposure to cutting-edge technology within the industrial automation space with robotics and machinery automation to improve assembly lines and production efficiencies.

So taken together, this portfolio represents a broad and diversified exposure to everyday America with a focus on essential services, recurring revenue and businesses positioned to compound through operational improvement. To bring further insight to our portfolio, we will now show a short video featuring one of our managers Boston-based New Heritage Capital. We have now New Heritage since 2014 and are invested in their funds 3 and 4. The funds have consistently been strong performers performing ahead or in line with our fund underwrite of 2.5x money-on-money.

In 2006, when we set up New Heritage Capital, we saw a real opportunity in the world of founder-owned businesses, both from the perspective of the investment opportunity, but also the opportunity for us to really be different as a firm. I think people do not fully appreciate that when you come across a successful founder-owned business, it was a very hard road for that company to get there. And there's a bit of natural selection going on. There's a natural selection of the management team that sort of put it all together, a natural selection of the niche strategy that they came up with to put it all together and that represents a terrific investment opportunity.

I think founder owners are sometimes undervalued by private equity. But the experience they've had of building their business from the ground up, of taking risks and saying, yes, when others might have been more conservative. We think that passion and that experience make them incredibly valuable assets for us to sort of invest behind. Value creation is a huge piece of how we add value and grow our businesses. And it's a big focus at the beginning of our investments. I think one of the core areas we focus on first is around management team augmentation. Sometimes that's a CFO. Sometimes that's a COO.

One of the other core things we do upfront is around data and information. So a lot of founder-owned businesses in the lower middle market, they have good data, but they don't sort of use it to the best of their abilities. And often, when you have the right information in the right hands of senior leadership, you can just make better decisions. So we invest in systems and data information gathering techniques and analysis and reporting that puts that information in the hands of the C-level leadership so that they can make really good decisions about growing the business. The 3 key levers for us in driving equity value creation is really organic growth, acquisition, inorganic growth and multiple expansion. The organic growth, that is what we back in our founder owned businesses. We're backing companies that historically have grown 10%, 15%, 20%, and we're putting in place business plans that allow that sort of same organic growth to continue.

The second piece is around acquisitions. We do acquisitions in most of our companies, but not all, but it is really more of a strategic value that we're trying to bring to the table. So if we're trying to enter a new market, a new geography. If we're trying to expand capabilities, if we're trying to build a certain type of customer base, we look at acquisitions as a way to enhance the overall positioning and strategy of the business.

The last piece is really around multiple expansion, and it is a huge opportunity in the lower middle market to be able to continue to drive businesses and get that multiple expansion at the next liquidity event. Sometimes it's partly its size. So being able to bring a company from 5, 6, 7, 8 of EBITDA to 20 or 30 of EBITDA, really drives multiple expansion. But it's more than that, it tends to be a transformation of that business, putting in new people, new process, new infrastructure that allows that business to double and triple in size. That transformation that growth of the business to the next level really is the driver of where we can get strategic and financial buyers to pay significantly higher multiples on the back end.

Some examples of our companies that we've invested with alongside our founders are really across broad industries, so business services, manufacturing and health care. But there's really niche-y, wonderful examples within those. So for example, we invested in a company called Revela Foods, which is the largest manufacturer of liquid pouch mac and cheese here in the United States. And it's a 100-year-old company that 4 founders sort of brought together. It was about bringing sort of savory ingredients and seasonings and flavorings into the center of the grocery aisle store.

It's important to us to have the representation of European capital in our firm. But it's very difficult to access specific European limited partners. There are very few that are coming over to actually get to know a $400 million fund in the U.S. Many might prefer to go through fund to funds or something like that. Caledonia is very unique where the senior professionals come and spend time getting to know a middle market firm such as ourselves well enough to be able to make a really well informed investment in us. And that allows us to have a relationship with a European limited partner that's very different than is typical.

When we first met the Caledonia team, I think we were operating in a closet of an office with a really interesting strategy and a few great investments under our belt. The Caledonia team spent years visiting us, hearing our story, hearing what our plans were and checking as to whether or not we actually came through on those plans and ideas. And with after many years of those kinds of discussions and follow-up and then intense diligence I think from our perspective, that switch went on in Caledonia's mind that this is a great investment firm to back. Knowing us means understanding our investment strategy better and means being able to support our investment strategy better. For us, Caledonia has really turned out to be one of our core strategic limited partners.

Huge thanks to Mark Jrolf and Nickie Noriss at New Heritage Capital for their tremendous partnership with Caledonia and the successes we have shared.

On performance, over the long term, returns have been strong. This has largely been due to solid underlying operating performance across the portfolio alongside a stronger exit environment over the period. Recently, returns have been impacted by a slowdown in the exit markets, but we remain confident in the quality of the underlying companies. In terms of cash flows, these are influenced by a number of factors, including commitment pacing, the speed at which the fund manager identifies opportunities and deploys capital, the growth trajectory of the underlying assets and importantly, liquidity in the exit market.

The program is maturing with about 1/3 of North American NAV being owned for over 5 years. As the portfolio continues to develop, we would expect it to become increasingly cash generative under normal market conditions. Pleasingly, we are beginning to see an improvement in market engagement with transaction activity starting to pick up. To summarize, we believe the North American lower mid-market represents a really compelling opportunity set in private markets today. It is vast in scale and highly fragmented which means there is no shortage of opportunity and significant value can be created through disciplined sourcing and operational execution.

Over the past 15 years, we've built a deep pipeline and portfolio of specialist managers who know this market intimately. They are on the ground. They see opportunities that others don't, and they have a proven track record of professionalizing founder-owned businesses and scaling them into higher quality platforms. The result is a portfolio with broad exposure to everyday American Life, underpinned by essential services and recurring revenue streams.

Thank you for your time today. I'll now hand over to my colleague, Min Ong, who will take you through the Asia funds program.

Thank you, Eloise. Good morning, everyone. My name is Min Ong, I joined Caledonia 14 years ago, and I lead the firm's fund investments in Asia. Asia offers long-term growth driven by a rapidly expanding middle class and its growing role in global innovation providing differentiated return potential to active, selective investing.

The first mega trend we want to highlight is the large and growing middle class in Asia that is driving domestic consumption. It is home to around 60% of the world's 8 billion population, but its share of the global middle class has risen from under 25% in 2010 to more than half today and estimated to rise even more to 2/3 by 2030. This effectively adds about 2 European unions worth of consumers or about 1 billion consumers in this decade. Share of spending by this middle class from Asia has also increased from 23% in 2010 to 57% today, potentially reaching 60% in 2030. These dynamics are underpinning rising living standards and sustained aspirational consumption across the region. In many markets, domestic demand is now sufficiently deep to support the scaling of high-quality businesses, reinforcing a virtual cycle of growth, investment and further consumption.

The second mega trend to highlight is Asia's increasing role in global innovation and industrial capability. China's share of global R&D spend has risen from around 4% in 2000 to 26% in 2023, underscoring the region's deepening scientific and technical capacity. In biotechnology, cross-border partnerships is an increasing trend. Approximately 1/3 of the drug candidates recently licensed by large pharmaceutical companies originated from China. In electric vehicles, the scale of adoption and manufacturing advantage is clear. China dominates the global electric car market, accounting for roughly 2/3 of total EV sales and production. As automation becomes increasingly critical to competitiveness, China has moved decisively ahead in robotics, accounting for around 51% of global installations and reflecting the power of its deeply integrated supply chains, driving productivity and scalable lights-out manufacturing.

So let's look at this from a portfolio perspective. On the left, you can see investments that have already been realized. And on the right, investments that have yet to realize. These illustrative examples evolve around the 2 themes described earlier. On the theme of domestic consumption, Imeik captures the enduring human preference for looking and feeling good. It is a leading Chinese medical and regenerative aesthetics company supported by strong in-house R&D, a deep clinical pipeline and the ability to scale clinically validated products at price points accessible to the middle class. The company listed on the Shenzhen Stock Exchange in September 2020, and the fund began selling down once the lockup period expired. A small amount of NAV remains but the position has largely been exited delivering a blended return of 30x.

In the interest of life cycle coverage, we also invest at the other end. Our Korean fund acquired a pre-need funeral services platform in 2016 as organic growth and a merger with another leading player created the largest provider of its kind in Korea. The business was sold to a strategic buyer in 2025, generating a 3.6x return. On the theme of powering innovation, we have momentum and AI-driven autonomous driving software company with partnerships spanning General Motors, Toyota, Mercedes-Benz and BMW as well as mobility platforms such as Uber and Grab with an exit potentially being an IPO. Our CEO, Matt and our CFO, Rob has both experienced Momenta Power Vehicles in public roads in China. Their presence today at tests at the very least to the safety of the technology and they were no doubt also vouch for its stability and smoothness.

The portfolio construction is the result of thoughtful, deliberate bottom-up work spending around 10 weeks each year on the ground in Asia, visiting portfolio companies, conducting on-site due diligence, stress testing processes, attending annual meetings and monitoring the portfolio. This frontline presence enables direct engagement with founders, industry participants, regulators and government bodies. Through our managers, we have access to highly driven founders who are deeply mission-led, technically exceptional and intensely focused on long-term value creation. These founders and fund managers we back are typically educated in both Asia and the West providing a differentiated perspective on technology and markets. With 3 native mandarin speakers, we're able to conduct deep local language diligence, broadened coverage efficiently and remain close to fast-moving developments through local media and social channels.

The total portfolio value in the ground is GBP 313.8 million. The current portfolio comprises 15 managers across 35 funds and investments in 385 companies with fund of funds holdings included, this would be in access of 800 companies. The portfolio provides broad sector diversification with the heaviest weighting to health care at 33% followed by consumer discretionary at 24% and IT at 20%. The current weighted average age of these underlying companies is 5.5 years. Taken together, this illustrates a highly diversified portfolio that is aligned with the 2 mega trends discussed earlier. Macroeconomic uncertainty and foreign exchange movements across Asia have weighed in valuations and sentiment over the past 3 years, contributing to slower exit activity amid the prolonged weakness in IPO markets. This more broadly reflects weak market sentiment rather than any deterioration in underlying asset quality.

Portfolio companies have continued to execute well operationally with our cash flows over the period broadly neutral, but more subdued recently, given Asia's greater reliance on IPOs as an exit route. In the past year, however, we have seen an improvement in IPO markets and are cautiously optimistic. In summary, Asia offers 3 core attractions for Caledonia. One, it is large and growing with significant scale, a rising middle class and increasingly self-sustaining domestic demand. Two, it is a center of innovation leading in strategic technologies, such as biotechnology, climate technology and robotics. Three, it provides diversification offering long-term structural growth exposure to one of the largest and fastest-growing regions in the world today.

Thank you, and I'll now hand you back to Jamie.

Thank you, Min. Thank you, Eloise, for those in-depth reviews of our portfolio. Here at Caledonia, we have developed an interesting and proven investment strategy, one that is not easy to replicate. It provides shareholders with exposure to global markets and investment products that are difficult to access from the U.K. without our network and resources. Hopefully, we've demonstrated that we have a highly skilled, experienced team that spends considerable amount of time on the ground, engaging directly with our markets and managers and that we interact with those opportunities through an appropriate cultural lens that helps gain better and original insight.

You will have seen that the risk management systems that we have built around our team and investment processes would be very difficult to replicate. They reflect years of investment, hard learned experience and substantial resource, giving Caledonia a genuine competitive advantage. This, in turn, supports highly diversified portfolio giving our shareholders exposure to the rising middle class and global innovation in Asia and the broader North American lower mid-market. These are 2 of the largest and most dynamic markets in the world.

Now all of today's presenters will be happy to answer your questions, and I shall now hand over to Rob Memmott, our CFO, to conduct that process.

On similar few themes and a few have come through already. We will group them together and address them collectively. And if we are unable to get to your question today due to time, then we will respond to you by e-mail shortly after the event. So I'll now hand over to the moderator to assemble a queue.

[Operator Instructions] The first question is from Anthony Leatham at Peel Hunt.

Some very interesting presentations there. I appreciate it. Just on the Asia portfolio. I was wondering if you could provide a little bit more detail on performance drivers as you've experienced them and maybe a comment on future commitment levels. And then on the North American portfolio, I think you described quite a lot of the businesses as representing kind of everyday America. I'm interested to learn more about how you've assessed the impact of tariffs on the underlying businesses and perhaps how the portfolio might behave in economic downturn?

Thanks, Anthony. Jamie will start with response to that.

Thank you. Just to reiterate, as Min said in the presentation, I mean, the last 3 years have been challenging and the sort of macroeconomic uncertainty, foreign exchange movements across Asia weighed on valuation sentiment contributing to any slowdown in exit activity. However, we remain confident about the underlying quality of our funds assets. And if we just look at the last 18 months, we've had several IPOs in the portfolio and looking forward over the next 6 months. We have got 4 companies that have been approved for IPO and another 6 that are filed. So hopefully, 10 IPOs in the next 6 months.

On trade sales during the last 18 months, 9 of our companies were sold by a trade sale, and they averaged more than a 30% uplift in NAV that sale time. So I think it's fair to say, sort of cautiously optimistic, but there has been a lot of uncertainty out there, but we stick with the fundamentals of our assets. Maybe I should hand over to Eloise to take a little bit about tariffs on North America.

Yes, of course. Thank you, Jamie. So in terms of the exposure we have for the North American economy, in terms of tariffs and a broad economic downturn, they would have an impact on returns, but we don't think it would be catastrophic. Usually, in the downturn, demand will slow but not disappear. For example, households, property owners, we may delay optional upgrades, but repairs and maintenance and failures will continue and require action, and that's where we have a lot of exposure across our portfolio. And that's also where manager selection is key. So we're backing managers with operating partner capability and really hands-on experience running these types of businesses.

Anthony, thanks for the question on commitment. So we are opportunistic with how we commit in any capital across Caledonia. We continue to support the strategies. Typically, in America, we've been committing about $130 million per year. It's been bit more muted in Asia over the last few years as we are porting the opportunity set.

Any other questions moderator from the analysts?

[Operator Instructions] There are no further questions on Zoom. I will now hand back to Rob to cover the written questions. Please go ahead.

Thank you. A question that's come in related to exposure to North America and are we considering reducing the overall exposure for Caledonia to North America? And then related to that is a point on hedging and what is our strategy with respect to hedging? So maybe, Matt, if you deal with the first question there on exposure to North American market and then I'll pick up.

Yes. Well, thanks for the question on North America. Very topical. I'm guessing that's because of the volatility with President Trump in the recent actions. Look, the areas of exposure to North America for us are across our quoted equities pool and then obviously, the North American part of the [indiscernible]. Just breaking those down, the quoted equities exposure with that team are looking to invest in the world's great long-term compounders as we evaluate them. They're free to invest North America, Northern Europe or across Europe, mainly. And so we're really driven by the opportunity set there. I don't anticipate making major changes to their portfolio as a result of sort of a probably short-term volatility. They also tend to invest in companies which are somewhat immune or resilient and sets a macro volatility.

Turning to North American funds. We just had the benefit of watching Jamie and Eloise take us through the virtues of that strategy. It's a long-term strategy. You can't sort of dip in and dip out of it. We remain infused about the consistent fundamental largely operational returns drivers that we get to access through that market. And so we don't anticipate making any changes to our engagement there.

Rob, you should probably ask yourself the question about hedging because you'll do a better job than me.

With respect to hedging, we don't hedge the balance sheet. If there are specific cash flows and we are aware of the timing of those cash flows. So for example, a large sale of a private capital event that was in a particular currency, then we would consider hedging that but hedging the balance sheet, given that we are a long-term investor is expensive. And generally, you end up in the same place anyway. It's just you pay for the privilege of a smoother ride. So we don't deploy hedging the balance sheet.

In terms of next question. There's a question actually on the fund of fund holdings, which you sort of referenced. And a specific point of that is why do you use fund of funds within the strategy?

I try to take that one yes. So fund of funds, we've used both in North America and Asia, and they've been incredibly helpful and great teams that we back behind. And we did this at the early stage of our program when we were really getting access and exposure and getting to know our markets and these fund platforms allowed us to deploy capital then whilst we were beginning to develop that knowledge. They've also had a very good relationships. So many of our early introductions came through the fund of fund platforms. As we developed our programs and Min and Eloise really began to understand and get better knowledge of that markets, then actually the information flow between the fund of funds and ourselves, we saw 2 way. We were able to share knowledge and information with them.

The fund of funds still -- we're still about 1/4 of our NAV is actually in fund of funds structures. However, if you look at our outstanding commitment to fund of funds, it's just shy of GBP 40 billion. So you can see that it is being generally sort of winding down, but they still have a role in our portfolio and great teams that we like to partner with.

Thank you, Jamie. The next sort of question is maybe one for both Min and Eloise and this sort of relates to the sort of cash flows coming from the each of their pools, and how do you expect those to evolve in the coming period? And I think it's implicit in there, do we expect to see the cash flows improve over the coming period?

Turn to Eloise first.

Sure. Happy to answer that. So we believe the portfolio is well positioned to benefit from an improvement in the exit environment. What we feel is it clearly covers a whole PE sector and the last few years have been quite challenging, but we're seeing selectively more exits, structured transactions and early indicators of improving distribution activity. So specifically for North America, over the last 3.5 years, portfolio net cash flows has been broadly neutral with distributions of around GBP 300 million. We're seeing increased deal engagement now, and we are starting to see some of that translate into cash. So roughly 1/3 of the North American portfolio is over 5 years old and maturing nicely. So with significant dry powder in the sector, we think this part of it is primed for capitalization once the exit environment improves.

And I'll hand over to Min to cover Asia.

In Asia, in the last 3.5 years, similarly, portfolio net cash flows have been broadly neutral with distributions totaling around GBP 130 million. While market conditions vary by region, we are indeed seeing momentum really in the right direction. All that being said, this is unlikely to be a sharp rebound in either region given the uncertainty surrounding the broad environment.

Okay. So I guess, in summary, we're sort of cautiously optimistic that the cash flows will start to improve, recognizing that the breakeven-ish at the moment.

There's a couple of questions on valuations and how do we deal with valuations from the funds. I guess I'll take that one.

Really, the view of valuation starts with our due diligence process. And a key component of that is to ensure that the funds are audited by reputable firms big 4 accountancy firms audit the majority of the funds where we're invested. They all account under IAS or U.S. GAAP, and that means that they account under fair value. We received a manager's NAV statement on a quarterly basis and as we receive an updated NAV statement, then we reflect that updated NAV statement in our NAV.

In addition, we adjust the cash flow, so additional cash going into a fund or cash which we've received. So we're rolling the statements for our actual cash flow. There is then a point where when we are reporting our NAV, particularly at the half year and at the year-end, there is a little bit of sort of what we call as stale pricing, and that is because we're receiving a NAV statement and it might be 3 months or -- after a 3-month lag to the point where we are reporting our NAV. So the team do quite a bit of extensive work to make sure that if there are any key themes or any issues in a particular company that we consider those, and we will adjust out NAV accordingly if there was a material to impact on our amounts. So hopefully that covers the valuation point.

Maybe 1 question, increasingly common are continuation vehicles. Is this a significant feature of the markets where you operate? Maybe, Eloise, if you take that?

Yes, happy to. So just for context, continuation vehicles are new funds that are created to put existing portfolio companies into beyond the original funds life. So it gives LPs the option to cash out or to roll into the new vehicle. So effectively, this is a manager selling to itself. So in the sort of larger private equity landscape, we are seeing these vehicles being quite widely used, and it's a growing feature. I'd say that where we play in North America, which is in the lower mid-market, these are a lot less prevalent.

So we do see them occasionally. And typically, we take the money rather than following on and staying in the vehicle. But we do get very good oversight of these given we sit on a lot of LPACs as an advisory Board member, is typically is something that would come up for discussion. And so the managers are talking that through with us in terms of their thinking around the exit and how they're planning that and sometimes, these continuation vehicles do take place, and sometimes they get discussed and the fund decides to hold out for another year and have an outright sale instead. So I would say less prevalent where we play.

Question has come through, which is how significant are you in the funds that -- where we invest. So roughly what is the percentage of the AUM or the fund where we are investing? Maybe Eloise take that one?

Yes, happy to. So typically, in terms of fund commitments, it's typically about $25 million to $30 million per fund and typically, we're doing sort of 5 these year, which is how we get to that sort of $130 million commitment number that Matt referenced. And in terms of underlying fund sizes in North America, it's roughly around $400 million-ish sort of the average fund size. So a $30 million commitment into a $400 million fund. We are a meaningful investor, and that also means that quite often we are then able to sit on the LPAC and be an advisory board member because we are a meaningful investor assets management.

Great. There's a couple of questions, I guess, not specific to the call in the presentation today. The first one is on an update on the Stonehage Fleming sale.

As many of you will be aware, we've agreed to sale -- to sell Stonehage Fleming, and that should realize cash proceeds of GBP 290 million as of the 30th of September and currently in the December NAV, we are holding it in the books at GBP 260 million. The sale process is continuing. We're going through the regulatory approvals and bonds, all of those regulatory approvals are completed. Then the first payment of GBP 251 million will be made to us. We're expecting that still in the second quarter of this calendar year.

And then a final one on the discount and any additional actions which we are taking to address the discount. Clearly, the discount is as we've said, is a very important issue, which is front and center in Board's agenda. In recent periods, we've done a number of initiatives, things like the enabling the counter party to go through 50%, which unlocks the ability for us to do share buybacks. We have done a share split, and we've also reprofiled the dividend, which are all we hope shareholder-friendly initiatives. We continue to pursue share buybacks, but that's part of a broader capital allocation policy, which is understandably prudent. We want to remain invested. We want to commit capital to a dividend but where appropriate. And clearly its north of 30%. We do think it is appropriate to continue with share buybacks, which we do.

And then the other thing on ways or the 2 areas of addressing discounts to continue to make sure that we're delivering good NAV growth coming from 3 strategies to continue to perform well and then improving and increasing the disclosure which we're making to shareholders and potential shareholders to make sure that people understand and rate Caledonia's strategies and obviously, today's spotlight, which is the third of 3 is a step in making sure that people probably understand the opportunity set and how we go about investing in the good markets where we participate.

I think we're now just about end of time. So thank you very much for all of your questions and your participation today. We will just sort of see through any remaining questions, and we will e-mail directly if we haven't specifically answered your question. Thank you again for your time. Bye.

Thank you for joining today's call. We are no longer live. Have a nice day.

Good morning, everyone, and thank you for joining us today for Caledonia Investments Plc Half Year Results Presentation. [Operator Instructions] Please note that this call is being live streamed to a webcast for a wider audience and will be recorded. I would now like to hand over to Mat Masters, Chief Executive Officer, to open the presentation. Please go ahead.

Hello. I'm Mat Masters, CEO of Caledonia Investments, and welcome to our results presentation for our half year to 30th September 2025. You will also hear from Tom Leader, who leads our private capital strategy; and Rob Memmott, our Chief Financial Officer. Before we go through these results, a short reminder about Caledonia. We are long-term stewards of our shareholders' capital, including the Cayzer family who have entrusted us with theirs for generations. Looking after multigenerational capital shapes everything we do. We need to make returns, but do so whilst limiting the risk of losing capital.

We target absolute returns of inflation plus 3% to 6%, and this influences the level of risk we're prepared to take. Over time, our approach to investing has delivered results at the top end of this target range at 9.8% per annum, outperforming inflation by 6.5% per annum, and we have consistently increased our dividend for over half a century. Our approach to investing is straightforward. We invest in high-quality businesses and hold them for the long term. Our maximum time well invested captures the essence of our approach perfectly. Our in-house investment team is fully aligned with shareholders. We do not manage anyone else's money, and there is no fundraising. Performance is measured against NAV per share over time and rewarded in Caledonia shares. So our incentives are directly tied to long-term value creation. Our investment strategy is perfectly encapsulated by time well invested.

We use our strong balance sheet, long-term approach and in-house investment team to underpin our focus on long-term results and be robust during downturns and in fact, aim to use these to our advantage. We're organized across 3 main strategies, providing access to private and public companies across different sectors and geographies. We're looking for the same 3 key ingredients, which are attractive markets to operate in, resilient businesses with strong fundamentals and return characteristics and that are well managed and aligned with shareholders. The strategies have together generated Caledonia's overall performance, which is shown in the chart. Over 5 and 10 years, we have delivered at or beyond the top end of our targets and across all periods, both NAV per share total return and share price total return have kept ahead of inflation, which is our core aim.

In the last 3 years, share price total return has been stronger than NAV per share total return as the discount has reduced from 37% to 33%. Moving on to the highlights for the half year. We're pleased to report another positive performance with NAV total return of 4.4% and total shareholder return of 8.5%. This was driven by strong public companies and private capital performance, partially offset by funds and including the impact of the pound strengthening against the dollar, reducing NAV by approximately 2%. Today, we are announcing our interim dividend of 3.68p per share, which reflects the change in dividend payment profile to 50% of the prior year's annual total dividend. This dividend will be paid on 8th of January 2026.

Moving on to public companies. This comprises 2 portfolios, each taking a concentrated approach to making long-term investments in high-quality companies. We're looking for high-quality, durable businesses, which we think have got great futures ahead of them. We aim to buy well and hold for the long term. The overall public company strategy delivered 9.9%, driven by a capital portfolio and within that, primarily Oracle, Microsoft and Alibaba who are benefiting from continuing demand for cloud-based services, including AI. We initiated a new position in Charles Schwab, the U.S.-listed brokerage business that we've been tracking since 2017. We like Schwab because of its massive scale with just over $10 trillion in client assets and market-leading focus on driving down costs for its clients.

Its track record speaks for itself with annualized total shareholder return of 17% since it listed in 1987. It's well managed with good continuity of leadership with the eponymous Charles Schwab still on the board. We deployed GBP 35 million, mostly on 7th of April, shortly after President Trump's Liberation Day, which was followed by a downturn in the equity markets and presented the lowest price that Schwab and the market traded in the last year. This derisked our point of entry and is a good demonstration of our time well invested approach. We purposely set ourselves up to buy shares in wonderful companies when they become more attractively priced.

On the same theme, Oracle delivered a standout performance for us, and we were able to realize gains, selling 3/4 of the value of our holding at the start of the period as its share price doubled and its risk characteristics changed. We first invested in Oracle in 2014 when it was rated as legacy tech and judged late to the cloud and as a service. We look closer and saw a business with a good market position in an attractive market, excellent business fundamentals with high levels of recurring revenue and plans to increase this and excellent returns metrics, run by a management team that was certainly aligned with shareholders and very well proven.

Our analysis helped us establish that long-term ownership was very likely to be rewarded. And as you can see from the chart, Oracle took a little while to get going, but we could see that they were doing what great long-term businesses do, which is accept some short-term pain as they invested in a comprehensive move to the cloud and as-a-service offering, whilst using their low rating to undertake a massive share buyback with them buying back $120 billion of their shares and the share count reduced by 38%.

As their transition to the cloud and as a service became better understood by the market, share price performance improved. And more recently, Oracle's cloud offering and incumbent position in corporate and governmental data places them very well for AI, and this has driven the doubling of its share price during the first half of our year. Our overall investment performance from only Oracle has been good with GBP 35 million invested, delivering GBP 101 million in cash returns through top slicing and dividends with the position worth GBP 89 million at the end of the period, so 5.4x our money. I will now hand over to Tom to talk about private capital.

Thank you, Mat. Today, I'll walk you through our performance, portfolio highlights and recent developments, focusing on how we continue to support private companies in creating enduring value. As a reminder, Caledonia Private Capital is focused on making direct investments, usually on a majority basis into high-quality mid-market U.K.-centric businesses. Our model is built on permanent capital, genuine partnership, a patient long-term perspective with moderate use of leverage. Unlike private equity firms whose funds have limited life spans, restricting the time when investments must be made, grown and sold, we have no time limitations on our investments. We can build genuine partnerships with strong management teams and help them create enduring value without the constraints of short-term capital.

Our current portfolio has a net asset value of GBP 907 million, invested across 8 companies and represents approximately 30% of the NAV of Caledonia as a whole. For the half year, we delivered a total return of 7.7%. This result was primarily driven by the agreed sale of our minority stake in Stonehage Fleming to Corient Wealth, on which we exchanged contracts in September, along with continued good operating performance from AIR-serv. I will cover Stonehage Fleming in a bit more detail on the next slide. But clearly, the sale, when it completes, will deliver an excellent result for Caledonia. AIR-serv was another strong performer, valued at GBP 193 million as at 30th of September. In the half year, it delivered an 11% return, driven by strong revenue and profit growth. The business paid Caledonia a dividend of GBP 24.5 million in the period. The other companies in the portfolio continue to make progress in executing their value creation plans.

Looking at our long-term performance, Private capital has delivered annualized returns of 8.5% over 3 years, 20.7% over 5 years and 12.5% over 10 years, all versus our 14% target. Stonehage Fleming is a full-service multifamily office, helping discerning clients address the challenges of creating and preserving wealth. It is focused on the ultra-high net worth market, which is the fastest-growing segment of the wealth market. The firm's clients have entrusted it with the management, fiduciary oversight and administration of assets in excess of USD 175 billion. Stonehage Fleming provides its services from 20 offices in 14 geographies. With an initial investment of approximately GBP 90 million in July 2019, we acquired a minority stake alongside Giuseppe Ciucci and the other founder partners.

The management were not looking for a conventional private equity investor, but instead for a capital provider, which shared their long-term perspective and multigenerational approach to preserving and growing capital. Together, we restructured the balance sheet and the shareholder base of the group to position it for the next phase of growth. Over the following 6 years, we have worked in close partnership with the leadership team to deliver upon our original investment thesis, which entailed, first, streamlining the governance structure by financing and supporting succession management; second, investing in technology, which improved margins and allowed Stonehage Fleming to internalize services that were previously outsourced; third, enhancing business development, which delivered strong organic growth; and fourth, completing 4 strategic acquisitions, which have expanded the firm's geographic reach and diversified its product and service offering.

The business has been a consistent performer, a true compounder. Strong cash generation and disciplined reinvestment have driven returns steadily upward through our ownership. This investment is a hallmark example of our unique approach, long-term partnership-driven and unconstrained by fixed fund life and has delivered exceptional value for all stakeholders. We expect the deal to close in mid-2026, subject to the required regulatory consents at which point it should deliver cash proceeds of approximately GBP 288 million, representing including dividends received along the way, a 3.2x multiple on cost of investment. As of 30th September, Stonehage Fleming was valued in the portfolio at GBP 259.7 million, net of approximately 10% discount to reflect the transaction execution risk and the time value of money.

The bubble chart here illustrates for all our major realizations since 2012 on the X-axis, the realized IRR and on the Y-axis, the NAV uplift at exit compared to the carrying value 12 months prior to exit. For Stonehage Fleming, the expected exit proceeds of GBP 288 million represent a 30% uplift to its carrying value as at the 31st of March 2025. This result is comparable with a 37% uplift relative to the carrying value when we sold 7iM in January 2024. Overall, across the portfolio, we have a strong track record of realizations. Since 2012, we've generated GBP 1.4 billion in proceeds, returning around GBP 700 million in net cash to Caledonia.

Our realized investments have delivered a 17% IRR and a 2x multiple on cost, which, given the low appetite for and use of leverage, compares very favorably with the returns delivered by U.K. mid-market private equity. Let me finish by saying we continue to deliver strong and consistent returns, underpinned by our disciplined approach and the strength of our partnerships. The success of Stonehage Fleming exemplifies the power of our permanent capital model, enabling us to back exceptional businesses and management teams, support their long-term growth and realize substantial value for our shareholders. Thank you, and I'll now hand over to Rob.

Thank you, Tom. Our funds pool has been running for more than 15 years. The opportunity is significant. These funds tend not to market in Europe, meaning that we are often the only European investor, a real differentiator. The pool NAV of GBP 884 million is a diverse portfolio invested in some 82 funds by 46 managers and in more than 600 underlying businesses. 64% of the NAV is focused on the North America lower mid-market buyouts. The funds are typically the first institutional investment into relatively small often owner-managed businesses. The playbook is to transform the companies by strengthening the management team, improving operational efficiency, growing sales by product and geography, both organically and through bolt-on acquisitions.

These improved companies with greater scale provide feedstock to mid-market private equity. It's a very pure form of capitalism. Of the North American companies, 2/3 are providing services with the balance having very little exposure to international trade flows. 36% of the pool NAV is invested in Asian buyout, growth and venture. The buyout assets are focused on domestic consumption and supply chains, fueled by the aging population, growing middle class and tech adoption. The venture and growth funds are invested in government supported new technologies and health. Whilst there is very limited exposure to the direct impact of trade tariffs, as expected, economic uncertainty has reduced investment and realization activity in the short term. The pool has delivered solid returns of 13.3% over 5- and 10-year periods.

Performance over the 6 months reflects the continuation of trends experienced for the last 3 years. During that period, the North American pool delivered local currency returns of 8.9%, driven by the trading performance of the underlying companies. In Asia, the companies are making progress. However, the continued reduction in capital market flows has impacted on fundraising and exits suppressing our returns. Overall, the pool NAV grew by 4.3% in local currency, but reduced by 1.8% in sterling. Our capital commitments are GBP 394 million, 75% of which is to North America. GBP 52 million was invested in the 6-month period and $55 million of new commitments were made to 2 North American managers. Looking at the cash flows in a bit more detail. The chart shows the realization and investment activity over recent 6-month periods.

As I mentioned earlier and as expected, economic uncertainty has reduced investment activity in the last 6 months, which can be seen on the graph. The pie chart details the weighted average life of the primary portfolio. For North America, the weighted average life is 4.3 years. For Asia, it's 5.5 years. We expect a longer hold period in Asia given that the assets are weighted towards venture growth and fund of fund investments. And so to the numbers. During the 6-month period, our NAV total return was 4.4%, growing our NAV to just over GBP 3 billion, of which GBP 2.9 billion is invested in a diversified portfolio of listed and privately held companies and funds that have got global reach. Cash on balance sheet was GBP 105 million. This, combined with our undrawn revolving credit facility of GBP 325 million, enables us to act quickly to invest in companies and funds that we find attractive.

This was demonstrated in April when we deployed approximately GBP 50 million into the public company strategy, taking advantage of opportunities provided by the market volatility around Liberation Day. We have reprofiled the interim dividend such that it is 50% of the prior year total. This equates to 3.68p, which will be paid to shareholders on the 8th of January 2026. And now to my beloved waterfall chart. This chart shows the movement in NAV over the period. We started the year at GBP 2.9 billion. The portfolio return of GBP 145 million includes the negative impact of foreign exchange. We then deduct management expenses of GBP 17 million. There is then the cash returned to shareholders, GBP 14 million allocated to share buybacks and GBP 28 million for the final dividend from the prior year. That results in a closing NAV of just over GBP 3 billion.

Our OCR is 87 basis points, slightly up on the prior year, reflecting some investment in our teams. I expect this to increase slightly over the next 12 months, taking account of full year effects. 54% of our assets are domiciled in U.S. dollars and 37% in sterling. Movements in the sterling-dollar exchange rate will, therefore, impact our in-period results. In the last 6 months, we suffered an FX loss of GBP 59 million, reducing our NAV by approximately 2%. We have a robust balance sheet with no structural leverage. Walking you through the cash movements, we started the year with GBP 151 million, and net GBP 27 million has been invested. The investment income from our assets was GBP 47 million, higher than in previous periods as it includes the GBP 25 million dividend from AIR-serv. We have consumed GBP 24 million in the cash cost of management expenses and working capital. And next, there is the payment of the prior year final dividend, GBP 28 million and GBP 14 million allocated to share buybacks, resulting in a closing cash position of GBP 105 million.

This, combined with our undrawn revolving credit facility of GBP 325 million means that we have liquidity of GBP 430 million. Of the revolving credit facility, GBP 150 million has just under 4 years remaining duration and GBP 175 million just under 2 years. We expect to complete the sale of Stonehage Fleming in Q2 2026 once all the regulatory approvals are obtained. GBP 251 million will be received on completion with 2 further amounts of GBP 18 million being due 6 and 12 months following. These amounts will come back on to the balance sheet. We feel no pressure to invest, and we will continue to appraise investment opportunities on their merits and as they arise. The discount at the end of the period was 33%. We believe this fundamentally undervalues the quality of the portfolio, our track record and prospects.

We are taking actions over the things that we can control, including share buybacks, which remain an attractive investment for us. We have a prudent capital allocation policy to investments, our dividend and when appropriate, share buybacks. During the 6 months, we allocated GBP 14 million to share buybacks, increasing the total since March '24 to GBP 78 million, delivering a 7.44p NAV per share accretion. We continue to evolve our IR and communications to ensure that the Caledonia investment proposition is understood and rated. We held capital market spotlight events in January and June, focused on private capital and public companies. If you've not had the opportunity, I would encourage you to visit the website and watch the presentations. They provide a great insight into how the pools operate, what differentiates us and how we add value.

When you visit the website, you will see that this has been significantly improved with new content. A date for your diaries, the 27th of January 2026, we will be holding the third spotlight session focused on the funds pool. We believe Caledonia is a great home for long-term investors. Following shareholder approval, we have completed the 10 for 1 share split. In addition, we have rebalanced the profile of the dividend, increasing the interim to 50% of the prior year total rather than the historic rate of approximately 25%. These measures will improve visibility of income, make payments more balanced, and I expect will improve accessibility for all shareholders. I'll now pass back to Mat.

Thanks, Rob. We're pleased with our 6-month performance, which supports our track record of delivering NAV total return of 9.8% per annum over the last 10 years, which is at the top end of our target range. Across both public and private markets, our portfolio is high quality, diversified and deliberately positioned to withstand short-term market volatility while compounding value over time. And none of this would be possible without our strong balance sheet, exceptional team fully aligned with shareholders and focused on long-term value creation. Thank you very much for joining us today, and we will now take questions.

[Operator Instructions] Our first question comes from Iain Scouller with Stifel.

I just wanted to ask about the valuation of Stonehage. I think in the statement, you're saying it's at a 5% discount to the expected proceeds. But in the presentation, you're talking about a 10% discount. So I just wondering if you could clarify that.

Certainly, the total discount relative to the expected proceeds is approximately 10%, comprising 2 separate adjustments: one, approximately 5% discount for execution risk and a 5% discount for the time value of money. The total discount relative to the expected proceeds is 10%.

Okay. And when do you expect to receive the proceeds?

We expect to receive the proceeds on completion of all the regulatory approvals. But there are, in fact, slightly more than 20 regulatory approvals required in multiple jurisdictions. That process will take several months. So we expect the deal to complete towards the back end of the first half of calendar 2026.

Our next question comes from Anthony Leatham with Peel Hunt.

A couple of questions, if I may. You were particularly active kind of April, that liberation day volatility on the public company side. How are you feeling about the environment and the positioning of the portfolio today? And then I had a couple of questions on the private equity side. Maybe a comment on the maturity profile of the funds portfolio. And then we're hearing from private equity trusts and managers that realization activity is actually improving. And I didn't know whether you had seen the same trend within your holdings.

Anthony, thanks for the question. Mat here. So yes, we did. So following President Trump's what's been Liberation Day sort of announcements and things, the stock markets sold off. And we added -- very pleased to add Charles Schwab to the portfolio. And that is absolutely sort of the playbook when we sort of invest in the quoted markets is to keep our powder dry until opportunities present themselves. And we also topped up other holdings in the wake of that, and that's all thus far performed very well for us.

The portfolio is a long-term portfolio. We try not to judge precisely where it is on any particular day, but we do feel as we risk manage the portfolio as we go forward, we obviously talk about the fact that we to Oracle as that went up in value and loss rating went up, we did that across the whole portfolio. So we feel good about the medium and long-term prospects of the portfolio. Obviously, impossible to predict what share prices do on a day-to-day basis, I'm sure you'll appreciate. Maybe Rob could tackle the funds questions.

Yes. Thanks, Anthony. Just in terms of the fund’s activity, as we mentioned in the presentation, the level of realization and investment activity in the last 6 months has reduced quite significantly. And what we're seeing is that start to increase the weighted average life of the portfolio compared to where we were a year ago. In terms of recent activity in the market, certainly, there is sort of noise of increased activity taking place. We're yet to see that sort of flow through into sort of real pound notes coming back through to us. And certainly, from a sort of planning and thinking about sort of liquidity, we're sort of still quite cautious in terms of the speed of that recovery getting back up to the norms, which I guess we were experiencing in the prior financial year.

[Operator Instructions] There are no further questions on the webinar. I will now hand over to [Beck Hughes] to read out the written questions. Please go ahead.

So the first question is about Oracle. What is your view and future prospects for your Oracle holding? And have you sold any more since the period end?

Thanks for the question. Mat here again. So we think Oracle has a fantastic future ahead of it. Most of its current trading is still sort of legacy type business. And what's really happened is its forward order book, it's grown a lot and a lot of that is sort of AI related. So actually, that's reflecting the opportunity expanding ahead of it. So we're quite excited about the future for Oracle. Nevertheless, the rating has changed materially during the period. And so we do sort of respond to that. And so we have also the size of the position during the we talked about the money we've had it over the course of our investment period. But over the year -- over the half year rather, we've taken GBP 54 million of it. So we have trimmed the holding according to the change in risk -- really around rating risk with it. We remain pretty excited about its medium and long-term future.

A question on Stonehage. Are the proceeds contingent on anything or just deferred? And what are the most attractive areas for new investment?

So dealing with the Stonehage completion mechanism first. As I alluded to earlier, completion is conditional on reg approval in multiple jurisdictions. That will crystallize payment of the bulk of the proceeds, just over GBP 250 million. There is a deferred element, which is payable in 2 tranches 6 and 12 months post completion. Those deferred proceeds are interest-bearing, and they are subject to adjustment depending on the finalization of a closing balance sheet audit, which includes a true-up mechanism. So that could go either up or down, positive or negative against the estimated closing balance sheet just prior to closing.

So there is bound to be a small difference between the 2, but we do not expect it to be material. In terms of the second part of the question, future opportunities, we scan somewhere between 300 and 350 new opportunities a year across a very broad range of sectors. Our historic strengths have been in financial services and business services and technology-driven industrial businesses. And there is a regular flow of opportunities in all of those sectors. But I would add that it is a difficult market in which to deploy capital. Good quality assets are still transacting at very high prices, and less good quality assets are either taking longer to sell or not selling at all. So we will remain selective and we have the liquidity to finance new acquisitions if and when we can find the right opportunity.

Thanks, Tom. A question around discount. What plans do you have to reduce the very large discount now the buyback may have marginal benefits, but does not seem to benefit? And why have you only bought back GBP 13 million worth of stock given the discount is just over 30% and you have a lot of liquidity.

Yes. Thank you, Beck. So as you rightly point out, the discount of around 33%, we certainly feel undervalues the value of the portfolio, our track record and our prospects. I guess the buybacks, we sort of see those as an investment opportunity for us. We don't see that -- we don't have a discount control mechanism. The things that we are doing to influence the discount are the things that we can control, which is continue to invest in a good quality, high-quality portfolio, make sure that we communicate with as large an investor base as possible to make sure that we -- the proposition is properly understood and rated.

And then there are some smaller sort of tactical things that we've done around the share split, rebalancing the dividend payment to make sure that the shares are as attractive to a broader investor base as possible.

Another question here about hedging. You mentioned return in sterling is diminished by your U.S. dollar weakness. Do you hedge?

And the answer to that is that we do not hedge. We're a long-term investor. And if you like, the short-term volatility coming from exchange rates, we sort of understand those and sort of monitor them, but it is about sort of long-term sort of value sort of creation. And generally, if you sort of hedge the balance sheet position, you pay a premium in order to end up in the same place. So we don't hedge unless there are specific cash flows that we would do so for. And I think that the weighting of the portfolio is more dollar denominated reflects the fact that the size and the quality of the companies which we're investing in, a lot of those are based in North America or headquartered in North America.

Another question here on special dividend. In the past, there was a loose policy of providing a special dividend every 3 years or so. Is this policy still operative?

So we have -- thanks for the question. We have a track record of occasionally paying special dividends. I don't think we've ever sort of announced a policy about when we would do it. And we've not made any announcement about paying a special dividend. So that is the case at the moment.

Another question here about equity market valuations. What do you think of them.

Well, thanks for the question. So equity market valuations vary around the globe, and there'll be one market up and one market not quite so far up. And actually, it's a really difficult question to address and actually respond to in your portfolio. And so what we do is to try and keep it very simple. We invest in good quality companies and hold them for the longer term and try not to worry too much about what's going in the macro and make sure we invest in things where we don't have to worry too much about the macro.

Okay. Well, we have gone through the questions now, and we're very grateful for everyone joining us on the call today and for the questions, and we look forward to connecting with you next time.

Thank you for joining today's call. We are no longer live. Have a nice day.