Northern 2 VCT's £9.7M Raise Signals Investor Hunger for Growth

LONDON, UK – November 25, 2025 – Northern 2 VCT PLC, a venture capital trust managed by Mercia Asset Management, has successfully completed a fully subscribed equity issue, raising £9.67 million in net proceeds. The strong investor demand underscores the continued appeal of VCTs as a vehicle for tax-efficient growth and a vital source of capital for the UK's innovative small businesses.

The company announced today that it allotted 16,751,648 new ordinary shares as part of its offer for the 2025/26 tax year. This successful fundraising effort not only expands the VCT's investment capacity but also serves as a strong indicator of market confidence in both the trust's strategy and the wider venture capital landscape.

The Mechanics of a Successful Raise

According to the official announcement, the new shares were issued at prices ranging from 58.94 pence to 62.32 pence per share. The variation in price reflects a pricing formula outlined in the prospectus that accounts for different levels of promoter's fees and adviser charges associated with each application.

Following the allotment, Northern 2 VCT's total issued share capital has increased to 256,458,997 ordinary shares. In line with regulatory requirements, the company confirmed this figure also represents the total number of voting rights, a crucial piece of information for shareholders to determine if they need to notify their holdings under the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules. The company holds no shares in treasury.

An application will be made for the new shares, which will rank pari passu (on equal footing) with existing ordinary shares, to be admitted to the Official List of the FCA and to commence trading on the London Stock Exchange's main market for listed securities. Dealings are expected to begin on or around December 2, 2025. This move will provide liquidity for the new shareholders, although VCTs are generally considered long-term, illiquid investments. The trust maintains a policy of buying back its own shares at a 5% discount to Net Asset Value (NAV) to support market liquidity, though this is not guaranteed.

Tapping into Buoyant VCT Market Demand

This successful raise by Northern 2 VCT is not an isolated event but rather a reflection of a broader trend. The VCT market has demonstrated remarkable resilience and growth, with the 2024/25 tax year seeing fundraising totals reach £895 million—the third-highest figure on record. This sustained investor interest is fueled by a confluence of factors that make VCTs a compelling proposition in the current economic climate.

The primary driver remains the significant tax incentives. Investors can claim up to 30% upfront income tax relief on subscriptions up to £200,000 per tax year, provided the shares are held for a minimum of five years. Furthermore, any dividends paid are tax-free, and there is no capital gains tax on the disposal of the shares. For higher-rate taxpayers facing restrictions on other tax shelters like pensions, these benefits are particularly attractive.

Adding to investor confidence is the UK government's long-term commitment to the VCT scheme, which has been extended to April 2035. This provides a stable, long-term framework, assuring investors that the structure supporting their investments will remain in place and ensuring a continued flow of crucial capital into the UK's most promising start-ups and scale-ups.

Fueling the Next Wave of UK Innovation

With nearly £10 million in fresh capital, Northern 2 VCT is well-positioned to expand its portfolio and continue its mission of backing high-growth UK businesses. The trust's investment strategy focuses on a diversified portfolio of unquoted UK manufacturing, service, and technology companies that exhibit strong management teams and clear growth potential. The portfolio is diversified across sectors including software, consumer goods, healthcare, and industrial manufacturing.

Recent portfolio activity demonstrates this strategy in action. In the year ending March 31, 2025, the trust invested £14.6 million into 17 businesses, including six new ventures. Notable new additions highlighted in its September 2024 half-yearly report include a £1.5 million investment in Heidi, a platform for flexible winter mountain breaks; £1.4 million into Culture AI, a cybersecurity training firm; and £1.3 million into Promethean Particles, a company developing innovative carbon capture technology.

This approach not only nurtures innovation but also has the potential to deliver significant returns. The exit of Gentronix, a genetic toxicology services provider, generated net proceeds of £5.2 million, representing an impressive 4.5 times return on the original investment cost. Strong trading at other portfolio companies, such as Pure Pet Food and The Beauty Tech Group, also led to significant valuation uplifts during the last fiscal year. This new capital injection will allow Mercia's management team to provide crucial follow-on funding to existing portfolio winners and seize new opportunities in the market.

Performance, Risk, and Investor Outlook

Managed by the experienced team at Mercia Asset Management, Northern 2 VCT has a track record of delivering steady returns. For the year ended March 31, 2025, the trust reported a total return of 3.8 pence per share, equivalent to 6.6% of the opening NAV. Its dividend policy aims for a yield of at least 5% of the opening NAV, and it delivered on this with a total dividend of 3.0 pence per share for the year. Since its launch, the VCT has delivered a cumulative return of 200.3 pence per share.

However, prospective and existing investors must remain mindful of the inherent risks. VCTs invest in small, unlisted companies that carry a higher risk of failure than their larger, publicly-traded counterparts. The value of investments can fall as well as rise, and investors may not get back their initial capital. The recent write-down of Adludio, for instance, serves as a reminder of this volatility.

Furthermore, the tax benefits are conditional on the VCT maintaining its qualifying status with HMRC and the investor holding the shares for at least five years. Early withdrawal or a change in the trust's status could result in the loss of these valuable reliefs. As such, VCTs are best suited for experienced investors who understand the risks and are looking to allocate a smaller portion of a well-diversified portfolio to long-term, high-growth opportunities. With its coffers now replenished, Northern 2 VCT is set to continue its role as a key player in this dynamic segment of the investment market.