TIDMOFG
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 statement
I am pleased to present the annual results for Future
Generations VCT for the year ended 30 June 2023.
Highlights
GBP45.4m in net assets
94.3p net asset value (NAV) per share
GBP15.2m 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 GBP24.4 million of our
cash resources, including GBP23.2 million which was invested in new
portfolio companies. The cash and cash equivalents balance of
GBP20.3 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 GBP0.8
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 GBP30 million, with an over-allotment facility of up to
GBP10 million, and as of 30 June 2023, the Company has successfully
raised GBP15.2 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 Sinclair
Chair
18 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 performance
The 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 -- GBP15.1m
-- Empowering people -- GBP6.7m
-- Building a sustainable planet -- GBP3.1m
Overview of investments
Future Generations VCT completed 23 new investments in the
reporting period, totalling GBP23.2 million. The total value of the
portfolio as at 30 June 2023 is GBP24.9 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 planet
Kita
https://www.globenewswire.com/Tracker?data=4DjeWwN7wYpHSOQM8Y-wTl8X6y_ZywwFuFMg2k-5yzf5fdl4SK2T4CHwdCI437rNyV5wimIc6hOlxwdeiD8MpA==
www.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.
-- GBP4 million total seed investment secured in February 2023
-- Kita is a Lloyd's of London Coverholder and regulated by the FCA
Empowering people
Apheris
https://www.globenewswire.com/Tracker?data=4DjeWwN7wYpHSOQM8Y-wTm00cpCqmuARKfOOgCwQORrqClWUWnMYYGspC4CdUF4O8SpLnnMFpLpzmD68yaCqqQ==
www.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
-- EUR8.7 million raised in November 2022
Revitalising healthcare
Perci Health
https://www.globenewswire.com/Tracker?data=4DjeWwN7wYpHSOQM8Y-wToA9BPkFegHe0u6jiSRptrOG3-RSI5HAlZMQNNAMDhRvuq1K7KPJLquOw1eYS7GGqzwiW-DFgnmdOPgCh-B9Xek=
www.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.
-- GBP3.4 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 Investment theme
June 2023
----------------- ------- --------------- -----------------------
1 Tympa Health GBP2.7m GBP2.7m Revitalising healthcare
----------------- ------- --------------- -----------------------
2 HelloSelf GBP2.6m GBP2.6m Revitalising healthcare
----------------- ------- --------------- -----------------------
3 Cobee GBP2.6m GBP2.5m Empowering people
----------------- ------- --------------- -----------------------
4 Pear Bio GBP2.0m GBP2.0m Revitalising healthcare
----------------- ------- --------------- -----------------------
5 Infinitopes GBP1.6m GBP1.6m Revitalising healthcare
----------------- ------- --------------- -----------------------
6 Skin + Me GBP1.0m GBP1.3m Revitalising healthcare
----------------- ------- --------------- -----------------------
7 Apheris GBP1.2m GBP1.2m Revitalising healthcare
----------------- ------- --------------- -----------------------
8 Elo Health GBP1.3m GBP1.1m Revitalising healthcare
----------------- ------- --------------- -----------------------
9 Inflow GBP1.0m GBP1.0m Revitalising healthcare
----------------- ------- --------------- -----------------------
10 Intrinsic GBP0.9m GBP0.9m 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 emissions
Signed up -- 16
Introduced -- 8
In 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 rst 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 o ering gives us greater con dence 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 King
Partner and Lead Fund Manager for Future Generations VCT
18 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 Octopus has signi cant Increased due to the
VCT investments is into experience and a strong di cult macro environment
early-stage, unquoted, track record of investing and challenging trading
small and medium-sized in early-stage unquoted conditions for some companies.
VCT qualifying companies companies, and appropriate
which, by their nature, due diligence is undertaken
entail a higher level on every new investment.
of risk and shorter cash A member of the Octopus
runway than investments Ventures team is typically
in larger quoted companies. 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.
-------------------------------- ---------------------------------- ---------------------------------
Risk Mitigation Change
-------------------------------- ---------------------------------- ---------------------------------
VCT qualifying status:
Future Generations VCT Octopus tracks Future Given the level of independent
is required at all times Generations VCT's qualifying verification, a systemic
to observe the conditions status throughout the issue which would result
for the maintenance of period, and reviews this in loss of VCT status
approved VCT status. at key points, including is considered less likely
The loss of such approval at the point of investment and therefore a decreased
could lead to Future and realisation. This risk.
Generations VCT and its status is reported to
investors losing access the Board at each Board
to the various tax benefits meeting. The Future Generations
associated with VCT status VCT Board has also engaged
and investment. external independent
advisers to undertake
an independent VCT status
monitoring role.
-------------------------------- ---------------------------------- ---------------------------------
Risk Mitigation Change
-------------------------------- ---------------------------------- ---------------------------------
Loss of key people:
The loss of key investment The Portfolio Manager No overall change in
staff by the Portfolio has a broad team experienced risk exposure on balance.
Manager could lead to in and focused on early-stage
poor fund management investing. This mitigates
and/or performance due the risk of any one individual
to lack of continuity with the required skill
or understanding of Future set and knowledge of
Generations VCT. venture capital investing,
and the portfolio specifically,
leaving. Key investment
staff are also incentivised
via the performance incentive
fee.
-------------------------------- ---------------------------------- ---------------------------------
Risk Mitigation Change
-------------------------------- ---------------------------------- ---------------------------------
Operational:
The Future Generations The Future Generations No overall change in
VCT Board is reliant VCT Board reviews the risk exposure on balance.
on the Portfolio Manager system of internal controls,
to manage investments both financial and non-financial,
effectively, and manage operated by Octopus (to
the services of a number the extent the latter
of third parties, in are relevant to Future
particular the registrar, Generations VCT internal
depositary and tax advisers. controls). These include
A failure of the systems controls designed to
or controls at Octopus make sure that Future
or third-party providers Generations VCT assets
could lead to an inability are safeguarded and that
to provide accurate reporting proper accounting records
and accounting and to are maintained.
ensure adherence to VCT
rules.
-------------------------------- ---------------------------------- ---------------------------------
Risk Mitigation Change
-------------------------------- ---------------------------------- ---------------------------------
Information security:
A loss of key data could Annual due diligence No overall change on
result in a data breach is conducted on third balance, although cyber
and fines. The Future parties which includes threat remains a significant
Generations VCT Board a review of their controls risk area faced by all
is reliant on Octopus for information security. providers.
and third parties to Octopus has a dedicated
take appropriate measures information security
to prevent a loss of team and a third party
confidential customer is engaged to provide
information. continual protection
in this area. A security
framework is in place
to help prevent malicious
events.
-------------------------------- ---------------------------------- ---------------------------------
Risk Mitigation Change
-------------------------------- ---------------------------------- ---------------------------------
Economic:
Events such as an economic Future Generations VCT Increased due to continued
recession, movement in aims to invest in a diverse uncertainty in an environment
interest rates, inflation portfolio of companies, that includes high interest
and rising living costs across a range of sectors, rates, high inflation
could adversely affect which helps to mitigate and other economic factors.
some smaller companies' against the impact on
valuations, as they may any one sector. Future
be more vulnerable to Generations VCT also
changes in trading conditions maintains adequate liquidity
or the sectors in which to make sure that it
they operate. This could can continue to provide
result in a reduction follow-on investment
in the value of Future to those portfolio companies
Generations VCT assets. which require it and
which is supported by
the individual investment
case.
-------------------------------- ---------------------------------
Risk Mitigation Change
-------------------------------- ---------------------------------- ---------------------------------
Legislative:
A change to the VCT regulations The Portfolio Manager No overall change, although
could adversely impact engages with HM Treasury there remains some uncertainty
Future Generations VCT and industry bodies to around removal of the
by restricting the companies demonstrate the positive sunset clause.
Future Generations VCT benefits of VCTs in terms
can invest in under its of growing early-stage
current strategy. Similarly, companies, creating jobs
changes to VCT tax reliefs and increasing tax revenue,
for investors could make and to help shape any
VCTs less attractive change to VCT legislation.
and impact Future Generations The 'sunset clause' meant
VCT's ability to that in 2025 the government
raise further funds. 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.
-------------------------------- ---------------------------------- ---------------------------------
Risk Mitigation Change
-------------------------------- ---------------------------------- ---------------------------------
Liquidity:
The risk that Future Future Generations VCT's Increased to reflect
Generations VCT's available liquidity risk is managed the potential knock-on
cash will not be sufficient on a continuing basis effects of economic uncertainty,
to meet its financial by Octopus in accordance impacting fundraising
obligations. Future Generations with policies and procedures and increasing the risk
VCT invests into smaller agreed by the Board. of disposal failure.
unquoted companies, which Future Generations VCT's
are inherently illiquid overall liquidity risks
as there is no readily are monitored on a quarterly
available market for basis by the Board, with
these shares. Therefore, frequent budgeting and
these may be difficult close monitoring of available
to realise for their cash resources. Future
fair market value at Generations VCT maintains
short notice. sufficient investments
in cash and readily realisable
securities to meet its
financial obligations.
At 30 June 2023, these
resources were valued
at GBP20,292,000.
-------------------------------- ---------------------------------- ---------------------------------
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 GBP30 million
with an over-allotment of up to GBP10 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
Chair
18 October 2023
Income Statement
Year to 30 June 2023 Period to 30 June 2022
------------------------- ------------------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
-------------------- --------------------
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
Fixed asset investments 24,895 1,663
Current assets:
Debtors 379 54
Applications cash(1) 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
1. 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
Chair
Company No: 13750143
Statement of changes in equity
Capital Capital
Share reserve reserve Revenue
Share
capital premium realised(1) unrealised reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
1. Reserves are available for distribution, subject to restrictions.
Capital Capital
Share reserve reserve Revenue
Share
capital premium realised(1) unrealised reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
1. Reserves are available for distribution, subject to restrictions.
The accompanying notes form an integral part of the financial
statements.
Cash flow statement
Period
Year to to 30
30 June June
2023 2022
GBP'000 GBP'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 (GBP) to the
nearest GBP'000. The functional currency is also GBP (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 income
Accounting policy
Investment income comprises interest earned on money market
funds.
30 June 2023 30 June 2022
GBP'000 GBP'000
------------ ------------
Money market funds 424 --
Total 424 --
3. Investment management fees
Accounting 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
------- ------- ------- -------- ------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 expenses
Accounting 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.
Period
Year to to
30 June 30 June
2023 2022
GBP'000 GBP'000
------- -------
NISA fees 122 24
Director's remuneration(1) 77 29
Audit fees(2) 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' remuneration
Total Directors' fees paid during the period were GBP70,000
(2022: GBP28,000). Employers' National Insurance contributions paid
during the period were GBP7,000 (2022:GBP1,000). The highest paid
Director received GBP35,000 (2022: GBP16,000). 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 activities
Accounting policy
Corporation 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.
Disclosure
The corporation tax charge for the period was GBPnil.
Period
Year to to
30 June 30 June
2023 2022
GBP'000 GBP'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 differences(1) (35) (19)
----------------------------------------------------- ------- -------
Total current tax charge -- --
1. 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 GBP1,094,000 (2022: GBP313,000) 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 GBP273,000 (2022: GBP81,000) 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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- ------- ------- -------- ------- -------
Loss attributable to
Ordinary shareholders
(GBP'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 (GBP'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 GBP0.9 million, two of which
were the second tranche of funding agreed previously.
10. Transactions with the Manager and Portfolio Manager
Future 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
GBP696,000 (2022: GBP157,000) 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 GBP1
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 GBP122,000 (2022: GBP24,000)
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: GBPnil).
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 information
The 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. 13750143
LEI: 213800AL71Z7N2O58N66
16. Directors
Helen Sinclair (Chair), Joanna Santinon and Emma Davies.
17. Secretary and registered office
Octopus Company Secretarial Services Limited
33 Holborn, London EC1N 2HT
(END) Dow Jones Newswires
October 18, 2023 12:55 ET (16:55 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
Octopus Future Generatio... (LSE:OFG)
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