Augmentum Fintech plc Annual Report 2023

4 July 2023

Augmentum Fintech plc

Annual Financial Report for the year ended 31 March 2023

Augmentum Fintech plc (LSE: AUGM) (the “Company” or “Augmentum”), Europe’s leading publicly listed fintech fund, announces its audited Annual Results for the year ended 31 March 2023.

Financial highlights

•           NAV per share after performance fee increased by 2.4% to 158.9p1 (31 March 2022: 155.2p).

•           IRR of 18.5%2 on invested capital since inception (31 March 2022: 22.6%).

•           Available cash at year end of £38.5 million, which has increased to £50.0 million as at 30 June 2023 following the Company’s accretive exit from Cushon.

Portfolio highlights

•           Top 10 holdings, which represent 78% of portfolio value, grew revenue at an average of 117% year-on-year and are cash generative or have an average of 29 months cash runway3 and are funded to their next key inflexion points.

•           interactive investor’s acquisition by abrdn completed in May 2022 and resulted in proceeds for the Company of £42.8 million, delivering an 11.1x multiple on invested capital and 84.8% IRR.

•           Cushon’s majority shareholding acquisition by NatWest Group completed post year end and returned £22.8 million to the Company, delivering a return of 2.1x multiple on invested capital and an IRR of 62%.

•           There have now been 5 exits from the portfolio since inception all at or above their last reported value, which have realised a cumulative £79.5 million in proceeds – £53.5 million over their original cost.

Investment activity

•           £19.9 million invested in 2 new companies and 8 existing portfolio investments in line with a disciplined approach to capital allocation (31 March 2022: £60.8 million invested in 7 new companies and 7 existing portfolio companies).

Portfolio updates

•           Grover (15.5% of net assets after performance fee) completed a US$330 million Series C equity and debt funding round in April 2022 and leased over 1 million devices globally.

•           Tide (12.9%) grew its UK SME banking market share to 9% and acquired Funding Options.

•           Zopa (10.8%) completed a £75 million funding round, surpassed £8 billion in approved personal loans and £3.5 billion in savings.

•           Volt (5.1%) completed a US$60 million Series B funding round post year end led by IVP and won Worldpay and Shopify as clients.

•           Anyfin (3.4%) completed a US$30 million Series C funding round in January 2023.

Valuation movements

•           NAV at year end was £294.1 million4 (31 March 2022: £295.2 million), of which the value of the investment portfolio at year end was £254.3 million (31 March 2022: £268.8 million).

•           Key drivers of the change in the investment portfolio valuation for the year were: investee company revenue growth +£84.8 million, comparables’ contraction -£81.2 million, FX +£5.6 million, additions £19.9 million, the exit from ii -£42.8 million.

•           The increase in NAV per share after performance fee was driven by return for the year net of performance fee movements +1.9p and impact of share buybacks +1.8p.

Neil England, Chairman of Augmentum Fintech plc commented:

“Despite challenging markets, the bulk of your Company’s investments have performed well and I am pleased to report that they made a positive contribution to the Company’s NAV per share after performance fee, which increased by 3.7p to 158.9p.

Your Company has now successfully exited five portfolio investments, all of which have been at or above the last reported holding value. This should provide investors with comfort that our valuations process is rigorous and corroborates the discipline our Portfolio Manager has exercised when evaluating new investments and their reporting on the portfolio.

We maintained our investment discipline over the last year and, with our strong cash reserves (£38.5 million at 31 March 2023, £50.0 million at 30 June 2023) we are well placed both to take advantage of new opportunities and to reinforce our appeal as a supportive investor.

Your Board believes that the Company will see a closing of the discount at which its shares trade over time and, with the underlying growth of the portfolio generally being very strong, expects that patient shareholders will be well rewarded.”

Tim Levene, CEO of Augmentum Fintech Management Limited commented:

“Our 10 highest value holdings have seen revenue growth at an impressive average of 117% year-on-year and raised over US$300 million in capital during a challenging macroeconomic and fundraising environment. Despite an increased focus from venture investors on companies displaying a clear path to profitability and reducing cash burn, the growth in our portfolio through the cycle reflects the quality of many of our companies and the unabated advance of digital transformation in the financial services sector.

We are seeing a material increase in the number of compelling investment opportunities at more pragmatic valuations and expect that to continue into 2024. Our fintech specialism and strong balance sheet position leave us well positioned to take advantage of more favourable investment conditions.”

Notes

1 The Board considers the NAV per share after any performance fees payable to be the most accurate way to reflect the underlying value of each share.
2 Annualised IRR on invested capital and realisations since inception using valuations at the last reporting date. This measure does not include the impact of net expenses and the performance fee provision.
3 Average months of cash runway based on current burn rate for non-cash generative companies in Top 10, using latest available data as of June 2023, excludes Cushon exited post year end.
4 NAV before performance fee.

Enquiries

About Augmentum Fintech

Augmentum invests in fast growing fintech businesses that are disrupting the financial services sector. Augmentum is the UK’s only publicly listed investment company focusing on the fintech sector in the UK and wider Europe, having launched on the main market of the London Stock Exchange in 2018, giving businesses access to patient capital and support, unrestricted by conventional fund timelines and giving public markets investors access to a largely privately held investment sector during its main period of growth.

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Augmentum Fintech plc

Annual Report and Financial Statements
for the year ended 31st March 2023

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CHAIRMAN’S STATEMENT

Performance Highlights

*  These are considered to be Alternative Performance Measures. Please see the Glossary and Alternative Performance Measures on page 79.

To read about our KPIs see page 22.

I am pleased to present our fifth annual report since the launch of the Company in March 2018. This report covers the year ended 31 March 2023.

Investment Policy

Your Company invests in early stage European fintech businesses which have technologies that are disruptive to the traditional financial services sectors and/or support the trend to digitalisation and market efficiency. A typical investment will offer the prospect of high growth and the potential to scale.

Our objective is to provide long-term capital growth to shareholders by offering them exposure to a diversified portfolio of private fintech companies during what is often their period of rapid value accretion.

Performance

Shareholders will be fully aware of the significant market volatility throughout the year under review. The war in Europe, inflation, rising interest rates after a prolonged period of close to free money, highly priced US technology stocks falling in value and the contagion from that have all been factors. Fast growing companies that need cash to fuel that growth have generally been out of favour.

Despite difficult markets, the bulk of your Company’s investments performed very well and I am pleased to report that they made a positive contribution to the Company’s net asset value (“NAV”) per share after performance fee1*, which increased by 3.7p to 158.9p.

The operational performance of portfolio companies was generally strong, with some stand out results, and the majority have cash runways that will fund their businesses through to profitability. In normal markets these performances would be expected to produce a strong NAV improvement, but valuations were negatively affected in some cases by declines in public market comparators.

The modest increase in the Company’s NAV per share after performance fee is nonetheless encouraging in a market where many others have suffered significant valuation write downs and illustrates that the diversified portfolio of investments we hold is important when individual sectors become stressed.

It is disappointing that the NAV growth we have enjoyed over the past five years is not reflected in our share price. For a long period, your Company enjoyed the highest premiums of any investment company listed in London. This reflected the opportunity for a public market investor to gain exposure to fast growing private fintech companies, which was otherwise not available to them. That opportunity in a vast addressable market is undimmed, yet the price at which the Company’s shares traded fell again across the period. The share price touched a low of 86.8p during the year and ended the period at 97.0p, representing a 27.1% reduction from the price at 31 March 2022. The share price falling to a discount to NAV from the beginning of 2022 correlates with market sentiment turning against growth stocks and private equity generally, but is frustrating because it does not reflect the underlying performance or the potential of the Company’s portfolio and seemingly gives little credit to the rigour of our valuations process. The proceeds from our recent portfolio disposals provide an illustration of the latter.

1* Note: The Board considers the NAV per share after any performance fees provision to be the most accurate way to reflect the underlying value of each share, whereas accounting standards require the Group’s consolidated NAV per share to be presented before such fees are deducted as a consequence of our Portfolio Manager being within our Group structure and the fees therefore being eliminated on consolidation.

Portfolio

The most significant portfolio transaction in the year was the receipt of proceeds of £42.8 million early in the period from the completion of abrdn’s acquisition of interactive investor (“ii”), which was the Company’s largest investment. The transaction delivered an 84.8% IRR and 11.1 times multiple on invested capital  .

Post year end, another significant disposal was made when the Company sold its holding in Cushon to NatWest Group. The £22.8 million proceeds of this sale, which is fully reflected in the year end valuation, represents a multiple of 2.1 times invested capital and an IRR of 61.6%.

Your Company has now made five successful portfolio investment exits, all of which have been at or above the last reported holding value. This should provide investors with comfort that our valuations process is rigorous and corroborates the discipline our Portfolio Manager has exercised when evaluating new investments and their reporting on the portfolio.

Deployments in the year included new investments of £4.0 million in Israeli payments monitoring and acceptance fintech Kipp and €3 million (£2.6 million) in Berlin-based cyber insurance platform Baobab. A further £13.1 million of follow-on funding was made to support existing portfolio companies. These included Zopa (£4.0 million), Anyfin (£2.7 million), Previse (£2.0 million), Habito (£1.3 million), Wayhome (£0.9 million) and Cushon (£0.8 million).

Since the year end we have also participated in the Series B fundraising of Volt, investing a further £5.3 million.

There is a full review of the portfolio and investment transactions in the year in the Portfolio Manager’s Review beginning on page 15.

Portfolio Management

Our investment team continues to evaluate a wide range of opportunities, reviewing financial and commercial metrics in order to identify those most likely to be successful. We are active investors and work closely with the companies we invest in, often taking either a board or an observer seat, and working closely with management to guide strategy consistent with long-term value creation. Our portfolio is already diversified across different fintech sectors and maturity stages and we are keen to expand it further. We are committed to responsible investing. We integrate Environmental, Social and Governance (“ESG”) factors in our investment analysis, due diligence and operating practices as we believe that these are key in mitigating risk and creating sustainable, profitable investments.

Valuations

Your Board considers its governance role in the valuations process to be of utmost importance. Shareholders in investment companies with a private portfolio are understandably sceptical of valuations when they don’t see them change as much or as rapidly as they do in many public companies. The results we are reporting reflect an in-depth and challenging process, supported by our advisers.

We have always maintained a consistent, rigorous and disciplined approach to valuations. We did not write up the value of your Company’s investments to the levels attributed to many fintech companies when the market was very bullish. It follows that the level of any adjustments we have needed to make this year is relatively small in comparison to some other funds, quite apart from strong growth offsetting reductions in comparative multiples.

We have carefully reviewed both the status and the forecasts of all of the portfolio companies, used appropriate and consistent methodologies to determine the value of each investment and to sense check our conclusions. We also benefit from some of our investments occupying a senior position in the capital structures of the investee companies, protecting against downside risk.

Discount Control

The Company’s shares traded at a discount to NAV for the whole of the year under review and up to the date of this report, notwithstanding the underlying value and strong prospects of the portfolio.

The Board has instigated a programme of highly accretive buybacks, seeking to convey to the market our confidence in the value of the portfolio. Directors and others associated with the Company have also purchased shares. We continued with these accretive buybacks through the year under review, with all the shares purchased by the Company being held in treasury to potentially reissue when the share price returns to a premium.

5,806,934 shares were bought back into treasury during the year to 31 March 2023, at an average price of 102.9p per share, representing an average discount to the prevailing NAV per share after performance fee of 34.1% and adding 1.8p/1.1% to the NAV per share. A further 3,918,878 shares have been bought back since March, up to 30 June 2023, at an average price of 98.6p per share.

We will seek to renew shareholders’ authorities to issue and buy back shares at the forthcoming AGM.

Potential Returns of Capital

As set out on page 24 of this annual report, the Company may, at the discretion of the Directors, return a proportion of the gains realised during a year from the disposal of investments. Factors influencing this will include the quantum of any sale proceeds, the opportunities offered by the investment pipeline and the working capital requirements of the Company. I explained in last year’s report that following the sale of ii we considered whether some of the proceeds should be returned to shareholders or retained to facilitate future investment opportunities. The Company has not reached the scale to which we aspire and the current share price discount and unfavourable market conditions are frustrating our ability to raise new capital for investment. After consultation with major shareholders last year we decided to retain a good proportion of these proceeds for reinvestment to support our capital growth objective and utilise the balance to support an accretive share buyback programme when the discount is high. The Board reconsidered this decision during the year and decided to commit further to the buyback programme whilst retaining funds to take advantage of new investment opportunities and to provide follow-on support to existing investments, which are often available on favourable terms.

Dividend

No dividend has been declared or recommended for the year. Your Company is focused on providing capital growth and has a policy to only pay dividends to the extent that it is necessary to maintain the Company’s investment trust status.

Registrar

Shareholders should note that, as part of our regular review of service providers, we have decided to change the Company's registrar from Link Group to Computershare Investor Services PLC. This change will take place on 18 December 2023.

AGM

Our AGM will be held on Tuesday 19 September 2023 at 11.00 a.m. at the Augmentum Fintech Management Limited office at 4 Chiswell Street EC1Y 4UP. The Notice of AGM will be published shortly after the publication of this annual report. Your Board strongly encourages shareholders to register their votes in advance by voting online using the Registrar’s portal, www.signalshares.com or, if they are not held directly, by instructing the nominee company through which the shares are held. Registering votes online will not preclude shareholders from attending the meeting.

One of our resolutions will be to seek shareholder authority to issue shares by reference to the NAV per share after performance fee as we believe this to be the best reflection of value, as explained in the note at the foot of page 2.

Further details of this and other resolutions will be found in the Notice of AGM, which will be published and sent to shareholders shortly after the publication of this annual report. Both documents will also be available to view on or download from the Company’s website at www.augmentum.vc.

Your Directors consider all the resolutions that will be listed in the Notice of AGM to be in the best interests of the Company and its shareholders and recommend voting in favour of them, as your Directors intend to do in respect of their own holdings.

Outlook

Inflation remains high, along with interest rates as the authorities strive to bring it back to target levels. Early stage growth portfolios may currently be out of favour, but Augmentum has proved its model, well-illustrated by our realisations all producing returns in excess of their previous carrying value. Our largest 5 investments, in particular, are performing well.

The underlying need to digitalise and transform last century’s infrastructure remains, as nearly all financial services sectors continue to be dominated by traditional operators whose operations cannot ignore the rapid development of less costly, and in many cases more secure, business models. We maintained our investment discipline over the last year and, with our strong cash reserves (£38.5 million at 31 March 2023, £50.0 million at 30 June 2023), we are well placed both to take advantage of new opportunities and to reinforce our appeal as a supportive investor.

Your Board believes that the Company will see a closing of the discount at which its shares trade over time and, with the underlying growth of the portfolio generally being very strong, expects that patient shareholders will be well rewarded.

Neil England

Chairman

3 July 2023

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PORTFOLIO MANAGER’S REVIEW

Overview

I write to you after another 12 months of uncertainty following the economy-wide adjustment to a higher interest rate environment. Having flown the furthest under the market conditions of 2020-21, it is the listed technology sector that has faced the most significant correction to valuations in response to rising rates. Despite a bounce, in particular by the FAANG stocks, listed tech stocks continue to trade well below their 10-year average. The increased cost of capital has reordered priorities from growth to profitability, and returned focus to core business lines and expense control. The market has become more discerning of companies with strong fundamentals and those without, and the significant rotation of capital into low-risk assets means that valuation multiples for listed growth stocks, and fintechs within this, remain compressed.

The stability of Augmentum’s NAV per share over the past twelve months therefore belies the real story of continued progress and maturity in the portfolio. Our 10 highest value holdings have seen revenue growth at an impressive average of 117% year-on-year and raised over US$300 million in equity capital despite a more challenging macroeconomic and fundraising environment. Yet this strong performance has largely been offset by multiple compression in comparable public markets. The growth in our portfolio through the cycle reflects the quality of many of our companies and the unabated advance of digital transformation in the financial services sector.

The digital-asset sector suffered from a series of high-profile collapses and subsequent contagion during 2022. These events highlighted critical gaps in regulation and naivety in the nascent market structure. The response from regulators has been an acceleration in policy development and enforcement action. Europe has positioned itself as a leader through the Markets in Crypto Asset (MiCA) regulation that will apply from 2024 and brings welcome clarity to digital asset firms who are committed to building compliant, legitimate businesses. This clarity is lacking in the US market where enforcement action against high profile firms has increased and we expect to see the biggest players in the market move their domicile from the US to Europe, the Middle East or Asia unless this changes in the coming year.

Recent advances in generative AI have instigated a wave of interest in the technology and its future application in financial services. We believe that generative AI will significantly increase the efficiency of generalisable content-related tasks across industries such as coding and marketing. For more complex financial services use cases, where accuracy and compliance are imperative, it is still early from both a technology and regulatory perspective. For now we remain in discovery mode but it is our job as thesis driven investors to be ahead of the curve on the investment opportunities that these innovative technologies create.

From our perspective, it has taken the full year of 2022 and the first half of 2023 for the valuation expectations of founding teams and investors to reconverge. Our level of new investment activity, lower than previous periods, has reflected this. We expect the second half of 2023 to be more active than the first half as a result of a larger number of better quality fintechs coming to the market for more capital. Following the reset to private market valuations, this will be an exciting time to deploy early-stage capital.

We are a specialist investor in high potential businesses that are disrupting one of the largest and most profitable sectors of the economy. Our fintech specialism and strong balance sheet position leave us well positioned to take advantage of normalised investment conditions. We remain committed to a diversified, private-market strategy to deliver long-term returns.

Investment Activity

Investment activity during the year totalled £19.9 million. This is lower than the Company’s annual average since IPO of £36.4 million but has been appropriate during the period of adjustment that the investment environment has moved through.

New investment activity followed from high conviction thesis development in the areas of digital payments and cyber-insurance, and has been the product of our pan-European strategy, with both new investments located outside the UK.

In my half-year report I introduced our investment in Kipp, an Israeli innovator in online payment acceptance. In the period since, we have welcomed German cyber-insurance provider Baobab to the portfolio. Both companies characterise our early-stage strategy with teams who bring deep domain-expertise, technology that drives differentiation and a competitive advantage, and large, growing market opportunities.

These new investments, totalling £6.6 million, were secured off-market, outside of competitive investment processes, on the basis of strong relationships with the founding teams and their confidence in Augmentum as the right investment partner. Our thesis driven approach is particularly important when identifying early-stage opportunities ahead of our competition.

We continue to take advantage of our ability to support the strong performers in the portfolio with further capital and completed eight follow-on investments totalling £13.1 million.

With proceeds, now received, from our fifth portfolio exit, of Cushon to NatWest Group, the Company ends the period with a strong balance sheet.

New Investments

Falling within our thesis of optimisation in the digital payment technology stack, Augmentum invested £4.0 million in Kipp in May 2022. The acceptance of card payments in ecommerce transactions remains a critical issue for merchants and issuing banks, particularly in cross-border payment contexts. Kipp’s platform enables these parties to engage in real time information sharing to reduce rates of false-positive payment decline. Kipp is delivering significant additional conversion of transactions that would otherwise be lost across their initial cohort of international merchant customers.

Cyber-attacks represent a growing risk to businesses of all sizes and the insurance market is undergoing a rapid expansion, with the value of premiums expected to scale to US$22 billion by 20251. An integrated, data-driven approach is critical to understanding risk at an individual business level and to price policies accordingly. Incumbent insurers are not effectively set up to carry out data collection and assessment at scale and herein lies the opportunity for fintechs. In January 2023 Augmentum invested £2.6 million in Baobab, who provide coverage to SMEs in Germany and Austria with capacity provided by Zurich Insurance.

1  Munich Re, 2022

Portfolio

As I wrote to you in my half-year report, our team’s experience as operators and active engagement through board positions has played a significant role in helping our companies to navigate the change in market conditions. Throughout 2022 and 2023 cost control and sustainable growth have been core areas of focus.

Follow-on funding is also another avenue of portfolio support and we completed eight investments into the existing portfolio during the period. The funding rounds we participated in either supported companies with runway to breakeven or provided additional time ahead of their next funding round. For the companies that will fundraise in the year ahead we expect conditions to be more favourable, assuming they have used this period of market resettlement to realign strategy and costs to current conditions.

Follow-on Investments and Other Top 10

Early in the period, in July 2022, we invested £2.0 million in Previse’s £14.5 million Series B funding round led by Tencent. Previse provides embedded lending and payment technology within B2B supply chains. They are the technology provider behind Mastercard’s virtual card solution for businesses available in more than 100 markets. During 2023 Previse has taken steps to rationalise its product suite and there has been compression in the valuation multiples of listed peers. The fair value of our holding has accordingly reduced £1.9 million in the year.

In November 2022 we invested a further £2.7 million into Anyfin, the leading consumer credit refinancing player in the Nordics and Germany. Augmentum’s investment formed part of a €30 million Series C round which will take the company to breakeven in 2024. The round was led by existing investors along with a strategic investment from the venture investment arm of Citibank. Anyfin has seen strong counter cyclical demand for its product but has maintained discipline in underwriting approach given market conditions. The revaluation of our holding, down £3.3 million, reflects compression in market multiples in the listed lending vertical.

In January 2023 we invested £4 million into Zopa which, along with a £0.5 million uplift, takes the total value of our holding to £30.1 million. Zopa continues to deliver exceptional performance as a fully licensed bank with increasingly diversified lending activity and total deposits approaching £4 billion. The company is performing ahead of budget and on track to achieve full year profitability in 2023. The ability to maintain low cost of capital through deposits and to draw from a 17 year lending track record translate into a distinct competitive advantage for Zopa that is particularly powerful in the current economic environment.

We made four small investments of under £1.5 million each as part of funding rounds for Farewill, Wayhome and Habito, and supported Cushon through their acquisition process with a short-term investment that has since been returned as part of exit proceeds.

At the beginning of the calendar year we received a dividend of £0.6 million from BullionVault following strong trading performance and profitability, driving a £2.1 million valuation increase. The company is a leading precious metals investment marketplace and continues to trade well during periods of volatility in mainstream markets.

Grover (valuation up £0.7 million in the year) has enjoyed a successful year in its transition towards long-term profitable growth. Total subscription value as at the reporting date was rapidly nearing €250 million representing 50% year-on-year growth in the top line despite a near 50% year-on-year reduction in quarterly marketing spend. Average cost of customer acquisition has fallen by 25% since Q1 2022 with net revenue retention above 100%. Grover’s nascent B2B offering now represents fully 15% of overall subscription revenue, with the international business growing at nearly 20% month-on-month and growth outstripping the retail business in the domestic market.

Our second largest holding, Tide, is well established as the leading digital business banking platform for SMEs in the UK with half a million customers and market share of 9%. In the last 12 months considerable progress has been made on revenue diversification and geographical expansion with the official launch of Tide India taking place in December 2022. Year-on-year revenue growth of 74% has more than offset valuation multiple compression to deliver an 18% (£7.5 million) increase in our holding value. Tide completed their first acquisition; absorbing SME credit marketplace Funding Options into the business to broaden credit access for Tide customers. Tide is well positioned to consider additional acquisitions in the current market environment in order to further broaden product capabilities or geographical presence.

Fifty countries and counting now have an Open Banking initiative in place and account-to-account (“A2A”) payments - where funds are moved in real-time between transacting parties - is the fastest growing use case. Volt are established as a leading provider of account-to-account payment connectivity. Through a unique network aggregation model, Volt’s coverage is expanding in line with the global roll-out of Open Banking initiatives, delivering the consistency and quality of service demanded by the highest-volume ecommerce merchants and facilitators in twenty-five countries and counting. In June 2023 Worldpay, the world’s largest merchant acquirer, and ecommerce software giant Shopify selected Volt as their global A2A partner. The increase in the value of our holding, of £8.6 million, has been supported by exceptional revenue growth and post-period end Volt announced a Series B fundraising of US$60 million led by US based IVP with Augmentum investing a further £5.3 million.

Monese continues to advance their B2B strategy while maintaining moderated growth in their pan-European retail banking platform. In May 2023 the company announced their coreless banking platform under the new brand XYB. The last twelve months have been a period of adjustment for the company to the new strategy and market environment and we take confidence from the quality of customers that XYB has been able to secure, supported by a healthy pipeline. In September 2022, the strategic venture arm of HSBC joined Investec Bank with a £30 million investment driven by their interest in XYBs technology and delivery capability. Despite this positive newsflow Monese's valuation fell £1.5 million.

Onfido’s product is primarily used in customer on-boarding with volumes therefore influenced by product demand. With a mix of financial services verticals represented in the customer base, reduced on-boarding in areas such as digital assets has been offset by continued expansion in verticals such as digital banking. Onfido are another of our portfolio who have taken advantage of value-pricing in the market to extend product capabilities through acquisition, announcing the acquisition of Airside Mobile in May 2023 to accelerate product development in the area of re-usable digital ID. The reduction in the fair value of our holding, of £5.1 million, is reflective of compression in the valuation multiples of listed peers despite a positive year-on-year growth rate and being on a fully funded pathway to profitability.

Our investments in the digital asset sector make up 5.2% (2022: 8.6%) of the portfolio. Our thesis has focused on backing companies that have a long-term view and are intent on building an institutional grade proposition underpinned by robust regulatory frameworks. Despite our continued conviction in this approach, our investments so far have disappointed, and we are reporting significant reductions in the fair value of our positions in Gemini, Tesseract and Parafi, of £2.2 million, £6.3 million and £2.0 million, respectively. In the last 12 months digital asset markets have been undermined by actors operating without regard for regulation and the general reduction in the demand for risk assets in the new macroeconomic environment. The growth trajectories of our companies have been impacted by these events and each has taken steps to adjust costs and strategy to current trading conditions.

Exits

The Company saw its second significant exit during the year, with interactive investor, the direct-to-consumer fixed fee investment platform, acquired by abrdn in May 2022 for £1.49 billion. This resulted in proceeds for the Company of £42.8 million, delivering an IRR of 84.8% and multiple on capital invested of 11.1 times. interactive investor was an early investment in the Augmentum portfolio, quite antithetical to most venture capital radars at the point of investment. Under strong leadership and disciplined focus the company grew rapidly to over £55 billion of customer assets under administration, becoming the second largest self-directed investment platform in the UK.

The acquisition of workplace pensions provider Cushon by NatWest Group was announced during the period in February 2023 and, following regulatory approval, completed post-period end on 1st June. Augmentum received proceeds of £22.8 million from the sale, giving an IRR of 61.6% and multiple on capital invested of 2.1 times. Realised value represents a c40% uplift on the holding value we reported in the Company’s half year results. This marks the fifth exit from the portfolio and is a further example of our measured approach to valuation; each exit to date has been realised above or on-par with the previously reported carrying value.

Performance

For the year to 31 March 2023 we are reporting gains on investments of £9.9 million (2022 £56.7 million). Since IPO this represents an IRR of 18.5% on the capital that we have deployed.

We continue to take a consistent and disciplined approach to arrive at fair values for the Company’s portfolio positions. The valuation methodology (or methodologies) applied to each company is selected with consideration of individual stage and circumstance. Our growing track record of exits shows realisations above or on-par with the last reported holding value.

In recent reports we have spoken more actively to shareholders about the downside protections that form an integral part of the structure of our typical investments. The most common protections across the portfolio are liquidation preferences and anti-dilution provisions with 21 out of 25 portfolio positions protected by at least one of these.

These structures differentiate our shareholdings from ordinary shares held in public or private companies because they protect value in the eventuality that a company’s headline valuation is reduced. Through the market volatility of 2022 these structures provided additional support to the holding value of some of our positions, particularly those held in earlier stage companies.

Our diversified portfolio approach also remains important. This extends across verticals, stages of maturity and geographies and reduces our overall exposure to market impact on any one of these.

Outlook

In the dislocation that follows from periods of economic turbulence, entrepreneurs are presented with new opportunities to establish ground-breaking businesses. This principle can also apply to venture capital firms that operate with a clear purpose and we have welcomed the general retreat of ‘tourist capital’ and the so-called ‘mega-rounds’ that played a distortionary role in private markets during the second half of 2020 and 2021.

Quality deal flow is visibly improving as companies funded internally through the turbulence of 2022 are now returning to market. Amongst them are high potential prospects in line with our mandate which are bolstering the investment pipeline. Increasing levels of “dry powder” in the market maintain competition for quality companies but our thesis driven approach and unique proposition – fintech specialism, patient capital and operating experience – continue to cut through.

Less compelling investment opportunities are also returning to market, and we anticipate a further shakeout and consolidation of companies to come. Several of our established portfolio companies have already found value-opportunities to add product and personnel capabilities through acquisition. As fast-growing market leaders in their respective fintech verticals they are well positioned to consider further opportunities in the period ahead. Investors should see this is another signal of maturity in the portfolio along with progression towards profitability and exit.

The headroom for further disruption in financial services remains significant and recent policy dialogue provides us many reasons for optimism around the future of the technology sector in the UK and Europe. Strong cross-party support was in evidence at the recent London Tech Week (June 2023) where both the Prime Minister and Leader of the Opposition spoke in favour of further investment and progressive regulation in the UK in order to capture the economy-wide benefits of a generational opportunity in AI. Reforms such as the removal of the fee cap on defined contribution pension funds and a potential UK sovereign wealth fund will begin to address the historic under-investment from UK institutions in the venture capital asset class. In the interests of the UK building on its preeminent position in European fintech we hope and expect that those with the power to implement these measures proceed to do so in a full and timely fashion.

As we navigate an evolving investment and technology landscape where change is not uniform across countries, it is ever more important to continue to develop our brand across Europe. We are well positioned to identify and win exceptional investment opportunities and build on our reputation as one of Europe’s leading fintech venture investors.

Tim Levene CEO

Augmentum Fintech Management Ltd

3 July 2023

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INVESTMENT OBJECTIVE AND POLICY

Investment objective

The Company’s investment objective is to generate capital growth over the long term through investment in a focused portfolio of fast growing and/or high potential private financial services technology (“fintech”) businesses based predominantly in the UK and wider Europe.

Investment policy

In order to achieve its investment objective, the Company invests in early or later stage investments in unquoted fintech businesses. The Company intends to realise value through exiting these investments over time.

The Company seeks exposure to early stage businesses which are high growth, with scalable opportunities, and have disruptive technologies in the banking, insurance and wealth and asset management sectors as well as those that provide services to underpin the financial sector and other cross-industry propositions.

Investments are expected to be mainly in the form of equity and equity-related instruments issued by portfolio companies, although investments may be made by way of convertible debt instruments. The Company intends to invest in unquoted companies and will ensure that the Company has suitable investor protection rights where appropriate. The Company may also invest in partnerships, limited liability partnerships and other legal forms of entity. The Company will not invest in publicly traded companies. However, portfolio companies may seek initial public offerings from time to time, in which case the Company may continue to hold such investments without restriction.

The Company may acquire investments directly or by way of holdings in special purpose vehicles or intermediate holding entities (such as the Partnership*).

The Management Team has historically taken a board or board observer position at investee companies and, where in the best interests of the Company, will do so in relation to future investee companies.

The Company’s portfolio is expected to be diversified across a number of geographical areas predominantly within the UK and wider Europe, and the Company will at all times invest and manage the portfolio in a manner consistent with spreading investment risk.

The Management Team will actively manage the portfolio to maximise returns, including helping to scale the team, refining and driving key performance indicators, stimulating growth, and positively influencing future financing and exits.

Investment restrictions

The Company will invest and manage its assets with the object of spreading risk through the following investment restrictions:

• the value of no single investment (including related investments in group entities or related parties) will represent more than 15 per cent. of Net Asset Value;

• the aggregate value of seed stage investments will represent no more than 1 per cent. of Net Asset Value; and

• at least 80 per cent. of Net Asset Value will be invested in businesses which are headquartered in or have their main centre of business in the UK or wider Europe.

In addition, the Company will itself not invest more than 15 per cent. of its gross assets in other investment companies or investment trusts which are listed on the Official List of the FCA.

Each of the restrictions above will be calculated at the time of investment and disregard the effect of the receipt of rights, bonuses, benefits in the nature of capital or by reason of any other action affecting every holder of that investment. The Company will not be required to dispose of any investment or to rebalance the portfolio as a result of a change in the respective valuations of its assets.

Hedging and derivatives

Save for investments made using equity-related instruments as described above, the Company will not employ derivatives of any kind for investment purposes, but derivatives may be used for currency hedging purposes.

Borrowing policy

The Company may, from time to time, use borrowings to manage its working capital requirements but shall not borrow for investment purposes. Borrowings will not exceed 10 per cent. of the Company’s Net Asset Value, calculated at the time of borrowing.

Cash management

The Company may hold cash on deposit and may invest in cash equivalent investments, which may include short-term investments in money market type funds and tradeable debt securities.

There is no restriction on the amount of cash or cash equivalent investments that the Company may hold or where it is held. The Board has agreed prudent cash management guidelines with the AIFM and the Portfolio Manager to ensure an appropriate risk/return profile is maintained. Cash and cash equivalents are held with approved counterparties.

It is expected that the Company will hold between 5 and 15 per cent. of its Gross Assets in cash or cash equivalent investments, for the purpose of making follow-on investments in accordance with the Company’s investment policy and to manage the working capital requirements of the Company.

Changes to the investment policy

No material change will be made to the investment policy without the approval of Shareholders by ordinary resolution. Non-material changes to the investment policy may be approved by the Board. In the event of a breach of the investment policy set out above or the investment and gearing restrictions set out therein, the Management Team shall inform the AIFM and the Board upon becoming aware of the same and if the AIFM and/or the Board considers the breach to be material, notification will be made to a Regulatory Information Service.

* Please refer to the Glossary on page 79.

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PORTFOLIO REVIEW

^  Held via Augmentum I LP

*  There are fifteen other investments (31 March 2022: fourteen). See pages 13 and 14 for further details.

** The Other Investments investment loss is primarily from write-downs in the valuations of Gemini and Tesseract, as detailed on page 17.

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KEY INVESTMENTS

Grover

Berlin-based Grover (www.grover.com) is the leading consumer-tech subscription platform, bringing the access economy to the consumer electronics market by offering a simple, monthly subscription model for technology products. Private and business customers have access to over 5,000 products including smartphones, laptops, virtual reality technology, wearables and smart home appliances. The Grover service allows users to keep, switch, buy, or return products depending on their individual needs. Rentals are available in Germany, Austria, the Netherlands, Spain and the US. Grover is at the forefront of the circular economy, with products being returned, refurbished and recirculated until the end of their usable life. Grover has circulated over 1 million devices. With a total financing volume of around €1.4 billion to date and over 400 employees, Grover is one of the fastest-growing scale-ups in Europe.

In September 2019 Augmentum led a €11 million funding round with a €6 million convertible loan note (“CLN”) investment. This coincided with Grover signing a new €30 million debt facility with Varengold Bank, one of Germany’s major fintech banking partners. In March 2021 Grover completed a €60 million Series B funding round, with Augmentum participating and converting its CLN. The round was made up of €45 million from equity investors and €15 million in venture debt financing. With its Series C funding round in April 2022 Grover raised US$330 million in equity and debt funding, bringing the company’s valuation to over US$1 billion.

As an unquoted German company, Grover is not required to publicly file audited accounts.

^  See note 13 on pages 62 and 63.

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Tide

Tide’s (www.tide.co) mission is to help SMEs save time and money in the running of their businesses. Customers can be set up with an account number and sort code in less than 10 minutes, and the company is building a comprehensive suite of digital banking services for businesses, including automated accounting, instant access to credit, card control and quick, mobile invoicing. Tide has almost 10% market share of small business accounts in the UK.

In November 2022, Tide acquired Funding Options, a leading UK marketplace for SMEs seeking business finance, subject to FCA approval. The merged credit business will give Tide’s 500,000 customers access to a wider range of credit options and creates one of the UK’s biggest digital marketplaces for SME credit. In December 2022, Tide launched in India with two business banking solutions – the Tide Business Account and its RuPay-powered Tide Expense Card.

Augmentum led Tide’s £44.1 million first round of Series B funding in September 2019, alongside Japanese investment firm The SBI Group. In July 2021 Tide completed an £80 million Series C funding round led by Apax Digital, in which Augmentum invested an additional £2.2 million and into which the £2.5 million loan note converted.

As per last filed audited accounts of the investee company for the year to 31 December 2021:

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Zopa

Zopa (www.zopa.com) was founded in 2005 as the world’s first peer-to-peer (“P2P”) lending company, aiming to give people access to simpler, better-value loans and investments. Following a funding round in 2020 Zopa launched Zopa Bank and was granted a full UK banking licence, which allowed it to offer a wider product range. It is regulated by both the PRA and the FCA.

After 16 years of delivering positive returns for investors, Zopa closed the P2P lending side of its business in 2021 to fully focus on Zopa Bank. Current products include fixed term and smart savings, wedding and home improvement loans, debt consolidation loans, a credit card and motor finance.

Zopa is a multiple awards winner. In 2021 Zopa was awarded Best Personal Loan Provider and Best Credit Card Provider by the British Bank Awards, Best Online Savings Provider by Moneynet Personal Finance, Best use of IT in Consumer Finance in the FStech Awards and won the Personal Credit Cards Innovation award in the Finder Lending Innovation Awards. In 2022 it won Best Short Term Fixed Rate Bond Provider, Best Fixed Rate Bond Provider and Best New Savings Provider in the Savings Champion Awards and was awarded Banking Brand of the Year 2022 in the MoneyNet Awards.

Augmentum participated in a £20 million funding round led by Silverstripe in March 2021, in October 2021 participated with a further £10 million investment in a £220 million round led by SoftBank and in February 2023 invested a further £4 million as part of a £75 million funding round alongside other existing investors.

As per last filed audited accounts of the investee company for the year to 31 December 2021:

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Cushon

Cushon (www.cushon.co.uk) provides workplace pensions and payroll-linked ISAs across the UK and is authorised by The Pensions Regulator to operate a master trust pension scheme. In January 2021, Cushon became the first UK pension provider to launch a fully carbon neutral ‘Net Zero Now’ pension product. In April 2022 it finalised the acquisition of Creative Benefits, manager of Creative Pension Trust, making it the fifth largest master trust pension provider in the UK and doubling its assets under management.

NatWest Group, the FTSE 100 banking and financial services group, announced in February 2023 that it had agreed to acquire a majority shareholding in Cushon. The acquisition was completed on 1 June 2023.

Augmentum invested £5 million in Cushon in June 2021 and followed up with a further £5 million in March 2022 and £750,000 in December 2022.

As per last filed audited accounts of the investee company for the year to 31 March 2022:

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Volt

Volt (www.volt.io) is a provider of account-to-account payments connectivity for international merchants and payment service providers (PSPs). An application of Open Banking, account-to-account payments – where funds are moved directly from one bank account to another rather than via payment rails – deliver benefits to both consumers and merchants. This helps merchants shorten their cash cycle, increase conversion and lower their costs. In October 2021 Volt announced their partnership with Worldline, the European leader in payments and transactional services, giving over 600 enterprise-level merchants globally access to Volt’s open payments infrastructure. It also announced its expansion into Brazil in November 2021 to integrate Brazil’s domestic instant payments network, Pix, and established its physical presence in São Paolo.

Augmentum invested £0.5 million in Volt in December 2020 and a further £4 million in June 2021.

Volt is not required to publicly file audited accounts.

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Monese

With Monese (www.monese.com) you can open a UK or European current account in minutes from your mobile, with a photo ID and a video selfie. Their core customers are amongst the hundreds of millions of people who live some part of their life in another country - whether it’s for travel, work, business, study, family, or retirement.

With its mobile-only dual UK and Euro IBAN current account, its portability across 31 countries, and both the app and its customer service available in 15 languages, Monese allows people and businesses to bank like a local across the UK and Europe. Launched in 2015 Monese now has more than 2 million registered users. 70% of incoming funds are from salary payments, indicating that customers are using Monese as their primary account. In October 2020 Mastercard and Monese announced a multi-year strategic partnership, with Monese becoming a principal Mastercard issuer. Monese’s new Banking as a Service (“BaaS”) platform, which arrived following deals by Monese with Mastercard and core banking provider Thought Machine, has been adopted by Investec for its private client transactional banking service. In December 2021 the company expanded its credit and lending capabilities through the acquisition of financial services provider Trezeo.

Augmentum is invested alongside Kinnevik, PayPal, International Airlines Group, Investec and HSBC Ventures.

* 2022: £0.9m of investment in a convertible loan note.

As per last filed audited accounts of the investee company for the year to 31 December 2021:

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BullionVault

BullionVault (www.bullionvault.co.uk) is a physical gold and silver market for private investors online. It enables people across 175 countries to buy and sell professional-grade bullion at the very best prices online, with US$3.7 billion of assets under administration, over US$100 million worth of gold and silver traded monthly, and over 100,000 clients.

Each user’s property is stored at an unbeaten low cost in secure, specialist vaults in London, New York, Toronto, Singapore and Zurich. BullionVault’s unique Daily Audit then proves the full allocation of client property every day.

The company generates solid monthly profits from trading, commission and interest. It is cash generative, dividend paying, and well-placed for any downturns in the wider financial markets.

As per last filed audited accounts of the investee company for the year to 31 October 2022:

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Onfido

Onfido (www.onfido.com) is building the new identity standard for the internet. Its AI-based technology assesses whether a user’s government-issued ID is genuine or fraudulent, and then compares it against their facial biometrics. Using computer vision and a number of other AI technologies, Onfido can verify against 4,500 different types of identity documents across 195 countries, using techniques like “facial liveness’’ to see patterns invisible to the human eye.

Onfido was founded in 2012. It has offices in London, San Francisco, New York, Lisbon, Paris, Amsterdam, New Delhi and Singapore and helps over 900 companies, including industry leaders such as Revolut, bung and Bitstamp. These customers are choosing Onfido over others because of its ability to scale, speed in on-boarding new customers (15 seconds for flash verification), preventing fraud, and its advanced biometric technology.

Augmentum invested an additional £3.7 million in a convertible loan note in December 2019 as part of a £4.7 million round. This converted into equity when Onfido raised an additional £64.7 million in April 2020.

As per last filed audited accounts of the investee company for the 13 months to 31 January 2022 (previous period 12 months to 31 December 2020):

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Anyfin

Anyfin (www.anyfin.com) was founded in 2017 by former executives of Klarna, Spotify and iZettle, and leverages technology to allow credit-worthy consumers the opportunity to improve their financial wellbeing by consolidating and refinancing existing credit agreements with improved interest rates, as well as offering smart budgeting tools. Anyfin is currently available in Sweden, Finland, Norway and Germany, with plans to expand across Europe as well as strengthen its product suite in existing markets.

Augmentum invested £7.2 million in Anyfin in September 2021 as part of a $52 million funding round and a further £2.7 million in November 2022.

As an unquoted Swedish company, Anyfin is not required to publicly file audited accounts.

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Intellis

Intellis, based in Switzerland, is an algorithmic powered quantitative hedge fund operating in the FX space. Intellis’ proprietary approach takes a conviction based assessment towards trading in the FX markets, a position which is uncorrelated to traditional news driven trading firms. They operate across a range of trading venues with a regulated Investment Trust fund structure that enables seamless onboarding of new Liquidity Partners.

Augmentum exercised its option to invest a further €1 million in March 2020 and a further €1 million in March 2021.

As an unquoted Swiss company, Intellis is not required to publicly file audited accounts.

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OTHER INVESTMENTS

Gemini

Gemini (www.gemini.com) enables individuals and institutions to safely and securely buy, sell and store cryptocurrencies. Gemini was founded in 2014 by Cameron and Tyler Winklevoss and has been built with a security and regulation first approach. Gemini operates as a New York trust company regulated by the New York State Department of Financial Services (NYSDFS) and was the first cryptocurrency exchange and custodian to secure SOC 1 Type 2 and SOC 2 Type 2 certification. Gemini entered the UK market in 2020 with an FCA Electronic Money Institution licence. Gemini announced acquisitions of portfolio management services company BITRIA and trading platform Omniex in January 2022.

Augmentum participated in Gemini’s first ever funding round in November 2021 with an investment of £10.2 million.

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Iwoca

Founded in 2011, iwoca (www.iwoca.co.uk) uses award-winning technology to disrupt small business lending across Europe. They offer short-term loans of up to £500,000 to SMEs across the UK and Germany. iwoca leverages online integrations with high-street banks, payment processors and sector-specific providers to look at thousands of data points for each business. These feed into a risk engine that enables the company to make a fair assessment of any business – from a retailer to a restaurant, a factory to a farm – and approve a credit facility within hours. The company has offered more than £3 billion of finance to over 70,000 SMEs in total and successfully lent £370 million through the Coronavirus Business Interruption Loan Scheme to businesses grappling with the fallout of the economic crisis caused by the coronavirus. iwoca launched iwocaPay in June 2020, an innovative business-to-business (B2B) ‘buy now pay later’ product to provide flexible payment terms to buyers while giving peace of mind to sellers.

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Farewill

In the next 10 years, £1 trillion of inheritance will pass between generations in the UK. Farewill (www.farewill.com) is a digital, all-in-one financial and legal services platform for dealing with death and after-death services, including wills, probate and cremation. In 2022 Farewill won National Will Writing Firm of the Year for the fourth year in a row and in 2021 was Probate Provider of the Year for the second consecutive year at the British Wills and Probate Awards. Farewill also won Best Funeral Information Provider and Low-cost Funeral Provider of the Year at the Good Funeral Awards 2021. The organisation has also been voted the UK’s best-rated death experts on Trustpilot, scoring an average customer approval rating of 4.9/5 from over 13,000 reviews. It is now the largest will writer in the UK.

Since its launch in 2015 Farewill’s customers have pledged over £450 million in legacy gifts written into their wills.

Augmentum led Farewill’s £7.5 million Series A fundraise in January 2019, with a £4 million investment, participated in its £20 million Series B, led by Highland Europe in July 2020, with £2.6 million, and in its further £4.8 million fundraise in March 2023, with £0.8 million.

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Wematch

Wematch (www.wematch.live) is a capital markets trading platform that helps financial institutions transition liquidity to an orderly electronic service, improving productivity and de-risking the process of voice broking. Their solution helps traders find liquidity, negotiate, trade, optimise and manage the lifecycle of their portfolios of assets and trade structures. Wematch is focused on structured products such as securities financing, OTC equity derivatives and OTC cleared interest rates derivatives.

Created in 2017, Wematch is headquartered in Tel Aviv and has offices in London and Paris. In February 2023 it passed a milestone of $150 billion notional in ongoing open trades on their platform and in March announced a collaboration with MTS Markets, owned by Euronext, creating MTS Swaps by Wematch.live, which aims to bridge the gap between legacy voice trading and pure electronic trading in the interdealer IRS market.

Augmentum invested £3.7 million in September 2021.

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Kipp

Kipp (www.letskipp.com) is an Israeli fintech that has developed an AI platform that transforms the traditional payment model to increase credit card transaction approvals, revenue, and customer satisfaction. Its core solution relies heavily on data enrichment and risk management to help merchants and banks split the cost of risk to incentivize issuing banks to approve more transactions.

Augmentum invested £4 million in May 2022.

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Wayhome

Wayhome (www.wayhome.co.uk) offers a unique part-own part-rent model of home ownership, requiring as little as 5% deposit with customers paying a market rent on the portion of the home that Wayhome owns, with the ability to increase the equity in the property as their financial circumstances allow. It launched to the public in September 2021, following closure of the initial phase of a £500 million pension fund investment and has crossed the milestone of completing the purchase of its first 100 homes.

Wayhome opens up owner-occupied residential property as an asset class for pension funds, who earn inflation-linked rent on the portion not owned by the occupier.

Augmentum invested £2.5 million in 2019, £1 million in 2021 and a further £0.9 million in the Company's financial year to 31 March 2023.

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Previse

Previse (www.previ.se) allows suppliers to be paid instantly. Previse’s artificial intelligence (“AI”) analyses the data from the invoices that sellers send to their large corporate customers. Predictive analytics identify the few problematic invoices, enabling the rest to be paid instantly. Previse charges the suppliers a small fee for the convenience, and shares the profit with the corporate buyer and the funder. Previse precisely quantifies dilution risk so that funders can underwrite pre‑approval payables at scale. In January 2022 Mastercard unveiled that its next-generation virtual card solution for instant B2B payments would use Previse’s machine learning capabilities. The solution combines Previse’s machine learning, with Mastercard’s core commercial solutions and global payment network, to transform how businesses send and receive payments.

Augmentum invested £250,000 in a convertible loan note in August 2019. This converted into equity as part of the company’s US$11 million funding round in March 2020, alongside Reefknot Investments and Mastercard, as well as existing investors Bessemer Venture Partners and Hambro Perks. Previse was awarded a £2.5 million Banking Competition Remedies’ Capability and Innovation Fund grant in August 2020 In May 2022 Previse closed the first phase of its series B financing round, which was led by Tencent, with US$18 million raised, including £2 million from Augmentum.

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FullCircl

FullCircl (www.fullcircl.com) was formed from the combination of Artesian and Duedil. Artesian was founded with a goal to change the way B2B sellers communicate with their customers. They built a powerful sales intelligence service using the latest in Artificial Intelligence and Natural Language Processing to automate many of the time consuming, repetitive tasks that cause the most pain for commercial people.

Augmentum originally invested in DueDil, which merged with Artesian in July 2021. Combining DueDil’s Business Information Graph (B.I.G.)™ and Premium APIs, and Artesian’s powerful web application and advanced rules engine delivers an easy to deploy solution for banks, insurers and FinTechs to engage, onboard and grow the right business customers.

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Baobab

Berlin based Baobab (www.baobab.io) is a pioneer in the provision of European cyber insurance for SMEs. With capacity provision from Zurich, Baobab uses a novel approach to underwriting, pricing and risk mitigation, and works with leading SME cyber security providers to prevent breaches for its insured customers.

Augmentum invested £2.6 million in January 2023.

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ParaFi

ParaFi Capital (www.parafi.com) is an investor in decentralised finance protocols that address tangible use cases of the technology and demonstrate signs of product-market fit. The ParaFi investment has drawn on their domain expertise developed in both traditional finance and crypto to identify and invest in leading protocols such as Compound (lending and interest accrual), Aave (asset borrowing), Uniswap (automated liquidity provision), Synthetix (synthetic asset trading) and MakerDAO (stablecoins). ParaFi also supports its protocols as a liquidity provider and governance participant.

Augmentum invested £2.8 million in ParaFi in January 2021. Co-investors include Bain Capital Ventures and Galaxy Digital.

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Epsor

Epsor (www.epsor.fr) is a Paris based provider of employee and retirement savings plans delivered through an open ecosystem, giving access to a broad range of asset management products accessible through its intuitive digital platform. Epsor serves more than 700 companies in France.

Augmentum invested £2.2 million in Epsor in June 2021.

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WhiskyInvestDirect

Founded in 2015, WhiskyInvestDirect (www.whiskyinvestdirect.com) was a subsidiary of BullionVault and is the online market for buying and selling Scotch whisky as it matures in barrel. This is an asset class that has a long track record of growth, yet has previously been opaque and inaccessible.

The business seeks to change the way some of the three billion litres of maturing Scottish whisky is owned, stored and financed, giving self-directed investors an opportunity to profit from whisky ownership, with the ability to trade 24/7. At its October 2022 financial year end the company's clients held 12 million LPA (Litres of Pure Alcohol) of spirit.

Augmentum's holding derives from WhiskeyInvestDirect being spun out of BullionVault in 2020.

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Sfermion

Sfermion is an investment fund focused on the non-fungible token (NFT) ecosystem. Their goal is to accelerate the emergence of the open metaverse by investing in the founders, companies, and entities creating the infrastructure and environments forming the foundations of our digital future.

Augmentum committed US$3 million in October 2021, to be drawn down in tranches.

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Tesseract

Tesseract (www.tesseractinvestment.com) is a forerunner in the dynamic digital asset sector, providing digital lending solutions to market makers and other institutional market participants via regulated custody and exchange platforms. Tesseract was founded in 2017, is regulated by the Finnish Financial Supervisory Authority (“FIN-FSA”), and was one of the first companies in the EU to obtain a 5AMLD (Fifth Anti-Money Laundering Directive) virtual asset service provider (“VASP”) licence. It is the only VASP with an express authorisation from the FIN-FSA to deploy client assets into decentralized finance or “DeFi”.

Taking no principal position, Tesseract provides an enabling crypto infrastructure to connect digital asset lenders with digital asset borrowers. This brings enhanced capital efficiency with commensurate cost reduction to trading, in a space that is currently significantly under-leveraged relative to traditional capital markets.

Augmentum led Tesseract’s Series A funding round in June 2021 with an investment of £7.3 million.

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Habito

Habito (www.habito.com) is transforming the United Kingdom’s £1.3 trillion mortgage market by taking the stress, arduous paperwork, hidden costs and confusing process out of financing a home.

Since launching in April 2016, Habito had brokered £7 billion of mortgages by July 2021. Habito launched its own buy‑to‑let mortgages in July 2019 and in March 2021 launched a 40-year fixed-rate mortgage ‘Habito One’, the UK’s longest-ever fixed rate mortgage.

In August 2019, Augmentum led Habito’s £35 million Series C funding round with a £5 million investment and added £1.3 million in the Company's financial year ended 31 March 2023.

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STRATEGIC REPORT

Business Review

The Strategic Report, set out on pages 18 to 30, provides a review of the Company’s business, the performance during the year and its strategy going forward. It also considers the principal risks and uncertainties facing the Company.

It also includes information for shareholders to assess how the Directors have performed their duty to promote the success of the Company. In this respect, information on how the Directors have discharged their duties under Section 172 of the Companies Act 2006 can be found on pages 26 and 27.

The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the date of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward‑looking information.

Strategy and Strategic Review

Throughout the year under review, the Company continued to operate as an approved investment trust, following its investment objective and policy, seeking to generate capital growth over the long term through investment in a focused portfolio of fast growing and/or high potential private financial services technology (“fintech”) businesses based predominantly in the UK and wider Europe.

The Company is an alternative investment fund (“AIF”) under the Alternative Investment Fund Managers Regulations (“UK AIFMD”) and has appointed Frostrow Capital LLP as its alternative investment fund manager (“AIFM”).

During the year, the Board, Frostrow Capital LLP as AIFM, and the Portfolio Manager undertook all strategic and administrative activities.

Principal Risks and Risk Management

The Board considers that the risks detailed below are the principal risks currently facing the Company. These are the risks that could affect the ability of the Company to deliver its strategy.

The Board is responsible for the ongoing identification, evaluation and management of the principal risks faced by the Company and has established a process for the regular review of these risks and their mitigation. This process accords with the UK Corporate Governance Code and the FRC’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting.

The Board has carried out a robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity. Further details of the risk management processes that are in place can be found in the Corporate Governance Statement.

The Board's policy on risk management has not materially changed during the course of the reporting period and up to the date of this report.

The Company maintains a framework of the key risks, with the policies and processes devised to monitor, manage and mitigate them where possible. This risk map is reviewed regularly by the Audit Committee.

Further details of the financial risks are included in note 13 starting on page 61.

The Company’s key risks fall broadly under the following categories:

Emerging Risks

The Company has carried out a robust assessment of the Company’s emerging and principal risks and the procedures in place to identify emerging risks are described below. The International Risk Governance Council definition of an ‘emerging’ risk is one that is new, or is a familiar risk in a new or unfamiliar context or under new context conditions (re‑emerging). Failure to identify emerging risks may cause mitigating actions to be reactive rather than being proactive and, in the worst case, could cause the Company to become unviable or otherwise fail or force the Company to change its structure, objective or strategy.

The Audit Committee reviews the risk map at least half-yearly. Emerging risks are discussed in detail as part of this process and also throughout the year to try to ensure that emerging (as well as known) risks are identified and, so far as practicable, mitigated.

The experience and knowledge of the Directors are useful in these discussions, as are update papers and advice received from the Board’s key service providers such as the Portfolio Manager, the AIFM and the Company’s Brokers. In addition, the Company is a member of the AIC, which provides regular technical updates as well as drawing members’ attention to forthcoming industry and/or regulatory issues and advising on compliance obligations.

Ukraine

The Board continues to monitor events in Ukraine and related sanctions. The Board remains confident that the situation should have no direct impact on the Company and has not identified any Russian shareholders in the Company. The portfolio companies have no Russian operations.

ESG

As mentioned above under Investment Risks, the Board recognises the risks posed by environmental, social and governance (“ESG”) factors, particularly with respect to the portfolio. Investment companies are currently exempt from reporting under the Task Force on Climate-Related Financial Disclosures (“TCFD”) and the Company has not voluntarily adopted the requirements, but recognises the potential for reputational risk should the Company not meet investor expectations in relation to ESG. This, together with ESG factors that might affect portfolio companies, is considered to be an emerging risk area for the Company. ESG risk assessment is embedded in the Portfolio Manager's due diligence and decision-making process when investing in new companies and monitored thereafter.

Performance and Prospects

Performance

The Board assesses the Company’s performance in meeting its objective against the following Key Performance Indicators (“KPIs”). Due to the unique nature and investment policy of the Company, with no direct listed competitors or comparable indices, the Board considers that there is no relevant external comparison against which to assess the KPIs and as such performance against the KPIs is considered on an absolute basis. Information on the Company’s performance is provided in the Chairman’s Statement and the Portfolio Manager’s Review. The KPIs have not changed from the prior year:

• The Net Asset Value (“NAV”) per share after performance fee total return*

The Directors regard the Company’s NAV per share after performance fee total return as being the critical measure of value delivered to shareholders over the long term. The Board considers that the NAV per share after performance fee better reflects the current value of each share than the consolidated NAV per share figure, the calculation of which eliminates the performance fee.

This is an Alternative Performance Measure (“APM”) and its calculation is explained in the Glossary on page 79 and in note 16 on page 64. Essentially, it adds back distributions made in the period to the change in the NAV after performance fee to arrive at a total return.

The Group’s NAV per share after performance fee total return for the year was 2.4% (2022: 19.0%). This result is discussed in the Chairman's Statement on page 2.

• The Total Shareholder Return (“TSR”)*

The Directors also regard the Company’s TSR as a key indicator of performance. Like the NAV per share after performance fee total return discussed above, this is an APM and its calculation is explained in the Glossary on page 79. The TSR is similar in nature to the NAV per share after performance fee total return, except that it adds back distributions made in the period to the change in the share price, to reflect more closely the return in the hands of shareholders. Share price performance is monitored closely by the Board.

The Company's TSR for the year was (27.1%) (2022: (16.4%)) reflecting the swing in market sentiment against listed growth and tech stocks from the beginning of 2022 and the associated wide discount to NAV at which the Company's shares have traded.

• Ongoing Charges Ratio (“OCR”)*

Ongoing charges represent the costs that shareholders can reasonably expect to pay from one year to the next, under normal circumstances.

The Board is cognisant of costs and reviews the level of expenses at each Board meeting. It works hard to maintain a sensible balance between strong service and keeping costs down.

The terms of appointment of the Company’s AIFM and the Portfolio Manager are set out on pages 23 and 24. In reviewing their continued appointment the Board took into account the ongoing charges ratio of other investment companies with specialist mandates.

The Group’s OCR for the year was 1.9% (2022: 1.7%).

Discount/Premium*

The Board monitors the price of the Company's shares in relation to their net asset value after performance fee and the premium/discount at which the shares trade. Shareholder approvals are sought each year to issue and buy back shares, which can assist in reducing share price volatility. However, the level of discount or premium is understood to be mostly a function of investor sentiment and demand for the shares, over which the Board has little influence. The Portfolio Manager, the management fee arrangements and the Company’s cost base generally have not changed and the current discount follows an extended period during which the shares traded at a premium to NAV. The Board does not believe that Company specific factors have influenced the discount. Rather, the share price falling to a discount to NAV at the beginning of 2022 correlates with market sentiment turning against growth stocks generally, with the Company's shares being affected notwithstanding the portfolio’s potential. This situation continued unabated through the year under review.

The Board has sought to communicate its faith in the underlying value of the portfolio and simultaneously to take advantage of the discount by undertaking a programme of accretive share buybacks, to the benefit of remaining shareholders. It is thought that helping to create additional market liquidity for sellers in this way also had an effect on stabilising the share price. All shares purchased are held in treasury and will potentially be reissued when the share price returns to a premium to NAV after performance fee. Shareholder authorities to issue and buy back shares are being sought at the forthcoming AGM.

* See Glossary on page 79

Prospects

The Company’s current position and prospects are described in the Chairman’s Statement and Portfolio Manager’s Review sections of this annual report.

Performance and Future developments

The Board’s primary focus is on the Portfolio Manager’s investment approach and performance. The subject is thoroughly discussed at every Board meeting.

In addition, the AIFM updates the Board on company communications, promotions and investor feedback, as well as wider investment issues.

An outline of performance, investment activity and strategy, market background during the year and the outlook is provided in the Chairman’s Statement on pages 2 to 4 and the Portfolio Manager’s Review on pages 15 to 17.

Viability Statement

The Board has considered the Company’s financial position, including its ability to liquidate portfolio assets and meet its expenses as they fall due, and notes the following:

As part of its review the Board considered the impact of a significant and prolonged decline in the Company’s performance and prospects. This included a range of plausible downside scenarios such as reviewing the effects of substantial falls in investment values and the impact on the Company’s ongoing charges.

The expenses of the Company are predictable and modest in comparison with the assets and there are no capital commitments currently foreseen which would alter that position.

In considering the Company’s longer-term viability, as well as considering the principal risks on pages 18 to 21 and the financial position of the Company, the Board considered the following factors and assumptions:

• The Company is and will continue to be invested primarily in long-term illiquid investments which are not publicly traded;

• The Board reviews the liquidity of the Company, regularly considers any commitments it has and cash flow projections;

• The Board, AIFM and Portfolio Manager will continue to adopt a long-term view when making investments and anticipated holding periods will be at least five years;

• As detailed in the Directors’ Report, the Valuations Committee oversees the valuation process;

• There will continue to be demand for investment trusts;

• Regulation will not increase to a level that makes running the Company uneconomical; and

• The performance of the Company will continue to be satisfactory.

Whilst acknowledging that market and economic uncertainty remain heightened in view of current inflation, concerns about a recession and the Ukraine conflict, based on the results of its review, and taking into account the long-term nature of the Company, the Board has a reasonable expectation that the Company will be able to continue its operations and meet its expenses and liabilities as they fall due for the foreseeable future, taken to mean at least the next five years. The Board has chosen this period because, whilst it has no information to suggest this judgement will need to change in the coming five years, forecasting over longer periods is imprecise. The Board’s long-term view of viability will, of course, be updated each year in the annual report.

Going Concern

In light of the conclusions drawn in the foregoing Viability Statement and as set out in note 19.1 to the financial statements on page 65, the Company has adequate financial resources to continue in operational existence for at least the next 12 months from the date of signing of this report.

Therefore, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. In reviewing the position as at the date of this report, the Board has considered the guidance on this matter issued by the Financial Reporting Council.

Management Arrangements

Principal Service Providers

The Company is structured as an internally managed closed-ended investment company. Augmentum Fintech Management Limited (“Portfolio Manager”) is the wholly owned operating subsidiary of the Company that manages the investment portfolio of the Company as a delegate of the AIFM.

The other principal service providers to the Company are Frostrow Capital LLP (“Frostrow” or the “AIFM”) and IQ EQ Depositary Company (UK) Limited (the “Depositary”). Details of their key responsibilities and their contractual arrangements with the Company follow.

Alternative Investment Fund Manager (“AIFM”)

Frostrow, under the terms of its AIFM agreement with the Company, provides, inter alia, the following services:

• oversight of the portfolio management function delegated to Augmentum Fintech Management Limited;

• promotion of the Company’s shares;

• investment portfolio administration and valuation;

• risk management services;

• share price discount and premium monitoring;

• administrative and company secretarial services;

• advice and guidance in respect of corporate governance requirements;

• maintenance of the Company’s accounting records;

• review of the Company’s website;

• preparation and publication of annual and half year reports; and

• ensuring compliance with applicable legal and regulatory requirements.

AIFM Fees

Under the terms of the AIFM Agreement Frostrow is entitled to an annual fee of:

• on NAV up to £150 million: 0.225% per annum;

• on that part of NAV in excess of £150 million and up to £500 million: 0.2% per annum; and

• on that part of NAV in excess of £500 million: 0.175% per annum,

calculated on the last working day of each month and payable monthly in arrears.

The AIFM Agreement may be terminated by either party on giving notice of not less than 12 months.

Portfolio Manager

Augmentum Fintech Management Limited, as delegate of the AIFM, is responsible for the management of the Company’s portfolio of investments under an agreement between it, the Company and Frostrow (the “Portfolio Management Agreement”).

Under the terms of its Portfolio Management Agreement, Augmentum Fintech Management Limited provides, inter alia, the following services:

• seeking out and evaluating investment opportunities;

• recommending the manner by which monies should be invested, disinvested, retained or realised;

• advising on how rights conferred by the investments should be exercised;

• analysing the performance of investments made; and

• advising the Company in relation to trends, market movements and other matters which may affect the investment objective and policy of the Company.

Portfolio Manager Fees

Portfolio Management Fee

Under the terms of the Portfolio Management Agreement Augmentum Fintech Management Limited (the “Portfolio Manager”) receives an annual fee of 1.5% of the NAV per annum, falling to 1.0% of any NAV in excess of £250 million.

Performance Fee

The Portfolio Manager is entitled to a performance fee in respect of the performance of any investments and follow-on investments. Each performance fee operates in respect of investments made during a 24 month period and related follow‑on investments made for a further 36 month period, save that the first performance fee would be in respect of investments acquired using 80% of the net proceeds of the Company’s IPO in March 2018 (including the Initial Portfolio), and related follow-on investments.

Subject to certain exceptions, the Portfolio Manager receives, in aggregate, 15% of the net realised cash profits from the investments and follow-on investments made over the relevant period once the Company has received an aggregate annualised 10% realised return on investments (the “hurdle”) and follow-on investments made during the relevant period. The Portfolio Manager’s return is subject to a ‘’catch-up’’ provision in its favour. The performance fee is paid in cash as soon as practicable after the end of each relevant period, save that at the discretion of the Board payments of the performance fee may be made in circumstances where the relevant basket of investments has been realised in part, subject to claw-back arrangements in the event that payments have been made in excess of the Portfolio Manager’s entitlement to any performance fees as calculated following the relevant period.

Based on the investment valuations as at 31 March 2023 the hurdle has been met, on an unrealised basis, and as such a performance fee has been provided for as set out in notes 2 and 12. This will only be payable if the hurdle is met on a realised basis.

The Portfolio Management Agreement may be terminated by either party giving notice of not less than 12 months.

AIFM and Portfolio Manager Evaluation and Re-Appointment

The performance of Frostrow as AIFM and Augmentum Fintech Management Limited as Portfolio Manager is regularly monitored by the Board with a formal evaluation being undertaken each year. As part of this process the Board monitors the services provided by the AIFM and the Portfolio Manager and receives regular reports and views from them.

Following a review at a Management Engagement & Remuneration Committee meeting in March 2023 the Board believes that the continuing appointment of the AIFM and the Portfolio Manager, under the terms described within this Strategic Report, is in the best interests of the Company’s shareholders. In coming to this decision it took into consideration the following additional reasons:

• the quality and depth of experience of the management, company secretarial, administrative and marketing team that the AIFM brought to the management of the Company; and

• the quality and depth of experience allocated by the Portfolio Manager to the management of the portfolio, together with the clarity and rigour of the investment process.

Depositary

The Company has appointed IQ EQ Depositary (UK) Limited as its Depositary in accordance with the UK AIFMD on the terms and subject to the conditions of an agreement between the Company, Frostrow and the Depositary (the “Depositary Agreement”).

The Depositary provides the following services, inter alia, under its agreement with the Company:

• verification of non-custodial investments;

• cash monitoring;

• processing of transactions; and

• foreign exchange services.

The Depositary must take reasonable care to ensure that the Company is managed in accordance with the Financial Conduct Authority’s Investment Funds Sourcebook, the UK AIFMD and the Company’s Articles of Association.

Under the terms of the Depositary Agreement, the Depositary is entitled to receive an annual fee of £25,000 plus certain event driven fees.

The notice period on the Depositary Agreement is not less than six months.

Registrar

The Board has decided to change the Company’s share registrar. The Company’s current registrar is Link Group. With effect from 18 December 2023 the Company’s registrar will become Computershare Investor Services PLC. Contact details for both registrars are set out on page 81.

Dividend Policy

The Company invests with the objective of achieving capital growth over the long term and it is not expected that a revenue dividend will be paid in the foreseeable future. The Board intends only to pay dividends out of revenue to the extent required in order to maintain the Company’s investment trust status.

Potential returns of capital

It is expected that the Company will realise investments from time to time. The proceeds of these disposals may be re‑invested, used for working capital purposes or, at the discretion of the Board, returned to shareholders.

The Company has committed to return to Shareholders up to 50 per cent. of the gains realised by the disposal of investments in each financial year, with such returns of capital expected to be made on an annual basis. The Company may also seek to make returns of capital to Shareholders where available cash is not expected to be substantially deployed within the following 12-18 months. The options for effecting any return of capital to shareholders may include the Company making tender offers to purchase Shares, paying special dividends or any alternative method or a combination of methods. Certain methods intended to effect a return of capital may be subject to, amongst other things, shareholder approval. Shareholders should note that the return of capital by the Company is at the discretion of the Directors and is subject to, amongst other things, the working capital requirements of the Company. As described in the Chairman’s Statement the Board has confirmed its decision taken last year, following a consultation, that the Company will retain the bulk of the proceeds of the investment realisations to date for reinvestment to support its capital growth objective and utilise the balance to support accretive share buybacks.

Company Promotion

The Company has retained the services of Peel Hunt LLP and Singer Capital Markets Advisory LLP as joint corporate brokers, to work alongside one another to encourage demand for the Company’s shares.

In addition to AIFM services, Frostrow also provides investor relations & marketing services.

Engaging regularly with investors:

The Company’s brokers and Frostrow meet with institutional investors, discretionary wealth managers and execution-only platform providers around the UK and hold regular seminars and other investor events;

Making Company information more accessible:

Frostrow manages the investor database and produces all key corporate documents, distributes factsheets, annual reports and updates from the Portfolio Manager on portfolio and market developments; and

Monitoring market activity, acting as a link between the Company, shareholders and other stakeholders:

The Company’s brokers and Frostrow maintain regular contact with sector broker analysts and other research and data providers, and provide the Board with up-to-date information on the latest shareholder and market developments.

Community, Social, Employee, Human Rights, Environmental Issues, Anti-bribery and Anti-corruption

The Company is committed to carrying out business in an honest and fair manner with a zero-tolerance approach to bribery, tax evasion and corruption. As such, policies and procedures are in place to prevent bribery and corruption. In carrying out its activities, the Company aims to conduct itself responsibly, ethically and fairly, including in relation to social and human rights issues.

As an investment trust with limited internal resource, the Company has little impact on the environment. The Company believes that high ESG (Environmental, Social and Governance) standards within both the Company and its portfolio companies make good business sense and have the potential to protect and enhance investment returns. Consequently, the Group’s investment process ensures that ESG issues are taken into account and best practice is encouraged.

Diversity

There are currently three male and two female Directors (being 40% female representation) on the Board, and these Directors have three different nationalities and diverse educational backgrounds. The Company aims to have a balance of relevant skills, experience and background amongst the Directors on the Board and believes that all Board appointments should be made on merit and with due regard to the benefits of diversity. The Company's diversity policy is set out on pages 40 and 41. The Board also encourages diversity within AFML, where the team of 11 people represents four different nationalities and is 45% female. The Board is also keen to promote the benefits of diversity in the companies we invest in.

Engaging with our stakeholders

The following ‘Section 172’ disclosure describes how the Directors have had regard to the views of the Company’s stakeholders in their decision-making.

Approach to Responsible Investing

Augmentum Fintech Management Limited (“AFML”) continues to be committed to a responsible investment approach through the lifecycle of its investments, from pre-screening to exit. AFML believes that the integration of Environmental, Social and Governance (“ESG”) factors within the investment analysis, diligence and operating practices is pivotal in mitigating risk and creating sustainable, profitable investments.

Five-Stage Approach to Future-Proofing the Portfolio

ESG principles adapted from the UN PRI (Principles of Responsible Investment) are integrated throughout business operations; in investment decisions, at the screening stage through an exclusion list and due diligence, ongoing monitoring and engaging with portfolio companies post-investment and when making follow-on investment decisions, as well as within fund operations.

1. Screening

An Exclusion List is used to screen out companies incompatible with AFML’s corporate values (sub-sectors and types of business). AFML also commits to being satisfied that the investors they invest alongside are of good standing.

2. Due Diligence

An ESG Due Diligence (DD) survey is completed by teams from companies in the later stages of the investment process. An ESG scorecard is completed for each potential investment, in which potential ESG risks and opportunities are identified, and discussed with the investment committee. Where necessary, an action plan is agreed with the management team on areas for improvement and commitments are incorporated into the Term Sheet.

3. Post-Investment Monitoring and Engagement

An annual survey is completed by portfolio companies and areas for improvement are discussed with management teams, with commitments agreed and revisited as appropriate.

4. Follow On Investments

ESG risks and opportunities are assessed when making follow-on investment decisions, with an ESG scorecard completed and co-investors taken into consideration. Follow on investments are only made into companies that continue to meet AFML’s ESG criteria.

5. Internally at Augmentum

AFML has continued to identify priority areas in which to make suitable ESG-related advancements across fund operations. Key progress areas include:

• Tracking the gender diversity of founders/CEOs of companies in our dealflow;

• Continuing to embrace diversity and inclusion through inclusive hiring and professional development practices and Female Founder Office Hours;

• Building on our programme of CSR initiatives through supporting Crisis Venture Studio and The Lord Mayor's Appeal ‘We Can Be’ initiative.

ESG Focus Areas

AFML has identified eight key areas for consideration, across the three ESG categories, which best align with its values and are most relevant for companies operating in the fintech industry.

The key environmental consideration as identified by the AFML is the potential impact of business operations on the global issue of climate change. Social factors include the risks and opportunities associated with data security, privacy and ethical use, consumer protection, diversity and financial inclusion. Governance considerations include anti-bribery and corruption, board structure and independence and compliance.

AFML is committed to:

• Incorporating ESG and sustainability considerations into its investment analysis, diligence, and operating practices.

• Providing ESG training and support to the AFML employees involved in the investment process, so that they may perform their work in accordance with AFML’s policy.

• Actively engaging with portfolio companies to encourage improvement in key ESG areas.

• Annual reporting on progress to stakeholders.

ESG in Action

Company Initiatives

Investing in Women Code (ESG Focus Area – Social: Diversity)

This year Augmentum became signatories of the Investing in Women Code. The Investing in Women Code is a commitment to support the advancement of female entrepreneurship in the United Kingdom by improving female entrepreneurs’ access to tools, resources and finance from the financial services sector.

As a signatory to the Investing in Women Code, the Company is committed to a culture of inclusion and to advance access to capital for female entrepreneurs. As a signatory, the Company will:

• Have a nominated member of the senior leadership team who is responsible for supporting equality in all its interactions with entrepreneurs.

• Provide HM Treasury with a commonly agreed set of data concerning: all-female-led businesses; mixed-gender-led businesses and all-male-led businesses. The Company agrees that HM Treasury will collate this data and publish it on an aggregated and anonymised basis in an annual report.

• Adopt internal practices which aim to improve the potential for female entrepreneurs to successfully access the tools, resources, investment and finance they need to build and grow their businesses, working with relevant players in the ecosystem. The Company will review these actions annually and make this commitment publicly available.

The Lord Mayor’s Appeal (Environmental: climate/carbon footprint and Social: Diversity)

In September the Augmentum team took part in The Lord Mayor’s Appeal’s ‘City Giving Day’, entering a cycling challenge raising money for the various charitable causes supported by The Lord Mayor’s Appeal.

The Company participated in The Lord Mayor’s Appeal’s ‘We Can Be’ initiative for the first time, hosting a group of school girls, introducing them to a career in the City and the inner workings of an investment trust.

Female Founders in Fintech Office Hours (Social: Diversity)

Augmentum launched Female Fintech Founders monthly Office Hours along with other fintech investors Outward and Portage, providing an opportunity for early stage female fintech founders to speak with leading fintech investors and discuss fundraising and business scaling more broadly. 25 founders were selected and hosted across the first three sessions.

Portfolio Business Models

Anyfin: Consumer Financial Education (Social: Consumer protection)

A core element of Anyfin’s mission is to help get people out of debt and to date the company has helped customers save millions of Euros in credit costs. They are proactive with consumer financial education; earlier this year they released the third edition of the Anyfin Report, a financial health study conducted by YouGov. The report focused on the ways in which people are planning to deal with their debts (and finances more broadly) in 2023. The company hosts regular ‘Anyfin House’ sessions, open to the public, and covering topics such as financial management, financial stress and the economy.

Grover: Circular Economy Model (Environmental: Climate/carbon footprint)

Grover provides a sophisticated solution for the increasing number of consumers who value access over ownership via their circular economy tech-rental model. By replacing the highly wasteful linear product ownership approach (take -> make -> dispose), Grover’s model extends the lifecycle of a product by re-using, repairing and redistributing. A device rented from Grover is circulated 2-6 times on average, and as of 2023 the company has circulated over 1 million devices.

Wayhome: Gradual Home Ownership Model (Social: Financial inclusion)

Wayhome’s ‘Gradual Homeownership’ model aims to help aspiring homeowners who are unable to obtain a traditional mortgage to buy a home get on the housing ladder. With the average home now costing 9 times average income and the average first time buyer only able to borrow 3.55 times income, millions of hardworking families are locked out of homeownership. Wayhome customers own the share of the home they paid for and rent the remainder, gradually buying more and renting less over time.

Portfolio Initiatives

Onfido: The Trust Framework Certification (Social: Data security and consumer protection)

In January 2023 Onfido announced it had achieved certification for high confidence profile H1A under the UK Digital Identity and Attributes Trust Framework (the trust framework). The certification serves use cases where a higher confidence level in digital identity verification is required. The trust framework is part of the UK government’s wider plan to make it easier and more secure for people to prove their identity online. It provides a set of rules for organisations to adhere to in order to provide secure and trustworthy digital identity. The Home Office now recommends companies use identity service providers (IDSPs) that meet the trust framework standards for Right to Work, Right to Rent and Disclosure and Barring Service’s (DBS) screening checks.

Tide: (Environmental: Climate/carbon footprint)

In March, Tide became the first fintech globally to remove 100% of its emissions with durable carbon removals as of 2022 onwards. The business has also committed to becoming fully NetZero by 2030 and to support its UK members (more than 9% of UK SMEs), and growing network of Indian SMEs on their journey to NetZero.

Tide made three climate-focused pledges which included committing to removing 100% of their emissions with durable carbon removal from 2022 onwards and reducing 90% of their 2021 emissions per employee by 2030. These would make Tide fully Net Zero by 2030. The organisation also committed to making Net Zero simpler for their Members by developing the support on offer.

Post-period end Tide and Transcorp announced the launch of India’s-first recycled PVC RuPay Card. Made from 99% recycled plastic, this is a first for fintechs in India. Each rPVC card saves 7g of carbon and 3.18g plastic that would normally be used in production.

Zopa: 2025 Fintech Pledge (Social: Consumer protection and financial inclusion)

Led by Zopa, 33 fintechs and their industry partners are working together to tackle the cost-of-living crisis. The 2025 Fintech Pledge aims to drive 10 million consumer actions that build up the financial resilience of UK consumers by 2025. It will achieve this by connecting people to platforms that make savings work harder, improve credit scores, consolidate debt, and lower utility bills and household outgoing costs. To date, more than 2 million actions have been reported from all members combined.

This Strategic Report was approved by the Board of Directors and signed on its behalf by:

Neil England

Chairman

3 July 2023

.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT, THE DIRECTORS’ REMUNERATION REPORT AND THE FINANCIAL STATEMENTS

The directors are responsible for preparing the annual report and financial statements in accordance with United Kingdom applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the Group and Company financial statements in accordance with UK-adopted international accounting standards. 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 of the Group and Company and of the return or loss for the Group and Company for that period.

In preparing these group 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 they have been prepared in accordance with UK-adopted international accounting standards, 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 directors’ report, a strategic 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 Group and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and 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 Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Responsibility Statement

The Directors consider that this annual report and financial statements, taken as a whole, is fair, balanced, and understandable and provides the information necessary for shareholders to assess the Group and Company’s position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed under the ‘Board of Directors’ on page 31 confirm that, to the best of their knowledge:

• The financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company;

• The annual report includes a fair review of the development and performance of the business and the financial position of the Group and Company, together with a description of the principal risks and uncertainties that they face.

Neil England

Chairman

3 July 2023

.

CONSOLIDATED INCOME STATEMENT

The total column of this statement represents the Group’s Consolidated Income Statement, prepared in accordance with IFRS as adopted by the UK.

The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

The Group does not have any other comprehensive income and hence the total return, as disclosed above, is the same as the Group’s total comprehensive income.

All items in the above statement derive from continuing operations.

All returns are attributable to the equity holders of Augmentum Fintech plc, the parent company.

The notes on pages 58 to 68 are integral to and form part of these Financial Statements.

.

CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY

The notes on pages 58 to 68 are integral to and form part of these Financial Statements.

.

CONSOLIDATED BALANCE SHEET

as at 31 March 2023

The Financial Statements on pages 52 to 68 were approved by the Board of Directors on 3 July 2023 and signed on its behalf by:

Neil England

Chairman

The notes on pages 58 to 68 are integral to and form part of these Financial Statements.

Augmentum Fintech plc

Company Registration Number: 11118262

* Considered to be Alternative Performance Measure. Please see the Glossary and Alternative Performance Measures on page 79.

.

COMPANY BALANCE SHEET

as at 31 March 2023

The Company’s return for the year was £3,852,000 (2022: £43,066,000). The Directors have taken advantage of the exemption under s408 of the Companies Act and not presented an income statement or a statement of comprehensive income for the Company alone.

The Financial Statements on pages 52 to 68 were approved by the Board of Directors on 3 July 2023 and signed on its behalf by:

Neil England

Chairman

The notes on pages 58 to 68 are integral to and form part of these Financial Statements.

Augmentum Fintech plc

Company Registration Number: 11118262

.

CONSOLIDATED CASH FLOW STATEMENT

The notes on pages 58 to 68 are integral to and form part of these Financial Statements.

.

COMPANY CASH FLOW STATEMENT

The notes on pages 58 to 68 are integral to and form part of these Financial Statements.

.

NOTES TO THE FINANCIAL STATEMENTS

1 Segmental Analysis

The Group operates a single business segment for reporting purposes and is managed as a single investment company. Reporting is provided to the Board of Directors on an aggregated basis. The investments are located in the UK, continental Europe, Israel and the US.

2 Expenses

£209,138 of interest and depreciation relating to a lease (2022: £153,000) is included in administrative expenses. See note 5 for further details.

* Details of the amounts paid to Directors are included in the Directors Remuneration Report on page 44.

^  See note 4 for further details of the performance fee arrangements. Non-executive Directors of the Company are not eligible to participate in any allocation of the performance fee.

Auditor’s Remuneration

Non-audit services

It is the Group’s practice to employ BDO LLP on assignments additional to their statutory audit duties only when their expertise and experience with the Group are important. Details of the Group’s process for safeguarding and supporting the independence and objectivity of the external auditor are given in the Report of the Audit Committee beginning on page 48. In addition to the above BDO LLP was also paid £50,000 in 2022 for reporting accountant services, which is included within the costs of placing and offer for subscription in the Statement of Changes in Equity.

3 Key Management Personnel Remuneration

The Directors of the Company are considered to be the Key Management Personnel along with the directors of the Company’s subsidiary.

Other benefits include pension and social security contributions relating to the directors of the Company’s subsidiary.

* Allocation of the performance fee to the directors of the Company’s subsidiary. See note 4 for further details of the performance fee arrangements.

4 Staff Costs

The monthly average number of employees for the Group during the year was eleven (2022: ten). All employees are within the investment and administration function and employed by the Company's subsidiary.

* The performance fee arrangements were set up to provide a long-term employee benefit plan to incentivise employees of AFML and align them with shareholders through participation in the realised investment profits of the Group. During the year to 31 March 2022 the existing plan for AFML staff was terminated and the performance fee liability to AFML employees accrued as at 31 March 2021 of £6,508,000 was reversed. AFML continues to be entitled to a performance fee as before, but any performance fee paid by the Company to AFML will now be allocated to employees of AFML on a discretionary basis by the Management Engagement & Remuneration Committee of the Company.

The performance fee is payable by the Company to AFML when the Company has realised an aggregate annualised 10% return on investments (the ‘hurdle’) in each basket of investments. Based on the investment valuations and the hurdle level as at 31 March 2023 the hurdle has been met, on an unrealised basis, and as such a performance fee of £16,517,000 (2022: £15,265,000) has been provided for by the Company, equivalent to 9.1 pence per share. This provision is reversed on consolidation and not included in the Group Statement of Financial Position. The performance fee is only payable to AFML if the hurdle is met on a realised basis and the actual amount payable will depend on the amount and timing of investment realisations. See page 24 and note 19.9 for further details.

5 Leases

Leasing activities

The Group, through its subsidiary AFML, has leased an office in the UK from which it operates for a fixed fee. When measuring lease liabilities for leases that were classified as operating leases, the Group discounts lease payments at a rate of 6.4% (2022: 5.9%).

Right-of-Use Asset

Lease Liability

Maturity Analysis

6 Taxation Expense

The difference between the income tax expense shown above and the amount calculated by applying the effective rate of UK corporation tax of 19% (2022: 19%) to the (loss)/return before tax is as follows:

No provision for deferred taxation has been made in the current year. The Group has not provided for deferred tax on capital profits arising on the revaluation of investments, as it is exempt from tax on these items because of its status as an investment trust company.

The Company has not recognised a deferred tax asset on the excess management expenses of £32,904,000 (2022: £26,524,000). It is not anticipated that these excess expenses will be utilised in the foreseeable future.

7 (Loss)/Return per Share

The (loss)/return per share figures are based on the following figures:

8 Investments Held at Fair Value

Non-current Investments Held at Fair Value

Reconciliation of movements on investments held at fair value are as follows:

The Group and Company received £44,224,000 (2022: £11,263,000) from investments sold in the year. The book cost of these investments when they were purchased was £6,348,000 (2022: £8,227,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments. In addition, Augmentum I LP, the Company's unconsolidated subsidiary (See note 19.2), received proceeds of £2,673,000 in 2022 from investments sold during the year, which had a book cost of £3,173,000.

9 Subsidiary undertakings

The Company has an investment of £500,000 (2022: £500,000) in the issued ordinary share capital of its wholly owned subsidiary undertaking, Augmentum Fintech Management Limited (“AFML”), which is registered in England and Wales, operates in the United Kingdom and is regulated by the Financial Conduct Authority. AFML’s principal activity is the provision of portfolio management services to the Company. AFML’s registered office is 4 Chiswell Street, London EC1Y 4UP.

10  Other Receivables

* Includes £73,000 due back from the portfolio managers at 31 March 2022 due to an inadvertent overpayment that was repaid after the year end.

11 Other Payables

12 Provisions

* See page 24 and notes 4 and 19.9 for further details.

13  Financial Instruments

(i) Management of Risk

As an investment trust, the Group’s investment objective is to seek capital growth from a portfolio of securities. The holding of these financial instruments to meet this objective results in certain risks.

The Group’s financial instruments comprise securities in unlisted companies, partnership interests, trade receivables, trade payables, and cash and cash equivalents.

The main risks arising from the Group’s financial instruments are fluctuations in market price, and credit and liquidity risk. The policies for managing each of these risks are summarised below. These policies have remained constant throughout the year under review. The financial risks of the Company are aligned to the Group’s financial risks.

Market Price Risk

Market price risk arises mainly from uncertainty about future prices of financial instruments in the Group’s portfolio. It represents the potential loss the Group might suffer through holding market positions in the face of price movements, mitigated by stock diversification.

The Group is exposed to the risk of the change in value of its unlisted equity and non-equity investments. For unlisted equity and non-equity investments the market risk is principally deemed to be the assumptions used in the valuation methodology as set out in the accounting policies.

Liquidity Risk

The Group’s assets comprise unlisted equity and non-equity investments. Whilst unlisted equity is illiquid, short-term flexibility is achieved through cash and cash equivalents.

Credit Risk

The Group’s exposure to credit risk principally arises from cash and cash equivalents. Only highly rated banks or liquidity funds (with credit ratings above A3, based on S&P’s ratings or the equivalent from another ratings agency) are used for cash deposits and the level of cash is reviewed on a regular basis. The components of cash and cash equivalents are shown in the table below.

(ii) Financial Assets and Liabilities