Baronsmead Second VCT Reports 1.2% NAV Rise, 7.3% Yield, and Budget Impact

Baronsmead Second VCT: steady NAV growth, high yield, and a shifting tax landscape

Baronsmead Second Venture Trust (a VCT – a tax-efficient fund that backs UK growth companies) has posted a modest but welcome year: Net Asset Value (NAV) per share rose 1.2% to 55.81p before dividends, and the dividend tally for the year stayed on target at 4.00p. NAV is simply the value of the portfolio per share.

The headline since launch is still eye-catching: a NAV total return of 342.3p for every 100.0p invested at the January 2001 launch. But the mix underneath matters, and this year the private (unquoted) holdings did the heavy lifting while the AIM portfolio lagged.

Key metric	Figure	Context
NAV per share (30 Sep 2025, before dividends)	55.81p	Up 0.65p (+1.2%) year-on-year
Total net assets	£221.2 million	Well diversified across quoted and unquoted
Dividends for the year	4.00p	7.3% yield based on opening NAV of 55.16p
Proposed final dividend	2.25p	Payable 24 March 2026 (subject to approval)
Net investments	£10.3 million	6 new and 14 follow-ons across 19 companies
Realisations	£13.0 million	Gain of £2.1 million
Unquoted portfolio return	+7.1%	Strong contributor to overall NAV
AIM portfolio return	-0.5%	FTSE AIM All-Share was +5.8%
Cash and liquidity OEICs	~£16 million	7-day yield c3.9% at year end

What drove NAV: private companies up, AIM disappointed

The story of the year was a split performance: unquoted holdings were up 7.1%, while AIM-listed investments were down 0.5% and lagged the FTSE AIM All-Share’s 5.8% rise. The main culprit was Cerillion, the largest quoted position at 9.6% of NAV, which de-rated after the CEO tendered shares at a significant discount, despite ongoing contract momentum in the business.

On the plus side, Netcall and The Property Franchise Group delivered notable gains. The unquoted winners included Panthera Biopartners, exited for £10.3 million at a 3.1x money multiple, and CitySwift, which signed meaningful new contracts including Transport for London.

Portfolio mix, diversification and where risk sits

Baronsmead’s hybrid approach remains intact: at 30 September 2025 there were 42 direct AIM holdings and 39 unquoted holdings. By value, assets were split roughly as AIM 38%, unquoted 25%, collective funds 29% and cash 8% (based on £221 million disclosed in the Manager’s review). Sectorally, direct investments lean heavily to technology (66%), with healthcare & education (19%), consumer (8%) and business services (7%) rounding it out.

The obvious watch-out is concentration: with Cerillion at 9.6% of NAV, single-stock moves can swing outcomes. That said, the VCT also holds three Gresham House UK equity funds (£58.9 million) and invested £5.0 million in Strategic Equity Capital plc during the summer, which adds breadth via additional underlying holdings.

Cash returns: 4.00p dividends delivered, exits and write-offs

Income investors will welcome the 4.00p total payout, equating to a 7.3% yield on the opening NAV of 55.16p. A final dividend of 2.25p is proposed for 24 March 2026. The Board also flagged it may phase out cheque payments, encouraging shareholders to provide bank details to the registrar.

On exits, Panthera Biopartners led the line with £10.3 million proceeds at 3.1x cost. Inspired plc was realised at £2.2 million (2.6x), while Science in Sport exited at 0.58x. Some earlier-stage names were written down to zero (including Cisiv, Silkfred, Azarc and Mable Therapy), and Totally plc was written off after its delisting. These outcomes underline the higher-volatility profile of early-stage growth capital, which the Board explicitly acknowledges.

New deals highlight focus on fintech, AI, digital health and quantum

Baronsmead deployed £10.3 million across 19 companies, with six new unquoted additions totalling £5.0 million:

• Nu Quantum – quantum networking hardware to interconnect quantum processors.
• Mobility Mojo – software to evaluate accessibility of buildings.
• Penfold – a pension platform for managing and consolidating pensions.
• Much Better Adventures – an adventure travel marketplace.
• Spinners Group – competitive socialising venues (darts, bowling, etc.).
• AskBosco (Modo25) – digital marketing agency and AI-powered software.

Follow-on capital of £5.2 million went into 13 existing holdings (10 unquoted, 3 quoted), consistent with backing winners as they scale.

Budget 2025: higher company limits, lower investor relief

The Autumn Budget brings two big changes for VCTs. Positively, higher company size and investment limits should help VCTs provide more follow-on funding as portfolio companies mature. Negatively, upfront income tax relief on new VCT shares will drop from 30% to 20% from 6 April 2026. The Board notes the proposed 2% rise in dividend tax increases the relative value of tax-free VCT dividends, which helps offset the change over time.

In short: portfolio companies may benefit from larger cheques; new investors after April 2026 will get lower upfront relief but retain tax-free dividends and capital gains. Both measures are to be legislated in Finance Bill 2025-26.

Buybacks, fundraising and discount management

The Board aims to hold the share price at around a 5% discount to NAV through buybacks, subject to liquidity and market conditions, and has introduced an optional online route for selling shares via Redmayne Bentley. The VCT raised £15 million during the year and launched a new joint offer for £15 million with a £10 million over-allotment facility; the first allotment on 20 November 2025 raised £4.1 million, with further allotments scheduled for January, February and April 2026.

Cash and liquidity OEICs stood at roughly £16 million at year end, with a c3.9% 7-day yield, providing dry powder for follow-ons and new opportunities.

My take: resilient progress, but AIM drag and concentration to watch

This was a “grind it out” year. The unquoted book did its job, exits were respectable, and the 7.3% dividend yield target was met. The negatives are clear too: AIM underperformed the benchmark, and the team wrote down several earlier-stage names to zero. The Cerillion position – at 9.6% of NAV – remains the key swing factor on the quoted side.

Why it matters: if M&A and liquidity continue to thaw, the portfolio holds a number of maturing assets that can support ongoing dividends. The Budget changes should make follow-on support easier, which is handy given the VCT’s growing cohort of scale-ups. For would-be investors, the timing of subscriptions relative to 6 April 2026 will be a practical consideration.

Key dates and practicalities

• Proposed final dividend: 2.25p, payable 24 March 2026 (subject to approval). Ex-div 26 February 2026. DRIP deadline 3 March 2026.
• AGM: 19 March 2026 at Saddlers’ Hall, EC2V 6BR, with a shareholder presentation at 11.30am and formal AGM at 2.00pm.
• Further information and documents: www.baronsmeadvcts.co.uk.

Bottom line

Baronsmead Second VCT delivered a small NAV gain, maintained its dividend discipline, and continued to recycle capital sensibly. The hybrid model is proving its worth, but the quoted sleeve’s recovery – and management of concentration – will be crucial for smoother returns. With more supportive follow-on rules incoming and an active buyback policy, the foundations look sound, even if the macro remains choppy.