Augmentum Fintech plc Annual Report 2024

25 June 2024

Augmentum Fintech plc

Annual Financial Report for the year ended 31 March 2024

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 2024. 

Financial highlights

• NAV before performance fee increased by 3.1% to £303.3 million1 (31 March 2023: £294.1 million1) of which the value of the investment portfolio was £265.1 million (31 March 2023: £254.3 million).
• NAV per share after performance fee increased by 5.4% to 167.4p2 (31 March 2023: 158.9p). The increase in NAV per share after performance fee was driven by net investment return for the year +6.8p and impact of share buybacks +1.7p.
• Cash reserves of £38.5 million as at 31 March 2024 and £44.8 million as at 31 May 2024 (31 March 2023: £40.0 million).

Portfolio highlights

• The valuation of the top three positions (Tide, Zopa Bank and Grover) plus a strong cash position, was just below Augmentum’s £170 million market capitalisation at year end. These three companies have grown revenues by an average of over 1,300% since initial investment and are either profitable or expected to reach profitability without further funding.
• Top 10 holdings, which represent 81% of portfolio value (31 March 2023: 78%) grew revenue at an average of 65% year-on-year (31 March 2023: 117%) and are cash generative (five positions) or have an average of 203 months cash runway. 
• Cushon’s majority shareholding acquisition by NatWest Group completed during the period, and returned £22.8 million to the Company, delivering a return of 2.1x multiple on invested capital and an IRR of 62%.
• Post year end: exit from Onfido through the acquisition by Entrust, delivering a return of 1.3x on invested capital and an IRR of 5.8%.
• There have now been six exits from the portfolio since inception all at or above their last reported value, which have realised a cumulative £89.6 million in proceeds – £55.9 million over their original cost (c2.7x invested capital).
• IRR of 16%4 on invested capital since inception (31 March 2023: 18.5%).

Investment activity

• Continued to maintain valuation and investment discipline across the portfolio and new investment opportunities. Over the year, £15.8 million was invested across one new company (Artificial Labs, a leading London-based Insurtech) and six existing portfolio companies (31 March 2023: £19.9 million invested in two new companies and eight existing portfolio companies).
• Post year end: Investment of £2.6 million in a new portfolio company LoopFX.

Portfolio updates

• Tide (18.0% of NAV) grew its UK SME banking market share to 10% and is now structurally profitable at a group level. In October 2023 Augmentum invested a further £4.2 million through a combination of primary and secondary transactions. International expansion continues with Germany, following the successful launch in India.
• Zopa Bank (13.8% of NAV) raised £75 million in Tier 2 capital in October 2023 to support continued growth. It now has more than 1 million customers and reached full-year profitability for the first time in 2023.
• Volt (9.0% of NAV) completed a Series B funding round of $60m led by US investor IVP, with Augmentum investing a further £5.3 million. In June 2023, Worldpay and Shopify selected Volt as their global A2A partner.

Neil England, Chairman of Augmentum Fintech plc commented:

“The Company’s NAV per share after performance fee at 31 March 2024 was 167.4p, up 5.4% from 31 March 2023. This continued our history of increases for every reporting period since the Company’s IPO in 2018.”

“The UK equity market has been largely out of favour and investment company discounts are running at historic highs in many cases. However, UK inflation numbers are improving, and history suggests that growth companies such as Augmentum will be early beneficiaries of any rally inspired by declining rates.”

“We maintained our investment discipline over the last year and, with our strong cash reserves (£44.8 million as at 31 May 2024), we are well placed both to take advantage of new opportunities and to reinforce our appeal as a supportive investor. We have a healthy pipeline of opportunities under consideration.”

Tim Levene, CEO of Augmentum Fintech Management Limited commented:

“Several portfolio companies have posted meaningful profits this year and have attracted substantial growth capital of over £150 million during the period. The operational performance of the vast majority of the companies in the portfolio has continued to be strong, with an average revenue growth of 65% across the top 10 holdings in the last 12 months. There have been some standout results, in some cases ahead of expectations, and the majority of our companies have over two years of cash runway.”

"Fintech’s market share of global financial services revenue remains below 5% but is set to more than double during the next decade as fintech companies both disrupt incumbent firms and become their partners for delivering digital transformation and harnessing the potential of new technologies. Hundreds of valuable companies will be built in Europe to support this change. In our view, the European early stage fintech ecosystem has reached an exciting point of maturity.”

“This year, we have crossed several important milestones; six years since IPO, six exits delivered to the Company and the first portfolio position rising above a fair value of £50 million.”

Notes

1. NAV before performance fee.

2. 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.

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 2024, excludes Onfido exited post year end.

4. 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.
 

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 2024

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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 78.

1  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.

To read about our KPIs see page 23.

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I am pleased to present our sixth annual report since the launch of the Company in March 2018. This report covers the year ended 31 March 2024.

Investment Policy

Your Company predominantly invests in early stage European fintech businesses which have technologies with the potential to transform 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 focused portfolio of private fintech companies during what is often their period of rapid value accretion.

Performance

Your Company’s NAV per share after performance fee at 31 March 2024 was 167.4p, up 5.4% from 31 March 2023, continuing our history of increases for every reporting period since the Company’s IPO in 2018.

However, the price at which the shares traded continued to fail to represent the NAV throughout the period, ending at 100.5p per share, up 3.5p from the price at 31 March 2023 but still representing a discount to the NAV per share after performance fee of 40.0%.

The UK equity market, and investment companies in particular, has been largely out of favour and investment company discounts are running at historic highs in many cases. The initial negative reaction to increased interest rates has sustained but most commentators predict a rate reduction at some point; the question remains as to when. UK inflation numbers are improving which removes one of the barriers to lower rates. History suggests that growth companies such as Augmentum will be early beneficiaries of any rally inspired by declining rates. Our underlying portfolio is performing well and the current discount is illogical. As at 31 March 2024, like at the half year, the valuation of our top three positions in Tide, Zopa Bank and Grover, plus cash, was almost equivalent to our £170 million market capitalisation, attributing virtually no value to our £119 million of other investments.

Portfolio

In the first half of the year, the Company benefitted from its fifth portfolio realisation since IPO. We received proceeds of £22.8 million from the completion of NatWest Group’s acquisition of Cushon, appreciably ahead of its prior valuation and representing a 2.1x multiple on invested capital, and an IRR of 62%. Shortly after the year end, in April, we had our sixth exit. One of the leading global providers of online identity verification, Entrust, acquired Onfido, delivering an IRR of 5.8% and a multiple on capital invested of 1.3x, with the realised value representing a c.5% uplift on the holding value we reported in the Company’s half year results. To date, all of the Company’s investment exits have been at or above the last reported holding value, which 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 one new investment, £4.0 million in London-based insurtech Artificial, and a further £12.0 million of follow-on funding to support existing portfolio companies. These included Volt (£5.3 million), Tide (£4.2 million) and, Grover (£1.4 million).

There is a full review of the portfolio and investment transactions during 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 our Portfolio Manager works 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 analysis, due diligence and operating practices as we believe that these are key in mitigating risk and creating good investments.

Valuations

Your Board considers its governance role in the valuations process to be of utmost importance. We operate with a Valuations Committee in addition to an Audit Committee, both playing a key role in assessing portfolio valuation. Your Board understands that shareholders are often sceptical of private equity valuations as they cannot be readily verified in the way that public equities can. We have always maintained a consistent, rigorous and disciplined approach to valuations and the results we are reporting reflect an in-depth process, supported by our advisers. We maintained our multiples in the bull market for fintech when listed fintech multiples became elevated and so we have not needed to make subsequent corrections, unlike some others. The six disposals made to date provide some retrospective validation of this process.

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 sense checked our conclusions. We also benefit from the majority of our investments occupying a senior position in the capital structures of the investee companies, offering an element of protection 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 continued its programme of highly accretive buybacks, albeit more modestly in the second half, seeking to convey to the market our confidence in the value of the portfolio, while also balancing this with the need for capital to be available for new and follow-on investments. All the shares repurchased by the Company are being held in treasury to potentially reissue when the share price returns to a premium.

4,687,567 shares were bought back into treasury during the year to 31 March 2024 (2023: 5,806,934 shares), at an average price of 97.7p per share, representing an average discount to the prevailing NAV per share after performance fee of 38.6% and adding 1.7p/1.1% to the NAV per share. A further 99,118 shares have been bought back since March, up to 24 June 2024, at an average price of 98.7p 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 25 of this annual report, the Company may, at the discretion of the Directors, return up to 50% of the gains realised during a year from the disposal of investments. Factors influencing decisions in this regard include the quantum of sale proceeds, the opportunities offered by the investment pipeline and the working capital requirements of the Company. To date the Board has applied a proportion of such gains to share buybacks, as this has been highly accretive to the Company’s NAV per share. This notwithstanding, the Directors intend to consult with shareholders to determine whether other means of cash distribution would be preferred.

Dividend

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

Board

There have been no changes to the Board during the year but the three Directors at IPO in 2018 are all scheduled to retire from the Board at the same time, so it seems logical to stage these departures and commence Board refreshment now. After six years in the Chair, I have decided to retire first and will not be offering myself for re-election at the forthcoming AGM. We have an excellent mix of skills and experience on the Board already but intend to supplement our team with a new Director. We have engaged an independent search firm for this purpose.

It has been my pleasure to chair Augmentum Fintech PLC from its successful IPO in 2018 and to see it grow into a leading and highly respected player in European fintech. My grateful thanks to our shareholders for their support, to my Board colleagues for their diligence and hard work, and to Tim, Richard and the team at Augmentum Fintech Management Limited who have together built a much-admired Portfolio Manager.

AGM

Our AGM will be held on Thursday 19 September 2024 at 11.00 a.m. at the Augmentum Fintech Management Limited office at 4 Chiswell Street, London EC1Y 4UP. Your Board strongly encourages shareholders to register their votes in advance using the proxy form provided or by voting online, or if they are not held directly, by instructing the nominee company through which the shares are held. Registering votes in advance does not preclude shareholders from attending the meeting.

Details of all of the resolutions can be found in the Notice of AGM, which is published separately from this annual report and will be sent to shareholders when the annual report is published. Both documents will also be available to view on or download from the Company’s website at www.augmentum.vc.

Your Directors consider that all the resolutions listed are 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

Interest rates remain stubbornly high for now, but UK and global inflation numbers are improving which suggests a more positive medium-term outlook for growth companies. As I write, early-stage growth portfolios remain out of favour, but our Portfolio Manager has proved its model, well-illustrated by the returns produced by our six realisations to date. Additionally, our largest investments are performing very well.

The underlying need to digitalise and transform financial services remains. The opportunity is undiminished as the traditional operators continue to dominate, despite inroads made by some stellar fintech businesses with less costly, and in many cases more secure, business models. Penetration is still only c.5% across the industry although adoption of consumer focused fintech by younger demographics is markedly higher.

We maintained our investment discipline over the last year and, with our strong cash reserves (£44.8 million at 31 May 2024), we are well placed both to take advantage of new opportunities and to reinforce our appeal as a supportive investor. We have a healthy pipeline of opportunities under consideration.

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

Neil England

Chairman

24 June 2024

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PORTFOLIO MANAGER’S REVIEW

Overview

When I wrote to you in November it was against the backdrop of a welcome change in sentiment. Equity markets had responded positively to central bank decisions to hold interest rates steady, ending the tightening cycle of 2022 and 2023. Since November, the anticipation of future rate cuts has further boosted confidence, with global equity indices reaching record highs in early 2024.

Whilst we are as optimistic as we were in November, we temper this with a dose of realism; rates remain elevated and whilst the first-rate cuts are now trickling through, they will likely remain high well into 2025. The market continues to set a high bar for growth stocks, seeking capital efficiency and profitability, as well as strong growth. While the listed fintech sector is yet to enjoy as broad a recovery as other areas of the market, robust investor demand has emerged for top quality companies delivering disruptive and differentiated propositions.

A flight to quality is also present in private markets, where investment activity has normalised to the medium-term trend. This environment benefits the Company as a preferred investor for quality fintechs. Several portfolio companies have posted meaningful profits this year and have attracted growth capital of over £150 million during the period.

The operational performance of the vast majority of the companies in the portfolio has continued to be robust, with average revenue growth of 65% across the top 10 in the last 12 months. There have been some standout results, in some cases ahead of expectations, and the majority have over 2 years of cash runway, if they are not already profitable.

Longer term, the increasing dominance of US capital markets is a challenge that UK and European policy makers must work to address, with real implications for the future economic trajectory of the region. UK savings are under-allocated to domestic markets, hindering growth. Whilst we support initiatives such as the Mansion House Reforms, their implementation and capital deployment into private markets needs to accelerate. In the absence of meaningful change, as evidenced by diverging regional trajectories in this recent recovery period, the UK and European markets continue to lose ground to the US.

Fintech’s market share of global financial services revenue remains below 5% but is set to more than double during the next decade as fintech companies both disrupt incumbent firms and become their partners for harnessing the potential of new technologies1. Hundreds of valuable companies will be built in Europe to support sector wide digital transformation.

Companies in the fintech sector are addressing significant opportunities; in 2023, over 50% of fintechs in the F-Prime index of emerging, publicly traded, financial technology companies, posted revenues above US$1 billion, growing three times faster than incumbents (F-Prime Capital2). The European ecosystem is producing high quality companies that with the right support have the potential to operate and thrive at global scale. This includes a cohort of near-term IPO candidates, including several from the Company’s portfolio.

Whilst IPOs have been almost entirely absent from the market in 2024, we hope to see their return in 2025. With IPOs absent, M&A activity, driven mainly by incumbent firms acquiring digital capabilities, has meanwhile continued at pace. The resilience and depth of the exit market for fintechs is one of its key strengths from an investment perspective. Fintech exits in Q1 2024 totalled 247 transactions and US$77 billion in realisations globally 99% of which was M&A3. Without access to private markets, investors will continue to miss these compelling opportunities.

In our view, the European early stage fintech ecosystem has reached an exciting point of maturity. Exit activity has supported multiple cycles of capital and talent recycling, including the 10 repeat founders in the Company’s portfolio. This includes the Company’s 6th realisation through M&A with the sale of Onfido to Entrust, a leading US listed provider of digital identity solutions.

The flywheel of talent, funding and regulation is supporting quality companies through growth stages. As we move towards a period of greater market stability, we find ourselves operating from a position of strength. Our diversified portfolio is resilient and performing well. The Company’s cash position has been strengthened by recent exits, and we are addressing one of the most compelling sector-wide growth opportunities available to investors today.

In financial services, leveraging artificial intelligence (“AI”) is a top priority due to significant breakthroughs in generative AI over the past 24 months. Our engagement with AI spans three key areas; portfolio companies, such as Zopa Bank in credit underwriting and Intellis in trading decisions, are leading in AI applications; we are exploring innovative AI led investment opportunities; and our team uses AI tools and proprietary data to enhance efficiency and coverage on a day-to-day basis. Staying ahead in applying new technologies provides a competitive advantage for the portfolio and pipeline companies, as well as a forward-thinking venture capital investment team.

Our strategy remains consistent; investment discipline rooted in experience and fintech sector specialism, applied to proprietary pan-European deal flow with a distinct, value-add approach that resonates with exceptional founders. The Company remains a unique offer to public market investors, not just in terms of its structure but also in terms of the quality and diversification of the fintech exposure it offers.

Portfolio Overview

As I write the Company’s portfolio stands at 25 fintech companies, the same level as at 31 March 2023. This follows the exit of workplace pension provider Cushon during the reporting period and our post-period exit from Onfido, a global leader in digital identity verification. This was the sixth exit since IPO, which have delivered over £90 million in realisations to date. We have added one new investment to the portfolio in Artificial, an innovative algorithmic underwriting platform serving the speciality insurance industry. The other addition to the portfolio comes from the post-period split of existing portfolio company, Monese, into its retail bank Monese and its banking as a service business, XYB.

The portfolio’s top 10 companies employ over 4,500 people and generate over £1 billion in annual revenues, with year-on-year growth continuing at an average of 65%. Five of this group are profitable and the remaining five have an average cash runway of over 20 months.

As reflected in these recent transactions and true to our commitment six years ago at IPO, the portfolio has diversified across the breadth of verticals that make up the broader fintech opportunity, as well as by stages of maturity and European markets. The resilience and strong performance of the portfolio through more challenging macroeconomic times, and our growing record of realisations, continue to deepen our confidence in this approach.

At the end of March, the sum of our top three positions, Tide, Zopa Bank, and Grover, plus cash, is just below the Company’s market capitalisation. We believe this represents a compelling value opportunity with unpriced option value in the remaining 22 positions in the portfolio, which carry strong future growth potential themselves.

These top three holdings are growing revenue at an average of 70% year-on-year, with all three continuing to challenge their respective market incumbents in industries ripe for disruption, a key investment thesis across many of the portfolio companies. Tide, our largest holding, becomes the first portfolio position to surpass £50 million in fair value having further solidified their position as the market leader for SME banking in the UK and has successfully launched in Germany and India in recent months.

We continue to support portfolio companies from their early stages through both capital and strategic support. Our typical first investment is made at the Series A stage and benefits from protective structures and board representation, which we currently hold at 17 of the 25 portfolio companies, including all of those that are early stage (pre-series B). In addition to close monitoring of progress and strategic input, ongoing engagement enables us to identify and action compelling follow-on investment opportunities as companies mature.

We have demonstrated consistency in valuation approach against the backdrop of volatility in public and private markets over the last two years. All the Company’s material exits have now been delivered at or above the last reported fair value of the holding. Its permanent capital model enables us to reinvest exit proceeds into the next generation of high-potential European fintech firms.

Following the exit of Onfido the Group’s cash position as at 31 May 2024 was £44.8 million and, with greater confidence in early-stage valuations following the normalisation of market conditions, we are in an advantageous position to deploy capital into high-quality and appropriately priced investment opportunities in the period ahead.

Onfido and interactive investor are two of the largest fintech transactions in the UK in the last three years. We believe that from within the existing and future portfolio, the Company is positioned to be part of more exit transactions of this scale.

Investment Activity

In my recent reports, I have described our decision to slow deployment into new opportunities in response to market conditions. The distortionary impact of heightened valuations since late 2020 continued to play out during the period and our extremely disciplined approach to valuation remained a key reason for rejecting investment prospects at the investment committee stage. Our total investment of £16 million across both new and follow-on investments compares to £19.9 million in the prior year. We maintain that reduced deployment has been the correct course in a market absent of the right investments at the right price.

When we see the right opportunity, our ability to deploy capital remains intact. In January 2024, we led a highly competitive £8 million Series A round with a £4 million investment in Artificial, an emerging leader in the Insurtech space. With the digitalisation of the London insurance market at the forefront of change in the industry, we believe Artificial are well positioned as one of the leading platforms for algorithmic underwriting. Artificial characterises our early-stage strategy, bringing new technology that has the capability to disrupt and drive significant change in an industry that has been limited by legacy systems.

Within the existing portfolio, we invested a further £5.3 million into Volt as part of a US$60 million Series B round completed by the company in June 2023. This takes the total invested in the company to £9.8 million. The fair value of the holding at £25.5 million reflects this additional investment as well as a £5.9 million valuation uplift versus March 2023. During this period the company has grown revenue threefold, as the leading provider of real-time payment connectivity to global merchants and service providers. Volt’s increasingly diversified customer base spans a growing number of industries and markets as the adoption of real-time account-to-account payments continues around the world.

We made a £4.2 million additional investment in Tide in an oversubscribed primary and secondary transaction in October 2023, helping to bolster the company and increase our stake in one of the portfolio’s highest performing assets. As the leading digital banking platform for small businesses in the UK, Tide has now achieved 11% share of the UK market with more than 600,000 members and is both profitable in the UK and at a Group level. To further diversify from a predominantly UK revenue focus as the company moves into a new phase of maturity, Tide launched in India at the end of 2022, and in the first 18 months attracted more than 250,000 new members. Following the successful launch of their Indian operations, Tide launched in Germany in May 2024, further expanding their global offering.

In the reporting period, we also took up the Company’s shareholder rights to invest a total of £1.8 million in small additional rounds at Grover, Wayhome and Habito.

Other Top 10

During the last three years we have frequently talked about the resilience of the portfolio. This resilience is rooted in the strong fundamentals of the companies that we back and the ability of their management teams to weather challenges of all descriptions and return their companies to growth trajectories. The path to scale is never a straight line which is why a long-term view and ongoing support are essential when investing in private markets.

A patient approach is sometimes required to unlock long-term value. This has been demonstrated by the portfolio’s second largest holding, Zopa Bank, which has transformed since the write-down event in 2019. Their world class team, coupled with exceptional underwriting technology, which applies advanced AI, continues to drive Zopa’s position as a standout performer. During the period Zopa Bank passed 1 million customers, achieved full-year profitability, and further strengthened their balance sheet through a Tier 2 regulatory capital raise of £75 million. The upward movement in the valuation of the portfolio’s holding of £9.3 million follows year-on-year revenue growth of 74% and returns the fair value of the holding above the cost of investment.

Grover is focused on profitability, with their flexible subscription model now operating at significant scale with run-rate revenue now in excess of €250 million. The company achieved positive EBIT for the first three months of 2024 and plans to be cash-flow positive within the next 12 months. The last year has presented challenges for Grover but progress is underway to ensure performance is not stifled and the company can return to the growth it has long enjoyed. We have been prudent in its valuation to reflect the challenges the company has recently faced, and thus reduced the valuation by £8.6 million to £35.9 million.

At the beginning of this calendar year, we received a dividend of £0.8 million from BullionVault following a strong year of trading and record profits. BullionVault’s performance has been supported by a combination of investor demand for gold and other precious metals as an inflationary hedge, and net interest income earned on fiat balances held by users on the exchange. This has driven an uplift in the fair value of the portfolio’s holding of £2.4 million. BullionVault is a mature position in the portfolio and serves a hedging function during times of heightened market uncertainty.

Gemini represents another story of resilience and recovery as the company returns to the portfolio’s Top 10. As a regulated multi-asset exchange and custodian serving both institutional and retail investors, Gemini has been a beneficiary of the positive price action in digital asset markets that has followed from increased regulatory clarity in the US and the approval of crypto ETF products. In addition, acting on behalf of Gemini users, the company has secured a full recovery of assets loaned by users to a crypto-lending company called Genesis. The uplift in the holding’s fair value of £2.6 million is reflective of Gemini’s improved trajectory but remains prudent and supported by the downside protective structures held on this position.

We believe that the Company’s current exposure to the digital assets vertical, at 6.5% of net assets, is set at an appropriate level based on the maturity of the market. While we do not anticipate making further investments in this vertical in the near term, we continue to track institutional themes involving blockchain technologies that hold significant potential in the mid to long term. These include the tokenisation of real-world assets and trade settlement infrastructure.

One of the more unique propositions in the portfolio, Intellis, has continued to flourish in the last 12 months with an evolving strategy resulting in accelerated growth. The company deploys advanced proprietary AI trading strategies in foreign exchange markets and has the potential to scale significantly, both in current focus markets and potentially other asset classes. Intellis’s lean cost base has led to a sustained period of profitability. The £1.7 million uplift in the holding reflects their encouraging progress.

The acquisition of Onfido, one of the global leaders in digital identity verification, by Entrust was announced in February 2024. Following regulatory approval, the acquisition completed post-period end on 9 April 2024, with £10.1 million in proceeds received by the Company. This delivered an IRR of 5.8% and a multiple on capital invested of 1.3x. The realised value represented a c.5% uplift on the holding value reported in the Company’s half year results. The resulting IRR is well below our long-term target and the product of investment terms that were introduced to the capital structure of the company during a funding round that completed during the height of the Covid pandemic. This outcome highlights the importance of maintaining engagement and influence at board level, and of having the ability to defend positions through follow-on funding. As this transaction was completed after year end, Onfido remains in the top 10 at the completed transaction price.

Anyfin’s core product offering of credit refinancing combined with additional budgeting and savings tools has continued to support financial wellbeing for consumers across the Nordic region and Germany. Revenue growth in 2023 remained strong at 63%, although the company has faced higher costs of capital with an impact on margin. The experienced management team has demonstrated strong capability while adjusting credit underwriting to the more challenging macro environment. The company is prioritising an adjusted capital structure and additional licences which have the potential to significantly reduce the costs of capital over the longer term, following a trajectory similar to that taken by Zopa Bank.

iwoca provides another example of exceptional resilience in the portfolio, returning to performance and profitability following the end of Covid funding support schemes and the retreat of high-street lenders from small business funding. iwoca has demonstrated strong revenue growth with annualised revenue up 77% year-on-year and consistent profitability, with positive EBIT building month-on-month since January 2023. The company continues to prove the profit potential of lending businesses that harness digital technologies to drive significant operating leverage at scale.

Exits

In the half-year report I commented on the completion of a fifth portfolio exit in June, with the sale of Cushon to NatWest Group. Augmentum received proceeds of £22.8 million from the sale, delivering an IRR of 62% and a multiple on capital invested of 2.1x. Realised value represented a 47% uplift on the previously reported fair value of Augmentum’s position.

With Onfido, discussed above, these two additional exits bring total realisations since IPO to £92 million. Each of the material exits have been realised at or above the previously reported holding value, providing further evidence to support our valuations.

Performance

For the year to 31 March 2024, we are reporting a NAV per share after performance fee of 167.4p (31 March 2023: 158.9p). Since IPO the capital the Company has deployed has generated an IRR of 16%. This is below our long-term internal expectations of 20%.

The consistent approach to valuations that we have shown through the cycle is supported by a growing track record of realisations. We hope that this will continue to support investor confidence in the fair values we report for the portfolio’s positions. Each position is valued using the most appropriate methodology with most positions using public market comparables either as a primary valuation technique or as a secondary cross-check.

Along with another strong year of growth across the portfolio, valuation recovery in public markets has led to an increase in the public market multiples used in our valuation approach. However, we remained prudent, with our average forward sales multiple remaining at 4.8x, consistent with the previous reporting period. Wider governance is a key element of the process with each valuation audited and signed off by the Board and Valuations Committee.

As we have detailed in previous reports, we continue to structure our typical venture investments with downside protections such as liquidation preference and anti-dilution provisions. 21 out of the 25 portfolio positions carry these protections. Unlike ordinary share structures typically seen in the public markets, these structures protect the value of the Company’s position in the event of a reduction in the equity value of an investee company from the price paid.

Outlook

Each set of annual results provides an opportune moment to first reflect and then to chart the course ahead. We have crossed several important milestones; six years since IPO, six exits delivered to the Company and the first portfolio position rising above a fair value of £50 million. With this growing track record, we are optimistic about the future, operating with greater clarity and cohesion in a market primed for exceptional investments.

Cross-party political support for fintech in the UK positions the sector well. Policy makers recognise it as a key growth sector, and a source of international competitiveness. Investors can take further confidence in the future environment for fintech innovation from this backdrop, which we expect to continue.

In many respects the UK has led the way in fintech, building on strong financial services heritage, deep pools of talent and an attractive investment landscape. It remains the key market for fintech investment, capturing 57% of total European investment in 20234. However, increasingly there are lessons to be learnt from different approaches. In 2023, France (13%) overtook Germany (12%) to secure second place share of fintech investment, with activity supported by a collection of start-up friendly policies and the ‘Tibi’ pension fund investment scheme. It is important that the UK implements the Mansion House Reforms and other measures, and continues to invest in financial services regulation and emerging technologies such as AI to maintain its position.

Healthy competition among nations to support fintech startups drives progress in the European fintech ecosystem. Amongst the key benefits of this are value and job creation, and financial inclusion for previously underserved groups such as SMEs. Across Europe the value of the fintech sector is an estimated €340 billion and 134,000 jobs have been newly created, over 5,000 of which are from companies in the portfolio5.

We see excellent prospects in our pipeline and expect our deployment rate to return to our long-term average. Pre-seed and seed stage activity has been resilient, creating a strong pipeline of companies. Our proprietary origination engine, ADA, (named after the mathematician and computing pioneer, Ada Lovelace), reflects our extensive experience and assessment of over 5,000 fintech prospects. ADA enables us to operate at scale with a highly specialised team, maintaining a high investment standard with a lead-to-investment conversion rate of just 0.6%.

In the past year, our team has adjusted focus from portfolio management to deal sourcing and deployment, assessing numerous companies and actively engaging across Europe. Our latest investment in Artificial exemplifies our thesis-led approach, targeting the right opportunities in Insurtech. We are exploring themes including B2B payments, AI applications, compliance technologies, and fintech solutions for the green energy transition.

Our investment strategy remains consistent, while the macroeconomic and policy environments become more favourable. We will continue to invest in exceptional teams at the early stages and support them to scale their companies and ultimately secure meaningful exits.

Tim Levene

CEO

Augmentum Fintech Management Ltd

24 June 2024

1 BCG, 2023

2 https://fprimecapital.com/blog/the-2024-state-of-fintech-report

3 FT Partners

4 Innovate Finance

5 McKinsey

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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 78.

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PORTFOLIO REVIEW

^ Held via Augmentum I LP

* There are fourteen other investments (31 March 2023: fifteen). See page 13 for further details.

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KEY INVESTMENTS

Tide

Tide’s (www.tide.co) mission is to help small and mid-sized businesses (“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, instant card freezing and quick, mobile invoicing. Tide acquired Funding Options in 2022, giving Tide’s customers access to a wider range of credit options and creating one of the UK’s biggest digital marketplaces for SME credit. Tide continues to expand its product offering and launched Tide Accounting and Tide Acquiring in 2023, and recently joined the Current Account Switch Service. Tide is also expanding geographically. Tide launched in India in 2022 and it has recently announced plans to launch in Germany during 2024. Tide has 10% market share of small business accounts in the UK, with more than 575,000 customers, and more than 225,000 members in India.

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. In October 2023 Augmentum invested a further £4.2 million through a combination of primary and secondary transactions.

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

^  See note 13(iii) on pages 62 to 64.

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Zopa

Having been founded in 2005 as the world’s first peer-to peer (“P2P”) lending company, Zopa (www.zopa.com) launched Zopa Bank following a funding round in 2020. It was granted a full UK banking licence, allowing it to offer a wider product range to its customers. After 17 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 Bank is regulated by both the PRA and the FCA.

Zopa Bank is a multiple awards winner. In 2024, Zopa won three more awards from MoneyNet; Best Savings App, Best Fixed Rate Cash ISA Provider and Personal Savings Provider of the Year. These follow a string of previous awards, including being named the British Bank Awards’ Best Personal Loan Provider for the sixth year in a row in 2023. 2023 marked a key milestone, with Zopa achieving its first full year of profitability.

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 equity funding round alongside other existing investors. In September 2023 Zopa Bank raised £75 million in Tier 2 Capital to support further scaling.

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

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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 8,000 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 and Spain. 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 1.2 million devices. Total funding has been around €1.4 billion to date and it has over 400 employees.

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 €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 equity and debt funding round, with Augmentum participating and converting its CLN, and Grover’s Series C funding round in April 2022 raised US$330 million in equity and debt funding. In September 2023, Augmentum invested £1.4 million as part of a €23 million transaction that will help support the company to profitability.

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

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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 – delivering benefits to both consumers and merchants. This helps merchants shorten their cash cycle, increase conversion and lower their costs. Volt offers coverage in 25 markets and counting, including UK, Europe, Brazil and Australia. In June 2023 Volt announced their partnership with Worldpay, the world’s number one global non-bank merchant acquirer by volume processed, giving Worldpay’s more than 1 million merchant customers across 146 markets access to Volt’s open payment infrastructure. Volt also announced integration with leading global commerce company Shopify in 2023, to power a ‘pay-by-bank’ option at checkout for merchants who use the Shopify platform. In February 2024, Volt were granted a UK EMI licence by the FCA, enabling Volt to evolve its cash management product ‘Connect’ for virtual accounts.

Augmentum invested £0.5 million in Volt in December 2020, £4 million in its June 2021 US$23.5 million Series A funding round and £5.3 million in its US$60 million Series B funding round in June 2023.

Volt is not required to publicly file audited accounts.

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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 competitive 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 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 monthly profits from trading, commission and interest. It is cash generative, dividend paying, and well-placed for any cracks in the wider financial markets.

As per last filed audited accounts of the investee company for the year to 31 October 2023:

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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, becoming one of only ten companies to have achieved FCA Cryptoasset Firm Registration at that time.

Gemini announced acquisitions of portfolio management services company BITRIA and trading platform Omniex in January 2022. During 2023 Gemini expanded into the UAE and Asia.

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

Gemini is not required to publicly file audited accounts.

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Onfido

Onfido 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. In May 2023 Onfido announced the acquisition of Airside Mobile Inc, the leader in private, digital identity sharing technology whose customers include the world’s largest airlines.

Augmentum invested £4 million in 2018 as part of a US$50 million funding round and an additional £3.7 million in a convertible loan note in December 2019 as part of a £4.7 million round. The latter converted into equity when Onfido raised an additional £64.7 million in April 2020. Augmentum exited its position in April 2024 when Entrust, a global leader in identity, payments, and data security solutions, acquired Onfido. Proceeds of £10.1 million have been received.

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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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.

Following an initial investment of €1 million In 2019, 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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Anyfin

Anyfin (www.anyfin.com) was founded in 2017 by former executives of Klarna, Spotify and iZettle, and leverages technology to allow creditworthy 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, and over 500,000 people have downloaded the app.

Augmentum invested £7.2 million in Anyfin in September 2021 as part of a US$52 million funding round and a further £2.7 million as part of a US$30 million funding round in November 2022.

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

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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 ‘flexi-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 and approve a credit facility within hours. In addition to its flexi-loans, 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 and also launched a revenue-based loan with eBay in 2022 where repayments are a percentage of a business’s monthly sales. The company has lent over £3 billion in the UK and Germany since its launch across more than 130,000 business loans.

Augmentum originally invested £7.5 million in Iwoca in 2018 and has since added £0.35 million. Iwoca has raised over £1 billion in debt funding from partners including Barclays, Pollen Street Capital, Värde, Citibank and Insight Investment.

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

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OTHER INVESTMENTS

Monese

Monese (www.monese.com) offers consumers the ability to open a UK or European current account with a fully digital process. Launched in 2015 Monese has more than 2 million registered users. 70% of incoming funds are from salary payments, with customers using Monese as their primary account. In May 2023, building on strong platform infrastructure, Monese launched XYB, a banking-as-a-service (“BaaS”) platform. XYB enables financial institutions to build digital products using Monese’s technology. Monese counts HSBC and Investec amongst its XYB client base. The BaaS market shows strong growth as established banks and fintech companies continue to bring innovative digital products to market. In May 2024 Monese announced that it was splitting into two standalone entities: its B2C retail bank Monese, and its B2B business XYB.

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

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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, augmented with funeral plans in 2024. 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 115,000 reviews. It is now the largest will writer in the UK.

Since its launch in 2015 Farewill’s customers have pledged over £970 million to charities through 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 March 2023 it 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. In August 2023 Wematch passed a milestone of US$200 billion in ongoing notional value of trades on their platform and also reached an average daily matched volume (ADMV) of US$11 billion in Europe, the Middle East, and Africa.

Augmentum invested £3.7 million in September 2021.

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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. 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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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. The first fund has now closed having helped over 650 people buy a new home. Wayhome are currently working on their second fund.

Wayhome opens up owner-occupied residential property as an asset class for pension funds, who will 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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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. In 2022 Kipp won the Mastercard Fintech Engage Jury award and in 2023 was awarded first place at the Mastercard Fintech Forum CE event. It was also the ‘Leading Financial Services or Payments Start-Up’ winner at the 2023 PAY360 Awards.

Augmentum invested £4 million in May 2022.

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Artificial

Artificial (www.artificial.io) is an established underwriting technology provider for the London Insurance Market. This London-based insurtech partners with global insurers and brokers to facilitate algorithmic placement of commercial and specialty risk, backed by their powerful contract builder and underwriting platform.

Augmentum led Artificial’s £8 million Series A+ round in January 2024 with a £4 million investment, alongside existing investors MS&AD Ventures and FOMCAP IV. The round was aimed at allowing Artificial to accelerate their growth, to continue to build out its product range and further consolidate its position as a leader in algorithmic underwriting software as the insurance market migrates towards digital solutions.

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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.

In August 2023 FullCircl announced the acquisition of W2 Global Data Solutions, a provider of real-time digital solutions for global regulatory compliance. The acquisition strengthens FullCircl’s compliance suite and accelerates the company’s ambition to become the market leader in smart customer onboarding solutions for regulated businesses. In February 2024 FullCircl announced the launch of its first white label orchestration platform through W2 by FullCircl to help regulated businesses onboard more customers and meet regulatory requirements.

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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Sfermion

Sfermion (www.sfermion.io) 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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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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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 1,000 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 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 2023 financial year end the company's clients held 10.9 million LPA (Litres of Pure Alcohol) of spirit. Augmentum’s holding derives from WhiskyInvestDirect being spun out of BullionVault in 2020.

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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 has an express authorisation from the FIN-FSA to deploy client assets into decentralized finance or “DeFi”.

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 underleveraged 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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Previse

Previse (www.previse.co) 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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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 19 to 31, provides a review of the Company’s business, performance during the year and its strategy going forward. It also considers the principal risks and uncertainties facing the Company and 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 27 and 28.

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

In accordance with its investment objective and policy, the Company continued throughout the year under review to pursue the generation of 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 approved investment trust company and an alternative investment fund (“AIF”) under the Alternative Investment Fund Managers Regulations (“UK AIFMD”). It has appointed Frostrow Capital LLP as its alternative investment fund manager (“AIFM”) and Augmentum Fintech Management Limited as its Portfolio Manager.

Principal Risks and Risk Management

The Board is responsible for the ongoing identification, evaluation and management of the 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'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 identified 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 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 considers that the risks set out below are the principal risks currently facing the Company.

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 and Middle East

The Board does not expect the conflicts in Ukraine and the Middle East to have a material impact on the Company, but notes that two of the Company’s investments, Wematch and Kipp, are based in Israel. The Board continues to monitor events in both theatres. The Company has not identified any sanctioned shareholders on its share register and 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 (see page 29). However, the Company does not have explicit sustainability investment objectives or policies and will not seek to apply a sustainability label under the FCA’s UK Sustainability Disclosure Requirements and investment labels regime (“SDR”).

Performance and Prospects

Performance

The Board assesses the Company’s performance relative to its investment objective using 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 NAV per share after performance fee total return as being the critical measure of value delivered by the Company 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 78 and in note 16 on page 65. 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 5.4% (2023: 2.4%). 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 +3.6% (2023: negative 27.1%). Whilst this is broadly consistent with the NAV per share total return for the year, the share price remains under pressure following the swing in market sentiment in 2022.

• 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 reviews the costs incurred in operating the Company at each Board meeting and seeks 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 24 and 25. 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 2.0% (2023: 1.9%).

*See Glossary on page 78

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 Company has the same Portfolio Manager, management fee arrangements and cost base that it had in 2021 when the shares traded at a premium to NAV and 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. The year under review saw little improvement.

The Board has sought to communicate its faith in the underlying value of the portfolio and simultaneously to take advantage of the discount by continuing to undertake a limited programme of accretive share buybacks, to the benefit of remaining shareholders, whilst balancing the need to retain cash for new and follow-on investments. It is thought that helping to create some 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.

Performance, Prospects and Future developments

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

The Board’s primary focus is on the Portfolio Manager’s investment approach and performance, which are thoroughly discussed at every Board meeting. In addition, the AIFM, the Portfolio Manager and the Company’s Brokers update the Board on company communications, promotion, investor feedback and market background.

Outlines of performance, investment activity and strategy, market background during the year and outlook are provided in the Chairman’s Statement on pages 2 to 4 and the Portfolio Manager’s Review on pages 15 to 18.

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 modelling the impact of a 50% fall in the value of the investment portfolio, the impact of this on the Company’s ongoing charges and reviewing the ability of the Company to meet its liabilities as they fall due and support investee companies with future funding requirements in such a scenario.

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 19 to 22 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 inflation, concerns about a recession and the Ukraine and Middle East conflicts, 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 66, 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 2024 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 2024 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 Company’s registrar is Computershare Investor Services PLC. Contact details are set out on page 80.

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. The Board has affirmed, that the Company will continue to 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. Additionally, the Company has engaged Quill PR to assist in promoting the Company.

Further, 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 41 and 42. The Board also encourages diversity within AFML, where the team of 12 people represents four different nationalities and is 42% 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 important for mitigating risk and making 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’ and ‘City Giving Day’ initiatives.

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)

Augmentum is a signatory 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 Augmentum team participates in The Lord Mayor’s Appeal ‘We Can Be’ initiative, 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. Augmentum also participates in Playfair’s ‘Female Office Hours’, the largest diversity and inclusion initiative in venture to bring founders and investors together for one-to-one mentoring and pitch meetings.

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

Farewill: Charity Pledge (Social)

Farewill partners with charities to enable them to offer free will writing services through their website. In May 2024, Farewill announced they had hit £1 billion in legacy pledges for charity..

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

Led by Zopa Bank, 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

24 June 2024

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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 32 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

24 June 2024

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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.

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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.

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CONSOLIDATED BALANCE SHEET

as at 31 March 2024

The Financial Statements on pages 52 to 68 were approved by the Board of Directors on 24 June 2024 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 78.

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COMPANY BALANCE SHEET

as at 31 March 2024

The Company’s return for the year was £11,587,000 (2023: £3,175,000). 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 24 June 2024 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

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CONSOLIDATED CASH FLOW STATEMENT

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

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COMPANY CASH FLOW STATEMENT

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

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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

£169,000 of interest and depreciation relating to a lease (2023: £209,000) 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 45.

^  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.

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 (2023: eleven). 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. Any performance fee paid by the Company to AFML is allocated to employees of AFML on a discretionary basis and overseen 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 2024 the hurdle has been met, on an unrealised basis, and as such a performance fee of £18,980,000 (2023: £16,819,000) has been provided for by the Company, equivalent to 11.2 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 25 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% (2023: 6.4%).

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 25% (2023: 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 £36,704,000 (2023: £32,904,000). 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 £22,790,000 (2023: £44,224,000) from investments sold in the year. The book cost of these investments when they were purchased was £10,750,000 (2023: £6,348,000). 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.

9 Subsidiary undertakings

The Company has an investment of £750,000 (2023: £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

11 Other Payables

12 Provisions

* See page 25 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

Cash and other receivables and payables are measured at amortised cost and the rest of the financial assets in the table above are held at approximate to fair value. The carrying values of the financial assets and liabilities measured at amortised cost are equal to the fair value.

The unlisted financial assets held at fair value are valued in accordance with the IPEV Guidelines as detailed within note 19.4.

(iii) Fair Value Hierarchy

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction.

The Group complies with IFRS 13 in respect of disclosures about the degree of reliability of fair value measurements. This requires the Group to classify, for disclosure purposes, fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.

The levels of fair value measurement bases are defined as follows:

Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: fair values measured using valuation techniques for which any significant input to the valuation is not based on observable market data (unobservable inputs).

All investments were classified as Level 3 investments as at, and throughout the year to, 31 March 2024. Note 8 on page 61 presents the movements on investments measured at fair value. Total gains and losses on assets measured at Level 3 are recognised as part of Gains on Investments in the Consolidated Income Statement, and no other comprehensive income has been recognised on these assets.

When using the price of a recent transaction in the valuations, the Company looks to ‘re-calibrate’ this price at each valuation point by reviewing progress within the investment, comparing against the initial investment thesis, assessing if there are any significant events or milestones that would indicate the value of the investment has changed and considering whether a market-based methodology (ie. using multiples from comparable public companies) or a discounted cashflow forecast would be more appropriate.

The main inputs into the calibration exercise, and for the valuation models using multiples, are revenue, EBITDA, AuM, and P/E multiples (based on the most recent revenue, EBITDA, AuM, or earnings achieved and equivalent corresponding revenue, EBITDA, AuM, or earnings multiples of comparable public companies), quality of earnings assessments and comparability difference adjustments. Revenue multiples are often used, rather than EBITDA or earnings, due to the nature of the Group’s investments, being in fast-growing, small financial services companies which are not normally expected to achieve profitability or scale for a number of years. Where an investment has achieved scale and profitability the Group would normally then expect to switch to using an EBITDA or earnings multiple methodology.

The main input into the PWERM (‘Probability Weighed Expected Return Methodology’) is the probability of conversion. This method is used for the convertible loan notes held by the Company.

The fair valuation of private company investments is influenced by the estimates, assumptions and judgements made in the fair valuation process (see Note 19.12 on page 68). A sensitivity analysis is provided below which recognises that the valuation methodologies employed involve subjectivity in their significant unobservable inputs and illustrates the sensitivity of the valuations to these inputs. The inputs have been flexed with the exception of the Sales Price valuation approach as it does not involve significant subjectivity. The table also provides the range of values for the key unobservable inputs.