British Smaller Companies VCT Reports 0.4% Return on Opening Net Assets Amid Market Volatility

British Smaller Companies VCT annual results 2026 – a positive return, but not a clean win

British Smaller Companies VCT has put out a steady rather than spectacular set of annual results for the year to 31 March 2026. The headline is a 0.4 per cent return on opening net assets, which means the portfolio and cash pile still moved forward despite a choppy backdrop for growth investing.

That said, this was not a year of outright momentum. Net asset value (NAV) – the value of the fund’s assets less liabilities, per share – fell to 76.90 pence from 80.55 pence, and total dividends paid dropped to 4.00 pence from 5.25 pence. So the business is still delivering returns, but shareholders are feeling the pressure from softer technology valuations.

Key number	2026	2025
NAV per share	76.90p	80.55p
Total Return per share	265.05p	264.70p
Total dividends paid	4.00p	5.25p
Realisations proceeds	£18.5 million	Not disclosed in highlights
New and follow-on investments	£22.7 million	£29.3 million
Funds raised in the year	£44.7 million	Not comparable from text supplied

Why British Smaller Companies VCT NAV fell even though Total Return increased

This is the bit that matters most for retail investors. The company says Total Return increased by 0.35 pence per share, taking the lifetime figure to 265.05 pence. That includes both the year-end NAV and cumulative dividends paid since launch.

But the NAV itself fell by 3.65 pence year on year because the company paid out 4.00 pence in dividends during the period. In other words, the fund generated a small positive return, but not enough to fully offset the cash that went back out to shareholders.

There was also a valuation issue in the portfolio. A lot of these holdings are software and tech-enabled businesses, and the board says revenue growth has been good, but market valuation multiples for software companies have come down. That matters because VCTs often value unquoted holdings using revenue multiples, so even decent trading can still produce flat or lower valuations.

Portfolio performance – Xapien, Summize and Unbiased did the heavy lifting

The strongest performers were impressive. Xapien rose by £5.9 million after turnover increased by 142 per cent. Summize added £4.2 million in value and completed a $50 million Series B funding round, while Unbiased gained £2.9 million as its UK business grew and its US expansion gathered pace.

That is the good news. It shows the manager still has genuine winners in the book, and in venture investing that is what drives long-term outcomes.

The weaker side is just as important. Matillion fell by £3.8 million, Quality Clouds by £2.2 million, Force24 by £2.0 million and Outpost VFX by £2.1 million. These drops tell you that not all growth is being rewarded by the market right now, especially in software.

One number I like here is that 91 per cent of the portfolio is valued at cost or above, although that is down from 97 per cent combined last year if you add the prior year’s “above cost” and “at cost” figures. It still suggests the portfolio is holding up reasonably well, but the direction of travel is slightly less comfortable.

Realisations of £18.5 million show the portfolio is producing exits

This was one of the better parts of the update. Realisations – meaning cash proceeds from selling investments – came in at £18.5 million. That was a £1.6 million gain over opening carrying value and a much bigger £8.9 million gain over original cost.

For a VCT, exits matter because they prove that paper valuations can turn into real cash. The standout was Teraview, which delivered an 8.1x return on cost after listing on the Korean Stock Exchange. SharpCloud produced a 2.0x return on cost so far, rising to a potential 2.2x including deferred consideration, while Elucidat delivered 1.3x, potentially 1.45x.

Not every exit was pretty. Sipsynergy is expected to return only around 0.3x cost, and Wooshii generated no proceeds on exit. That is normal in venture capital, but it is worth remembering if anyone thinks VCT investing is a smooth ride. It is not.

Cash, fundraising and balance sheet strength are a big part of this story

One standout feature here is the sheer amount of liquidity. At year end, the company had £122.3 million in cash and cash equivalents, equal to 42.8 per cent of net assets. That is a chunky war chest.

It also earned £4.5 million from liquid assets during the year, with a weighted average interest rate of 3.8 per cent. That cash return helped support results and gave the VCT breathing room while parts of the portfolio were being marked more cautiously.

Fundraising remained strong too. The company received £44.7 million in the year, then raised gross proceeds of £37.3 million from the final allotment of the 2025/26 share offer just after year end. That is a vote of confidence from investors, even after the Budget reduced initial VCT income tax relief from 30 per cent to 20 per cent from 6 April 2026.

British Smaller Companies VCT dividends, charges and investment activity – what investors should notice

The board has declared an interim dividend of 2.00 pence for the year ending 31 March 2027, payable on 17 July 2026. But there is no final dividend proposed for the year just ended. That makes sense given the modest return and the need to preserve flexibility, though income-focused holders may not love it.

Investment activity stayed busy. The VCT put £22.7 million into the portfolio across five new investments and ten follow-on investments. After the year end it added another £10.4 million, including new positions in Inploi and StudentCrowd.

Costs ticked up. The ongoing charges figure rose to 1.83 per cent from 1.75 per cent. That is still described as one of the lowest in the VCT sector, but it is still a rise, and when returns are modest, fees matter more.

What this British Smaller Companies VCT RNS means for retail investors

My read is that this is a solid but mixed annual report. The positives are clear – real exits, strong fundraising, plenty of cash, and several portfolio companies growing fast enough to justify optimism. The manager also looks active rather than passive, which is exactly what you want in early-stage investing.

The negatives are also clear. NAV went backwards, dividends were lower, and software valuation multiples are still a drag. If that derating continues, good trading in the underlying businesses may not immediately show up in headline portfolio values.

For existing shareholders, this feels more like a hold-and-watch update than a breakout year. For potential investors, the main attraction remains exposure to a diversified pool of UK growth companies plus the VCT tax benefits, though the upfront relief is now lower at 20 per cent for new subscriptions after 6 April 2026.

In short, British Smaller Companies VCT is still doing the hard bits reasonably well. It is backing growth companies, generating some exits and keeping the balance sheet strong. What it needs next is a friendlier valuation backdrop so that the portfolio’s underlying progress can show through more clearly in shareholder returns.