11 June 2026
Northern 2 VCT PLC
Annual Report and Financial Statements for the year ended 31 March 2026
Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by Mercia Fund Management Limited.
It invests mainly in unquoted venture capital holdings and aims to provide long-term tax-free returns to shareholders through a combination of dividend yield and capital growth.
Financial summary
| Year ended 31 March 2026 | Year ended 31 March 2025 | |||
| Net assets | £137.8m | £128.1m | ||
| Net asset value per share | 54.6p | 58.3p |
| Return per share | ||||
| Revenue | 0.3p | 0.5p | ||
| Capital | (0.9)p | 3.3p | ||
| Total | (0.6)p | 3.8p |
| Dividend per share declared in respect of the period | ||||
| Interim dividend | 1.7p | 1.7p | ||
| Proposed final dividend | 1.3p | 1.3p | ||
| Total | 3.0p | 3.0p |
| Return to shareholders since launch | ||||
| Net asset value per share | 54.6p | 58.3p | ||
| Cumulative dividends paid per share^* | 145.0p | 142.0p | ||
| Cumulative return per share^ | 199.6p | 200.3p | ||
| Mid-market share price at end of period | 53.5p | 53.5p | ||
| Share price discount to net asset value | 2.0% | 8.2% | ||
| Annualised tax-free dividend yield^** | 5.1% | 5.2% |
* Excluding proposed final dividend payable on 4 September 2026.
** Based on net asset value per share at the start of the period.
^ Definitions of the terms and alternative performance measures used in this report can be found in the glossary of terms in the annual report.
Chair’s statement
Overview
The macro global economic and political environment in which your Company operates has inevitably had some impact on the growth and the resultant valuation of some of the portfolio companies, particularly in the last quarter of the financial year to 31 March 2026. Nonetheless, the overall performance of the investment portfolio has shown resilience despite the 0.6 pence per share reduction in the total return, caused by this volatility. The portfolio has remained active with £15.9 million of capital deployed in new and existing portfolio companies and £4.7 million received from realisations.
During the year, the Company closed the 2025/26 share offer with strong investor interest from new and existing shareholders, resulting in the Company’s £20 million share offer being oversubscribed. The Company is well positioned to support existing investments and pursue new opportunities.
Results and Investment Portfolio
The NAV per share as at 31 March 2026, after deducting dividends paid during the year totalling 3.0 pence, was 54.6 pence compared with 58.3 pence as at 31 March 2025.
The value of the portfolio decreased by £0.1 million in the year, despite several portfolio companies enjoying significant growth such as Pure Pet Food, which increased in value by £1.2 million, Semble, which increased in value by £1.0 million and Risk Ledger, which increased in value by £0.9 million.
During the period, The Beauty Tech Group (formerly Project Glow Topco) successfully completed its IPO on the London Stock Exchange. As part of the transaction, the Company realised 30% of its holding, generating £2.3 million cash proceeds and delivering 5.8x return on our original investment. It remains our second largest holding in the portfolio. Despite volatility in the quoted markets at the balance sheet date, The Beauty Tech Group’s valuation grew by £0.4 million over the year.
As at the year end, Pure Pet Food, The Beauty Tech Group and Risk Ledger were our largest portfolio companies by value.
Table 1: Movements in net assets and net asset value per share
| £000 | Pence per ordinary share | |
| Net asset value at 31 March 2025 | 128,078 | 58.3 |
| Net revenue (investment income less revenue expenses and tax) | 735 | 0.3 |
| Capital return on investments: | ||
| Realised net loss on disposals | (531) | (0.2) |
| Movements in fair value of investments | (61) | – |
| Expenses allocated to capital account (net of tax) | (1,679) | (0.7) |
| Total return for the year as shown in the income statement | (1,536) | (0.6) |
| Proceeds of issue of new shares (net of expenses) | 25,113 | – |
| Shares re-purchased for cancellation | (6,398) | (0.1) |
| Net movement for the year before dividends | 17,179 | (0.7) |
| Net asset value at 31 March 2026 before dividends recognised | 145,257 | 57.6 |
| Dividends paid in the financial year | (7,460) | (3.0) |
| Net asset value at 31 March 2026 | 137,797 | 54.6 |
Although the portfolio overall demonstrated NAV per share growth in the first nine months of the financial year, the effect of the market volatility in the quarter to 31 March 2026 is reflected in the portfolio valuations at the year end. As set out in the Investment Manager’s review, this appears to be driven by investor concerns over the impact of AI on software company valuations as well as the macroeconomic effects on the global economy as a result of conflict in the Middle East. In line with our valuation policy, quoted comparable company valuations have been taken into account when striking the 31 March 2026 valuation of the portfolio. At the time of publishing this report, there appears to be some recovery in global markets but the outlook remains uncertain.
As in any large venture portfolio, unfortunately there were also some write downs in the year. There were four other significant disposals, all of which were at below cost. Most notably Newcells Biotech which was written down to nil in the year (£1.9 million reduction) after entering administration.
Investment activity was in line with expectations, with £7.0 million of capital invested in four new venture capital portfolio companies and £8.9 million of follow-on capital invested into eighteen existing portfolio companies. Progress was also made in realising the Company’s mature portfolio acquired under the previous VCT rules with the remaining such investments now totalling £6.2 million (31 March 2025: £9.0 million).
Dividends
In 2018, your Directors set an objective of paying an annual dividend representing a yield of at least 5% of the opening NAV per share in each year whilst endeavouring to protect NAV from erosion over the medium term. Your Board is conscious of the need to balance payment of dividends while also growing NAV per share and sees this as a medium term target. Given the number of profitable realisations over the past few years and the prospects for good realisations from the current portfolio, the Board considers that the 5% dividend target is still appropriate.
Having already declared an interim dividend of 1.7 pence per share which was paid in January 2026, your Directors now propose a final dividend of 1.3 pence per share. The total of 3.0 pence per share is equivalent to 5.1% of the opening NAV of 58.3 pence per share and is consistent with the total pence per share dividends declared in respect of the previous financial year. The proposed final dividend will be paid on 4 September 2026, subject to approval by shareholders at the Annual General Meeting.
The target dividend yield will remain subject to regular review and the level of future dividend distributions will continue to reflect the level of returns generated by the Company in the medium term, the timing of investment realisations, the availability of distributable reserves and continuing compliance with the VCT scheme rules.
Cash balances
The Company’s liquid funds are held in a money market fund and interest bearing accounts. As at 31 March 2026, £32.0 million (out of a total of £39.3 million of cash and cash equivalent balances) was invested in BlackRock ICS Sterling Liquidity Fund. Interest income generated from the Company’s liquid funds totalled £1.8 million.
Share offer and liquidity
In April 2025, gross proceeds of £15 million were received from the fully subscribed 2024/25 share offer as 25,531,778 new ordinary shares were issued. The Board was also recently pleased to announce the successful subscription of its 2025/26 share offer, which amounted to £20 million. In relation to this offer, an interim allotment of 16,751,648 new ordinary shares was issued in November 2025, generating £10 million in gross proceeds, and 17,238,349 new ordinary shares were issued just after the end of the Company’s financial year in April 2026, yielding gross proceeds of £10 million.
The Board continues to monitor liquidity carefully and plans to raise up to £10 million of new capital in the 2026/27 tax year. Further details will be provided in due course.
Our dividend investment scheme continues to operate. This enables shareholders to invest their dividends in new ordinary shares free of dealing costs and with the benefit of the tax reliefs available on new VCT share subscriptions. During the year 12.9% of total dividends were reinvested by shareholders.
We have maintained our policy of being willing to buy back the Company’s shares in the market when necessary in order to maintain liquidity, at a 5% discount to NAV. During the year, a total of 11,694,979 shares were repurchased for cancellation, equivalent to approximately 5.3% of the opening share capital.
Responsible investment
The Company continues to be mindful of its Environmental, Social and Governance (ESG) responsibilities and we have outlined our evolving approach in the annual report.
Board changes
As previously announced, following the 2025 Annual General Meeting, Cecilia McAnulty retired from the Board, having served as a director since 2014. I succeeded David Gravells as Chair of the Board and David continued to serve as a non-executive Director.
Following the forthcoming Annual General Meeting on 29 July 2026, and subject to his re-election, David will assume the role of Senior Independent Director. In this capacity, he will lead the Board’s plans to recruit an additional non-executive Director within the next 12 months as part of its ongoing succession planning.
Biographical details of all of the directors can be found in the annual report.
VCT legislation and qualifying status
Announced at the Autumn Budget 2025 and legislated through the Finance Act 2026, the Government made a number of changes including increasing the amount that VCT-qualifying companies can raise. Annual investment limits were doubled to £10 million and £20 million for knowledge-intensive companies. Lifetime limits rose to £24 million and £40 million for knowledge-intensive companies in support of widening the pool of scaling businesses the scheme can support. We welcome this move which will allow the Company to deploy capital at scale and more flexibly.
Also with effect from 6 April 2026, income tax relief on new VCT subscriptions was reduced from 30% to 20%. This is a significant reduction in relief and may result in less money being raised from investors in the future. The Board believes this measure runs counter to the Government’s stated commitment to supporting early-stage UK businesses. In anticipation of a more challenging fundraising environment for VCTs, and to ensure the Company retains the capacity to meet demand for early-stage investment capital, we extended our 2025/26 offer to raise an additional £10 million, which was fully subscribed.
We have continued to meet the stringent and complex qualifying conditions laid down by HM Revenue & Customs for maintaining our approval as a VCT. The Manager monitors the position closely and reports regularly to the Board. Philip Hare & Associates LLP has continued to act as independent adviser to the Company on VCT taxation matters.
Investor communications
The Board is conscious of its responsibility to communicate transparently and regularly with shareholders. Investor information is contained on the Company website and communications are sent to shareholders who have consented to receive such information. We look forward to welcoming shareholders to our Annual General Meeting and to our forthcoming investor seminar to be held on 29 October 2026 in London. Our last investor seminar was held in October 2025 and it was a pleasure meeting so many shareholders. Details of how to register for the October seminar can be found on the Company’s website at www.mercia.co.uk/vcts/n2vct/.
Annual General Meeting
The Company’s Annual General Meeting (AGM) will take place on 29 July 2026. The AGM provides an excellent opportunity for shareholders, directors and the Manager to meet in person, exchange views and comment. We intend to hold the 2026 AGM in person at Fora, 210 Euston Road, London, NW1 2DA. We also intend to offer remote access for shareholders through an online webinar facility for those who would prefer not to travel. Please note that shareholders attending remotely must register their votes ahead of time, as it will not be possible to count votes from online participants at the AGM.
Outlook
Despite the ongoing geopolitical and economic uncertainties, our commitment to providing patient capital to support innovative early-stage businesses across the UK remains unchanged. We continue to be confident in the resilience and long-term growth potential of the portfolio and its ability to deliver sustainable value for shareholders.
We thank our investors for their continuing support.
Thomas Chambers
Chair
11 June 2026
Investment Manager’s review
Overview of the year
The UK venture capital market continued its recovery during the year to 31 March 2026, building on the stabilisation that followed the sharp correction from the 2021–22 funding peak. Total VC investment in UK businesses rebounded strongly in 2025, with year-on-year growth driven by renewed investor confidence, a more settled interest rate environment and sustained deal flow across the early and growth stages.
For the early-stage market in which the Company operates, conditions remained constructive. Seed-stage activity was robust, regional ecosystems outside London continued to develop, and the pipeline of new company formation remained healthy. Exit routes were more active than in the preceding two years, with trade sales and secondary transactions providing liquidity for investors. At the same time, the market for later-stage and scale-up capital remained tighter, reinforcing the structural importance of patient, early-stage investors such as VCTs in supporting UK businesses through their formative growth phases.
Against this backdrop, the Company remained an active investor throughout the year. Four new venture capital investments were completed and follow-on funding was provided to 18 existing portfolio companies, reflecting the increasing proportion of earlier-stage holdings that require multiple rounds of growth capital to realise their potential. At 31 March 2026 the portfolio comprised 56 companies with an aggregate value of £98.4 million. The diversity of the portfolio positions the Company well to benefit from the recovery in early-stage deal flow and exit activity described above. The sections that follow set out the portfolio’s performance in more detail.
Table 2: Venture capital portfolio cash flow
| Year ended 31 March | New investment £000 | Disposal proceeds £000 | Net cash inflow/ (outflow) £000 |
| 2022 | 14,681 | 26,153 | 11,472 |
| 2023 | 15,963 | 12,071 | (3,892) |
| 2024 | 14,817 | 12,667 | (2,150) |
| 2025 | 14,605 | 9,158 | (5,447) |
| 2026 | 15,887 | 7,191 | (8,696) |
| Total | 75,953 | 67,240 | (8,713) |
Investments in the year
During the year ended 31 March 2026, four new venture capital investments were completed at a cost of £7.0 million and additional funding totalling £8.9 million was invested in 18 existing portfolio companies, by way of follow-on funding rounds. The proportion of follow-on investments is increasing in line with the evolution of the portfolio to earlier stage companies, which often require multiple rounds of growth finance to realise their potential. 6% by value of the portfolio is represented by management buy-out and growth capital investments acquired prior to November 2015 when the VCT rules were amended to promote earlier stage investment.
A summary of the venture capital holdings at 31 March 2026 is given in the portfolio summary, with information on the 15 largest investments in the annual report.
The new investments completed during the year are set out below.
£2.4 million
Thanks Ben
Employee benefits orchestration platform
thanksben.com
£1.0 million
Snow Line (t/a Go Swag)
Sustainable, premium branded corporate merchandise platform
goswag.com
£2.2 million
Astral Neutronics (t/a Astral Systems)
Developer of compact fusion reactors for medical and industrial use
astralsystems.com
£1.4 million
Space and Time (t/a Tessaract)
Cloud based workflow and practice management platform for professional services
tessaract.io
Follow-on investments
During the year, the Company also made £8.9 million follow-on investments into 18 existing portfolio companies.
Realisations in the year
The most significant investment disposals in the year (original cost or sales proceeds in excess of £1 million) are set out below. Further details of investment disposals are set out in the annual report.
The Beauty Tech Group is an online marketplace for home-use beauty products. The Company originally invested in CurrentBody in August 2018 and, following its sale, part of the proceeds were rolled into Project Glow in November 2021. Project Glow successfully listed on the London Stock Exchange as The Beauty Tech Group plc in October 2025.
As part of the process the Company sold 30% of its holding for proceeds of £2.3 million, generating a lifetime return of 5.8x. The Company has also sold £0.2 million of preference shares in Project Glow earlier in the financial year.
Thanksbox (t/a Mo) is a platform for employee engagement through recognition and connection. The Company originally invested in 2018 and exited in October 2025 for proceeds of £0.8 million, an uplift on its 31 March 2025 holding value of £0.4 million and a lifetime return of 0.5x.
Northrow was an identity verification system provider.
The Company made its initial investment in 2017.
Northrow was fully impaired in the previous financial year, and entered into administration during the year.
Adludio was an online campaign marketing service.
The Company made its initial investment in 2021.
Adludio was fully impaired in the previous financial year, and is now in liquidation.
Newcells Biotech was a pharmaceutical product and services provider.
The Company made its initial investment in 2018.
Newcells Biotech is now in administration.
Table 3: Significant investment realisations
| Company | Date of original investment | Original cost £000 | Sales proceeds £000 | Realised surplus/ (deficit) £000 |
| The Beauty Tech Group plc | 2018 | 618 | 2,535 | 1,917 |
| Thanksbox (t/a Mo) | 2018 | 1,524 | 820 | (704) |
| Northrow | 2017 | 1,406 | – | (1,406) |
| Adludio | 2021 | 2,667 | – | (2,667) |
| Newcells Biotech | 2018 | 3,176 | – | (3,176) |
Portfolio
The venture capital investment portfolio comprises 56 portfolio companies and was valued at £98.4 million as at 31 March 2026. Approximately half of the portfolio (51%) was invested in companies operating in the areas of Software & AI, followed by Consumer at 22% and Health & Life Sciences sectors at 19%. A breakdown of the portfolio by valuation category is shown in the table below and further details of the composition of the portfolio are shown in the annual report.
Table 4: Venture capital investment valuation by category
| Number of investments | Valuation £000 | % of portfolio by value | |
| Unquoted investments at the Directors’ valuation | |||
| Revenue/earnings multiple | 34 | 67,388 | 68% |
| Price of a recent investment subsequently calibrated as appropriate | 19 | 26,119 | 27% |
| Quoted investments at bid price | |||
| Quoted on the London Stock Exchange and AIM | 3 | 4,940 | 5% |
| Total | 56 | 98,447 | 100% |
Liquid assets (cash and cash equivalents)
The Company had cash and cash equivalents of £39.3 million at 31 March 2026. Liquid cash balances are conservatively managed to take minimal risk, and are held with the Company’s banking partners and in a money market liquidity fund managed by BlackRock.
Outlook
The macroeconomic backdrop as we enter the new financial year remains mixed. UK GDP growth is forecast to be low once more for 2026, constrained by subdued business confidence and ongoing global uncertainty, including geopolitical tensions and the ongoing impact of US trade tariff policy on international supply chains. Once the Bank of England is able to reduce interest rates from their current level, financing conditions should ease for businesses and gradually support private market valuations. While the late-March volatility in quoted markets, driven in part by investor sentiment around AI and software company valuations as well as ongoing conflict in the Middle East, affected the carrying value of some holdings at our year end, a number of these have since recovered, and we do not regard this as indicative of a structural deterioration in the portfolio.
For the early-stage technology and growth businesses in which the Company invests, the underlying environment remains encouraging. Demand for innovative, capital-efficient businesses continues to grow across the sectors in which the portfolio is concentrated, and the UK’s position as Europe’s leading hub for AI, deep tech and health tech investment provides a supportive backdrop for exit activity over the medium term. The Company’s cash and cash equivalents position of £39.3 million at 31 March 2026 provides significant capacity to support existing portfolio companies through follow-on rounds and to selectively deploy capital into new opportunities as they arise.
We remain confident in the long-term prospects of the portfolio. We will continue to apply a disciplined approach to new investment, focusing on high-quality companies with credible paths to profitability, while working actively with existing holdings to build value ahead of future realisations. The Company is well-positioned to meet its objective of providing shareholders with attractive long-term tax-free returns, and we look forward to reporting on further progress in the year ahead.
Mercia Fund Management Limited
Investment Manager
11 June 2026
Investment portfolio
31 March 2026
Fifteen largest venture capital investments | Cost £000 | Valuation £000 | % of net assets by value | Like for like valuation increase/ (decrease) over year *** £000 | |
| 1 | Pure Pet Food | 1,516 | 6,792 | 4.9% | 1,178 |
| 2 | The Beauty Tech Group** | 925 | 4,926 | 3.6% | 387 |
| 3 | Risk Ledger | 2,445 | 3,922 | 2.8% | 943 |
| 4 | Pimberly | 1,876 | 3,159 | 2.3% | (48) |
| 5 | Semble | 2,072 | 3,101 | 2.3% | 1,029 |
| 6 | Tutora (t/a Tutorful) | 3,023 | 3,023 | 2.2% | – |
| 7 | Biological Preparations Group | 2,166 | 2,942 | 2.1% | 550 |
| 8 | Broker Insights | 2,808 | 2,808 | 2.0% | (73) |
| 9 | Turbine Simulated Cell Technologies | 2,488 | 2,723 | 2.0% | 14 |
| 10 | Rockar | 1,766 | 2,509 | 1.8% | (840) |
| 11 | Forensic Analytics | 2,475 | 2,475 | 1.8% | (0) |
| 12 | VoxPopMe | 1,781 | 2,447 | 1.8% | 666 |
| 13 | Thanks Ben | 2,392 | 2,392 | 1.7% | – |
| 14 | Ridge Pharma | 1,387 | 2,384 | 1.7% | 42 |
| 15 | Send Technology Solutions | 2,046 | 2,291 | 1.7% | 173 |
| Other venture capital investments | |||||
| 16 | Administrate | 3,117 | 2,279 | 1.7% | 124 |
| 17 | Astral Neutronics (t/a Astral Systems) | 2,217 | 2,217 | 1.6% | – |
| 18 | LMC Software | 1,842 | 2,174 | 1.6% | 138 |
| 19 | Napo | 2,052 | 2,052 | 1.5% | – |
| 20 | Centuro Global | 2,016 | 2,016 | 1.5% | – |
| 21 | Social Value Portal | 2,016 | 2,016 | 1.5% | – |
| 22 | Netacea | 2,486 | 1,990 | 1.4% | (497) |
| 23 | Ski Zoom (t/a Heidi Ski) | 1,960 | 1,978 | 1.4% | 18 |
| 24 | Warwick Acoustics | 1,970 | 1,970 | 1.4% | – |
| 25 | Clarilis | 1,828 | 1,828 | 1.3% | – |
| 26 | Naitive Technologies | 2,031 | 1,812 | 1.3% | (315) |
| 27 | Enate | 1,394 | 1,700 | 1.2% | (300) |
| 28 | Locate Bio | 1,597 | 1,597 | 1.2% | – |
| 29 | Optellum | 1,573 | 1,573 | 1.1% | (0) |
| 30 | Wonderush (t/a HowNow) | 1,513 | 1,513 | 1.1% | – |
| 31 | iOpt | 1,509 | 1,509 | 1.1% | (90) |
| 32 | Camena Bioscience | 2,307 | 1,506 | 1.1% | (801) |
| 33 | Duke & Dexter | 1,132 | 1,440 | 1.0% | 268 |
| 34 | Tozaro | 1,431 | 1,435 | 1.0% | 4 |
| 35 | Space and Time (t/a Tessaract) | 1,401 | 1,401 | 1.0% | – |
| 36 | Volumatic Holdings | 216 | 1,377 | 1.0% | – |
| 37 | Promethean Particles | 1,333 | 1,333 | 1.0% | – |
| 38 | Axis Spine Technologies | 1,841 | 1,323 | 1.0% | (521) |
| 39 | Scalpel | 1,287 | 1,289 | 0.9% | 2 |
| 40 | Moonshot | 1,235 | 1,276 | 0.9% | (403) |
| 41 | Rego Technologies (t/a Upp) (formerly Volo) | 2,349 | 1,072 | 0.8% | 39 |
| 42 | Snow Line (t/a Go Swag) | 1,003 | 1,003 | 0.7% | – |
| 43 | Buoyant Upholstery | 153 | 991 | 0.7% | 228 |
| 44 | Culture AI | 1,376 | 890 | 0.6% | (486) |
| 45 | Oddbox | 1,002 | 859 | 0.6% | 65 |
| 46 | Wobble Genomics | 1,034 | 718 | 0.5% | (315) |
| 47 | Seahawk Bidco | 479 | 716 | 0.5% | (191) |
| 48 | Synthesized | 675 | 682 | 0.5% | (221) |
| 49 | Quotevine | 1,187 | 416 | 0.4% | (33) |
| 50 | Atlas Cloud | 648 | 308 | 0.3% | (48) |
| 51 | Arnlea Holdings | 1,287 | 198 | 0.2% | (26) |
| 52 | Sen Corporation | 643 | 71 | 0.1% | (62) |
| 53 | Velocity Composites* | 84 | 13 | 0.0% | (11) |
| 54 | Customs Connect Group | 1,433 | 11 | 0.0% | (20) |
| 55 | CelLBxHealth (formerly Angle)* | 67 | 1 | 0.0% | (17) |
| 56 | Sorted | 164 | – | 0.0% | (216) |
| Total venture capital investments | 88,054 | 98,447 | 71.4% | ||
| Net current assets | 39,350 | 28.6% | |||
| Net assets | 137,797 | 100.0% | |||
* Quoted on AIM
** Listed on the London Stock Exchange
*** This change in ‘like for like’ valuations is a comparison of the 31 March 2026 valuations with the 31 March 2025 valuations (or where a new investment has been made in the year, the investment amount), having adjusted for any partial disposals, loan stock repayments or new and follow-on investments in the year.
Income statement
for the year ended 31 March 2026
| Year ended 31 March 2026 | Year ended 31 March 2025 | |||||||
| Revenue £000 | Capital £000 | Total £000 | Revenue £000 | Capital £000 | Total £000 | |||
| (Loss)/gain on disposal of investments | – | (531) | (531) | – | 3,148 | 3,148 | ||
| Movements in fair value of investments | – | (61) | (61) | – | 5,338 | 5,338 | ||
| (592) | (592) | – | 8,486 | 8,486 | ||||
| Dividend and interest income | 2,153 | – | 2,153 | 3,144 | – | 3,144 | ||
| Investment management fee | (632) | (1,895) | (2,527) | (567) | (2,022) | (2,589) | ||
| Other expenses | (570) | – | (570) | (675) | – | (675) | ||
| Return before tax | 951 | (2,487) | (1,536) | 1,902 | 6,464 | 8,366 | ||
| Tax on return | (216) | 216 | – | (852) | 852 | – | ||
| Return after tax | 735 | (2,271) | (1,536) | 1,050 | 7,316 | 8,366 | ||
| Return per share | 0.3p | (0.9)p | (0.6)p | 0.5p | 3.3p | 3.8p | ||
Balance sheet
as at 31 March 2026
| 31 March 2026 £000 | 31 March 2025 £000 | ||
| Fixed assets | |||
| Investments | 98,447 | 87,889 | |
| Current assets | |||
| Debtors | 241 | 2,670 | |
| Cash and cash equivalents | 39,316 | 38,062 | |
| 39,557 | 40,732 | ||
| Creditors (amounts falling due within one year) | (207) | (543) | |
| Net current assets | 39,350 | 40,189 | |
| Net assets | 137,797 | 128,078 | |
| Capital and reserves | |||
| Called-up equity share capital | 12,608 | 10,993 | |
| Share premium | 85,546 | 62,633 | |
| Capital redemption reserve | 2,053 | 1,468 | |
| Capital reserve | 26,574 | 47,177 | |
| Revaluation reserve | 10,393 | 4,939 | |
| Revenue reserve | 623 | 868 | |
| Total equity shareholders’ funds | 137,797 | 128,078 | |
| Net asset value per share | 54.6p | 58.3p |
Statement of changes in equity
for the year ended 31 March 2026
| Non-distributable reserves | Distributable reserves | |||||||||
| Called-up share capital £000 | Share premium £000 | Capital redemption reserve £000 | Revaluation reserve* £000 | Capital reserve £000 | Revenue reserve £000 | Total £000 | ||||
| At 31 March 2025 | 10,993 | 62,633 | 1,468 | 4,939 | 47,177 | 868 | 128,078 | |||
| Return after tax | – | – | – | 5,454 | (7,725) | 735 | (1,536) | |||
| Dividends paid | – | – | – | – | (6,480) | (980) | (7,460) | |||
| Net proceeds of share issues | 2,200 | 22,913 | – | – | – | – | 25,113 | |||
| Shares purchased for cancellation | (585) | – | 585 | – | (6,398) | – | (6,398) | |||
| At 31 March 2026 | 12,608 | 85,546 | 2,053 | 10,393 | 26,574 | 623 | 137,797 | |||
| Non-distributable reserves | Distributable reserves | |||||||||
| Called-up share capital £000 | Share premium £000 | Capital redemption reserve £000 | Revaluation reserve* £000 | Capital reserve £000 | Revenue reserve £000 | Total £000 | ||||
| At 31 March 2024 | 10,434 | 52,737 | 1,079 | (853) | 54,973 | 1,156 | 119,526 | |||
| Return after tax | – | – | – | 5,792 | 1,524 | 1,050 | 8,366 | |||
| Dividends paid | – | – | – | – | (5,109) | (1,338) | (6,447) | |||
| Net proceeds of share issues | 948 | 9,896 | – | – | – | – | 10,844 | |||
| Shares purchased for cancellation | (389) | – | 389 | – | (4,211) | – | (4,211) | |||
| At 31 March 2025 | 10,993 | 62,633 | 1,468 | 4,939 | 47,177 | 868 | 128,078 | |||
* The revaluation reserve is generally non-distributable other than that part of the reserve relating to gains or losses on readily realisable quoted investments, which is distributable, see the annual report for more details.
Statement of cash flows
for the year ended 31 March 2026
| Year ended 31 March 2026 £000 | Year ended 31 March 2025 £000 | ||
| Cash flows from operating activities | |||
| Return before tax | (1,536) | 8,366 | |
| Adjustments for: | |||
| Loss/(gain) on disposal of investments | 531 | (3,148) | |
| Movements in fair value of investments | 61 | (5,338) | |
| (Increase)/decrease in debtors | (25) | 38 | |
| (Decrease)/increase in creditors | (336) | 380 | |
| Net cash (outflow)/inflow from operating activities | (1,305) | 298 | |
| Cash flows from investing activities | |||
| Purchase of investments | (15,887) | (14,605) | |
| Proceeds on disposal of investments | 7,191 | 9,184 | |
| Net cash outflow from investing activities | (8,696) | (5,421) | |
| Cash flows from financing activities | |||
| Issue of ordinary shares | 25,963 | 11,309 | |
| Share issue expenses | (850) | (465) | |
| Purchase of ordinary shares for cancellation | (6,398) | (4,211) | |
| Equity dividends paid | (7,460) | (6,447) | |
| Net cash inflow from financing activities | 11,255 | 186 | |
| Increase/(decrease) in cash and cash equivalents | 1,254 | (4,937) | |
| Cash and cash equivalents at beginning of year | 38,062 | 42,999 | |
| Cash and cash equivalents at end of year | 39,316 | 38,062 |
Risk management
The Audit & Risk Committee carries out a regular and robust assessment of the risk environment in which the Company operates and seeks to identify new risks as they emerge. During the year, the Audit & Risk Committee reviewed the Company’s emerging risk framework and determined that “AI” and advanced technology risk has increased in significance and potential impact and should therefore now be classified as a principal risk. In addition stock market risk was included as a principal risk in the Company’s interim results following increased exposure to listed assets. The principal and emerging risks and uncertainties identified by the Audit & Risk Committee and accepted by the Board as potentially affecting the Company’s business model and future performance, and the corresponding steps taken with a view to their mitigation, are as follows:
| Risk | Mitigation | Change in risk level |
| Artificial intelligence (“AI”) and advanced technology risk: rapid developments in artificial intelligence and related technologies may present risks (and opportunities) to both the Company and the companies in which it invests. Adoption or use of AI technologies may expose businesses to execution, regulatory, ethical and reputational risks. Conversely, portfolio companies that do not successfully develop or adopt relevant AI‑enabled capabilities may face competitive disadvantages. The pace of AI development and the evolving regulatory environment create uncertainty which may adversely affect the operations, valuations or growth prospects of certain investee companies. Any of these factors could adversely affect the performance of the Company and investor returns. | The Manager considers technology strategy, data governance, cyber security and regulatory compliance as part of its due diligence and ongoing monitoring of portfolio companies, proportionate to the size, stage and nature of each business. The Board oversees the Manager’s operational control environment, including arrangements with third‑party service providers, to ensure appropriate systems, controls and policies are in place in relation to information security, data protection and regulatory compliance. The Board will continue to monitor developments in AI‑related regulation and market practice to assess whether additional disclosures or controls are appropriate as the landscape evolves. | New |
| Availability of qualifying investments: there can be no guarantee that suitable investment opportunities will be identified in order to meet the Company’s objectives, which could have an adverse effect on investor returns. Additionally, the Company’s ability to obtain maximum value from its investments may be limited by the requirements of the relevant VCT Rules in order to maintain the VCT status of the Company. | The Manager has a dedicated investment team that identifies and transacts in qualifying investments. The Directors regularly meet with the Manager to maintain awareness of the pipeline, and factor this into the Company’s fund raising plans. | No change |
| Economic and geopolitical risk: events such as economic recession or general fluctuation in stock markets, exchange rates and interest rates, notwithstanding recent lower inflation and falling interest rates, may affect the valuation of investee companies and their ability to access adequate financial resources, as well as affecting the Company’s own share price and discount to net asset value. In addition, heightened geopolitical tensions, including developments involving Iran and wider hostilities in the Middle East, alongside US trade policy and the ongoing conflict in Ukraine, may have further economic consequences as a result of increased market volatility and the restricted access to certain commodities and energy supplies. Such conditions may adversely affect the performance of companies in which the Company has invested (or may invest), which in turn may adversely affect the performance of the Company, and may have an impact on the number or quality of investment opportunities available to the Company and the ability of the Manager to realise the Company’s investments. Any of these factors could have an adverse effect on investor returns. | The Company invests in a diversified portfolio of investments spanning various industry sectors and which are at different stages of growth. The Company maintains sufficient cash reserves to be able to provide additional funding to investee companies where it is appropriate and in the interests of the Company to do so. The Manager’s team is structured such that appropriate monitoring and oversight is undertaken by an experienced investment executive. As part of this oversight, the investment executive will guide and support the board of each unquoted investee company. At all times, and particularly during periods of heightened economic uncertainty, the investment team of the Manager share best practice from across the portfolio with the investee management teams in order to help with addressing economic challenges. The Directors consider economic and geopolitical risk to have increased in the year. | Increased |
| Financial risk: most of the Company’s investments involve a medium to long-term commitment and many are illiquid. | The Directors consider that it is inappropriate to finance the Company’s activities through borrowing except on an occasional short-term basis. Accordingly they seek to maintain a proportion of the Company’s assets in cash or cash equivalents in order to be in a position to pursue new unquoted investment opportunities and to make follow-on investments in existing portfolio companies. The Company has very little direct exposure to foreign currency risk and does not enter into derivative transactions. | No change |
| Investment and liquidity risk: the Company invests in early stage companies which may be pre-revenue at the point of investment. Portfolio companies may also require significant funds, through multiple funding rounds to develop their technology or the products being developed may be subject to regulatory approvals before they can be launched into the market. This involves a higher degree of risk and company failure compared to investment in larger companies with established business models. Early stage companies generally have limited product lines, markets and financial resources and may be more dependent on key individuals. The securities of companies in which the Company invests are typically unlisted, making them particularly illiquid and may represent minority stakes, which may cause difficulties in valuing and disposing of the securities. The Company may invest in businesses whose shares are quoted on AIM however this may not mean that they can be readily traded and the spread between the buying and selling prices of such shares may be wide. | The Directors aim to limit the investment and liquidity risk through regular monitoring of the investment portfolio and oversight of the Manager, who is responsible for advising the Board in accordance with the Company’s investment objective. The investment and liquidity risks are mitigated through the careful selection, close monitoring and timely realisation of investments, by carrying out rigorous due diligence procedures and maintaining a wide spread of holdings in terms of financing stage and industry sector within the rules of the VCT scheme. The Board reviews the investment portfolio and liquidity with the Manager on a regular basis. | No change |
| Legislative and regulatory risk: in order to maintain its approval as a VCT, the Company is required to comply with current VCT legislation in the UK. Changes to UK legislation in the future could have an adverse effect on the Company’s ability to achieve satisfactory investment returns whilst retaining its VCT approval. Changes to investor tax reliefs, making investments in VCTs relatively less attractive, may result in investors favouring other investment classes, resulting in a lack of demand for the Company’s shares and impact the Company’s ability to fund raise. | The Board and the Manager monitor political developments and where appropriate seek to make representations either directly or through relevant trade bodies. The Directors consider these risks to have increased due to a reduction in income tax relief available to investors in the future. | Increased |
| Operational risk: the Company does not have any employees and the Board relies on a number of third-party providers, including the Manager, registrar and custodian, sponsor, receiving agent, lawyers and tax advisers, to provide it with the necessary services to operate. Such operations delegated to the Company’s key service providers may not be performed in a timely or accurate manner, resulting in reputational, regulatory, or financial damage. The risk of cyber-attack or failure of the systems and controls at any of the Company’s third- party providers may lead to an inability to service shareholder needs adequately, to provide accurate reporting and accounting and to ensure adherence to all VCT legislation rules. | The Board has appointed an Audit and Risk Committee, who monitor the effectiveness of the system of internal controls, both financial and non-financial, operated by the Company and the Manager. These controls are designed to ensure that the Company’s assets are safeguarded and that proper accounting records are maintained. Third-party suppliers are required to have in place their own risk and controls framework, business continuity plans and the necessary expertise and resources in place to ensure that a high quality service can be maintained even under stressed scenarios. | No change |
| Performance of the Manager: the successful implementation of the Company’s investment policy is dependent on the expertise of the Manager and its ability to attract and retain suitable staff. The Company’s ability to achieve its investment objectives is largely dependent on the performance of the Manager in the acquisition and disposal of assets and the management of such assets. The Board has broad discretion to monitor the performance of the Manager and the power to appoint a replacement, but the Manager’s performance or that of any replacement cannot be guaranteed. | The Board reviews the performance of the Manager formally at Management Engagement Committee meetings and during the year at board meetings. There is ongoing dialogue outside of formal meetings. Performance is closely monitored against other VCT funds and review of other market intelligence. | No change |
| Stock market risk: an increased proportion of the Company’s investments are quoted on the London Stock Exchange and AIM and will be subject to market fluctuations upwards and downwards. External factors such as terrorist activity, political activity or global health crises, can negatively impact stock markets worldwide. In times of adverse sentiment there may be very little, if any, market demand for shares in smaller companies quoted on the London Stock Exchange and AIM. | The Company’s small number of holdings of quoted investments are actively managed by the Manager, and the Board keeps the portfolio and the actions taken under ongoing review. | No change |
| VCT qualifying status risk: while it is the intention of the Directors that the Company will be managed so as to continue to qualify as a VCT, there can be no guarantee that this status will be maintained. A failure to continue meeting the qualifying requirements could result in the loss of VCT tax relief, the Company losing its exemption from corporation tax on capital gains, to shareholders being liable to pay income tax on dividends received from the Company and, in certain circumstances, to shareholders being required to repay the initial income tax relief on their investment. | The Manager keeps the Company’s VCT qualifying status under continual review and its reports are reviewed by the Board on a quarterly basis. The Board has also retained Philip Hare & Associates LLP to undertake an independent VCT status monitoring role. | No change |
The Audit & Risk Committee continually assesses and monitors emerging risks that could impact the Company’s operations and strategic objectives. As part of the risk assessment process, the Audit & Risk Committee evaluates a wide range of potential threats and uncertainties that may arise from evolving market dynamics, regulatory changes, technological advancements, geopolitical developments, and other external factors. By remaining aware of emerging risks, the Audit & Risk Committee by recommendations to the Board ensures that the Company is better equipped to anticipate challenges and adapt swiftly to changing circumstances.
The Strategic report was approved by the Board of Directors and is signed on its behalf by
Mercia Company Secretarial Services Limited
Company Secretary
11 June 2026
Other matters
The above summary of results for the year ended 31 March 2026 does not constitute statutory financial statements within the meaning of Section 435 of the Companies Act 2006 and has not been delivered to the Registrar of Companies. Statutory financial statements will be filed with the Registrar of Companies in due course; the independent auditor’s report on those financial statements under Section 495 of the Companies Act 2006 is unqualified, does not include any reference to matters to which the auditor drew attention by way of emphasis without qualifying the report and does not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
The calculation of the return per share is based on the loss after tax for the year of £1,536,000 (2025: profit after tax £8,366,000) and on 246,490,375 (2025: 223,219,247) shares, being the weighted average number of shares in issue during the year.
The Directors have proposed a final dividend of 1.3 pence per share for the year ended 31 March 2026. Subject to approval of the final dividend at the Annual General Meeting, the final dividend will be paid on 4 September 2026 to shareholders on the register on 7 August 2026.
The full annual report including financial statements for the year ended 31 March 2026 is expected to be made available to shareholders on or around 26 June 2026 and will be available to the public at the registered office of the company at Forward House, 17 High Street, Henley-in-Arden B95 5AA and on the Company’s website.
The contents of the Mercia Asset Management PLC website and the contents of any website accessible from hyperlinks on the Mercia Asset Management PLC website (or any other website) are not incorporated into, nor form part of, this announcement.
Enquiries:
Sarah Williams / James Sly, Mercia Fund Management Limited - 0330 223 1430
Website: www.mercia.co.uk/vcts
