Annual report and financial statements 2023
Octopus Future Generations VCT
plc
Annual report and financial statements
2023
Octopus Future Generations VCT plc today
announces the final results for the year ended 30 June 2023.
Octopus Future Generations VCT plc (‘Future
Generations VCT’ or the ‘Company’) is backing businesses that
aim to address society’s biggest challenges, providing an
opportunity for investors to share in the growth of ambitious,
purpose-driven companies.
Chair’s statementI am pleased to present the
annual results for Future Generations VCT for the year ended 30
June 2023.
Highlights£45.4m in net assets94.3p net asset
value (NAV) per share£15.2m raised to date in current fundraise
I would firstly like to welcome new shareholders
to the Company. Future Generations VCT invests in exciting
early-stage companies which we believe should also have a positive
impact on society. The NAV per share at 30 June 2023 was 94.3p, and
in the year the Company made 23 new investments. Each portfolio
company has the ambition to succeed as well as to address current
societal issues, ranging from improving healthcare to positively
impacting climate change. More information on some of these
business can be found in the Portfolio Manager’s Review.
In the year to 30 June 2023, we utilised £24.4
million of our cash resources, including £23.2 million which was
invested in new portfolio companies. The cash and cash equivalents
balance of £20.3 million as at 30 June 2023 represents 45% of net
assets at that date. The loss made in the year to 30 June 2023 was
£0.8 million, which is to be anticipated at this early stage due to
the running costs of the Company exceeding returns from
investments.
We look forward to deploying further capital
into attractive new investment opportunities, and we ultimately
intend the profile of the Company to comprise 80% to 90% in VCT
qualifying investments and 10% to 20% in permitted non-VCT
qualifying investments or cash.
Fundraise On 19 January 2023,
the Company launched an initial offer to raise up to £30 million,
with an over-allotment facility of up to £10 million, and as of 30
June 2023, the Company has successfully raised £15.2 million. The
offer will close for new applications on 31 October 2023.
As investors will be aware, the intention is to
invest in businesses which meet one of three key themes, which we
believe demonstrate excellent investment prospects as well as
having the potential to transform the world we live in for the
better.
Annual General Meeting (AGM)The
AGM will take place on 11 December 2023 from 12.00 noon and will be
held at 33 Holborn, London EC1N 2HT. Full details of the business
to be conducted at the AGM are given in the Notice of the AGM.
Shareholders’ views are important, and the Board
encourages shareholders to vote on the resolutions within the
Notice of the AGM using the proxy form, or electronically at
www.investorcentre.co.uk/eproxy. The Board has carefully considered
the business to be approved at the AGM and recommends shareholders
to vote in favour of all the resolutions being proposed, as the
Board will be doing.
In addition to the AGM, this year, we are also
pleased to offer shareholders the opportunity to attend an online
shareholder webinar on 4 December 2023 at 11.00 a.m., to make sure
we can respond to any questions you may have for either the
Portfolio Manager or the Company’s Board prior to the proxy forms
needing to be completed. At this event, Simon King (lead fund
manager for Future Generations VCT) and I will be presenting. For
details on how to sign up please see bit.ly/octopusfgwebinar.
Alternatively, shareholders are also invited to send any questions
they may have via email to FGAGM@octopusinvestments.com.
Outlook
This is the Company’s first full 12-month
report, and my Board colleagues and I are pleased with the progress
the Company has made in the period. As of 30 June 2023, the Company
comprised 25 portfolio companies spanning all three of its
investment themes. Each of these portfolio companies is addressing
crucial societal and environmental issues ranging from offering
personalised psychological therapy to creating smart nutrition or
automating the measurement of biodiversity. More can be read about
some of the real differences these companies are making in the
world in the Portfolio Manager’s review.
We have experienced challenges on many fronts
since the Company was launched, with an economic climate that has
made things more difficult for both our portfolio companies and
shareholders. However, our hope is that we are starting to see some
green shoots of recovery with inflation in the UK slowing. We are
still seeing good momentum in the UK early-stage market and are
regularly impressed by the ingenuity, energy and passion of the
entrepreneurs behind our portfolio companies. We are also heartened
by the wider European venture capital eco-system as it is now
valued at over $1.15 trillion, and the UK is at the very centre of
this. In 2010, there were only two European technology companies,
founded after 2000, valued at $1 billion or more. In 2023, there
are 311 companies with over a billion-dollar valuation, and 61 of
these are UK-based.
To remind shareholders, as the Company is at the
beginning of its investment journey, it will take time to deploy
the funds raised into portfolio companies that the investment team
consider to be good investment opportunities. While we are in this
early investment phase, the portfolio will naturally be more
concentrated in fewer companies. This means that performance will
be more sensitive to the success and/or failure of these
investments than if the portfolio was larger.
As such, over the next couple of years, there
may well be a decline in overall value as the Company invests in
new businesses, some of which are at the start of their growth
journey and will need to build their technology, prove their
market, win new contracts, and grow their teams. Their value will
take time to grow, and inevitably some of these will ultimately
fail.
The long-term target is to pay an annual
dividend of 5% of the NAV. However, given the expected holding
period of target portfolio companies and restrictions imposed on
VCTs, it is very unlikely that the Company will be able to pay
dividends before 1 July 2025. During this time, any growth in value
will increase the net asset value of the Company. Dividends are
likely to be generated from successful exits, so the Company is
unlikely to pay significant dividends until portfolio companies
have time to mature and be acquired.
I would like to conclude by thanking both my
Board colleagues and the Octopus team on behalf of all shareholders
for their hard work. I am excited to see what the coming year
brings for your Company.
Helen SinclairChair18 October
2023
Portfolio Manager’s review
At Octopus, our focus is on managing your investments and
providing investors with clear and transparent communication. Our
annual and half-yearly updates are designed to keep you informed
about the progress of your investment.
Focus on Future Generations VCT’s
performanceThe NAV per share at 30 June 2023 was 94.3p,
which represents a decrease in NAV of 1.8p per share versus a NAV
of 96.1p per share as at 30 June 2022. The Company invests in three
key areas that we believe demonstrate excellent investment
prospects and have potential to transform our world for the
better.
Below is a breakdown of the 25 investments held as at 30 June
2023, showing the proportion and value of the portfolio in each
investment theme:
Proportion by number of portfolio companies in each theme
- Revitalising healthcare – 48%
- Empowering people – 32%
- Building a sustainable planet – 20%
Value of the portfolio in each theme
- Revitalising healthcare – £15.1m
- Empowering people – £6.7m
- Building a sustainable planet – £3.1m
Overview of investmentsFuture Generations VCT
completed 23 new investments in the reporting period, totalling
£23.2 million. The total value of the portfolio as at 30 June 2023
is £24.9 million. A further five investments completed after 30
June 2023.
Below are some examples of new investments made across our three
investment themes during the year.
A selection of Future Generations VCT's current
portfolio
Building a sustainable planet:
- Puraffinity is a smart materials
company which has developed a design platform to create materials
which can capture the family of ‘forever chemicals’ known as
PFAS (Per-and polyfluoroalkyl substances).
- Neat is an embedded insurance
platform that gives merchants the ability to provide insurance
bundles to their customers at a competitive rate.
Empowering people:
- Cobee offers an employee benefits
platform.
- Correcto is an artificial
intelligence (AI) writing and grammar tool for the Spanish
language.
Revitalising healthcare:
- Little Journey is a digital eSupport platform that prepares,
informs and provides support for families' healthcare procedures
and clinical trials.
- HelloSelf is a digital, personalised psychological therapy and
coaching platform.
Building a sustainable
planetKitawww.kita.earth
To prevent the worst impacts of climate
change, alongside significantly avoiding/reducing emissions, we
must remove gigatons of carbon dioxide from the atmosphere annually
for the remainder of the 21st century.
Companies face multiple challenges in executing
net zero strategies: carbon removal credits are in high demand and
short supply, carbon removal takes time, new technologies need time
to scale up and nature needs time to grow. To meet future net zero
targets, carbon removal credits often need to be purchased in
advance. Carbon delivery risk can act as a deterrent to companies
that want to build a net zero strategy and Kita offers a
solution that reduces this risk and gives a green light to
investment.
Kita’s flagship product is Carbon Purchase
Protection Cover. It protects buyers of forward-purchased carbon
removal credits against under-delivery. If the carbon removal
credits underperform, Kita covers the loss (via a reinsurance
facility). With reduced risk in the carbon transaction, carbon
removal solutions can access greater flows of consistent capital to
scale their impact faster: helping contribute to a sustainable
planet.
Kita bridges the insurance and carbon markets,
providing a bespoke portfolio of carbon insurance products that
offer security and confidence to carbon projects and buyers of
carbon credits.
- £4 million total seed investment
secured in February 2023
- Kita is a Lloyd’s of London
Coverholder and regulated by the FCA
Empowering
peopleApheriswww.apheris.com
Apheris enables governed, private and
secure computational access to data for machine learning (ML) and
analytics.
With a rise in standardised ML models, which
businesses can customise for specific use cases, data becomes an
organisation’s key differentiator. However, businesses need to
safeguard their data assets and intellectual property while
leveraging it for ML.
The Apheris Compute Gateway ensures only
approved computations can be launched on data, allowing ML-powered
insights with no need to share data. Compute Gateways can
communicate with each other, allowing businesses to work
collaboratively across organisational or geographical boundaries,
while ensuring compliance with data privacy, security and
governance obligations.
- 7 to 3 years – the reduction in
time to market for neuroscience treatments using Apheris’
software
- €8.7 million raised in November
2022
Revitalising
healthcarePerci
Healthwww.percihealth.com
The Perci team have built the first
comprehensive, digital clinic for cancer patients. The service
offers bespoke, convenient healthcare with a focus on holistic
recovery, aimed at patients living with cancer, as well as those
further along in their survivorship journey. The Perci
platform offers access to a wealth of experts across
multi-disciplinary fields, offering a physical, mental, social and
emotional evidence-based care, with the aim of delivering better
clinical outcomes for survivors.
Cancer survival starts on day one of a cancer
diagnosis, but while remission rates are improving, advances in
cancer treatment have also introduced a wide range of long-term
side effects that require specialist help to manage. Cancer doesn’t
just impact health, it also has a significant impact on
psychological wellbeing, sometimes making survivors feel isolated,
as well as carrying practical implications. Perci Health believes
that it’s time to let go of the last historical taboos surrounding
cancer, and instead recognise it for the chronic condition that it
is, and address the high physical, mental, emotional, social and
financial costs associated with it.
- 800 – the number of people living
with and beyond cancer who have benefitted from Perci Health's
digital clinics.
- £3.4 million raised in April
2023
Top ten investments
Valuations
Future Generations VCT's portfolio companies are valued in
accordance with the International Private Equity and Venture
Capital valuation guidelines, as updated in December 2022. This
means we value the portfolio at fair value, which is the price we
expect people would be willing to buy or sell an asset for,
assuming they had all the information we have available; are
knowledgeable parties with no pre-existing relationship; and that
the transaction is carried out under the normal course of business.
As a result, valuations have been re-appraised in line with all
these factors.
|
Portfolio company |
Cost |
Valuation at 30 June 2023 |
Investment theme |
1 |
Tympa Health |
£2.7m |
£2.7m |
Revitalising healthcare |
2 |
HelloSelf |
£2.6m |
£2.6m |
Revitalising healthcare |
3 |
Cobee |
£2.6m |
£2.5m |
Empowering people |
4 |
Pear Bio |
£2.0m |
£2.0m |
Revitalising healthcare |
5 |
Infinitopes |
£1.6m |
£1.6m |
Revitalising healthcare |
6 |
Skin + Me |
£1.0m |
£1.3m |
Revitalising healthcare |
7 |
Apheris |
£1.2m |
£1.2m |
Revitalising healthcare |
8 |
Elo Health |
£1.3m |
£1.1m |
Revitalising healthcare |
9 |
Inflow |
£1.0m |
£1.0m |
Revitalising healthcare |
10 |
Intrinsic |
£0.9m |
£0.9m |
Empowering people |
Portfolio Engagement
As part of our strategy, we require portfolio
companies to put in place a Diversity and Inclusion policy
(D&I) and an Anti-Harassment policy. We also engage with each
company to help them understand their greenhouse gas (GHG)
emissions and support them to take action to minimise them. You can
see how we are progressing with these goals below, as at the date
of this report:
D&I policy status of portfolio companies
D&I policy status Policy in place – 100%
Engagement status of portfolio companies with
carbon accounting tool Engaged on monitoring GHG emissionsSigned up
– 16Introduced – 8In progress – 1
Outlook
Since Future Generations VCT was launched in
January 2022, we have experienced a period of immense global change
and economic complexity. Whilst this has brought greater challenges
and hurdles for the Company to overcome and work through, we are
impressed with how both the entrepreneurs we have invested in, and
the Octopus Ventures team, have navigated this in the Company’s
first full year of deployment.
The entrepreneurs we meet are intent on solving
some of the biggest challenges we have ever faced as a society and
planet by building successful companies which could have a material
and positive impact on people’s lives. We believe that Octopus is
very well placed to source and secure some of the best investment
opportunities, generated by our extensive network and reputation in
the early-stage market. The portfolio as at 30 June 2023 comprises
of 25 companies spanning all three of our investment themes which
address these challenges. We believe the entrepreneurs behind these
businesses have created some best-in-class solutions that we are
delighted to back.
The decline in NAV that we have seen in the year
to 30 June 2023 is not unexpected in an early stage fund, and has
been driven by the running costs.
The wide-ranging scope of Future Generations
VCT’s investment policy across its three investment themes, some
examples of which can be seen in the Portfolio Manager’s review,
allows us to build a diverse portfolio for the Company. This
diversity of stage, focus and offering gives us greater confidence in
the Company’s ability to succeed in more turbulent economic
times.
We are excited to have the opportunity to
continue to scale Future Generations VCT, support its ambition to
make the world a better place for future generations, and hope to
deliver attractive returns to shareholders.
Simon KingPartner and Lead Fund Manager for Future Generations
VCT18 October 2023
Risks and risk management
The Board assesses the risks faced by Future
Generations VCT, reviews the mitigating controls and monitors the
effectiveness of these controls.
Principal risks, emerging risks and
risk management
Detailed below are the principal risks of Future
Generations VCT, and the mitigating actions in relation to those
risks.
In addition to the principal risks, emerging
risks including adverse changes in the global macroeconomic
environment, climate change, high market valuations and
geopolitical protectionism are monitored by the Board.
The Board seeks to mitigate risks by setting
policy, regularly reviewing performance and monitoring progress and
compliance. In the mitigation and management of these risks, the
Board applies the principles detailed in the Financial Reporting
Council’s Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting.
Risk |
Mitigation |
Change |
Investment performance: |
|
|
The focus of Future Generations VCT investments is into
early-stage, unquoted, small and medium-sized VCT qualifying
companies which, by their nature, entail a higher level of risk and
shorter cash runway than investments in larger quoted
companies. |
Octopus has significant experience and a strong track record of
investing in early-stage unquoted companies, and appropriate due
diligence is undertaken on every new investment. A member of the
Octopus Ventures team is typically appointed to the board of a
portfolio company, and regular board reports are prepared by the
portfolio company’s management and examined by the Portfolio
Manager. This arrangement, in conjunction with its portfolio talent
team’s active involvement, allows Future Generations VCT to play a
prominent role in a portfolio company’s ongoing development and
strategy. |
Increased due to the difficult macro environment and challenging
trading conditions for some companies. |
Risk |
Mitigation |
Change |
VCT qualifying status: |
|
|
Future Generations VCT is required at all times to observe the
conditions for the maintenance of approved VCT status. The loss of
such approval could lead to Future Generations VCT and its
investors losing access to the various tax benefits associated with
VCT status and investment. |
Octopus tracks Future Generations VCT’s qualifying status
throughout the period, and reviews this at key points, including at
the point of investment and realisation. This status is reported to
the Board at each Board meeting. The Future Generations VCT Board
has also engaged external independent advisers to undertake an
independent VCT status monitoring role. |
Given the level of independent verification, a systemic issue which
would result in loss of VCT status is considered less likely and
therefore a decreased risk. |
Risk |
Mitigation |
Change |
Loss of key people: |
|
|
The loss of key investment staff by the Portfolio Manager could
lead to poor fund management and/or performance due to lack of
continuity or understanding of Future Generations VCT. |
The Portfolio Manager has a broad team experienced in and focused
on early-stage investing. This mitigates the risk of any one
individual with the required skill set and knowledge of venture
capital investing, and the portfolio specifically, leaving. Key
investment staff are also incentivised via the performance
incentive fee. |
No overall change in risk exposure on balance. |
Risk |
Mitigation |
Change |
Operational: |
|
|
The Future Generations VCT Board is reliant on the Portfolio
Manager to manage investments effectively, and manage the services
of a number of third parties, in particular the registrar,
depositary and tax advisers. A failure of the systems or controls
at Octopus or third-party providers could lead to an inability to
provide accurate reporting and accounting and to ensure adherence
to VCT rules. |
The Future Generations VCT Board reviews the system of internal
controls, both financial and non-financial, operated by Octopus (to
the extent the latter are relevant to Future Generations VCT
internal controls). These include controls designed to make sure
that Future Generations VCT assets are safeguarded and that proper
accounting records are maintained. |
No overall change in risk exposure on balance. |
Risk |
Mitigation |
Change |
Information security: |
|
|
A loss of key data could result in a data breach and fines. The
Future Generations VCT Board is reliant on Octopus and third
parties to take appropriate measures to prevent a loss of
confidential customer information. |
Annual due diligence is conducted on third parties which includes a
review of their controls for information security. Octopus has a
dedicated information security team and a third party is engaged to
provide continual protection in this area. A security framework is
in place to help prevent malicious events. |
No overall change on balance, although cyber threat remains a
significant risk area faced by all providers. |
Risk |
Mitigation |
Change |
Economic: |
|
|
Events such as an economic recession, movement in interest rates,
inflation and rising living costs could adversely affect some
smaller companies’ valuations, as they may be more vulnerable to
changes in trading conditions or the sectors in which they operate.
This could result in a reduction in the value of Future Generations
VCT assets. |
Future Generations VCT aims to invest in a diverse portfolio of
companies, across a range of sectors, which helps to mitigate
against the impact on any one sector. Future Generations VCT also
maintains adequate liquidity to make sure that it can continue to
provide follow-on investment to those portfolio companies which
require it and which is supported by the individual investment
case. |
Increased due to continued uncertainty in an environment that
includes high interest rates, high inflation and other economic
factors. |
Risk |
Mitigation |
Change |
Legislative: |
|
|
A change to the VCT regulations could adversely impact Future
Generations VCT by restricting the companies Future Generations VCT
can invest in under its current strategy. Similarly, changes to VCT
tax reliefs for investors could make VCTs less attractive and
impact Future Generations VCT’s ability to raise further
funds. |
The Portfolio Manager engages with HM Treasury and industry bodies
to demonstrate the positive benefits of VCTs in terms of growing
early-stage companies, creating jobs and increasing tax revenue,
and to help shape any change to VCT legislation. The ‘sunset
clause’ meant that in 2025 the government would need to renew the
legislation to allow VCTs to continue to operate under the current
legislation. However, recent government announcements have been
supportive of legislation renewal in support of VCT's. |
No overall change, although there remains some uncertainty around
removal of the sunset clause. |
Risk |
Mitigation |
Change |
Liquidity: |
|
|
The risk that Future Generations VCT’s available cash will not be
sufficient to meet its financial obligations. Future Generations
VCT invests into smaller unquoted companies, which are inherently
illiquid as there is no readily available market for these shares.
Therefore, these may be difficult to realise for their fair market
value at short notice. |
Future Generations VCT’s liquidity risk is managed on a continuing
basis by Octopus in accordance with policies and procedures agreed
by the Board. Future Generations VCT’s overall liquidity risks are
monitored on a quarterly basis by the Board, with frequent
budgeting and close monitoring of available cash resources. Future
Generations VCT maintains sufficient investments in cash and
readily realisable securities to meet its financial obligations. At
30 June 2023, these resources were valued at £20,292,000. |
Increased to reflect the potential knock-on effects of economic
uncertainty, impacting fundraising and increasing the risk of
disposal failure. |
Viability statement
In accordance with the FRC UK Corporate
Governance Code published in 2018 and provision 36 of the AIC Code
of Corporate Governance, the Directors have assessed the prospects
of Future Generations VCT over a period of five years, consistent
with the expected investment holding period of an investor. A
fundraising was launched on 19 January 2023 and is due to close for
new applications on 31 October 2023, proposing to raise £30 million
with an over-allotment of up to £10 million. Under VCT rules,
subscribing investors are required to hold their investment for a
five-year period in order to benefit from the associated tax
reliefs. The Board regularly considers strategy, including investor
demand for Future Generations VCT’s shares, and a five-year period
is considered to be a reasonable time horizon for this.
The Board carried out a robust assessment of the
emerging and principal risks facing Future Generations VCT and its
current position. This included the cost of living crisis, rising
interest rates, the war in Ukraine and any other risks which may
adversely impact its business model, future performance, solvency
or liquidity, and focused on the major factors which affect the
economic, regulatory and political environment.
Particular consideration was given to Future
Generations VCT’s reliance on, and close working relationship with,
the Portfolio Manager. The principal risks faced by Future
Generations VCT and the procedures in place to monitor and mitigate
them are set out above.
The Board has carried out robust stress testing
of cash flows, which included assessing the resilience of portfolio
companies, including the requirement for any future financial
support.
The Board has additionally considered the
ability of Future Generations VCT to comply with the ongoing
conditions to make sure it maintains its VCT qualifying status
under its current investment policy.
Based on this assessment, the Board confirms
that it has a reasonable expectation that Future Generations VCT
will be able to continue in operation and meet its liabilities as
they fall due over the five-year period to 30 June 2028. The Board
is mindful of the ongoing risks and will continue to make sure that
appropriate safeguards are in place, in addition to monitoring the
cash flow forecasts to make sure Future Generations VCT has
sufficient liquidity.
Directors’ responsibilities statement
The Directors are responsible for preparing the
Strategic Report, the Directors’ Report, the Directors’
Remuneration Report and the Financial Statements in accordance with
applicable law and regulations. They are also responsible for
ensuring that the annual report and financial statements include
information required by the Listing Rules of the Financial Conduct
Authority.
Company law requires the Directors to prepare
financial statements for each financial year. Under that law the
Directors have elected to prepare the financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (GAAP), including Financial Reporting Standard 102 – The
Financial Reporting Standard Applicable in the United Kingdom and
Republic of Ireland (FRS 102), United Kingdom accounting standards
and applicable law. Under company law the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs and profit
or loss of the Company for that period. In preparing these
financial statements, the Directors are required to:
- select suitable accounting policies
and then apply them consistently;
- make judgements and accounting
estimates that are reasonable and prudent;
- state whether applicable UK
accounting standards have been followed, subject to any material
departures disclosed and explained in the financial
statements;
- prepare the financial statements on
the going concern basis unless it is inappropriate to presume that
the Company will continue in business; and
- prepare a Strategic Report,
Directors’ Report and Directors’ Remuneration Report which comply
with the requirements of the Companies Act 2006.
The Directors are responsible for keeping
adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
In so far as each of the Directors is aware:
- there is no relevant audit
information of which the Company’s auditor is unaware; and
- the Directors have taken all steps
that they ought to have taken to make themselves aware of any
relevant audit information and to establish that the auditor is
aware of that information.
The Directors are responsible for preparing the
annual report and financial statements in accordance with
applicable law and regulations. Having taken advice from the Audit
Committee, the Directors are of the opinion that this report as a
whole provides the necessary information to assess the Company’s
performance, business model and strategy and is fair, balanced and
understandable.
The Directors are responsible for the
maintenance and integrity of the corporate and financial
information included on the Company’s website. Legislation in the
United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
The Directors confirm that, to the best of their
knowledge:
- the financial statements, prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice, including FRS 102, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company; and
- the annual report and financial
statements (including the Strategic Report), give a fair review of
the development and performance of the business and the position of
the Company, together with a description of the principal risks and
uncertainties that it faces.
On behalf of the Board
Helen Sinclair Chair18 October 2023
Income Statement
|
|
Year to 30 June 2023 |
Period to 30 June 2022 |
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Net (loss)/gain on valuation of fixed asset investments |
|
— |
(6) |
(6) |
— |
9 |
9 |
Investment management fee |
|
(174) |
(522) |
(696) |
(39) |
(118) |
(157) |
Investment income |
|
424 |
— |
424 |
— |
— |
— |
Other expenses |
|
(500) |
— |
(500) |
(165) |
— |
(165) |
Loss before tax |
|
(250) |
(528) |
(778) |
(204) |
(109) |
(313) |
Tax |
|
— |
— |
— |
— |
— |
— |
Loss after tax |
|
(250) |
(528) |
(778) |
(204) |
(109) |
(313) |
Loss per share – basic and diluted |
|
(0.6)p |
(1.3)p |
(1.9)p |
(1.6)p |
(0.8)p |
(2.4)p |
- The ‘Total’ column of this statement is the profit and loss
account of Future Generations VCT; the supplementary revenue return
and capital return columns have been prepared under guidance
published by the Association of Investment Companies.
- All revenue and capital items in the above statement derive
from continuing operations.
- Future Generations VCT has only one class of business and
derives its income from investments made in shares and securities
and from bank and money market funds.
Future Generations VCT has no other comprehensive income for the
period.
The accompanying notes form an integral part of the financial
statements.
Balance sheet
|
|
As at 30 June 2023 |
As at 30 June 2022 |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
Fixed asset investments |
|
|
24,895 |
|
1,663 |
Current assets: |
|
|
|
|
|
Debtors |
|
379 |
|
54 |
|
Applications cash1 |
|
370 |
|
1,915 |
|
Cash at bank |
|
152 |
|
29,826 |
|
Money market funds |
|
20,140 |
|
— |
|
|
|
|
21,041 |
|
31,795 |
Creditors: amounts falling due within one year |
|
(518) |
|
(2,166) |
|
Net current assets |
|
|
20,523 |
|
29,629 |
Net assets |
|
|
45,418 |
|
31,292 |
Share capital |
|
|
48 |
|
33 |
Share premium |
|
|
46,461 |
|
31,572 |
Capital reserve realised |
|
|
(640) |
|
(118) |
Capital reserve unrealised |
|
|
3 |
|
9 |
Revenue reserve |
|
|
(454) |
|
(204) |
Total equity shareholders’ funds |
|
|
45,418 |
|
31,292 |
NAV per share |
|
|
94.3p |
|
96.1p |
- Cash received from investors but not yet allotted.
The accompanying notes form an integral part of the financial
statements.
The statements were approved by the Directors and authorised for
issue on 18 October 2023 and are signed on their behalf by:
Helen Sinclair ChairCompany No: 13750143
Statement of changes in equity
|
|
|
Capital |
Capital |
|
|
|
|
Share |
reserve |
reserve |
Revenue |
|
|
Share capital |
premium |
realised1 |
unrealised |
reserve1 |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
As at 30 June 2022 |
33 |
31,572 |
(118) |
9 |
(204) |
31,292 |
Comprehensive income for the period: |
|
|
|
|
|
|
Management fees allocated as capital expenditure |
— |
— |
(522) |
— |
— |
(522) |
Net loss on fair value of fixed asset investments |
— |
— |
— |
(6) |
— |
(6) |
Loss after tax |
— |
— |
— |
— |
(250) |
(250) |
Total comprehensive loss for the period |
— |
— |
(522) |
(6) |
(250) |
(778) |
Contributions by and distributions
to owners: |
|
|
|
|
|
|
Shares issued |
15 |
15,164 |
— |
— |
— |
15,179 |
Share issue costs |
— |
(275) |
— |
— |
— |
(275) |
Total contributions by and distributions to owners |
15 |
14,889 |
— |
— |
— |
14,904 |
Balance as at 30 June 2023 |
48 |
46,461 |
(640) |
3 |
(454) |
45,418 |
- Reserves are available for distribution, subject to
restrictions.
|
|
|
Capital |
Capital |
|
|
|
|
Share |
reserve |
reserve |
Revenue |
|
|
Share capital |
premium |
realised1 |
unrealised |
reserve1 |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
As at 17 November 2021 |
— |
— |
— |
— |
— |
— |
Comprehensive income for the period: |
|
|
|
|
|
|
Management fees allocated as capital expenditure |
— |
— |
(118) |
— |
— |
(118) |
Net gain on fair value of fixed asset investments |
— |
— |
— |
9 |
— |
9 |
Loss after tax |
— |
— |
— |
— |
(204) |
(204) |
Total comprehensive loss for the period |
— |
— |
(118) |
9 |
(204) |
(313) |
Contributions by and distributions
to owners: |
|
|
|
|
|
|
Shares issued |
33 |
32,111 |
— |
— |
— |
32,144 |
Share issue costs |
— |
(539) |
— |
— |
— |
(539) |
Total contributions by and distributions to owners |
33 |
31,572 |
— |
— |
— |
31,605 |
Balance as at 30 June 2022 |
33 |
31,572 |
(118) |
9 |
(204) |
31,292 |
- Reserves are available for distribution, subject to
restrictions.
The accompanying notes form an integral part of the
financial statements.
Cash flow statement
|
|
Year to 30 June |
Period to 30 June |
|
|
2023 |
2022 |
|
|
£’000 |
£’000 |
Cash flows from operating activities |
|
|
|
Loss before tax |
|
(778) |
(313) |
Increase in debtors |
|
(325) |
(54) |
(Decrease)/increase in creditors |
|
(103) |
251 |
Loss/(gain) on valuation of fixed asset investments |
|
6 |
(9) |
Outflow from operating activities |
|
(1,200) |
(125) |
Cash flows from investing activities |
|
|
|
Purchase of fixed asset investments |
|
(23,238) |
(1,654) |
Outflow from investing activities |
|
(23,238) |
(1,654) |
Cash flows from financing activities |
|
|
|
Applications account inflow |
|
13,634 |
34,059 |
Applications account outflow |
|
(15,179) |
(32,144) |
Proceed from share issues |
|
15,179 |
32,144 |
Share issue costs |
|
(275) |
(539) |
Inflow from financing activities |
|
13,360 |
33,520 |
(Decrease)/Increase in cash and cash
equivalents |
|
(11,079) |
31,741 |
Opening cash and cash equivalents |
|
31,741 |
— |
Closing cash and cash equivalents |
|
20,662 |
31,741 |
Cash and cash equivalents comprise |
|
|
|
Cash at bank |
|
152 |
29,826 |
Money market funds |
|
20,140 |
— |
Applications cash |
|
370 |
1,915 |
Closing cash and cash equivalents |
|
20,662 |
31,741 |
The accompanying notes form an integral part of the financial
statements.
Notes to the financial statements
1. Principal accounting policies
Octopus Future Generations VCT plc (‘Future
Generations VCT’) is a Public Limited Company (plc) incorporated in
England and Wales and its registered office is at 6th Floor, 33
Holborn, London EC1N 2HT.
Future Generations VCT has been approved as a
Venture Capital Trust by HMRC under Section 259 of the Income Taxes
Act 2007. The shares of Future Generations VCT were first admitted
to the Official List of the UK Listing Authority and trading on the
London Stock Exchange on 5 April 2022 and can be found under the
TIDM code OFG. Future Generations VCT is premium listed.
The principal activity of Future Generations VCT
is to invest in a diversified portfolio of UK smaller companies in
order to generate capital growth over the long term as well as an
attractive tax-free dividend stream.
The financial statements are presented in GBP
(£) to the nearest £’000. The functional currency is also GBP
(£).
Basis of preparation
The financial statements have been prepared on a
going concern basis under the historical cost convention, except
for the measurement at fair value of certain financial instruments,
and in accordance with UK Generally Accepted Accounting Practice
(GAAP), including Financial Reporting Standard 102 – ‘The Financial
Reporting Standard applicable in the United Kingdom and Republic of
Ireland’ (FRS 102), the Companies Act 2006 and the Statement of
Recommended Practice (SORP) ‘Financial Statements of Investment
Trust Companies and Venture Capital Trusts (July 2022)’.
2. Investment
incomeAccounting policyInvestment income
comprises interest earned on money market funds.
|
|
|
|
30 June 2023 |
30 June 2022 |
|
£’000 |
£’000 |
Money market funds |
424 |
— |
Total |
424 |
— |
3. Investment management feesAccounting
policy
For the purposes of the revenue and capital
columns in the Income Statement, the management fee has been
allocated 25% to revenue and 75% to capital, in line with the
Board’s expected long-term return in the form of income and capital
gains respectively from Future Generations VCT’s investment
portfolio.
Disclosure
|
Year to 30 June 2023 |
Period to 30 June 2022 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Investment management fee |
174 |
522 |
696 |
39 |
118 |
157 |
Total |
174 |
522 |
696 |
39 |
118 |
157 |
The Portfolio Manager provides investment
management services through agreements with Octopus AIF Management
Limited and Future Generations VCT. It also provides accounting and
administration services to Future Generations VCT under a
Non-Investment Services Agreement (NISA). No compensation is
payable if the agreement is terminated by either party, if the
required notice period is given. The fee payable, should
insufficient notice be given, will be equal to the fee that would
have been paid should continuous service be provided, or the
required notice period was given.
4. Other
expensesAccounting Policy
Other expenses are accounted for on an accruals
basis and are charged wholly to revenue.
The transaction costs incurred when purchasing
or selling assets are written off to the Income Statement in the
period that they occur.
|
Year to |
Period to |
|
30 June 2023 |
30 June 2022 |
|
£’000 |
£’000 |
NISA fees |
122 |
24 |
Director’s remuneration1 |
77 |
29 |
Audit fees2 |
63 |
38 |
Listing fees |
58 |
17 |
Depositary fees |
57 |
13 |
Report and account fees |
38 |
17 |
Registrar fees |
21 |
12 |
Other fees |
64 |
15 |
Total |
500 |
165 |
(1) Includes employers’ NI. (2) Includes
VAT.
Total ongoing charges are capped at 3.0% of net
assets. For the year to 30 June 2023 the ongoing charges were 3.0%
(2022: 2.2%) of net assets. This is calculated by summing the
annualised expenses incurred in the period (excluding non-recurring
expenses) divided by the average NAV throughout the period.
5. Directors’ remunerationTotal
Directors’ fees paid during the period were £70,000 (2022:
£28,000). Employers’ National Insurance contributions paid during
the period were £7,000 (2022:£1,000). The highest paid
Director received £35,000 (2022: £16,000). None of the Directors
received any other remuneration or benefit from Future Generations
VCT during the period. Future Generations VCT has no employees
other than Non-Executive Directors. The average number of
Non-Executive Directors in the period was three.
6. Tax on ordinary
activitiesAccounting policyCorporation
tax payable is applied to profits chargeable to corporation tax, if
any, at the current rate. The tax effect of different items of
income/gain and expenditure/loss is allocated between capital and
revenue return on the ‘marginal’ basis as recommended in the
SORP.
Deferred tax is recognised in respect of all
timing differences at the reporting date. Timing differences are
differences between taxable profits and total income as stated in
the financial statements that arise from the inclusion of income
and expenses in tax assessments in periods different from those in
which they are recognised in financial statements.
DisclosureThe corporation tax charge for the
period was £nil.
|
Year to |
Period to |
|
30 June 2023 |
30 June 2022 |
|
£’000 |
£’000 |
Loss on ordinary activities before tax |
(778) |
(313) |
Current tax at 20.5% |
(159) |
(60) |
Effects of: |
|
|
Non‑taxable income |
— |
— |
Non‑taxable capital gains |
1 |
(2) |
Non‑deductible expenses |
— |
— |
Excess management expenses on which deferred tax not
recognised |
193 |
81 |
Tax rate differences1 |
(35) |
(19) |
Total current tax charge |
— |
— |
- Tax rate difference due to tax charge for the period being
calculated at 20.5% and excess management expenses on which
deferred tax is not recognised being calculated at 25%.
Unrelieved tax losses of £1,094,000 (2022:
£313,000) are estimated to be carried forward at 30 June 2023
(subject to completion of Future Generations VCT’s tax return) and
are available for offset against future taxable income, subject to
agreement with HMRC.Future Generations VCT has not recognised the
deferred tax asset of £273,000 (2022: £81,000) in respect of these
tax losses because there is insufficient forecast taxable income in
excess of deductible expenses to utilise these losses carried
forward.
The deferred tax asset is based on the future
tax rate that has been substantially enacted as at the balance
sheet date.
Approved VCTs are exempt from tax on capital
gains. As the Directors intend for Future Generations VCT to
continue to maintain its approval as a VCT through its affairs, no
current deferred tax has been recognised in respect of any capital
gains or losses arising on the revaluation or disposal of
investment.
7. Loss per share
|
Year to 30 June 2023 |
Period to 30 June 2022 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Loss attributable to Ordinary shareholders (£’000) |
(250) |
(528) |
(778) |
(204) |
(109) |
(313) |
Loss per Ordinary share (p) |
(0.6) |
(1.3) |
(1.9) |
(1.6) |
(0.8) |
(2.4) |
The loss per share is based on 40,987,788 (2022:
13,205,218) Ordinary shares, being the weighted average number of
Ordinary shares in issue during the period.There are no potentially
dilutive capital instruments in issue and so no diluted return per
share figures are relevant. The basic and diluted earnings per
share are therefore identical.
8. Net asset value per share
|
30 June 2023 |
30 June 2022 |
Net assets (£’000) |
45,418 |
31,292 |
Shares in issue |
48,138,337 |
32,569,178 |
NAV per share (p) |
94.3 |
96.1 |
9. Post balance sheet events
The following events occurred between the
balance sheet date and the signing of these financial
statements:
- Five new investments completed
totalling £0.9 million, two of which were the second tranche of
funding agreed previously.
10. Transactions with the Manager and
Portfolio ManagerFuture Generations VCT is classified as a
full-scope Alternative Investment Fund under the Alternative
Investment Fund Management Directive (the ‘AIFM Directive’). Future
Generations VCT has appointed Octopus AIF Management Limited to
provide the services of an AIFM of a full-scope AIF. In accordance
with its power to do so under AIFMD, Octopus AIF Management Limited
has delegated investment management to Octopus Investments Limited,
whilst retaining the obligations of a risk manager.
Future Generations VCT paid Octopus AIF
Management Limited £696,000 (2022: £157,000) in the period as a
management fee. The annual management charge (AMC) is based on 2%
of Future Generations VCT’s NAV. The AMC is payable quarterly in
advance and calculated using the latest published NAV of Future
Generations VCT and the number of shares in issue at each quarter
end. Once the quarter has ended, an adjustment will be made if the
NAV at the end of the current quarter is calculated and which
differs from the NAV as at the end of the previous quarter. The
Manager will donate 10% of the management fee to the Octopus Giving
Charitable Foundation, which was set up in 2014 to help charities
make the world a better place and which, since inception, has
donated more than £1 million to such worthy causes.
Octopus also provides Non-Investment Services to
Future Generations VCT, payable quarterly in advance. The fee is
0.3% of Future Generations VCT’s NAV, calculated at quarterly
intervals. The NISA fee is calculated using the latest published
NAV of Future Generations VCT and the number of shares in issue at
each quarter end. As with the AMC, an adjustment will be made once
the quarter has ended if the NAV at the end of the current quarter
is calculated and which differs from the NAV as at the end of the
previous quarter. During the period £122,000 (2022: £24,000) was
paid to Octopus for Non-Investment Services.
In addition, Octopus is entitled to
performance-related incentive fees, subject to Future Generations
VCT’s total return at year end exceeding the total return at the
previous year end when an incentive fee was paid, or 97p if the
first incentive fee has not yet been paid (the ‘Excess’), equal to
20% of the Excess. No performance fee will be paid prior to the
financial year ending on 30 June 2025, dividends (paid or declared)
being equal to or greater than 10p per Ordinary share and the total
return exceeding 120p.
The cap relating to Future Generations VCT’s
total expense ratio, that is the regular, recurring costs of Future
Generations VCT expressed as a percentage of its NAV, above which
Octopus has agreed to pay, is 3.0%, and is calculated in accordance
with the AIC Guidelines.
Octopus AIF Management Limited remuneration disclosures
(unaudited)
Quantitative remuneration disclosures required
to be made in this annual report in accordance with the FCA
Handbook FUND 3.3.5 are available on the website:
https://www.octopusinvestments.com/remuneration-disclosures/.
11. Related party transactions
Several members of the Octopus investment team
hold non-executive directorships as part of their monitoring roles
in Future Generations VCT’s portfolio companies, but they have no
controlling interests in those companies.
Emma Davies, a Non-Executive Director of Future
Generations VCT, previously held the role of co-CEO of Octopus
Ventures and she also holds shares in Octopus Capital Ltd. On 24
March 2023, Emma Davies ceased to be employed by Octopus Capital
Limited and therefore she is no longer considered a related party.
Emma continues her role as a Non-Executive Director of Future
Generations VCT. No dividends have been paid to the Directors of
Future Generations VCT in the year (2022: £nil).
12. 2023 financial information
The figures and financial information for the
year ended 30 June 2023 are extracted from the Company’s annual
financial statements for the period and do not constitute statutory
accounts. The Auditors’ report on the 2023 annual financial
statements was unqualified, did not include a reference to any
matter to which the auditors drew attention without qualifying the
report, and did not contain any statements under Sections 498(2) or
498(3) of the Companies Act 2006.
13. 2022 financial
informationThe figures and financial information for the
period ended 30 June 2022 are compiled from an extract of the
published financial statements for the period and do not constitute
statutory accounts. Those financial statements have been delivered
to the Registrar of Companies and included the Auditors’ report
which was unqualified, did not include a reference to any matter to
which the auditors drew attention without qualifying the report,
and did not contain any statements under Sections 498(2) or 498(3)
of the Companies Act 2006.
14. Annual Report and financial statements
The Annual Report and financial statements will
be available on the Company’s website
www.octopusinvestments.com/our-products/venture-capital-trusts/octopus-future-generations-vct
and the National Storage Mechanism which is located at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The Notice
of Annual General Meeting is contained within the Annual
Report.
15. General information Registered in England
& Wales. Company No. 13750143LEI: 213800AL71Z7N2O58N66
16. Directors Helen Sinclair (Chair), Joanna
Santinon and Emma Davies.
17. Secretary and registered office Octopus
Company Secretarial Services Limited33 Holborn, London EC1N 2HT
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