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This report is printed on Revive 100% White Silk, a totally recycled paper
produced using 100% recycled waste at a mill that has been awarded the
ISO 14001 certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
This report has been produced using vegetable based inks.
To view the report online visit: www.augmentum.vc
Annual Report
For the year ended 31st March 2023
Investing in Fintech.
About Augmentum Fintech plc
Augmentum Fintech plc (the “Company”) is the UK’s only publicly
listed investment company focusing on the fintech sector, having
launched on the main market of the London Stock Exchange in
2018, giving businesses access to patient funding and support,
unrestricted by conventional fund timelines.
We invest in early and later stage fast growing fintech businesses that are disrupting
the banking, insurance, asset management and wider financial services sectors.
Portfolio management is undertaken by Augmentum Fintech Management Limited
(“AFML”). AFML is a wholly owned subsidiary of the Company, together referred to
as the “Group”.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
1
Contents
Strategic Report and Business Review
Financial Statements
Chairman’s Statement
52 Consolidated Income Statement
Investment Objective and Policy
53 Consolidated and Company Statements of
2
5
6
7
Portfolio Review
Key Investments
13 Other Investments
15
Portfolio Manager’s Review
18 Strategic Report
22 Viability Statement
Corporate Governance
31 Board of Directors
32 Management Team
33 Directors’ Report
37 Corporate Governance Report
43 Directors’ Remuneration Report
46 Directors’ Remuneration Policy
48 Report of the Audit Committee
51 Statement of Directors’ Responsibilities
Changes in Equity
54 Consolidated Balance Sheet
55 Company Balance Sheet
56 Consolidated Cash Flow Statement
57 Company Cash Flow Statement
58 Notes to the Financial Statements
69 Independent Auditor’s Report to the Members of
Augmentum Fintech plc
Further Information
78 Information for Shareholders
79 Glossary and Alternative Performance Measures
81 Contact Details
2
AUGMENTUM FINTECH PLC
Chairman’s Statement
Performance Highlights
31 March 31 March
2023 2022
NAV per Share after performance fee1* 158.9p 155.2p
NAV per Share after performance fee Total Return* 2.4% 19.0%
Total Shareholder Return* (27.1%) (16.4%)
Discount to NAV per Share after performance fee* (39.0%) (14.3%)
Ongoing Charges Ratio* 1.9% 1.7%
* These are considered to be Alternative Performance Measures. Please see the Glossary and Alternative
Performance Measures on page 79.
To read about our KPIs see page 22.
I am pleased to present our fifth annual report since the launch of the
Company in March 2018. This report covers the year ended 31 March
2023.
Investment Policy
Your Company invests in early stage European fintech businesses
which have technologies that are disruptive to the traditional financial
services sectors and/or support the trend to digitalisation and market
efficiency. A typical investment will offer the prospect of high growth and
the potential to scale.
Our objective is to provide long-term capital growth to shareholders by
offering them exposure to a diversified portfolio of private fintech
companies during what is often their period of rapid value accretion.
Performance
Shareholders will be fully aware of the significant market volatility
throughout the year under review. The war in Europe, inflation, rising
interest rates after a prolonged period of close to free money, highly
priced US technology stocks falling in value and the contagion from that
have all been factors. Fast growing companies that need cash to fuel
that growth have generally been out of favour.
Despite difficult markets, the bulk of your Company’s investments
performed very well and I am pleased to report that they made a
positive contribution to the Company’s net asset value (“NAV”) per
share after performance fee1*, which increased by 3.7p to 158.9p.
The operational performance of portfolio companies was generally
strong, with some stand out results, and the majority have cash runways
that will fund their businesses through to profitability. In normal markets
these performances would be expected to produce a strong NAV
improvement, but valuations were negatively affected in some cases by
declines in public market comparators.
The modest increase in the Company’s NAV per share after
performance fee is nonetheless encouraging in a market where many
others have suffered significant valuation write downs and illustrates
that the diversified portfolio of investments we hold is important when
individual sectors become stressed.
It is disappointing that the NAV growth we have enjoyed over the past
five years is not reflected in our share price. For a long period, your
Company enjoyed the highest premiums of any investment company
listed in London. This reflected the opportunity for a public market
investor to gain exposure to fast growing private fintech companies,
which was otherwise not available to them. That opportunity in a vast
addressable market is undimmed, yet the price at which the Company’s
shares traded fell again across the period. The share price touched a
low of 86.8p during the year and ended the period at 97.0p, representing
a 27.1% reduction from the price at 31 March 2022. The share price
falling to a discount to NAV from the beginning of 2022 correlates with
market sentiment turning against growth stocks and private equity
generally, but is frustrating because it does not reflect the underlying
performance or the potential of the Company’s portfolio and seemingly
gives little credit to the rigour of our valuations process. The proceeds
from our recent portfolio disposals provide an illustration of the latter.
Portfolio
The most significant portfolio transaction in the year was the receipt of
proceeds of £42.8 million early in the period from the completion of
abrdn’s acquisition of interactive investor (“ii”), which was the
Company’s largest investment. The transaction delivered an 84.8% IRR
and 11.1 times multiple on invested capital.
Post year end, another significant disposal was made when the
Company sold its holding in Cushon to NatWest Group. The £22.8
million proceeds of this sale, which is fully reflected in the year end
valuation, represents a multiple of 2.1 times invested capital and an IRR of
61.6%.
Your Company has now made five successful portfolio investment exits,
all of which have been at or above the last reported holding value. This
should provide investors with comfort that our valuations process is
rigorous and corroborates the discipline our Portfolio Manager has
exercised when evaluating new investments and their reporting on the
portfolio.
Deployments in the year included new investments of £4.0 million in
Israeli payments monitoring and acceptance fintech Kipp and €3 million
1 Note: The Board considers the NAV per share after any performance fees provision to be the most accurate way to reflect the underlying value of
each share, whereas accounting standards require the Group’s consolidated NAV per share to be presented before such fees are deducted as a
consequence of our Portfolio Manager being within our Group structure and the fees therefore being eliminated on consolidation.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
3
(£2.6 million) in Berlin-based cyber insurance platform Baobab. A further
£13.1 million of follow-on funding was made to support existing portfolio
companies. These included Zopa (£4.0 million), Anyfin (£2.7 million),
Previse (£2.0 million), Habito (£1.3 million), Wayhome (£0.9 million) and
Cushon (£0.8 million).
Since the year end we have also participated in the Series B fundraising
of Volt, investing a further £5.3 million.
There is a full review of the portfolio and investment transactions in the
year in the Portfolio Manager’s Review beginning on page 15.
Portfolio Management
Our investment team continues to evaluate a wide range of
opportunities, reviewing financial and commercial metrics in order to
identify those most likely to be successful. We are active investors and
work closely with the companies we invest in, often taking either a
board or an observer seat, and working closely with management to
guide strategy consistent with long-term value creation. Our portfolio is
already diversified across different fintech sectors and maturity stages
and we are keen to expand it further. We are committed to responsible
investing. We integrate Environmental, Social and Governance (“ESG”)
factors in our investment analysis, due diligence and operating
practices as we believe that these are key in mitigating risk and creating
sustainable, profitable investments.
Valuations
Your Board considers its governance role in the valuations process to
be of utmost importance. Shareholders in investment companies with a
private portfolio are understandably sceptical of valuations when they
don’t see them change as much or as rapidly as they do in many public
companies. The results we are reporting reflect an in-depth and
challenging process, supported by our advisers.
We have always maintained a consistent, rigorous and disciplined
approach to valuations. We did not write up the value of your
Company’s investments to the levels attributed to many fintech
companies when the market was very bullish. It follows that the level of
any adjustments we have needed to make this year is relatively small in
comparison to some other funds, quite apart from strong growth
offsetting reductions in comparative multiples.
We have carefully reviewed both the status and the forecasts of all of
the portfolio companies, used appropriate and consistent
methodologies to determine the value of each investment and to sense
check our conclusions. We also benefit from some of our investments
occupying a senior position in the capital structures of the investee
companies, protecting against downside risk.
Discount Control
The Company’s shares traded at a discount to NAV for the whole of the
year under review and up to the date of this report, notwithstanding the
underlying value and strong prospects of the portfolio.
The Board has instigated a programme of highly accretive buybacks,
seeking to convey to the market our confidence in the value of the
portfolio. Directors and others associated with the Company have also
purchased shares. We continued with these accretive buybacks
through the year under review, with all the shares purchased by the
Company being held in treasury to potentially reissue when the share
price returns to a premium.
5,806,934 shares were bought back into treasury during the year to
31 March 2023, at an average price of 102.9p per share, representing
an average discount to the prevailing NAV per share after performance
fee of 34.1% and adding 1.8p/1.1% to the NAV per share. A further
3,918,878 shares have been bought back since March, up to 30 June
2023, at an average price of 98.6p per share.
We will seek to renew shareholders’ authorities to issue and buy back
shares at the forthcoming AGM.
Potential Returns of Capital
As set out on page 24 of this annual report, the Company may, at the
discretion of the Directors, return a proportion of the gains realised during
a year from the disposal of investments. Factors influencing this will
include the quantum of any sale proceeds, the opportunities offered by
the investment pipeline and the working capital requirements of the
Company. I explained in last year’s report that following the sale of ii we
considered whether some of the proceeds should be returned to
shareholders or retained to facilitate future investment opportunities. The
Company has not reached the scale to which we aspire and the current
share price discount and unfavourable market conditions are frustrating
our ability to raise new capital for investment. After consultation with major
shareholders last year we decided to retain a good proportion of these
proceeds for reinvestment to support our capital growth objective and
utilise the balance to support an accretive share buyback programme
when the discount is high. The Board reconsidered this decision during
the year and decided to commit further to the buyback programme whilst
retaining funds to take advantage of new investment opportunities and to
provide follow-on support to existing investments, which are often
available on favourable terms.
Dividend
No dividend has been declared or recommended for the year. Your
Company is focused on providing capital growth and has a policy to
only pay dividends to the extent that it is necessary to maintain the
Company’s investment trust status.
Registrar
Shareholders should note that, as part of our regular review of service
providers, we have decided to change the Company's registrar from
Link Group to Computershare Investor Services PLC. This change will
take place on 18 December 2023.
AGM
Our AGM will be held on Tuesday 19 September 2023 at 11.00 a.m. at
the Augmentum Fintech Management Limited office at 4 Chiswell
Street EC1Y 4UP. The Notice of AGM will be published shortly after the
publication of this annual report. Your Board strongly encourages
shareholders to register their votes in advance by voting online using
the Registrar’s portal, www.signalshares.com or, if they are not held
directly, by instructing the nominee company through which the shares
are held. Registering votes online will not preclude shareholders from
attending the meeting.
4
AUGMENTUM FINTECH PLC
Chairman’s Statement continued
One of our resolutions will be to seek shareholder authority to issue
shares by reference to the NAV per share after performance fee as we
believe this to be the best reflection of value, as explained in the note at
the foot of page 2.
Further details of this and other resolutions will be found in the Notice of
AGM, which will be published and sent to shareholders shortly after the
publication of this annual report. Both documents will also be available
to view on or download from the Company’s website at
www.augmentum.vc.
Your Directors consider all the resolutions that will be listed in the
Notice of AGM to be in the best interests of the Company and its
shareholders and recommend voting in favour of them, as your
Directors intend to do in respect of their own holdings.
Outlook
Inflation remains high, along with interest rates as the authorities strive
to bring it back to target levels. Early stage growth portfolios may
currently be out of favour, but Augmentum has proved its model, well-
illustrated by our realisations all producing returns in excess of their
previous carrying value. Our largest 5 investments, in particular, are
performing well.
The underlying need to digitalise and transform last century’s
infrastructure remains, as nearly all financial services sectors continue
to be dominated by traditional operators whose operations cannot
ignore the rapid development of less costly, and in many cases more
secure, business models. We maintained our investment discipline over
the last year and, with our strong cash reserves (£38.5 million at
31 March 2023, £50.0 million at 30 June 2023), we are well placed both
to take advantage of new opportunities and to reinforce our appeal as a
supportive investor.
Your Board believes that the Company will see a closing of the discount
at which its shares trade over time and, with the underlying growth of
the portfolio generally being very strong, expects that patient
shareholders will be well rewarded.
Neil England
Chairman
3 July 2023
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Investment Objective and Policy
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
5
In addition, the Company will itself not invest more than 15 per cent. of its
gross assets in other investment companies or investment trusts which
are listed on the Official List of the FCA.
Each of the restrictions above will be calculated at the time of investment
and disregard the effect of the receipt of rights, bonuses, benefits in the
nature of capital or by reason of any other action affecting every holder of
that investment. The Company will not be required to dispose of any
investment or to rebalance the portfolio as a result of a change in the
respective valuations of its assets.
Hedging and derivatives
Save for investments made using equity-related instruments as
described above, the Company will not employ derivatives of any kind
for investment purposes, but derivatives may be used for currency
hedging purposes.
Borrowing policy
The Company may, from time to time, use borrowings to manage its
working capital requirements but shall not borrow for investment
purposes. Borrowings will not exceed 10 per cent. of the Company’s
Net Asset Value, calculated at the time of borrowing.
Cash management
The Company may hold cash on deposit and may invest in cash
equivalent investments, which may include short-term investments in
money market type funds and tradeable debt securities.
There is no restriction on the amount of cash or cash equivalent
investments that the Company may hold or where it is held. The Board
has agreed prudent cash management guidelines with the AIFM and
the Portfolio Manager to ensure an appropriate risk/return profile is
maintained. Cash and cash equivalents are held with approved
counterparties.
It is expected that the Company will hold between 5 and 15 per cent. of
its Gross Assets in cash or cash equivalent investments, for the purpose
of making follow-on investments in accordance with the Company’s
investment policy and to manage the working capital requirements of
the Company.
Changes to the investment policy
No material change will be made to the investment policy without the
approval of Shareholders by ordinary resolution. Non-material changes
to the investment policy may be approved by the Board. In the event of
a breach of the investment policy set out above or the investment and
gearing restrictions set out therein, the Management Team shall inform
the AIFM and the Board upon becoming aware of the same and if the
AIFM and/or the Board considers the breach to be material, notification
will be made to a Regulatory Information Service.
Investment objective
The Company’s investment objective is to generate capital growth over
the long term through investment in a focused portfolio of fast growing
and/or high potential private financial services technology (“fintech”)
businesses based predominantly in the UK and wider Europe.
Investment policy
In order to achieve its investment objective, the Company invests in
early or later stage investments in unquoted fintech businesses. The
Company intends to realise value through exiting these investments
over time.
The Company seeks exposure to early stage businesses which are
high growth, with scalable opportunities, and have disruptive
technologies in the banking, insurance and wealth and asset
management sectors as well as those that provide services to underpin
the financial sector and other cross-industry propositions.
Investments are expected to be mainly in the form of equity and equity-
related instruments issued by portfolio companies, although
investments may be made by way of convertible debt instruments. The
Company intends to invest in unquoted companies and will ensure that
the Company has suitable investor protection rights where appropriate.
The Company may also invest in partnerships, limited liability
partnerships and other legal forms of entity. The Company will not invest
in publicly traded companies. However, portfolio companies may seek
initial public offerings from time to time, in which case the Company may
continue to hold such investments without restriction.
The Company may acquire investments directly or by way of holdings in
special purpose vehicles or intermediate holding entities (such as the
Partnership*).
The Management Team has historically taken a board or board
observer position at investee companies and, where in the best
interests of the Company, will do so in relation to future
investee companies.
The Company’s portfolio is expected to be diversified across a number
of geographical areas predominantly within the UK and wider Europe,
and the Company will at all times invest and manage the portfolio in a
manner consistent with spreading investment risk.
The Management Team will actively manage the portfolio to maximise
returns, including helping to scale the team, refining and driving key
performance indicators, stimulating growth, and positively influencing
future financing and exits.
Investment restrictions
The Company will invest and manage its assets with the object of
spreading risk through the following investment restrictions:
l
l
l
the value of no single investment (including related investments in
group entities or related parties) will represent more than 15 per
cent. of Net Asset Value;
the aggregate value of seed stage investments will represent no
more than 1 per cent. of Net Asset Value; and
at least 80 per cent. of Net Asset Value will be invested in
businesses which are headquartered in or have their main centre
of business in the UK or wider Europe.
* Please refer to the Glossary on page 79.
6
AUGMENTUM FINTECH PLC
Portfolio Review
Fair value of Impact Fair value of
holding at Net of foreign holding at % of Net
31 March investments/ currency rate Investment 31 March assets after
2022 (realisations) changes return 2023 performance
£’000 £’000 £’000 £’000 £’000 fee
Grover 42,415 – 1,833 (1,098) 43,150 15.5%
Tide 28,221 – – 7,471 35,692 12.9%
Zopa ^ 25,577 4,000 – 516 30,093 10.8%
Cushon 13,584 750 – 8,456 22,790 8.2%
Volt 5,608 – – 8,608 14,216 5.1%
Monese 13,225 – – (1,542) 11,683 4.2%
BullionVault ^ 10,023 (564) – 2,106 11,565 4.2%
Onfido 15,393 – 1,198 (6,349) 10,242 3.7%
AnyFin 9,870 2,709 57 (3,331) 9,305 3.4%
Intellis 4,003 – 232 4,177 8,412 3.0%
Top 10 Investments 167,919 6,895 3,320 19,014 197,148 71.0%
interactive investor ^ 42,797 (42,797) – – – 0.0%
Other Investments * 58,091 11,532 2,325 (14,801)** 57,147 20.6%
Total Investments 268,807 (24,370) 5,645 4,213 254,295 91.6%
Cash & cash equivalents 31,326 40,015 14.4%
Net other current liabilities (4,929) (186) -0.1%
Net Assets 295,204 294,124 105.9%
Performance Fee provision (15,265) (16,819) -5.9%
Net Assets after performance fee 279,939 277,305 100.0%
^ Held via Augmentum I LP
* There are fifteen other investments (31 March 2022: fourteen). See pages 13 and 14 for further details.
** The Other Investments investment loss is primarily from write-downs in the valuations of Gemini and Tesseract, as detailed on page 17.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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Portfolio valuation changes
Year ended 31 March 2023
March-22 Investment Realisation1
Uplift Reduction Cash Other2
March-23
Other
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Exit Post
Period End3
1. Bullionvault dividend received in January 2023, interactive investor exited in May 2022
2. Other is made up of AFML cash less net liabilities
3. Cushon exited post period end
4. NAV is shown before performance fee , NAV after performance fee is £277.3m
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Gross
Portfolio
Value
NAV4
The Augmentum portfolio is well diversified across the fintech ecosystem
NAV1 by sub-sector, %
Insurtech
Proptech
Payments
Infrastructure
Circular Economy
Exit post period end
1. NAV before performance fee, as at 31 March 2023, NAV after performance fee is £277.3m
2. £38.5m available cash and £2.3m of other net assets as at 31 March 2023
32%
Cash and
other net
assets2
14%
NAV1
£294.1m
1%
2%
7%
10%
19%
15%
Digital Banking & Lending
Wealth & Asset Management
8%
8
AUGMENTUM FINTECH PLC
Key Investments continued
Berlin-based Grover (www.grover.com) is the leading consumer-tech
subscription platform, bringing the access economy to the consumer
electronics market by offering a simple, monthly subscription model for
technology products. Private and business customers have access to
over 5,000 products including smartphones, laptops, virtual reality
technology, wearables and smart home appliances. The Grover service
allows users to keep, switch, buy, or return products depending on their
individual needs. Rentals are available in Germany, Austria, the
Netherlands, Spain and the US. Grover is at the forefront of the circular
economy, with products being returned, refurbished and recirculated
until the end of their usable life. Grover has circulated over 1 million
devices. With a total financing volume of around €1.4 billion to date and
over 400 employees, Grover is one of the fastest-growing scale-ups in
Europe.
In September 2019 Augmentum led a €11 million funding round with a
€6 million convertible loan note (“CLN”) investment. This coincided with
Grover signing a new €30 million debt facility with Varengold Bank, one
of Germany’s major fintech banking partners. In March 2021 Grover
completed a €60 million Series B funding round, with Augmentum
participating and converting its CLN. The round was made up of €45
million from equity investors and €15 million in venture debt financing.
With its Series C funding round in April 2022 Grover raised US$330
million in equity and debt funding, bringing the company’s valuation to
over US$1 billion.
Source: Grover 31 March 31 March
2023 2022
£’000 £’000
Cost: 7,927 7,927
Value: 43,150 42,415
Valuation Methodology^ Rev.Multiple CPORT
% ownership (fully diluted): 6.3% 6.4%
As an unquoted German company, Grover is not required to publicly file audited
accounts.
^ See note 13 on pages 62 and 63.
Tide’s (www.tide.co) mission is to help SMEs save time and money in
the running of their businesses. Customers can be set up with an
account number and sort code in less than 10 minutes, and the
company is building a comprehensive suite of digital banking services
for businesses, including automated accounting, instant access to
credit, card control and quick, mobile invoicing. Tide has almost 10%
market share of small business accounts in the UK.
In November 2022, Tide acquired Funding Options, a leading UK
marketplace for SMEs seeking business finance, subject to FCA
approval. The merged credit business will give Tide’s 500,000
customers access to a wider range of credit options and creates one of
the UK’s biggest digital marketplaces for SME credit. In December
2022, Tide launched in India with two business banking solutions – the
Tide Business Account and its RuPay-powered Tide Expense Card.
Augmentum led Tide’s £44.1 million first round of Series B funding in
September 2019, alongside Japanese investment firm The SBI Group.
In July 2021 Tide completed an £80 million Series C funding round led
by Apax Digital, in which Augmentum invested an additional £2.2 million
and into which the £2.5 million loan note converted.
Source: Tide 31 March 31 March
2023 2022
£’000 £’000
Cost: 13,200 13,200
Value: 35,692 28,221
Valuation Methodology^ Rev.Multiple Rev.Multiple
% ownership (fully diluted): 5.1% 5.4%
As per last filed audited accounts of the investee company for the year
to 31 December 2021:
2021 2020
£’000 £’000
Turnover 33,541 14,442
Pre tax loss (32,719) (25,825)
Net assets 66,297 17,761
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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Zopa (www.zopa.com) was founded in 2005 as the world’s first peer-to-
peer (“P2P”) lending company, aiming to give people access to simpler,
better-value loans and investments. Following a funding round in 2020
Zopa launched Zopa Bank and was granted a full UK banking licence,
which allowed it to offer a wider product range. It is regulated by both
the PRA and the FCA.
After 16 years of delivering positive returns for investors, Zopa closed
the P2P lending side of its business in 2021 to fully focus on Zopa Bank.
Current products include fixed term and smart savings, wedding and
home improvement loans, debt consolidation loans, a credit card and
motor finance.
Zopa is a multiple awards winner. In 2021 Zopa was awarded Best
Personal Loan Provider and Best Credit Card Provider by the British
Bank Awards, Best Online Savings Provider by Moneynet Personal
Finance, Best use of IT in Consumer Finance in the FStech Awards and
won the Personal Credit Cards Innovation award in the Finder Lending
Innovation Awards. In 2022 it won Best Short Term Fixed Rate Bond
Provider, Best Fixed Rate Bond Provider and Best New Savings
Provider in the Savings Champion Awards and was awarded Banking
Brand of the Year 2022 in the MoneyNet Awards.
Augmentum participated in a £20 million funding round led by
Silverstripe in March 2021, in October 2021 participated with a further
£10 million investment in a £220 million round led by SoftBank and in
February 2023 invested a further £4 million as part of a £75 million
funding round alongside other existing investors.
Source: Zopa 31 March 31 March
2023 2022
£’000 £’000
Cost: 33,670 29,670
Value: 30,093 25,577
Cushon (www.cushon.co.uk) provides workplace pensions and payroll-
linked ISAs across the UK and is authorised by The Pensions Regulator
to operate a master trust pension scheme. In January 2021, Cushon
became the first UK pension provider to launch a fully carbon neutral
‘Net Zero Now’ pension product. In April 2022 it finalised the acquisition
of Creative Benefits, manager of Creative Pension Trust, making it the
fifth largest master trust pension provider in the UK and doubling its
assets under management.
NatWest Group, the FTSE 100 banking and financial services group,
announced in February 2023 that it had agreed to acquire a majority
shareholding in Cushon. The acquisition was completed on 1 June 2023.
Augmentum invested £5 million in Cushon in June 2021 and followed up
with a further £5 million in March 2022 and £750,000 in December
2022.
Source: Cushon 31 March 31 March
2023 2022
£’000 £’000
Cost: 10,750 10,000
Value 22,790 13,584
Valuation Methodology Sale Proceeds CPORT
% ownership (fully diluted): 13.9% 13.9%
As per last filed audited accounts of the investee company for the year
to 31 March 2022:
2022 2021
£’000 £’000
Valuation Methodology Rev.Multiple CPORT
Turnover 5,501 1,632
% ownership (fully diluted): 3.4% 3.3%
As per last filed audited accounts of the investee company for the year
to 31 December 2021:
2021 2020
£’000 £’000
Operating income 60,501 21,171
Pre tax loss (41,599) (41,479)
Net assets 270,512 134,074
Pre tax loss (8,548) (3,742)
Net assets 7,394 5,407
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Key Investments continued
!
Volt (www.volt.io) is a provider of account-to-account payments
connectivity for international merchants and payment service providers
(PSPs). An application of Open Banking, account-to-account payments
– where funds are moved directly from one bank account to another
rather than via payment rails – deliver benefits to both consumers and
merchants. This helps merchants shorten their cash cycle, increase
conversion and lower their costs. In October 2021 Volt announced their
partnership with Worldline, the European leader in payments and
transactional services, giving over 600 enterprise-level merchants
globally access to Volt’s open payments infrastructure. It also
announced its expansion into Brazil in November 2021 to integrate
Brazil’s domestic instant payments network, Pix, and established its
physical presence in São Paolo.
Augmentum invested £0.5 million in Volt in December 2020 and a
further £4 million in June 2021.
Source: Volt 31 March 31 March
2023 2022
£’000 £’000
Cost: 4,500 4,500
Value: 14,216 5,608
Valuation Methodology CPORT CPORT
% ownership (fully diluted): 8.3% 8.3%
Volt is not required to publicly file audited accounts.
With Monese (www.monese.com) you can open a UK or European current
account in minutes from your mobile, with a photo ID and a video selfie.
Their core customers are amongst the hundreds of millions of people who
live some part of their life in another country - whether it’s for travel, work,
business, study, family, or retirement.
With its mobile-only dual UK and Euro IBAN current account, its
portability across 31 countries, and both the app and its customer
service available in 15 languages, Monese allows people and
businesses to bank like a local across the UK and Europe. Launched in
2015 Monese now has more than 2 million registered users. 70% of
incoming funds are from salary payments, indicating that customers are
using Monese as their primary account. In October 2020 Mastercard
and Monese announced a multi-year strategic partnership, with
Monese becoming a principal Mastercard issuer. Monese’s new
Banking as a Service (“BaaS”) platform, which arrived following deals by
Monese with Mastercard and core banking provider Thought Machine,
has been adopted by Investec for its private client transactional banking
service. In December 2021 the company expanded its credit and
lending capabilities through the acquisition of financial services
provider Trezeo.
Augmentum is invested alongside Kinnevik, PayPal, International
Airlines Group, Investec and HSBC Ventures.
Source: Monese 31 March 31 March
2023 2022
£’000 £’000
Cost: 11,467 11,467
Value: 11,683 13,225
Valuation Methodology CPORT CPORT
% ownership (fully diluted)*: 6.0% 7.5%
* 2022: £0.9m of investment in a convertible loan note.
As per last filed audited accounts of the investee company for the year
to 31 December 2021:
2021 2020
£’000 £’000
Turnover 17,573 16,285
Pre tax loss (17,529) (28,461)
Net liabilities (2,972) (15,410)
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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BullionVault (www.bullionvault.co.uk) is a physical gold and silver market
for private investors online. It enables people across 175 countries to
buy and sell professional-grade bullion at the very best prices online,
with US$3.7 billion of assets under administration, over US$100 million
worth of gold and silver traded monthly, and over 100,000 clients.
Each user’s property is stored at an unbeaten low cost in secure,
specialist vaults in London, New York, Toronto, Singapore and Zurich.
BullionVault’s unique Daily Audit then proves the full allocation of client
property every day.
The company generates solid monthly profits from trading, commission
and interest. It is cash generative, dividend paying, and well-placed for
any downturns in the wider financial markets.
Source: BullionVault 31 March 31 March
2023 2022
£’000 £’000
Cost: 8,424 8,424
Value: 11,565 10,023
Onfido (www.onfido.com) is building the new identity standard for the
internet. Its AI-based technology assesses whether a user’s
government-issued ID is genuine or fraudulent, and then compares it
against their facial biometrics. Using computer vision and a number of
other AI technologies, Onfido can verify against 4,500 different types of
identity documents across 195 countries, using techniques like “facial
liveness’’ to see patterns invisible to the human eye.
Onfido was founded in 2012. It has offices in London, San Francisco,
New York, Lisbon, Paris, Amsterdam, New Delhi and Singapore and
helps over 900 companies, including industry leaders such as Revolut,
bung and Bitstamp. These customers are choosing Onfido over others
because of its ability to scale, speed in on-boarding new customers
(15 seconds for flash verification), preventing fraud, and its advanced
biometric technology.
Augmentum invested an additional £3.7 million in a convertible loan
note in December 2019 as part of a £4.7 million round. This converted
into equity when Onfido raised an additional £64.7 million in April 2020.
Valuation Methodology EBITDA Multiple EBITDA Multiple
% ownership (fully diluted): 11.1% 11.1%
Source: Onfido 31 March 31 March
2023 2022
£’000 £’000
Dividends paid: 564 520
As per last filed audited accounts of the investee company for the year
to 31 October 2022:
2022 2021
£’000 £’000
Gross profit 13,071 12,086
Pre tax profit 8,364 7,741
Net assets 41,294 39,148
Cost: 7,750 7,750
Value: 10,242 15,393
Valuation Methodology Rev.Multiple Rev.Multiple
% ownership (fully diluted): 2.1% 2.3%
As per last filed audited accounts of the investee company for the
13 months to 31 January 2022 (previous period 12 months to
31 December 2020):
2022 2020
£’000 £’000
Turnover 94,513 45,408
Pre tax loss (44,980) (34,712)
Net assets 39,221 68,508
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AUGMENTUM FINTECH PLC
Key Investments continued
Anyfin (www.anyfin.com) was founded in 2017 by former executives of
Klarna, Spotify and iZettle, and leverages technology to allow credit-
worthy consumers the opportunity to improve their financial wellbeing
by consolidating and refinancing existing credit agreements with
improved interest rates, as well as offering smart budgeting tools. Anyfin
is currently available in Sweden, Finland, Norway and Germany, with
plans to expand across Europe as well as strengthen its product suite in
existing markets.
Augmentum invested £7.2 million in Anyfin in September 2021 as part of
a $52 million funding round and a further £2.7 million in November
2022.
Source: Anyfin 31 March 31 March
2023 2022
£’000 £’000
Cost: 9,924 7,248
Value: 9,305 9,870
Valuation Methodology Rev. Multiple CPORT
% ownership (fully diluted): 3.2% 2.7%
As an unquoted Swedish company, Anyfin is not required to publicly file
audited accounts.
Intellis, based in Switzerland, is an algorithmic powered quantitative
hedge fund operating in the FX space. Intellis’ proprietary approach
takes a conviction based assessment towards trading in the
FX markets, a position which is uncorrelated to traditional news driven
trading firms. They operate across a range of trading venues with a
regulated Investment Trust fund structure that enables seamless
onboarding of new Liquidity Partners.
Augmentum exercised its option to invest a further €1 million in March
2020 and a further €1 million in March 2021.
Source: Intellis
31 March 31 March
2023 2022
£’000 £’000
Cost 2,696 2,696
Value 8,412 4,003
Valuation Methodology P/E Multiple CPORT
% ownership (fully diluted) 23.8% 23.8%
As an unquoted Swiss company, Intellis is not required to publicly file
audited accounts.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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Gemini (www.gemini.com) enables individuals and institutions to safely and securely
buy, sell and store cryptocurrencies. Gemini was founded in 2014 by Cameron and
Tyler Winklevoss and has been built with a security and regulation first approach.
Gemini operates as a New York trust company regulated by the New York State
Department of Financial Services (NYSDFS) and was the first cryptocurrency
exchange and custodian to secure SOC 1 Type 2 and SOC 2 Type 2 certification.
Gemini entered the UK market in 2020 with an FCA Electronic Money Institution
licence. Gemini announced acquisitions of portfolio management services company
BITRIA and trading platform Omniex in January 2022.
Augmentum participated in Gemini’s first ever funding round in November 2021 with an
investment of £10.2 million.
Founded in 2011, iwoca (www.iwoca.co.uk) uses award-winning technology to disrupt
small business lending across Europe. They offer short-term loans of up to £500,000
to SMEs across the UK and Germany. iwoca leverages online integrations with high-
street banks, payment processors and sector-specific providers to look at thousands
of data points for each business. These feed into a risk engine that enables the
company to make a fair assessment of any business – from a retailer to a restaurant, a
factory to a farm – and approve a credit facility within hours. The company has offered
more than £3 billion of finance to over 70,000 SMEs in total and successfully lent £370
million through the Coronavirus Business Interruption Loan Scheme to businesses
grappling with the fallout of the economic crisis caused by the coronavirus. iwoca
launched iwocaPay in June 2020, an innovative business-to-business (B2B) ‘buy now
pay later’ product to provide flexible payment terms to buyers while giving peace of
mind to sellers.
In the next 10 years, £1 trillion of inheritance will pass between generations in the UK.
Farewill (www.farewill.com) is a digital, all-in-one financial and legal services platform for
dealing with death and after-death services, including wills, probate and cremation. In
2022 Farewill won National Will Writing Firm of the Year for the fourth year in a row and
in 2021 was Probate Provider of the Year for the second consecutive year at the British
Wills and Probate Awards. Farewill also won Best Funeral Information Provider and
Low-cost Funeral Provider of the Year at the Good Funeral Awards 2021. The
organisation has also been voted the UK’s best-rated death experts on Trustpilot,
scoring an average customer approval rating of 4.9/5 from over 13,000 reviews. It is
now the largest will writer in the UK.
Since its launch in 2015 Farewill’s customers have pledged over £450 million in legacy
gifts written into their wills.
Augmentum led Farewill’s £7.5 million Series A fundraise in January 2019, with a £4
million investment, participated in its £20 million Series B, led by Highland Europe in
July 2020 , with £2.6 million, and in its further £4.8 million fundraise in March 2023, with
£0.8 million.
Wematch (www.wematch.live) is a capital markets trading platform that helps financial
institutions transition liquidity to an orderly electronic service, improving productivity
and de-risking the process of voice broking. Their solution helps traders find liquidity,
negotiate, trade, optimise and manage the lifecycle of their portfolios of assets and
trade structures. Wematch is focused on structured products such as securities
financing, OTC equity derivatives and OTC cleared interest rates derivatives.
Created in 2017, Wematch is headquartered in Tel Aviv and has offices in London and
Paris. In February 2023 it passed a milestone of $150 billion notional in ongoing open
trades on their platform and in March announced a collaboration with MTS Markets,
owned by Euronext, creating MTS Swaps by Wematch.live, which aims to bridge the
gap between legacy voice trading and pure electronic trading in the interdealer IRS
market.
Augmentum invested £3.7 million in September 2021.
Kipp (www.letskipp.com) is an Israeli fintech that has developed an AI platform that
transforms the traditional payment model to increase credit card transaction approvals,
revenue, and customer satisfaction. Its core solution relies heavily on data enrichment
and risk management to help merchants and banks split the cost of risk to incentivize
issuing banks to approve more transactions.
Augmentum invested £4 million in May 2022.
Wayhome (www.wayhome.co.uk) offers a unique part-own part-rent model of home
ownership, requiring as little as 5% deposit with customers paying a market rent on the
portion of the home that Wayhome owns, with the ability to increase the equity in the
property as their financial circumstances allow. It launched to the public in September
2021, following closure of the initial phase of a £500 million pension fund investment
and has crossed the milestone of completing the purchase of its first 100 homes.
Wayhome opens up owner-occupied residential property as an asset class for pension
funds, who earn inflation-linked rent on the portion not owned by the occupier.
Augmentum invested £2.5 million in 2019, £1 million in 2021 and a further £0.9 million in
the Company's financial year to 31 March 2023.
Previse (www.previ.se) allows suppliers to be paid instantly. Previse’s artificial
intelligence (“AI”) analyses the data from the invoices that sellers send to their large
corporate customers. Predictive analytics identify the few problematic invoices,
enabling the rest to be paid instantly. Previse charges the suppliers a small fee for the
convenience, and shares the profit with the corporate buyer and the funder. Previse
precisely quantifies dilution risk so that funders can underwrite pre-approval payables
at scale. In January 2022 Mastercard unveiled that its next-generation virtual card
solution for instant B2B payments would use Previse’s machine learning capabilities.
The solution combines Previse’s machine learning, with Mastercard’s core commercial
solutions and global payment network, to transform how businesses send and receive
payments.
Augmentum invested £250,000 in a convertible loan note in August 2019. This
converted into equity as part of the company’s US$11 million funding round in March
2020, alongside Reefknot Investments and Mastercard, as well as existing investors
Bessemer Venture Partners and Hambro Perks. Previse was awarded a £2.5 million
Banking Competition Remedies’ Capability and Innovation Fund grant in August 2020
In May 2022 Previse closed the first phase of its series B financing round, which was
led by Tencent, with US$18 million raised, including £2 million from Augmentum.
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Other Investments continued
FullCircl (www.fullcircl.com) was formed from the combination of Artesian and Duedil.
Artesian was founded with a goal to change the way B2B sellers communicate with
their customers. They built a powerful sales intelligence service using the latest in
Artificial Intelligence and Natural Language Processing to automate many of the time
consuming, repetitive tasks that cause the most pain for commercial people.
Augmentum originally invested in DueDil, which merged with Artesian in July 2021.
Combining DueDil’s Business Information Graph (B.I.G.)™ and Premium APIs, and
Artesian’s powerful web application and advanced rules engine delivers an easy to
deploy solution for banks, insurers and FinTechs to engage, onboard and grow the right
business customers.
Berlin based Baobab (www.baobab.io) is a pioneer in the provision of European cyber
insurance for SMEs. With capacity provision from Zurich, Baobab uses a novel
approach to underwriting, pricing and risk mitigation, and works with leading SME
cyber security providers to prevent breaches for its insured customers.
Augmentum invested £2.6 million in January 2023.
ParaFi Capital (www.parafi.com) is an investor in decentralised finance protocols that
address tangible use cases of the technology and demonstrate signs of product-
market fit. The ParaFi investment has drawn on their domain expertise developed in
both traditional finance and crypto to identify and invest in leading protocols such as
Compound (lending and interest accrual), Aave (asset borrowing), Uniswap (automated
liquidity provision), Synthetix (synthetic asset trading) and MakerDAO (stablecoins).
ParaFi also supports its protocols as a liquidity provider and governance participant.
Augmentum invested £2.8 million in ParaFi in January 2021. Co-investors include Bain
Capital Ventures and Galaxy Digital.
Epsor (www.epsor.fr) is a Paris based provider of employee and retirement savings
plans delivered through an open ecosystem, giving access to a broad range of asset
management products accessible through its intuitive digital platform. Epsor serves
more than 700 companies in France.
Augmentum invested £2.2 million in Epsor in June 2021.
Founded in 2015, WhiskyInvestDirect (www.whiskyinvestdirect.com) was a subsidiary of
BullionVault and is the online market for buying and selling Scotch whisky as it matures
in barrel. This is an asset class that has a long track record of growth, yet has previously
been opaque and inaccessible.
The business seeks to change the way some of the three billion litres of maturing
Scottish whisky is owned, stored and financed, giving self-directed investors an
opportunity to profit from whisky ownership, with the ability to trade 24/7. At its October
2022 financial year end the company's clients held 12 million LPA (Litres of Pure
Alcohol) of spirit.
Augmentum's holding derives from WhiskeyInvestDirect being spun out of BullionVault
in 2020.
Sfermion is an investment fund focused on the non-fungible token (NFT) ecosystem.
Their goal is to accelerate the emergence of the open metaverse by investing in the
founders, companies, and entities creating the infrastructure and environments forming
the foundations of our digital future.
Augmentum committed US$3 million in October 2021, to be drawn down in tranches.
Tesseract (www.tesseractinvestment.com) is a forerunner in the dynamic digital asset
sector, providing digital lending solutions to market makers and other institutional
market participants via regulated custody and exchange platforms. Tesseract was
founded in 2017, is regulated by the Finnish Financial Supervisory Authority (“FIN-FSA”),
and was one of the first companies in the EU to obtain a 5AMLD (Fifth Anti-Money
Laundering Directive) virtual asset service provider (“VASP”) licence. It is the only VASP
with an express authorisation from the FIN-FSA to deploy client assets into
decentralized finance or “DeFi”.
Taking no principal position, Tesseract provides an enabling crypto infrastructure to
connect digital asset lenders with digital asset borrowers. This brings enhanced capital
efficiency with commensurate cost reduction to trading, in a space that is currently
significantly under-leveraged relative to traditional capital markets.
Augmentum led Tesseract’s Series A funding round in June 2021 with an investment of
£7.3 million.
Habito (www.habito.com) is transforming the United Kingdom’s £1.3 trillion mortgage
market by taking the stress, arduous paperwork, hidden costs and confusing process
out of financing a home.
Since launching in April 2016, Habito had brokered £7 billion of mortgages by July 2021.
Habito launched its own buy-to-let mortgages in July 2019 and in March 2021 launched
a 40-year fixed-rate mortgage ‘Habito One’, the UK’s longest-ever fixed rate mortgage.
In August 2019, Augmentum led Habito’s £35 million Series C funding round with a £5
million investment and added £1.3 million in the Company's financial year ended 31
March 2023.
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Portfolio Manager’s Review
technology and regulatory perspective. For now we remain in discovery
mode but it is our job as thesis driven investors to be ahead of the curve
on the investment opportunities that these innovative technologies
create.
From our perspective, it has taken the full year of 2022 and the first half
of 2023 for the valuation expectations of founding teams and investors
to reconverge. Our level of new investment activity, lower than previous
periods, has reflected this. We expect the second half of 2023 to be
more active than the first half as a result of a larger number of better
quality fintechs coming to the market for more capital. Following the
reset to private market valuations, this will be an exciting time to deploy
early-stage capital.
We are a specialist investor in high potential businesses that are
disrupting one of the largest and most profitable sectors of the
economy. Our fintech specialism and strong balance sheet position
leave us well positioned to take advantage of normalised investment
conditions. We remain committed to a diversified, private-market
strategy to deliver long-term returns.
Investment Activity
Investment activity during the year totalled £19.9 million. This is lower
than the Company’s annual average since IPO of £36.4 million but has
been appropriate during the period of adjustment that the investment
environment has moved through.
New investment activity followed from high conviction thesis
development in the areas of digital payments and cyber-insurance, and
has been the product of our pan-European strategy, with both new
investments located outside the UK.
In my half-year report I introduced our investment in Kipp, an Israeli
innovator in online payment acceptance. In the period since, we have
welcomed German cyber-insurance provider Baobab to the portfolio.
Both companies characterise our early-stage strategy with teams who
bring deep domain-expertise, technology that drives differentiation and
a competitive advantage, and large, growing market opportunities.
These new investments, totalling £6.6 million, were secured off-market,
outside of competitive investment processes, on the basis of strong
relationships with the founding teams and their confidence in
Augmentum as the right investment partner. Our thesis driven approach
is particularly important when identifying early-stage opportunities
ahead of our competition.
We continue to take advantage of our ability to support the strong
performers in the portfolio with further capital and completed eight
follow-on investments totalling £13.1 million.
With proceeds, now received, from our fifth portfolio exit, of Cushon to
NatWest Group, the Company ends the period with a strong balance
sheet.
New Investments
Falling within our thesis of optimisation in the digital payment
technology stack, Augmentum invested £4.0 million in Kipp in May
2022. The acceptance of card payments in ecommerce transactions
remains a critical issue for merchants and issuing banks, particularly in
cross-border payment contexts. Kipp’s platform enables these parties
to engage in real time information sharing to reduce rates of false-
positive payment decline. Kipp is delivering significant additional
conversion of transactions that would otherwise be lost across their
initial cohort of international merchant customers.
Overview
I write to you after another 12 months of uncertainty following the
economy-wide adjustment to a higher interest rate environment. Having
flown the furthest under the market conditions of 2020-21, it is the listed
technology sector that has faced the most significant correction to
valuations in response to rising rates. Despite a bounce, in particular by
the FAANG stocks, listed tech stocks continue to trade well below their
10-year average. The increased cost of capital has reordered priorities
from growth to profitability, and returned focus to core business lines
and expense control. The market has become more discerning of
companies with strong fundamentals and those without, and the
significant rotation of capital into low-risk assets means that valuation
multiples for listed growth stocks, and fintechs within this, remain
compressed.
The stability of Augmentum’s NAV per share over the past twelve months
therefore belies the real story of continued progress and maturity in the
portfolio. Our 10 highest value holdings have seen revenue growth at an
impressive average of 117% year-on-year and raised over US$300 million
in equity capital despite a more challenging macroeconomic and
fundraising environment. Yet this strong performance has largely been
offset by multiple compression in comparable public markets. The growth
in our portfolio through the cycle reflects the quality of many of our
companies and the unabated advance of digital transformation in the
financial services sector.
The digital-asset sector suffered from a series of high-profile collapses
and subsequent contagion during 2022. These events highlighted
critical gaps in regulation and naivety in the nascent market structure.
The response from regulators has been an acceleration in policy
development and enforcement action. Europe has positioned itself as a
leader through the Markets in Crypto Asset (MiCA) regulation that will
apply from 2024 and brings welcome clarity to digital asset firms who
are committed to building compliant, legitimate businesses. This clarity
is lacking in the US market where enforcement action against high
profile firms has increased and we expect to see the biggest players in
the market move their domicile from the US to Europe, the Middle East
or Asia unless this changes in the coming year.
Recent advances in generative AI have instigated a wave of interest in
the technology and its future application in financial services. We
believe that generative AI will significantly increase the efficiency of
generalisable content-related tasks across industries such as coding
and marketing. For more complex financial services use cases, where
accuracy and compliance are imperative, it is still early from both a
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Portfolio Manager’s Review continued
Cyber-attacks represent a growing risk to businesses of all sizes and the
insurance market is undergoing a rapid expansion, with the value of
premiums expected to scale to US$22 billion by 20251. An integrated,
data-driven approach is critical to understanding risk at an individual
business level and to price policies accordingly. Incumbent insurers are
not effectively set up to carry out data collection and assessment at scale
and herein lies the opportunity for fintechs. In January 2023 Augmentum
invested £2.6 million in Baobab, who provide coverage to SMEs in
Germany and Austria with capacity provided by Zurich Insurance.
Portfolio
As I wrote to you in my half-year report, our team’s experience as
operators and active engagement through board positions has played a
significant role in helping our companies to navigate the change in
market conditions. Throughout 2022 and 2023 cost control and
sustainable growth have been core areas of focus.
Follow-on funding is also another avenue of portfolio support and we
completed eight investments into the existing portfolio during the
period. The funding rounds we participated in either supported
companies with runway to breakeven or provided additional time ahead
of their next funding round. For the companies that will fundraise in the
year ahead we expect conditions to be more favourable, assuming they
have used this period of market resettlement to realign strategy and
costs to current conditions.
Follow-on Investments and Other Top 10
Early in the period, in July 2022, we invested £2.0 million in Previse’s
£14.5 million Series B funding round led by Tencent. Previse provides
embedded lending and payment technology within B2B supply chains.
They are the technology provider behind Mastercard’s virtual card
solution for businesses available in more than 100 markets. During
2023 Previse has taken steps to rationalise its product suite and there
has been compression in the valuation multiples of listed peers. The fair
value of our holding has accordingly reduced £1.9 million in the year.
In November 2022 we invested a further £2.7 million into Anyfin, the
leading consumer credit refinancing player in the Nordics and Germany.
Augmentum’s investment formed part of a €30 million Series C round
which will take the company to breakeven in 2024. The round was led
by existing investors along with a strategic investment from the venture
investment arm of Citibank. Anyfin has seen strong counter cyclical
demand for its product but has maintained discipline in underwriting
approach given market conditions. The revaluation of our holding, down
£3.3 million, reflects compression in market multiples in the listed
lending vertical.
In January 2023 we invested £4 million into Zopa which, along with a
£0.5 million uplift, takes the total value of our holding to £30.1 million.
Zopa continues to deliver exceptional performance as a fully licensed
bank with increasingly diversified lending activity and total deposits
approaching £4 billion. The company is performing ahead of budget
and on track to achieve full year profitability in 2023. The ability to
maintain low cost of capital through deposits and to draw from a 17 year
lending track record translate into a distinct competitive advantage for
Zopa that is particularly powerful in the current economic environment.
We made four small investments of under £1.5 million each as part of
funding rounds for Farewill, Wayhome and Habito, and supported
Cushon through their acquisition process with a short-term investment
that has since been returned as part of exit proceeds.
At the beginning of the calendar year we received a dividend of
£0.6 million from BullionVault following strong trading performance
1 Munich Re, 2022
and profitability, driving a £2.1 million valuation increase. The company is
a leading precious metals investment marketplace and continues to
trade well during periods of volatility in mainstream markets.
Grover (valuation up £0.7 million in the year) has enjoyed a successful
year in its transition towards long-term profitable growth. Total
subscription value as at the reporting date was rapidly nearing €250
million representing 50% year-on-year growth in the top line despite a
near 50% year-on-year reduction in quarterly marketing spend. Average
cost of customer acquisition has fallen by 25% since Q1 2022 with net
revenue retention above 100%. Grover’s nascent B2B offering now
represents fully 15% of overall subscription revenue, with the international
business growing at nearly 20% month-on-month and growth
outstripping the retail business in the domestic market.
Our second largest holding, Tide, is well established as the leading
digital business banking platform for SMEs in the UK with half a million
customers and market share of 9%. In the last 12 months considerable
progress has been made on revenue diversification and geographical
expansion with the official launch of Tide India taking place in
December 2022. Year-on-year revenue growth of 74% has more than
offset valuation multiple compression to deliver an 18% (£7.5 million)
increase in our holding value. Tide completed their first acquisition;
absorbing SME credit marketplace Funding Options into the business
to broaden credit access for Tide customers. Tide is well positioned to
consider additional acquisitions in the current market environment in
order to further broaden product capabilities or geographical presence.
Fifty countries and counting now have an Open Banking initiative in
place and account-to-account (“A2A”) payments - where funds are
moved in real-time between transacting parties - is the fastest growing
use case. Volt are established as a leading provider of account-to-
account payment connectivity. Through a unique network aggregation
model, Volt’s coverage is expanding in line with the global roll-out of
Open Banking initiatives, delivering the consistency and quality of
service demanded by the highest-volume ecommerce merchants and
facilitators in twenty-five countries and counting. In June 2023
Worldpay, the world’s largest merchant acquirer, and ecommerce
software giant Shopify selected Volt as their global A2A partner. The
increase in the value of our holding, of £8.6 million, has been supported
by exceptional revenue growth and post-period end Volt announced a
Series B fundraising of US$60 million led by US based IVP with
Augmentum investing a further £5.3 million.
Monese continues to advance their B2B strategy while maintaining
moderated growth in their pan-European retail banking platform. In May
2023 the company announced their coreless banking platform under
the new brand XYB. The last twelve months have been a period of
adjustment for the company to the new strategy and market
environment and we take confidence from the quality of customers that
XYB has been able to secure, supported by a healthy pipeline. In
September 2022, the strategic venture arm of HSBC joined Investec
Bank with a £30 million investment driven by their interest in XYBs
technology and delivery capability. Despite this positive newsflow
Monese’s valuation fell £1.5 million.
Onfido’s product is primarily used in customer on-boarding with
volumes therefore influenced by product demand. With a mix of
financial services verticals represented in the customer base, reduced
on-boarding in areas such as digital assets has been offset by
continued expansion in verticals such as digital banking. Onfido are
another of our portfolio who have taken advantage of value-pricing in
the market to extend product capabilities through acquisition,
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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announcing the acquisition of Airside Mobile in May 2023 to accelerate
product development in the area of re-usable digital ID. The reduction in
the fair value of our holding, of £5.1 million, is reflective of compression in
the valuation multiples of listed peers despite a positive year-on-year
growth rate and being on a fully funded pathway to profitability.
Our investments in the digital asset sector make up 5.2% (2022: 8.6%)
of the portfolio. Our thesis has focused on backing companies that have
a long-term view and are intent on building an institutional grade
proposition underpinned by robust regulatory frameworks. Despite our
continued conviction in this approach, our investments so far have
disappointed, and we are reporting significant reductions in the fair
value of our positions in Gemini, Tesseract and Parafi, of £2.2 million,
£6.3 million and £2.0 million, respectively. In the last 12 months digital
asset markets have been undermined by actors operating without
regard for regulation and the general reduction in the demand for risk
assets in the new macroeconomic environment. The growth
trajectories of our companies have been impacted by these events and
each has taken steps to adjust costs and strategy to current trading
conditions.
Exits
The Company saw its second significant exit during the year, with
interactive investor, the direct-to-consumer fixed fee investment
platform, acquired by abrdn in May 2022 for £1.49 billion. This resulted in
proceeds for the Company of £42.8 million, delivering an IRR of 84.8%
and multiple on capital invested of 11.1 times. interactive investor was
an early investment in the Augmentum portfolio, quite antithetical to
most venture capital radars at the point of investment. Under strong
leadership and disciplined focus the company grew rapidly to over
£55 billion of customer assets under administration, becoming the
second largest self-directed investment platform in the UK.
The acquisition of workplace pensions provider Cushon by NatWest
Group was announced during the period in February 2023 and,
following regulatory approval, completed post-period end on 1st June.
Augmentum received proceeds of £22.8 million from the sale, giving an
IRR of 61.6% and multiple on capital invested of 2.1 times. Realised value
represents a c40% uplift on the holding value we reported in the
Company’s half year results.This marks the fifth exit from the portfolio
and is a further example of our measured approach to valuation; each
exit to date has been realised above or on-par with the previously
reported carrying value.
Performance
For the year to 31 March 2023 we are reporting gains on investments of
£9.9 million (2022 £56.7 million). Since IPO this represents an IRR of
18.5% on the capital that we have deployed.
We continue to take a consistent and disciplined approach to arrive at
fair values for the Company’s portfolio positions. The valuation
methodology (or methodologies) applied to each company is selected
with consideration of individual stage and circumstance. Our growing
track record of exits shows realisations above or on-par with the last
reported holding value.
In recent reports we have spoken more actively to shareholders about
the downside protections that form an integral part of the structure of
our typical investments. The most common protections across the
portfolio are liquidation preferences and anti-dilution provisions with 21
out of 25 portfolio positions protected by at least one of these.
These structures differentiate our shareholdings from ordinary shares
held in public or private companies because they protect value in the
eventuality that a company’s headline valuation is reduced. Through the
market volatility of 2022 these structures provided additional support to
the holding value of some of our positions, particularly those held in
earlier stage companies.
Our diversified portfolio approach also remains important. This extends
across verticals, stages of maturity and geographies and reduces our
overall exposure to market impact on any one of these.
Outlook
In the dislocation that follows from periods of economic turbulence,
entrepreneurs are presented with new opportunities to establish
ground-breaking businesses. This principle can also apply to venture
capital firms that operate with a clear purpose and we have welcomed
the general retreat of ‘tourist capital’ and the so-called ‘mega-rounds’
that played a distortionary role in private markets during the second half
of 2020 and 2021.
Quality deal flow is visibly improving as companies funded internally
through the turbulence of 2022 are now returning to market. Amongst
them are high potential prospects in line with our mandate which are
bolstering the investment pipeline. Increasing levels of “dry powder” in
the market maintain competition for quality companies but our thesis
driven approach and unique proposition – fintech specialism, patient
capital and operating experience – continue to cut through.
Less compelling investment opportunities are also returning to market,
and we anticipate a further shakeout and consolidation of companies to
come. Several of our established portfolio companies have already
found value-opportunities to add product and personnel capabilities
through acquisition. As fast-growing market leaders in their respective
fintech verticals they are well positioned to consider further
opportunities in the period ahead. Investors should see this is another
signal of maturity in the portfolio along with progression towards
profitability and exit.
The headroom for further disruption in financial services remains
significant and recent policy dialogue provides us many reasons for
optimism around the future of the technology sector in the UK and
Europe. Strong cross-party support was in evidence at the recent
London Tech Week (June 2023) where both the Prime Minister and
Leader of the Opposition spoke in favour of further investment and
progressive regulation in the UK in order to capture the economy-wide
benefits of a generational opportunity in AI. Reforms such as the
removal of the fee cap on defined contribution pension funds and a
potential UK sovereign wealth fund will begin to address the historic
under-investment from UK institutions in the venture capital asset class.
In the interests of the UK building on its preeminent position in
European fintech we hope and expect that those with the power to
implement these measures proceed to do so in a full and timely fashion.
As we navigate an evolving investment and technology landscape
where change is not uniform across countries, it is ever more important
to continue to develop our brand across Europe. We are well positioned
to identify and win exceptional investment opportunities and build on
our reputation as one of Europe’s leading fintech venture investors.
Tim Levene CEO
Augmentum Fintech Management Ltd
3 July 2023
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AUGMENTUM FINTECH PLC
Strategic Report
Business Review
The Strategic Report, set out on pages 18 to 30, provides a review of
the Company’s business, the performance during the year and its
strategy going forward. It also considers the principal risks and
uncertainties facing the Company.
It also includes information for shareholders to assess how the
Directors have performed their duty to promote the success of the
Company. In this respect, information on how the Directors have
discharged their duties under Section 172 of the Companies Act 2006
can be found on pages 26 and 27.
The Strategic Report contains certain forward-looking statements.
These statements are made by the Directors in good faith based on the
information available to them up to the date of this report and such
statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying any such forward-looking information.
Strategy and Strategic Review
Throughout the year under review, the Company continued to operate
as an approved investment trust, following its investment objective and
policy, seeking to generate capital growth over the long term through
investment in a focused portfolio of fast growing and/or high potential
private financial services technology (“fintech”) businesses based
predominantly in the UK and wider Europe.
The Company is an alternative investment fund (“AIF”) under the
Alternative Investment Fund Managers Regulations (“UK AIFMD”) and
has appointed Frostrow Capital LLP as its alternative investment fund
manager (“AIFM”).
During the year, the Board, Frostrow Capital LLP as AIFM, and the
Portfolio Manager undertook all strategic and administrative activities.
Principal Risks and Risk Management
The Board considers that the risks detailed below are the principal risks
currently facing the Company. These are the risks that could affect the
ability of the Company to deliver its strategy.
The Board is responsible for the ongoing identification, evaluation and
management of the principal risks faced by the Company and has
established a process for the regular review of these risks and their
mitigation. This process accords with the UK Corporate Governance
Code and the FRC’s Guidance on Risk Management, Internal Control
and Related Financial and Business Reporting.
The Board has carried out a robust assessment of the emerging and
principal risks facing the Company, including those that would threaten
its business model, future performance, solvency and liquidity. Further
details of the risk management processes that are in place can be
found in the Corporate Governance Statement.
The Board's policy on risk management has not materially changed
during the course of the reporting period and up to the date of
this report.
The Company maintains a framework of the key risks, with the policies
and processes devised to monitor, manage and mitigate them where
possible. This risk map is reviewed regularly by the Audit Committee.
Further details of the financial risks are included in note 13 starting on
page 61.
The Company’s key risks fall broadly under the following categories:
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 have an impact on the Group’s ability to
realise a return from its investments and cannot be directly controlled
by the Group. Particular current factors include high inflation,
recession fears and sanctions related to the situation in Ukraine.
Within the constraints dictated by its objective, the Company’s
portfolio is diversified across a range of sectors, has no leverage, 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 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.
An experienced fintech Portfolio Manager has been retained in order
to deliver the strategy.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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Principal Risks and Uncertainties
Mitigation
Investment Risks
The performance of the Group’s portfolio is influenced by a number
of factors. These include, but are not limited to:
(i)
(ii)
the quality of the initial investment decision;
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;
(vi) the macroeconomic risks described above; and
(vii) environmental, social and governance (“ESG”) factors.
Any 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.
Portfolio Diversification Risk
The Group is subject to the risk that its portfolio may not be
diversified, being heavily concentrated in the fintech sector and the
portfolio value may be dominated by a single or limited number of
companies.
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, and 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
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.
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 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 to afford a degree of downside protection
through mechanisms such as a liquidation preference and/or anti-
dilution provisions.
As noted above the Portfolio Manager provides a detailed update at
each Board meeting, including, inter alia, investee company
developments and funding requirements.
The Group attempts to mitigate this risk by making investments
across a range of companies in a range of fintech company
subsectors and in companies at different stages of their lifecycle in
accordance with the Investment Objective and Investment Policy.
There is also geographic diversification with 66.6% of the portfolio
being based in the UK and 33.4% in continental Europe, Israel and
the US. Given the nature of the Company’s Investment Objective this
remains a significant risk.
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.
20
AUGMENTUM FINTECH PLC
Strategic Report continued
Principal Risks and Uncertainties
Mitigation
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.
Valuation Risk
The valuation of investments in accordance with IFRS 13 and
International Private Equity and Venture Capital (IPEV) Valuation
Guidelines requires considerable judgement and is explained in note
19.17.
The Company’s investments are 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 as estimated by the Company.
Valuations are often based on comparator prices and market-based
multiples, which can be affected by equity market sentiment and
comparators’ situations that may not reflect the individual positions of
companies invested in.
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.
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,
who are required 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.
The Company has a rigorous valuation policy and process as set out
in notes 19.4 and 19.17. This process is led by the Board and includes
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.
To manage these risks the Board:
l receives a quarterly compliance report from the AIFM and the
Portfolio Manager, which includes, inter alia, details of
compliance with applicable laws and regulations;
l 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;
l maintains a risk matrix with details of risks to which the Group
and Company are exposed, the controls relied on to manage
those risks and the frequency of operation of the controls; and
l receives updates on pending changes to the regulatory and
legal environment and progress towards the Group and
Company’s compliance with these.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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Principal Risks and Uncertainties
Mitigation
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 manages this risk by:
l receiving reports from AFML at each Board meeting, such
reports include any significant changes in the make-up of the
team supporting the Company;
l delegating to the Management Engagement & Remuneration
Committee oversight of the remuneration of employees of AFML;
l meeting the wider team, outside the designated lead managers,
at the Portfolio Manager’s offices and by video conference, and
encouraging the participation of the wider AFML team in investor
updates; and
l 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
Ukraine
The Company has carried out a robust assessment of the Company’s
emerging and principal risks and the procedures in place to identify
emerging risks are described below. The International Risk Governance
Council definition of an ‘emerging’ risk is one that is new, or is a familiar
risk in a new or unfamiliar context or under new context conditions
(re-emerging). Failure to identify emerging risks may cause mitigating
actions to be reactive rather than being proactive and, in the worst case,
could cause the Company to become unviable or otherwise fail or force
the Company to change its structure, objective or strategy.
The Audit Committee reviews the risk map at least half-yearly. Emerging
risks are discussed in detail as part of this process and also throughout
the year to try to ensure that emerging (as well as known) risks are
identified and, so far as practicable, mitigated.
The experience and knowledge of the Directors are useful in these
discussions, as are update papers and advice received from the
Board’s key service providers such as the Portfolio Manager, the AIFM
and the Company’s Brokers. In addition, the Company is a member of
the AIC, which provides regular technical updates as well as drawing
members’ attention to forthcoming industry and/or regulatory issues
and advising on compliance obligations.
The Board continues to monitor events in Ukraine and related
sanctions. The Board remains confident that the situation should have
no direct impact on the Company and has not identified any Russian
shareholders in the Company. The portfolio companies have no
Russian operations.
ESG
As mentioned above under Investment Risks, the Board recognises the
risks posed by environmental, social and governance (“ESG”) factors,
particularly with respect to the portfolio. Investment companies are
currently exempt from reporting under the Task Force on Climate-
Related Financial Disclosures (“TCFD”) and the Company has not
voluntarily adopted the requirements, but recognises the potential for
reputational risk should the Company not meet investor expectations in
relation to ESG. This, together with ESG factors that might affect
portfolio companies, is considered to be an emerging risk area for the
Company. ESG risk assessment is embedded in the Portfolio Manager's
due diligence and decision-making process when investing in new
companies and monitored thereafter.
* See Glossary on page 79
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AUGMENTUM FINTECH PLC
Strategic Report continued
Performance and Prospects
Performance
The Board assesses the Company’s performance in meeting its
objective against the following Key Performance Indicators (“KPIs”).
Due to the unique nature and investment policy of the Company, with no
direct listed competitors or comparable indices, the Board considers
that there is no relevant external comparison against which to assess
the KPIs and as such performance against the KPIs is considered on an
absolute basis. Information on the Company’s performance is provided
in the Chairman’s Statement and the Portfolio Manager’s Review. The
KPIs have not changed from the prior year:
l
The Net Asset Value (“NAV”) per share after performance fee total
return*
The Directors regard the Company’s NAV per share after
performance fee total return as being the critical measure of value
delivered to shareholders over the long term. The Board considers
that the NAV per share after performance fee better reflects the
current value of each share than the consolidated NAV per share
figure, the calculation of which eliminates the performance fee.
This is an Alternative Performance Measure (“APM”) and its
calculation is explained in the Glossary on page 79 and in note 16
on page 64. Essentially, it adds back distributions made in the
period to the change in the NAV after performance fee to arrive at
a total return.
The Group’s NAV per share after performance fee total return for
the year was 2.4% (2022: 19.0%). This result is discussed in the
Chairman's Statement on page 2.
l
The Total Shareholder Return (“TSR”)*
The Directors also regard the Company’s TSR as a key indicator of
performance. Like the NAV per share after performance fee total
return discussed above, this is an APM and its calculation is explained
in the Glossary on page 79. The TSR is similar in nature to the NAV
per share after performance fee total return, except that it adds back
distributions made in the period to the change in the share price, to
reflect more closely the return in the hands of shareholders. Share
price performance is monitored closely by the Board.
The Company's TSR for the year was (27.1%) (2022: (16.4%))
reflecting the swing in market sentiment against listed growth and
tech stocks from the beginning of 2022 and the associated wide
discount to NAV at which the Company's shares have traded.
l Ongoing Charges Ratio (“OCR”)*
Ongoing charges represent the costs that shareholders can
reasonably expect to pay from one year to the next, under normal
circumstances.
The Board is cognisant of costs and reviews the level of expenses at
each Board meeting. It works hard to maintain a sensible balance
between strong service and keeping costs down.
The terms of appointment of the Company’s AIFM and the Portfolio
Manager are set out on pages 23 and 24. In reviewing their
continued appointment the Board took into account the ongoing
charges ratio of other investment companies with specialist
mandates.
The Group’s OCR for the year was 1.9% (2022: 1.7%).
* See Glossary on page 79
Discount/Premium*
The Board monitors the price of the Company's shares in relation to
their net asset value after performance fee and the premium/discount
at which the shares trade. Shareholder approvals are sought each year
to issue and buy back shares, which can assist in reducing share price
volatility. However, the level of discount or premium is understood to be
mostly a function of investor sentiment and demand for the shares, over
which the Board has little influence. The Portfolio Manager, the
management fee arrangements and the Company’s cost base
generally have not changed and the current discount follows an
extended period during which the shares traded at a premium to NAV.
The Board does not believe that Company specific factors have
influenced the discount. Rather, the share price falling to a discount to
NAV at the beginning of 2022 correlates with market sentiment turning
against growth stocks generally, with the Company's shares being
affected notwithstanding the portfolio’s potential. This situation
continued unabated through the year under review.
The Board has sought to communicate its faith in the underlying value
of the portfolio and simultaneously to take advantage of the discount by
undertaking a programme of accretive share buybacks, to the benefit of
remaining shareholders. It is thought that helping to create additional
market liquidity for sellers in this way also had an effect on stabilising the
share price. All shares purchased are held in treasury and will potentially
be reissued when the share price returns to a premium to NAV after
performance fee. Shareholder authorities to issue and buy back shares
are being sought at the forthcoming AGM.
Prospects
The Company’s current position and prospects are described in the
Chairman’s Statement and Portfolio Manager’s Review sections of this
annual report.
Performance and Future developments
The Board’s primary focus is on the Portfolio Manager’s investment
approach and performance. The subject is thoroughly discussed at
every Board meeting.
In addition, the AIFM updates the Board on company communications,
promotions and investor feedback, as well as wider investment issues.
An outline of performance, investment activity and strategy, market
background during the year and the outlook is provided in the
Chairman’s Statement on pages 2 to 4 and the Portfolio Manager’s
Review on pages 15 to 17.
Viability Statement
The Board has considered the Company’s financial position, including
its ability to liquidate portfolio assets and meet its expenses as they fall
due, and notes the following:
As part of its review the Board considered the impact of a significant
and prolonged decline in the Company’s performance and prospects.
This included a range of plausible downside scenarios such as
reviewing the effects of substantial falls in investment values and the
impact on the Company’s ongoing charges.
The expenses of the Company are predictable and modest in
comparison with the assets and there are no capital commitments
currently foreseen which would alter that position.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
23
In considering the Company's longer-term viability, as well as
considering the principal risks on pages 18 to 21 and the financial
position of the Company, the Board considered the following factors
and assumptions:
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The Company is and will continue to be invested primarily in long-
term illiquid investments which are not publicly traded;
The Board reviews the liquidity of the Company, regularly
considers any commitments it has and cash flow projections;
The Board, AIFM and Portfolio Manager will continue to adopt a
long-term view when making investments and anticipated holding
periods will be at least five years;
As detailed in the Directors’ Report, the Valuations Committee
oversees the valuation process;
There will continue to be demand for investment trusts;
Regulation will not increase to a level that makes running the
Company uneconomical; and
The performance of the Company will continue to be satisfactory.
Whilst acknowledging that market and economic uncertainty remain
heightened in view of current inflation, concerns about a recession and
the Ukraine conflict, based on the results of its review, and taking into
account the long-term nature of the Company, the Board has a
reasonable expectation that the Company will be able to continue its
operations and meet its expenses and liabilities as they fall due for the
foreseeable future, taken to mean at least the next five years. The Board
has chosen this period because, whilst it has no information to suggest
this judgement will need to change in the coming five years, forecasting
over longer periods is imprecise. The Board’s long-term view of viability
will, of course, be updated each year in the annual report.
Going Concern
In light of the conclusions drawn in the foregoing Viability Statement
and as set out in note 19.1 to the financial statements on page 65, the
Company has adequate financial resources to continue in operational
existence for at least the next 12 months from the date of signing of this
report.
Therefore, the Directors believe that it is appropriate to continue to
adopt the going concern basis in preparing the financial statements. In
reviewing the position as at the date of this report, the Board has
considered the guidance on this matter issued by the Financial
Reporting Council.
Management Arrangements
Principal Service Providers
The Company is structured as an internally managed closed-ended
investment company. Augmentum Fintech Management Limited
(“Portfolio Manager”) is the wholly owned operating subsidiary of the
Company that manages the investment portfolio of the Company as a
delegate of the AIFM.
The other principal service providers to the Company are Frostrow Capital
LLP (“Frostrow” or the “AIFM”) and IQ EQ Depositary Company (UK)
Limited (the “Depositary”). Details of their key responsibilities and their
contractual arrangements with the Company follow.
Alternative Investment Fund Manager (“AIFM”)
Frostrow, under the terms of its AIFM agreement with the Company,
provides, inter alia, the following services:
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oversight of the portfolio management function delegated to
Augmentum Fintech Management Limited;
promotion of the Company’s shares;
investment portfolio administration and valuation;
risk management services;
share price discount and premium monitoring;
administrative and company secretarial services;
advice and guidance in respect of corporate governance
requirements;
l maintenance of the Company’s accounting records;
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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:
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on NAV up to £150 million: 0.225% per annum;
on that part of NAV in excess of £150 million and up to £500 million:
0.2% per annum; and
on that part of NAV in excess of £500 million: 0.175% per annum,
calculated on the last working day of each month and payable monthly
in arrears.
The AIFM Agreement may be terminated by either party on giving
notice of not less than 12 months.
Portfolio Manager
Augmentum Fintech Management Limited, as delegate of the AIFM, is
responsible for the management of the Company’s portfolio of
investments under an agreement between it, the Company and
Frostrow (the “Portfolio Management Agreement”).
Under the terms of its Portfolio Management Agreement, Augmentum
Fintech Management Limited provides, inter alia, the following services:
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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.
* See Glossary on page 79
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Portfolio Manager Fees
Portfolio Management Fee
Under the terms of the Portfolio Management Agreement Augmentum
Fintech Management Limited (the “Portfolio Manager”) receives an
annual fee of 1.5% of the NAV per annum, falling to 1.0% of any NAV in
excess of £250 million.
Performance Fee
The Portfolio Manager is entitled to a performance fee in respect of the
performance of any investments and follow-on investments. Each
performance fee operates in respect of investments made during a
24 month period and related follow-on investments made for a further
36 month period, save that the first performance fee would be in
respect of investments acquired using 80% of the net proceeds of the
Company’s IPO in March 2018 (including the Initial Portfolio), and related
follow-on investments.
Subject to certain exceptions, the Portfolio Manager receives, in
aggregate, 15% of the net realised cash profits from the investments and
follow-on investments made over the relevant period once the Company
has received an aggregate annualised 10% realised return on
investments (the “hurdle”) and follow-on investments made during the
relevant period. The Portfolio Manager’s return is subject to a ‘’catch-up’’
provision in its favour. The performance fee is paid in cash as soon as
practicable after the end of each relevant period, save that at the
discretion of the Board payments of the performance fee may be made
in circumstances where the relevant basket of investments has been
realised in part, subject to claw-back arrangements in the event that
payments have been made in excess of the Portfolio Manager’s
entitlement to any performance fees as calculated following the relevant
period.
Based on the investment valuations as at 31 March 2023 the hurdle has
been met, on an unrealised basis, and as such a performance fee has
been provided for as set out in notes 2 and 12. This will only be payable
if the hurdle is met on a realised basis.
The Portfolio Management Agreement may be terminated by either
party giving notice of not less than 12 months.
AIFM and Portfolio Manager Evaluation and Re-Appointment
The performance of Frostrow as AIFM and Augmentum Fintech
Management Limited as Portfolio Manager is regularly monitored by the
Board with a formal evaluation being undertaken each year. As part of this
process the Board monitors the services provided by the AIFM and the
Portfolio Manager and receives regular reports and views from them.
Following a review at a Management Engagement & Remuneration
Committee meeting in March 2023 the Board believes that the
continuing appointment of the AIFM and the Portfolio Manager, under
the terms described within this Strategic Report, is in the best interests
of the Company’s shareholders. In coming to this decision it took into
consideration the following additional reasons:
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the quality and depth of experience of the management, company
secretarial, administrative and marketing team that the AIFM
brought to the management of the Company; and
the quality and depth of experience allocated by the Portfolio
Manager to the management of the portfolio, together with the
clarity and rigour of the investment process.
Depositary
The Company has appointed IQ EQ Depositary (UK) Limited as its
Depositary in accordance with the UK AIFMD on the terms and subject
to the conditions of an agreement between the Company, Frostrow and
the Depositary (the “Depositary Agreement”).
The Depositary provides the following services, inter alia, under its
agreement with the Company:
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verification of non-custodial investments;
cash monitoring;
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foreign exchange services.
The Depositary must take reasonable care to ensure that the Company
is managed in accordance with the Financial Conduct Authority’s
Investment Funds Sourcebook, the UK AIFMD and the Company’s
Articles of Association.
Under the terms of the Depositary Agreement, the Depositary is entitled
to receive an annual fee of £25,000 plus certain event driven fees.
The notice period on the Depositary Agreement is not less than
six months.
Registrar
The Board has decided to change the Company’s share registrar. The
Company’s current registrar is Link Group. With effect from
18 December 2023 the Company’s registrar will become
Computershare Investor Services PLC. Contact details for both
registrars are set out on page 81.
Dividend Policy
The Company invests with the objective of achieving capital growth
over the long term and it is not expected that a revenue dividend will be
paid in the foreseeable future. The Board intends only to pay dividends
out of revenue to the extent required in order to maintain the Company’s
investment trust status.
Potential returns of capital
It is expected that the Company will realise investments from time to
time. The proceeds of these disposals may be re-invested, used for
working capital purposes or, at the discretion of the Board, returned to
shareholders.
The Company has committed to return to Shareholders up to 50 per
cent. of the gains realised by the disposal of investments in each
financial year, with such returns of capital expected to be made on an
annual basis. The Company may also seek to make returns of capital to
Shareholders where available cash is not expected to be substantially
deployed within the following 12-18 months. The options for effecting
any return of capital to shareholders may include the Company making
tender offers to purchase Shares, paying special dividends or any
alternative method or a combination of methods. Certain methods
intended to effect a return of capital may be subject to, amongst other
things, shareholder approval. Shareholders should note that the return
of capital by the Company is at the discretion of the Directors and is
subject to, amongst other things, the working capital requirements of
the Company. As described in the Chairman’s Statement the Board has
confirmed its decision taken last year, following a consultation, that the
Company will retain the bulk of the proceeds of the investment
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realisations to date for reinvestment to support its capital growth
objective and utilise the balance to support accretive share buybacks.
Community, Social, Employee, Human Rights, Environmental Issues,
Anti-bribery and Anti-corruption
Company Promotion
The Company has retained the services of Peel Hunt LLP and Singer
Capital Markets Advisory LLP as joint corporate brokers, to work
alongside one another to encourage demand for the Company’s
shares.
In addition to AIFM services, Frostrow also provides investor relations &
marketing services.
Engaging regularly with investors:
The Company's brokers and Frostrow meet with institutional investors,
discretionary wealth managers and execution-only platform providers
around the UK and hold regular seminars and other investor events;
Making Company information more accessible:
Frostrow manages the investor database and produces all key
corporate documents, distributes factsheets, annual reports and
updates from the Portfolio Manager on portfolio and market
developments; and
Monitoring market activity, acting as a link between the Company,
shareholders and other stakeholders:
The Company’s brokers and Frostrow maintain regular contact with
sector broker analysts and other research and data providers, and
provide the Board with up-to-date information on the latest shareholder
and market developments.
The Company is committed to carrying out business in an honest and
fair manner with a zero-tolerance approach to bribery, tax evasion and
corruption. As such, policies and procedures are in place to prevent
bribery and corruption. In carrying out its activities, the Company aims
to conduct itself responsibly, ethically and fairly, including in relation to
social and human rights issues.
As an investment trust with limited internal resource, the Company has
little impact on the environment. The Company believes that high ESG
(Environmental, Social and Governance) standards within both the
Company and its portfolio companies make good business sense and
have the potential to protect and enhance investment returns.
Consequently, the Group’s investment process ensures that ESG
issues are taken into account and best practice is encouraged.
Diversity
There are currently three male and two female Directors (being 40%
female representation) on the Board, and these Directors have three
different nationalities and diverse educational backgrounds. The
Company aims to have a balance of relevant skills, experience and
background amongst the Directors on the Board and believes that all
Board appointments should be made on merit and with due regard to
the benefits of diversity. The Company's diversity policy is set out on
pages 40 and 41. The Board also encourages diversity within AFML,
where the team of 11 people represents four different nationalities and is
45% female. The Board is also keen to promote the benefits of diversity
in the companies we invest in.
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Strategic Report continued
Engaging with our stakeholders
The following ‘Section 172’ disclosure describes how the Directors have had regard to the views of the Company’s stakeholders in their decision-
making.
Who?
Stakeholder group
Investors
Portfolio Manager
Service Providers
Why?
How?
The benefits of engagement with our
stakeholders
How the Board the AIFM and the Portfolio
Manager has engaged with our stakeholders
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
endeavours to make himself available to meet
with shareholders wishing to engage.
Key mechanisms of engagement included:
l The Annual General Meeting;
l The Company’s website which hosts reports,
video interviews with the managers and
regular market commentary;
l Online newsletters;
l One-on-one investor meetings;
l Investor meetings with the Portfolio Manager
and AIFM; and
l The Portfolio Manager hosts an annual
Capital Markets Day event to inform
investors about portfolio constituents.
The Board meets regularly with the Company’s
Portfolio Manager throughout the year both
formally at the quarterly Board meetings and
more regularly on an informal basis. The Board
also receives 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.
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.
Clear communication of the Company’s strategy
and the performance against its 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 diluting the NAV per share of existing
shareholders. Increasing the size of the
Company can benefit liquidity as well as spread
costs.
Understanding investor preferences in relation
to potential Board decisions, such as in relation
to possible distributions.
Engagement with our Portfolio Manager is
necessary to evaluate performance against the
stated strategy and to understand any risks or
opportunities this may present to the Company. It
also provides clarity on the Board’s expectations
and helps ensure that portfolio management
costs are closely monitored and remain
competitive.
The Company contracts with third parties for
other services including: depositary, investment
accounting & administration, company
secretarial and share registration. It is necessary
for the Company's success to ensure the third
parties to whom we have outsourced services
complete their roles diligently and correctly.
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.
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Who?
Stakeholder group
Employees of AFML
Why?
How?
The benefits of engagement with our
stakeholders
How the Board the AIFM and the Portfolio
Manager has engaged with our stakeholders
In order to attract and retain talent to ensure the
Group has the resources to successfully
implement its strategy and manage third-party
relationships.
AFML has an open plan office, facilitating ready
interaction and engagement. Senior team
members 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
Manager 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. See pages 28 to 30 for further
detail on AFML’s ESG approach to investing.
What?
Outcomes and actions
What were the key topics of engagement?
What actions were taken, including principal decisions?
Key topics of engagement with investors
l The Portfolio Manager, Frostrow and the joint brokers meet
Ongoing dialogue with shareholders concerning the strategy of the
Company, performance and the portfolio.
Key topics of engagement with the Portfolio Manager
On an ongoing basis the Board engages on portfolio composition,
performance, outlook and business updates.
Additional topics included:
l The impact of market conditions upon their business and the
portfolio.
l The impact of the Ukraine conflict upon their business and the
portfolio.
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. The Chairman
and Mr Haysey also engaged with certain of the Company's
larger shareholders.This interaction informed the Board’s
deliberations on various matters, including in relation to the
distribution of investment realisation proceeds where it
contributed to the Board’s decision to restrict distributions to an
accretive share buyback programme, with it being considered
that shareholders were better served by realisation proceeds
mainly being used for further investment.
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The prospects for the portfolio and the pipeline of potential
investment opportunities were of particular interest to the Board.
l The integration of ESG into the Portfolio Manager’s investment
l Russian sanctions have no direct impact on the Company and
processes.
l Compensation arrangements within AFML.
l The structure of management arrangements.
extremely limited impact on portfolio companies.
l The portfolio manager reports regularly any ESG issues in the
portfolio companies to the Board. Please see pages 28 to 30 for
further details of AFML’s ESG policies.
l As a result of discussions about the compensation
arrangements within AFML the remuneration policy put to
shareholders at the last AGM no longer covers key personnel of
AFML and the terms of reference of the Management
Engagement & Remuneration Committee were also revised.
l The structure of management arrangements is the subject of
continuing dialogue.
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Approach to Responsible Investing
Five-Stage Approach to Future-Proofing the Portfolio
Augmentum Fintech Management Limited (“AFML”) continues to be
committed to a responsible investment approach through the lifecycle
of its investments, from pre-screening to exit. AFML believes that the
integration of Environmental, Social and Governance (“ESG”) factors
within the investment analysis, diligence and operating practices is
pivotal in mitigating risk and creating sustainable, profitable investments.
ESG principles adapted from the UN PRI (Principles of Responsible
Investment) are integrated throughout business operations; in
investment decisions, at the screening stage through an exclusion list
and due diligence, ongoing monitoring and engaging with portfolio
companies post-investment and when making follow-on investment
decisions, as well as within fund operations.
1.
Screening
An Exclusion List is used to screen out companies incompatible with
AFML’s corporate values (sub-sectors and types of business). AFML
also commits to being satisfied that the investors they invest alongside
are of good standing.
2. Due Diligence
An ESG Due Diligence (DD) survey is completed by teams from
companies in the later stages of the investment process. An ESG
scorecard is completed for each potential investment, in which potential
ESG risks and opportunities are identified, and discussed with the
investment committee. Where necessary, an action plan is agreed with
the management team on areas for improvement and commitments are
incorporated into the Term Sheet.
3. Post-Investment Monitoring and Engagement
An annual survey is completed by portfolio companies and areas for
improvement are discussed with management teams, with
commitments agreed and revisited as appropriate.
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Continuing to embrace diversity and inclusion through inclusive
hiring and professional development practices and Female
Founder Office Hours;
Building on our programme of CSR initiatives through supporting
Crisis Venture Studio and The Lord Mayor's Appeal `We Can Be'
initiative.
ESG Focus Areas
AFML has identified eight key areas for consideration, across the three
ESG categories, which best align with its values and are most relevant
for companies operating in the fintech industry.
The key environmental consideration as identified by the AFML is the
potential impact of business operations on the global issue of climate
change. Social factors include the risks and opportunities associated
with data security, privacy and ethical use, consumer protection,
diversity and financial inclusion. Governance considerations include
anti-bribery and corruption, board structure and independence and
compliance.
4.
Follow On Investments
AFML is committed to:
ESG risks and opportunities are assessed when making follow-on
investment decisions, with an ESG scorecard completed and
co-investors taken into consideration. Follow on investments are only
made into companies that continue to meet AFML’s ESG criteria.
5.
Internally at Augmentum
AFML has continued to identify priority areas in which to make suitable
ESG-related advancements across fund operations. Key progress
areas include:
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Tracking the gender diversity of founders/CEOs of companies in
our dealflow;
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Incorporating ESG and sustainability considerations into its
investment analysis, diligence, and operating practices.
Providing ESG training and support to the AFML employees
involved in the investment process, so that they may perform their
work in accordance with AFML’s policy.
Actively engaging with portfolio companies to encourage
improvement in key ESG areas.
Annual reporting on progress to stakeholders.
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Pertinent Sustainable Development Goals
ESG in Action
Company Initiatives
Investing in Women Code (ESG Focus Area – Social: Diversity)
This year Augmentum became signatories of the Investing in Women
Code. The Investing in Women Code is a commitment to support the
advancement of female entrepreneurship in the United Kingdom by
improving female entrepreneurs’ access to tools, resources and finance
from the financial services sector.
As a signatory to the Investing in Women Code, the Company is
committed to a culture of inclusion and to advance access to capital for
female entrepreneurs. As a signatory, the Company will:
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Have a nominated member of the senior leadership team who is
responsible for supporting equality in all its interactions with
entrepreneurs.
Provide HM Treasury with a commonly agreed set of data
concerning: all-female-led businesses; mixed-gender-led
businesses and all-male-led businesses. The Company agrees
that HM Treasury will collate this data and publish it on an
aggregated and anonymised basis in an annual report.
Adopt internal practices which aim to improve the potential for
female entrepreneurs to successfully access the tools, resources,
investment and finance they need to build and grow their
businesses, working with relevant players in the ecosystem. The
Company will review these actions annually and make this
commitment publicly available.
The Lord Mayor’s Appeal (Environmental: climate/carbon footprint
and Social: Diversity)
In September the Augmentum team took part in The Lord Mayor’s
Appeal’s ‘City Giving Day’, entering a cycling challenge raising money
for the various charitable causes supported by The Lord Mayor’s
Appeal.
The Company participated in The Lord Mayor’s Appeal’s ‘We Can Be’
initiative for the first time, hosting a group of school girls, introducing
them to a career in the City and the inner workings of an investment
trust.
Female Founders in Fintech Office Hours (Social: Diversity)
Augmentum launched Female Fintech Founders monthly Office Hours
along with other fintech investors Outward and Portage, providing an
opportunity for early stage female fintech founders to speak with
leading fintech investors and discuss fundraising and business scaling
more broadly. 25 founders were selected and hosted across the first
three sessions.
Portfolio Business Models
Anyfin: Consumer Financial Education (Social: Consumer protection)
A core element of Anyfin’s mission is to help get people out of debt and
to date the company has helped customers save millions of Euros in
credit costs. They are proactive with consumer financial education;
earlier this year they released the third edition of the Anyfin Report, a
financial health study conducted by YouGov. The report focused on the
ways in which people are planning to deal with their debts (and finances
more broadly) in 2023. The company hosts regular ‘Anyfin House’
sessions, open to the public, and covering topics such as financial
management, financial stress and the economy.
Grover: Circular Economy Model (Environmental: Climate/carbon
footprint)
Grover provides a sophisticated solution for the increasing number of
consumers who value access over ownership via their circular economy
tech-rental model. By replacing the highly wasteful linear product
ownership approach (take -> make -> dispose), Grover’s model extends
the lifecycle of a product by re-using, repairing and redistributing. A
device rented from Grover is circulated 2-6 times on average, and as of
2023 the company has circulated over 1 million devices.
Wayhome: Gradual Home Ownership Model
(Social: Financial inclusion)
Wayhome’s ‘Gradual Homeownership’ model aims to help aspiring
homeowners who are unable to obtain a traditional mortgage to buy a
home get on the housing ladder. With the average home now costing
9 times average income and the average first time buyer only able to
borrow 3.55 times income, millions of hardworking families are locked
out of homeownership. Wayhome customers own the share of the
home they paid for and rent the remainder, gradually buying more and
renting less over time.
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Portfolio Initiatives
Onfido: The Trust Framework Certification (Social: Data security and
consumer protection)
In January 2023 Onfido announced it had achieved certification for
high confidence profile H1A under the UK Digital Identity and Attributes
Trust Framework (the trust framework). The certification serves use
cases where a higher confidence level in digital identity verification is
required. The trust framework is part of the UK government’s wider plan
to make it easier and more secure for people to prove their identity
online. It provides a set of rules for organisations to adhere to in order to
provide secure and trustworthy digital identity. The Home Office now
recommends companies use identity service providers (IDSPs) that
meet the trust framework standards for Right to Work, Right to Rent and
Disclosure and Barring Service’s (DBS) screening checks.
Tide: (Environmental: Climate/carbon footprint)
In March, Tide became the first fintech globally to remove 100% of its
emissions with durable carbon removals as of 2022 onwards. The
business has also committed to becoming fully NetZero by 2030 and to
support its UK members (more than 9% of UK SMEs), and growing
network of Indian SMEs on their journey to NetZero.
Tide made three climate-focused pledges which included committing
to removing 100% of their emissions with durable carbon removal from
2022 onwards and reducing 90% of their 2021 emissions per employee
by 2030. These would make Tide fully Net Zero by 2030. The
organisation also committed to making Net Zero simpler for their
Members by developing the support on offer.
Post-period end Tide and Transcorp announced the launch of India’s-
first recycled PVC RuPay Card. Made from 99% recycled plastic, this is
a first for fintechs in India. Each rPVC card saves 7g of carbon and 3.18g
plastic that would normally be used in production.
Zopa: 2025 Fintech Pledge (Social: Consumer protection and
financial inclusion)
Led by Zopa, 33 fintechs and their industry partners are working
together to tackle the cost-of-living crisis. The 2025 Fintech Pledge
aims to drive 10 million consumer actions that build up the financial
resilience of UK consumers by 2025. It will achieve this by connecting
people to platforms that make savings work harder, improve credit
scores, consolidate debt, and lower utility bills and household outgoing
costs. To date, more than 2 million actions have been reported from all
members combined.
This Strategic Report was approved by the Board of Directors and
signed on its behalf by:
Neil England
Chairman
3 July 2023
Board of Directors
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Neil England
(Chairman of the Board and Nominations Committee)
Neil has extensive international business expertise in a career spanning public and private companies varying in size from
start-ups to global corporations.
He has held leadership roles in various sectors including food, FMCG, distribution, media, sport and technology.
Neil was a Vice President of Mars Incorporated; Group Chief Executive at The Albert Fisher Group plc and Group Commercial
Director at Gallaher Group plc. Additionally he started two technology businesses and has advised on others. He is a past
Chairman of a number of other companies, most recently ITE Group plc and Blackrock Emerging Europe plc.
Neil is currently Chairman of Schroder British Opportunities Trust plc and a non-executive director of two private companies.
Neil holds 300,000 shares in the Company.
He is a Fellow of The Chartered Institute of Marketing.
Karen Brade
(Chairman of the Audit Committee)
Karen has extensive experience of project finance, private equity and asset management. She started her career at Citibank
working on various multi-national project finance transactions.
Karen worked at CDC (now known as British International Investment), the UK Government’s development finance institution,
where she held a variety of positions in equity and debt investing, portfolio management, fund raising and investor development.
She currently serves as Chairman of Aberdeen Japan Investment Trust PLC; Chairman of Keystone Positive Change Investment
Trust plc; Non-Executive Director of HeiQ plc and is an external panel member of the Albion Capital VCT investment committee.
Karen holds 39,019 shares in the Company.
David Haysey
(Chairman of the Management & Remuneration Committee and Valuations Committee, and Senior Independent Director)
David has extensive experience in the investment business, working on both public and private equities, and asset allocation.
He started his career as a stockbroker, and held a number of senior positions, including as head of European equities for
SG Warburg plc and Deutsche Bank AG and CIO and co-CEO of Deutsche Asset Management’s European Absolute Return
business.
David previously worked for RIT Capital Partners plc, where he was a board member and head of public equities. He joined the
multi-strategy firm Marylebone Partners from its launch as head of liquid strategies. He is now a non-executive partner and
member of the firm’s investment committee.
David holds 94,230 shares in the Company.
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Conny Dorrestijn
Conny joined the Board on 1 November 2021. She has been an active part of European fintech for many years and has worked
with a number of early stage fintech businesses. She is a founding partner of BankiFi, a developer of technology ‘putting banks
at the heart of business’, where she currently fulfils a non-executive role, Chair of the Supervisory Board of Cobase bv. Conny is
also Chair of the Advisory Board of Amsterdam Fintech Week, an Associate of the Digital Insurance Agenda (DIA) and a Global
Innovation Awards Judge at BAI (US). Previous roles include Chair of the supervisory board of pan-European fintech provider
Blanco Services, VP Global Payments Marketing at FIS, following its acquisition of Clear2Pay, where she was Global Head of
Corporate Marketing & Analyst Relations.
Sir William Russell
Sir William joined the Board on 1 April 2022. He was the Lord Mayor of the City of London from November 2019 until November
2021 and is an Alderman of The City of London. He is a past board member of Innovate Finance, the industry body for the UK
Fintech community, and has more than 30 years’ experience in financial services including senior positions in domestic and
international banking with Merrill Lynch.
Sir William holds 240,000 shares in the Company.
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AUGMENTUM FINTECH PLC
Management Team
The Portfolio Manager is a specialist fund management and advisory business whose experienced and entrepreneurial Management Team has a
strong track record in fintech venture capital. They are London based and are authorised and regulated in the UK by the FCA. All of the team
members featured below are investors in the Company. In aggregate employees of AFML hold 3,616,902 (2.1%) of the Company's shares..
Tim Levene
CEO and Partner
Tim began his career at Bain & Co before leaving to co-found Crussh, the chain of juice bars. In 1999, Tim became a founding
employee at Flutter.com and after it merged with Betfair in 2001 he led the commercial side, including launching its international
business. In 2010 Tim co-founded Augmentum with the backing of RIT Capital. Tim has been a Young Global Leader at the World
Economic Forum since 2012 and was also elected as a Common Councillor (Independent) for the Ward of Bridge in the City of
London in 2017.
Richard Matthews
COO and Partner
Richard qualified as a chartered accountant with Coopers & Lybrand/PricewaterhouseCoopers LLP before joining Tim as chief
financial officer of Flutter.com in 1999. In 2001, upon the merger with Betfair, he left to become chief financial officer of Benchmark
Europe. In 2005 Richard became a partner at Manzanita Capital, a large US family office, and in 2010 he co-founded Augmentum.
Perry Blacher
Partner
Perry started his career at McKinsey & Co in 1996, moving to Microsoft in 1998 and he has spent the last decade as an angel
investor in, and adviser to, fintech businesses. Perry is a FinTech specialist, holding advisory or non-executive roles at Fairpoint plc,
Barclays UK, Google, Onfido, Prodigy Finance, TransferGo and other FinTech businesses. He was a founding principal at Chase
Episode 1 Partners when they invested in Flutter.com and is a venture partner at Amadeus Capital. He was the founder and chief
executive officer of two businesses, both sold to public companies (Serum in 2002 and Covestor in 2007).
Martyn Holman
Partner
Martyn has 20 years of experience as an operator, adviser and investor in tech and growth spaces. His early career was spent as a
strategy consultant with the Boston Consulting Group, with FTSE 100 clients across consumer, energy, financial services and
heavy industry sectors. He was a key member of the early Betfair team and later co-founded LMAX Exchange which has featured
as the number 1 Times Tech Track Growth Company and a Fintech Future 50 member. Most recently, Martyn has been an investor
and partner in UK venture capital where he helped raise a £60 million early seed fund.
Ellen Logan
Principal
Ellen previously worked at OC&C Strategy Consultants, conducting commercial due diligence and strategy projects for private
equity and multinational corporate clients across TMT, B2B services, FMCG and retail sectors. Ellen also worked at HR analytics
startup Bunch, after studying Economics at the University of Edinburgh. Ellen has a particular interest in emerging technologies
such as the digital asset economy and alternative payment methods.
Réginald de Wasseige
Principal
Réginald (Reggie) started his career at Cobepa in Belgium (his home country), and then founded a software company focused on
document security for large organisations. Off the back of both experiences, VC was a natural evolution and Reggie joined ABN
AMRO Ventures, the venture capital arm of the Dutch bank, and relocated to Amsterdam. This position introduced him to the world
of fintech.
Georgie Hazell Kivell
Director of Marketing and Operations
Georgie started her career working in startups across marketing, people and strategy positions. Following time at a startup studio,
investment platform Crowdcube and gaining an MBA, she joined Augmentum in 2018. Georgie is head of marketing and
communications, company ESG champion and supports portfolio companies post-investment. She co-chairs the UK Women in
VC community and is a trained coach, working primarily with women in tech.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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Directors
The Directors of the Company, who all served throughout the year to
31 March 2023, are listed on page 31.
All Directors seek re-election by shareholders at each Annual General
Meeting.
The Board has reviewed the performance and commitment of the
Directors standing for re-election and considers that each should serve
on the Board as they bring wide, current and relevant experience that
allows them to contribute effectively to the leadership of the Company.
More details are contained within the Notice of Annual General Meeting
circular.
Directors’ Conflicts of Interest
Directors report on actual or potential conflicts of interest at each Board
meeting. Any Director or Directors with a potential conflict would be
excluded from any related discussion.
Directors’ & Officers’ Liability Insurance Cover
Directors’ and officers’ liability insurance cover has been maintained by
the Company since its incorporation. It is intended that cover will
continue for the year ending 31 March 2024 and subsequent years.
Directors’ Indemnity
The Company provides, subject to the provisions of applicable UK
legislation, an indemnity for Directors in respect of costs incurred in the
defence of any proceedings brought against them and also liabilities
owed to third parties, in either case arising out of their positions as
Directors. This was in place throughout the financial year under review,
up to and including the date of the Financial Statements.
A copy of each deed of indemnity is available for inspection at the
Company’s offices during normal business hours and will be available at
the Annual General Meeting.
Directors’ Fees
The Directors’ Remuneration Report and the Directors’ Remuneration
Policy are set out on pages 43 to 47
Directors’ Responsibilities
The Statement of Directors Responsibilities is to be found on page 51
and is included in this Directors' Report by reference.
Portfolio Manager
It is the opinion of the Directors that the continuing appointment of the
Portfolio Manager (details on page 23) is in the interests of the
Company’s shareholders as a whole and that the terms of engagement
negotiated with them are competitive and appropriate to the investment
mandate. The Board and the Company’s AIFM review the appointment
of the Portfolio Manager on a regular basis and make changes as
appropriate.
Directors’ Report
Directors’ Report
The Directors present the audited Financial Statements of the Group
and the Company for the year ended 31 March 2023 and their Report
on its affairs.
In accordance with the requirement for the Directors to prepare a
Strategic Report for the year ended 31 March 2023, the following
information is set out in the Strategic Report on pages 18 to 30: a review of
the business of the Company including details about its objective, strategy
and business model, future developments, details of the principal risks and
uncertainties associated with the Company’s activities (including the
Company’s financial risk management objectives and policies), information
on stakeholder engagement, information on the Company’s contractual
arrangements with key service providers and information regarding
community, social, employee, human rights and environmental issues.
Information about Directors’ interests in the Company’s ordinary shares is
included within the Directors’ Remuneration Report on page 45.
The Corporate Governance Statement starting on page 37 forms part
of this Directors’ Report.
Business and Status of the Company
The Company is registered as a public limited company in England and
Wales (registered number 11118262) and is an investment company
within the terms of Section 833 of the Companies Act 2006 (the “Act”).
Its shares are traded on the main market of the London Stock
Exchange, which is a regulated market as defined in Section 1173 of the
Act.
The Company has received approval from HM Revenue & Customs as an
investment trust under Sections 1158 and 1159 of the Corporation Tax Act
2010. In the opinion of the Directors, the Company continues to direct its
affairs so as to qualify for such approval.
Investment Policy
The Company’s investment policy is set out on page 5.
Subsidiary Companies
The Company has two corporate subsidiaries, both of which are wholly
owned by the Company and are incorporated in England and Wales as
private limited companies:
(i)
(ii)
the General Partner (Augmentum Fintech GP Limited), the principal
activity of which is to act as the general partner of the Partnership;
and
the Portfolio Manager (Augmentum Fintech Management Limited),
the principal activity of which is to act as the portfolio manager of the
Company.
The Partnership, Augmentum I LP, is a limited partnership registered in
Jersey and is wholly owned by the Company.
Results and Dividend
The results attributable to shareholders for the year are shown on the
Income Statement.
The Directors are not recommending the payment of a dividend for the
year.
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Directors’ Report continued
Capital Structure
At 31 March 2023 there were 181,013,697 ordinary shares of 1p each in
issue (31 March 2022: 181,013,697), of which 6,494,845 were held in
treasury (31 March 2022: 687,911).
The Company bought back 5,806,934 shares into treasury during the
year at an average price of 102.9 pence per share.
The shares, other than those held in treasury, entitle the holders to one
vote per share on a poll. Total voting rights at 31 March 2023 was
174,518,852.
At the end of the year under review, the Directors had shareholder
authorities to issue a further 18,101,369 shares without relying on a
prospectus and to buy back a further 26,793,349 shares. These
authorities will expire at the forthcoming Annual General Meeting.
Since the year end, to 30 June 2023, the Company has bought back a
further 3,918,878 shares at an average price of 98.6 pence per share.
These shares are held in treasury.
The Company’s capital structure is summarised in note 15 on page 63.
Substantial Interests
The Company was aware of the following interests in voting rights of
3% or more of the Company as at 31 March 2023 and 31 May 2023.
31 May 2023 31 March 2023
Number Number
of % of of % of
Ordinary Voting Ordinary Voting
Shareholder Shares Rights Shares Rights
Canaccord Genuity Wealth
Management - Institutional 13,904,183 8.1 16,004,183 9.2
Hawksmoor Investment
Management 12,205,046 7.1 12,225,046 7.0
Interactive Investor 11,021,099 6.4 10,874,655 6.2
Hargreaves Lansdown,
Interests in the Company’s shares and percentage of voting rights of key
management personnel of its subsidiary at 31 March 2023 are shown
below:
Tim Levene 2,774,203 1.6%
Richard Matthews 575,000 0.3%
Beneficial Owners of Shares – Information Rights
Beneficial owners of shares who have been nominated by the
registered holder of those shares to receive information rights under
section 146 of the Companies Act 2006 are required to direct all
communications to the registered holder of their shares rather than to
the Company’s registrar or to the Company directly.
Global Greenhouse Gas Emissions for the year ended
31 March 2023
At the date of this report, the Group has a staff of 11 individuals,
operating from small office premises in the UK. Accordingly, it does not
have any significant greenhouse gas emissions to report from the
operations of the Group, nor does it have responsibility for any other
emissions producing sources under the Companies Act 2006
(Strategic Report and Directors’ Reports) Regulations 2013, including
those within its underlying investment portfolio. The Group consumed
less than 40,000 kWh of energy during the year in respect of which the
Directors’ Report is prepared and therefore is exempt from the
disclosures required under the Streamlined Energy and Carbon
Reporting criteria.
Modern Slavery Act 2015
As an investment vehicle, the Company does not provide goods or
services in the normal course of business and does not have
customers. Also, the Company's portfolio management subsidiary,
which does provide services to the Company, is not in scope on
grounds of scale. Accordingly, the Directors consider that the Group
and Company are not required to make any anti-slavery or human
trafficking statement under the Modern Slavery Act 2015.
stockbrokers 10,379,666 6.0 10,656,352 6.1
Political Donations
EFG Harris Allday, stockbrokers 8,474,980 4.9 8,557,477 4.9
Rathbones 8,472,835 4.9 8,593,909 4.9
The Company has not in the past and does not intend in the future to
make political donations.
South Yorkshire Pension Authority 7,263,157 4.2 7,263,157 4.2
Common Reporting Standard (‘CRS’)
Tikehau Investment Management 7,112,917 4.1 7,112,917 4.1
Close Brothers Asset Management 6,909,541 4.0 7,051,191 4.0
Charles Stanley 6,671,397 3.9 6,932,107 4.0
RBC Brewin Dolphin,
stockbrokers 5,751,537 3.3 5,575,923 3.2
Percentages shown are the percentage of the ordinary shares in issue less shares held
in treasury at the respective date.
No changes of interest in voting rights have been notified to the Company in
accordance with the FCA Disclosure Guidance and Transparency Rules since 31 May
2023.
CRS is a global standard for the automatic exchange of information
commissioned by the Organisation for Economic Cooperation and
Development and incorporated into UK law by the International Tax
Compliance Regulations 2015. CRS requires the Company to provide
certain additional details to HMRC in relation to certain shareholders.
The reporting obligation began in 2016 and is now an annual
requirement. The Registrars, Link group, have been engaged to collate
such information and file the reports with HMRC on behalf of the
Company.
Directors’ Report continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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Listing Rule 9.8.4
Annual General Meeting (“AGM”)
Listing Rule 9.8.4 requires the Company to include certain information
in a single identifiable section of the annual report or a cross-reference
table indicating where the information is set out. The Directors confirm
that there are no disclosures to be made in this regard.
UK Securities Financial Transactions Regulation Disclosure
(unaudited)
The Company does not engage in Securities Financing Transactions
including repurchase transactions, securities or commodities lending
and securities or commodities borrowing, buy-sell back transactions or
sell-buy back transactions and margin lending transactions) or total
return swaps.
Alternative Performance Measures
The Financial Statements (on pages 52 to 68) set out the required
statutory reporting measures of the Company’s financial performance.
In addition, the Board assesses the Company’s performance against
criteria that are viewed as particularly relevant for investment trusts,
which are summarised on page 2 and explained in greater detail in the
Strategic Report, under the heading “Performance” on page 22.
Definitions of the terms used and the basis of calculation adopted are
set out in the Glossary and Alternative Performance Measures on
page 22.
Statement of Disclosure of Information to the Auditor
As at the date of this report each of the Directors confirms that so far as
they are aware, there is no relevant audit information of which the
Company’s auditor is unaware and they have taken all steps they ought
to have taken to make themselves aware of any relevant audit
information and to establish that the Company’s auditor is aware of that
information.
This confirmation is given and should be interpreted in accordance with
the provisions of Section 418 of the Companies Act 2006.
Independent Auditor
Resolutions to reappoint BDO LLP as the Company's auditor and to
authorise the Audit Committee to determine their remuneration will be
proposed at the forthcoming Annual General Meeting. Further details
are included in the Report of the Audit Committee on pages 48 to 50.
Risk Management and Internal Controls
Details of the Company’s risk management and internal control
arrangements, including the Board’s annual review of the effectiveness
of the Company’s risk management and internal control arrangements,
are contained in the Corporate Governance Statement.
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The AGM will be held on Tuesday, 19 September 2023. The formal
notice of the AGM is sent out as a separate circular and will be posted to
shareholders shortly after the publication of this annual report.
Explanatory notes to the proposed resolutions will be included in the
Notice of Meeting circular.
The Board considers the proposed resolutions to be in the best
interests of the shareholders as a whole. Accordingly, the Board
unanimously recommends to shareholders that they vote in favour of
the resolutions by proxy ahead of the meeting, as the Directors intend to
do in respect of their own beneficial holdings.
Authority to Purchase Own Shares
A special resolution will be proposed at the forthcoming AGM to grant
the Company authority to purchase its own shares, so as to permit the
purchase of up to 14.99% of the number of ordinary shares in issue
excluding shares held in treasury at the date of the passing of the
resolution, subject to the constraints set out in the special resolution.
The Directors intend to use this authority to purchase shares only if this
would result in an increase in net asset value per share and if they
consider it to be in the best interests of shareholders generally. Ordinary
shares which are purchased under this authority may be held in
treasury or cancelled.
The Directors believe that granting the Board authority to purchase
shares, as detailed above, is in the best interests of shareholders as a
whole and therefore recommend that shareholders vote in favour of this
resolution.
Authorities to Issue Shares
Separate resolutions will be proposed at the forthcoming AGM to grant
the Company authority to issue ordinary shares with and without
pre-emption rights. Both resolutions seek to permit the issue of up to
20% of the share capital in issue, excluding shares held in treasury, at
the date of the passing of the resolution. The latter resolution will be
proposed as a special resolution and incorporates within that limit the
sale of shares held in treasury. This is an increase on the authority
sought last year following a revision of the Pre-emption Group’s
principles. For this purpose the Board classes the Company as a
‘capital hungry company’, it having completed fund raises in 2019
(24.5%), 2020 (20.0%) and 2021 (28.9%), with plans for further
fundraises only deferred because of the market rotation in 2022 and
the shares moving to a discount. Additionally, since the Company is an
investment vehicle rather than a commercial operating entity, it is
considered unlikely that the potential dilution of voting rights will be of
concern for existing shareholders. Shares will only be issued or sold
from treasury in accordance with this resolution at a premium to the
prevailing NAV per share after performance fee in order not to dilute the
financial interests of existing shareholders. The Board considers the
NAV per share after performance fee to be the most appropriate metric
of NAV and to best reflect the value of each share.
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Directors’ Report continued
Voting Rights
Other Statutory Information
Subject to any rights or restrictions attached to any shares, on a show
of hands, every member who is present in person has one vote and
every proxy present who has been duly appointed has one vote.
However, if the proxy has been duly appointed by more than one
member entitled to vote on the resolution, and is instructed by one or
more of those members to vote for the resolution and by one or more
others to vote against it, or is instructed by one or more of those
members to vote in one way and is given discretion as to how to vote by
one or more others (and wishes to use that discretion to vote in the
other way) that proxy has one vote for and one vote against the
resolution. Every corporate representative present who has been duly
authorised by a corporation has the same voting rights as the
corporation would be entitled to. On a poll, every member present in
person or by duly appointed proxy or corporate representative has one
vote for every share of which they are the holder or in respect of which
the appointment as proxy or corporate representative has been made.
A member, proxy or corporate representative entitled to more than one
vote need not, if they vote, use all their votes or cast all the votes used
the same way.
In the case of joint holders, the vote of the senior who tenders a vote
shall be accepted to the exclusion of the votes of the other joint holders,
and seniority shall be determined by the order in which the names of
the holders stand in the register of members.
A member is entitled to appoint another person as their proxy to
exercise all or any of their rights to attend and to speak and vote at a
meeting of the Company. The appointment of a proxy shall be deemed
also to confer authority to demand or join in demanding a poll. Delivery
of an appointment of proxy shall not preclude a member from attending
and voting at the meeting or at any adjournment of it. A proxy need not
be a member. A member may appoint more than one proxy in relation to
a meeting, provided that each proxy is appointed to exercise the rights
attached to a different share or shares.
The following information is disclosed in accordance with the
Companies Act 2006:
l
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The rules on the appointment and replacement of Directors are set
out in the Company’s articles of association (the “Articles”). Any
change to the Articles is governed by the Companies Act 2006.
Subject to the provisions of the Companies Act 2006, to the
Articles, and to any directions given by special resolution, the
business of the Company shall be managed by the Directors who
may exercise all the powers of the Company. The powers shall not
be limited by any special powers given to the Directors by the
Articles and a meeting of the Directors at which a quorum is
present may exercise all the powers exercisable by the Directors.
The Directors’ powers to issue and buy back shares in force at the
end of the year are recorded in the Directors’ Report.
l
There are no agreements:
(i)
(ii)
to which the Company is a party that might affect its control
following a takeover bid; and/or
between the Company and its Directors concerning
compensation for loss of office.
By order of the Board
Frostrow Capital LLP
Company Secretary
3 July 2023
Corporate Governance Report
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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Corporate Governance Statement
Company’s Purpose, Values and Strategy
The Board has considered the principles and provisions of the AIC
Code of Corporate Governance (the “AIC Code”). The AIC Code
addresses all the principles and provisions set out in the UK Corporate
Governance Code (the “UK Code”), as well as setting out additional
principles and recommendations on issues that are of specific
relevance to investment companies.
The Board considers that reporting against the principles and
provisions of the AIC Code, which has been endorsed by the Financial
Reporting Council, provides more relevant information to shareholders.
By reporting against the AIC Code investment companies will meet
their obligations under the UK Corporate Governance Code and
associated disclosure requirements under paragraph 9.8.6 of the UK
Listing Rules. As such, the Company does not need to report further on
issues contained in the UK Code which are not relevant to it.
The AIC Code can be viewed on the AIC’s website www.theaic.co.uk
and the UK Code can be viewed on the Financial Reporting Council
website www.frc.org.uk.
Statement of Compliance
The Company has complied with the principles and provisions of the
AIC Code and the relevant provisions of the UK Code except that:
l
the Chairman of the Board is a member of the Audit Committee,
which is permitted by the AIC Code since he was independent on
appointment, and in the Board’s view he continues to be so. It is the
opinion of the Board that, given its small size, it is appropriate for
him to be a member of the Audit Committee in order for it to benefit
from his experience and knowledge.
Board Leadership and Purpose
Responsibility for effective governance and for the overall management
of the Company’s affairs lies with the Board. The governance framework
of the Company reflects the fact that it is an investment company that
outsources company secretarial, administration, marketing, portfolio
and risk management services to Frostrow. Portfolio management is
then delegated to Augmentum Fintech Management Limited (“Portfolio
Manager”) by Frostrow.
Role of the Board
The Board’s statutory duties are defined by sections 171 to 177 of the
Companies Act 2006. In particular, under section 172 the Directors have
a duty to promote the success of the Company taking into
consideration the likely consequences of any decision in the long term;
the need to foster the Company’s business relationships with its service
providers; the impact of the Company’s operations on the community
and the environment; the desire for the Company to maintain a
reputation for high standards of business conduct; and the need to act
fairly between members of the Company. The Board reports on its
engagement with stakeholders in the context of its duties under section
172 within the Strategic Report on pages 26 and 27.
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.
The Company’s purpose is to generate value for shareholders over the
long term in accordance with its investment objective, and the Board
assesses the basis on which this is achieved. The Strategic Report
describes how opportunities and risks to the future success of the
business have been considered and addressed, the sustainability of the
Company’s business model and how its governance contributes to the
delivery of its strategy. The Company’s investment objective and
investment policy are set out on page 5.
The Board’s key responsibilities are to set the strategy, values and
standards; to provide leadership within a controls framework which
enables risks to be assessed and managed; to challenge constructively
and scrutinise the performance of all outsourced activities; and to
review regularly the contracts, performance and remuneration of the
Company’s principal service providers and Portfolio Manager.
Culture
The Board seeks to establish and maintain a corporate culture
characterised by fairness in its treatment of the Group’s employees and
service providers, whose efforts are collectively directed towards
delivering returns to shareholders in line with the Company’s purpose
and objectives. It is the Board’s belief that this contributes to the
success of the Company, as well as being an appropriate way to
conduct relations between parties engaged in a common purpose.
Board Committees
The Board has delegated specific responsibilities to the Audit
Committee, the Management Engagement & Remuneration Committee,
the Nominations Committee and the Valuations Committee, details of
which are set out below.
Every year the Board reviews its composition and the composition of its
Committees. The Board and the Nominations Committee oversee this
process. Further details are given on page 41 under Board Evaluation.
Audit Committee
As expanded in the Report of the Audit Committee starting on page 48,
the Audit Committee’s key responsibilities are to monitor the integrity of
the annual report and financial statements; to oversee the risk and
control environment and financial reporting; and to review the
performance of the Company’s external auditor.
Valuations Committee
The Valuations Committee adds a further level of oversight to the
valuation process carried out by Frostrow and AFML under their
contractual arrangements with the Company. The Committee meets at
least twice a year to review the valuation of investments.
Management Engagement & Remuneration Committee
The Management Engagement & Remuneration (“ME&R”) Committee
reviews annually the performance of the AIFM and the Portfolio
Manager. The Committee considers the quality, cost and remuneration
method of the service provided by the AIFM and the Portfolio Manager
against their contractual obligations. The Committee is also responsible
for the regular review of the terms of the AIFM Agreement and the
Portfolio Management Agreement. The Committee last reviewed these
in March 2023, at which time it was agreed that no amendments to the
agreements were required.
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Corporate Governance Report continued
The Committee’s duties also include determining and agreeing with the
Board the policy for remuneration of the Directors and monitoring the
Portfolio Manager’s remuneration arrangements. Where appropriate,
the Committee will consider both the need to judge the position of the
Company relative to other companies on the remuneration of Directors
and whether to appoint external remuneration consultants. The
Committee met once in the year to consider remuneration matters.
A report on its activities in relation to remuneration is contained in the
Directors’ Remuneration Report.
Nominations Committee
The Nominations Committee considers annually the skills possessed
by the Board and identifies any skill shortages to be addressed. When
considering new appointments, the Board reviews the skills of the
Directors and seeks to add persons with complementary skills or who
possess the skills and experience which fill any gaps in the Board’s
knowledge or experience and who can devote sufficient time to the
Company to carry out their duties effectively.
In view of the size of the Board and the nature of the Company, all
independent non-executive Directors are members of each Committee.
Copies of the full terms of reference, which clearly define the
responsibilities of each Committee, can be obtained from the Company
Secretary and they are available for inspection on the Company’s
website www.augmentum.vc.
Board Meetings
Representatives of the Portfolio Manager, AIFM and Company
Secretary are expected to be present at all meetings. The primary focus
at Board meetings is a review of investment performance and
associated matters. The Chairman seeks to encourage open debate
within the Board and a supportive and co-operative relationship with
the Company’s Portfolio Manager, advisers and other service providers.
The table that follows sets out the number of formal Board and
Committee meetings held during the year ended 31 March 2023 and
the number of meetings attended by each Director.
Four Board meetings are scheduled each year. In addition to the
scheduled Board and Committee meetings, Directors attended a
number of ad hoc Board and Committee meetings to consider matters
such as the granting of powers of attorney in connection with
investment projects.
Meeting Attendance
Neil Karen David Conny William
England Brade Haysey Dorrestijn Russell
Scheduled Board meetings 4 4 4 4 4
Ad Hoc Board meetings 2 2 3 3 3
Audit Committee 4 4 4 4 4
ME&R Committee 2 2 2 2 2
Valuations Committee 2 2 2 2 2
Nominations Committee 2 2 2 2 2
All the Directors attended the Annual General Meeting in September 2022.
Shareholder Engagement
The Chairman is responsible for ensuring that there is effective
communication with the Company’s shareholders. He works closely
with the Portfolio Manager and there is regular liaison with the
Company’s stockbrokers and the AIFM. There is a process in place for
analysing and monitoring the shareholder register and a programme for
meeting or speaking with the institutional investors and with private
client stockbrokers and advisers. In addition to the Portfolio Manager
and AIFM the Chairman endeavours to make himself available to meet
with shareholders wishing to engage.
The Board encourages shareholders to attend the Company’s Annual
General Meeting, which provides an opportunity for engagement. The
Notice of the Annual General Meeting and related papers are sent to
shareholders at least 20 working days before the meeting. The
Chairman, Directors and the Portfolio Manager all expect to be in
attendance at the Annual General Meeting and encourage
shareholders to submit questions ahead of the Meeting. Details of the
proxy votes received in respect of each resolution will be announced
after the Meeting. In the event of a significant (defined as 20% or more)
vote against any resolution proposed at the Annual General Meeting,
the Board will consult with shareholders in order to understand the
reasons for this and consider appropriate action to be taken, reporting
to shareholders within six months.
The Directors may be contacted through the Company Secretary at the
address shown on page 81.
While the Portfolio Manager and AIFM expect to lead on preparing and
effecting communications with investors, all major corporate issues are
put to the Board or, if time is of the essence, to a Committee thereof.
The Board places importance on effective communication with
investors and approves a marketing programme each year to enable
this to be achieved. Copies of the annual report and the half year report
are made available to shareholders and, where possible, to investors
through other providers’ products and nominee companies. All this
information is readily accessible on the Company’s website
www.augmentum.vc. A Key Information Document is also published on
the Company’s website. The Company is a member of the Association
of Investment Companies which publishes information to increase
investors’ understanding of the sector.
Stakeholders
Section 172 of the Companies Act 2006 requires that the Directors
have regard to the Company’s stakeholders, amongst other
considerations, within their duty to promote the success of the
Company. The Board’s report on its compliance with Section 172 of the
Companies Act 2006 is contained within the Strategic Report on
pages 26 and 27.
Corporate Governance Report continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
39
Subsidiary Employees
Stewardship and the Exercise of Voting Powers
The Board seeks to ensure that workforce policies and practices are in
line with the Company’s purpose and values and support its culture.
The Management Engagement & Remuneration and Nominations
Committees advises the Board in respect of policies on remuneration-
related matters.
Since the subsidiary company has only 11 employees, including its two
executive directors, the Board considers that the directors of AFML are
best-placed to engage with the workforce. In accordance with the
Company’s whistleblowing policy, members of staff who wish to discuss
any matter with someone other than the subsidiary directors are able to
contact the Audit Committee Chairman or, in her absence, another
member of the Audit Committee.
Relationship with other service providers
The Board has delegated a wide range of activities to external agents,
in addition to the Portfolio Manager.
These services include investment administration, management and
financial accounting, company secretarial and certain other
administrative and registration services. The contracts for each of these
were entered into after full and proper consideration by the Board of the
quality and cost of the services offered, including the control systems in
operation in so far as they relate to the affairs of the Company.
Further information on the service providers is contained within the
Strategic Report on pages 23 and 24.
The Board receives and considers reports and information from these
contractors as required. The Board and AIFM are responsible for
monitoring and evaluating the performance of the Company’s service
providers.
Viability Statement and Going Concern
The Board’s assessment of the Company’s longer-term viability and that
it is appropriate for the financial statements to be prepared on a going
concern basis are set out in the Strategic Report on pages 22 and 23.
Significant Holdings and Voting Rights
Details of the substantial interests in the Company’s Shares, the voting
rights of the shares and the Directors’ authorities to issue and
repurchase the Company’s shares, are set out in the Directors’ Report.
Nominee Share Code
Where shares in the Company are held via a nominee company,
the Company undertakes:
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to provide the nominee company with multiple copies of
shareholder communications, so long as an indication of quantities
has been provided in advance; and
to allow investors holding shares through a nominee company to
attend general meetings, provided the correct authority from the
nominee company is available.
Nominee companies are encouraged to provide the necessary
authority to underlying shareholders to attend the Company’s Annual
General Meeting.
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It is the Board’s view that, in order to achieve long-term success,
companies need to maintain high standards of corporate governance
and corporate responsibility. Therefore the Company expects the
companies in which it is invested to comply with best practice in
corporate governance matters, or to provide adequate explanation of
any areas in which they fail to comply, whilst recognising that a different
approach may be justified in special circumstances. In respect of UK
companies, current best practice in corporate governance matters is
set out in the UK Corporate Governance Code.
The Board has delegated authority to the Portfolio Manager to vote the
shares owned by the Company. The Board has instructed that the
Portfolio Manager submit votes on behalf of the Company wherever
possible, in the best long-term interest of shareholders in accordance
with their own investment philosophy and knowledge of the relevant
circumstances, although the Portfolio Manager may refer to the Board
on matters of a contentious nature.
The Board also monitors the ESG policies of the Portfolio Manager,
given the likely influence of such factors on the long-term growth
prospects of the companies in the portfolio.
Division of Responsibilities
Responsibilities of the Chairman
The Chairman’s primary role is to provide leadership to the Board,
assuming responsibility for its overall effectiveness in directing the
company. The Chairman is responsible for:
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ensuring that the Board is effective in its task of setting and
implementing the Company’s direction and strategy taking the
chair at general meetings and Board meetings, conducting
meetings effectively and ensuring all Directors are involved in
discussions and decision-making;
setting the agenda for Board meetings and ensuring the Directors
receive accurate, timely and clear information for decision-making;
taking a leading role in determining the Board’s composition and
structure, overseeing the induction of new Directors and the
development of the Board as a whole, leading the annual board
evaluation process and assessing the contribution of individual
Directors;
supporting and also challenging the AIFM and the Portfolio
Manager (and other suppliers where necessary) ensuring effective
communications with shareholders and, where appropriate,
stakeholders; and
engaging with shareholders to ensure that the Board has a clear
understanding of shareholder views.
Given the small size of the Board and the Company’s shareholder
register, the Board has not appointed a senior independent director.
40
AUGMENTUM FINTECH PLC
Corporate Governance Report continued
Directors’ Interests
The beneficial interests of the Directors in the Company are set out on
page 45 of this annual report.
Directors’ Independence
The Board consists of five non-executive Directors, each of whom is
independent of Frostrow and AFML. No member of the Board has been
an employee of the Company, Frostrow, AFML or any of its service
providers. Accordingly, the Board considers that all the Directors are
independent and there are no relationships or circumstances which are
likely to affect or could appear to affect their judgement.
Directors’ Other Commitments
Each of the Directors has assessed the overall time commitment of their
external appointments and it was concluded that they have sufficient
time to discharge their duties.
Matters Reserved for Decision by the Board
The Board has adopted a schedule of matters reserved for its decision.
This includes, inter alia, the following:
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Requirements under the Companies Act 2006, including approval
of the half yearly and annual financial statements, recommendation
of any final dividend, the appointment or removal of the Company
Secretary, and determining the policy on share issuance and
buybacks.
l Matters relating to certain Stock Exchange requirements and
announcements, the Company’s internal controls, and the
Company’s corporate governance structure, policy and procedures.
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Decisions relating to the strategic objectives and overall
management of the Company, including the appointment or
removal of the AIFM and other service providers, and review of the
Investment Policy.
l Matters relating to the Board and Board committees, including the
terms of reference and membership of the committees, the
appointment of Directors (including the Chairman) and the
determination of Directors’ remuneration.
Some of these are delegated to committees of the Board. Day-to-day
operational and portfolio management is delegated to Frostrow and
AFML, respectively.
The Board takes responsibility for the content of communications
regarding major corporate issues, although Frostrow or AFML may act
as spokesmen. The Board is kept informed of relevant promotional
material that is issued by Frostrow.
Tenure, Composition, Succession and Evaluation
Policy on the Tenure of the Chairman and other Non-Executive
Directors
The tenure of each independent, non-executive director, including the
Chairman, is not ordinarily expected to exceed nine years.
Succession Planning
The Board regularly considers its structure and recognises the need for
progressive refreshment. The Board has an approved succession
planning policy to ensure that (i) there is a formal, rigorous and
transparent procedure for the appointment of new directors; and (ii) the
Board is comprised of members who collectively display the necessary
balance of professional skills, experience, length of service and
industry/Company knowledge.
The Board considers that five Directors is the appropriate number for
the Company given the workload, particularly around valuations and
audit, in addition to its general governance activities. The Board intends
to comply with accepted best practice and will replace Directors at or
around nine years of tenure. The three Directors at the time of the
Company’s IPO are all scheduled to rotate off the Board in 2027. They
hold key positions as Chair of the Company, Valuations Committee and
Audit Committee respectively.
To allow orderly succession, it is intended to spread the replacement of
these Directors over three years and for their replacements to join
approximately six months prior to their departure.
Appointments to the Board
The rules governing the appointment and replacement of Directors are
set out in the Company’s Articles of Association. Where the Board
appoints a new Director during the year, that Director will stand for
election by shareholders at the next Annual General Meeting. Subject to
there being no conflict of interest, all Directors are entitled to vote on
new Director candidates. When considering new appointments, the
Board endeavours to ensure that its members collectively have the
capabilities necessary for it to be effective and oversee the Company’s
strategic priorities. This will include an appropriate range, balance and
diversity of skills, experience and knowledge. The Company is
committed to ensuring that any vacancies arising are filled by the most
qualified candidates.
Diversity Policy
The Board supports the principle of boardroom diversity, of which
gender and ethnicity are important aspects. The Company’s policy is
that the Board should be comprised of directors who collectively
display the necessary balance of professional skills, experience, length
of service and industry knowledge and that appointments to the Board
should be made on merit, against objective criteria, including diversity in
its broadest sense.
The objective of the policy is to have a broad range of approaches,
backgrounds, skills, knowledge and experience represented on the
Board. The Board believes that this will make the Board more effective
at promoting the long-term sustainable success of the Company and
generating value for all shareholders by ensuring there is a breadth of
perspectives among the Directors and the challenge needed to
support good decision-making. To this end achieving a diversity of
perspectives and backgrounds on the Board is a key consideration in
any Director search process. The Board currently comprises Directors
of different nationalities, educational backgrounds and gender.
The gender balance of three men and two women meets the FCA rules
on gender diversity for premium listed investment companies. No
current members of the Board are from a non-white ethnic minority, but
the Board supports the representation of ethnic minorities on boards
and this will be a material factor for the Board when undertaking its next
search process. However, this is unlikely to be before 2027, since the
Company was only launched in 2018 and after two recent
appointments the Board, which comprises only five Directors, is now
considered to be the right size for the Company, and succession is
expected to follow the nine year cycle of the Board’s policy on tenure.
Corporate Governance Report continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
41
The Board has noted the FCA’s new Listing Rules which require
companies to report against the following diversity targets:
(a) At least 40% of individuals on the board are women;
(b) At least one of the senior board positions is held by a woman; and
(c) At least one individual on the board is from a minority ethnic
background.
The following tables set out the information a listed company must now
include in its annual financial report under listing rule 9.8.6R (10). The
information below reflects the Board's position as at the Company's
year end. The Company is an investment company with a non-
executive Board and no executive employees. As such it does not have
the roles of CEO or CFO. Given the nature of the Company, the Board
considers the chairs of the Audit Committee and Valuations Committee
to be senior positions. These are not captured by the prescribed listing
rules disclosure, so an additional column has been added to the right of
the prescribed tables below to show the Board-defined senior
positions. Each Director volunteered how they wished to be included in
the tables.
(a) Table for reporting on gender identity or sex
Number
of senior
positions
on the Board-
Number Percentage board (CEO, defined
of board of the CFO, SID senior
members board and Chair) positions
Men 3 60 2 2
The latest evaluation did not identify any material deficiencies in the
Board or its Committees, so no new actions were implemented as a
result. However, as a matter of course, the Board continues to monitor
particular areas of relevance highlighted in the evaluation process,
including intra-meeting communications between service providers
and the Board and the discount at which the Company’s shares trade.
The Chairman is satisfied that the structure and operation of the Board
continues to be effective and relevant and that there is a satisfactory
mix of skills, experience, length of service and knowledge of the
Company. The Board has considered the position of all of the Directors
as part of the evaluation process, and believes that it would be in the
Company’s best interests for them to be re-elected at the AGM.
Conflicts of Interest
In line with the Companies Act 2006, the Board has the power to
sanction any potential conflicts of interest that may arise and impose
such limits or conditions as it thinks fit. A register of interests and
external appointments is maintained and is reviewed at every Board
meeting to ensure all details are kept up to date. Should a conflict arise,
the Board has the authority to request that the Director concerned
abstains from any relevant discussion or vote where a perceived
conflict may arise. Appropriate authorisation is sought prior to the
appointment of any new Director or if any new conflicts or potential
conflicts arise.
Exercise of Voting Powers
Stewardship and the exercise of voting powers is summarised on
page 39.
Women 2 40 – 1
Anti-Bribery and Corruption Policy
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(b) Table for reporting on ethnic background
Number
of senior
positions
on the Board-
Number Percentage board (CEO, defined
of board of the CFO, SID senior
members board and Chair) positions
White British or other White
(including minority-white
groups) 5 100 2 3
Mixed/Multiple Ethnic Groups – – – –
Asian/Asian British – – – –
Black/African/Caribbean/Black
British – – – –
Other ethnic group, including Arab – – – –
Not specified/prefer not to say – – – –
Board Evaluation
During the year the performance of the Board, its committees and
individual Directors (including each Director’s independence) was
evaluated through a formal assessment process. This year the process
was administered by the AIFM in order to provide a degree of
independence. It involved a questionnaire tailored to suit the nature of
the Company and discussions with individual directors. The
performance of the Chairman was evaluated in the same manner.
The Board has adopted a zero-tolerance approach to bribery and
corruption. Accordingly it expressly prohibits any Director or associated
persons when acting on behalf of the Company from accepting,
soliciting, paying, offering or promising to pay or authorise any payment,
public or private, in the United Kingdom or abroad to secure any
improper benefit.
The Board applies the same standards to its service providers in their
activities for the Company.
A copy of the Company’s Anti Bribery and Corruption Policy can be
found on its website at www.augmentum.vc. The policy is reviewed
regularly by the Audit Committee.
Prevention of the Facilitation of Tax Evasion
In response to the implementation of the Criminal Finances Act 2017, the
Board adopted a zero-tolerance approach to the criminal facilitation of tax
evasion. A copy of the Company’s policy on preventing the facilitation of
tax evasion can be found on the Company’s website www.augmentum.vc.
The policy is reviewed regularly by the Audit Committee.
Independent Professional Advice
The Board has formalised arrangements under which the Directors, in
the furtherance of their duties, may seek independent professional
advice at the Company’s expense.
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Corporate Governance Report continued
Company Secretary
Annual General Meeting
The Directors have access to the advice and services of a Company
Secretary which is responsible to the Board for ensuring, through its
appointed representative, that the Board procedures are followed and
that the Company complies with applicable rules and regulations. The
Company Secretary is also responsible for ensuring good information
flows between all parties.
Relationship with the AIFM and with the Portfolio Manager
The Company manages its own operations through the Board and
AIFM, as set out on pages 23 and 24. The Portfolio Manager manages
the investment portfolio within the terms of its portfolio management
contract.
The Board scrutinises the performance of the AIFM and Portfolio
Manager at each meeting. The Management Engagement &
Remuneration Committee reviews the contractual relationships with the
AIFM and Portfolio Manager at least annually. Further information on the
AIFM and Portfolio Manager fees are contained within the Strategic
Report on pages 23 and 24.
Audit, Risk and Internal Control
The Statement of Directors’ Responsibilities on page 51 describes the
Directors’ responsibility for preparing this report.
The Report of the Audit Committee, beginning on page 48, explains the
work undertaken to allow the Directors to make this statement and to
apply the going concern basis of accounting. It also sets out the main
roles and responsibilities and the work of the Audit Committee and
describes the Directors’ review of the Company’s risk management and
internal control systems.
A description of the principal risks facing the Company and an
explanation of how they are being managed is provided in the Strategic
Report on pages 18 to 21.
The fifth AGM of the Company will be held on Tuesday, 19 September
2023 at 11.00 a.m. at the offices of Augmentum Fintech Management
Limited, 4 Chiswell Street, London EC1Y 4UP.
The Notice for the Annual General Meeting will be published as a
separate document from this annual report and financial statements. A
summary of the Annual General Meeting business will be appended to
that document, in the form of explanatory notes to the resolutions.
These include specific reasons why (in the Board’s opinion) each
Director’s contribution is, and continues to be, important to the
Company’s long-term sustainable success.
In addition to the ordinary business of the meeting the following items of
special business will be proposed:
Authority to allot shares;
Authority to disapply pre-emption rights;
Authority to buy back shares;
Authority to hold General Meetings (other than the Annual General
Meeting) on at least 14 clear days’ notice.
The details of the resolutions to be proposed at the Annual General
Meeting will be set out in the separate Notice of Meeting document,
which will be sent to Shareholders shortly and will be made available on
the Company’s website www.augmentum.vc.
By order of the Board
Frostrow Capital LLP
Company Secretary
3 July 2023
Directors’ Remuneration Report
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
43
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The Committee assesses the workload and responsibilities of the
non-executive Directors and reviews, annually, the fees paid to them in
accordance with the Directors' Remuneration Policy.
The Directors’ fees are determined subject to the limit set out in the
Company’s Articles of Association.
The Directors are remunerated exclusively by fixed fees in cash and do
not receive bonus payments or pension contributions from the
Company, hold options to acquire shares in the Company, or other
benefits, nor do they participate in the AFML performance fee allocation.
The Company does not have share options or a share scheme.
Directors are entitled to be reimbursed for reasonable out of pocket
expenses incurred by them in order to perform their duties as Directors
of the Company. Under HMRC guidance, travel expenses and other out
of pocket expenses may be considered as taxable benefits for the
Directors. Where expenses reimbursed to the Directors are classed as
taxable under HMRC guidance they are shown in the taxable expenses
column of the Directors’ remuneration table along with the associated
tax liability, which is settled by the Company.
Annual Report on Remuneration
We are submitting this report in accordance with the requirements of
the Large and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013 (Regulations) and relevant
sections of the Listing Rules. It will be subject to an advisory vote at the
forthcoming Annual General Meeting in September 2023.
Over the year ended 31 March 2023 the Directors’ fees were as follows:
Chairman of the Board: £45,000 per annum; Directors: £27,000 per
annum; additional fees paid to Directors who chair one or more of the
Audit, Valuations and Management Engagement & Remuneration
Committees: £8,000 per annum.
At the most recent review of Directors’ fees, held in March 2023, it was
agreed that with effect from 1 April 2023 the Directors' fees be
increased to the following: Chairman of the Board: £50,000 per annum;
Directors: £30,000 per annum; additional fees paid to Directors who
chair one or more of the Audit, Valuations and Management
Engagement & Remuneration Committees: £8,000 per annum.
The Committee was not provided with any external advice or services
during the financial year ended 31 March 2023 in respect of the fees
payable to the non-executive Directors.
The Committee is required to submit its remuneration policy to a
shareholder vote every three years and accordingly a resolution to
approve the remuneration policy was put to shareholders at the last
AGM.
Statement by the Chairman of the Management Engagement
& Remuneration Committee
On behalf of the Board, I am pleased to present my report as Chairman
of the Management Engagement & Remuneration Committee (the
“Committee”). This report covers the remuneration-related activities of
the Committee for the year ended 31 March 2023. It sets out the
remuneration policy and remuneration details for the non-executive
Directors.
Role of the Management Engagement & Remuneration Committee
All of the members of the Board are members of the Committee, all
being independent Directors of the Company.
The Committee operates under terms of reference, which are reviewed
annually and approved by the Board. The Committee’s core
responsibilities include:
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Determining the policy for the remuneration of the Chairman and
non-executive Directors of the Company;
overseeing the remuneration of employees of Augmentum Fintech
Management Limited (“AFML”), including the total remuneration
packages (including bonuses, incentive payments or other awards)
for key management personnel of AFML; and
Reviewing management engagement terms in place with the
Company’s AIFM and Portfolio Manager.
The Committee will meet at least once per year. The Committee met on
two occasions during the year under review.
The activity of the Committee during the year focused predominantly on
the remuneration of the non-executive Directors and matters in respect
of AFML.
The Companies Act 2006 requires the auditor to report to shareholders
on certain parts of the Directors’ Remuneration Report and to state
whether, in their opinion, those parts of the report have been properly
prepared in accordance with the Regulations. The parts of the annual
report on remuneration that are subject to audit are indicated in the report.
Consideration by Directors of Matters Relating to Directors’
Remuneration
Each of the Directors is appointed pursuant to a letter of appointment
with the Company. Subject to their re-election by shareholders,
Directors’ initial term is three years from their appointment, and their
appointments are terminable upon three months’ notice by either party.
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Directors’ Remuneration Report continued
Statement of shareholder voting
The Company is committed to ongoing shareholder dialogue and takes
an active interest in voting outcomes. Where there are substantial votes
against resolutions in relation to Directors’ remuneration, the reasons for
any such vote will be sought and any actions in response will be detailed
in future Directors’ Remuneration Reports. There have been no
substantial shareholder votes against the resolutions at Annual General
Meetings since listing.
At the Annual General Meeting held on 14 September 2022 ordinary
resolutions to approve the Directors’ Remuneration Report for the year
ended 31 March 2022 and to approve the Directors' Remuneration
Policy were put to shareholders and approved by poll. The results of the
polls for the respective resolutions were as follows:
Votes Total Votes Votes
Resolution Votes For % Against % Cast Withheld
Approval of the Directors’ Remuneration Report
for the year ended 31 March 2022 76,046,297 99.7 196,821 0.3 76,243,118 69,651
Approval of the Directors’ Remuneration Policy 76,057,949 99.7 204,640 0.3 76,262,589 50.,180
Single total figure of remuneration (Audited)
The following table shows the single figure of remuneration of the non-executive Directors’ remuneration for the year:
2023 2022
Fixed Taxable Fixed Taxable
fees expenses1 Total fees expenses Total
Role £’000s £’000s £’000s £’000s £’000s £’000s
Neil England Chairman of the Board and 45 – 45 45 2 47
Nominations Committee
Karen Brade Chairman of the Audit Committee 35 – 35 35 – 35
David Haysey Chairman of the Management 35 – 35 35 – 35
Engagement & Remuneration
Committee and Valuations Committee
Conny Dorrestijn Director 27 – 27 11 – 11
William Russell Director 27 – 27 n/a n/a n/a
Total 169 – 169 126 2 128
1 taxable expenses primarily comprise travel and associated expenses incurred by the Directors in attending Board and Committee meetings in London. These are reimbursed by
the Company and, under HMRC Rules, are subject to tax and National Insurance and therefore are treated as a benefit in kind within this table.
Changes in Directors’ Remuneration
The following table shows the percentage changes in the levels of fixed fees paid to the Directors from year to year for each financial year since the
launch of the Company:
2024 2023 2022 2021 2020
(projected) Change Change Change Change
% % % % %
Neil England 11.1 – 28.6 – –
Karen Brade 8.6 – 16.7 – –
David Haysey 8.6 – 16.7 – –
Conny Dorrestijn1 11.1 – n/a n/a n/a
William Russell2 11.1 n/a n/a n/a n/a
1 Appointed with effect from 1 November 2021.
2 Appointed with effect from 1 April 2022.
Directors’ Remuneration Report continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
45
Directors’ share interests (Audited)
Relative importance of spend on pay
The interests at 31 March 2023 of the Directors who served in the year
and who held an interest in the ordinary shares of the Company were as
follows:
2023 2022
Spend £’000 £’000
Fees of non-executive Directors 169 126
Number of Number of
ordinary ordinary
shares shares
as at as at
31 March 31 March
2023 2022
Remuneration paid to or 2,944 1,877
receivable by all employees of
the Group in respect of the year**
Total Expenses** 5,271 3,801
Neil England 300,000 210,000
** excludes performance fee allocation and other capital expenses.
Karen Brade 39,019 39,019
David Haysey 94,230 94,230
William Russell 240,000 n/a
The Directors are not required to own shares in the Company.
There have been no changes to Directors’ share interests from 31 March
2023 to the date of this report.
David Haysey
Chairman of the Management Engagement & Remuneration
Committee
Total Shareholder Return
The graph below shows the total return for the period from 13 March
2018 to 31 March 2023 against the FTSE 250 Ex Investment Trust Index.
3 July 2023
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Mar
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Mar
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Mar
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Mar
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Mar
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Augmentum Fintech Ord (Share Price Total Return)
FTSE 250 Ex Investment Trust (Total Return)
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Directors’ Remuneration Policy
The Company reports on the implementation of its remuneration policy each year in accordance with the Regulations and is required to submit its
remuneration policy to a binding shareholder vote every three years. An ordinary resolution for the approval of the current policy was passed by
members at the Annual General Meeting on 14 September 2022.
The Directors’ Remuneration Policy aims to ensure that Directors fees are set at a level that is commensurate with the duties, responsibilities and
time commitment of each respective role and consistent with the need to attract and retain directors of appropriate quality and experience.
Directors’ remuneration should also be comparable to that of other investment trusts of a similar size and structure;
The views of shareholders on remuneration are extremely important to the Committee. As such, it is intended that an ongoing and open dialogue
with shareholders is maintained. It is the Committee’s policy to consult with major shareholders and investor representative bodies prior to
proposing any material changes to either this policy or any related remuneration arrangements at an Annual General Meeting. On an ongoing basis,
any feedback received from shareholders is considered as part of the Committee’s annual review of remuneration.
Directors’ Remuneration Policy
The table below sets out the Company’s policy for Directors’ fees.
Fee element Purpose and link to strategy Operation Maximum
Chairman’s and Directors’
basic fees
To attract and retain high
calibre individuals to serve as
Directors
Fee levels are set to reflect the time commitment,
responsibility of the role, and taking into account
fees paid by similarly sized companies in the market
The Chairman’s and Directors’ fees are determined
by the Management Engagement & Remuneration
Committee
Fees are reviewed annually to ensure that they
remain in line with market practice and are paid in
equal monthly instalments
The maximum aggregate fee
for Directors, including the
Chairman, is limited by the
Company’s articles of
association to £500,000 p.a.
Additional fees
Benefits
To provide compensation
to Directors taking on
additional Committee
responsibility
Directors (other than the Chairman) are paid an
additional fee if they chair one or more Board
Committees
See page 43
To facilitate the execution of
the role
The Company reimburses reasonable travel and
subsistence costs together with any tax liabilities
arising from these amounts
No maximum set
The above policy will also apply to new Directors.
Directors’ Remuneration Policy continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
47
Terms of appointment
No Director has a contract of employment or service with the Company. Directors’ terms and conditions of appointment are set out in letters of
appointment, which are available for inspection from the Company Secretary at the Company’s registered office during normal business hours and
at the Annual General Meeting. In line with the recommendations of the UK Corporate Governance Code, all Directors will stand for annual re-
election by shareholders at the Annual General Meeting.
Payments for Loss of Office and Payments to Former Directors (Audited)
No payments have been made to any former directors. It is the Company’s policy not to pay compensation upon leaving office for whatever reason.
David Haysey
Chairman of the Management Engagement & Remuneration Committee
3 July 2023
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AUGMENTUM FINTECH PLC
Report of the Audit Committee
l
Reviewing the arrangements in place whereby employees may, in
confidence, raise concerns about possible improprieties in matters
of financial reporting or other matters insofar as they may affect the
Company.
Meetings and Business
I report to the Board after each Audit Committee meeting on the main
matters discussed at the meeting.
The Audit Committee met four times during the year under review and
again in the subsequent period to the date of this report. The main
matters discussed at those meetings were:
l
l
l
l
l
Review and approval of the annual plan of the external auditor
Discussion and approval of the fee for the external audit
Review of Audit Committee terms of reference and the accounting
policies
Review of the Company’s key risks and internal controls
Review of the Annual and Interim Reports, including consideration
of the significant accounting issues relating to the financial
statements
l Meeting with the external auditor without management present
l
l
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Assessment of the need for an internal audit function
Review of whistleblowing arrangements
Consideration of the Valuations Committee’s assessment and
recommendation concerning the adequacy of the methodologies
applied in and results of the Group’s valuation process, and its
discussions with the AIFM, Portfolio Manager and the external
auditor.
Internal Controls and Risk Management
The Board has overall responsibility for risk management and for the
review of the internal controls of the Company, undertaken in the
context of its investment objective.
A summary of the principal risks facing the Company is provided in the
Strategic Report.
The review covers the key business, operational, compliance and
financial risks facing the Company, including emerging risks. In arriving
at its judgement of what risks the Company faces, the Board has
considered the Company’s operations in light of the following factors:
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l
The nature and extent of risks which it regards as acceptable for
the Company to bear within its overall investment objective;
The threat of such risks becoming a reality; and
The Company’s ability to reduce the incidence and impact of risk
on its performance.
Against this background, a risk matrix has been developed which
covers all key risks that the Company faces, the likelihood of their
occurrence and their potential impact, how these risks are monitored
and mitigating controls in place.
Statement by the Chairman of the Audit Committee
I am pleased to present my report as Chairman of the Audit Committee.
All of the members of the Board are members of the Committee. The
Board has taken note of the requirement that at least one member of the
Audit Committee should have recent and relevant financial experience
and is satisfied that the Audit Committee is properly constituted in this
respect.
The role of the Committee is to assist the Board in protecting
shareholders’ interests through fair, balanced and understandable
reporting, ensuring effective internal controls and maintaining an
appropriate relationship with the Group’s auditor. The Committee’s role
and responsibilities are set out in its terms of reference, which comply
with the UK Corporate Governance Code. The terms of reference are
available on request from the Company Secretary and can be seen on
the Company’s website.
Responsibilities of the Committee
The Audit Committee’s responsibilities include:
l Monitoring and reviewing the integrity of the financial statements,
the internal financial controls and the independence, objectivity
and effectiveness of the external auditor
l
Providing advice to the Board on whether the annual financial
statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Company’s performance, business
model and strategy
l Making recommendations to the Board in relation to the
appointment of the external auditor and approving their
remuneration and the terms of their engagement
l
Advising the Board on the Company’s overall risk appetite,
tolerance and strategy
l Overseeing and advising the Board on the current risk exposures
of the Company and future risk strategy, including reviewing the
Company’s key risks and internal controls
l
l
Developing and implementing the Company’s policy on the
provision of non-audit services by the external auditor
Considering annually whether there is a need for the Company to
have its own internal audit function
Report of the Audit Committee continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
49
The Board has delegated to the Audit Committee responsibility for the
review and maintenance of the risk matrix and it reviews, in detail, the
risk matrix at least half-yearly, bearing in mind any changes to the
Company, its environment or service providers since the last review.
Any significant changes to the risk matrix are discussed with the whole
Board. There were no changes to the Company’s risk management
processes during the year and no significant failings or weaknesses
were identified from the Committee’s most recent risk review.
The Committee reviews internal controls reports from its principal
service providers on an annual basis. The Committee is satisfied that
appropriate systems have been in place for the year under review and
up to the date of approval of this report.
Significant Reporting Matters
The most significant risk in the Company’s financial statements is
whether its investments are fairly and consistently valued and this issue
is considered carefully when the Audit Committee reviews the
Company’s Annual and Interim Reports. We also ask the external
auditor to pay particular attention this area. We have considered the
work of the Valuations Committee and the results of their discussions
with the AIFM, Portfolio Manager and the external auditor. We consider
the work to be detailed, comprehensive and that the persons preparing
the reports have sufficient and appropriate expertise through their
experience and qualifications. Furthermore, we believe that the process
is planned and managed so as to devote adequate time and resource
to preparation and review by the AIFM, Portfolio Manager and the
Valuations Committee. This is the most significant area of judgement in
the compilation of the financial statements and we specifically note the
challenge provided by the members of the Valuations Committee in this
process.
Financial Statements
The Board has asked the Committee to confirm that in its opinion the
Board can make the required statement that the annual report taken as
a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s
position, performance, business model and strategy. The Committee
has given this confirmation on the basis of its review of the whole
document, underpinned by involvement in the planning for its
preparation and review of the processes to assure the accuracy of
factual content.
The Committee is satisfied that it is appropriate for the Board to prepare
the financial statements on the going concern basis.
The Committee considered the longer-term viability of the Company in
connection with the Board’s statement in the Strategic Report on
pages 22 and 23. The Committee reviewed the Company’s financial
position, expected future cash flows and position, together with the
principal risks and uncertainties. This included performing stress tests
which considered the impact of a fall in valuation and liquidity constraints.
The results demonstrated the impact on the Company’s NAV, its
expenses and its ability to meet its liabilities. The Committee concluded
it was reasonable for the Board to expect that the Company will be able
to continue in operation and meet its liabilities as they fall due over the
next five financial years.
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External Auditor
The Committee met with BDO in March 2023 to review the audit plan
and in June to review the outcome of the year end audit, during part of
which the Committee also met separately with BDO without Frostrow or
the Portfolio Manager being present. I also engaged with BDO on their
progress ahead of the June Audit Committee meeting. In addition, BDO
attended all Valuations Committee meetings.
In order to fulfil the Committee’s responsibility regarding the
independence of the Auditor, the Committee reviewed:
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l
l
The senior audit personnel in the audit plan, in order to ensure that
there were sufficient, suitably experienced staff with knowledge of
the investment trust sector working on the audit;
The steps the Auditor takes to ensure its independence and
objectivity;
The statement by the Auditor that they remain independent within
the meaning of the relevant regulations and their professional
standards; and
l
The extent of non-audit services provided by the Auditor.
Following the finalisation of the 2022 annual report the Committee
conducted a formal review of the quality and effectiveness of the audit.
During this exercise we reviewed:
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l
The Auditor’s execution and fulfilment of the agreed audit plan,
including their ability to communicate with and challenge
management and to resolve any issues promptly and satisfactorily,
and the audit partner’s leadership of the audit team;
Communications between the Auditor, the Directors and the AIFM
on the consideration of certain disclosure matters in the annual
report;
The quality of the Auditor’s report to the Committee
Feedback from Frostrow as the AIFM on the conduct of the audit
and their working relationship; and
l We particularly noted, in relation to the significant reporting matter
last year, which was the same as that above for the current year,
that the Auditor attended each of the Valuations Committee
meetings in the year and diligently challenged valuation
methodologies and conclusions when they thought it appropriate.
The Committee is satisfied with the overall quality of the audit, the
Auditor’s independence and the effectiveness of the audit process,
together with the degree of diligence and professional scepticism
brought to bear and notes that, pending a formal review, the current
year’s audit has proceeded in a consistent manner.
As a public company listed on the London Stock Exchange, the
Company is subject to mandatory auditor rotation requirements. Based
on these requirements, another tender process will be required in 2029.
The Committee will, however, continue to consider annually the need to
go to tender for audit quality, remuneration or independence reasons.
50
AUGMENTUM FINTECH PLC
Report of the Audit Committee continued
Non-Audit Services
Evaluation
The Committee’s evaluation of its own performance was covered as
part of the process of the Board’s annual evaluation of its operations
and performance and those of its Committees, as described in the
Corporate Governance Statement.
It was concluded that the Committee was performing satisfactorily and
there were no formal recommendations made to the Board.
Karen Brade
Chairman of the Audit Committee
3 July 2023
The Committee has approved a policy on non-audit services, which
requires that non-audit fees must not exceed 70% of the average of the
fees paid in the last three consecutive years for the statutory audit.
BDO was not engaged for any non-audit services during the year, other
than those disclosed in note 2 on page 58.
Internal Audit Function
The Group does not have an internal audit function. Through Frostrow,
the AIFM, most of the Company’s operations are delegated to third
parties and the portfolio management subsidiary, AFML, employs only a
small staff. AFML and certain other key service providers are subject to
external regulation and have compliance functions in place. The Audit
Committee receives an annual assurance report on the AIFM’s internal
controls, which includes a report from the AIFM’s auditor on the control
policies and procedures in operation. AFML provides half yearly
compliance reports to the Audit Committee confirming, amongst other
things, that compliance monitoring is carried out in the manner and with
the frequency specified in its compliance monitoring programme. The
appointment of separate service providers ensures a clear separation
of duties and a structure of internal controls that is balanced and robust.
For these reasons, supported by the review of the effectiveness of
internal controls referred to above, the Audit Committee considers that
an internal audit function specific to the Company is unnecessary. The
Board and the AIFM will continue to monitor the system of internal
controls in order to provide assurance that it operates as intended and
the Directors will review at least annually whether a function equivalent
to an internal audit is needed.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
51
Statement of Directors’ Responsibilities in respect of
the Annual Report, the Directors’ Remuneration
Report and the Financial Statements
The directors are responsible for preparing the annual report and
financial statements in accordance with United Kingdom applicable law
and regulations.
Company law requires the directors to prepare financial statements for
each financial year. Under that law the directors have prepared the
Group and Company financial statements in accordance with UK-
adopted international accounting standards. Under Company law the
directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
Group and Company and of the return or loss for the Group and
Company for that period.
In preparing these group financial statements, the directors are
required to:
l
Select suitable accounting policies and then apply them
consistently;
l Make judgements and accounting estimates that are reasonable
and prudent;
Responsibility Statement
The Directors consider that this annual report and financial statements,
taken as a whole, is fair, balanced, and understandable and provides the
information necessary for shareholders to assess the Group and
Company’s position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed under the
‘Board of Directors’ on page 31 confirm that, to the best of their
knowledge:
l
l
The financial statements, prepared in accordance with applicable
accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit of the Group and Company;
The annual report includes a fair review of the development and
performance of the business and the financial position of the
Group and Company, together with a description of the principal
risks and uncertainties that they face.
l
l
l
State whether they have been prepared in accordance with UK-
adopted international accounting standards, subject to any
material departures disclosed and explained in the financial
statements;
Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
Neil England
Chairman
3 July 2023
Prepare a directors’ report, a strategic report and directors’
remuneration report which comply with the requirements of the
Companies Act 2006.
Note to those who access this document by electronic means:
The annual report for the year ended 31 March 2023 has been
approved by the Board of Augmentum Fintech plc.
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group and Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to
ensure that the financial statements comply with the Companies Act
2006.
Copies of the annual report and the half year report are circulated to
shareholders and, where possible, to investors through other providers’
products and nominee companies (or written notification is sent when
they are published online). 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.
They are also responsible for safeguarding the assets of the Group and
the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
company’s website: www.augmentum.vc. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
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AUGMENTUM FINTECH PLC
Consolidated Income Statement
Year ended 31 March 2023 Year ended 31 March 2022
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Gains on Investments 8 – 9,858 9,858 – 56,681 56,681
Interest Income 412 – 412 3 – 3
Expenses 2 (5,270) (107) (5,377) (3,801) 6,432 2,631
(Loss)/Return before Taxation (4,858) 9,751 4,893 (3,798) 63,113 59,315
Taxation 6 – – – – – –
(Loss)/Return for the year (4,858) 9,751 4,893 (3,798) 63,113 59,315
(Loss)/Return per Share (pence) 7 (2.7)p 5.4p 2.7p (2.2)p 37.1p 34.9p
The total column of this statement represents the Group’s Consolidated Income Statement, prepared in accordance with IFRS as adopted by the UK.
The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
The Group does not have any other comprehensive income and hence the total return, as disclosed above, is the same as the Group’s total comprehensive income.
All items in the above statement derive from continuing operations.
All returns are attributable to the equity holders of Augmentum Fintech plc, the parent company.
The notes on pages 58 to 68 are integral to and form part of these Financial Statements.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
53
Consolidated and Company Statements of
Changes in Equity
Year ended 31 March 2023
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Group £’000 £’000 £’000 £’000 £’000 £’000
Opening Shareholders’ funds 1,810 105,383 91,191 107,989 (11,169) 295,204
Purchase of own shares into treasury – – (5,973) – – (5,973)
Return/(loss) for the year – – – 9,751 (4,858) 4,893
At 31 March 2023 1,810 105,383 85,218 117,740 (16,027) 294,124
Year ended 31 March 2022
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Group £’000 £’000 £’000 £’000 £’000 £’000
Opening Shareholders’ funds 1,405 52,151 92,101 44,876 (7,371) 183,162
Issue of shares following placing and offer for subscription 405 54,595 – – – 55,000
Costs of placing and offer for subscription – (1,363) – – – (1,363)
Purchase of own shares into treasury – – (910) – – (910)
Return/(loss) for the year – – – 63,113 (3,798) 59,315
At 31 March 2022 1,810 105,383 91,191 107,989 (11,169) 295,204
Year ended 31 March 2023
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Company £’000 £’000 £’000 £’000 £’000 £’000
Opening Shareholders’ funds 1,810 105,383 91,191 92,724 (12,556) 278,552
Purchase of own shares into treasury – – (5,973) – – (5,973)
Return/(loss) for the year – – – 8,195 (5,020) 3,175
At 31 March 2023 1,810 105,383 85,218 100,919 (17,576) 275,754
Year ended 31 March 2022
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Company £’000 £’000 £’000 £’000 £’000 £’000
Opening Shareholders’ funds 1,405 52,151 92,101 44,876 (7,774) 182,759
Issue of shares following placing and offer for subscription 405 54,595 – – – 55,000
Costs of placing and offer for subscription – (1,363) – – – (1,363)
Purchase of own shares into treasury – – (910) – – (910)
Return/(loss) for the year – – – 47,848 (4,782) 43,066
At 31 March 2022 1,810 105,383 91,191 92,724 (12,556) 278,552
The notes on pages 58 to 68 are integral to and form part of these Financial Statements.
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AUGMENTUM FINTECH PLC
Consolidated Balance Sheet
as at 31 March 2023
2023 2022
Note £’000 £’000
Non-Current Assets
Investments held at fair value 8 254,295 268,807
Property, plant & equipment 297 9
Current Assets
Right-of-use asset 5 588 750
Other receivables 10 555 391
Cash and cash equivalents 40,015 31,326
Total Assets 295,750 301,283
Current Liabilities
Other payables 11 (948) (5,296)
Lease liability 5 (678) (783)
Total Assets less Current Liabilities 294,124 295,204
Net Assets 294,124 295,204
Capital and Reserves
Called up share capital 15 1,810 1,810
Share premium 105,383 105,383
Special reserve 85,218 91,191
Retained earnings:
Capital reserves 117,740 107,989
Revenue reserve (16,027) (11,169)
Total Equity 294,124 295,204
Net Asset Value per share (pence) 16 168.5p 163.7p
Net Asset Value per share after performance fee (pence)* 16 158.9p 155.2p
The Financial Statements on pages 52 to 68 were approved by the Board of Directors on 3 July 2023 and signed on its behalf by:
Neil England
Chairman
The notes on pages 58 to 68 are integral to and form part of these Financial Statements.
Augmentum Fintech plc
Company Registration Number: 11118262
* Considered to be Alternative Performance Measure. Please see the Glossary and Alternative Performance Measures on page 79.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
55
Company Balance Sheet
as at 31 March 2023
2023 2022
Note £’000 £’000
Non-Current Assets
Investments held at fair value 8 254,295 268,807
Investment in subsidiary undertakings 9 500 500
Current Assets
Other receivables 10 118 39
Cash and cash equivalents 38,470 29,694
Total Assets 293,383 299,040
Current Liabilities
Other payables 11 (810) (5,223)
Provisions 12 (16,819) (15,265)
Total Assets less Current Liabilities 275,754 278,552
Net Assets 275,754 278,552
Capital and Reserves
Called up share capital 15 1,810 1,810
Share premium 105,383 105,383
Special reserve 85,218 91,191
Retained earnings:
Capital reserves 100,919 92,724
Revenue reserve (17,576) (12,556)
Total Equity 275,754 278,552
The Company’s return for the year was £3,852,000 (2022: £43,066,000). The Directors have taken advantage of the exemption under s408 of the
Companies Act and not presented an income statement or a statement of comprehensive income for the Company alone.
The Financial Statements on pages 52 to 68 were approved by the Board of Directors on 3 July 2023 and signed on its behalf by:
Neil England
Chairman
The notes on pages 58 to 68 are integral to and form part of these Financial Statements.
Augmentum Fintech plc
Company Registration Number: 11118262
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AUGMENTUM FINTECH PLC
Consolidated Cash Flow Statement
Year Year
ended ended
31 March 31 March
2023 2022
£’000 £’000
Operating activities
Sales of investments 44,226 11,263
Purchases of investments (24,855) (55,992)
Acquisition of property, plant and equipment (365) (9)
Interest income received 326 1
Expenses paid (5,058) (3,958)
Lease payments (153) (139)
Net cash inflow/(outflow) from operating activities 14,121 (48,834)
Issue of shares following placing and offer for subscription – 55,000
Costs of placing and offer for subscription – (1,363)
Purchase of own shares into treasury (5,432) (910)
Net cash generated from financing activities (5,432) 52,727
Net increase in cash and cash equivalents 8,689 3,893
Cash and cash equivalents at start of year 31,326 27,433
Cash and cash equivalents at end of year 40,015 31,326
The notes on pages 58 to 68 are integral to and form part of these Financial Statements.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
57
Company Cash Flow Statement
Year Year
ended ended
31 March 31 March
2023 2022
£’000 £’000
Operating activities
Sales of investments 44,226 11,263
Purchases of investments (24,855) (55,992)
Interest income received 326 –
Expenses paid (5,489) (4,837)
Net cash outflow from operating activities 14,208 (49,566)
Issue of shares following placing and offer for subscription – 55,000
Costs of placing and offer for subscription – (1,363)
Purchase of own shares into treasury (5,432) (910)
Net cash generated from financing activities (5,432) 52,727
Net increase in cash and cash equivalents 8,776 3,161
Cash and cash equivalents at start of year 29,694 26,533
Cash and cash equivalents at end of year 38,470 29,694
The notes on pages 58 to 68 are integral to and form part of these Financial Statements.
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AUGMENTUM FINTECH PLC
Notes to the Financial Statements
1
Segmental Analysis
The Group operates a single business segment for reporting purposes and is managed as a single investment company. Reporting is provided to
the Board of Directors on an aggregated basis. The investments are located in the UK, continental Europe, Israel and the US.
2
Expenses
2023 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
AIFM fees 593 – 593 507 – 507
Administrative expenses 1,415 107 1,522 1,141 76 1,217
Directors’ fees* 169 – 169 126 – 126
Performance fee (see note 4)^ – – – – (6,508) (6,508)
Staff costs (see note 4) 2,944 – 2,944 1,877 – 1,877
Auditor’s remuneration 149 – 149 150 – 150
Total expenses 5,270 107 5,377 3,801 (6,432) (2,631)
£209,138 of interest and depreciation relating to a lease (2022: £153,000) is included in administrative expenses. See note 5 for further details.
* Details of the amounts paid to Directors are included in the Directors Remuneration Report on page 44.
^ See note 4 for further details of the performance fee arrangements. Non-executive Directors of the Company are not eligible to participate in any allocation of the performance fee.
Auditor’s Remuneration
2023 2022
Group Company Group Company
£’000 £’000 £’000 £’000
Audit of Group accounts pursuant to legislation 104 104 83 83
Audit of subsidiaries accounts pursuant to legislation 18 – 14 –
Audit related assurance services 27 20 18 15
Reporting accountant services – – 35 35
Total auditors’ remuneration 149 124 150 133
Non-audit services
It is the Group’s practice to employ BDO LLP on assignments additional to their statutory audit duties only when their expertise and experience with
the Group are important. Details of the Group’s process for safeguarding and supporting the independence and objectivity of the external auditor
are given in the Report of the Audit Committee beginning on page 48. In addition to the above BDO LLP was also paid £50,000 in 2022 for
reporting accountant services, which is included within the costs of placing and offer for subscription in the Statement of Changes in Equity.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
59
3
Key Management Personnel Remuneration
The Directors of the Company are considered to be the Key Management Personnel along with the directors of the Company’s subsidiary.
2023 2022
Other Other
Salary/Fees benefits Total Salary/Fees benefits Total
£’000 £’000 £’000 £’000 £’000 £’000
Key management personnel remuneration 1,352 277 1,629 799 175 974
Performance fee allocation* – – – (4,296) – (4,296)
1,352 277 1,629 (3,497) 175 (3,322)
Other benefits include pension and social security contributions relating to the directors of the Company’s subsidiary.
* Allocation of the performance fee to the directors of the Company’s subsidiary. See note 4 for further details of the performance fee arrangements.
4
Staff Costs
The monthly average number of employees for the Group during the year was eleven (2022: ten). All employees are within the investment and
administration function and employed by the Company's subsidiary.
2023 2022
£’000 £’000
Wages and salaries 2,437 1,551
Social security costs 347 211
Other pension costs 104 84
Other staff benefits 56 31
Staff costs 2,944 1,877
Performance fee (charged to capital)* – (6,508)
Total 2,944 (4,631)
* The performance fee arrangements were set up to provide a long-term employee benefit plan to incentivise employees of AFML and align them with shareholders through
participation in the realised investment profits of the Group. During the year to 31 March 2022 the existing plan for AFML staff was terminated and the performance fee liability to
AFML employees accrued as at 31 March 2021 of £6,508,000 was reversed. AFML continues to be entitled to a performance fee as before, but any performance fee paid by the
Company to AFML will now be allocated to employees of AFML on a discretionary basis by the Management Engagement & Remuneration Committee of the Company.
The performance fee is payable by the Company to AFML when the Company has realised an aggregate annualised 10% return on investments (the ‘hurdle’) in each basket of
investments. Based on the investment valuations and the hurdle level as at 31 March 2023 the hurdle has been met, on an unrealised basis, and as such a performance fee of
£16,517,000 (2022: £15,265,000) has been provided for by the Company, equivalent to 9.1 pence per share. This provision is reversed on consolidation and not included in the Group
Statement of Financial Position. The performance fee is only payable to AFML if the hurdle is met on a realised basis and the actual amount payable will depend on the amount and
timing of investment realisations. See page 24 and note 19.9 for further details.
5
Leases
Leasing activities
The Group, through its subsidiary AFML, has leased an office in the UK from which it operates for a fixed fee. When measuring lease liabilities for
leases that were classified as operating leases, the Group discounts lease payments at a rate of 6.4% (2022: 5.9%).
Right-of-use Asset
2023 2022
Group Group
Office Premises Office Premises
£’000 £’000
As at 1 April 750 145
Addition – 752
Depreciation (162) (147)
At 31 March 588 750
Lease Liability
2023 2022
Group Group
Office Premises Office Premises
£’000 £’000
As at 1 April 783 148
Addition – 769
Interest Expense 48 6
Lease Payments (153) (140)
At 31 March 678 783
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5
Leases (continued)
Maturity Analysis
Group
Between Between
At 31 March 2023 Up to 3 months 3 – 12 months 1 – 2 years 2 – 5 years
£’000 £’000 £’000 £’000
Lease payments 60 181 241 362
6
Taxation Expense
2023 2022
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 – – – – – –
The difference between the income tax expense shown above and the amount calculated by applying the effective rate of UK corporation tax of 19%
(2022: 19%) to the (loss)/return before tax is as follows:
2023 2022
Revenue Capital Total Revenue Capital Total
For the year ended 31 March £’000 £’000 £’000 £’000 £’000 £’000
(Loss)/return before taxation (4,858) 9,751 4,893 (3,798) 63,113 59,315
(Loss)/return before tax multiplied by the effective rate of
UK corporation tax of 19% (2022: 19%) (923) 1,853 930 (722) 11,991 11,269
Effects of:
Non-taxable capital returns – (1,873) (1,873) – (10,770) (10,770)
Excess management expenses 923 20 943 722 (1,221) (499)
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 £32,904,000 (2022: £26,524,000). It is not
anticipated that these excess expenses will be utilised in the foreseeable future.
7
(Loss)/Return per Share
The (loss)/return per share figures are based on the following figures:
2023 2022
£’000 £’000
Net revenue loss (4,858) (3,798)
Net capital return 9,751 63,113
Net total return 4,893 59,315
Weighted average number of ordinary shares in issue 178,651,736 169,923,583
Pence Pence
Revenue loss per share (2.7) (2.2)
Capital return per share 5.4 37.1
Total return per share 2.7 34.9
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
61
8
Investments Held at Fair Value
Non-current Investments Held at Fair Value
2023 2022
Group and Group and
Company Company
As at 31 March £’000 £’000
Unlisted at fair value 254,295 268,807
Reconciliation of movements on investments held at fair value are as follows:
2023 2022
Group and Group and
Company Company
£’000 £’000
As at 1 April 268,807 164,127
Purchases at cost 19,854 59,262
Realisation proceeds (44,224) (11,263)
Gains on investments 9,858 56,681
As at 31 March 254,295 268,807
The Group and Company received £44,224,000 (2022: £11,263,000) from investments sold in the year. The book cost of these investments when
they were purchased was £6,348,000 (2022: £8,227,000). These investments have been revalued over time and until they were sold any
unrealised gains/losses were included in the fair value of the investments. In addition, Augmentum I LP, the Company's unconsolidated subsidiary
(See note 19.2), received proceeds of £2,673,000 in 2022 from investments sold during the year, which had a book cost of £3,173,000.
9
Subsidiary undertakings
The Company has an investment of £500,000 (2022: £500,000) in the issued ordinary share capital of its wholly owned subsidiary undertaking,
Augmentum Fintech Management Limited (“AFML”), which is registered in England and Wales, operates in the United Kingdom and is regulated by
the Financial Conduct Authority. AFML’s principal activity is the provision of portfolio management services to the Company. AFML’s registered office
is 4 Chiswell Street, London EC1Y 4UP.
10 Other Receivables
2023 2023 2022 2022
Group Company Group Company
As at 31 March £’000 £’000 £’000 £’000
Other receivables* 555 118 391 39
*Includes £73,000 due back from the portfolio managers at 31 March 2022 due to an inadvertent overpayment that was repaid after the year end.
11 Other Payables
2023 2023 2022 2022
Group Company Group Company
As at 31 March £’000 £’000 £’000 £’000
Purchases payable – – 5,000 5,000
Other payables 948 810 296 223
948 810 5,296 5,223
12 Provisions
2023 2022
Company Company
As at 31 March £’000 £’000
Performance fee provision* 16,819 15,265
* See page 24 and notes 4 and 19.9 for further details.
13 Financial Instruments
(i)
Management of Risk
As an investment trust, the Group’s investment objective is to seek capital growth from a portfolio of securities. The holding of these financial
instruments to meet this objective results in certain risks.
The Group’s financial instruments comprise securities in unlisted companies, partnership interests, trade receivables, trade payables, and cash and
cash equivalents.
The main risks arising from the Group’s financial instruments are fluctuations in market price, and credit and liquidity risk. The policies for managing
each of these risks are summarised below. These policies have remained constant throughout the year under review. The financial risks of the
Company are aligned to the Group’s financial risks.
Market Price Risk
Market price risk arises mainly from uncertainty about future prices of financial instruments in the Group’s portfolio. It represents the potential loss
the Group might suffer through holding market positions in the face of price movements, mitigated by stock diversification.
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13 Financial Instruments (continued)
The Group is exposed to the risk of the change in value of its unlisted equity and non-equity investments. For unlisted equity and non-equity
investments the market risk is principally deemed to be the assumptions used in the valuation methodology as set out in the accounting policies.
Liquidity Risk
The Group’s assets comprise unlisted equity and non-equity investments. Whilst unlisted equity is illiquid, short-term flexibility is achieved through
cash and cash equivalents.
Credit Risk
The Group’s exposure to credit risk principally arises from cash and cash equivalents. Only highly rated banks or liquidity funds (with credit ratings
above A3, based on S&P’s ratings or the equivalent from another ratings agency) are used for cash deposits and the level of cash is reviewed on a
regular basis. The components of cash and cash equivalents are shown in the table below.
Financial Assets and Liabilities
(ii)
Group Company Group Company
Fair value Fair value Fair value Fair value
2023 2023 2022 2022
As at 31 March £’000 £’000 £’000 £’000
Financial Assets
Unlisted equity shares 249,529 249,529 266,720 266,720
Unlisted convertible loan notes 4,766 4,766 2,087 2,087
Cash at bank 14,715 13,470 24,326 22,694
Cash Equivalents – Liquidity Funds 25,300 25,000 7,000 7,000
Other assets 1,143 118 1,141 39
Financial Liabilities
Other payables and lease liabilities (1,626) (810) (6,079) (5,223)
Cash and other receivables and payables are measured at amortised cost and the rest of the financial assets in the table above are held at
approximate to fair value. The carrying values of the financial assets and liabilities measured at amortised cost are equal to the fair value.
The unlisted financial assets held at fair value are valued in accordance with the IPEV Guidelines as detailed within note 19.4.
(iii)
Fair Value Hierarchy
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length
transaction.
The Group complies with IFRS 13 in respect of disclosures about the degree of reliability of fair value measurements. This requires the Group to
classify, for disclosure purposes, fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the
measurements.
The levels of fair value measurement bases are defined as follows:
Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included within Level
1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: fair values measured using valuation techniques for which any significant input to the valuation is not based on observable market data
(unobservable inputs).
All investments were classified as Level 3 investments as at, and throughout the year to, 31 March 2023. Note 8 on page 61 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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
63
13 Financial Instruments (continued)
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’) is the probability of conversion. This method is 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 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
2023 2022 possible shift valuation
Valuation Technique £’000 £’000 Unobservable Inputs in input +/- +/(-) £’000
Multiple methodology 197,876 35,888 Multiple 10% 15,772/(15,780)
Premium/Discount to quoted multiples 30% (21,344)/21,941
CPORT* 21,568 180,359 Transaction price 10% 2,107/(2,107)
PWERM** 4,766 2,087 Probability of conversion 25% 247/(247)
NAV 7,295 7,677 Discount to NAV 10% (456)
Sales Price 22,790 42,796 N/a
* Calibrated price of recent transaction.
** Probability weighted expected return methodology.
14 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.
2023 2022
% ownership % of % ownership % of
(fully diluted) portfolio (fully diluted) portfolio
interactive investor* – – 3.6 15.9
Zopa* 3.4 11.8 3.3 9.5
Augmentum I LP ** 100 17.5 100.0 30.3
Tide 5.1 14.0 5.4 10.5
Grover 6.3 17.0 6.4 15.8
Cushon 13.9 9.0 13.9 5.1
Volt 8.3 5.6 8.3 2.1
* 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.
15 Called up Share Capital
2023 2022
Ordinary Shares Ordinary Shares
No. £’000 No. £’000
Opening issued and fully paid ordinary shares of 1p each 180,325,786 1,810 140,423,291 1,405
Issue of shares – – 40,590,406 405
Ordinary shares purchased into treasury (5,806,934) – (687,911) –
Closing issued and fully paid ordinary shares of 1p each 174,518,852 1,810 180,325,786 1,810
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15 Called up Share Capital (continued)
No shares were issued during the year ended 31 March 2023. In the prior year 40,590,406 ordinary shares were issued on 8 July 2021. The nominal
value of the shares issued was £405,000 and the total gross cash consideration received was £55,000,000. The costs of issue, which totalled
£1,363,000, are offset against the consideration received in the share premium account.
5,806,934 shares were bought back into treasury during the year at an average price of 102.9p per share. In the year ended 31 March 2022 687,911
shares were bought back into treasury at an average price of 131.1p per share.
At 31 March 2023 there were 6,494,845 shares held in treasury (2022: 687,911).
16 Net Asset Value per Share
The net asset value per share is based on the Group net assets attributable to the equity shareholders of £294,124,000 (2022: £295,204,000) and
174,518,852 (2022: 180,325,786) shares in issue at the year end excluding shares held in treasury.
The net asset value per share after performance fee* is based on the Group net assets attributable to the equity shareholders of £294,124,000
(2022: £295,204,000), less the performance fee provision made by the Company of £16,819,000 (2022: £16,819,000), and 174,518,852 (2022:
180,325,786) shares in issue at the year end excluding shares held in treasury.
* Alternative Performance Measure
17 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 on page 23. Details of fees paid to
Frostrow by the Company and Group can be found in note 2 on page 58.
Details of the remuneration of all Directors can be found on page 44. Details of the Directors’ interests in the capital of the Company can be found on
page 45.
Augmentum Fintech Management Limited is appointed as the Company’s delegated Portfolio Manager. The Portfolio Manager earns 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 performance 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 on page 24 in the Strategic Report. During the year the Portfolio Manager received a portfolio management fee of
£4,026,000 (2022: £3,510,000), which has been eliminated on consolidation and therefore does not appear in these accounts. A performance fee
provision of £16,217,000 (2022: £15,265,000) has been accrued in the Company's accounts, which is eliminated on consolidation in the Group
accounts. No performance fee is payable or has been paid during the year. There were no outstanding balances due to the Portfolio Manager at the
year end (2022: nil).
18 Capital Risk Management
Group Group
2023 2022
£’000 £’000
Equity
Equity share capital 1,810 1,810
Retained earnings and other reserves 292,314 293,394
Total capital and reserves 294,124 295,204
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 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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
65
19 Basis of Accounting and Significant Accounting Policies
19.1
Basis of preparation
The Group and Company Financial Statements for the year ended 31 March 2023 have been prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those
standards.
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 19.4. 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. 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 from the date of signing of these financial statements 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 July 2022 (the “SORP”).
The recommendations of the SORP which have been followed include:
l
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.
l 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.
l
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.
19.2
Basis of Consolidation
The Consolidated Financial Statements include the Company and certain subsidiary undertakings.
IFRS 10 and IFRS 12 define an investment entity and include an exemption 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:
l
The Company has multiple unrelated investors which are not related parties, and holds multiple investments
l Ownership interests in the Company are exposed to variable returns from changes in the fair value of the Company’s net assets
l
l
l
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 9 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.
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.
19.3
Application of New Standards
(i) New standards, interpretations and amendments effective from 1 April 2022
There were no new standards or interpretations effective for the first time for periods beginning on or after 1 April 2022 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.
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19 Basis of Accounting and Significant Accounting Policies (continued)
19.4
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. The enterprise
value is adjusted for factors such as surplus assets, excess liabilities or other contingencies or relevant factors; the resulting amount is apportioned
between the investee company’s relevant financial instruments according to their ranking and the effect of any instrument that may dilute economic
entitlements.
(ii) Unlisted Equity Investments
In respect of each unlisted investment one or more of the following valuation techniques is used:
l
l
l
A market approach, based on the price of the recent investment, market multiples or industry valuation benchmarks.
A probability-weighted expected returns methodology. 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.
A net assets based approach based on the value of the underlying assets of 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 or revenue 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 due to which
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 (‘Probability-Weighted Expected Returns Methodology’)
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.
Net Assets
For the net asset approach the fair value estimate is based on the attributable proportion of the reported net asset value of the investment derived
from the fair value of underlying assets / investments. Valuation reports provided by the manager or general partner of the investments are used to
calculate fair value where there is evidence that the valuation is derived using fair value principles that are consistent with the Company’s accounting
policies and valuation methods. Such valuation reports may be adjusted to take account of changes or events to the reporting date, or other facts
and circumstances which might impact the underlying value.
19.5
Cash and Cash Equivalents
Cash comprises cash at bank and short-term deposits with an original maturity of less than 3 months and subject to minimal risk of changes in value.
19.6
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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
67
19 Basis of Accounting and Significant Accounting Policies (continued)
19.7
Other income
Interest income received from cash equivalents is accounted for on an accruals basis.
19.8
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 does not complete the related cost is charged to the revenue
column of the Income Statement.
19.9
Performance Fee
As set out in prior annual reports the performance fee arrangements were set up to provide a long-term employee benefit plan to incentivise
employees of AFML and align them with shareholders through participation in the realised investment profits of the Group. During the year to
31 March 2022 the existing plan for AFML staff was terminated and the performance fee liability to AFML employees accrued as at 31 March 2021 of
£6,805,000 was reversed. AFML continues to be entitled to a performance fee as before, but any performance fee paid by the Company to AFML
will now be allocated to employees of AFML on a discretionary basis by the Management Engagement & Remuneration Committee of the Company.
Non-executive Directors of the Company are not eligible to participate in any allocation of the performance fee.
The Company provides for the performance fee in full. A performance fee is provided for if its performance conditions would be achieved if the
remaining assets in that basket were realised at fair value, at the Statement of Financial Position date. The performance fee is equal to the share of
profits in excess of the performance conditions in the basket. On consolidation the performance fee is eliminated since it is payable to the
Company’s subsidiary, AFML.
Performance fees will be charged to the capital column of the Income Statement and taken to the Capital Reserve.
19.10
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 Group’s incremental borrowing rate. 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.
19.11
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.
19.12 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.
19.13
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.
19.14
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.
19.15
Share Premium and Special Reserve
The share premium account arose following the Company’s admission to listing in 2018 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.
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19 Basis of Accounting and Significant Accounting Policies (continued)
19.16
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. When positive, 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 £40,519,000 (2022: £2,750,000) representing realised capital profits less costs charged to capital.
19.17
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.
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
auditor 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 19.4. As
set out in note 19.9 performance fee is calculated based on the valuation of the investments and as such is considered a significant accounting
estimate.
20 Post Balance Sheet Events
At the year end regulatory approval remained outstanding for a deal announced in February 2023 in which the Company's holding in Cushon would
be realised as part of its acquisition by Natwest Group. This transaction completed in June 2023, with the Company receiving proceeds of £22.8
million. There are no other significant events after the end of the reporting period requiring disclosure.
21 Financial Commitment
The Company made commitments to invest up to $3,000,000 into the Snowcrash Offshore Feeder LP. Of this commitment $750,000 (2022:
$1,500,000) remains outstanding.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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Independent Auditor’s Report to the Members of
Augmentum Fintech plc
Opinion on the financial statements
In our opinion:
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the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2023 and of the
Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting standards and
as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Augmentum Fintech plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
31 March 2023 which comprise the Consolidated Income Statement, the Consolidated and Company Statement of Changes in Equity, the
Consolidated Balance Sheet, the Company Balance Sheet, the Consolidated Cash Flow Statement, the Company Cash Flow Statement and notes
to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their
preparation is applicable law and UK adopted international accounting standards and, as regards the Parent Company financial statements, as
applied in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional
report to the Audit Committee.
Independence
Following the recommendation of the Audit Committee, we were appointed by the Directors in February 2020 to audit the financial statements for
the year ended 31 March 2020 and subsequent financial periods. The period of total uninterrupted engagement including retenders and
reappointments is 4 years, covering the years ended 31 March 2020 to 31 March 2023. We remain independent of the Group and the Parent
Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by that standard were not provided to the Group or the Parent Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt
the going concern basis of accounting included:
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agreeing the inputs and assumptions (ie. forecasted income, expenditure and Investment Portfolio Value) within the board’s assessment of the
going concern status of the Group and Parent Company to supporting documentation and our own understanding of the Group.
assessing the appropriateness of assumptions made by the Directors in their stress tests and considered the likelihood of the extreme
downside scenarios occurring and the resulting effects on the liquidity of the Group.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
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Independent Auditor’s Report to the Members of
Augmentum Fintech plc continued
Overview
Coverage 100% (2022: 100%) of Group profit before tax
100% (2022: 100%) of Group revenue
100% (2022: 100%) of Group total assets
Key audit matters 2023 2022
Valuation of unquoted Investments
(Group and Parent Company) Yes Yes
Materiality Group financial statements as a whole
£5.77m (2022: £5.91m) based on 2% of net assets at planning (2022: 2%
of net assets)
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and
assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls,
including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
The Group audit team performed a full scope audit of the Group, Parent Company and sole subsidiary using materiality levels set out in the
materiality section of our report.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
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Key audit matter How the scope of our audit addressed the key audit matter
Valuation of unquoted investments (Group and Parent Company)
The Group’s accounting policy for assessing the fair value of
investments is disclosed on page 66 in note 19.4 and disclosures
regarding the fair value estimates are given on page 68 in note 19.17.
We consider the valuation of unquoted investments to be the most
significant audit area as there is a high level of estimation uncertainty
involved in determining the unquoted investment valuations.
The share price valuation of the Group is informed by the value of the
investments recognised in the Statement of Financial Position. As the
Portfolio Manager is responsible for valuing investments in the financial
statements, and there is a high level of estimation uncertainty in
determining the valuation of unquoted investments due to the lack of
readily available prices, there is a potential risk of overstatement of the
valuation of the unquoted investments.
Our testing of unquoted investments was stratified according to risk
considering, inter alia, the value of individual investments, the nature of
the investment, the extent of the fair value movement and the
subjectivity of the valuation technique.
For all investments in our sample:
• We considered whether the assumptions and underlying
evidence supporting the year end valuations are in line with the
requirements of the applicable accounting standards and whether
the valuation methodology is the most appropriate in the
circumstances under the International Private Equity and Venture
Capital Valuation (“IPEV”) Guidelines.
• We attended the Valuations Committee meeting on 5 June 2023
where we discussed the valuations with management and
challenged significant judgements made.
• We recalculated the attributable value based on the rights of the
relevant instruments, which were agreed to investment
agreements. We received direct confirmation of the capital
structure from all of the investee companies.
For CPORT (Calibrated Price of Recent Transaction) valuations:
• We agreed the price of the recent investment to supporting
documentation and management information. We considered
whether or not the performance of the portfolio company has
significantly varied from expectations at the transaction date by
obtaining management’s evaluation of post transaction
performance against relevant milestones to determine the
appropriateness of the level of adjustment, if any, made to the
recent transaction price. In particular, we challenged management
in respect of whether the current market and economic conditions
have been considered and taken into account where valuations
have been calibrated to a price of recent investment.
• We assessed whether the investment was an arm’s length
transaction through reviewing the parties involved in the
transaction and checking whether or not they were already
investors of the investee company or otherwise connected;
For earnings and revenue multiple valuations, as well as valuations that
have been restricted to the value of the liquidation preference:
• We held discussions with management and reviewed
management accounts/board packs to understand the
performance of the portfolio company, including its cash runway,
and challenged estimates used in the valuations of the
investments. We assessed the reasonableness of the budgeted
revenue figures used considering historical performance and
information available in board packs. We recalculated discounts
and premiums and assessed these against those of comparable
companies. We also performed a review of the appropriateness of
the basket of comparable companies through consideration of
those companies’ operations and business sectors.
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Augmentum Fintech plc continued
Key audit matter How the scope of our audit addressed the key audit matter
For convertible loan note valuations:
• We agreed the terms of the instruments to the loan agreements
and challenged the basis on which the valuation appropriately
assessed the weighted probability of the various scenarios by
agreeing to supporting documentation.
For investments based on the share of net assets of fund investment:
• We confirmed the market value based on the net asset value
statement provided by the independent fund administrator. We
obtained an understanding of the controls surrounding the fund
accounting and reconciliation process performed by the
independent administrator of the General Fund through review of
the Systems and Organization Controls Report certified by an
independent auditor. We also assessed the Portfolio Manager’s
reasonableness testing of the market value of the underlying
assets using information obtained from the due diligence
procedures performed by the Portfolio Manager and movements
in the publicly quoted Decentralized Finance index to the year end.
Key observations:
Based on the procedures performed we consider the unquoted
investment valuations to be appropriate, and the estimates made by
management in valuing the unquoted investments to be reasonable.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality
to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the
basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated
as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Group financial statements Parent company financial statements
2023 2022 2023
£m £m £m
Materiality 5.77 5.91 5.42
2022
£m
5.58
Basis for determining materiality 2023: 2% of net assets at planning (2022: 2% of net assets)
Rationale for the benchmark applied
In determining the appropriate
benchmark, consideration was given
as to:
In determining the appropriate
benchmark, consideration was given
as to:
• The nature of the investment portfolio
and the level of judgement inherent in
the valuation.
• The nature of the investment portfolio
and the level of judgement inherent in
the valuation.
• The range of reasonable alternative
valuations.
• The range of reasonable alternative
valuations.
Performance materiality 4.03 4.43 3.79
4.18
Basis for determining 70% of materiality 75% of materiality 70% of materiality
performance materiality
75% of materiality
Rationale for the benchmark applied
In determining the appropriate
benchmark, consideration was given
as to:
In determining the appropriate
benchmark, consideration was given
as to:
• Our risk assessment,
• Our risk assessment,
• Consideration of the control
Environment, and
• Consideration of the control
Environment, and
• The level of historical misstatements
identified.
• The level of historical misstatements
identified.
Component materiality
We set materiality for each significant component of the Group based on our assessment of the risk of material misstatement of that component.
Materiality for the Parent Company is set out above. The materiality for the sole subsidiary was set at £80k (2022: £70k) and was based on 2%
(2022: 2%) of its Revenue. We further applied a performance materiality level of 70% (2022: 75%) of the component materiality to our testing to
ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £230k (2022:£295k). We also agreed
to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
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Independent Auditor’s Report to the Members of
Augmentum Fintech plc continued
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report other than
the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to
the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Parent Company’s compliance with the provisions of the UK Corporate Governance Code specified for
our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement
is materially consistent with the financial statements or our knowledge obtained during the audit.
Going concern and longer-term viability • The Directors' statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material
uncertainties identified set out on page 23; and
• The Directors’ explanation as to their assessment of the Group’s
prospects, the period this assessment covers and why the period is
appropriate set out on page 22.
Other Code provisions • Directors' statement on fair, balanced and understandable set out on
page 51;
• Board’s confirmation that it has carried out a robust assessment of
the emerging and principal risks set out on page 18;
• The section of the annual report that describes the review of
effectiveness of risk management and internal control systems set
out on pages 48 and 49; and
• The section describing the work of the Audit Committee set out on
page 48.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
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Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006
and ISAs (UK) to report on certain opinions and matters as described below.
Strategic Report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the Strategic Report and the Directors’ Report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and
Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the Strategic
Report or the Directors’ Report.
Directors’ remuneration In our opinion, the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with the Companies
Act 2006.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation
to which the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the Parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not
made; or
• we have not received all the information and explanations we require
for our audit.
Responsibilities of Directors
As explained more fully in the statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
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Independent Auditor’s Report to the Members of
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Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below:
Non-compliance with laws and regulations
Based on:
l Our understanding of the Group and the industry in which it operates;
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l Obtaining and understanding of the Group’s policies and procedures regarding compliance with laws and regulations, we considered the
significant laws and regulations to be Companies Act 2006, AIC Code of Governance, Section 1158 of Corporation Tax Act 2010, UK-adopted
international accounting standards, London Stock Exchange and Financial Conduct Authority Listing requirements, Alternative Investment
Fund Managers Directive and The AIC Guidance.
The Group is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or
disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be the
Anti - Money Laundering Act 2018, Data Protection Act 1988 and Bribery Act 2010.
Our procedures in respect of the above included:
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Review of minutes of meeting of those charged with governance for any instances of non-compliance with laws and regulations;
Enquiries of management, the Directors, and the Audit Committee, as to whether they were aware of any non-compliance with laws and
regulations;
Review of correspondence with regulatory and tax authorities for any instances of non-compliance with laws and regulations;
l Obtaining an understanding of the control environment in monitoring compliance with laws and regulations;
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Review of financial statement disclosures and agreeing to supporting documentation;
Review of legal invoices and legal correspondence to identify potential non-compliance with laws and regulations or undisclosed
contingencies and commitments; and
Review of the complaints and breaches register for any instances of non-compliance with laws and regulations.
Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:
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Enquiry with management and those charged with governance including the Directors, and the Audit Committee, regarding any known or
suspected instances of fraud;
l Obtaining an understanding of the Group’s policies and procedures relating to:
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Detecting and responding to the risks of fraud; and
Internal controls established to mitigate risks related to fraud.
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Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud;
Discussion amongst the engagement team as to how and where fraud might occur in the financial statements; and
Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to
fraud.
Based on our risk assessment, we considered the areas most susceptible to fraud to be Management Override of Controls and Valuation of
Unquoted Investments.
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Our procedures in respect of the above included:
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A critical review of the consolidation and, in particular, agreeing manual or late journals posted at consolidated level to supporting documents;
and
the procedures outlined in our key audit matters section above in respect of unquoted investment valuations.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to
have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and
the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Peter Smith (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
3 July 2023
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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AUGMENTUM FINTECH PLC
Information for Shareholders
Shareholder services
Link Group (a trading name of Link Market Services Limited and Link
Market Services Trustees Limited) may be able to provide you with a
range of services relating to your shareholding. To learn more about the
services available to you please visit the shareholder portal at
www.signalshares.com or
call +44 (0) 371 664 0300.
Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the
applicable international rate. Lines are open between 09:00 – 17:30,
Monday to Friday excluding public holidays in England and Wales.
From 18 December 2023, if you have any queries in relation to your
shareholding please contact: Computershare Investor Services PLC,
the Pavilions, Bridgwater Road, Bristol BS99 6ZZ.
Email: WebCorres@computershare.co.uk
Telephone: +44 (0)370 889 3231
Website: www.investorcentre.co.uk
Risk Warnings
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Past performance is no guarantee of future performance.
The value of your investment and any income from it may go down
as well as up and you may not get back the amount invested. This
is because the share price is determined, in part, by the changing
conditions in the relevant stock markets in which the Company
invests and by the supply and demand for the Company’s shares.
As the shares in an investment trust are traded on a stock market,
the share price will fluctuate in accordance with supply and
demand and may not reflect the underlying net asset value of the
shares; where the share price is less than the underlying value of
the assets, the difference is known as the ‘discount’. For these
reasons, investors may not get back the original amount invested.
Although the Company’s financial statements are denominated in
sterling, some of the holdings in the portfolio are currently
denominated in currencies other than sterling and therefore they
may be affected by movements in exchange rates. As a result, the
value of your investment may rise or fall with movements in
exchange rates.
Investors should note that tax rates and reliefs may change at any
time in the future.
How to Invest
Retail Investors Advised by IFAs
The Company currently conducts its affairs so that its shares can be
recommended by Independent Financial Advisers (IFAs) in the UK to
ordinary retail investors in accordance with the Financial Conduct
Authority (FCA) rules in relation to non-mainstream investment products
and intends to continue to do so. The shares are excluded from the
FCA’s restrictions which apply to non-mainstream investment products
because they are shares in an investment trust.
Investment Platforms
The Company’s shares are traded openly on the London Stock
Exchange and can be purchased through a stock broker or other
financial intermediary. The shares are available through savings plans
(including Investment Dealing Accounts, ISAs, Junior ISAs and SIPPs)
which facilitate both regular monthly investments and lump sum
investments in the Company’s shares. There are a number of
investment platforms that offer these facilities. A list of some of them,
that is not comprehensive and does not constitute any form of
recommendation, can be found below:
AJ Bell Youinvest www.youinvest.co.uk
Charles Stanley Direct www.charles-stanley-direct.co.uk
EQi www.eqi.co.uk
Halifax Investing www.halifax.co.uk/investing
Hargreaves Lansdown www.hl.co.uk
iDealing www.idealing.com
interactive investor www.ii.co.uk
Pello Capital www.pellocapital.com
Redmayne Bentley www.redmayne.co.uk
Share Deal Active www.sharedealactive.co.uk
Shareview www.shareview.co.uk
X-O www.x-o.co.uk
Financial Calendar
Date Event
31 March Financial Year End
June/July Financial Results Announced
September Annual General Meeting
30 September Half Year End
November/December Half Year Results Announced
Website
For further information on share prices, regulatory news and other
information, please visit www.augmentum.vc.
Shareholder Enquiries
In the event of queries regarding your shareholding, please contact the
Company’s registrar, Link Group, who will be able to assist you with:
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Registered holdings
Balance queries
Lost certificates
Change of address notifications
Link’s full details are provided on page 81 or please visit
www.linkgroup.eu.
Glossary and Alternative Performance Measures
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
79
Within the Strategic Report and Business Review, certain financial
measures common to investment trusts are shown. Where relevant,
these are prepared in accordance with guidance from the AIC, and this
glossary provides additional information in relation to them.
Alternative Investment Fund Managers Regulations ("UK AIFMD")
Agreed by the European Parliament and the Council of the EU and
transposed into UK legislation, the UK AIFMD classifies certain
investment vehicles, including investment companies, as Alternative
Investment Funds (“AIFs”) and requires them to appoint an Alternative
Investment Fund Manager (“AIFM”) and depositary to manage and
oversee the operations of the investment vehicle. The Board of the
Company retains responsibility for strategy, operations and compliance
and the Directors retain a fiduciary duty to shareholders.
Average net assets
The average net assets figure is the average of the net assets of the
Group after performance fee calculated on a time weighted basis and
adjusted for share buybacks and issuance.
Downside Protection
Downside protection is an investment technique that is employed to
mitigate against or prevent a decrease in the value of an investment. In
relation to venture capital investing the key methods of achieving this are
through liquidation preferences over other investors, and/or anti-dilution
provisions, which allow an investor to maintain their ownership
percentage in the event that new shares are issued.
Discount or Premium
A description of the difference between the share price and the net asset
value per share. The size of the discount or premium is calculated by
subtracting the share price from the net asset value per share and is
usually expressed as a percentage (%) of the net asset value per share. If
the share price is higher than the net asset value per share the result is a
premium. If the share price is lower than the net asset value per share, the
shares are trading at a discount.
Initial Public Offering (“IPO”)
An IPO is a type of public offering in which shares of a company are
sold to institutional investors and usually also retail (individual) investors.
Through this process, colloquially known as floating, or going public, a
privately held company is transformed into a public company.
Internal Rate of Return (“IRR”)
IRR is the annualised return on an investment calculated from the cash
flows arising from that investment taking account of the timing of each
cash flow. It is derived by computing the discount rate at which the
present value of all subsequent cash flows arising from an investment
are equal to the original amount invested.
Leverage
For the purposes of the UK AIFMD, leverage is any method which
increases the Company’s exposure, including the borrowing of cash
and the use of derivatives. It is expressed as a ratio between the
Company’s exposure and its net asset value and can be calculated
using gross and a commitment methods.
Under the gross method, exposure represents the sum of the
Company’s positions after the deduction of sterling cash balances,
without taking into account any hedging and netting arrangements.
Under the commitment method, exposure is calculated without the
deduction of sterling cash balances and after certain hedging and
netting positions (as detailed in the UK AIFMD) are offset against
each other.
Net Asset Value (“NAV”)
The value of the Company’s assets, principally investments made in
other companies and cash being held, minus any liabilities. The NAV is
also described as ‘shareholders’ funds’. The NAV is often expressed in
pence per share after being divided by the number of shares in issue,
excluding treasury shares. The NAV per share is unlikely to be the same
as the share price, which is the price at which the Company’s shares
can be bought or sold by an investor. The share price is determined by
the relationship between the demand and supply of the shares.
Net Asset Value ("NAV") per share after performance fee*
The NAV of the Group as calculated above less the performance fee
provision made by the Company divided by the number of shares in
issued (excluding treasury shares).
NAV per share Total Return after performance fee*
The theoretical total return on the NAV per share after performance fee,
reflecting the change in NAV after performance fee during the period
assuming that any dividends paid to shareholders were reinvested at
NAV after performance fee at the time the shares were quoted ex-
dividend. This is a way of measuring investment management
performance of investment trusts which is not affected by movements
in the share price discount/premium.
2023 2022
pence pence
per share per share
Opening NAV after performance fee 155.2 130.4
Earnings per share 2.7 34.9
Performance fee impact (0.8) (10.6)
Impact of buybacks and issuance 1.8 0.5
Closing NAV after performance fee 158.9 155.2
NAV after performance fee Total Return 2.4% 19.0%
Ongoing Charges Ratio (“OCR”)*
As an investment trust with an operating subsidiary, the calculation of
the Company’s OCR requires adjustments to the total operating
expenses.
Year ended Year ended
31 March 31 March
2023 2022
£’000 £’000
Operating expenses 5,377 (2,631)
Less: due diligence costs (107) (76)
Add-back: performance fee – 6,508
Recurring operating expenses 5,270 3,801
Average net assets 275,575 221,741
Ongoing charges ratio 1.9% 1.7%
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AUGMENTUM FINTECH PLC
Glossary and Alternative Performance Measures continued
Partnership
Augmentum I LP, a limited partnership registered in Jersey and a
wholly-owned subsidiary of the Company.
Regtech
Computer programs and other technology used to help banking and
financial companies comply with their regulatory obligations.
Total Shareholder Return*
The theoretical total return per share reflecting the change in share
price during the period and assuming that any dividends paid were
reinvested at the share price at the time the shares were quoted
ex-dividend.
Unquoted investment
Investments in unquoted securities such as shares and debentures
which are not quoted or traded on a stock market.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
81
Registrars
Until 15 December 2023, if you have any queries in relation to your
shareholding please contact:
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
United Kingdom
Email: enquiries@linkgroup.co.uk
Telephone: +44 (0)371 664 0300
Website: www.linkgroup.eu
+ Calls are charged at the standard geographic rate and will vary by provider. Calls
outside the United Kingdom will be charged at the applicable international rate. Lines
are open between 09:00 - 17:30, Monday to Friday excluding public holidays in
England and Wales.
From 18 December 2023, if you have any queries in relation to your
shareholding please contact: Computershare Investor Services PLC,
the Pavilions, Bridgwater Road, Bristol BS99 6ZZ, United Kingdom.
Email: WebCorres@computershare.co.uk
Telephone: +44 (0)370 889 3231
Website: www.investorcentre.co.uk
Identification codes
SEDOL: BG12XV8
ISIN: GB00BG12XV81
BLOOMBERG: AUGM LN
EPIC: AUGM
Legal Entity Identifier:
213800OTQ44T555I8S71
Foreign Account Tax Compliance Act (“FATCA”)
IRS Registration Number (GIIN): 755CKI.99999.SL.826
Disability Act
Copies of this annual report and other documents issued by the
Company are available from the Company Secretary. If needed, copies
can be made available in a variety of formats, including braille, audio tape
or larger type as appropriate. You can contact the Registrar to the
Company, Link Group, which has installed telephones to allow speech
and hearing impaired people who have their own telephone to contact
them directly, without the need for an intermediate operator, for this
service please call 0800 731 1888. Specially trained operators are
available during normal business hours to answer queries via this
service. Alternatively, if you prefer to go through a ‘typetalk’ operator
(provided by The Royal National Institute for Deaf People) you should dial
18001 from your textphone followed by the number you wish to dial.
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Contact Details
Directors
Neil England (Chairman of the Board and Nominations Committee)
Karen Brade (Chairman of the Audit Committee)
David Haysey (Chairman of the Management & Remuneration
Committee and Valuations Committee)
Conny Dorrestijn
Sir William Russell
Registered Office
Augmentum Fintech plc
25 Southampton Buildings
London WC2A 1AL
United Kingdom
Incorporated in England and Wales with company no. 11118262 and
registered as an investment company under Section 833 of the
Companies Act 2006
AIFM, Company Secretary and Administrator
Frostrow Capital LLP
25 Southampton Buildings
London WC2A 1AL
United Kingdom
Telephone: 0203 008 4910
Email: info@frostrow.com
Portfolio Manager
Augmentum Fintech Management Limited
4 Chiswell Street
London EC1Y 4UP
United Kingdom
Joint Corporate Brokers
Peel Hunt LLP
100 Liverpool Street
London EC2M 2AT
United K ingdom
Singer Capital Markets Advisory LLP
1 Bartholomew Lane
London EC2N 2AX
United Kingdom
Depositary
IQ EQ Depositary Company (UK) Limited
4th Floor
3 More London Riverside
London SE1 2AQ
United Kingdom
Legal Adviser to the Company
Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
United Kingdom
Independent Auditor
BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
A member of the Association of
Investment Companies
About Augmentum Fintech plc
Augmentum Fintech plc (the “Company”) is the UK’s only publicly
listed investment company focusing on the fintech sector, having
launched on the main market of the London Stock Exchange in
2018, giving businesses access to patient funding and support,
unrestricted by conventional fund timelines.
We invest in early and later stage fast growing fintech businesses that are disrupting
the banking, insurance, asset management and wider financial services sectors.
Portfolio management is undertaken by Augmentum Fintech Management Limited
(“AFML”). AFML is a wholly owned subsidiary of the Company, together referred to
as the “Group”.
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This report is printed on Revive 100% White Silk, a totally recycled paper
produced using 100% recycled waste at a mill that has been awarded the
ISO 14001 certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
This report has been produced using vegetable based inks.
To view the report online visit: www.augmentum.vc
Annual Report
For the year ended 31st March 2023
Investing in Fintech.