Defence Holdings Commitment of £2 Million as Cornerstone Investor in UK Defence Fund

(the “Company” or “Defence Holdings”) (LSE: ALRT), the UK software-led defence technology group, announces that it has committed £2 million as a cornerstone investor in a new UK Defence Fund (the “

Commitment

”), a professionally structured investment vehicle focused exclusively on modern defence technology.

Highlights

·

£2 million cornerstone investment in a UK Defence Fund. The Defence Fund is expected to continue to raise capital from other professional investors

·

The Defence Fund is structured to bring together third-party capital alongside Defence Holdings' investment,

increasing

the overall capital available for investment and accelerating investment opportunities.

·

A scalable and capital-efficient mechanism for Defence Holdings to participate in a broader and larger range of defence technology opportunities, including those identified through Meridian and the Company's wider ecosystem. There are currently 5 companies in initial due diligence with the potential for investment terms to be agreed within the next 2 to 3 months.

·

The Defence Fund will focus on funding private defence-focused companies with pre-seed and seed round minority equity holdings between £250,000 and £1 million.

·

The Defence Fund intends to apply for UK public backed capital participation in Defence Fund investments which, if successful, will enable accelerated and stretched capital deployment.

·

Extends the Defence Holdings operating model while maintaining the Company's core focus on the development and commercialisation of sovereign software capabilities.

·

Defence Holdings will maintain full independence of the Defence Fund with no further obligation for capital commitment to the Fund, although there is an agreement to be able to participate in future rounds to maintain its percentage position in the Defence Fund.

Strategic Rationale

Defence Holdings has established a differentiated position within the UK defence ecosystem through its sovereign software capabilities, government customer relationships, strategic partnerships and the

Meridian Accelerator Programme

. Together, these activities provide the Company with access to emerging technologies and businesses developing capabilities aligned with the future operational requirements of the UK and its allies.

The breadth of this ecosystem means that Defence Holdings is exposed to opportunities across multiple areas of defence technology, with differing business models, development pathways and capital requirements. Whilst many of these opportunities are strategically attractive, some require levels of capital investment, ownership structures or investment horizons that would not be appropriate for Defence Holdings to pursue directly. Individually, such investments could represent a significant concentration of the Company's capital and increase risk. The Defence Fund has been established to provide a complementary mechanism through which the Company can retain exposure to the potential value created by these opportunities whilst reducing the risk for the Company.

The Defence Fund is structured to bring together Defence Holdings' cornerstone investment with capital from a third-party investor base. This enables a greater pool of capital to be deployed across selected opportunities while allowing Defence Holdings to maintain disciplined capital allocation towards the development and commercialisation of its own sovereign software capabilities.

Further, not every business identified through Meridian, the Company's strategic relationships or its wider deal flow will be appropriate for acquisition or internal development. The Defence Fund provides an additional pathway through which those opportunities can be supported while Defence Holdings retains economic participation through its investment in the Defence Fund.

The Founding Principals of the Defence Fund intend to make applications to the various government and public bodies that back investment into defence related companies. If successful, these applications will enable the Defence Fund to scale the capital available to be deployed. The Company believes that access to many of these funding sources would not ordinarily be available to Defence Holdings in its capacity as an operating listed company, rather than through the Defence Fund..

The investment does not represent a change in Defence Holdings' strategic focus as a software-led defence technology company. Rather, it extends the existing operating model by providing an additional route through which the Company can participate in value creation across the wider defence technology ecosystem while maintaining disciplined deployment of its own capital. In addition, the Company is not obligated to participate in further capital rounds for the Defence Fund, although it retains an agreement that it can participate pro-rata to its initial participation to maintain its holding in the Defence Fund.

·

Defence is in a generational capital super-cycle. Global military expenditure reached $2.72 trillion in 2024 — a 9.4% year-on-year rise, the steepest since at least 1988, and a 37% increase over the past decade.

·

NATO Allies formally committed at The Hague in June 2025 to invest up to 5% of GDP annually by 2035 (3.5% core + 1.5% security-related), a step-change from the prior 2% target.

·

The European Union’s Readiness 2030 / ReArm Europe plan is mobilising up to €800 billion of additional defence spending by 2030.

·

The UK’s June 2025 Strategic Defence Review accepted all 62 recommendations, targeting 3% of GDP in the next parliament and mandating that at least 10% of MoD equipment procurement be spent on novel technologies each year.

The UK defence sector is expected to experience sustained long-term growth, with Government defence expenditure forecast to increase from approximately £62.2 billion in 2025/26 to £73.5 billion by 2028/29, before reaching approximately £80 billion per annum by 2029. The Founding Principals believe this increased investment, combined with a growing emphasis on sovereign software, artificial intelligence and autonomous capabilities, creates a compelling backdrop for investment in innovative UK defence technology businesses.

Related Party Transaction

The Company’s investment into the Defence Fund is a material related party transaction under Rule 7.3 of the Financial Conduct Authority’s

Disclosure Guidance

and

Transparency Rules

, as a consequence of

Andrew Roughan (Chief Executive Officer of Defence Holdings)

,

Brian Stockbridge (Finance Director of Defence Holdings)

and

Andrew McCartney (Chief Technology Officer of Defence Holdings)

being

three

of the

four

“

Founding Principals

”

of the Defence Fund

.

It should be noted that the Company’s Vice President, Richard Bassett, is also a Founding Principal.

The Defence Fund’s investment adviser is First Sentinel Corporate Finance Limited, of which Brian Stockbridge is Chief Executive Officer and substantial shareholder. The investment adviser and the manager of the Defence Fund are entitled to be paid management charges and/or performance fees from the Defence Fund, at market standard rates.

The Company will not be required to pay any performance fees to the Defence Fund’s advisors for any participation in the Defence Fund. All costs charged will be used to cover reasonable and properly incurred third party costs of the operation and management of the Defence Fund as an investment vehicle.

The Company’s independent directors, (thereby excluding Andrew Roughan, Brian Stockbridge and Andrew McCartney) approved the Company’s investment into the Defence Fund and the participation of the Founding Principals in the Defence Fund and are of the opinion that such investment and participation are fair and reasonable from the perspective of the Company and of its shareholders that are not related parties.

Andrew Roughan, Chief Executive Officer of Defence Holdings, commented:

"Defence Holdings has built a differentiated position within the defence sector through the combination of sovereign software capabilities, customer relationships and our ability to identify emerging technologies through Meridian and our broader ecosystem.

"As that ecosystem grows, we are increasingly exposed to opportunities across a wider range of defence technologies. Some fit naturally within our own software strategy; others may have different development pathways and capital requirements. The Defence Fund provides a mechanism through which we can participate in both, while remaining disciplined about where Defence Holdings deploys its own capital.

"Our commitment to a £2 million cornerstone investment is structured to sit alongside capital from a third-party investor base, increasing the overall investment capacity available to support defence technology businesses identified through the ecosystem.

“We look forward to providing a further operational update in early September to coincide with the formal launch of Meridian”.