Core Viewpoint - The interim management statement for Hargreave Hale AIM VCT PLC highlights contrasting economic conditions in the US and UK, with the US showing strong growth while the UK faces challenges including weak economic growth and rising unemployment [3][5]. Economic Overview - The US economy reported a robust growth rate of 4.3% in Q3 2025, despite political pressures [3]. - The UK is projected to have a growth rate of 1.5% for 2025 and 1.4% for 2026, with an unemployment rate rising to 5.1% [5]. - Consumer sentiment in the UK has improved post-Autumn Budget, although business confidence remains fragile [4]. Inflation and Monetary Policy - UK inflation, as measured by CPI, increased by 3.4% year-on-year as of December 2025, down from 3.8% in September 2025 [6]. - The Bank of England reduced interest rates to 3.75% during the quarter, with expectations for further cuts in 2026 [6]. Investment Performance - The unaudited NAV per share decreased by 1.25 pence to 35.21 pence, resulting in a total return of -3.43% for shareholders [9]. - The AIM index returned -0.97% in the three months to December 31, 2025, reflecting a challenging market environment [8]. Qualifying Investments - Hardide saw a significant increase of 157.1% in value, returning to profitability and reporting a 40% year-on-year revenue increase [10]. - Skillcast and Tortilla Mexican Grill also reported positive performance, with increases of 11.7% and 34.3% respectively [11]. - Negative contributors included Cohort, which declined by 36.7% despite solid revenue growth, and Diaceutics, which fell by 23.3% without specific news [12][13]. Portfolio Structure - The company maintained a strong investment position, ending the period with 84.11% invested according to HMRC VCT investment tests [16]. - The weighting to qualifying investments increased from 54.0% to 54.9% by market value [16]. Share Buybacks and Market Activity - The company repurchased 2.6 million shares at an average price of 34.14 pence, with the share price trading at a discount of 4.30% to the last published NAV [21]. - Post-period, the NAV per share increased to 36.33 pence, reflecting a 3.18% rise, while AIM increased by 6.54% [22].

Group 1 - CSG Group, through its subsidiary Excalibur Army, has secured contracts in Southeast Asia for the delivery of over 100 Patriot armored vehicles, with a total contract value exceeding USD 300 million, scheduled for completion within three years [1] - The order includes various configurations of the Patriot platform, such as mortar carrier vehicles, command vehicles, armored personnel carriers, wheeled infantry fighting vehicles, and armored medical evacuation versions [1] - Excalibur Army specializes in developing and producing advanced land systems, confirming the trust of partners in Southeast Asia and building on a successful track record of previous exports in the region [2] Group 2 - The Patriot armored vehicle is built on a Tatra chassis, featuring a unique central backbone tube design that ensures high mobility in demanding conditions, representing the largest export order for the Patriot platform to date [3] - CSG N.V. is a leading European defense group based in Prague, Czech Republic, focusing on the development and production of strategically important defense and industrial technologies [4] - CSG operates key manufacturing facilities across multiple countries and employs over 14,000 people, with reported annual revenues of EUR 4.0 billion in 2024 [4]

Group 1 - Iveco Group has received an 'A' rating in the climate change category of the 2025 CDP assessment, recognizing its leadership in corporate transparency and action on climate change [1] - The company also achieved an 'A-' rating in water security for 2025, both ratings showing improvement over the previous year [2] - Michele Ziosi, Chief Global Affairs & Sustainability Officer, emphasized that the 'A' rating validates the company's climate governance and transparency in disclosures [3] Group 2 - Iveco Group is committed to sustainable business practices and has set bold ESG targets in four areas: net zero carbon emissions, workplace and product safety, life cycle thinking, and inclusion and engagement [3] - The company operates seven major brands, including IVECO, FPT Industrial, IVECO BUS, HEULIEZ, IDV, ASTRA, and IVECO CAPITAL, employing 36,000 people globally [4]

Market Overview - The year was characterized by high-conviction bets and rapid reversals across various markets, including bonds, currencies, and stocks [1] - Investors engaged in significant bets on political shifts, inflated balance sheets, and speculative narratives, leading to both substantial gains and losses [2][3] Cryptocurrency Trends - The Trump brand initially drove momentum in the cryptocurrency market, with various tokens launched by Trump family members experiencing significant but short-lived rallies [4][5] - By December 23, Trump's memecoin had dropped over 80% from its January high, while Melania Trump's token fell nearly 99% [6] - The volatility in crypto assets highlighted the speculative nature of the market, where political momentum could not shield investments from core market patterns [7] Defence Stocks Surge - A geopolitical shift led to a significant rise in European defence stocks, with companies like Rheinmetall AG and Leonardo SpA seeing year-to-date gains of approximately 150% and over 90%, respectively [10] - Asset managers, previously hesitant to invest in defence due to ESG concerns, began to redefine their mandates and invest heavily in the sector [11][12] - A Bloomberg basket of European defence stocks rose over 70% for the year, indicating a major shift in capital allocation towards defence as a public good [12] Debasement Trade Narrative - Heavy debt loads in major economies prompted investors to seek refuge in gold and alternative assets, leading to the emergence of the "debasement trade" narrative [13] - In October, both gold and Bitcoin reached record highs amid concerns over the US fiscal outlook and a prolonged government shutdown [14] - Despite the initial rise, Bitcoin later slumped, and the dollar stabilized, illustrating the complexities of the debasement trade [15][16] South Korean Stock Market - South Korea's benchmark equity index surged over 70% in 2025, driven by President Lee Jae Myung's efforts to enhance capital markets [18] - Foreign investment increased significantly, while local retail investors remained net sellers, indicating a disconnect between domestic sentiment and foreign capital inflows [20] Japanese Bonds - The "widowmaker" trade against Japanese bonds turned profitable in 2025 as yields surged, driven by interest rate hikes and increased government spending [26][27] - The benchmark 10-year JGB yields surpassed 2%, marking levels not seen in decades, while the overall bond market faced significant declines [28][29] Credit Market Dynamics - The credit market in 2025 experienced a series of smaller collapses, exposing poor lending practices and leading to significant losses for investors [40][41] - Companies like Saks Global and New Fortress Energy faced severe financial difficulties, prompting a reevaluation of credit risk and lending standards [41][42] Fannie Mae and Freddie Mac - Following Donald Trump's re-election, shares of Fannie Mae and Freddie Mac surged by 367% from the start of the year to their September high, driven by optimism regarding potential privatization [34][35] - The possibility of an IPO valuing the companies at around $500 billion further fueled investor interest, despite ongoing skepticism about the timeline for such a move [35][36] Turkish Carry Trade Collapse - The Turkish carry trade, initially favored by investors, collapsed following political unrest, leading to significant outflows from Turkish lira-denominated assets [37][39] - By December 23, the lira had weakened by 17% against the dollar, highlighting the risks associated with high-yield investments in politically unstable environments [39]

Core Insights - Critical Infrastructure Technologies Ltd. (CiTech) has expanded its collaboration with Babcock International Group to co-develop a platform integrating 5G communications and ISR capabilities for European and Southeast Asian markets [1][2] - The original MOU focused on supplying 50 Nexus 20 platforms to the Ukrainian Ministry of Defence, but the new agreement broadens the scope to include all of Europe and Southeast Asia [2] - The first Nexus 20 platform is expected to arrive in the EU in April 2026 for regional demonstrations, indicating a strong outlook for 2026 [3] Company Overview - CiTech specializes in autonomous, high-capacity mobile communications platforms, targeting sectors such as mining, defense, border security, and emergency services [5] - The company's first product, the Nexus 16, aims to provide critical mobile telecommunications using patented self-deploying technology [5] - CiTech has completed its research and development phase and is currently in the commercialization stage for its products [5] Partner Overview - Babcock International Group is a FTSE 100 defense company operating in multiple regions, including the UK, Australasia, Canada, France, and South Africa [3] - The company focuses on delivering complex support and product solutions to enhance defense capabilities and critical assets [3]

Economic Overview - The UK economy has contracted by 0.1% in October, following a similar decline in September and no growth in August [1][2] - Unemployment has risen to 5.1%, marking the highest level in nearly five years [3][104] - Public sector wage growth has reached a record high of 7.6%, nearly double the 3.9% increase in the private sector [51][93] Debt and Fiscal Concerns - The Chancellor has borrowed £116.8 billion this financial year to cover the gap between tax receipts and public spending [1] - The Office for Budget Responsibility (OBR) warns that the UK's debt-to-GDP ratio could exceed 270% by 2073-74 if current trends continue, with a forecast of 96% by the end of the decade [4][7] - Debt interest payments are expected to remain above £100 billion annually for the rest of the decade [9] Job Market Dynamics - The job market is showing signs of cooling, with public sector wage growth outpacing the private sector [2][51] - The number of redundancies has increased significantly, with 156,000 reported in the three months to October, the highest since the pandemic [94] - Private sector employment has declined for the 15th consecutive month, indicating a persistent downturn in hiring [62][68] Monetary Policy Implications - The Bank of England is anticipated to cut interest rates for the first time since August, with expectations of a reduction from 4% to 3.75% [96][105] - Analysts suggest that the Bank will adopt a cautious approach to future rate cuts due to strong public sector wage growth [50][54] Market Reactions - UK stocks have experienced declines in response to rising unemployment and a weakening jobs market [20][86] - The FTSE 100 index fell by 0.8% as investors reacted to the latest employment data [20][86]

Core Viewpoint - BAE Systems, the largest defense company in Britain, has been awarded a significant contract by the U.S. Navy, valued at up to $1.7 billion over five years for the supply of laser-guidance kits [1] Group 1: Company Overview - BAE Systems is recognized as Britain's biggest defense contractor [1] - The awarded contract is part of the company's ongoing relationship with the U.S. Navy [1] Group 2: Contract Details - The contract spans five years and is worth up to $1.7 billion [1] - The purpose of the contract is to supply laser-guidance kits that convert unguided rockets into precision-guided munitions [1]

Core Viewpoint - Rheinmetall CEO Armin Papperger stated that the company is not currently in negotiations with Volkswagen regarding its factory in Osnabrueck [1] Company Summary - Rheinmetall is a German defense company [1] - The CEO's comments indicate a clear stance on the lack of ongoing discussions with Volkswagen [1] Industry Summary - The statement reflects the current state of negotiations within the defense and automotive sectors in Germany [1]

Core Insights - German defence giant Rheinmetall is negotiating a multi-billion-euro ammunitions supply contract [1] Group 1 - The CEO of Rheinmetall, Armin Papperger, confirmed the negotiations are in the final stages [1]

Market Performance - The US benchmark S&P 500 rose by 1.13%, the Dow Jones Industrial Average climbed by 1.04%, and the Nasdaq Composite increased by 1.49%, driven by easing investor fears over regional banks and positive sentiment regarding a potential trade deal with China [1][4][29] - Apple shares surged by 5.35% this year, contributing significantly to the Nasdaq's performance, as strong iPhone sales data indicated a potential shift beyond the typical iPhone refresh cycle [5][6][7] Trade Relations - President Trump expressed optimism about reaching a trade deal with Chinese President Xi Jinping during their upcoming meeting in South Korea, highlighting a good relationship between the two nations [2][26] - Trump has threatened to impose additional tariffs on China, potentially raising the total US tariffs on Chinese goods to 157%, following China's export controls on rare earths essential for chip production [3][11] Company-Specific Developments - Apple has seen a significant rebound in its stock price, hitting a record of $264.22, following an upgrade from Loop Capital based on strong demand for the iPhone 17, which saw sales 14% higher than the iPhone 16 during the initial launch period [6][7][17] - Defence stocks, particularly Babcock International and Rolls Royce, surged as hopes for a peace deal in Ukraine faded, with Babcock rising by 2.3% and Rolls Royce by 1.9% [12][13] Economic Indicators - Oil prices fell by 1% to $60.68 per barrel due to concerns over a global supply glut and lower economic growth [8] - The US Treasury signed a $20 billion lifeline for Argentina's economy, which is expected to provide vital access to US dollars and support President Javier Milei ahead of midterm elections [18][19] Consumer Sentiment and Business Outlook - Consumer sentiment dipped slightly to 47.4 in October, indicating financial stress among households despite rising incomes, as high bills continue to impact disposable income [56][57] - Canadian businesses are facing significant layoffs in the steel and aluminum sectors due to the impact of US tariffs, with a weak outlook for growth in domestic export sales [23][24]