b'Annual Report & Accounts 2022 Mercia Asset Management PLC 11Strategic reportMercias 20:20 three-year plan;my sincere gratitude to the amazingFinally, I would like to thank Mercias one year in portfolio companies that we have theemployees, without whom we would From 1 April 2021, we set a newprivilege to support. As a Group, we arenot have become who we are today: strategic target; on average, overalso very appreciative of the growing#OneMercia. the next three years we will seek tobelief in Mercia from our third-party generate 20million of PBT per annumfund investors, and both VCT and MerciaDr Mark Paytonand 20% growth in AuM per annum.shareholders, that the UK regions canChief Executive OfficerAccepting the likely uneven spread ofdeliver value and returns. this on a per annum basis, we remain confident in achieving both objectives at the end of this three-year period. As these results show, one year in weAxis Spine Technologies: have exceeded the average annual PBT target, achieving c.27million profitcase studybefore tax. Although Mercias AuM is not open-ended, we have experienced higher than anticipated distributionsSpinal treatment without damage to vertebraea new wayto investors, ironically as a result of ourto treat disc degeneration, back pain and spinal deformities.excellent exit investment performance.Mercia Chief Operating Officer Peter Dines had worked with experienced Therefore, notwithstanding our overallspinal implant executive, and now Axis Spine Technologies CEO, Jon Arcos positive portfolio companies progress and the additional funds which havetwice before. When Arcos approached Mercia with his idea for a wholly been raised and/or awarded to us bynew kind of spinal implant technology, we invested at an early stage. existing investors, the net effect is aNow, patients and surgeons are benefiting from Axis Spine small increase in AuM for the year as aTechnologies novel implants, which reduce vertebrae damage and whole, although shortly post year endreduce fitting complexity for surgeons. we have raised c.45million in new VCT and EIS capital to invest, taking our AuM to over 1billion for the first time. FDA approvedA positive outlook in10 patients operated onuncertain times Opened new office in Leeds12 hires since first investmentWe all face an uncertain global outlook as the economic system absorbsc.3.2minflation levels not seen for 30 years, climbing interest rates and the ongoing war in Ukraine. The world continues to retrench from globalisation towards aTotal investmentmore nationalist economic agenda. For Mercia, we continue to have a positive outlook despite the macro challenges. Our purpose-led UK-only agenda of responsible investment across theThe Axis Spine Technologies investment is a great example of regions, coupled with maturing equityMercia drawing on its industry expertise and knowledge to support portfolios across our asset classesfounders at a very early stage. in sectors less likely to be adversely impacted by Brexit, supply chainWe worked alongside CEO Jon Arcos to build Axis Spine from its issues and sanctions, together with ourearliest days to develop the business plan and adapt it each time increasing investment performance,the business hit growth milestones that warranted subsequented place us in a positive position as werounds of capital investment.look to further scale our assets under management and, with it, continue toIt is a pleasure to see a business that began as an idea is now a next-grow total shareholder return.generation, FDA-approved spinal implant that is being successfully Our significant success that we haveused by surgeons all over the world to improve the outcomes of seen during the last two financial years,patients. and our positive future prospects, havePeter Dinesbeen made possible by the combinedChief Operating Officerefforts of everyone connected with Mercia. I would therefore like to express'