Final Results

16 July 2020

Augmentum Fintech plc

This announcement contains regulated information

Annual Financial Report for the year ended 31 March 2020

Augmentum Fintech plc (LSE: AUGM), the UK’s only publicly listed investment company solely focused on the fintech sector, announces its Final Results for the year ended 31 March 2020.

Financial highlights

NAV per share increased by 5.9% to 116.1p* (31 March 2019: 109.6p)
Unrealised annualised IRR of 18% on invested capital.
£14.4 million available cash as at 31 March 2020 (31 March 2019: £25.1 million)
Raised gross proceeds of £25.8 million through an equity issue in July 2019.
£33.0 million invested during the year (2019**: £44 million) and unrealised gains of £12.7 million (2019**: £12.2 million) across the portfolio.

Portfolio highlights

Invested £17.8 million in three new companies Habito, Grover and Receipt Bank (2019**: 32.1 million in nine companies in addition to the seed portfolio).
Invested £15.0 million in seven existing portfolio companies (2019**: 33.5 million in six investments constituting the seed portfolio).
Total of £413 million*** equity raised by portfolio companies in the year (2019**: £368 million).

Reacted swiftly to the COVID-19 pandemic to safeguard employees, our investments and monitor liquidity across the portfolio.
Focus on scaling investment capabilities to take advantage of existing and future investment opportunities that present themselves, in part as of result of accelerated digitisation due to COVID-19 and its impact on private funding markets.
interactive investor’s acquisition of Alliance Trust Savings completed.

Post period-end

Augmentum was included in the FTSE All Share Index and the FTSE Smallcap Index.
Zopa gained its full UK banking licence and will launch Zopa Bank alongside its P2P business.
ReceiptBank acquired Xavier, who automate complex checking of financial data.
iwoca and Previse accredited to the Coronavirus Business Interruption Loan Scheme (CBILS) and Tide accredited to the Bounce Back Loan Scheme (BBLS).

interactive investor’s acquisition of Share PLC completed, which valued interactive investor at £675 million.
In excess of £100 million*** equity raised by portfolio companies.
Farewill: Augmentum invested a further £2.6 million as part of a £20 million Series B investment round led by Highland Europe.
ESG: Re-designed investment selection and management process in line with PRI guidelines.

Alternative Performance Measures

The financial statements in the Annual Report set out the required statutory reporting measures of the Company’s financial performance. In addition, the Board assesses the Company’s performance against a range of criteria which are viewed as particularly relevant for investment trusts, which are summarised in the key performance indicators in the Annual Report. Definitions of the terms used are set out in the Annual Report.

* These are all considered to be Alternative Performance Measures.

** For the period from incorporation on 19 December 2017 to 31 March 2019.

*** Source: Pitchbook

Neil England, Chairman of Augmentum Fintech plc commented:

“I am pleased to present our second annual results since the launch of Augmentum Fintech plc in March 2018.

In July 2019, we raised £25.8 million through an issue of equity which has provided the resources for our Manager to add to your portfolio and to make further investments in existing portfolio companies.

Our diverse portfolio of investments, which we have added to in the year, have performed largely to expectations in the run up to the Covid-19 crisis and I am pleased to report that all of these companies have grown their revenues, in several cases substantially, and a number are building a strong market position in their respective sectors.

Much of our portfolio has been more resilient during this crisis than many other companies in financial services, but clearly any outlook needs to take account of the macro-economic position.

Your Board believe that there is likely to be further market volatility but the overall portfolio will continue to be resilient to the short and medium term impact of the current crisis. We believe there are compelling reasons to be confident in our long term prospects. Carefully selected European fintech businesses should provide a platform for the Company to experience substantial long-term growth and value accretion. Combined with the industry leading expertise that exists in our Portfolio Manager and advisory group, we remain positive about our future.”

Tim Levene, CEO of Augmentum Fintech Management Limited commented:

“Our strategy remains to back some of Europe’s most exciting early and growth stage fintech businesses that are disrupting the traditional financial services industry.

Over the reporting period, as well as seeking out new compelling opportunities, we have continued our close operational relationship with existing portfolio companies to ensure that they are well positioned to continue operating effectively in the new economic environment.

Covid-19 has fundamentally changed behaviours. This has accelerated the digitisation of financial services and has created significant opportunity for further disruption. Fintech per se finds itself at the centre of this change and we expect to capitalise on a once in a generation transformation in digital adoption.

We anticipate that over the coming 12 months there will be a number of compelling investment opportunities.

As the UK’s only publicly listed fintech fund, Augmentum Fintech is uniquely positioned to capitalise on these opportunities and provide investors with diversified exposure to some of Europe’s most exciting Fintech companies. With private companies staying private for longer, a trend that continues to persist, we expect to deliver compelling venture returns over time.”

For further information, please contact:

Augmentum Fintech Tim Levene, Portfolio Manager Nigel Szembel, Investor Relations	+44 (0)20 3961 5420 +44 (0)7802 362 088 / nigel@augmentum.vc
Peel Hunt Liz Yong / Luke Simpson	+44 (0)20 7418 8900
N+1 Singer Harry Gooden / James Moat	+44 (0)20 7496 3000

About Augmentum Fintech plc:

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.

Chairman’s Statement

Financial Highlights

	31 March	31 March
	2020	2019**
NAV per Share Total Return*	5.9%	10.7%
Total Shareholder Return*	(41.6%)	9.4%
Ongoing Charges*	2.1%	2.1%

* These are all considered to be Alternative Performance Measures. Please see the Glossary and Alternative Performance Measures on page 78 of the Annual Report.

** for the period from incorporation on 19 December 2017 to 31 March 2019.

I am pleased to present our second annual report since the launch of the Company in March 2018. This report covers the year ended 31 March 2020.

Investment Policy

Your Company is set up to invest in early stage (post-seed capital) European Fintech businesses which have disruptive technologies and offer the prospect of high growth with scalable opportunities. All of this is consistent with our objective to provide long term capital growth to shareholders.

Performance

Our diverse portfolio of investments, which we have added to in the year, have performed largely to expectations in the run up to the Covid-19 crisis. I am pleased to report that all of these companies have grown their revenues, in several cases substantially, and a number are building a strong market position in their respective sectors. The Portfolio Review gives a comprehensive analysis of all the factors contributing to the Company’s performance during the year.

Our level of investment is on plan and we have the cash reserves in place for the follow on investments that we expect to make.

The Covid-19 crisis was clearly not part of these forecasts. This crisis has provided opportunities, and in some instances challenges, for your portfolio companies.

It is clear that the shared experience of work and life generally under lockdown combined with social distancing are accelerating the trend towards a digital economy, not least in financial services where many products are already virtual or digitally based. This is an unequivocal boost to the fintech sector. Indeed, some of our portfolio companies saw an increased demand for their services as a result of the crisis. Farewill, BullionVault and Onfido are examples of these.

Equally, for some of our investments, especially those involved in the provision of credit, there has been a significant impact on their business as economies decelerated rapidly and some sectors ceased activity altogether. The team at Augmentum have worked closely with management at portfolio companies in these cases to help ensure that they have adapted to weather this difficult period, not least to ensure that they have sufficient balance sheet reserves to be able to continue to grow.

Valuations

Together with our advisors, we have carefully reviewed the status of all of our portfolio companies in light of recent events. This is reflected in the revised valuations in this report. The Board have looked at different methodologies and outcomes to validate our conclusions.

For several of our portfolio companies the crisis has had a positive impact with record levels of trading. Where the impact has been negative, our stake is often protected by the structure of the deal. In many of our investments we benefit from a senior position in the capital structures, providing downside protection. Further details on our investments in individual companies are set out in the Portfolio Manager’s Review.

I am pleased to confirm, that despite the impact of the crisis and the general fall in public market indices per share, we are reporting an increase in the Company’s NAV* per share of 5.9%.

Auditor

Your Board is conscious of its role to keep costs as low as possible while maintaining high standards of governance. During the year, we undertook a review of the Company’s auditor by way of a competitive tender process. The result of the review was the appointment of a new external auditor, BDO LLP. Further details can be found in the Report of the Audit Committee beginning on page 49 of the Annual Report.

Dividend

No dividend is declared for the year. Your Company is focused on providing capital growth and will only pay an ordinary dividend in order to maintain the Company’s investment trust status.

Share Capital and Discount

As I reported at the half year, in July 2019 the Company issued 23,051,911 shares and raised £25.8 million for new investments and to support the existing portfolio.

Towards the end of the year under review, in common with many other listed private equity vehicles, the Company’s share price discount widened to a significant discount to NAV per share. Your Board monitor discounts closely and during March 2020 when the discount was wide, took the opportunity to buy back 120,000 shares, at an average discount to the historic NAV per share of 50.1%, to the benefit of shareholders. A further 75,000 shares were bought back in April at a similar discount level. The shares bought back are held in Treasury and are available for reissue at a premium to net asset value per share in the future.

As at 31 March 2020 the share price stood at a deep discount of 41.6% to NAV per share. Since then the share price has recovered well and currently stands at a discount of 7.8%, as at the close of business on 14 July 2020. Your Board believes that this level of discount undervalues the Company given its potential.

Non material change to the investment policy

Under the Company’s investment previous policy, no single investment may represent more than 15% of NAV, with the exception that one single investment may represent up to 20% of NAV, measured at the time of investment. With the development of the Company since its initial public offering and the Company now holding investments in 17 fintech companies, the Board has concluded it is now appropriate to remove the exception that one single investment may represent up to 20% of NAV, and accordingly has made a non material change to the investment policy. Under the revised policy no single investment may represent more than 15% of NAV, measured at the time of investment. The amended investment policy is set out in this announcement and is also available on the Company’s website.

Annual General Meeting

The second Annual General Meeting of the Company will be held on Tuesday, 29 September 2020 at 11.00 a.m. The Notice of Annual General Meeting is in a separate document.

Your Board is keen to allow as many shareholders as possible to participate in the proceedings and have the opportunity to and to ask any questions you may have of our Portfolio Manager or the Board. We do recognise however that some shareholders may be reticent to travel and attend public meetings; for the near future at least.

We have therefore decided to take advantage of recent legislation which allows us to webcast the meeting in place of a physical meeting and provide a live link for any shareholder questions or comments. We will attempt to answer questions received remotely during the meeting itself but if that is not possible then they will be answered later that day. It would be appreciated if any questions or comments are tabled in advance of the meeting via the Company Secretary. Details for joining the Annual General Meeting will be posted on the Company’s website on Friday, 25 September 2020.

The Board strongly encourages all shareholders to exercise their votes in advance, or by proxy to the Chairman if preferred, to ensure your vote is counted. We have not included paper forms of proxy to accompany the Notice of Annual General Meeting. Shareholders can vote online in advance by visiting www.signalshares.com and following instructions. If you require assistance with this or a hard copy form of proxy please refer to the Notice of Annual General Meeting or contact our registrar, Link Asset Services.

The Directors consider that all the resolutions detailed in the formal notice are in the best interests of the Company and the shareholders taken as a whole and therefore unanimously recommend to shareholders that they vote in favour of each resolution, as the Directors intend to do in respect of their own holdings.

Outlook

As I write, it appears that Europe is slowly emerging from the worst of the crisis, markets are cautiously positive and consumer spending is starting to increase. Much has been written about the ‘new normal’ and how this might impact businesses. What we do know is that much of our portfolio was more resilient during this crisis than many other companies in financial services but clearly any outlook needs to take account of the macro-economic position.

Neil England
Chairman

15 July 2020

Portfolio Manager’s Review

Overview

It has been another year of significant progress for the Group despite the market highs and lows in the year under review – from a stable and reasonably predictable macro-economic environment to the uncertainty and disruption created by Covid-19.

Covid-19 has fundamentally changed behaviours. This has accelerated the digitisation of financial services which has created significant opportunity for disruption. Fintech per se finds itself at the centre of this change and we hope to capitalise on a once in a generation transformation in digital adoption.

Fundamental attributes of successful fintech companies are world class technology, data driven processes, operational efficiency, and customer centricity, but the attributes that are particularly advantageous in these challenging and fast changing times are responsiveness and agility; these attributes define fintech and are often hard to find in traditional institutions.

Both fintechs and incumbent financial services providers will be tested by the Coronavirus pandemic. Within our portfolio there will be stresses and challenges but also significant opportunities for companies who are able to effortlessly adapt their product, make difficult decisions quickly and to execute on them.

Performance

Performance overall has been sustained despite Covid-19 with the portfolio showing an unrealised IRR of 18% on invested capital. In the latter part of the reporting period some portfolio companies have benefitted from the new circumstances, whilst others have faced challenges. Our reported increase in fair value of £12.7 million (period ended 31 March 2019: £12.2 million) over the year is set against the backdrop of falls of almost 20% in major public equity indices. This reflects the longer-term horizons of private venture capital and some of the downside protection mechanisms we have built into our investments.

During the year, we have invested £32.8 million in both new and existing portfolio companies.

New Investments

Since April 2019 we have invested £17.8 million in three innovative businesses that are becoming the leading digital disrupters in their fields.

Habito is transforming the £1.3 trillion UK mortgage market. Our £5.0 million investment in Habito will further their efforts to shake up the archaic process of purchasing property. They have built a platform that aims to take the stress out of home buying. Since launch, they have become the UK’s most recognised digital broker with a market share of almost 2%.

Grover is bringing the access economy to the consumer electronics market by offering a simple, monthly subscription model for technology products. We have invested €6 million in Grover who have benefitted significantly from the shift to homeworking. The company has more than doubled its monthly revenue since our investment in September to over €40 million on an annualised basis.

We invested £7.5 million in Receipt Bank as part of their £55 million Series C round alongside Insight Venture Partners. Receipt Bank is a productivity software business that deploys machine learning and computer vision techniques to automate data entry for small businesses, accountants and bookkeepers, thereby removing time-consuming manual process. It has processed over 250 million receipts, bills, and bank statements since inception with 50,000 accountant clients and over 400,000 small businesses operating in six markets. Our investment in Receipt Bank illustrates our desire to invest across a spectrum of growth maturities in our portfolio.

The Existing Portfolio

We are a team that works actively across our companies typically having oversight at board level and supporting management. Our priority in recent months has been to focus heavily on our existing portfolio, ensuring they have sufficient cash runway to focus on efficient growth, and to ensure their cost base is appropriate to the economic environment. Many of our companies are growing at a rapid rate, and although they are run by talented and dynamic management, there are often elements of inefficiency and we have been impressed by how quickly our portfolio companies have reacted to the changing market by becoming leaner and nimbler.

Over the reporting period we have made £15.0 million of additional investments across the existing portfolio. The bulk of which was deployed into three companies.

In December, we added £3.8 million to our existing investment in Onfido as part of an $80 million round that completed in April 2020. Our earlier convertible note also converted into equity in that round at a 46% uplift in valuation, valuing our total holding at £10.9 million. This is one of five investments now in our portfolio valued at more than £10 million and represents the diversification of value that is a key part of our portfolio strategy.

We have continued to support the growth of Monese with a further £4.0 million of investment alongside co-investors PayPal and Kinnevik. It is differentiated from many of the other more capital intensive neobanks, as it focuses on an underserved segment many of whom are using Monese as their primary account. Nevertheless, the current environment necessitates that the business manages ongoing growth in a more capital efficient manner. Monese have therefore implemented a significant cost reduction program that will give them a longer cash runway and moderate the double-digit monthly growth the company was experiencing until the beginning of 2020.

We invested a further £5.0 million in Tide as part of a £60 million Series B investment round. They have become one of the UK’s leading SME digital challenger banking platforms with 3% market share having launched just over three years ago. Demand for the product remains strong with more new customers signing up to the service in May than in any previous month.

Significant progress has also been made elsewhere across other key companies within the portfolio.

Zopa has been granted a full UK banking licence by the PRA following the £140 million funding round led by IAG Silverstripe, the private investment group specialising in digital and technology led businesses. Despite a write down in value over the past year driven by challenging fundraising conditions and regulatory deadlines, we see a bright future for Zopa with strong potential upside from our current valuation. The process to acquire a bank licence has become exceptionally rigorous and this licence will, we believe, become an incredibly valuable asset over time. Zopa Bank will launch with a clean balance sheet and start by offering a fixed term saving account followed by an innovative credit card later in the year.

Market uncertainty affected the SME lending sector and iwoca moved quickly to adapt its credit scoring and processes accordingly. Accreditation to issue loans under the Government CBILs scheme was welcome news, and the company has seen a marked improvement in loan performance since May both in Germany and UK where the business operates. The business remains well capitalised and well positioned to operate within the new normal with the launch of an innovative set of new products including iwocaPay, which allows small businesses to offer flexible payment terms to their B2B customers without taking credit or liquidity risk.

interactive Investor (ii) now has over £36 billion of assets under administration and successfully integrated the acquisition of Alliance Trust Savings. In February, ii announced the intended acquisition of Share PLC which closed in July. The deal valued ii at over £675 million which now makes the company our most significant holding by value. In Q1 2020 ii achieved record trading numbers in terms of revenue, new customers, and accounts. Trading levels and account openings have been robust since the pandemic and the outlook remains very positive for the company.

BullionVault has seen strong growth as a result of these uncertain times. They offer customers direct, digital access to physical bullion and have seen trading volumes increase 400% from the previous 52-week average. With over $3 billion of physical gold, silver, and platinum in client assets, they have consolidated their position as the largest retail investment platform for precious metals globally.

Farewill, the digital leader in death services has seen impressive uptake in its wills service alongside promising early growth across new product verticals. The business has seen significant revenue growth of 859.1% in the first half of 2020 compared to the same period last year. Its compelling story has resonated with the investment community where access to its latest investment round was in significant demand. Since 31 March 2020 the company has closed a £20 million funding round, led by Highland Europe. We invested a further £2.6 million in this round and have benefited from a £4 million uplift in valuation in relation to our initial £4 million investment.

Outlook

Although it is likely that retrospective figures will show a decline in overall venture capital investment activity during 2020, funding and valuations will remain competitive for those companies thriving under the new normal. Nevertheless, this will be a more challenging period to navigate for businesses and some may require short term support as they feel the impact of a changing macro environment.

The opportunity to capitalise on the shifts in consumer and business behaviour in regard to digital financial services is greater than ever. Incumbent players still control more than 90% of the global market, and many of the financial services giants of tomorrow are yet to emerge.

Our focus remains on investing in excellent companies where we have high conviction, and which are priced fairly. We anticipate that over the coming 12 months there is potential for M&A, consolidation, and some keenly priced investment opportunities.

As the UK’s only publicly listed fintech focused investment fund, we are uniquely positioned to capitalise on these opportunities. With private companies staying private for longer, a trend that is likely to persist, we expect to deliver compelling venture returns over time.

Tim Levene
Augmentum Fintech Management Limited

15 July 2020

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 (but not seed) or later stage investments in unquoted fintech businesses. The Company intends to realise value through exiting the investments over time.

The Company will seek exposure to early stage businesses which are high growth, with scalable opportunities, and have disruptive technologies in the banking, insurance 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 on 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; 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.

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. 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 to ensure an appropriate risk/return profile is maintained.

Cash and cash equivalents are held with approved counterparties, and in line with prudent cash management guidelines, agreed with the Board, AIFM and Portfolio Manager.

It is expected that the Company will hold between 10 and 20 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 and 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 of the Annual Report.

Portfolio Review

	Fair value of			Fair value of
	holding at	Net		holding at
	31 March	investments/	Gain/(loss) on	31 March
	2019	(realisations)	investments	2020	% of
	£000	£000	£000	£000	portfolio
interactive investor^	10,060	49	11,698	21,807	17.7%
Tide	4,975	5,000	4,246	14,221	11.5%
BullionVault*^	7,621	(360)¹	3,930	11,191	9.1%
Onfido	3,972	3,750	3,145	10,867	8.8%
Monese	6,524	4,000	(365)	10,159	8.3%
Zopa^	21,954	–	(14,024)	7,930	6.4%
Iwoca	7,500	100	–	7,600	6.2%
Receipt Bank	–	7,500	–	7,500	6.1%
Farewill	4,000	–	3,216	7,216	5.9%
Grover	–	5,347	920	6,267	5.1%
Top 10 Investments	66,606	25,386	12,766	104,758	85.1%
Other Investments	10,994	7,463	(83)	18,374	14.9%
Total Investments	77,600	32,849	12,683	123,132	100.0%

* includes WhiskyInvestDirect

^ Held via Augmentum I LP

1 Dividend paid

Key Investments

interactive investor

interactive investor is the No.1 UK direct-to-consumer fixed fee investment platform, with over £30 billion of assets under administration and over 300,000 customers across its general trading, ISA and SIPP account. It has a 14% share of UK retail equity trading. The company offers execution-only trading and investing services in shares, funds, ETFs and investment trusts, all for a market-leading monthly subscription fee.

interactive investor completed a £40 million acquisition of Alliance Trust Savings in 2019, bringing together the two largest UK fixed price platforms, and in February 2020 reached an agreement to acquire Share PLC.

Source: ii	31 March	31 March
	2020	2019
	£000	£000
Cost:	3,175	3,175
Value:	21,807	10,060
% ownership (fully diluted)	3.7%	3.7%
Turnover¹:	72,956	47,901
Pre tax profits¹:	8,925	10,198
Net assets¹:	116,624	95,386

1 As per last filed audited accounts of the investee company for the year to 31 December 2018.

Tide

Tide’s mission is to help SMEs save time and money in the running of their businesses. Customers are set up with an account number and sort code in as little as 5 minutes, and the company is building a comprehensive suite of digital banking services for businesses, including automated accounting, instant access to credit, card control and quick, mobile invoicing. Tide is the fifth largest business banking challenger in the UK (by volume of customers), and the largest digital challenger. Tide has 2% market penetration and is estimated to have a share of 12-15% of new-to-market business current accounts.

In September 2019 Augmentum led Tide’s £44.1m first round of Series B funding, alongside Japanese investment firm The SBI Group.

Source: Tide	31 March	31 March
	2020	2019
	£000	£000
Cost:	9,261	5,261
Value:	14,221	6,524
% ownership (fully diluted)	5.9%	5.9%
Turnover¹:	5,485	1,662
Pre tax losses¹:	(12,663)	(7,261)
Net assets¹:	18,101	385

1 As per last audited accounts of the investee company for the year to 31 December 2018.

BullionVault

BullionVault is a physical gold and silver market for private investors online. It enables people across 175 countries to buy and sell professional-grade bullion at the very best prices online, with $2 billion of assets under administration and over $100 million worth of gold and silver traded monthly.

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

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

Source: BullionVault	31 March	31 March
	2020	2019
	£000	£000
Cost:	8,424	8,424
Value:	11,191	7,621
% ownership (fully diluted)	11.1%	11.1%
Dividends paid¹:	360	448
Turnover²:	9,341	6,668
Pre tax profits²:	5,198	3,129
Net assets²:	35,712	33,569

1 In the year to 31 March 2020 and the period from 13 March 2018 to 31 March 2019.

2 As per last filed audited accounts of the investee company for the year to 31 October 2019.

WhiskyInvestDirect

Founded in 2015, WhiskyInvestDirect, a subsidiary of BullionVault, 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 Company has over 2,500 bulk-stockholding clients, the equivalent of 25 million bottles of whisky stored in barrels and 7 million litres of Pure Alcohol under Management. The business seeks to change the way some of the three billion litres of maturing Scottish whisky is owned, stored and financed, giving self-directed investors an opportunity to profit from whisky ownership, with the ability to trade 24/7.

Source: BullionVault

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 and has offices in London, San Francisco, New York, Lisbon, Paris, New Delhi and Singapore. The company has attracted over 1,500 customers in 60 countries worldwide, including industry leaders such as GoCardless, Nutmeg, Bitstamp and Revolut. These customers are choosing Onfido over others because of its ability to scale, speed in on-boarding new customers (15 seconds for flash verification), preventing fraud, and its advanced biometric technology.

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

Source: Onfido	31 March	31 March
	2020	2019
	£000	£000
Cost:	7,750	3,972
Value:	10,867	3,972
% ownership (fully diluted)	1.7%	1.5%*
Turnover¹:	18,591	7,927
Pre tax losses¹:	(17,265)	(8,827)
Net assets¹:	12,776	15,460

1 As per last filed audited accounts of the investee company for the year to 31 December 2018.

* £5.7m (2019: £2.0m) is in a convertible loan note.

Monese

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

With its mobile-only dual UK and Euro IBAN current account, its portability across 30 countries, and both the app and its customer service available in 14 languages, Monese allows people and businesses to bank like a local across the UK and Europe. Launched in 2015 Monese already has more than 2 million registered users. 70% of incoming funds are from salary payments, indicating that customers are using Monese as their primary account. Monese has become one of the most popular and trusted banking services in the UK and Europe. Customers move over £5 billion annually through their Monese accounts.

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

Source: Monese	31 March	31 March
	2020	2019
	£000	£000
Cost:	9,261	5,261
Value:	10,159	6,524
% ownership (fully diluted)	5.4%*	5.4%
Turnover¹:	5,485	1,662
Pre tax losses¹:	(12,663)	(7,261)
Net assets¹:	18,101	385

1 As per last audited accounts of the investee company for the year to 31 December 2018.

* £4m of investment in a convertible loan note.

Zopa

Zopa built the first peer-to-peer (P2P) lending company to give people access to simpler, better-value loans and investments. Silverstripe invested £140m in April 2020 following which Zopa have now been granted their full UK banking license.

Zopa’s proprietary technology has contributed to their leading digital acquisition position. The company has lent over £5 billion in personal loans since inception and generated positive returns every year through the cycle. New products include a fixed term savings product protected by the Financial Services Compensation Scheme (FSCS), a credit card and a money management product.

Source: Zopa	31 March	31 March
	2020	2019
	£000	£000
Cost:	18,500	18,500
Value:	7,930	21,954
% ownership (fully diluted)	6.1%	6.1%
Turnover¹:	38,550	43,980
Pre tax losses¹:	(18,295)	(556)
Net assets¹:	48,903	66,295

1 As per last filed audited accounts of the investee company for the year to 31 December 2018.

iwoca

Founded in 2011, iwoca uses award-winning technology to disrupt small business lending across Europe. They offer short-term loans of up to £200,000 to SMEs across the UK, Germany and Poland. iwoca leverage online integrations with high-street banks, payment processors and sector-specific providers to look at thousands of data points for each business. These feed into a risk engine that enables the company to make a fair assessment of any business – from a retailer to a restaurant, a factory to a farm – and approve a credit facility within hours. The company has issued over £1 billion in funding to over 50,000 SMEs in total and was awarded £10m from the Banking Competition Remedies’ Capability and Innovation Fund (CIF) in 2019.

Source: iwoca	31 March	31 March
	2020	2019
	£000	£000
Cost:	7,600	7,500
Value:	7,600	7,500
% ownership (fully diluted)	2.5%	2.8%
Turnover¹:	47,534	25,274
Pre tax (losses)/profits¹:	506	(3,131)
Net assets¹:	28,957	22,376

1 As per last filed audited accounts of the investee company for the year to 31 December 2018.

Receipt Bank

Receipt Bank was founded in 2010 out of frustration from the amount of time and money lost in forgotten expenses, lost receipts and weekends spent sorting through paperwork. The founders decided there must be a better way to track business expenses and share them with accountants.

With over 400,000 businesses using the platform, Receipt Bank has processed over 250 million receipts, bills and bank statements. It uses powerful machine learning technology to connect accountants, bookkeepers and businesses to unlock the value of accounting data. It employs 450 people in offices across 4 continents.

Augmentum’s £7.5 million investment in January 2020 was part of Receipt Bank’s £55m Series C round led by US based Inside Partners.

Source: ReceiptBank	31 March
	2020
	£000
Cost:	7,500
Value:	7,500
% ownership	3.7%
Turnover¹:	18,619
Pre tax losses¹:	(17,619)
Net assets¹:	3,601

1 As per last filed audited accounts for the year to 31 December 2018.

Farewill

In the next 10 years, £1 trillion of inheritance will pass between generations in the UK. Farewill is a digital, all-in-one financial and legal services platform for dealing with death and after-death services, including wills, probate and cremation. “The nation’s favourite will writer” according to Trustpilot reviews, Farewill aims to be the first major consumer brand in death services.

Farewill writes 1 in 25 UK wills and has raised £125m for charity in pledged income.

Augmentum led Farewill’s £7.5 million Series A fundraise, with a £4 million investment.

Source: Farewill	31 March	31 March
	2020	2019
	£000	£000
Cost:	4,000	4,000
Value	7,216	4,000
% ownership (fully diluted)	13.4%	13.4%
Turnover:	N/A^	N/A^
Pre tax profits:	N/A^	N/A^
Net assets:	N/A^	N/A^

^ No audited accounts filed.

Grover

Grover brings 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 2,000 products including smartphones, laptops, virtual reality technology and wearables. The Grover service allows users to keep, switch, buy, or return products depending on their individual needs. With a total financing volume of €103m, the company has over 300,000 registered users.

In September 2019 Augmentum led a €11 million funding round with a €6 million investment. This coincided with Grover signing a new €30 million debt facility with Varengold Bank, one of Germany’s major fintech banking partners.

Source: Grover	31 March
	2020
	£000
Cost:	5,347
Value:	6,267
% ownership (fully diluted)	N/A*
Turnover:	^
Pre tax profits:	^
Net assets:	^

* Investment via a convertible loan note.

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

Other Investments

DueDil

DueDil is a predictive company intelligence platform whose mission is to inform and connect the economy by telling the story behind every business. DueDil’s purpose-built matching technology links together data from authoritative sources, helping its clients find, verify and monitor opportunities and risks. More than four hundred B2B financial services and technology companies rely on DueDil’s web platform and API as an end-to-end solution for go to market execution, compliant on-boarding and lifecycle risk assessment. DueDil has over 20 years’ worth of financial data, 57 million pieces of company information and indexes 680 million news articles every day. Alongside Augmentum, major investors include Notion Capital and Oak Investment Partners.

Previse

Previse 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. The company has analysed over 3 million invoices and processed £160 billion spend to date.

Augmentum invested £250,000 in a convertible loan note in August 2019. This converted into equity as part of the company’s $11 million funding round in March 2020, alongside Reefknot Investments and Mastercard, as well as existing investors Bessemer Venture Partners and Hambro Perks.

SRL Global

SRL Global focuses on assisting owners and operators of private wealth with the problems of financial data management, portfolio valuation and reporting by combining cutting-edge technology with back-office and middle-office operations. SRL Global’s Nexus Platform provides access to an entire wealth picture on demand by creating an encompassing relationship between every part of the investment process.

Serving as an enterprise business intelligence platform, the solution provides clients with a single investment repository and reporting platform that helps enforce consistency and accuracy by standardising the way information is accessed, analysed and shared. SRL Global is profitable, has served family offices in 14 countries worldwide and offers 24/7 online access.

Habito

Habito 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 has helped over 200,000 people better understand their mortgage needs and completed £2.4 billion in mortgage submissions. Habito launched their own buy-to-let mortgages in July 2019 and ‘Habito Go’ cash advances in October 2019.

Augmentum invested £5 million in August 2019.

Seedrs

Seedrs is the leading online platform for investing in the equity of startups and other growth companies in Europe, and has been named the most active investor in private companies in the UK.

Seedrs allows all types of investors to invest in businesses they believe in and share in their success, and allows all types of growth-focused businesses to raise capital and business community in the process. The Seedrs Secondary Market (launched in June 2017) enables investors to buy and sell shares from each other, and has delivered over 10,000+ exits to investors to date. £700 million has been invested into pitches to date (£280 million in 2019) from investors from over 70 countries, with 110 successful fundraises of over £1 million.

Wayhome

Wayhome (previously Unmortgage) 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.

Wayhome opens up owner-occupied residential property as an asset class for pension funds, who will earn inflation-linked rent on the portion the occupier doesn’t own.

Intellis

Intellis is an automated forex trading platform governed by AI. Augmentum exercised its option to invest a further €1m in March 2020.

Strategic Report

Business Review

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

The Strategic Report has been prepared solely to provide information to shareholders to assess how the Directors have performed their duty to promote the success of the Company.

Further information on how the Directors have discharged their duty under Section 172 of the Companies Act 2006 can be found in the Strategic Report.

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

Strategy and Strategic Review

Throughout the year under review, the Company continued to operate as an approved investment trust, following its investment objectives and policy which 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.

The Company is an alternative investment fund (“AIF”) under the European Union’s (“EU”) alternative investment fund managers’ directive (“AIFMD”) and has appointed Frostrow Capital LLP as its alternative investment fund manager (“AIFM”).

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

The Board

Details of the Board of Directors of the Company are set out on page 29 of the Annual Report. All Directors will seek re-election by shareholders at the Company’s Annual General Meeting to be held on Tuesday, 29 September 2020.

The Board is responsible for all aspects of the Company’s affairs, including setting the parameters for monitoring the investment strategy and the review of investment performance and policy. It also has responsibility for all strategic policy issues, including share issuance and buy backs, share price and discount/premium monitoring, corporate governance matters, dividends and gearing.

Further information on the Board’s role and the topics it discusses with the AIFM and the Portfolio Manager is provided in the Corporate Governance Report beginning on page 35 of the Annual Report.

Principal Risks and Risk Management

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

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

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

As a result of the COVID-19 pandemic, the economic risk of a global recession has risen sharply. Despite the mitigants of monetary and fiscal stimulus, the Directors believe that the duration of the pandemic and its effects will be a source of uncertainty for some time to come and may increase some of the risks set out as follows.

Principal Risks and Uncertainties	Mitigation
Macroeconomic Risks The performance of the Group’s investment portfolio is materially influenced by economic conditions. These may affect demand for services supplied by investee companies, foreign exchange rates, input costs, interest rates, debt and equity capital markets and the number of active trade and financial buyers. All of these factors could be influenced by the current pandemic and the Brexit negotiations. They may have an impact on the Group’s ability to realise a return from its investments and cannot be directly controlled by the Group.	The Company has a portfolio diversified across a range of sectors, has no leverage and a net cash balance, and as set out below the Portfolio Manager structures investments to provide downside protection, where possible. The Board, AIFM and Portfolio Manager monitor the macroeconomic environment and this is discussed at each Board meeting, along with the potential impact. The Portfolio Manager also provides a detailed update on the investments at each meeting, including, inter alia, developments at each investment in relation to the macro environment and trends.
Strategy Implementation Risks The Group is subject to the risk that its long term strategy and its level of performance fail to meet the expectations of its shareholders.	A robust and sustainable corporate governance structure has been implemented with the Board responsible for continuing to act in the best interests of shareholders. Experienced fintech Portfolio Managers have been retained in order to deliver the strategy.
Investment Risks The performance of the Group’s portfolio is influenced by a number of factors. These include, but are not limited to: (i) the quality of the initial investment decision; (ii) reliance on co-investment parties; (iii) the quality of the management team of each underlying portfolio company and the ability of that team to successfully implement its business strategy; (iv) the success of the Portfolio Manager in building an effective working relationship with each team in order to agree and implement value-creation strategies; (v) changes in the market or competitive environment in which each portfolio company operates; and (vi) the macroeconomic risks described above. Any one of these factors could have an impact on the valuation of an investment and on the Group’s ability to realise the investment in a profitable and timely manner. The Company also invests in early-stage companies which, by their nature, may be smaller capitalisation companies. Such companies may not have the financial strength, diversity and the resources of larger and more established companies, and may find it more difficult to operate, especially in periods of low economic growth.	The Portfolio Manager has put in place a rigorous investment process which ensures disciplined investment selection and portfolio management. This includes detailed due diligence, regular portfolio reviews and in many cases an active engagement with portfolio companies, by way of board representation or observer status. Investing in young businesses that may be cash consuming for a number of years is inherently risky. In order to reduce the risks of permanent capital loss the Portfolio Manager will, where possible, structure investments so that they enjoy a senior position in the capital structure in order to provide downside protection. As noted above the Portfolio Manager provides a detailed update at each Board meeting, including, inter alia, developments at each investment, funding requirements and the pipeline of potential new investments.
Portfolio Diversification Risk The Group is subject to the risk that its portfolio may not be diversified, being heavily concentrated in the fintech sector, on the UK economy where the investments are primarily located and that the portfolio value may be dominated by a single or limited number of companies.	The Group attempts to mitigate this risk by making investments across a range of companies and fintech companies/subsectors and in companies at different stages of their lifecycle in accordance with the Investment Objective and Investment Policy. Given the nature of the Company’s Investment Objective this remains a significant risk.
Cash Risk Returns to the Company through holding cash and cash equivalents are currently low. The Company may hold significant cash balances, particularly when a fundraising has taken place, this may have a drag on the Company’s performance. The Company may require cash to fund potential follow-on investments in existing investee companies. If the Company does not hold sufficient cash to participate in subsequent funding rounds carried out by portfolio companies, this could result in the interest which the Company holds in such businesses being diluted. This may have a material adverse effect on the Company’s financial position and returns for shareholders.	To mitigate this risk the Board has agreed prudent cash management guidelines with the AIFM and Portfolio Manager. The Group maintains sufficient cash resources to manage its ongoing operational and investment commitments. Regular discussions are held to consider the future cash requirements of the Company and its investments to ensure that sufficient cash is maintained.
Credit Risk As noted the Company may hold significant cash balances. There is a risk that the banks with which the cash is deposited fail and the Company could be adversely affected through either delay in accessing the cash deposits or the loss of the cash deposit. When evaluating counterparties there can be no assurance that the review will reveal or highlight all relevant facts and circumstances that may be necessary or helpful in evaluating the creditworthiness of the counterparty.	Set limits are agreed on the maximum exposure to any one counterparty and require all counterparties to have a high credit rating and financial strength. Compliance with these guidelines is monitored regularly and reported to the Board on a quarterly basis.
Valuation Risk The valuation of investments in accordance with IFRS 13 and IPEV Valuation Guidelines requires considerable judgement and is explained in Note 20.17. The Company’s investments may be illiquid and a sale may require consent of other interested parties. Such investments may therefore be difficult to value and realise. Such realisations may involve significant time and cost and/or result in realisations at levels below the value of such investments estimated by the Company.	The Company has a rigorous valuation policy and process as set out Notes 20.4 and 20.17. This process is led by the Board and involves benchmarking valuations against actual prices received when a sale of shares is made, as well as taking account of liquidity issues and/or any restrictions over investments.
Operational Risk The Board is reliant on the systems of the Group and Company’s service providers and as such disruption to, or a failure of, those systems could lead to a failure to comply with law and regulations leading to reputational damage and/or financial loss to the Group and/or Company.	To manage these risks the Board: • receives a quarterly compliance report from the AIFM and the Portfolio Manager, which includes, inter alia, details of compliance with applicable laws and regulations; • reviews internal control reports, where available, key policies, including measures taken to combat cybersecurity issues, and also the disaster recovery procedures of its service providers; • maintains a risk matrix with details of risks the Group and Company are exposed to, the controls relied on to manage those risks and the frequency of the controls operation; and • receives updates on pending changes to the regulatory and legal environment and progress towards Group and the Company’s compliance with these.
Key person risk There is a risk that the individuals responsible for managing the portfolio may leave their employment or may be prevented from undertaking their duties.	The Board manage this risk by: • receiving reports from AFML at each Board meeting, such reports include any significant changes in the make-up of the team supporting the Company; • meeting the wider team, outside the designated lead managers, at the Portfolio Manager’s offices and encouraging the participation of the wider AFML team in investor updates; and • delegating to the Management Engagement & Remuneration Committee, responsibility to perform an annual review of the service received from AFML, including, inter alia, the team supporting the lead managers and succession planning.

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 reactive actions rather than being proactive and, in worse 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 a risk map at its half-yearly meetings. 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 is 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.

COVID-19

The market and operational risks and financial impact as a result of the COVID-19 pandemic, and the measures introduced to combat its spread, have been discussed by the Board, with updates on operational resilience being received from the Company’s principal services providers.

The Company’s Portfolio Manager continues to provide regular updates to the Board on the financial impacts of the pandemic on portfolio performance and investee companies as well as the effect on the fintech sector.

Brexit

The Board has considered whether the UK’s exit from the EU (“Brexit”) poses a unique threat to the Company. At the date of this report, the UK had entered into a “transition period” while it negotiates new arrangements with the EU. There is, therefore, still considerable uncertainty about the effects of Brexit.

Due to the nature of the investee companies the effects of Brexit are likely to be limited.

Furthermore, whilst the Company’s current shareholders are predominantly UK based holders, sharp or unexpected changes in investor sentiment, or tax or regulatory changes, could lead to short term selling pressure on the Company’s shares which potentially could lead to the share price discount widening.

Overall, however, the Board believes that over the longer term, Brexit is unlikely to affect the Company’s business model or whether the shares trade at a premium or discount to the net asset value per share. The Board will continue to monitor developments as they occur.

Performance and Prospects

Performance

As set out in the Chairman’s Statement, considering the opportunities and challenges faced during the year, relative to the wider market, the Board is satisfied with the Company’s performance and believes it to be a good result when considering its Key Performance Indicators (“KPIs”).

The Board assesses the Company’s performance in meeting its objective against the following KPIs. 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 total return^

The Directors regard the Company’s net asset value per share total return as being the critical measure of value delivered to shareholders over the long term.

This is expressed as a percentage and is calculated by dividing the closing NAV per share, adjusting for dividends paid in the year, if any, by the opening NAV per share. Please see the Chairman’s Statement and the Portfolio Manager’s Review for further information.

The Group’s Net Asset Value per share total return for the year was 5.9% (period ended 31 March 2019: 10.7%).

• The Total Shareholder Return (“TSR”)^

The Directors also regard the Company’s TSR to be a key indicator of performance. Share price performance is monitored closely by the Board.

This is expressed as a percentage and is calculated by dividing the closing share price, adjusting for dividends paid in the year, if any, by the opening share price. Please see the Chairman’s Statement and the Portfolio Manager’s Review for further information.

The Group’s TSR for the year was (41.6%) (period ended 31 March 2019: 9.4%).

• Ongoing Charges Ratio (“OCR”)^

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

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

The reasons for the continued appointment of the Company’s AIFM and the Portfolio Manager, together with their terms are set out in the Strategic Report. In reaching this decision, the Board took into account the ongoing charges ratio of other investment companies with specialist mandates, in line with that of the Company.

The Group’s OCR for the year was 2.1% (period ended 31 March 2019: 2.1%). It is the Board’s objective to reduce this ratio over time.

^ Alternative Performance Measure

Due to the unique nature and investment policy of the Company, with no direct listed competitors or comparable indices, the Board consider that there is no relevant comparison against which to assess the KPIs and as such performance against the KPIs is considered on an absolute basis.

Prospects

The Company’s current position and prospects are described in the Chairman’s Statement and Portfolio Review sections of this Annual Report and Financial Statements.

Performance and Future developments

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

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

An outline of performance, investment activity and strategy, and market background during the year, as well as the outlook, is provided in the Chairman’s Statement and the Portfolio Manager’s Review.

It is expected that the Company’s overall corporate and investment strategies will remain unchanged in the coming year.

Viability Statement

In accordance with the AIC Code of Corporate Governance and the Listing Rules, the Directors have carefully assessed the Company’s current position and prospects as well as the Principal Risks over a longer period than the 12 months required by the ‘Going Concern’ provision and have formed a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five financial years.

The particular factors the Directors have considered in assessing the prospects of the Company and in selecting a suitable period in making this assessment are as follows:

• The Company is presently invested primarily in long-term illiquid investments which are not publicly traded;

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

• 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.

The Board, as well as considering the principal risks and the financial position of the Company, has also considered the following assumptions in considering the Company’s longer-term viability:

• There will continue to be demand for investment trusts;

• The Board and the Portfolio Manager will continue to adopt a long-term view when making investments;

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

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

Management Arrangements

Principal Service Providers

The Company is structured as an internally managed closed-ended investment company. Augmentum Fintech Management Limited (“Portfolio Manager”) (a wholly owned subsidiary of the Company) is the 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 arrangement with the Company follows.

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;

• investment portfolio administration and valuation;

• risk management services;

• share price discount and premium management;

• 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 or 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

Under the AIFM Agreement 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

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

The Portfolio Manager is entitled to a carried interest fee in respect of the performance of any investments and follow-on investments. Each carried interest fee will operate 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 carried interest fee shall be in respect of investments acquired using 80% of the net proceeds of the IPO* (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 carried interest fee will be 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 carried interest 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 carried interest fees as calculated following the relevant period.

Based on the investment valuations as at 31 March 2020 the hurdle has been met, on an unrealised basis, as such a carried interest fee has been provided for as set out in Note 4 and 13. 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 Manager 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 2020 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, the clarity and rigour of the investment process.

Depositary

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

* See Glossary on page 78

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 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.

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 committed in its Prospectus to return to shareholders up to 50 per cent. of the gains realised by the disposal of investments each year. However, shareholders should note that the return of capital by the Company is at the discretion of the Directors and such returns would only be made where considered to be in the best interests of shareholders as a whole.

Company Promotion

In February 2020, the Company appointed N+1 Singer as joint corporate broker, to work alongside Peel Hunt LLP, the existing corporate broker, to encourage demand for the Company’s shares.

In addition to AIFM services, Frostrow also provides marketing and distribution 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 monthly 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 provides 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 standards of corporate social responsibility (“CSR”) make good business sense and have the potential to protect and enhance investment returns. Consequently, the Group’s investment process ensures that social, environmental and ethical issues are taken into account and best practice is encouraged.

Diversity

There are currently two male Directors and one female Director on the Board. 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, including gender.

Engaging with our stakeholders

The following ‘Section 172’ disclosure, which is required by the Companies Act 2006 and the AIC Code describes how the Directors have had regard to the views of the Company’s stakeholders in their decision-making.

Who? STAKEHOLDER GROUP	Why? THE BENEFITS OF ENGAGEMENT WITH OUR STAKEHOLDERS	How? HOW THE BOARD THE AIFM AND THE PORTFOLIO MANAGER HAS ENGAGED WITH OUR STAKEHOLDERS
Investors	Clear communication of the Company’s strategy and the performance against our objective can help the share price trade at a narrower discount or a wider premium to its net asset value which benefits shareholders. New shares may be issued to meet demand without dilution to existing shareholders. Increasing the size of the Company can benefit liquidity as well as spread costs.	Frostrow as AIFM, the Portfolio Manager and the Company’s joint brokers on behalf of the Board complete a programme of investor relations throughout the year. In addition the Chairman has continued to engage regularly with the Company’s larger shareholders. Key mechanisms of engagement included: • The Annual General Meeting • The Company’s website which hosts reports, video interviews with the managers and regular market commentary • Online newsletters • One-on-one investor meetings • Group investor meetings with the Portfolio Manager and AIFM.
Portfolio Manager	Engagement with our managers is necessary to evaluate their performance against their stated strategy and to understand any risks or opportunities this may present to the Company. This also helps ensure that Portfolio Management costs are closely monitored and remain competitive.	The Board meet regularly with the Company’s Portfolio Managers throughout the year both formally at the quarterly Board meetings and more regularly on an informal basis. The Board also receive quarterly performance and compliance reporting at each Board meeting. The Portfolio Manager’s attendance at each Board meeting provides the opportunity for the Portfolio Manager and Board to further reinforce their mutual understanding of what is expected from all parties.
Service Providers	The Company contracts with third parties for other services including: depositary, investment accounting & administration and company secretarial and registrars. To ensure the third parties to whom we have outsourced services complete their roles diligently and correctly is necessary for the Company’s success. The Company ensures all service providers are paid in accordance with their terms of business. The Board closely monitors the Company’s Ongoing Charges Ratio.	The Board and Frostrow engage regularly with all service providers both in one-to-one meetings and via regular written reporting. This regular interaction provides an environment where topics, issues and business development needs can be dealt with efficiently and collegiately. During the year, the Audit Committee led a competitive tender process for the external audit, resulting in the appointment of a new external auditor, BDO LLP. Further details can be found in the Audit Committee Report.
Employees of AFML COVID-19/well being of employees	Attract and retain talent to ensure the Group has the resources to successfully implement its strategy and manage third-party relationships.	All employees of AFML sit in one open plan office, facilitating interaction and engagement. The senior team report to the Board at each meeting. Given the small number of employees, engagement is at an individual level rather than as a group.
Portfolio companies	Incorporating consideration of ESG factors into the investment process assists in understanding and mitigating risks of an investment and potentially identifying future opportunities.	The Board encourages the Company’s Portfolio Managers to engage with companies and in doing so expects ESG issues to be a key consideration. The Portfolio Manager seeks to take a board seat, or have board observer status, on all investments.

What? WHAT WERE THE KEY TOPICS OF ENGAGEMENT?	Outcomes and actions WHAT ACTIONS WERE TAKEN, INCLUDING PRINCIPAL DECISIONS?
Key topics of engagement with investors Ongoing dialogue with shareholders concerning the strategy of the Company, performance and the portfolio.	• The Portfolio Manager, Frostrow and the joint brokers meet regularly with shareholders and potential investors to discuss the Company’s strategy, performance and portfolio. These meetings take place with and without the Portfolio Manager.
Key topics of engagement with the external managers on an ongoing basis are portfolio composition, performance, outlook and business updates. • The impact of Brexit upon their business and the portfolio. • The impact of COVID-19 upon their business and the portfolio. • The integration of environmental, social and governance (‘ESG’) into the Portfolio Managers investment processes. • Manager fees were reviewed by the Board for the Company’s costs to remain competitive. • Performance and compensation of Group employees is decided by the Remuneration Committee with the Directors of AFML. • Change in regulatory requirements in response to Senior Manager and Certification Regime.	• No specific action required. • Regular Board calls with representatives of the Portfolio Manger and AIFM. • The portfolio manager to report regularly any ESG issues in the portfolio companies to the Board. • Changes made to Group’s costs. • See the Remuneration Report on pages 41 to 43 of the Annual Report. • Training was provided to all affected Group employees and Directors.

Augmentum Fintech Management Limited

Committed to Responsible Investing
Augmentum Fintech Management Limited (“AFML”) believes that the integration of Environmental, Social and Governance (“ESG”) factors within the investment analysis, diligence and operating practices is pivotal in mitigating risk and creating sustainable, profitable investments.

1. Screening
We use an Exclusion List to screen out companies incompatible with our corporate values (sub-sectors and types of business). We also commit to being satisfied that the investors we invest alongside are of good standing.

2. Due Diligence
An ESG Due Diligence (DD) survey is completed on behalf of all 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, we agree an action plan with the management team on areas for improvement and incorporate commitments 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.

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 the fund operations itself.

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. We only make follow on investments into companies that meet our ESG criteria.

5. Internally at Augmentum
We identify key areas and set goals for ESG advancement annually. The Investment Team has completed ESG training.

ESG Focus Areas
We have identified eight key areas for consideration, across the three ESG categories, which best align with their 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.

The AFML is committed to:

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

• Providing ESG training and support to the AFML’s 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
Strong ESG practices can be found across our portfolio, in business models and operating procedures. Below we highlight some examples.

Grover
Grover is built on a circular economy business model, in which products are rented rather than owned, extending the life of the product and reducing waste. Through partnering with Grover, large retailers and OEMs can incorporate the beneficial elements of a circular economy model without the need to redesign their entire internal operations.

Farewill
Farewill has raised over £125m to date for their charity partners including Cancer Research UK and Save the Children, through customers leaving a gift in their will. They also offered NHS workers discounts on wills during COVID-19.

interactive investor
interactive investor launched their Ethical Growth portfolio and ii ACE30, the UK’s first rated list of ethical investments, helping customers to build their own balanced ethical portfolio. Their free “Knowledge Centre” and podcast serve to educate customers on the multiple facets of investing.

Onfido
At Onfido security and compliance are essential to their mission of creating a more open world, where identity is the key to access. The company has implemented robust, industry-leading data security and compliance measures and accreditation, including SOC 2 Type II and ISO 27001.

Tide
Tide has made a commitment to support 100,000 female founders by the end of 2023 in response to the Alison Rose Review of Female Entrepreneurship, which found that only 32% of UK entrepreneurs are women and revealed significant untapped potential for the UK economy.

Focusing on Diversity and Inclusion to Drive Better Business Outcomes
AFML believes that diversity and inclusion are crucial both in scaling and supporting successful technology businesses shaping the future. Companies in the top quartile of gender diversity on executive teams are 25% more likely to experience above-average profitability (McKinsey Report: Diversity Wins, May 2020). AFML has worked hard to build a diverse and inclusive team and company culture in which diversity of thought is encouraged and has a designated Diversity and Inclusion Lead.

The Investment Team takes a proactive approach to diversity when sourcing deals, through continuously diversifying their networks, being mindful of unconscious bias and building fair assessment into the investing process, as well as working with and supporting third parties making great strides in these areas. We have made a good start but there is a lot more we would like to do. The next phase involves using more data to drive our approach.

Progress Highlights
AFML selected gender diversity in dealflow and hiring as their diversity and inclusion focuses for the past twelve months, and identified a number of impactful initiatives through which to support these, across both the fintech and investment ecosystems:

Encouraging a Diverse Fintech Industry
We hosted and supported numerous events for women running and working in fintech businesses, including Female Founder Office Hours and speed mentoring, in partnership with industry body Innovate Finance and portfolio companies including Tide and Seedrs.

We also worked with female fintech Founders from across Europe during a trade mission coordinated by the UK Government’s Department for International Trade.

Supporting an Inclusive Investment Ecosystem
We evolved our hiring processes to ensure inclusive practices are ingrained. The team was joined by its first female associate and hosted a female intern over the Summer.

We have engaged with numerous diversity-focused communities and charities, including hosting virtual education sessions with students via The Sutton Trust, a charity for social mobility, as part of their ‘Pathways to Banking and Finance’ initiative.

We hosted numerous networking events for women working across the VC industry and the team worked closely with Diversity VC on their “Venturing into Diversity and Inclusion” report and Future VC internship application screening.

TeenVC
In March 2020 we launched TeenVC, a free online education platform for students from all backgrounds to learn about venture capital, technology and entrepreneurship, culminating in The TeenVC Challenge, a deal-sourcing exercise in which students could secure work experience with us. The initiative reached over 10,000 students around the world and The TeenVC Challenge saw entries being submitted from as far as San Francisco, South Africa, Bangladesh and Scotland. Of the TeenVC Challenge applicants, over 50% were female, 50% were from state schools and 70% were BAME (Black, Asian and minority ethnic).

This strategic report was approved by the Board of Directors and signed on its behalf by:

Neil England
Chairman

15 July 2020

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 the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial period. Under that law the Directors have prepared the group and company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (“EU”) and Article 4 of the EU IAS Regulation and have also chosen to prepare the parent company financial statements under IFRSs as adopted by the EU. 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 of the group and company for that period. In preparing the financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• state whether applicable IFRSs as adopted by the EU have been followed for the group financial statements and IFRSs as adopted by the EU have been followed for the company financial statements, subject to any material departures disclosed and explained in the financial statements;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• make judgements and accounting estimates that are reasonable and prudent; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.

The Directors are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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 and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation.

The Directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility Statement

The Directors consider that the annual report and accounts, 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 confirm that, to the best of their knowledge:

• the company financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the company;

• the group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

• the Strategic Report includes a fair review of the development and performance of the business and the position of the group and company, together with a description of the principal risks and uncertainties that it faces.

The Directors also confirm that the group financial statements, are taken as a whole, are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.

Approved by the Board of Directors and signed on its behalf by

Neil England
Chairman

15 July 2020

Note to those who access this document by electronic means:

The annual report for the year ended 31 March 2020 has been approved by the Board of Augmentum Fintech plc. Copies of the annual report are circulated to shareholders and, where possible to investors. It is also made available in electronic format for the convenience of readers. Printed copies are available from the Company’s Registered Office in London.

CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2020

		Year ended 31 March 2020			Period ended 31 March 2019
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£000	£000	£000	£000	£000	£000
Gains on Investments	8	–	12,683	12,683	–	12,183	12,183
Interest Income		106	–	106	222	–	222
Expenses	2	(2,579)	(2,410)	(4,989)	(2,248)	(128)	(2,376)
(Loss)/Return before Taxation		(2,473)	10,273	7,800	(2,026)	12,055	10,029
Taxation	6	–	–	–	–	–	–
(Loss)/Return for the year/period		(2,473)	10,273	7,800	(2,026)	12,055	10,029
(Loss)/Return per Share (pence)*	7	(2.3)p	9.3p	7.0p	(2.6)p	15.6p	13.0p
(Loss)/Return per Share since IPO (pence)**	7				(2.2)p	12.8p	10.6p

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

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. There are no non-controlling interests.

* The return per share is the figure calculated in accordance with IAS 33 ‘Earnings per share’.

** The return per share since IPO figure has been disclosed for 2019 as all earnings were earned subsequently to the IPO, and the issue of the 93,999,999 shares. The Directors consider this to reflect the actual return generated for shareholders for that period.

CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
for the year ended 31 March 2020

		Year ended 31 March 2020
	Ordinary	Share		Other
	share	premium	Special	capital	Revenue
	capital	account	reserve	reserve	reserve	Total
Group	£000	£000	£000	£000	£000	£000
Opening Shareholders funds	940	–	92,101	12,055	(2,026)	103,070
Issue of shares following placing and offer for subscription	231	25,587	–	–	–	25,818
Costs of placing and offer for subscription	–	(827)	–	–	–	(827)
Purchase of own shares into Treasury	–	–	(68)	–	–	(68)
Return/(loss) for the year	–	–	–	10,273	(2,473)	7,800
At 31 March 2020	1,171	24,760	92,033	22,328	(4,499)	135,793
		Period ended 31 March 2019
	Ordinary	Share		Other
	share	premium	Special	capital	Revenue
	capital	account	reserve	reserve	reserve	Total
Group	£000	£000	£000	£000	£000	£000
Issue of shares following placing and offer for subscription	940	93,060	–	–	–	94,000
Costs of placing and offer for subscription	–	(959)	–	–	–	(959)
Conversion of share premium account	–	(92,101)	92,101	–	–	–
Return/(loss) for the period	–	–	–	12,055	(2,026)	10,029
At 31 March 2019	940	–	92,101	12,055	(2,026)	103,070
		Year ended 31 March 2020
	Ordinary	Share		Other
	share	premium	Special	capital	Revenue
	capital	account	reserve	reserve	reserve	Total
Company	£000	£000	£000	£000	£000	£000
Opening Shareholders funds	940	–	92,101	12,055	(2,053)	103,043
Issue of shares following placing and offer for subscription	231	25,587	–	–	–	25,818
Costs of placing and offer for subscription	–	(827)	–	–	–	(827)
Purchase of own shares into Treasury	–	–	(68)	–	–	(68)
Return/(loss) for the year	–	–	–	10,273	(2,637)	7,636
At 31 March 2020	1,171	24,760	92,033	22,328	(4,690)	135,602
		Period ended 31 March 2019
	Ordinary	Share		Other
	share	premium	Special	capital	Revenue
	capital	account	reserve	reserve	reserve	Total
Company	£000	£000	£000	£000	£000	£000
Issue of shares following placing and offer for subscription	940	93,060	–	–	–	94,000
Costs of placing and offer for subscription	–	(959)	–	–	–	(959)
Conversion of share premium account	–	(92,101)	92,101	–	–	–
Return/(loss) for the period	–	–	–	12,055	(2,053)	10,002
At 31 March 2019	940	–	92,101	12,055	(2,053)	103,043

CONSOLIDATED BALANCE SHEET
as at 31 March 2020

		2020	2019
	Note	£000	£000
Non-Current Assets
Investments held at fair value	8	123,132	77,600
Fixed Assets		17	39
Current Assets
Right of use asset	5	333	–
Other receivables	11	112	56
Cash and cash equivalents		15,111	25,592
Total Assets		138,705	103,287
Current Liabilities
Other payables	12	(212)	(217)
Lease liability	5	(333)	–
Provisions	13	(2,367)	–
Total Assets less Current Liabilities		135,793	103,070
Net Assets		135,793	103,070
Capital and Reserves
Called up share capital	16	1,171	940
Share premium		24,760	–
Special reserve		92,033	92,101
Retained earnings:
Capital reserves		22,328	12,055
Revenue reserve		(4,499)	(2,026)
Total Equity		135,793	103,070
Net Asset Value per share (pence)	7	116.1p	109.6p

The accompanying notes are an integral part of these Financial Statements.

The Financial Statements were approved by the Board of Directors on 15 July 2020 and signed on its behalf by:

Neil England
Chairman

The notes form part of these Financial Statements.

Augmentum Fintech plc
Company Registration Number: 11118262

COMPANY BALANCE SHEET
as at 31 March 2020

		2020	2019
	Note	£000	£000
Non-Current Assets
Investments held at fair value	8	123,132	77,600
Investment in subsidiary undertakings	10	500	500
Current Assets
Other receivables	11	83	34
Cash and cash equivalents		14,387	25,046
Total Assets		138,102	103,180
Current Liabilities
Other payables	12	(133)	(137)
Provisions	13	(2,367)	–
Total Assets less Current Liabilities		135,602	103,043
Net Assets		135,602	103,043
Capital and Reserves
Called up share capital	16	1,171	940
Share premium		24,760	–
Special reserve		92,033	92,101
Retained earnings:
Capital reserves		22,328	12,055
Revenue reserve		(4,690)	(2,053)
Total Equity		135,602	103,043

The accompanying notes are an integral part of these Financial Statements.

The Company profit for the year was £7,636,000 (period ended 31 March 2019: £10,002,000). 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 were approved by the Board of Directors on 15 July 2020 and signed on its behalf by:

Neil England
Chairman

The notes form part of these Financial Statements.

Augmentum Fintech plc
Company Registration Number: 11118262

CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2020

	Year	Period
	ended	ended
	31 March	31 March
	2020	2019
	£000	£000
Operating activities
Purchases of investments	(32,849)	(43,967)
Acquisition of fixed assets	(13)	(52)
Interest income received	70	199
Expenses paid	(2,454)	(2,113)
Lease payments	(158)	(66)
Net cash outflow from operating activities	(35,404)	(45,999)
Issue of shares following placing and offer for subscription	25,818	72,550
Costs of placing and offer for subscription	(827)	(959)
Purchase of own shares into Treasury	(68)	–
Net cash generated from financing activities	24,923	71,591
Net increase in cash and cash equivalents	(10,481)	25,592
Cash and cash equivalents at start of year/period	25,592	–
Cash and cash equivalents at end of year/period	15,111	25,592

The accompanying notes are an integral part of these Financial Statements.

COMPANY CASH FLOW STATEMENT
for the year ended 31 March 2020

	Year	Period
	ended	ended
	31 March	31 March
	2020	2019
	£000	£000
Operating activities
Purchases of investments	(32,849)	(43,967)
Investment in subsidiary	–	(500)
Interest income received	70	199
Expenses paid	(2,803)	(2,277)
Net cash outflow from operating activities	(35,582)	(46,545)
Issue of shares following placing and offer for subscription	25,818	72,550
Costs of placing and offer for subscription	(827)	(959)
Purchase of own shares into Treasury	(68)	–
Net cash generated from financing activities	24,923	71,591
Net increase in cash and cash equivalents	(10,659)	25,046
Cash and cash equivalents at start of year/period	25,046	–
Cash and cash equivalents at end of year/period	14,387	25,046

The accompanying notes are an integral part of these Financial Statements.

NOTES TO THE FINANCIAL STATEMENTS

1 Segmental Analysis

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

2 Expenses

	Year ended 31 March 2020			Period ended 31 March 2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£000	£000	£000	£000	£000	£000
AIFM fees	278	–	278	225	–	225
Administrative expenses	1,016	43	1,059	649	128	777
Directors fees*	95	–	95	108	–	108
Investment Advisory fee**	–	–	–	891	–	891
Carried Interest (see Note 4)^	–	2,367	2,367	–	–	–
Staff costs (see Note 4)	1,081	–	1,081	278	–	278
Auditors’ remuneration	109	–	109	97	–	97
Total expenses	2,579	2,410	4,989	2,248	128	2,376

£158,000 of interest and amortisation relating to a lease (2019: £66,000 operating lease expenses) were 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 42 of the Annual Report.

** For the period from 13 March 2018 to 31 October 2018, Augmentum Capital LLP was employed as the Company’s Investment Advisor. With effect from 1 November 2018 Augmentum Fintech Management Limited, a subsidiary of the Company, became the Company’s delegated Portfolio Manager and the Investment Advisory Agreement with Augmentum Capital LLP was terminated.

^ Carried Interest is calculated based on the valuation of the Company’s investments as at the year end, assuming all the investments were converted to cash at that point, less estimated selling costs. The actual amount payable will be dependent on the amount and timing of the actual realisations of the portfolio investments. See the Strategic Report and Notes 4 and 20.9 for further details.

Auditors’ Remuneration

	Year ended		Period ended
	31 March 2020		31 March 2019
	Group	Company	Group	Company
	£000	£000	£000	£000
Audit of Group accounts pursuant to legislation*	64¹	64¹	61	61
Audit of subsidiaries accounts pursuant to legislation*	12	–	15	–
Audit related assurance services*	33²	30²	21	16
Total auditors’ remuneration	109	94	97	77

* 2019 figures refer to amounts paid to PWC.

1 Includes £4,000 payable to PWC relating to overruns on the 2019 audit.

2 Includes £30,000 payable to PWC in relation to the review of the Interim Report to 30 September 2019.

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 auditors are given in the Audit Committee Report beginning on page 49 of the Annual Report. BDO LLP were paid £25,000 (period ending 31 March 2019: £77,000) for reporting accountant services. These expenses are included within the costs of placing and offer for subscription in the Statement of Changes in Equity. BDO LLP were not the Group or Company’s auditor at the time of their engagement as reporting accountants.

3 Key Management Personnel Remuneration

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

	Year ended 31 March 2020			Period ended 31 March 2019
		Other			Other
	Salary/Fees	benefits	Total	Salary/Fees	benefits	Total
	£000	£000	£000	£000	£000	£000
Key management personnel remuneration	495	73	568	391	25	416
Carried Interest Allocation*	1,656	–	1,656	–	–	–
	2,151	73	2,224	391	25	416

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

* Allocation of the carried interest provision to the directors of the Company’ subsidiary. See Note 4 for further details of the carried interest arrangements.

4 Employee Costs

The monthly average number of employees for the Group during the year was seven (2019: three). All employees are within the investment and administration function and employed by the Company’s subsidiary. Employee costs were only incurred in the prior period from 1 November 2018 when Augmentum Fintech Management Limited, a subsidiary of the Company, became the Company’s delegated portfolio manager upon receiving FCA authorisation, as set out in Note 2.

	Year ended	Period ended
	31 March	31 March
	2020	2019
	£000	£000
Wages and salaries	876	224
Social security costs	114	28
Other pension costs	68	26
Other staff benefits	23	–
Employee costs payable	1,081	278
Carried Interest (charged to capital)*	2,367	–
Total	3,448	278

* Carried interest is only payable once the Group has received an aggregate annualised 10% realised return on investments (the ‘hurdle’). Based on the investment valuations as at 31 March 2020 the hurdle has been met, on an unrealised basis, as such carried interest has been provided for. This will only be payable if the hurdle is met on a realised basis and carried interest fee is paid by the Company to AFML, it’s subsidiary. See the Strategic Report and Note 20.9 for further details.

The carried interest arrangements have been set up with aim of incentivising employees of AFML and aligning them with shareholders through participation in the realised investment profits of the Group. The Management Engagement and Remuneration Committee determine the allocation of the carried interest amongst employees of AFML and any unallocated carried interest on receipt of a carried interest fee from the company, or unvested carried interest resulting from a participant becoming a leaver, is expected to be allocated to remaining participants. Non-executive Directors of the Company are not eligible to participate in the carried interest arrangements.

5 Leases

Leasing activities

The Group, through its subsidiary AFML, has leased an office, in both 2020 and 2019, in the UK from which it operates for a fixed fee. The Group had no other leases in 2020 and 2019. When measuring lease liabilities for leases that were classified as operating leases, the Group discounts lease payments at a rate of 5%.

Right of Use Asset

	Group
	Office Premises
	£000
Addition – Recognised on initial adoption of IFRS 16 on 1 April 2019	164
Addition	320
Amortisation	(151)
At 31 March 2020	333

Lease Liability

	Group
	Office Premises
	£000
Addition – Recognised on initial adoption of IFRS 16 on 1 April 2019	164
Addition	320
Interest Expense	7
Lease Payments	(158)
At 31 March 2020	333

Maturity Analysis

	Group
			Between	Between
	Up to 3 months	3 – 12 months	1 – 2 years	2 – 5 years
At 31 March 2020	£000	£000	£000	£000
	41	126	168	14

The aggregate lease liability recognised in the statement of financial position at 1 April 2019 and The Group’s operating lease commitment at 31 March 2019 can be reconciled as follows:

	Group
	£000
Operating lease commitment at 31 March 2019	172
Effect of discounting those lease commitments	(8)
Lease liability recognised on initial adoption of IFRS 16 on 1 April 2019	164

6 Taxation Expense

	Year ended 31 March 2020			Period ended 31 March 2019
For the year ended 31 March	Revenue	Capital	Total	Revenue	Capital	Total
For the year ended 31 March	£000	£000	£000	£000	£000	£000
Current tax:
UK corporate tax on profits for the year/period	–	–	–	–	–	–

The difference between the income tax expense shown above and the amount calculated by applying the effective rate of UK corporation tax of 19% (2019: 19%) to the (loss)/return before tax is as follows:

	Year ended 31 March 2020			Period ended 31 March 2019
For the year ended 31 March	Revenue	Capital	Total	Revenue	Capital	Total
For the year ended 31 March	£000	£000	£000	£000	£000	£000
(Loss)/return before taxation	(2,473)	10,273	7,800	(2,026)	12,055	10,029
(Loss)/return before tax multiplied by the effective rate of:
UK corporation tax of 19% (2019: 19%)	(470)	1,952	1,482	(385)	2,290	1,905
Effects of:
Non-taxable capital returns	–	(2,410)	(2,410)	–	(2,290)	(2,290)
Excess management expenses	470	458	928	385	–	385
Total tax expense	–	–	–	–	–	–

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 £7,089,000 (2019: 2,154,000). 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:

	Year	Period
	ended	ended
	31 March	31 March
	2020	2019
	£000	£000
Net revenue loss	(2,473)	(2,026)
Net capital return	10,273	12,055
Net total return	7,800	10,029
Weighted average number of ordinary shares in issue	111,066,278	77,092,077¹

1 From the incorporation of the Company on 19 December 2017 to 31 March 2019

	Pence	Pence
Revenue loss per share	(2.3)	(2.6)
Capital return per share	9.3	15.6
Total return per share	7.0	13.0

The return per share is the figure calculated in accordance with IAS 33 ‘Earnings per share’.

Returns in the period since IPO to 31 March 2019
Weighted average number of ordinary shares in issue		94,000,000²

2 From the IPO of the Company on 13 March 2018 to 31 March 2019

		Pence
Revenue loss per share since IPO		(2.2)
Capital return per share since IPO		12.8
Total return per share since IPO		10.6

The return per share since IPO figure has been disclosed as all returns were earned subsequently to the IPO, and the issue of the 94,000,000 shares. The Directors decided to disclose this as it better reflects the return generated for Shareholders.

8 Investments Held at Fair Value

Non-current Investments Held at Fair Value

	2020	2019
	Group and	Group and
As at 31 March	Company	Company
As at 31 March	£000	£000
Unlisted at fair value	123,132	77,600

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

	Group and	Group and
	Company	Company
	£000	£000
As at 1 April	77,600	–
Purchases at cost	32,849	65,417
Gains on investments	12,683	12,183
As at 31 March	123,132	77,600

9 Acquisition of Augmentum I LP

Immediately following the Company’s successful IPO, on 13 March 2018, the Company acquired 100% of the interests in Augmentum I LP (the LP) for consideration of £33,308,473. The consideration for the LP was made up of 21,450,303 ordinary shares, worth £21,450,303 based on their issue price of £1, and cash of £11,858,170.

The acquisition provided the Company with the portfolio of investments held by the LP. The initial fair value of the LP’s net assets was £33,308,473. The fair value of the LP’s net assets equalled the consideration paid. Augmentum I LP is registered in England and Wales. The LP’s principal activity is that of a holding company and it’s registered office is IFC 5, St Helier, Jersey, JE1 1ST. The net assets of the LP as at 31 March 2020 were £44,510,000 (2019: £43,280,000).

10 Subsidiary undertakings

The Company has an investment 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 as of 1 November 2018. AFML’s principal activity is the provision of portfolio management services to the Company. AFML’s registered office is 5-23 Old Street, London EC1V 9HL.

11 Other Receivables

	2020	2020	2019	2019
As at 31 March	Group	Company	Group	Company
As at 31 March	£000	£000	£000	£000
Other receivables	112	83	56	34
Right of use asset*	333	–	–	–
	445	83	56	34

* See note 5.

12 Other Payables

	2020	2020	2019	2019
As at 31 March	Group	Company	Group	Company
As at 31 March	£000	£000	£000	£000
Other payables	212	133	217	137
Lease liability*	333	–	–	–
	545	133	217	137

* See note 5.

13 Provisions

	2020	2020	2019	2019
As at 31 March	Group	Company	Group	Company
As at 31 March	£000	£000	£000	£000
Carried Interest provision*	2,367	2,367	–	–

* See the Strategic Report and Notes 4 and 22.10 for further details.

14 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 (with credit ratings above A3, based on Moodys ratings or the equivalent from another ratings agency) are used for cash deposits and the level of cash is reviewed on a regular basis. Cash was held with the following banks (see table below) and totalled £15.1 million (2019: £25.6 million).

Bank Credit Ratings at 31 March 2020	2020	2019
Bank Credit Ratings at 31 March 2020	£000	£000	Moody’s
Barclays Bank plc	4,096	2,953	A1
Santander International*	11,016	10,021	Aa3
Lloyds Bank plc	–	12,618	Aa3
	15,112	25,592

* Rating is for parent company

(ii) Financial Assets and Liabilities

	Group	Company	Group	Company
	Fair value	Fair value	Fair value	Fair value
As at 31 March	2020	2020	2019	2019
As at 31 March	£000	£000	£000	£000
Financial Assets
Unlisted equity shares	103,991	103,991	70,625	71,125
Unlisted convertible loan notes	19,141	19,141	6,975	6,975
Cash and cash equivalents	15,112	14,387	25,592	25,046
Other assets	112	83	56	34
Financial Liabilities
Other payables	(212)	(133)	(217)	(137)

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 fair value through profit or loss. 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 20.4.

(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).

The determination of what constitutes ‘observable’ requires significant judgement by the Directors.

The Group considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market.

All investments were classified as Level 3 investments as at, and throughout the year to, 31 March 2020. Note 8 presents the movements on investments measured at fair value.

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 and P/E multiples (based on the most recent revenue, EBITDA or earnings achieved and equivalent corresponding revenue, EBITDA 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.

In the calibration exercise and in determining the valuation for the Group’s equity instruments, comparable trading multiples are used. In accordance with the Group’s policy, appropriate comparable public companies based on industry, size, developmental stage, revenue generation and strategy are determined and a trading multiple for each comparable company identified is then calculated. The multiple is calculated by dividing the enterprise value of the comparable group by its revenue, EBITDA or earnings. The trading multiple is then adjusted for considerations such as illiquidity, marketability and other differences, advantages and disadvantages between the Group’s portfolio company and the comparable public companies based on company specific facts and circumstances.

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

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. The total unrealised return for the year was £12,731,000 (period ended 31 March 2019 £12,183,000).

The table below presents those investments in portfolio companies whose fair values are recognised in whole or in part using valuation techniques based on assumptions that are not supported by prices or other inputs from observable current market transactions in the same instrument and the effect of changing one or more of those assumptions behind the valuation techniques adopted based on reasonable possible alternative assumptions.

	Fair Value	Fair Value		Reasonably	Change in
	2020	2019		possible shift	valuation
Valuation Technique	£000	£000	Unobservable Inputs	in input +/-	+/(-) £000
Multiple methodology	34,554	21,081	Multiple	10%	1,422/(1,854)
			Illiquidity adjustment	30%	(3,087)/2,364
CPORT*	69,437	51,544	Transaction price	10%	6,428/(4,416)
PWERM**	19,141	4,975	Probability of conversion	25%	468/(821)

* Calibrated price of recent transaction.

** Probability weighted expected return methodology.

15 Substantial holdings in Investments

The table below shows substantial holdings in investments where the Company owns more than 3% of the fully diluted capital of the investee company, and the investment value is more than 5% of the Company’s non-current investments.

	2020		2019
	% ownership	% of	% ownership	% of
	(fully diluted)	portfolio	(fully diluted)	portfolio
Interactive Investor*	3.7	17.7	3.7	13.0
BullionVault*	11.1	9.1	11.0	9.8
Zopa*	6.1	6.4	6.1	28.3
Augmentum I LP **	100.0	36.1	100.0	55.7
Tide	5.9	11.5	–	–
Monese	5.4	8.3	5.4	8.4
Receipt Bank	3.7	6.1	–	–
Farewill	13.4	5.9	13.6	5.2

* indirect ownership via Augmentum I LP.

** Augmentum I LP’s registered office is IFC 5, St Helier, Jersey JE1 1ST and it is registered in Jersey.

16 Called up Share Capital

		2020		2019
	Ordinary Shares		Ordinary Shares
	No.	£000	No.	£000
Opening issued and fully paid shares of 1p each	94,000,000	940	–	–
Issue of share on incorporation	–	–	1	–
Issue of shares from public offering	23,051,911	231	93,999,999	940
Ordinary shares purchased into treasury	(120,000)	–	–	–
Closing issued and fully paid shares of 1p each	116,931,911	1,171	94,000,000	940

On 13 March 2018, 93,999,999 ordinary shares were issued, with 1 share issued on incorporation.

The nominal value of the shares issued was £940,000 and the total consideration received was £94,000,000. 72,549,697 shares were issued in exchange for gross cash proceeds of £72,549,697. 21,450,303 shares were issued to the Limited Partners of Augmentum I LP (the ‘LP’) in exchange for their interests in the LP totalling £21,450,303.

The balance of the Limited Partners interests in the LP was acquired for £11,858,170 in cash. The amount paid to one of the Limited Partners was reduced by £930,299 to reflect their contribution to the costs of the issue. This contribution has been offset against the costs of the issue, which totalled £1,889,000, in the Consolidated Statement of Changes in Equity. The net costs of the issue were £959,000.

On 4 July 2019 23,051,911 ordinary shares were issued. The nominal value of the shares issued was £230,519 and the total gross cash consideration received was £25,818,140. This consideration has been offset against costs of issue, which totalled £826,523.

At 31 March 2020 there were 120,000 (2019: nil) shares held in treasury. Since the year end date a further 75,000 shares have been bought back and are also held in treasury.

17 Net Asset Value per Share

The Net Asset Value (“NAV”) per share is calculated by dividing the NAV of £135,793,000 (2019: £103,070,000) by the number of ordinary shares in issue at the year end amounting to 116,931,911 (31 March 2019: 94,000,000).

18 Related Party Transactions

Balances and transactions between the Company and its subsidiaries are eliminated on consolidation. Details of transactions between the Group and Company and other related parties are disclosed below.

The following are considered to be related parties:

Frostrow Capital LLP (under the Listing Rules only)
The Directors of the Company and the Company’s subsidiary, Augmentum Fintech Management Limited
Augmentum Fintech Management Limited

Details of the relationship between the Company and Frostrow Capital LLP, the Company’s AIFM, are disclosed in the Strategic Report. Details of fees paid to Frostrow by the Company and Group can be found in Note 2.

Details of the remuneration of all Directors can be found on page 42 of the Annual Report. Details of the Directors’ interests in the capital of the Company can be found on page 43 of the Annual Report.

Augmentum Fintech Management Limited was appointed as the Company’s delegated Portfolio Manager with effect from 1 November 2018. Following its appointment the Portfolio Manager earned a portfolio management fee of 1.5% of NAV up to £250 million and 1.0% of NAV for any excess over £250 million and is entitled to a carried interest fee of 15% of net realised cash profits once the Company has received an annual compounded 10% realised return on its investments. Further details of this arrangement are set out in the Strategic Report. During the year the Portfolio Manager received a portfolio management fee of £1,861,000 (period ended 31 March 2019: £613,000), which has been eliminated on consolidation and therefore does not appear in these accounts. A carried interest provision of £2,367,000 (2019: nil) has been accrued. No carried interest fee is payable or has been paid. There were no outstanding balances due to the Portfolio Manager at the year end (period ended 31 March 2019: nil).

19 Capital Risk Management

	Group	Group
	2020	2019
	£000	£000
Equity
Equity share capital	1,171	940
Retained earnings and other reserves	134,622	102,130
Total capital and reserves	135,793	103,070

The Group’s objective in the management of capital risk is to safeguard its liquidity in order to provide returns for shareholders and to maintain an optimal capital structure. In doing so the Group may adjust the amount of dividends paid to shareholders (whilst remaining within the restrictions imposed by its investment trust status) or issue new shares or debt.

The Group manages the levels of cash deposits held whilst maintaining sufficient liquidity for investments and operating expenses.

There are no externally imposed restrictions on the Company’s capital.

20 Basis of Accounting and Significant Accounting Policies

20.1 Basis of preparation

The Group and Company Financial Statements for the year ended 31 March 2020 have been prepared in accordance with the Companies Act 2006 and International Financial Reporting Standards (“IFRS”), as adopted in the EU and interpretations issued by the IFRS Interpretations Committee.

The Financial Statements have been prepared on a going concern basis and under the historical cost basis of accounting, modified to include the revaluation of certain assets at fair value, as disclosed in Note 20.4. The Board has considered a detailed assessment of the Group and Company’s ability to meet their liabilities as they fall due, including stress tests which modelled the effects of a fall in portfolio valuations and liquidity constraints on the Group and Company’s financial position and cash flows. Further information on the stress tests are provided in the Audit Committee Report on page 50 of the Annual Report. The results of the tests showed that the Group and Company would have sufficient cash to meet their liabilities as they fall due. Based on the information available to the Directors at the time of this report, including the results of the stress tests, and the Group and Company’s cash balances, the Directors are satisfied that the Group and Company have adequate financial resources to continue in operation for at least the next 12 months and that, accordingly, it is appropriate to adopt the going concern basis in preparing these financial statements.

In order to reflect the activities of an investment trust company, supplementary information which analyses the Consolidated Income Statement between items of a revenue and capital nature has been presented alongside the Consolidated Income Statement. In analysing total income between capital and revenue returns, the Directors have followed the guidance contained in the Statement of Recommended Practice for investment companies issued by the Association of Investment Companies issued in October 2019 (the “SORP”).

The recommendations of the SORP which have been followed include:

Realised and unrealised profits or losses arising on the revaluation or disposal of investments classified as held at fair value through profit or loss should be shown in the capital column of the Consolidated Income Statement. Realised gains are taken to the realised reserves in equity and unrealised gains are transferred to the unrealised reserves in equity.
Other returns on any investment (whether in respect of dividends, interest or otherwise) should be shown in the revenue column of the Consolidated Income Statement. The total of the revenue column of the Consolidated Income Statement is taken to the revenue reserve in equity.
The Board should determine whether the indirect costs of generating capital returns should be allocated to capital as well as the direct costs incurred in generating capital profits. In this regard the Board has decided to follow a non-allocation approach to indirect costs, which will therefore be charged in full to the revenue column of the Consolidated Income Statement.

20.2 Basis of Consolidation

The Consolidated Financial Statements include the Company and certain subsidiary undertakings.

IFRS 10 and 12 define an investment entity and include an exception from the consolidation requirements for investment entities. The Company has been deemed to meet the definition of an investment entity per IFRS 10 as the following conditions exist:

The Company has multiple unrelated investors which are not related parties, and holds multiple investments
Ownership interests in the Company are exposed to variable returns from changes in the fair value of the Company’s net assets
The Company has obtained funds for the purpose of providing investors with investment management services
The Company’s business purpose is investing solely for returns from capital appreciation and investment income
The performance of investments is measured and evaluated on a fair value basis

The Company will not consolidate the portfolio companies or other investment entities it controls. The principal subsidiary Augmentum Fintech Management Limited as set out in Note 10 is wholly owned. It provides investment related services through the provision of investment management. As the primary purpose of this subsidiary is to provide investment related services that relate to the Company’s investment activities it is not held for investment purposes. This subsidiary has been consolidated.

As set out in Note 9 the Company also owns 100% of the interests in Augmentum I LP (the ‘LP’). As this LP is itself an investment entity and is held as part of the Company’s investment portfolio it has not been consolidated.

20.3 Application of New Standards

(i) New standards, interpretations and amendments effective from 1 April 2019

IFRS 16: Leases was applied for the first time by the Group in these financial statements. The impact of IFRS 16’s adoption is set out in Note 5 and the accounting policy for leases is set out in 20.10. The Group has adopted the modified retrospective approach when adopting IFRS 16 and as such the 2019 comparatives have not been restated. A reconciliation between the operating lease commitment disclosed in the 31 March 2019 financial statements and the aggregate lease liability recognised in the statement of financial position at 1 April 2019 on adoption of IFRS 16 is shown in Note 5.

There were no other new standards or interpretations effective for the first time for periods beginning on or after 1 April 2019 that had a significant effect on the Group’s financial statements,

(ii) New standards, interpretations and amendments not yet effective

There are a number of standards and interpretations which have been issued by the International Accounting Standards Board (‘IASB’) that are effective in future accounting periods. The Group does not expect any of the standards issued by the IASB, but not yet effective, to have a material impact on the Group or Company.

20.4 Investments

All investments are defined by IFRS as fair value through profit or loss (described in the Financial Statements as Investments held at fair value) and are subsequently measured at reporting dates at fair value. The fair value of direct unquoted investments is calculated in accordance with the Principles of Valuation of Investments below. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional.

Increases or decreases in valuation are recognised as part of gains on investments at fair value in the Consolidated Income Statement.

Principles of Valuation of Investments

(i) General

The Group estimates the fair value of each investment at the reporting date in accordance with IFRS 13 and the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines.

Fair value is the price for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. In estimating fair value, the AIFM and Board apply valuation techniques which are appropriate in light of the nature, facts and circumstances of the investment and use reasonable current market data and inputs combined with judgement and assumptions. Valuation techniques are applied consistently from one reporting date to another except where a change in technique results in a better estimate of fair value.

In general, the enterprise value of the investee company in question will be determined using one of a range of valuation techniques; adjust the enterprise value for factors that would normally be taken into account such as surplus assets, excess liabilities or other contingencies or relevant factors; and apportion the resulting amount between the investee company’s relevant financial instruments according to their ranking and taking into account the effect of any instrument that may dilute the economic entitlement of a given instrument.

(ii) Unlisted Equity Investments

In respect of each unlisted investment one or more of the following valuation techniques is used:

A market approach, based on the price of the recent investment, market multiples or industry valuation benchmarks
A probability-weighted expected returns methodology (“PWERM”). Under the PWERM fair value is based on consideration of values for the investment under different scenarios. This will primarily be used where there is a convertible element to the investment.

In assessing whether a methodology is appropriate techniques that use observable market data are preferred.

Price of Recent Investment/Transaction

Where the investment being valued was itself made recently, or there has been a third party transaction in the investment, the price of the transaction may provide a good indication of fair value. Using the Price of Recent Investment technique is not a default and at each reporting date the fair value of investments is estimated to assess whether changes or events subsequent to the relevant transaction would imply a material change in the investment’s fair value.

Multiple

Under the multiple methodology an earnings or revenue multiple technique is used. This involves the application of an appropriate and reasonable multiple to the maintainable earnings of an investee company.

Multiples used are usually taken from current market-based multiples, reflected in the market valuations of quoted comparable companies or the price at which comparable companies have changed ownership. Differences between these market-based multiples and the investee company being valued are reflected by adjusting the multiple for points of difference which might affect the risk and growth prospects which underpin the multiple. Such points of difference might include the relative size and diversity of the entities, rate of revenue/earnings growth, reliance on a small number of key employees, diversity of product ranges, diversity and quality of customer base, level of borrowing, and any other reason the quality of revenue or earnings may differ.

In respect of maintainable revenue/earnings, the most recent 12 month period, adjusted if necessary to represent a reasonable estimate of the maintainable amount, is used. Such adjustments might include exceptional or non-recurring items, the impact of discontinued activities and acquisitions, or forecast material changes.

PWERM

Under the PWERM potential scenarios are identified. Under each scenario the value of the investment is estimated and a probability for each scenario was selected. The fair value is then calculated as the sum of the value under each scenario multiplied by its probability.

20.5 Cash and Cash Equivalents

Cash comprises cash at bank and short-term deposits with an original maturity of less than 3 months.

20.6 Presentation and Functional Currency

The Group’s and Company’s presentation and functional currency is Pounds Sterling (“Sterling”), since that is the currency of the primary economic environment in which the Group operates.

20.7 Other income

Interest income received from cash equivalents is accounted for on an accruals basis.

20.8 Expenses

Expenses are accounted for on an accruals basis, and are charged through the revenue column of the Consolidated Income Statement except for transaction costs and the carried interest fee as noted below.

Transaction costs are legal and professional fees incurred when undertaking due diligence on investment transactions. Transaction costs, when incurred, are recognised in the Income Statement. If a transaction successfully completes, as a direct cost of an investment, the related transaction cost is charged to the capital column of the Income Statement. If the transaction falls through the related cost is charged to the revenue column of the Income Statement.

20.9 Carried Interest Fee

The Group offers certain employees the opportunity to participate in the returns from successful investments. “Carried Interest Fee” is the term used for amounts accruing to or payable to employees on investment-related transactions. Dependent on the timing of the investment, investments will be allocated to a basket and each basket will be subject to its own carried interest fee as set out in the Strategic Report.

Carried interest is accrued if its performance conditions would be achieved if the remaining assets in that basket were realised at fair value. Carried interest is equal to the share of profits in excess of the performance conditions in the basket.

The Group accounts for the carried interest fee as an other long term employment benefit and the cost, or reversal, of the employment benefit is recognised as an expense over the relevant vesting period with a corresponding liability.

The Company accrues for the Carried Interest Fee in full.

Carried Interest Fees will be charged to the capital column of the Income Statement and taken to the Capital Reserve.

20.10 Leases

All leases are accounted for by recognising a right-of-use asset and a lease liability.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease. Right-of-use assets are measured at the amount of the lease liability less provisions for dilapidations, where applicable.

Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease.

The Group has adopted the modified retrospective approach when adopting IFRS 16. A reconciliation between the operating lease commitment disclosed in the 31 March 2019 financial statements and the aggregate lease liability recognised in the statement of financial position at 1 April 2019 on adoption of IFRS 16 is shown in note 5.

20.11 Taxation

The tax effect of different items of income/gain and expense/loss is allocated between capital and revenue on the same basis as the particular item to which it relates.

20.12 Deferred Tax

Deferred taxation is provided on all timing differences other than those differences regarded as permanent. Deferred tax assets are only recognised to the extent that it is probable that taxable profits will be available from which the reversal of timing differences can be utilised. Deferred tax is not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax is provided at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the Statement of Financial Position date.

20.13 Receivables and Payables

Receivables and payables are typically settled in a short time frame and are carried at amortised cost. As a result, the fair value of these balances is considered to be materially equal to the carrying value, after taking into account potential impairment losses.

20.14 Share Capital

Ordinary shares issued by the Group are recognised at the proceeds or fair value received with the excess of the amount received over nominal value being credited to the share premium account. Direct issue costs are deducted from equity.

20.15 Share Premium and Special Reserve

The share premium account arose following the Company’s Admission and represented the difference between the proceeds raised and the par value of the shares issued. Costs of the share issuance were offset against the proceeds of the relevant share issue and also taken to the share premium account.

Subsequent to admission and following the approval of the Court, the initial share premium account was cancelled and the balance of the account was transferred to the Special Reserve. The purpose of this was to enable the Company to increase the distributable reserves available to facilitate the payment of future dividends or with which to make share repurchases.

20.16 Revenue and Capital Reserves

Net capital return is added to the Capital Reserve in the Consolidated Statement of Financial Position, while the net revenue return is added to the Revenue Reserve. The revenue reserve is distributable by way of dividend, as is any realised portion of the capital reserve. The realised portion of the capital reserve is £(171,000) (2019: £(128,000)) representing transaction costs charged to capital.

20.17 Critical Accounting Judgements and Key Sources of Estimation Uncertainty

Critical accounting judgements and key sources of estimation uncertainty used in preparing the financial information are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable. The resulting judgements and estimates will, by definition, seldom equal the related actual results.

There is one significant judgement included in the presentation of the Consolidated Financial Statements, that the Company has determined it is an investment company as set out in Note 20.2.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty in the reporting year, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Fair value measurements and valuation processes

Unquoted assets are measured at fair value in accordance with IFRS 13 and the IPEV Valuation Guidelines. Decisions are required in order to determine the appropriate valuation methodology and subsequently in determining the inputs into the valuation model used. These decisions include selecting appropriate quoted company comparables, appropriate multiples to apply, adjustments to comparable multiples and estimating future cash flows of investee companies. In estimating the fair value of an asset, market-observable data is used, to the extent it is available.

The Valuations Committee, which is chaired by a Director, determines the appropriate valuation techniques and inputs for the model. The Audit Committee considers the work of the Valuations Committee and the results of their discussion with the AIFM, Portfolio Manager and the external auditors and works closely with the AIFM and Portfolio Manager to review the appropriate valuation techniques and inputs to the model. The Chairman of the Audit Committee reports its findings to the Board of Directors of the Group every six months to explain the cause of fluctuations in the fair value of the investments.

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in Note 20.4.

2020 Accounts

The figures and financial information for 2020 are extracted from the Annual Report and financial statements for the year ended 31 March 2020 and do not constitute the statutory accounts for the year. The Annual Report and financial statements include the Report of the Independent Auditor which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and financial statements have not yet been delivered to the Registrar of Companies.

2019 Accounts

The figures and financial information for 2019 are extracted from the published Annual Report and financial statements for the period ended 31 March 2020 and do not constitute the statutory accounts for that year. The Annual Report and financial statements have been delivered to the Registrar of Companies and included the Report of the Independent Auditor which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

Annual report and financial statements

Copies of the Annual Report and financial statements will be posted to shareholders by the end of July 2020 and will be available on the Company’s website (www.augmentum.vc) or in hard copy format from the Company Secretary.

The Company's Annual Report for the period ended 31 March 2020 has been submitted to the Financial Conduct Authority and will shortly be available for inspection on the National Storage Mechanism (NSM) via https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

The Annual General Meeting will be webcast on Tuesday, 29 September 2020 at 11.00 a.m.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

-ENDS-

Companies

Augmentum Fintech (AUGM)

Friday, 22nd November 2024

COMPANIES COVERED:

GAW AMGO ITH

Games Workshop shares jump in early trade as interim results are on track to impress, and Ithaca Energy continues its march higher off yesterday’s dividend news but Amigo slips as options for the future remain limited.

Full Archive

UK 100

Latest directors dealings

19 minutes ago Braemar
33 minutes ago Ricardo
35 minutes ago Airtel Africa
1 hour ago Burford Capital NPV (DI)
1 hour ago Imperial Brands

All directors dealings today