2025 was a good year in terms of absolute returns. The net asset value was up 20.4%, which compared with the benchmark being up 20.6% over the year.
In terms of the dividend, it was another year of growth. The dividend was declared at 10.9p for the year, representing 2.8% growth on the previous year. This marks the thirteenth consecutive year in which we have grown the dividend.
Looking at performance drivers over the year, returns were very much led by the equity portfolio, and particularly by financials. Our insurance holdings, including M&G and Phoenix, performed very robustly, especially in the first half of the year. Our bank holdings, such as NatWest and Lloyds, also delivered strong performance.
In terms of detractors, unfortunately this included a stock we did not own, but which is a very large constituent of the benchmark. Rolls‑Royce, given its strong share price performance, was a negative for relative returns. Among the stocks we did hold, Hilton Food Group was disappointing, struggling with inflation flowing through to weaker demand across some of its key categories, including seafood and beef. Sodexo, our French contract caterer, also had a difficult year after losing a number of contracts in the US.
Turning to portfolio activity, within equities we added new holdings in AXA, the French insurance company, and Aberdeen, the UK asset management business. Both offer attractive dividends and trade at relatively cheap valuations compared with some of their peers.
Within our bank exposure, we made a switch by selling our holding in BNP Paribas and buying into BBVA, the Spanish bank. BBVA has strong market positions in Spain, Mexico and Turkey, and we believe its dividend could grow quite aggressively over the next few years.
We also sold several equity holdings during the year. These included Coca‑Cola Hellenic Bottling Company, which had performed very strongly for the trust over recent years, but where we felt the valuation no longer adequately discounted the risks to future volume growth following several years of price increases. We also sold Sabre Insurance, as its valuation had recovered alongside profits and we felt upside from here was more limited. In addition, we sold SSE, the UK utility company, which had been a strong performer for us, but where we had some concerns around the returns generated from its planned renewable energy infrastructure investment over the coming years.
Within the bond portfolio, we added approximately £7 million on a net basis. This reflected the underperformance of bonds relative to equities over recent years and allowed us to reduce the underweight we had maintained in bonds within the trust. We continue to hold an overweight position in equities relative to bonds, but this move allowed us to take a small amount of risk off the table.
Looking ahead to 2026, we need to be mindful of ongoing events, particularly in the Middle East, and the associated surge in oil prices. At the start of the year, we expected equity markets to make further gains, supported by strong earnings growth, lower inflation and falling interest rates. However, higher oil prices are likely to have implications for the inflation outlook, potentially leading to slower economic growth and putting expected interest rate cuts on hold for the time being.
Much will depend on the duration of the conflict. If there is some degree of de‑escalation in the near term, markets can refocus on company fundamentals and the outlook for growth. A prolonged conflict, however, would have different implications for inflation and economic growth.
In uncertain and volatile times like these, it is important to remain disciplined. We continue to focus on identifying good‑quality companies that we believe are undervalued and that have the ability not only to pay a dividend but also to grow over the longer term. That remains our approach.
Thank you.